Exhibit 10.1

FORM OF

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of May 18,
2007, between SumTotal Systems, 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”).

WHEREAS, subject to the terms and conditions set forth in this Agreement, the
Company desires to issue and sell to each Purchaser, and the Purchasers,
severally and not jointly, desire to purchase from the Company, shares of Common
Stock as set forth herein on the Closing Date (as defined herein) pursuant to an
effective Registration Statement on Form S-3, Commission File No. 333-134645.

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 agree
as follows:

ARTICLE I.

DEFINITIONS

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

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

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

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

“Closing” means the closing of the purchase and sale of the Shares pursuant to
Section 2.1.

“Closing Date” means the later of (i) the third (3rd) Trading Day following the
date of this Agreement and (ii) the date of approval by the Corporate Financing
Department of the National Association of Securities Dealers.

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“Commission” means the United States Securities and Exchange Commission.

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

“Common Stock Equivalents” means any securities of the Company or any Subsidiary
which 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 exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

“Company Counsel” means Wilson Sonsini Goodrich & Rosati Professional
Corporation.

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

“GAAP” means United States generally accepted accounting principles applied on a
consistent basis during the periods involved.

“Intellectual Property Rights” means all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material for use in
connection with the Company’s business as described in the SEC Reports.

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

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

“Material Permits” means all certificates, authorizations and permits issued by
the appropriate federal, state, local or foreign regulatory authorities
necessary for the Company and its Subsidiaries to conduct their respective
businesses as described in the SEC Reports.

“Per Share Purchase Price” equals $6.50, 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 and
prior to the Closing.

“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.

 

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“Prospectus Supplement” means the prospectus supplement filed with the
Commission pursuant to Rule 424(b) promulgated under the Securities Act and
deemed to be part of the Registration Statement at the time of effectiveness.

“RBC” means RBC Capital Markets Corporation.

“Registration Statement” means the registration statement on Form S-3 of the
Company (Commission File No. 333-134645), covering the sale by the Company to
the Purchasers of the Shares, including the Prospectus Supplement, amendments
and supplements to such registration statement or Prospectus Supplement,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.

“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” mean all reports filed by the Company 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 reports).

“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 (it being understood that no fractions of a share
will be issued).

“Short Sale” means all “short sales” as defined in Rule 200 of Regulation SHO
promulgated under the Exchange Act.

“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” means any “significant subsidiary” as defined in Rule 1-02(w) of
Regulation S-X promulgated by the Commission under the Exchange Act.

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading
Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed on a Trading Market (other than the OTC Bulletin Board), a day on which
the Common Stock is traded in the over-the-counter market, as reported by the
OTC Bulletin Board, or (iii) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the

 

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National Quotation Bureau Incorporated (or any similar organization or agency
succeeding to its functions of reporting prices); provided that in the event
that the Common Stock is not listed or quoted as set forth in (i), (ii) and
(iii) hereof, then Trading Day shall mean a Business Day.

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

“Transaction Documents” means this Agreement and any other instruments,
documents or agreements executed or delivered in connection with the
transactions contemplated hereunder, including, without limitation, the
Registration Statement.

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 number of Shares equal to such
Purchaser’s Subscription Amount divided by the Per Share Purchase Price. Upon
satisfaction of the conditions set forth in Section 2.3, the Closing shall occur
telephonically or at such 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) the number of Shares equal to such Purchaser’s Subscription Amount divided
by the Per Share Purchase Price, in accordance with each such Purchaser’s
written delivery instructions;

(ii) any prospectus and Prospectus Supplement as required under the Securities
Act; and

(iii) a legal opinion of Company Counsel in the form previously delivered by the
Company to the Purchasers.

(b) On the Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company such Purchaser’s Subscription Amount by wire transfer of
immediately available funds to the account as specified in writing by the
Company.

