Document:

EXHIBIT 10.53
                                                                   -------------

                            BRIDGELINE SOFTWARE, INC.

                               STOCK OPTION GRANT

OPTIONEE: Ken Galaznik

     Bridgeline Software, Inc. (hereinafter called the "Company"), pursuant to
its Stock Option Plan adopted August 30, 2000, as amended and restated
(hereinafter called the "Plan"), hereby grants to you, the optionee above named
(hereinafter called the "Optionee"), an option to purchase shares of the $.001
par value common stock of the Company (hereinafter called the "Common Stock").
The options granted will be Non-Statutory Stock Options as defined in the Plan.

     The details of your option are as follows:

1. The total number of shares of Common Stock subject to this option is 25,000.
This option shall become exercisable in three installments, as follows:

     Installment        Number of Shares     First Date Exercise is Permitted
     -----------        ----------------     --------------------------------

          1                  8,333                 September 20, 2007
          2                  8,333                 September 20, 2008
          3                  8,334                 September 20, 2009

          TOTAL             25,000

2. The term of this option commences on the date hereof and terminates 10 years
hereafter on September 20, 2016. This option is not transferable, except at
death by will or the laws of descent and distribution, and is exercisable during
your life only by you. No assignment or transfer of the option, or of the rights
represented thereby, whether voluntary or involuntary, by operation of law or
otherwise, except by will or the laws of descent and distribution, shall vest in
the assignee or transferee any interest or right herein whatsoever, but
immediately upon any attempt to assign or transfer an option the same shall
terminate and be of no force or effect.

3. The exercise price of this option is $3.75 per share.

4. a. You may exercise this option to purchase all or any part of your allotment
which has accrued to you, at any time during the term of this option, but not
thereafter, by depositing with the Secretary or Assistant Secretary of the
Company notice in writing, designating the number of shares as to which you are
exercising your option, accompanied by payment in full for such number of
shares; provided, however, that not less than 100 shares may be purchased upon
any one exercise of the option granted hereby unless the number of shares
purchased at such time is the total number of shares in respect of which the
option hereby granted is then exercisable.

<PAGE>

     b. Payment shall be in the form of cash, certified check, bank draft or
postal or express money order payable to the order of the Company in United
States Dollars. If the Board of Directors of the Company or an authorized
committee of the Board has, pursuant to Section 5(d) of the Plan, authorized
payment in stock of the Company, payment, in whole or in part, may be in the
form of a certificate or certificates representing stock of the Company at its
then value.

     c. Following receipt of such notice and required payment and compliance by
the Optionee or other person entitled to exercise the option with any
limitations and conditions imposed by this grant, the Company shall thereafter
cause its transfer agent and registrar to issue and deliver to the Optionee (or
other person entitled to exercise the option) as soon as practically possible a
certificate or certificates for such number of shares registered in the name of
the Optionee or such other person entitled to exercise the option, as the case
may be.

5. This option is subject to (a) all the provisions of the Plan, a copy of which
is attached hereto and is specifically incorporated by reference herein, and (b)
to all interpretations, rules and regulations which may from time to time be
promulgated and adopted pursuant to such Plan.

6. The Company is under no obligation to register the shares of Common Stock
purchased upon exercise of this option under the Securities Act of 1933.

7. Any dispute or disagreement which shall arise under, or as a result of, or
pursuant to, this Agreement shall be determined by the Board of Directors of the
Company in its absolute and uncontrolled discretion, and any such determination
or any other determination by the Board of Directors under or pursuant to this
Agreement and any interpretation by the Board of Directors of the terms of this
Agreement, shall be final, binding and conclusive on all persons affected
thereby.

8. Any notice which either party hereto may be required or permitted to give to
the other shall be in writing and may be delivered personally or by mail,
postage prepaid, addressed as follows: to the President of the Company, at
Bridgeline Software, Inc. at 10 Sixth Road, Woburn, MA 01801, or at such other
address as the Company by notice to the Optionee may designate in writing from
time to time; to the Optionee, at his address as the Optionee, by notice to the
President of the Company, may designate in writing from time to time.

                                        2
<PAGE>

     Dated as of the 20th day of September 2006.

                                       BRIDGELINE SOFTWARE, INC.

                                       By: /S/ THOMAS MASSIE
                                           ----------------------------
                                           President
                                           Duly authorized on behalf of the
                                           Board of Directors

     The undersigned accepts the foregoing option and agrees to all the terms
and conditions thereof, acknowledging hereby receipt of a copy of the Stock
Option Plan.

     Dated as of the 20th day of September 2006.

                                       /S/ KEN GALAZNIK
                                       --------------------------
                                       Optionee

                                        3Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of
December 12, 2006, among KINTERA,
INC., a Delaware corporation (the “Company”), and the investors identified on the
signature pages hereto (each, an “Investor”
and collectively, the “Investors”).

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 Investor, and each Investor, severally and not jointly,
desires to purchase from the Company certain securities of the Company, as more
fully described in this Agreement.

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 the Investors 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 shall
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.

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

“Closing” means the closing of the purchase
and sale of the Securities pursuant to Article II.

“Closing Date” means the Business Day on
which all of the conditions set forth in Sections 5.1 and 5.2 hereof are
satisfied, or such other date as the parties may agree.

