Document:

Common Stock and Warrant Purchase Agreement

 Exhibit 10.01 
  
 COMMON STOCK AND WARRANT PURCHASE AGREEMENT 
  
 THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT dated as of September 29, 2005 (this “Agreement”), by
and among Kana Software, Inc., a Delaware corporation, with headquarters located at 181 Constitution Drive, Menlo Park, California 94025 (the “Company”), and each of the Buyers set forth on the signature pages hereto (the
“Buyers”); 
  
 WHEREAS: 
  
 A. The Company and the Buyers are executing and delivering this Agreement in
reliance upon an exemption from securities registration afforded by Rule 506 under Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the
Securities Act of 1933, as amended (the “1933 Act”); 
  
 B. The Company has authorized the issuance to the Buyers of Four Million Dollars ($4,000,000) of units (the “Units”), each Unit consisting of (i) one (1) share of the Company’s common stock, par value $.001
(the “Common Stock”), and (ii) 0.36 warrants, in the form attached hereto as Exhibit “A” (each, a “Warrant” and, collectively, the “Warrants”), at the Purchase Price Per
Unit described in Section 1.2. The shares of Common Stock issuable pursuant hereto, together with any shares of Common Stock issued in replacement thereof or as a dividend thereon or otherwise with respect thereto, are hereinafter referred to
as the “Purchased Shares.” The shares of Common Stock issuable upon exercise of or otherwise pursuant to the Warrants are hereinafter collectively referred to as the “Warrant Shares.” The Purchased Shares, Warrants
and Warrant Shares are collectively referred to herein as the “Securities”; 
  
 C. The Buyers desire to purchase and the Company desires to issue and sell upon, and subject to, the terms and conditions set forth in this Agreement, the Units for an aggregate purchase price of Four Million Dollars
($4,000,000) (the “Aggregate Purchase Price”); and 
  
 D. Contemporaneous with the execution and delivery of this Agreement, the Company and the Buyer are executing and delivering a Registration Rights Agreement, in the form attached hereto as Exhibit “B” (the
“Registration Rights Agreement”), pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

  
 NOW, THEREFORE, the parties hereto agree as follows:

  
 ARTICLE I 
  
 PURCHASE AND SALE OF COMMON STOCK AND WARRANTS 
  
 Section 1.1 Purchase and Sale of Units. Subject to the
terms and conditions of this Agreement, on the Closing Date (as defined below), the Company shall issue and sell to the Buyers, and each Buyer shall purchase from the Company, such number of Units as set forth immediately below such Buyer’s
name on signature pages hereto. 

 Section 1.2 Purchase Price Per Unit. The “Purchase Price Per Unit”
shall equal $1.5227. The aggregate number of Units to be issued by the Company to the Buyers on the Closing Date (as defined below) shall equal the quotient arrived at by dividing (x) the Aggregate Purchase Price by (y) the Purchase Price
Per Unit. 
  
 Section 1.3 Form of Payment; Delivery of
Purchased Shares and Warrants. On the Closing Date, (i) each Buyer shall pay the purchase price for the Units to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of
immediately available funds to the Company (in accordance with the Company’s written instructions) against the Company’s delivery of duly executed certificates for the Purchased Shares and Warrants representing the number of Units set
forth immediately below such Buyer’s name on the signature pages hereto and (ii) the Company or its transfer agent (the “Transfer Agent”) shall deliver such certificates, duly executed on behalf of the Company, to such
Buyer, against the delivery of such Purchase Price. In addition, on or prior to the Closing Date, each of the Company and the Buyers shall deliver all documents, instruments and writings required to be delivered by either of them pursuant to this
Agreement in order to implement and effect the transactions contemplated herein. 
  
 Section 1.4 Closing Date. Subject to the satisfaction (or waiver) to the conditions thereto set forth in Article VI below, the date and time of the issuance and sale of the Purchased Shares and
Warrants pursuant to this Agreement (the “Closing Date”) shall occur on a date after satisfaction of the conditions to closing set forth in Section 6 hereof; provided however that the Closing Date shall not be later than
September 30, 2005. The closing of the transaction contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at the offices of Akerman Senterfitt, One S.E. 3rd Avenue, 28th Floor,
Miami, Florida 33131, or at such other location as may be agreed to by the parties. “Trading Day” means any day during which (i) the Principal Exchange shall be open for trading and (ii) trading in the Company Common Stock
shall not have been halted at any time during such day for any reason. 
  
 ARTICLE II 
  
 BUYER’S REPRESENTATIONS AND
WARRANTIES 
  
 Each Buyer severally (and not jointly)
represents and warrants to the Company solely as to such Buyer that: 
  
 Section 2.1 Investment Purpose. The Buyer is purchasing the Securities for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from
registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. 
  
 Section 2.2 Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D (an “Accredited Investor”). 
  

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 Section 2.3 Reliance on Exemptions. The Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance
with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities. 
  
 Section 2.4 Information. The Buyer and its advisors, if
any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect
Buyer’s right to rely on the Company’s representations and warranties contained in Article III below. The Buyer understands that its investment in the Securities involves a significant degree of risk. 
  
 Section 2.5 Governmental Review. The Buyer understands
that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities. 
  
 Section 2.6 Transfer or Re-sale. The Buyer understands that (i) except as provided in the
Registration Rights Agreement, the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are
sold pursuant to an effective registration statement under the 1933 Act in accordance with the prospectus delivery requirements thereunder, (b) the Buyer shall have delivered to the Company an opinion of counsel (which opinion shall be in form,
substance and scope reasonably acceptable to the Company) to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, (c) the Securities are sold or transferred to an
“affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2.6 and
who is an Accredited Investor or (d) the Securities are sold pursuant to Rule 144 and Buyer shall provide customary documentation to the Company confirming eligibility for such exemption; (ii) any sale of such Securities made in reliance
on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case, other than pursuant to the Registration Rights Agreement). Notwithstanding
the foregoing or anything else contained herein to the contrary, in accordance with Section 4.14, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. 

 
 Section 2.7 Legends. The Buyer understands that the
Warrants and, until such time as the Purchased Shares and Warrant Shares have been registered under the 1933 Act as contemplated by the Registration Rights Agreement or otherwise may be sold pursuant to Rule 
  

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 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, the
Purchased Shares and Warrant Shares, may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities): 
  
 “The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The securities may not be sold, transferred or assigned in the absence of an effective registration statement for the securities under said Act, or an opinion of counsel, in form, substance
and scope customary for opinions of counsel in comparable transactions and reasonably acceptable to the Company, that registration is not required under said Act or unless sold pursuant to Rule 144 under said Act.” 
  