 

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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) all representations and warranties of the Purchasers contained herein were
true and correct on the date hereof and shall remain true and correct as of the
Closing Date;

(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 each Purchaser of such Purchaser’s Subscription Amount in
accordance with 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 or waived in
writing by each Purchaser:

(i) all representations and warranties of the Company contained herein were true
and correct on the date hereof and shall remain true and correct as of the
Closing Date;

(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;

(v) the Prospectus Supplement shall have been filed with the Commission and the
Registration Statement shall be effective and available for the issuance and
sale of the Shares hereunder;

(vi) RBC shall have received a signed letter from BDO Seidman, LLP (“BDO”),
addressed to the Company and RBC and dated, respectively, the date of this
Agreement and the Closing Date, in form and substance reasonably satisfactory to
RBC containing statements and information of the type ordinarily included in
accountants’ “comfort letters” with respect to the financial statements and
certain financial information contained (directly or via incorporation by
reference) in the Registration Statement;

(vii) no order preventing or suspending the use of any prospectus or the
Prospectus Supplement shall have been or shall be in effect and no order
suspending the effectiveness of the Registration Statement shall be in effect
and

 

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no proceedings for such purpose shall be pending before or threatened by the
Commission, and any requests for additional information on the part of the
Commission (to be included in the Registration Statement or the prospectus or
the Prospectus Supplement or otherwise) shall have been complied with to the
satisfaction of the Commission and the Purchasers; and

(viii) from the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission 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. The Company represents and
warrants to each Purchaser, except as disclosed or incorporated by reference in
the Registration Statement:

(a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than
those listed in the SEC Reports. The Company owns, directly or indirectly, all
of the capital stock or comparable equity interests of each Subsidiary free and
clear of any and all Liens, other than restrictions on transfer under applicable
securities laws and Liens imposed pursuant to that certain Credit Agreement
dated October 4, 2005, as amended, to which Wells Fargo Foothill, Inc. is a
party and which is an exhibit to the Company’s Current Report on Form 8-K filed
with the Commission on October 6, 2005 (with amendments filed as an exhibit to
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2005, the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2006 and the Company’s Current Report on Form 8-K filed with the
Commission on November 14, 2006, respectively), and all the issued and
outstanding shares of capital stock or comparable equity interests of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.

(b) Organization and Qualification. The Company and each Subsidiary is an entity
duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted,
except where the failure to be validly existing or in good standing would not,
individually or in the aggregate, have or reasonably be

 

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expected to result in a Material Adverse Effect. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational,
charter or equivalent documents. The Company and each Subsidiary is duly
qualified to conduct business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
would not, individually or in the aggregate, have or reasonably be expected to
have a Material Adverse Effect.

(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and 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 herewith and 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 and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.

(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 hereby and
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 the Nasdaq Global Market, any court or governmental authority to
which the Company or a Subsidiary is subject (including federal, state and local
laws applicable to its business and federal and state securities laws and
regulations and the rules and regulations of any self regulatory organization to
which the Company or its securities are subject) or by which any property or
asset of the Company is bound or affected, or (iv) conflict with or violate the
terms of any agreement by which the Company is bound or to which any property or
asset of the Company is

 

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bound or affected; except in the case of each of clauses (ii), (iii) and (iv),
such as would not have or reasonably be expected to result in, individually or
in the aggregate, a Material Adverse Effect.

(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, approval (including, but not limited to, the approval of the
stockholders of the Company), 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 Sections 4.1 and 4.4, (ii) filings
required in connection with the issuance and listing on the Nasdaq Global Market
of the Shares and (iii) such filings as are required to be made under applicable
state securities laws (collectively, the “Required Approvals”).