“Commission” means the 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 entitle the holder thereof to
acquire Common Stock at any time, 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 or other securities that entitle the holder to
receive, directly or indirectly, Common Stock.

“Company Counsel” means Morrison &
Foerster LLP.

“Company Deliverables” has the meaning set
forth in Section 2.2(a).

“Disclosure Materials” has the meaning set
forth in Section 3.1(h).

“Effective Date” means the date that the
Registration Statement required by Section 2(a) of the Registration Rights
Agreement is first declared effective by the Commission.

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

“GAAP” means U.S. generally accepted
accounting principles.

“Intellectual Property Rights” has the
meaning set forth in Section 3.1(n).

“Investment Amount” means, with respect to
each Investor, the Investment Amount indicated on such Investor’s signature
page to this Agreement.

“Investor Deliverables” has the meaning set
forth in Section 2.2(b).

“Investor Party” has the meaning set forth
in Section 4.7.

“Lien” means any lien, charge, encumbrance,
security interest, right of first refusal or other restrictions of any kind.

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

“New York Courts” means the state and
federal courts sitting in the City of New York, Borough of Manhattan.

 “Outside Date”
means January 31, 2007.

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“Per Share Purchase Price” equals $1.25.

“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.

“Prior Investor” means an Investor, as such
term is defined in that certain Securities Purchase Agreement, dated November
21, 2005, by and among the Company and the investors identified on the
signature pages thereto.

 “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 the Investors, in the form of Exhibit B hereto.

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

“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” has the meaning set forth 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 the Investors pursuant to this Agreement.

“Short Sales” include, without limitation,
all “short sales” as defined in Rule 200 promulgated under Regulation SHO under
the Exchange Act and all types of direct and indirect stock pledges, forward
sale contracts, options, puts, calls, swaps and similar arrangements (including
on a total return basis), and sales and other transactions through non-US
broker dealers or foreign regulated brokers.

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

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“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 any Trading Market, a day on which the Common Stock is quoted in
the over-the-counter market as reported by the 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 Market, the
NASDAQ Capital Market or OTC Bulletin Board on which the Common Stock is listed
or quoted for trading on the date in question.

“Transaction Documents” means this
Agreement, the Warrants, the Registration Rights Agreement, the Warrant Amendment
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 A, which are issuable to the Investors
at the Closing.

 “Warrant Amendment
Agreement” means the Warrant Amendment Agreement,
dated as of the date of this Agreement, by and among the Company and the
Investors that are Prior Investors, in the form of Exhibit C hereto.

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

ARTICLE II.

PURCHASE AND SALE

2.1           Closing.  Subject to the terms and conditions set forth
in this Agreement, at the Closing the Company shall issue and sell to each
Investor, and each Investor shall, severally and not jointly, purchase from the
Company, the Shares and the Warrants representing such Investor’s Investment
Amount.  The Closing shall take place at
the offices of Morrison & Foerster LLP, 12531 High Bluff Drive, Suite 100,
San Diego, CA 92130 on the Closing Date or at such other location or time as
the parties may agree.

2.2           Closing Deliveries.  (a)  At the Closing, the Company
shall deliver or cause to be delivered to each Investor the following (the “Company
Deliverables”):

(i)            a certificate evidencing a number of
Shares equal to such Investor’s Investment Amount divided by the Per Share
Purchase Price, registered in the name of such Investor;

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(ii)           a Warrant, registered in the name of
such Investor, pursuant to which such Investor shall have the right to acquire
the number of shares of Common Stock equal to 30% of the number of Shares
issuable to such Investor pursuant to Section 2.2(a)(i);

(iii)          a certificate of the Transfer Agent
with respect to the outstanding Common Stock number of the Company as of the
most recent practicable date;

(iv)          an Officer’s Certificate and Secretary
Certificate, in agreed form, duly executed by such officers of the Company;

(v)           certificates of good standing of the
Company in its jurisdiction of incorporation and in each jurisdiction in which
qualification to do business as a foreign corporation is required, except where
failure to so qualify would not have a Material Adverse Effect;

(vi)          the legal opinion of Company Counsel,
in agreed form, addressed to the Investors;

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

(viii)        with respect to each Investor that is a
Prior Investor, the Warrant Amendment Agreement, duly executed by the Company.

(b)           At the Closing, each Investor shall
deliver or cause to be delivered to the Company the following (the “Investor Deliverables”):

(i)            its Investment Amount, in United
States dollars and in immediately available funds, by wire transfer to an
account designated in writing by the Company for such purpose;

(ii)           the Registration Rights Agreement,
duly executed by such Investor; and

(iii)          with respect to each Investor that is
a Prior Investor, the Warrant Amendment Agreement, duly executed by such
Investor.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1           Representations and Warranties of
the Company.  The Company hereby
makes the following representations and warranties to each Investor:

(a)           Subsidiaries.  The Company has no direct or indirect
Subsidiaries other than as specified in the SEC Reports.  The Company owns, directly or indirectly, all
of the

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capital stock of each Subsidiary free and
clear of any and all 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 preemptive and similar rights.  Neither the Company nor any Subsidiary is
party to any material joint venture, nor has any ownership interest in any
entity that is material to the Company or as disclosed in the SEC Reports.