 The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed
under the 1933 Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of
counsel, in form, substance and scope customary for opinions of counsel in comparable transactions and reasonably acceptable to the Company, to the effect that a public sale or transfer of such Security may be made without registration under the
1933 Act and such sale or transfer is effected or (c) such holder provides the Company with reasonable assurances that such Security can be sold pursuant to Rule 144. The Buyer agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. 
  
 Section 2.8 Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and
delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer, liquidation or similar laws relating to, or affecting generally, the enforcement of creditor’s rights and remedies or by other equitable principles of general application from time to time in effect. 

 
 Section 2.9 Residency. The Buyer is a resident of the
jurisdiction set forth immediately below such Buyer’s name on the signature pages hereto.
  
 ARTICLE III 
  
 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 
  
 The Company represents and warrants to each Buyer that: 
  
 Section 3.1 Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and 
  

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 authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where
now owned, leased, used, operated and conducted. Schedule 3.1 sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified
or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” shall mean any material adverse effect on (i) the assets, liabilities, business, properties, operations, financial condition, prospects or
results of operations of the Company and its Subsidiaries (as defined below), if any, taken as a whole, (ii) the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith or (iii) the
authority or the ability of the Company to perform its obligations under this Agreement. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest. 
  
 Section 3.2 Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement and the Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Registration Rights Agreement and the Warrants by the Company and
the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Purchased Shares and Warrants and the issuance and reservation for issuance of the Warrant Shares issuable upon exercise of
or otherwise pursuant to the Warrants, respectively) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors or its stockholders is required, (iii) this
Agreement has been duly executed and delivered by the Company, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Registration Rights Agreement and the Warrants, each of such agreement and instruments
will constitute, a legal, 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,
fraudulent transfer, liquidation or similar laws relating to, or affecting generally, the enforcement of creditor’s rights and remedies or by other equitable principles of general application from time to time in effect. 
  
 Section 3.3 Capitalization. As of the business day prior
to the date hereof, the authorized capital stock of the Company consists of (i) 1,000,000,000 shares of Common Stock, of which 30,872,064 shares of Common Stock are issued and outstanding, 18,827,825 shares of Common Stock are reserved for
issuance pursuant to the Company’s stock option plans, 1,161,537 shares of Common Stock are reserved for issuance pursuant to securities exercisable for, or convertible into or exchangeable for shares of Common Stock and such number of shares
of Common Stock equal to the Purchased Shares plus 1.25 multiplied by the number of shares issuable upon exercise of the Warrants have been reserved for issuance pursuant to this Agreement (including the Warrant Shares issuable upon exercise of or
otherwise pursuant to the Warrants); (ii) 5,000,000 shares of preferred stock, none of which shares are issued or outstanding. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully
paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the stockholders of the 
  

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 Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in
Schedule 3.3, as of the effective date of this Agreement, (i) there are no outstanding options, warrants, scrips, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any
of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered
by the issuance of the Securities (including the issuance of the Warrant Shares upon exercise of the Warrants). The Company has furnished to the Buyer true and correct copies of the Company’s Certificate of Incorporation as in effect on the
date hereof (the “Certificate of Incorporation”), the Company’s By-laws as in effect on the date hereof (the “Bylaws”), and the terms of all securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer with a written update of this representation signed by the Company’s Chief Executive or Chief Financial Officer on behalf of the
Company on the Closing Date. 
  
 Section 3.4 Issuance
of Shares. The Purchased Shares are duly authorized and, upon issuance in accordance with the terms of this Agreement, will be validly issued, fully paid, and non-assessable and free from all taxes, liens, claims and encumbrances with
respect to the issuance thereof and shall not be subject to preemptive rights or other similar rights of stockholders of the Company and will not impose personal liability on the holder thereof. The Warrant Shares are duly authorized and reserved
for issuance, and, when issued upon exercise of or otherwise pursuant to the Warrants, respectively, in accordance with the terms thereof, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances
and will not be subject to preemptive rights or other similar rights of stockholders of the Company and will not impose personal liability upon the holder thereof. 
  
 Section 3.5 Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive
effect to the Common Stock upon the issuance of the Securities. The Company further acknowledges that its obligation to issue the Securities in accordance with this Agreement is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the Company. Taking the foregoing into account, the Company’s Board of Directors has determined, in its good faith business judgment, that the issuance of the Securities
hereunder and the consummation of the transactions contemplated hereby and thereby are in the best interest of the Company and its stockholders. 
  
 Section 3.6 Sarbanes-Oxley Act. The Company is in substantial compliance with the applicable provisions of the Sarbanes-Oxley Act of
2002 (the “Sarbanes-Oxley Act”), and the rules and regulations promulgated thereunder, that are effective and intends to comply substantially with other applicable provisions of the Sarbanes-Oxley Act, and the rules and regulations
promulgated thereunder, upon the effectiveness of such provisions. 
  

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 Section 3.7 No Conflicts. The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions contemplated hereby (including, without limitation, the issuance and reservation for issuance, as applicable, of the Purchased Shares, Warrants and Warrant Shares) will not
(i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice
or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or
other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as a Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. 
  
 Section 3.8 No Consents. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court,
governmental agency, regulatory agency, self regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement in accordance with the terms hereof or thereof or to
issue and sell the Securities in accordance with the terms hereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior
to the date hereof. Except as disclosed in Schedule 3.8, the Company is not in violation of the listing requirements of the Principal Exchange and the Company is not aware of any event or condition that could reasonably be expected to cause the
Common Stock to be delisted by the Principal Exchange in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. 
  
 Section 3.9 SEC Documents; Financial Statements. Except as
set forth on Schedule 3.9, since December 31, 2002, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities
1934 Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial 
  

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 statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein,
being hereinafter referred to as the “SEC Documents”). The Company has delivered or made available to the Buyer true and complete copies of the SEC Documents. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, 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. As of their respective dates, the
financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in
the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to December 31, 2004 and
(ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company. Neither the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (the “Form 10-K”), nor any of the other reports
filed by the Company pursuant to Sections 13 or 15(d) of the 1934 Act, since the date of the filing of the Form 10-K, contain any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of circumstances under which they were made, not misleading, as of its filing date. 
  
 Section 3.10 Absence of Certain Changes. Since December 31, 2004, there has been no material adverse change and no material adverse development in
the assets, liabilities, business, properties, operations, financial condition or results of operations of the Company or any of its Subsidiaries (other than changes which have been disclosed in the SEC Documents filed since such date or listed on
Schedule 3.10). 
  