(f) Issuance of the Shares; Reservation of Common Stock. The Shares are duly
authorized and, when issued and paid for in accordance with this Agreement, will
be duly and validly issued, fully paid and nonassessable, free and clear of all
Liens created by the Company or any of its Subsidiaries. The Company has
reserved from its duly authorized capital stock the maximum number of shares of
Common Stock issuable pursuant to this Agreement. The Shares have been
registered under the Securities Act and all of the Shares will be freely
transferable and tradable by the Purchasers without restriction created by the
Company or any of its Subsidiaries. The Registration Statement is effective and
available for the issuance of the Shares and the Company has not received any
notice that the Commission has issued or intends to issue a stop-order with
respect to the Registration Statement or that the Commission otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened in writing to do so.
The “Plan of Distribution” section under the Registration Statement permits the
issuance and sale of the Shares hereunder. Upon receipt of the Shares and making
payment for them in accordance with the terms hereof, the Purchasers will have
good and marketable title to such Shares and the Shares will be freely tradable
on the Nasdaq Global Market. As of the date hereof, the Company has reserved a
sufficient number of shares of Common Stock for the purpose of enabling the
Company to issue the Shares pursuant to this Agreement.

(g) Capitalization. As of March 31, 2007, the capitalization of the Company was
as described in the Company’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2007 as 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, the issuance of
shares of Common Stock to employees pursuant to the Company’s employee stock
purchase plan and pursuant to the conversion, exercise or exchange of
outstanding Common Stock Equivalents and as disclosed in the SEC Reports. No
Person has any right of first refusal, preemptive right, registration right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. The issue and sale of the Shares will
not obligate the Company to issue shares of Common Stock or other securities to
any Person (other than the Purchasers) and, except as disclosed in the
Prospectus Supplement, will not result in a right of any holder of securities of
the

 

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Company to adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding shares of capital stock of the Company have
been duly authorized and 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 any
other third party 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. Since March 18, 2004, the
Company’s date of inception, all options to purchase shares of the Company’s
Common Stock granted by the Company to its directors, officers, employees or
consultants, pursuant to the Company’s stock option plans, or otherwise,
provided for an exercise price equal to no less than the fair market value of
the underlying shares of the Company’s Common Stock on the date of grant, except
where the failure of such options to be granted at an exercise price equal to
less than the fair market value of the underlying shares of the Company’s Common
Stock on the date of grant would not reasonably be expected to (i) cause the
Company to restate any previously issued financial statements or (ii) result in
a delay in the filing after the date hereof of a quarterly report on Form 10-Q
or an annual report on Form 10-K by the Company, which delay in filing would
cause the Company to lose its eligibility to file registration statements on
Form S-3.

(h) SEC Reports; Financial Statements. Except for the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2004 and the Company’s
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2005, both
of which were filed with the Commission on August 1, 2005, the Company has filed
all reports required to be filed by it pursuant to Section 13(a) of the Exchange
Act since June 30, 2005 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 or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
Registration Statement and any prospectus included therein, including the
prospectus supplement to be filed covering the transactions covered hereby,
comply or will comply, as the case may be, 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
Registration Statement or any such prospectus contain or contained any untrue
statement of a material fact or omits or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the case of any prospectus in the 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

 

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of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with GAAP, except as may
be otherwise specified in such financial statements or the notes thereto or as
may otherwise be permitted or required by Form 10-K or Form 10-Q under the
Exchange Act 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 would reasonably be expected to result in a Material Adverse Effect,
(ii) neither the Company nor any Subsidiary has 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) neither the Company nor any Subsidiary has altered its method
of accounting except as required by GAAP, (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 (other than for the repurchase of restricted stock in
accordance with the terms of the restricted stock agreements related thereto)
and (v) neither the Company nor any Subsidiary has issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company or
Subsidiary stock option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.

(j) Litigation. There is no Action which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Shares or (ii) would have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary nor any director or
officer of the Company (in their capacities as directors or officers of the
Company) 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 and any
Subsidiary, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of
the Company (in their capacities as directors or officers 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 under the
Exchange Act or the Securities Act.

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

 

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(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
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, which violation would reasonably be expected to
result in a Material Adverse Effect. The Company is in material compliance with
the requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules
and regulations thereunder.