(b)           Organization and Qualification.  The Company and each Subsidiary are duly
incorporated or otherwise organized and validly existing 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. 
Neither the Company nor any Subsidiary is in violation of any of the
material provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents.  The Company and each Subsidiary are duly
qualified to conduct its respective businesses and are 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, individually or in the aggregate, have or
reasonably be expected to result in 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
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. 
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 as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

(d)           No Conflicts.  The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the 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, 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) 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 (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or

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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, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.

(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) the filing with the Commission of one or more Registration Statements
in accordance with the requirements of the Registration Rights Agreement, (ii)
filings required by state securities laws, (iii) the filing of a Notice of Sale
of Securities on Form D with the Commission under Regulation D of the
Securities Act, (iv) the filings required in accordance with Section 4.5, (v)
such consents or waivers as may be required under registration rights
agreements entered into in connection with business acquisitions effected prior
to the date of this Agreement, and (vi) the filing of any requisite notices
with the Trading Market and (vii) those that have been made or obtained prior to
the date of this Agreement.

(f)            Issuance of the Securities.  The Securities have been 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.  The Company has reserved from its
duly authorized capital stock the shares of Common Stock issuable pursuant to
this Agreement and upon the exercise of the Warrants in order to issue the
Shares and the Warrant Shares.

(g)           Capitalization.  The number of shares and type of all
authorized, issued and outstanding capital stock of the Company, and all shares
of Common Stock reserved for issuance under the Company’s various option and
incentive plans as of September 30, 2006, is accurately set forth in the SEC
Reports.  Except as specified in the SEC
Reports, no securities of the Company are entitled to preemptive or similar
rights.  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 specified in the SEC Reports, and
other than stock options granted pursuant to the Company’s stock option plans
following September 30, 2006, there are no outstanding options, warrants, scrip
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, immediately or with the
passage of time, obligate the Company to issue shares of Common Stock or other
securities to

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any Person (other than the Investors) 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.

(h)           SEC Reports; Financial Statements.  The Company has filed all reports, forms and
schedules 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 twelve
months preceding the date hereof (or such shorter period as the Company was
required by law to file such reports) (the foregoing materials being
collectively referred to herein as the “SEC Reports” and, together with the Schedules to
this Agreement (if any), the “Disclosure Materials”) on a timely basis or has
timely filed a valid extension of such time of filing and has filed any such
SEC Reports prior to the expiration of any such extension.  The SEC Reports, as amended, when filed,
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, as amended, 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 light of the circumstances under which they were made,
not misleading.  The financial statements
of the Company included in the SEC Reports, as amended, 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 GAAP applied on a consistent basis during the periods
involved, except as may be otherwise specified in such financial statements or
the notes thereto, 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, 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, accrued expenses and
other liabilities 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 or the identity of its auditors, (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 in connection with
repurchases of unvested stock issued to employees of the Company), and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans.

(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 Securities or (ii) except as specifically
disclosed in the SEC Reports, could, if there were an unfavorable

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decision, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor
any director or officer thereof (in his or her capacity as such), 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, except
as specifically disclosed in the SEC Reports. 
There has not been, and to the knowledge of the Company, there is not
pending any investigation by the Commission involving the Company or any
current or former director or officer of the Company (in his or her capacity as
such).  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)           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, or in receipt of notice that it is in violation of, any order of
any court, arbitrator or governmental body, or (iii) is or has been in
violation of, or in receipt of notice that it is in violation of, any statute,
rule or regulation of any governmental authority, including without limitation
all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety,
employment and labor matters and, to its knowledge, privacy, except in each
case as could not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect. The Company is in compliance
with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended,
and the rules and regulations thereunder, that are applicable to it, except
where such noncompliance could not have or reasonably be expected to result in
a Material Adverse Effect.

(l)            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, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such permits.

(m)          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 their respective businesses and good and marketable title in all
personal property owned by them that is material to their respective
businesses, 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. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them

 9
 

 

under leases valid, subsisting and
enforceable against the Company and the Subsidiaries, and the Company and the
Subsidiaries are in compliance with such leases, except as could not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.

(n)           Patents and Trademarks.  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 that are 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, individually or in the aggregate, have or reasonably be expected
to result in 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 and the Company has no knowledge of any such
violation or infringement.  Except as set
forth in the SEC Reports, to the knowledge of the Company, all such
Intellectual Property Rights are enforceable.

(o)           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 for enterprises of
similar size and stage of development in the businesses in which the Company
and the Subsidiaries are engaged.  The
Company has no reason to believe that it will not be able to renew its and the
Subsidiaries’ 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 on terms consistent with market for the Company’s and
such Subsidiaries’ respective lines of business.

(p)           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 required to be
disclosed in the SEC Reports (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.

(q)           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) 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

 10
 

 

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.  The Company’s certifying officers have
evaluated the effectiveness of the Company’s controls and procedures in
accordance with Item 307 of Regulation S-K under the Exchange Act for the
Company’s fiscal quarter ended September 30, 2006 (such date, the “Evaluation Date”).  The Company presented in its most recently
filed 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, there have been no significant changes in the Company’s
internal controls (as such term is defined in Item 308(c) of Regulation S-K
under the Exchange Act) or, to the Company’s knowledge, in other factors that
could significantly affect the Company’s internal controls which was required
to be disclosed in the SEC Reports and was not so disclosed.