 Section 3.11 Absence of
Litigation. Except as set forth on Schedule 3.11, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. Schedule 3.11
contains a complete list and summary description of any pending or threatened material proceeding against or affecting the Company or any of its Subsidiaries. The Company and its Subsidiaries are unaware of any facts or circumstances which are
reasonably likely to give rise to any of the foregoing and would reasonably be expected to have a Material Adverse Effect. 
  

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 Section 3.12 Patents, Copyrights, etc. The Company and each of its Subsidiaries owns
or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights
(“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, except as set forth in Schedule 3.12 hereof, to the best of the Company’s knowledge, as presently contemplated to be
operated in the future); there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual
Property necessary to enable it to conduct its business as now operated (and, except as set forth in Schedule 3.12 hereof, to the best of the Company’s knowledge, as presently contemplated to be operated in the future); the
Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which are
reasonably likely to give rise to any of the foregoing and would reasonably be expected to have a Material Adverse Effect. The Company and each of its Subsidiaries have taken reasonable measures to protect the secrecy, confidentiality and value of
their Intellectual Property. 
  
 Section 3.13 No
Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is
expected to have a Material Adverse Effect. 
  
 Section 3.14 Tax Status. Except as set forth on Schedule 3.14, the Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other material tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and 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 has set aside on its
books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. 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. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or
local tax. Except as set forth on Schedule 3.14, none of the Company’s tax returns is presently being audited by any taxing authority. 
  
 Section 3.15 Certain Transactions. Except as set forth on Schedule 3.15 and as otherwise disclosed in the SEC Documents and
except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third
parties and other than the grant of stock options disclosed on Schedule 3.3, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for
services as employees, officers and directors), including 
  

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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 corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner. 
  
 Section 3.16 Disclosure. Other than information requested by (and delivered to) the Buyers in their diligence review, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the
Buyers or their agents or counsel with any information that the Company believes constitutes material nonpublic information. The Company understands and confirms that the Buyers will rely on the foregoing representations in effecting
transactions in securities of the Company. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement (including the Schedules to this Agreement) and provided to the Buyer in connection with the
transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they
were made, not misleading (other than any information the Buyer has refused to accept). No event or circumstance has occurred or exists, nor is the Company in possession of any information, with respect to the Company or any of its Subsidiaries or
its or their business, properties, prospects, operations or financial conditions, which has not been publicly announced or disclosed that was (or is) required to be disclosed or announced under applicable securities laws or Nasdaq rules and
regulations (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act). “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. The Company acknowledges and
agrees that no Buyer makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Article II. 
  
 Section 3.17 Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and
agrees that the Buyers are acting solely in the capacity of an arm’s length Buyer with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyers are not 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 that any statement made by the Buyers or any of their representatives or agents in connection with this Agreement and
the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyers’ purchase of the Securities and has not been relied upon by the Company, its officers or directors in any way. The Company further
represents to the Buyers that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives. 
  
 Section 3.18 No Integrated Offering. The issuance of the Securities to the Buyers will not be integrated
with any other issuance of the Company’s securities (past, current or future other than the securities issued pursuant to the Common Stock and Warrant Purchase Agreement, dated June 25, 2005, by and among the Company and the Buyers) for
purposes of any stockholder approval provisions (under the rules of the Principal Exchange or otherwise) applicable to the Company or its securities. 
  
 Section 3.19 No Brokers. Except as set forth in Schedule 3.19, the Company has taken no action which would give rise to any
claim by any person for brokerage commissions, finder’s fees or similar payments relating to this Agreement or the transactions contemplated hereby. 
  

 10 

 Section 3.20 Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under
the Company’s Certificate of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Buyers as a result of the Buyers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents (as defined in Section 8.14), including, without limitation, as a result of the Company’s issuance of the Securities and the Buyers’ ownership of the Securities. 
  
 Section 3.21 Permits; Compliance. The Company and each of
its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the “Company Permits”) except in such instances where the failure to possess such Company Permits would not, either individually or in the aggregate, have a Material Adverse
Effect, and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits, the suspension or cancellation of which would not, either individually or in the aggregate,
have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect. Since December 31, 2003, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect. 
  
 Section 3.22 Environmental Matters. 
  
 (a) Except as set forth in Schedule 3.22, there are, with respect to the Company or any of its Subsidiaries or
any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations
which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and neither the Company nor any of
its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing. The term “Environmental Laws” means
all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without
limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder. 
  

 11 

 (b) Other than those that are or were stored, used or disposed of in compliance with applicable law, no
Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the
Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business. 
  
 (c) There are no underground storage tanks on or under any real property
owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law. 
  
 Section 3.23 Title to Property. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and
good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in
Schedule 3.23. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

  
 Section 3.24 Insurance. The Company and
each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and
its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. 
  
 Section 3.25 Internal Accounting Controls. Except as set forth on Schedule 3.25, the Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, 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 generally accepted accounting principles 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. 
  
 Section 3.26 Foreign Corrupt
Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company,
used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official
or employee. 
  

 12 

 Section 3.27 Solvency. The Company (both before and after giving effect to the
transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured). The Company did
not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and does not anticipate or know of any basis upon which its auditors might issue a qualified opinion in respect of its current fiscal year. 

 
 Section 3.28 No Investment Company. The Company is not,
and upon the issuance and sale of the Securities as contemplated by this Agreement will not be, an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The
Company is not controlled by an Investment Company. 
  
 Section 3.29 Off-Balance Sheet Transactions. Except as described in the SEC Filings, there are no material off-balance sheet transactions (as defined in Regulation S-K Item 303(a)(4)(ii)), arrangements, obligations
(including contingent obligations), or any other relationships with unconsolidated entities or other persons, that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. 
  
 ARTICLE IV 
  
 COVENANTS 
  
 Section 4.1 Best
Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Article VI of this Agreement. 
  
 Section 4.2 Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities as required under Regulation D
and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer
pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or
prior to the Closing Date. 
  
 Section 4.3 Reporting
Status. The Company’s Common Stock is registered under Section 12(g) of the 1934 Act. So long as the Buyer beneficially owns any of the Securities, the Company shall timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination. 
  
 Section 4.4 Disclosure of Transaction; Other Disclosure.
The Company shall issue a press release describing the material terms of the transactions contemplated hereby as soon as practicable after the Closing but in no event later than one (1) hour after Closing; provided, however, that if Closing
occurs after 4:00 p.m. Eastern Time on any Trading Day, the Company 
  

 13 

 shall issue the Press Release no later than 9:00 a.m. Eastern Time on the first Trading Day following the Closing
Date. The Company shall also file with the SEC a Current Report on Form 8-K (the “Transaction Disclosure”) describing the material terms of the transactions contemplated hereby (and attaching as exhibits thereto this Agreement, the
Registration Rights Agreement and the Warrants) prior to the third (3rd) Trading Day following the date of execution of this Agreement. Such press release and Form 8-K shall be subject to prior review and comment by the Buyers. 
  