(m) Material Permits. The Company and each Subsidiary possess all Material
Permits except where the failure to possess such permits would not have or
reasonably be expected to result in a Material Adverse Effect and neither the
Company nor any Subsidiary has received any notice of Actions relating to the
revocation or modification of any Material Permit.

(n) Application of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, 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 charter documents or the laws of its state of incorporation that is or
could become applicable to any of 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, as a result of the
Company’s issuance of the Shares and the Purchasers’ ownership of the Shares.

(o) Title to Assets. The Company and each Subsidiary has good and marketable
title in fee simple to all real property owned by them that is material to their
respective business and good and marketable title in all personal property owned
by the Company and each Subsidiary that is material to their respective
business, 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
each Subsidiary. Any real property and facilities or personal property held
under lease by the Company and any Subsidiary is held by the Company and such
Subsidiary, respectively, under valid, subsisting and enforceable leases of
which the Company and such Subsidiary are in compliance, except as would not,
individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect.

(p) Patents and Trademarks. The Company and each Subsidiary has, or has rights
to use, all Intellectual Property Rights which the failure to so have would
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary has received written notice that any of the
Intellectual Property Rights

 

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used by the Company or any Subsidiary violates or infringes upon the rights of
any Person which violation or infringement would, individually or in the
aggregate, have or reasonably be expected to have a Material Adverse Effect. To
the knowledge of the Company and each Subsidiary, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the intellectual property rights of others which infringement would,
individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect.

(q) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or Section 12(g) of the Exchange Act, and neither the
Company nor any Subsidiary has taken any 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 in compliance
with all such listing and maintenance requirements for continued listing of the
Common Stock on the Trading Market. The issuance and sale of the Shares under
the Transaction Documents does not contravene the rules and regulations of the
Trading Market on which the Common Stock is currently listed or quoted
(including Rule 4350 of the Nasdaq Stock Market if the Trading Market is the
Nasdaq Global Market or Nasdaq Capital Market), and no approval of the
stockholders of the Company thereunder is required for the Company to issue and
deliver to the Purchasers the maximum number of Shares contemplated by
Transaction Documents, including such as may be required pursuant to Nasdaq Rule
4350.

(r) Disclosure. The Company confirms that, neither the Company nor any
Subsidiary nor any other Person acting on its or their behalf has provided any
of the Purchasers or their agents or counsel with any information that
constitutes or might constitute material, non-public information except with
respect to the transactions contemplated by the Transaction Documents. 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, any
Subsidiary, their respective businesses and the transactions contemplated hereby
furnished by or on behalf of the Company or any Subsidiary with respect to the
transactions contemplated hereby and the representations and warranties made
herein are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the 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.

(s) 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

 

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any offers or sales of any security or solicited any offers to buy any security,
under circumstances that would, to the knowledge of the Company, cause the sale
of the Shares to be integrated with prior offerings by the Company for purposes
of any applicable stockholder 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.

(t) Acknowledgment Regarding Purchasers’ Purchase of Shares. As between the
Company and the Purchasers, 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.

(u) Acknowledgement Regarding Trading Activity. Anything in this Agreement or
elsewhere herein to the contrary notwithstanding (except for Section 4.7 as to
the Purchasers), it is understood and agreed by the Company (i) that, except as
may be set forth in any “no trade” letter between RBC and a third party, none of
the Purchasers or any Person to whom an offer of Shares have been made (each, an
“Offeree”) have been asked to agree, nor has any Purchaser or Offeree agreed, to
desist from purchasing or selling, long and/or short, securities of the Company,
or “derivative” securities based on securities issued by the Company or to hold
the Shares, securities of the Company, or “derivative” securities based on
securities issued by the Company for any specified term; (ii) that past or
future open market or other transactions by any Purchaser or Offeree, including
without limitation, Short Sales or “derivative” transactions, before or after
the closing of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded securities; (iii) that
any Purchaser or Offeree, and counter parties in “derivative” transactions to
which any such Purchaser or Offeree is a party, directly or indirectly,
presently may have a “short” position in the Common Stock, and (iv) that no
Purchaser or Offeree shall be deemed to have any affiliation with or control
over any arm’s length counter-party in any “derivative” transaction.