(r)            Certain Fees.  Roth Capital Partners, LLC will receive
brokerage or finder fees or commissions payable by the Company with respect to
the transactions contemplated by this Agreement.  The Investors shall have no obligation with
respect to any fees or with respect to any claims (other than such fees or
commissions owed by an Investor pursuant to written agreements executed by such
Investor which fees or commissions shall be the sole responsibility of such
Investor) 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.

(s)           Certain Registration Matters.
Assuming the accuracy of the Investors’ representations and warranties set
forth in Section 3.2(b)-(e), no registration under the Securities Act is
required for the offer and sale of the Shares and Warrants and the offer of
Warrant Shares by the Company to the Investors under the Transaction
Documents.  The Company is eligible to
register its Common Stock for resale by the Investors under Form S-3 promulgated
under the Securities Act.  Except as
specified in Schedule 3.1(s), the Company has not granted or agreed to
grant to any Person any rights (including “piggy-back” registration
rights) to have any securities of the Company registered with the Commission or
any other governmental authority that have not been satisfied.

(t)            Listing and Maintenance
Requirements.  Except as specified in
the SEC Reports, the Company has not, in the two years preceding the date
hereof, received notice from any Trading Market to the effect that the Company
is not in compliance with the listing or maintenance requirements thereof.  The Company is, and has no reason to believe
that it will not in the foreseeable future continue to be, in compliance with
the listing and maintenance requirements for continued listing of the Common
Stock on the Trading Market on which the Common Stock is currently listed or
quoted.  The issuance and sale of the
Securities 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, and no approval of the shareholders of the Company thereunder is
required for the Company to issue and deliver to the Investors the Securities
contemplated by Transaction Documents.

 11
 

 

(u)           Investment Company.  The Company is not, and is not an Affiliate
of, and immediately following the Closing will not have become, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.

(v)           Application of Takeover
Protections.  The Company has 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 Investors as a result of the Investors 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
Investors’ ownership of the Securities.

(w)          No Additional Agreements.  The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction
Documents.

(x)            Disclosure.  The Company confirms that neither it nor any
Person acting on its behalf has provided any Investor or its respective agents
or counsel with any information that the Company believes constitutes material,
non-public information except insofar as the existence and terms of the
proposed transactions hereunder may constitute such information. The Company
understands and confirms that the Investors will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company.  All disclosure provided to the
Investors regarding the Company, its business and the transactions contemplated
hereby, furnished by or on behalf of the Company (including the Company’s
representations and warranties set forth in this Agreement) 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 light of the circumstances under which they were made, not misleading.

(y)           Insolvency.  The Company is not as of the date hereof, and
after giving effect to the transactions contemplated hereby to occur at the Closing
will not, be Insolvent.  For purposes of
this Agreement, “Insolvent” shall mean, with respect to any Person, that (i)
such Person is unable to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured or (ii) such Person intends to incur or believes that it will incur
debts that would be beyond its ability to pay as such debts mature.

(z)            Transfer Taxes.  On the Closing Date, all stock transfer or
other taxes (other than income or similar taxes) which are required to be paid
in connection with the sale and transfer of the Securities to be sold to each
Investor hereunder will be, or will have been, fully paid or provided for by
the Company, and all laws imposing such taxes will be or will have been
complied with by the Company, except where such noncompliance could not have or
reasonably be expected to result in a Material Adverse Effect.

 12
 

 

(aa)         Tax Status.  The Company and each of its Subsidiaries (i)
has made or filed all foreign, federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and (iii)
has set aside on its books provision reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or declarations
apply, except where the failure to do so could not have or reasonably be
expected to result in a Material Adverse Effect.  There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.

(bb)         Undisclosed Liabilities.  No event, liability, development or
circumstance has occurred or exists with respect to the Company or its
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under the Securities Act
and the Exchange Act and the rules and regulations of the Commission
promulgated thereunder relating to an issuance and sale by the Company of its
securities and which has not been reported in accordance with such rules and
regulations of the Commission.

(cc)         Employee Relations.  Neither Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or employs any member of a
union.  The Company and its Subsidiaries
believe that their relations with their employees are good.  No executive officer of the Company or any of
its Subsidiaries (as defined in Rule 501(f) of the Securities Act) has notified
the Company or any such Subsidiary that such officer intends to leave the
Company or any such Subsidiary or otherwise terminate such officer’s employment
with the Company or any such Subsidiary. 
No executive officer of the Company or any of its Subsidiaries, to the
knowledge of the Company or any such Subsidiary, is now, or expects to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract, agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any
such Subsidiary to any liability with respect to any of the foregoing
matters.  The Company and its
Subsidiaries are in compliance with all federal, state and local laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.  There are no complaints or charges against
the Company or its Subsidiaries pending or, to the knowledge of the Company and
its Subsidiaries, threatened to be filed with any Governmental Authority or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment by the Company or its
Subsidiaries of any individual, that would be reasonably likely to result in a
Material Adverse Effect.

(dd)         Subsidiary Rights.  The Company or one of its Subsidiaries has
the unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive

 13
 

 

dividends and distributions on, all capital
securities of its Subsidiaries as owned by the Company or such Subsidiary.