 Section 4.5 Use of Proceeds. The Company shall use the
proceeds from the sale of the Units for general corporate purposes and working capital and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person (except
in connection with its currently existing direct or indirect Subsidiaries). 
  
 Section 4.6 Expenses. At the Closing, the Company shall deliver up to $25,000 by wire transfer of immediately available funds to NightWatch Capital Advisors, LLC (“NightWatch”) (in
accordance with NightWatch’s written instructions) for all out of pocket expenses incurred (and for which documentation is delivered to the Company) by it in connection with the negotiation, preparation, execution, delivery and performance of
this Agreement and the other agreements to be executed in connection herewith. 
  
 Section 4.7 Financial Information. The Company agrees to send the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities: (i) within one (1) day
after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (ii) contemporaneously with the making available or giving to the stockholders of the Company, copies of any notices or other information the
Company makes available or gives to such stockholders. 
  
 Section 4.8 Reservation of Shares. On and after the Closing Date, the Company shall at all times have authorized, and reserved for the purpose of issuance (including being free of any preemptive rights), a sufficient
number of shares of Common Stock to provide for the full exercise of the Warrants (based on the exercise price of the Warrants in effect from time-to-time). The Company shall not reduce the number of shares reserved for issuance upon exercise of or
otherwise pursuant to the Warrants without the consent of the Buyer. The Company shall use its best efforts at all times to maintain the number of shares of Common Stock so reserved for issuance at no less than 1.25 times the number that is then
actually issuable upon exercise of or otherwise pursuant to the Warrants (based on the exercise price of the Warrants in effect from time-to-time). If at any time the number of shares of Common Stock authorized and reserved for issuance is below the
number of Warrant Shares to be issued upon exercise of or otherwise pursuant to Warrants (based on the exercise price of the Warrants in effect from time-to-time), the Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation, calling a special meeting of stockholders to authorize additional shares to meet the Company’s obligations under this Section 4.8, in the case of an insufficient number
of authorized shares, and using its best efforts to obtain stockholder approval of an increase in such authorized number of shares. 
  
 Section 4.9 Listing. The Company shall promptly secure the listing of the Purchased Shares and Warrant Shares upon the Principal
Exchange and each other national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as any of the Buyers owns any of the 
  

 14 

 Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Purchased
Shares issuable pursuant to this Agreement, Warrant Shares issuable upon exercise of or otherwise pursuant to the Warrants. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common
Stock on the Principal Exchange, the Nasdaq SmallCap Market (the “Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects
with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Exchange and any other exchanges or automated quotation systems on which the Common Stock is then listed. The Company shall promptly provide
to the Buyer copies of any notices it receives from the Principal Exchange and any other exchanges or automated quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such
exchanges and quotation systems. 
  
 Section 4.10 No
Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the Securities Act or cause
the offering of Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities. 
  
 Section 4.11 Disclosure of Material Information. In the
event that the Company comes into possession of any material non-public information, the Company shall make full and complete public disclosure if and to the extent required by applicable securities laws (including all common law formulations
thereof). The Company covenants and agrees that neither it nor any other Person acting on its behalf has provided or will provide any Buyer or its agents or counsel with any information that the Company believes constitutes material non-public
information, unless prior thereto such Buyer shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Buyer shall be relying on the foregoing
representations in effecting transactions in securities of the Company. 
  
 Section 4.12 Additional Equity Capital. The Company agrees to consult in good faith with NightWatch about meeting any equity financing needs at any time prior to the second anniversary date of the Closing Date. For a
period of two years following the Closing Date, prior to offering (or accepting any offer) to issue or sell to any third party (a “Subsequent Financing”), (i) securities related to any additional equity or equity-related
financing (including debt financing with an equity component) or (ii) Common Stock or any securities convertible, exercisable or exchangeable into Common Stock, including convertible debt securities (clauses (i) and (ii) are
collectively referred to herein as the “Financing Securities”), the Company covenants and agrees to offer in writing (a “Rights Notice”) to the Buyers (or their affiliates) the right to purchase (on a pro rata basis
among the Buyers in accordance with their percentage of securities purchased hereunder) Units having an aggregate purchase price of $3,000,000 (the “Additional Units”), in one or more transactions, on substantially the same terms
and conditions set forth in this Agreement (the “First Offer Rights”). The Rights Notice shall provide the Buyers (or their affiliates) an option to exercise the First Offer Rights during the fifteen (15) Trading Days following
delivery of the Rights Notice (the “Option Period”), and pursuant to the same forms of definitive agreements as the Transaction Documents. If a Buyer elects not to exercise its First Offer Rights, the other Buyers may participate on
a pro rata basis so long as such participation in the aggregate does not exceed the aggregate Additional Units being offered 
  

 15 

 by the Company in such transaction. If a Buyer elects to exercise its First Offer Rights, it shall do so in written
notice of exercise signed by such Buyer and delivered to the Company during the Option Period, which written notice shall also indicate whether such Buyer is electing to purchase any Additional Units (and if so, the aggregate dollar value thereof)
otherwise offered to any other Buyer and as to which such other Buyer does not exercise its First Offer Rights. Any such written notice of exercise shall represent an irrevocable and binding commitment by the Buyer to purchase such Additional Units
as to which the applicable Buyer is exercising its First Offer Rights, plus any additional Additional Units pursuant to the preceding sentence, and shall represent a commitment by the Company to sell such Additional Units (not to exceed $3,000,000
in aggregate purchase price pursuant to all exercises of First Offer Rights) on a closing date no later than ten (10) Trading Days after the delivery of such notice of exercise. The First Offer Rights will expire upon the earlier of
(i) the second anniversary of the Closing Date or (ii) the Purchase by the Buyers of an aggregate of $3,000,000 of Units. If the Company does not receive notice of exercise of a Rights Option from any of the Buyers within the Option
Period, the Company shall have the right to negotiate and close any Subsequent Financing with a third party. Subject to the requirements set forth in the first sentence of this Section 4.12, notwithstanding the Company has received notice of
exercise of a Rights Option from a Buyer, it will be permitted to negotiate and close a Subsequent Financing if the Company requires additional financing. For purposes of this Agreement, a Permitted Financing (as defined hereinafter) shall not be
considered a Subsequent Financing. A “Permitted Financing” shall mean (1) shares of Common Stock or other Financing Securities issued in connection with a strategic relationship, joint venture or investment in the Company (so
long as (i) the main purpose of which is not to raise equity capital and (ii) the Company’s board of directors approves such issuance solely for strategic purposes); provided, however, such number of shares of Common Stock (or
Financing Securities convertible or exercisable into Common Stock) issuable pursuant to this clause (1) shall not be in excess of 1,500,000 shares (subject to appropriate arithmetic adjustment in the event of any stock splits, stock dividends,
combinations of shares, recapitalizations or other such events relating to the Common Stock occurring subsequent to the date hereof)) without written consent of the Buyers; (2) shares of Common Stock or other Financing Securities issued in
connection with a strategic merger or acquisition, (3) shares of Common Stock or the issuance of options to purchase shares of Common Stock to employees, officers, directors, consultants and vendors in accordance with the Company’s equity
incentive policies; (4) shares of Common Stock to be issued in a public underwritten offering; and (5) the conversion or exercise of convertible or exercisable securities issued or outstanding prior to the date hereof. 
  