(v) Transactions With Affiliates and Employees. None of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is or was a party to any transaction with the Company
or any Subsidiary (other than for services as employees, officers and directors)
that would be required to be disclosed as of the date hereof in an SEC Report
pursuant to the requirements of Item 404 of Regulation S-K promulgated under the
Securities Act.

(w) Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii)

 

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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 and 15d-15) 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 to allow
timely decisions regarding required disclosures. The Company’s certifying
officers have evaluated the effectiveness of the Company’s disclosure controls
and procedures as of a date within 90 days prior to the filing date of the Form
10-K for the Company’s most recently ended fiscal year and the Form 10-Q for the
Company’s most recently ended fiscal quarter (each such applicable date, the
“Evaluation Date”). The Company presented in its most recently filed Form 10-K
or Form 10-Q 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 and except as disclosed in the SEC
Reports, there have been no changes in the Company’s internal control over
financial reporting that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting.

(x) Investment Company. The Company is not, and will not after the consummation
of the offering of Shares contemplated by this Agreement be, an “investment
company” or an Affiliate of an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended.

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

(z) Auditors. Effective following KPMG LLP’s (“KPMG”) review of the Company’s
financial statements as of and for the three and nine months ended September 30,
2005, the Company changed auditors from KPMG to BDO. During the period from the
date of KPMG’s original engagement by the Company through the date of their
resignation, the Company had no disagreements with KPMG on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements, if not resolved to the former
auditors’ satisfaction, would have caused them to make reference to the subject
matter of the disagreement in connection with their report on the Company’s
financial statements.

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:

 

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(a) Organization; Authority. If the Purchaser is not an individual: (i) 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, limited liability company or partnership power and authority to enter
into and to consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder; (ii) the execution, delivery
and performance by such Purchaser of this Agreement have been duly authorized by
all necessary corporate, limited liability company, partnership or similar
action on the part of such Purchaser; (iii) this Agreement 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
(1) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (2) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (3) insofar as indemnification and contribution
provisions may be limited by applicable law. If the Purchaser is an individual:
(i) the Purchaser and any spouse of the Purchaser have the legal capacity to
enter into this Agreement; (ii) the Agreement has been duly executed by the
Purchaser and any spouse of the Purchaser; (iii) this Agreement has been duly
executed by such Purchaser and any spouse of 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 (1) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’ rights generally,
(2) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (3) insofar as indemnification
and contribution provisions may be limited by applicable law.

(b) Distribution. Such Purchaser does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Shares. Such
Purchaser is not required to be registered as a broker-dealer under Section 15
of the Exchange Act.

(c) Purchaser Status. The Purchaser is either (i) a Qualified Institutional
Buyer within the meaning of Rule 144A under the Securities Act, (ii) an
“accredited investor” as defined in Rule 501(a) under the Securities Act or
(iii) is organized in a non-United States jurisdiction.

(d) No Trading. Each Purchaser represents and warrants that, except as otherwise
disclosed to the Company in writing, from                     , 20071 (the

 

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1 The date RBC informed such Purchaser that RBC was authorized by the Company to
give such Purchaser material non-public information and that such Purchaser
expressly agreed to receive such material non-public information in confidence.

 

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“Discussion Time”), up through the execution of this Agreement, the Purchaser
did not, directly or indirectly, execute and Short Sales or engage in any other
trading in the Common Stock or any derivative security thereof or disclose the
existence of the offering contemplated by this Agreement to any other person not
subject to a non-disclosure agreement or similar agreement regarding the same.
Notwithstanding the foregoing, in the case of a Purchaser and/or its Affiliates
that is, individually or collectively, a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser’s
or Affiliates assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions of
such Purchaser’s or Affiliates assets, the representation set forth above shall
only apply with respect to the portion of assets managed by the portfolio
managers that have knowledge about the financing transaction contemplated by
this Agreement.