(ee)         Off Balance Sheet Arrangements.  There is no transaction, arrangement, or
other relationship between the Company and an unconsolidated or other off
balance sheet entity that is required to be disclosed by the Company in its SEC
Reports and is not so disclosed or that otherwise would be reasonably likely to
have a Material Adverse Effect.

3.2           Representations and Warranties of
the Investors.  Each Investor hereby,
for itself and for no other Investor, represents and warrants to the Company as
follows:

(a)           Organization; Authority.  Such Investor is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder.
The execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such
Investor.  Each of this Agreement and the
Registration Rights Agreement has been duly executed by such Investor, and when
delivered by such Investor in accordance with terms hereof, will constitute the
valid and legally binding obligation of such Investor, enforceable against it
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general application.

(b)           Investment Intent.  Such Investor is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof,
without prejudice, however, to such Investor’s right at all times to sell or
otherwise dispose of all or any part of such Securities in compliance with
applicable federal and state securities laws. 
Subject to the immediately preceding sentence, nothing contained herein
shall be deemed a representation or warranty by such Investor to hold the
Securities for any period of time.  Such
Investor is acquiring the Securities hereunder in the ordinary course of its
business. Such Investor does not have any agreement or understanding, directly
or indirectly, with any Person to distribute any of the Securities.

(c)           Investor Status.  At the time such Investor was offered the
Securities, it was, and at the date hereof it is, and at the Closing and on
each date on which it exercises Warrants it will be, an “accredited investor”
as defined in Rule 501(a) under the Securities Act.  Such Investor is not a registered
broker-dealer under Section 15 of the Exchange Act.

(d)           General Solicitation.  Such Investor 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.

 14

 

(e)           Access to Information.  Such Investor acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Shares and the merits and risks of investing in the Securities;
(ii) access to information about the Company and the Subsidiaries and their
respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information that the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment.  Neither such inquiries nor
any other investigation conducted by or on behalf of such Investor or its
representatives or counsel shall modify, amend or affect such Investor’s right
to rely on the truth, accuracy and completeness of the Disclosure Materials and
the Company’s representations and warranties contained in the Transaction
Documents.

(f)            Certain Trading Activities.  Such Investor has not directly or indirectly,
nor has any Person acting on behalf of or pursuant to any understanding with
such Investor, engaged in any transactions in the securities of the Company
(including, without limitations, any Short Sales involving the Company’s
securities) since the time that such Investor was first contacted by the
Company or Roth Capital Partners, LLC regarding the investment in the Company
contemplated by this Agreement.  Such
Investor covenants that neither it nor any Person acting on its behalf or
pursuant to any understanding with it will engage in any transactions in the
securities of the Company (including Short Sales) prior to the time that the
transactions contemplated by this Agreement are publicly disclosed by the
Company.  Such Investor has maintained,
and covenants that until such time as the transactions contemplated by this
Agreement are publicly disclosed by the Company such Investor will maintain,
the confidentiality of any disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).  Such Investor understands and acknowledges,
that the Commission currently takes the position that coverage of Short Sales “against
the box” prior to the Effective Date of the Registration Statement is a
violation of Section 5 of the Securities Act, as set forth in Item 65, Section
A, of the Manual of Publicly Available Telephone Interpretations, dated July
1997, compiled by the Office of Chief Counsel, Division of Corporation Finance.

(g)           Independent Investment Decision.  Such Investor has independently evaluated the
merits of its decision to purchase Securities pursuant to the Transaction
Documents, and such Investor confirms that it has not relied on the advice of
any other Investor’s business and/or legal counsel in making such decision.  Such Investor has not relied on the business
or legal advice of Roth Capital Partners, LLC or any of its agents, counsel or
Affiliates in making its investment decision hereunder, and confirms that none
of such Persons has made any representations or warranties to such Investor in
connection with the transactions contemplated by the Transaction Documents.

(h)           Limited Ownership.  The purchase by such Investor of the
Securities issuable to it at the Closing will not result in such Investor
(individually or together with any other Person with whom such Investor has
identified, or will have identified, itself as part of a

 15
 

 

“group” in a public filing made with the
Commission involving the Company’s securities) acquiring, or obtaining the
right to acquire, in excess of 19.999% of the outstanding shares of Common
Stock or the voting power of the Company on a post transaction basis that
assumes that the Closing shall have occurred. 
Such Investor does not presently intend to, alone or together with
others, make a public filing with the Commission to disclose that it has (or
that it together with such other Persons have) acquired, or obtained the right
to acquire, as a result of the Closing (when added to any other securities of
the Company that it or they then own or have the right to acquire), in excess
of 19.999% of the outstanding shares of Common Stock or the voting power of the
Company on a post transaction basis that assumes that the Closing shall have
occurred.

The Company acknowledges and agrees that no
Investor has made or makes 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           (a)           Securities
may only be disposed of in compliance with state and federal securities
laws.  In connection with any transfer of
the Securities other than pursuant to an effective registration statement, to
the Company, to an Affiliate of an Investor 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, 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.