 Section 4.13 Pledge of Securities. The Company
acknowledges and agrees that the Securities may be pledged by an Investor (as defined in the Registration Rights Agreement) in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Investor effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other Transaction Document, including, without limitation, Section 2.6 of this Agreement; provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2.6 hereof in order to effect a sale, transfer or assignment of Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor. 
  

 16 

 Section 4.14 Board Seat. So long as NightWatch owns in excess of 12.5% (calculated on
an as-converted basis with respect to NightWatch) of the issued and outstanding Common Stock, from and after the Closing Date, NightWatch shall have the right to appoint one (1) member to the Company’s board of directors; provided,
however, that any board member appointed by NightWatch hereunder shall be subject to the approval of the Company’s board of directors, which approval shall not be unreasonably withheld. In the event NightWatch’s appointee to the
Company’s board is not approved by the Company’s board of directors, NightWatch shall have the right to reappoint nominees until NightWatch’s appointee is acceptable to the Company’s board of directors. Upon approval of the
NightWatch appointee as a nominee for the Company’s board of directors, the Company shall take all actions necessary to insure election or appointment to the Company’s board of directors of such appointee. In calculating the issued and
outstanding Common Stock for purposes of this Section 4.14, any shares issued pursuant to clause (1) of the definition of “Permitted Financing” contained in Section 4.14 will be deemed not to be issued and outstanding. The
Company agrees to continue to maintain directors and officers insurance for all of its directors in such amounts as the Company’s board of directors shall in good faith determine is adequate. So long as an appointee of NightWatch serves as a
member of the Company’s board of directors pursuant to this Section 4.12, all rights of NightWatch to have a representative act as an observer pursuant to Section 4.12 of the Common Stock and Warrant Purchase Agreement, dated
June 25, 2005, by and among the Company and the Buyers, shall be suspended. The covenants set forth in this Section 4.14 are solely for the benefit of NightWatch and its affiliates and are not for the benefit of any of the other Buyers.

  
 Section 4.15 Adjustment of Purchase Price.
In the event the Common Stock is delisted from the Principal Exchange due to the Company’s failure to timely file its quarterly reports on Form 10-Q for any of the three-month periods ended March 31, 2005, June 30, 2005 or
September 30, 2005 (the “Delisting”), the Company hereby agrees to reset the Purchase Price Per Unit at a price equal to the Adjusted Purchase Price Per Unit. The Company agrees to issue to the Buyers on the Adjustment Date (as
defined below) an additional aggregate number of Units equal to (i) the quotient arrived at by dividing (x) the Aggregate Purchase Price by (y) the Adjusted Purchase Price Per Unit (as defined below) minus (ii) the number
of Units issued on the Closing Date. The additional Units issued pursuant to this Section 4.15 shall be allocated among the Buyers in proportion to the Units issued to each Buyer at the Closing. The Exercise Price (as defined in the Warrants)
of the Warrants issued pursuant to this Section 4.15 shall be equal to 150% of the Adjusted Purchase Price Per Unit; provided, however, that in no event shall the Exercise Price of the Warrants issued pursuant to this Section 4.15 be less than
$1.58. The “Adjusted Purchase Price Per Unit” shall equal the VWAP (as defined herein) for the three (3) consecutive Trading Day period immediately following the Announcement Date; provided, however, that the Adjusted Purchase
Price Per Unit shall in no event be less than $0.95. The “Adjustment Date” shall be the fourth (4th) Trading Day immediately after to the Announcement Date. “VWAP” means, with respect to any particular Trading Day or for any particular period, the volume weighted average trading price per share of Common
Stock on such date or for such period on the Nasdaq National Market (the “Principal Exchange”) as reported by Bloomberg, L.P., or any successor performing similar functions. The “Announcement Date” shall be the
Trading Day on which a press release is issued by the Company (or any other public disclosure is made) announcing the Delisting; provided, however, that if such press release is issued (or public disclosure is made) prior to 9:00 a.m. Eastern
Time on a Trading Day, the “Announcement Date” will be deemed to be the previous Trading Day. The Company hereby agrees not to issue a press release (or make any other public disclosure) announcing the Delisting between 9:00 a.m.
Eastern Time and 4:00 p.m. Eastern Time on any Trading Day. 
  

 17 

 ARTICLE V 
  

TRANSFER AGENT 
  
 Section 5.1 Transfer Agent Instructions. The Company shall issue irrevocable instructions to its Transfer Agent to issue certificates,
registered in the name of each Buyer or its nominee, for the Purchased Shares at the Closing, the Warrant Shares upon exercise of or otherwise pursuant to the Warrants in accordance with the terms thereof, each in such amounts as specified from time
to time by each Buyer to the Company (the “Irrevocable Transfer Agent Instructions”). Prior to registration of the Purchased Shares and Warrant Shares under the 1933 Act or the date on which the Purchased Shares or Warrant Shares
may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in Section 2.7 of this
Agreement. The Company warrants that no instruction, other than the Irrevocable Transfer Agent Instructions referred to in this Section 5.1 and stop transfer instructions to give effect to Section 2.6 hereof (in the case of the Purchased
Shares and Warrant Shares, prior to registration of the Common Shares and Warrant Shares under the 1933 Act or the date on which the Purchased Shares or Warrant Shares may be sold pursuant to Rule 144 without any restriction as to the number of
securities as of a particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Purchased Shares and Warrant Shares shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Registration Rights Agreement. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2.7 hereof to comply with all applicable
prospectus delivery requirements, if any, upon resale of the Securities and to comply with the plan of distribution portion of the prospectus contained in the Registration Statement (as defined in the Registration Rights Agreement). If a Buyer
provides the Company with (i) an opinion of counsel, reasonably satisfactory to the Company in form, substance and scope, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and
such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144 and that the Securities will be sold pursuant to Rule 144, the Company shall permit the transfer, and, in
the case of the Purchased Shares and Warrant Shares, promptly instruct its transfer agent to issue one or more certificates, free from any restrictive legend, in such name and in such denominations as specified by such Buyer. 
  