(e) No Additional Representations. 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.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 Securities Laws Disclosure; Publicity. The Company shall, before the Nasdaq
Stock Market opens, by the Trading Day following the date hereof issue a press
release disclosing the material terms of the transactions. The Company shall,
before the Nasdaq Stock Market opens, by the second Trading Day following the
date hereof (i) file a Current Report on Form 8-K (which attaches as an exhibit
this Agreement) disclosing the material terms of the transactions, as required
by applicable law, contemplated hereby and (ii) file the Prospectus Supplement
to be delivered by the Company in connection herewith with the Commission via
the EDGAR system. 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, except as
set forth in the exhibits to be attached to the Form 8-K contemplated above,
without the prior written consent of such Purchaser (such consent not to be
unreasonably withheld), and except if, legal counsel to the Company advises that
such disclosure is required by the Company pursuant to (i) federal securities
law or (ii) 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).

4.2 Non-Public Information. Except in connection with the transactions
contemplated by this Agreement, 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.

4.3 Indemnification of Purchasers. Subject to the provisions of this
Section 4.3, the Company will indemnify and hold the Purchasers and their
directors, officers, stockholders,

 

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partners, members, 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 (the
“Indemnified Liabilities”) 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
brought or made against such Purchaser Party by a third party (including for
these purposes a derivative action brought on behalf of the Company) and arising
out of or resulting from (i) the execution, delivery, performance or enforcement
of the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Shares or (iii) the status of such Purchaser or holder of the Shares as
an investor in the Company. The Company shall not be liable to any Purchaser
under this provision in respect of any Indemnified Liability if such liability
arises out of any misrepresentation by the Purchaser in Section 3.2 of this
Agreement. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law 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 notify the Company in writing within 10
Business Days of such Action being brought and served against the Purchaser
Party, and the Company shall have the right to 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 Section 4.3 for any settlement by a Purchaser
Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed. The Company shall not, without the prior
written consent of the Purchaser Party, effect any settlement of any pending
Action in respect of which any Purchaser Party is a party, unless such
settlement includes an unconditional release of such Purchaser Party from all
liability on claims that are the subject matter of such Action.

4.4 Reservation and Listing of Common Stock. The Company shall promptly secure
the listing of all of the Shares upon each national securities exchange and
automated quotation system, if any, upon which the Common Stock is then listed
or quoted. The Company hereby agrees to use commercially reasonable efforts to
maintain the listing of the Shares on a Trading Market. The Company further
agrees that 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 will
take such other action as is necessary to cause all of the Shares to be listed
on such other Trading Market as promptly as possible. The Company will take all
action reasonably necessary to continue the listing and trading of its Common
Stock on a Trading Market and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Trading
Market.

 

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4.5 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
for the Company 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 Shares or otherwise.

4.6 Approval of Subsequent Equity Sales. The Company shall not issue shares of
Common Stock or Common Stock Equivalents if such issuance would require
stockholder approval of the transactions contemplated by the Transaction
Documents pursuant to Rule 4350 of the NASD Marketplace Rules or any similar
rule of any other Trading Market, unless and until such shareholder approval is
obtained prior to such issuance.