(b)           Certificates evidencing the
Securities will contain the following legend, until such time as they are not
required under Section 4.1(c):

[NEITHER THESE SECURITIES
NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE 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 AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES] MAY

 16
 

 

BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

The Company
acknowledges and agrees that an Investor may from time to time pledge, and/or
grant a security interest in some or all of the Securities pursuant to a bona
fide margin agreement in connection with a bona fide margin account and, if
required under the terms of such agreement or account, such Investor may
transfer pledged or secured Securities to the pledgees or secured parties.  Such a pledge or transfer would not be
subject to approval or consent of the Company and no legal opinion of legal
counsel to the pledgee, secured party or pledgor shall be required in
connection with the pledge, but such legal opinion may be required in
connection with a subsequent transfer following default by the Investor
transferee of the pledge.  No notice
shall be required of such pledge.  At the
appropriate Investor’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 the preparation and filing of any required prospectus supplement
under Rule 424(b)(3) of 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) following a sale or transfer of such Shares or Warrant
Shares pursuant to an effective registration statement (including the
Registration Statement), or (ii) following a sale or transfer of such Shares or
Warrant Shares pursuant to Rule 144 (assuming the transferor is not an
Affiliate of the Company), or (iii) while 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 pronouncements issued by the Staff of the Commission).  Upon the earlier of (i) the Effective Date or
(ii) Rule 144(k) becoming available for the resale of Registrable Securities,
Company shall (A) deliver to the transfer agent for the Common Stock (the “Transfer Agent”) irrevocable
instructions that the Transfer Agent shall reissue a certificate representing
shares of Common Stock without legends upon receipt by such Transfer Agent of
the legended certificates for such shares, together with either (1) a customary
representation by the Investor that Rule 144(k) applies to the shares of Common
Stock represented thereby or (2) a statement by the Investor that such Investor
has sold the shares of Common Stock represented thereby in accordance with the
Plan of Distribution contained in the Registration Statement, and (B) cause its
counsel to deliver to the Transfer Agent one or more blanket opinions to the
effect that the removal of such legends in such circumstances may be effected
under the Securities Act.  From and after
the earlier of such dates, upon an Investor’s written request, the Company
shall promptly cause certificates evidencing the Investor’s Shares to be
replaced with certificates which do not bear such restrictive legends.  When the Company is required to cause
unlegended certificates to replace previously issued legended certificates
under this Section, if unlegended certificates are not delivered to an Investor
within three (3) Trading Days of submission by that Investor of legended
certificate(s) to the Transfer Agent as provided above (the “Delivery Date”), and if after
such Delivery Date and prior to the receipt of such unlegended certificates,
the Investor or the Investor’s broker purchases (in an open market transaction
or otherwise)

 17
 

 

shares of Common Stock to deliver in
satisfaction of a sale by the Investor of the Shares which the Investor
anticipated receiving upon such request (a “Buy In”), then the Company shall (1) pay in cash to the
Investor the amount by which (x) the Investor’s total purchase price (including
reasonable brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (A) the number of
Shares that the Company was required to deliver to the Investor on the Delivery
Date by (B) the closing bid price of the Common Stock on the Delivery Date and
(2) deliver to such Investor the number of shares of Common Stock that would
have been issued had the Company timely complied with its delivery obligations
hereunder.  The Investor shall provide
the Company written notice indicating the amounts payable to the Investor in
respect of the Buy In.

4.2           Furnishing of Information.  As long as any Investor owns the 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 Investor owns Securities, if
the Company is not required to file reports pursuant to such laws, it will
prepare and furnish to the Investors and make publicly available in accordance
with Rule 144(c) such information as is required for the Investors to sell the
Shares and Warrant Shares 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 the Shares and Warrant Shares without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144.

4.3           Integration.  The Company shall not, and shall use its best
efforts to ensure that no Affiliate of the Company shall, 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 Investors, or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market in a manner that would
require stockholder approval of the sale of the securities to the Investors.

4.4           Subsequent Registrations.  Other than pursuant to the Registration
Statement, prior to the Effective Date, the Company may not file any
registration statement (other than on Form S-8) 
with the Commission with respect to any securities of the Company.

4.5           Securities Laws Disclosure;
Publicity.  By 9:00 a.m. (New York
time) on the Trading Day following the execution of this Agreement, and by 9:00
a.m. (New York time) on the Trading Day following the Closing Date, the Company
shall issue press releases disclosing the transactions contemplated hereby and
the Closing.  On the Trading Day
following the execution of this Agreement the Company will file a Current
Report on Form 8-K disclosing the material terms of the Transaction Documents
(and attach as exhibits thereto the Transaction Documents), and on the Trading
Day following the Closing Date the Company will file an additional Current
Report on Form 8-K to disclose the Closing. 
In addition, the Company will make such other filings and notices in the
manner and time required by the Commission and the

 18
 

 

Trading Market on which the Common Stock is
listed.  Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Investor, or include
the name of any Investor in any filing with the Commission (other than the
Registration Statement and any exhibits to filings made in respect of this
transaction in accordance with periodic filing requirements under the Exchange
Act) or any regulatory agency or Trading Market, without the prior written
consent of such Investor, except to the extent such disclosure is required by
law or Trading Market regulations.

4.6           Limitation on Issuance of Future
Priced Securities.  During the six
months following the Closing Date, the Company shall not issue any “Future
Priced Securities” as such term is described by Nasdaq IM-4350-1.