 ARTICLE VI 
  
 CONDITIONS TO CLOSING 
  
 Section 6.1 Conditions Precedent to the Obligation of the Company
to Issue and Sell the Units. The obligation hereunder of the Company to issue and sell the Units to a Buyer is subject to the satisfaction, at or prior to the Closing Date, of each of the conditions set forth below provided that these
conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion: 
  
 (a) The applicable Buyer shall have executed this Agreement and the Registration Rights Agreement, and delivered the same to the Company. 
  

 18 

 (b) The applicable Buyer shall have delivered the Purchase Price for the Units which it is purchasing in
accordance with Section 1.2 above. 
  
 (c) The
representations and warranties of the applicable Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at each such time (except for representations and warranties specifically
made as of a particular date which shall be true and correct in all material respects as of the date when made). The applicable Buyer shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by applicable the Buyer at or prior to the Closing Date. 
  
 (d) No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by
or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

  
 Section 6.2 Conditions Precedent to the Obligation
of the Buyer to Purchase the Units. The obligation of a Buyer to purchase the Units hereunder is subject to the satisfaction, at or prior to the Closing Date, of each of the following conditions provided that these conditions are for such
Buyer’s sole benefit and may be waived (in whole or in part as to any portion of its obligation to purchase the Securities hereunder) by such Buyer at any time in its sole discretion: 
  
 (a) The Company shall have executed this Agreement and the Registration
Rights Agreement, and delivered the same to the Buyer. 
  
 (b) The
Company shall have delivered to such Buyer (i) duly executed certificates (in such denominations as the Buyer shall request) representing the Common Shares and (ii) duly executed Warrants, each in accordance with Section 1.2 above.

  
 (c) The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent. 
  
 (d) The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing
Date as though made at such time (except for representations and warranties specifically made as of a particular date which shall be true and correct in all material respects as of the date when made). The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to such date. The Buyer shall have received a certificate or
certificates, executed on behalf of the Company by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer including, but not limited
to, those matters described in Section 3.3 above, and certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions relating to the transactions contemplated hereby. 

 

 19 

 (e) No litigation, 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 or any self-regulatory organization having authority over the matters contemplated hereby that prohibits or directly and adversely
affects any of the transactions contemplated by this Agreement, and no proceeding shall have been commenced that may have the effect of prohibiting or adversely affecting any of the transactions contemplated by this Agreement. 
  
 (f) Since the date hereof, no event that had or is reasonably likely to have
a Material Adverse Effect shall have occurred. 
  
 (g) The trading
of the Common Stock (including without limitation the Purchased Shares and Warrant Shares) shall not have been suspended by the SEC, the Principal Exchange or the National Association of Securities Dealers, Inc. (the “NASD”) and the
Common Stock (including without limitation the Purchased Shares and Warrant Shares) shall have been authorized and approved for listing or quotation on and shall not have been delisted from the Principal Exchange. 
  
 (h) Neither the Dow Jones Industrial Average nor the Nasdaq Composite Index
shall be down more that 5% from their close on the date of execution of this Agreement. 
  
 (i) The Buyer shall have received an opinion of the Company’s counsel, dated as of the Closing Date, in form, scope and substance reasonably satisfactory to the Buyer and in substantially the same form as
Exhibit “C” attached hereto. 
  
 (j) An event of
default shall not have occurred or continue to occur pursuant to any material agreement of the Company. 
  
 ARTICLE VII 
  
 INDEMNIFICATION 
  
 The Company agrees to
indemnify and hold harmless the Buyer, its partners, affiliates, officers, directors, employees, and duly authorized agents, and each Person or entity, if any, who controls the Buyer within the meaning of Section 15 of the Securities Act or
Section 20 of the 1934 Act (a “Control Person”), from and against any loss, claim, damage, liability, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements and costs and expenses
of expert witnesses and investigation) (“Damages”), joint or several, and any action in respect thereof to which the Buyer, its partners, affiliates, officers, directors, employees, duly authorized agents and Control Persons
(collectively, the “Indemnified Parties”), becomes subject to, resulting from, arising out of or relating to: (a) any misrepresentation, breach or inaccuracy, or any allegation by a third party that, if true, would constitute a
breach or inaccuracy, 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 cause of action, suit or claim brought or made against such
Indemnified Party and arising primarily out of or primarily resulting from the execution, delivery, performance or enforcement of this Agreement or any of the other Transaction Documents and without causation by any other activity, obligation,
condition or liability pertaining to such Buyer and not to the transactions 
  

 20 

 contemplated by this Agreement. The Company and the Buyer hereby agree to resolve any claim for indemnification under
this Article VII pursuant to the procedures for indemnification set forth in Section 6 of the Registration Rights Agreement. 
  
 ARTICLE VIII 
  
 MISCELLANEOUS 
  
 Section 8.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed in the State of
Delaware (without regard to principles of conflict of laws). Both parties irrevocably consent to the exclusive jurisdiction of the United States federal courts and the state courts located in Delaware with respect to any suit or proceeding based on
or arising under this Agreement, the agreements entered into in connection herewith or the transactions contemplated hereby or thereby and irrevocably agree that all claims in respect of such suit or proceeding may be determined in such courts. Both
parties irrevocably waive the defense of an inconvenient forum to the maintenance of such suit or proceeding. Both parties further agree that service of process upon a party mailed by first class mail shall be deemed in every respect effective
service of process upon the party in any such suit or proceeding. Nothing herein shall affect either party’s right to serve process in any other manner permitted by law. Both parties agree that a final non-appealable judgment in any such suit
or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 
  
 Section 8.2 Notices. Any notices required or permitted to be given under the terms of this Agreement shall be sent by certified or
registered mail (return receipt requested) or delivered personally or by courier (including a recognized overnight delivery service) or by facsimile and shall be effective five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a recognized overnight delivery service) or by facsimile, in each case addressed to a party. The addresses for such communications shall be: 
  
 If to the Company: 
  
 Kana Software, Inc. 
 181 Constitution Drive 
 Menlo Park, California 94025 
 Attention: John Thompson 
 Facsimile: (650) 614-8301 
  
 With copy to: 
  
 Fenwick & West LLP 
 275 Battery Street 
 San Francisco, CA 94111 
 Attention: David K. Michaels 
 Facsimile: (415) 281-1350 
  

 21 

 If to a Buyer: To the address set forth immediately below such Buyer’s name on the signature pages
hereto with a copy to its legal counsel as set forth below such Buyer’s name on the signature pages hereto. 
  
 Each party shall provide notice to the other party of any change in address. 
  