4.7 Trading Limitations and Restrictions on Short Sales. Each Purchaser
represents, warrants, covenants and agrees that from the Discussion Time through
the date hereof, such Purchaser did not, and from the date hereof until the date
the transactions contemplated by this Agreement are first publicly announced by
the Company as described in Section 4.1, such Purchaser will not, directly or
indirectly, trade in the Common Stock or execute or effect (or cause to be
executed or effected) any Short Sale in the Common Stock or disclose the
existence of the offering contemplated by this Agreement to any other person not
subject to a non-disclosure or similar agreement regarding the same.
Furthermore, until the date the transactions contemplated by this Agreement are
first publicly announced by the Company as described in Section 4.1, the
Purchaser will not directly or indirectly sell, offer to sell, solicit offers to
buy, dispose of, loan, pledge or grant any right with respect to shares of
Common Stock, except in compliance with all relevant securities laws and
regulations. Notwithstanding the foregoing, no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in Short
Sales in the securities of the Company after the time that the transactions
contemplated by this Agreement are first publicly announced by the Company as
described in Section 4.1. Notwithstanding the foregoing, in the case of a
Purchaser and/or its Affiliates that is, individually or collectively, a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s or Affiliates assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s or Affiliates
assets, the covenant set forth above shall only apply with respect to the
portion of assets managed by the portfolio managers that have knowledge about
the financing transaction contemplated by this Agreement.

4.8 Subsequent Issuances. From the date hereof until 90 days after the Closing,
the Company will not issue, agree to issue or announce any intent to issue, any
equity securities (or any securities convertible, exercisable or exchangeable
for or into any equity securities) other than (i) equity securities issued in
connection with any employee benefit plan which has been approved by the Board
of Directors of the Company, pursuant to which the Company’s securities may be
issued to any employee, officer or director for services provided to the
Company, (ii) the issuance by the Company of any shares of Common Stock upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof (provided that the terms of such options or warrants are not
amended or modified in any manner after the date hereof) or an

 

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option or warrant issued or granted in compliance with this Section 4.8, and
(iii) the issuance of Common Stock or securities convertible into, exchangeable
or exercisable for Common Stock pursuant to an acquisition, merger or
consolidation approved by the Company’s Board of Directors.

ARTICLE V.

MISCELLANEOUS

5.1 Fees and Expenses. 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 Shares.

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 second Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (b) in all other cases, 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 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 (except that no such prior
written consent will be required in connection with the sale of all or
substantially all of the business, assets or properties of the Company by means
of an asset purchase, merger, consolidation or otherwise). Any Purchaser may
assign any or all of its

 

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rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Shares, provided such transferee agrees in writing to be bound,
with respect to the transferred Shares, 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 4.6.

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 any
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 reasonable and documented
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.

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

 

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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 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 Shares. If any certificate or instrument evidencing any
Shares 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 Shares.

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 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. 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.

5.16 Acknowledgment Regarding RBC. Each Purchaser acknowledges that RBC is
acting as a placement agent for the Shares being offered hereby and will be
compensated by the Company for acting in such capacity. Each Purchaser further
acknowledges that RBC has acted solely as agent of the Company in connection
with the offering of the Shares by the Company. Each Purchaser further
acknowledges that the provisions of Sections 2.2(a)(iii) and 2.3(b)(vi) and this
Section 5.16 are for the benefit of and may be enforced by RBC.

(Signatures begin on the next page.)

 

21

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

 

Company: SumTotal Systems, Inc.       Address for Notice: By:  

 

    1808 North Shoreline Boulevard Mountain Name:       View, CA 94043 Title:  
    Attn: General Counsel       Fax: (650) 962-5677 With a copy to (which shall
not constitute notice):     Wilson Sonsini Goodrich & Rosati Professional
Corporation     650 Page Mill Road     Palo Alto, CA 94303     Attn: Katharine
A. Martin, Esq     Fax: (650) 493-6811    

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOW]

[Signature Page to Securities Purchase Agreement]

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[PURCHASER SIGNATURE PAGES TO SUMT 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 Purchasing Entity:  

 

Signature of Authorized Signatory of Investing Entity:  

 

Name of Authorized Signatory:  

 

Title of Authorized Signatory:  

 

Email Address of Authorized Entity:  

 

Fax:  

 

   

 

Address for Notice of Purchasing Entity:  

 

 

 

 

 

  Subscription Amount: $                       Number of Shares:
                              

[SIGNATURE PAGES CONTINUE]