4.7           Indemnification of Investors.  In addition to the indemnity provided in the
Registration Rights Agreement, the Company will indemnify and hold the
Investors and their directors, officers, shareholders, partners, employees,
Affiliates and agents (each, an “Investor 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 (collectively, “Losses”)
that any such Investor Party may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy of any representation, warranty, covenant
or agreement made by the Company in any Transaction Document.  In addition to the indemnity contained
herein, the Company will reimburse each Investor Party for its reasonable legal
and other expenses (including the cost of any investigation, preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred.

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

4.9           Listing of Securities.  The Company agrees, (i) if the Company
applies to have the Common Stock traded on any other Trading Market, it will
include in such application the Shares and Warrant Shares, and will take such
other action as is necessary or desirable to cause the Shares and Warrant
Shares to be listed on such other Trading Market as promptly as possible, and
(ii) it 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 material
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the Trading Market.

 19
 

 

4.10         Use of Proceeds.  The Company will use the net proceeds from
the sale of the Securities hereunder for general corporate purposes, which may
include working capital and reduction of contractual obligations.

ARTICLE
V.

CONDITIONS
PRECEDENT TO CLOSING

5.1           Conditions Precedent to the
Obligations of the Investors to Purchase Securities.  The obligation of each Investor to acquire
Securities at the Closing is subject to the satisfaction or waiver by such
Investor, at or before the Closing, of each of the following conditions:

(a)           Representations and Warranties.  The representations and warranties of the
Company contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing as though made on and as of such
date, except that representations and warranties that are qualified by
materiality shall be true and correct as of the date when made and as of the
Closing as though made on and as of such date;

(b)           Performance.  The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by it at or prior to the Closing;

(c)           No Injunction.  No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;

(d)           Adverse Changes.  Since the date of execution of this
Agreement, no event or series of events shall have occurred that reasonably
could have or result in a Material Adverse Effect;

(e)           No Suspensions of Trading in
Common Stock; Listing.  Trading in
the Common Stock shall not have been suspended by the Commission or any Trading
Market (except for any suspensions of trading of not more than one Trading Day
solely to permit dissemination of material information regarding the Company)
at any time since the date of execution of this Agreement, and the Common Stock
shall have been at all times since such date listed for trading on a Trading
Market;

(f)            Nasdaq Listing.  If applicable, the Nasdaq Stock Market shall
have waived application of the 15 day prior notice contained in Nasdaq
Marketplace Rule 4310(c)(17)(D) or such timeframe shall have expired without
objection;

(g)           Company Deliverables.  The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a); and

 20
 

 

(h)           Termination.  This Agreement shall not have been terminated
as to such Investor in accordance with Section 6.5 herein.

5.2           Conditions Precedent to the
Obligations of the Company to sell Securities.  The obligation of the Company to sell
Securities at the Closing is subject to the satisfaction or waiver by the
Company, at or before the Closing, of each of the following conditions:

(a)           Representations and Warranties.  The representations and warranties of each
Investor contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made on and as of
such date;

(b)           Performance.  Each Investor shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by such Investor at or prior to the Closing;

(c)           No Injunction.  No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;

(d)           Nasdaq Listing.  If applicable, the Nasdaq Stock Market shall
have waived application of the 15 day prior notice contained in Nasdaq
Marketplace Rule 4310(c)(17)(D) or such timeframe shall have expired without
objection;

(e)           Investors Deliverables.  Each Investor shall have delivered its
Investors Deliverables in accordance with Section 2.2(b); and

(f)            Termination.  This Agreement shall not have been terminated
as to such Investor in accordance with Section 6.5 herein.

ARTICLE VI.

MISCELLANEOUS

6.1           Fees and Expenses.  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 the Transaction Documents.  The Company shall pay all stamp and other
taxes and duties levied in connection with the sale of the Shares.

6.2           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,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.

 21
 

 

6.3           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
(provided the sender receives a machine-generated confirmation of successful
transmission and reasonably promptly following such transmission sends such
notice or communication via U.S. mail or overnight courier) at the facsimile
number specified in this Section prior to 5:00 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 specified
in this Section on a day that is not a Trading Day or later than 5:00 p.m. (New
York City time) on any Trading Day, (c) the 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 follows:

	
  If to the Company:

  	
  Kintera, Inc.

  
	
   

  	
  9605 Scranton Road, Suite 240

  
	
   

  	
  San Diego, California 92121

  
	
   

  	
  Facsimile No.: (858) 795-3010

  
	
   

  	
  Telephone No.: (858) 795-3000

  
	
   

  	
  Attention each of the Chief Executive Officer and
  the General Counsel

  
	
   

  	
   

  
	
  With a copy to:

  	
  Morrison & Foerster LLP

  
	
   

  	
  12531 High Bluff Drive, Suite 100

  
	
   

  	
  San Diego, CA 92130

  
	
   

  	
  Facsimile No.:  (858) 523-5941

  
	
   

  	
  Attention:  Scott Stanton, Esq.