 Section 8.3 Counterparts; Signatures by Facsimile. This Agreement may be executed in one or more
counterparts, all of which 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. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. 
  
 Section 8.4 Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. 
  
 Section 8.5
Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity
or enforceability of this Agreement in any other jurisdiction. 
  
 Section 8.6 Entire Agreement; Amendments. This Agreement, the Registration Rights Agreement and the Exhibits hereto contain the entire agreement and understanding of the parties with respect to the matters covered herein
and therein and supersede all prior and contemporaneous agreements, negotiations and understandings between the parties, both oral and written relating to the subject matter hereof. The terms and conditions of all Exhibits to this Agreement are
incorporated herein by this reference and shall constitute part of this Agreement as if fully set forth herein. Any term of this Agreement may be amended or waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the Buyer purchasing Units representing at least 50% of the number of Units sold pursuant to this Agreement. No such amendment shall be effective to the extent that it applies to less than
all of the Buyers or their Securities then outstanding. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of this Agreement, the Registration Rights Agreement or the Warrants
unless the same consideration also is offered to all the parties to this Agreement or the Registration Rights Agreement or holders of the Warrants, as the case may be. The Company shall give prompt written notice to a Buyer of any amendment hereof
or waiver hereunder that was effected without the Buyer’s written consent. No waivers of any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of
any such term, condition or provision. 
  
 Section 8.7
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyers shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

  

 22 

 Section 8.8 Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. 
  
 Section 8.9 Survival. The representations and warranties of the Company set forth in Article III and the
agreements and covenants set forth in Articles II, IV, V, VII and VIII shall survive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer.
  
 Section 8.10 Publicity. The Company and NightWatch shall
have the right to review a reasonable period of time before issuance of any press releases, filings with the SEC, NASD or any stock exchange or interdealer quotation system, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of any Buyer, to make any press release or public filings with respect to such transactions as is required by applicable law and
regulations (although NightWatch shall be consulted by the Company in connection with any such press release or public filing prior to its release or public filing and shall be provided with a copy thereof and be given an opportunity to comment
thereon).
  
 Section 8.11 Further Assurances.
Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 
  
 Section 8.12 No Strict Construction. 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. 
  
 Section 8.13 Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Buyer by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of this Agreement (including the failure to deliver unlegended, freely tradable Purchased Shares on the Closing Date), that the Buyer shall be entitled, in addition to all other available
remedies in law or in equity, to an injunction or injunctions to prevent or cure any breaches of the provisions of this Agreement and to enforce specifically the terms and provisions of this Agreement, without the necessity of showing economic loss
and without any bond or other security being required. 
  
 Section 8.14 Independent Nature of Buyers. 
  
 (a) The Company acknowledges that the obligations of each Buyer under this Agreement, the Registration Rights Agreement, the Warrants and any other document entered into in connection with this Agreement, the Registration Rights Agreement,
the Warrants and the transactions contemplated hereby and thereby (collectively, the “Transaction Documents”) are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer under the Transaction Documents. The decision of each Buyer to purchase Securities pursuant to this 
  

 23 

 Agreement has been made by such Buyer independently of any other Buyer and independently of any information, materials,
statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of the Subsidiaries which may have made or given by any other
Buyer or by any agent or employee of any other Buyer, and, as between the Buyers no Buyer or any of its agents or employees shall have any liability to any Buyer relating to or arising from any such information, materials, statements or opinions.
The Company further acknowledges that nothing contained in the Transaction Documents, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby. Each Buyer 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 Buyer to be joined as an additional party in any proceeding for such purpose.

  
 (b) Each Buyer has been represented by its own separate legal
counsel in their review and negotiation of the Transaction Documents. For reasons of administrative convenience only, the Transaction Documents have been prepared by counsel for one of the Buyers. Such counsel does not represent all of the
Buyers but only such Buyer and the other Buyers have retained their own individual counsel with respect to the transactions contemplated hereby. The Company has elected to provide all Buyers 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 Buyers. The Company acknowledges that such procedure with respect to the Transaction Documents in no way creates a presumption that the Buyers are in any way
acting in concert or as a group with respect to the Transaction Documents or the transactions contemplated hereby or thereby. 
  
 [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 
  

 24 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above. 
  

			
	KANA SOFTWARE, INC.
		
	 By:
	 	 /S/    JOHN THOMPSON

	 Name:
	 	 John Thompson

	 Title:
	 	 Executive Vice President & Chief Financial Officer

  
 [SIGNATURES
CONTINUE ON THE FOLLOWING PAGE] 
  

 25 

			
	NIGHTWATCH CAPITAL PARTNERS, LP
	
	 By NightWatch Capital Management, LLC,
         its general partner

		
	By:	 	 /S/    JOHN F. NEMELKA

	 	 	John F. Nemelka
	 	 	Managing Principal
	
	Number of Units Purchased: 1,275,096
	Purchase Price: $1,941,589
	Residency:                     

  

			
	NIGHTWATCH CAPITAL PARTNERS II, LP
	
	 By NightWatch Capital Management, LLC,
its general partner

		
	By:	 	 /S/    JOHN F. NEMELKA

	 	 	John F. Nemelka
	 	 	Managing Principal
	
	Number of Units Purchased: 913,910
	Purchase Price: $1,391,611
	Residency:                    

  
 each
c/o NightWatch Capital Advisors, LLC 
 3311 North University Avenue, Suite 200 
 Provo, Utah 84604 
 Phone: (801) 805-1305 
 Fax: (801) 344-8773 
 Attention: John F. Nemelka 
  
 Copy all notices to: 
  
 Akerman Senterfitt 
 One S.E. 3rd Avenue, 28th Floor 
 Miami, Florida 33131-1714

 Attention: Martin T. Schrier, Esq. 
  

 26 

			
	RHP MASTER FUND, LTD.
		
	By:	 	Rock Hill Investment Management, L.P.,
	 	 	its investment manager
		
	By:	 	RHP General Partner, LLC
		
	By:	 	 /S/    KEITH S. MARLOWE

	 	 	Keith S. Marlowe
	 	 	Director

  

	Number	of Units Purchased: 437,906 

 Purchase
Price: $666,800 
 Residency: Cayman Islands 
  
 c/o Rock Hill Investment Management, L.P. 
 3
Bala Plaza – East, Suite 585 
 Bala Cynwyd, PA 19004 
 Phone: (610) 949-9700 
 Fax: (610) 949-9600 
 Attention: Keith S. Marlowe 
  
 Copy all
notices to: 
  
 Ballard Spahr Andrews &
Ingersoll, LLP 
 1735 Market Street, 51st Floor 
 Philadelphia, PA 19103 
 Attention: Gerald J. Guarcini, Esq. 
  