  
	
   

  	
   

  
	
  If to an
  Investor:

  	
  To the address set forth under such Investor’s name
  on the signature pages hereof;

  
	
   

  	
   

  
	
  With a copy to:

  	
  Schulte Roth & Zabel LLP

  
	
   

  	
  919 Third Avenue

  
	
   

  	
  New York, New York 10022

  
	
   

  	
  Facsimile No.:  (212) 593-5955

  
	
   

  	
  Attention:  Eleazer N. Klein, Esq.

  

 

or such other
address as may be designated in writing hereafter, in the same manner, by such
Person.

6.4           Amendments; Waivers; No Additional
Consideration.  No provision of this
Agreement may be waived or amended except in a written instrument signed by the
Company and the Investors holding a majority of the Shares.  No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver

 22
 

 

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.  No consideration shall be offered or paid to
any Investor to amend or consent to a waiver or modification of any provision
of any Transaction Document unless the same consideration is also offered to all
Investors who then hold Shares.

6.5           Termination.  This Agreement may be terminated prior to
Closing:

(a)           by written agreement of the Investors
and the Company; and

(b)           by the Company or an Investor (as to
itself but no other Investor) upon written notice to the other, if the Closing
shall not have taken place by 5:00 p.m. (New York City time) on the Outside
Date; provided, that the right to terminate this Agreement under this
Section 6.5(b) shall not be available to any Person whose failure to
comply with its obligations under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or before such time.

In the event
of a termination pursuant to this Section, the Company shall promptly notify
all non-terminating Investors. Upon a termination in accordance with this
Section 6.5, the Company and the terminating Investor(s) shall not have any
further obligation or liability (including as arising from such termination) to
the other and no Investor will have any liability to any other Investor under
the Transaction Documents as a result therefrom.

6.6           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.  This
Agreement shall be construed as if drafted jointly by the parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement or any of the
Transaction Documents.

6.7           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns.  Other than in connection with a
merger, consolidation, sale of all or substantially all of the Company’s assets
or other similar change in control transaction, the Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Investors. Any Investor may assign any or all of its rights
under this Agreement to any Person to whom such Investor 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 “Investors.”

6.8           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 4.7 (as to each Investor
Party).

 23
 

 

6.9           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement 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 agrees that all Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective Affiliates, employees or
agents) shall be commenced exclusively in the New York Courts.  Each party hereto hereby irrevocably submits
to the exclusive jurisdiction of the New York Courts 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 the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such New York Court, or that such
Proceeding has been commenced in an improper or inconvenient forum.  Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
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.  Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.  If either party shall commence a Proceeding
to enforce any provisions of a Transaction Document, then the prevailing party
in such Proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.

6.10         Survival.  The agreements, covenants, representation and warranties
contained herein shall survive the Closing and the delivery of the Securities.

6.11         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.

6.12         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.

 24
 

 

6.13         Rescission and Withdrawal Right.  Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Investor 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 Investor 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.

6.14         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.  If a replacement certificate
or instrument evidencing any Securities is requested due to a mutilation thereof,
the Company may require delivery of such mutilated certificate or instrument as
a condition precedent to any issuance of a replacement.

6.15         Remedies.  In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each
of the Investors 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.

6.16         Payment Set Aside.  To the extent that the Company makes a payment
or payments to any Investor pursuant to any Transaction Document or an Investor
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.

6.17         Independent Nature of Investors’
Obligations and Rights.  The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. 
The decision of each Investor to purchase Securities pursuant to the
Transaction Documents has been made by such Investor independently of any other
Investor.  Each Investor’s obligations
hereunder are

 25
 

 

expressly not conditioned on the purchase by
any or all of the other Investors of the Shares and the Warrants.  Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents.  Each Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its
investment hereunder and that no Investor will be acting as agent of such
Investor in connection with monitoring its investment in the Securities or
enforcing its rights under the Transaction Documents.  Each Investor 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 Investor to be joined as an
additional party in any proceeding for such purpose.  The Company acknowledges that each of the
Investors has been provided with the same Transaction Documents for the purpose
of closing a transaction with multiple Investors and not because it was
required or requested to do so by any Investor. 
The
Company’s obligations to each Investor under this Agreement are identical to
its obligations to each other Investor other than such differences resulting
solely from the number of Securities purchased by each Investor, but regardless
of whether such obligations are memorialized herein or in another agreement
between the Company and an Investor.

6.18         Limitation of Liability.  Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of an Investor
arising directly or indirectly, under any Transaction Document of any and every
nature whatsoever shall be satisfied solely out of the assets of such Investor,
and that no trustee, officer, other investment vehicle or any other Affiliate
of such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.

[Remainder of Page Intentionally Left Blank]

 26
 

 

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.

	
   

  	
  KINTERA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Harry E.
  Gruber, M.D.

  
	
   

  	
   

  	
  Title: President
  and Chief Executive Officer

  

 

[Signature Pages For Investors Follows]

 27
 

 

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.

	
   

  	
  NAME OF INVESTOR

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment
  Amount: $

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address
  For Notice

  
	
   

  	
   

  
	
   

  	
  c/o:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Street:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  City/State/Zip:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Tel:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Delivery
  Instructions

  
	
   

  	
  (if
  different from above)

  
	
   

  	
   

  
	
   

  	
  c/o:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Street:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  City/State/Zip:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Tel:

  	
   

  	
   

  
													

 

 28

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