 27Registration Rights Agreement

 Exhibit 10.02 
  
 REGISTRATION RIGHTS AGREEMENT 
  

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of September 29, 2005, by and among Kana Software, Inc., a Delaware
corporation, with its headquarters located at 181 Constitution Drive, Menlo Park, California 94025 (the “Company”), and each of the undersigned (together with their respective affiliates and any assignee or transferee of all of
their respective rights hereunder, the “Initial Investors”). 
  
 WHEREAS: 
  
 A. In
connection with the Common Stock and Warrant Purchase Agreement by and among the parties hereto of even date herewith (the “Purchase Agreement”), the Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) the Purchased Shares (as defined in the Purchase Agreement) and (ii) the Aggregate Warrant Shares (as defined in the Stock Purchase Warrant, dated September 29, 2005 (the
“Warrants”)) upon the terms and conditions set forth in the Warrants; and 
  
 B. To induce the Initial Investors to execute and deliver the Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the “1933 Act”), and applicable state securities laws; 
  
 NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and each of the Initial Investors hereby agree as follows: 
  
 1. DEFINITIONS. 
  
 a. As used in this Agreement, the following terms shall have the following meanings: 
  
 (i) “Common Stock” means the Company’s common stock, par value $.001 per share

  
 (ii) “Investors” means the
Initial Investors and any transferee or assignee who agrees to become bound by the provisions of this Agreement in accordance with Section 9 hereof. 
  
 (iii) “register,” “registered,” and “registration” refer to a registration of the offer
and sale of securities effected by preparing and filing a Registration Statement or Statements in compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule providing for offering securities on a continuous basis
(“Rule 415”), and the declaration or ordering of effectiveness of such Registration Statement by the United States Securities and Exchange Commission (the “SEC”). 

 (iv) “Registrable Securities” means (A) the Purchased Shares (as
defined in the Purchase Agreement) issued pursuant to the Purchase Agreement (including any shares of Common Stock issuable pursuant to Section 4.15 of the Purchase Agreement), (B) the Warrant Shares (as defined in the Purchase Agreement)
issued or issuable (up to the maximum number of Warrant Shares issuable pursuant to the Warrants) upon exercise of or otherwise pursuant to the Warrants and (C) any shares of capital stock issued or issuable as a dividend on or in exchange for
or otherwise with respect to any of the foregoing; provided, however, that the foregoing definition shall include in all cases any Registrable Securities sold in a transaction in which the rights under this Agreement are not assigned. 
  
 (v) “Registration Statement(s)” means a
registration statement(s) of the Company under the 1933 Act. 
  
 b. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Purchase Agreement. 
  
 2. REGISTRATION. 
  
 a. Mandatory Registration. The Company shall prepare, and, on or prior to the date (the “Filing Date”) which is not later
than the twentieth (20th) day following the filing of the Company’s Quarterly Report on Form 10-Q for the six months ended June 30, 2005, file with the SEC a Registration Statement on such form of Registration Statement as is
then available to effect a registration of the Registrable Securities, covering the resale of the Registrable Securities, which Registration Statement, to the extent allowable under the 1933 Act and the rules and regulations promulgated thereunder
(including Rule 416), shall state that such Registration Statement also covers such indeterminate number of additional shares of Common Stock as may become issuable upon exercise of or otherwise pursuant to the Warrants (i) to prevent dilution
resulting from stock splits, stock dividends or similar transactions or (ii) by reason of changes in the Exercise Price (as defined in the Warrants) of the Warrants in accordance with the terms thereof. The number of shares of Common Stock
initially included in such Registration Statement shall be no less than one (1) times the aggregate number of Purchased Shares and one and one-quarter (1.25) times the aggregate number of Warrant Shares that are then issuable upon the
exercise of or otherwise pursuant to the Warrants without regard to any limitation on the Investor’s ability to exercise the Warrants. The Company acknowledges that the number of shares initially included in the Registration Statement with
respect to the Warrants represents a good faith estimate of the maximum number of shares issuable upon exercise of or otherwise pursuant to the Warrants. The Registration Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided to (and subject to the approval of) the Initial Investors and their counsel prior to its filing or other submission. 
  
 b. Underwritten Offering. If any offering pursuant to a Registration Statement pursuant to Section 2(a)
hereof involves an underwritten offering, the Company shall have the right to select one legal counsel and an investment banker or bankers and manager or managers to administer the offering (collectively, the “underwriters”) which
underwriter shall be reasonably satisfactory to the Investors who hold a majority in interest of the Registrable Securities. In such event, the right of any Investor to include such Investor’s Registrable 
  

 2 

 Securities in such registration shall be conditioned upon such Investor’s participation in such underwriting and the
inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Investors proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in
customary form. In the event that any Investors elect not to participate in such underwritten offering, the Registration Statement covering certain of the Registrable Securities shall contain appropriate plans of distribution reasonably satisfactory
to the Investors participating in such underwritten offering. 
  
 c. Payments by the Company. The Company shall use its best efforts to obtain effectiveness of the Registration Statement as soon as practicable, but in any event not later than 120 days from the date of Closing (the
“Registration Deadline”). If (i) the Registration Statement(s) covering the Registrable Securities required to be filed by the Company pursuant to Section 2(a) hereof is not declared effective by the SEC by the
Registration Deadline, or (ii) after the Registration Statement has been declared effective by the SEC, sales of all of the Registrable Securities cannot be made pursuant to the Registration Statement, or (iii) the Common Stock is not
listed or included for quotation on the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (the “Nasdaq SmallCap”), the New York Stock Exchange (the “NYSE”) or the American Stock Exchange
(the “AMEX”) after being so listed or included for quotation, then the Company will make payments to the Investors in such amounts and at such times as shall be determined pursuant to this Section 2(c) as partial relief for the
damages to the Investors by reason of any such delay in or reduction of their ability to sell the Registrable Securities (which remedy shall not be a penalty and shall not be exclusive of any other remedies available at law or in equity). The
Company shall pay to each holder of the Registrable Securities an amount equal to the product of (i) the sum of (A) the Purchase Price (as defined in the Purchase Agreement) of the Purchased Shares and (B) the exercise price of the
Warrants upon exercise of which such Registrable Securities were received (“Aggregate Share Price”) multiplied by (ii) the product of (A) 1.5% and the sum of: (x) the number of months (prorated for partial months)
after the Registration Deadline and prior to the date the Registration Statement is declared effective by the SEC; provided, however, that there shall be excluded from such period any delays which are solely attributable to changes
required by the Investors in the Registration Statement with respect to information relating to the Investors, including, without limitation, changes to the plan of distribution, or to the failure of the Investors to conduct their review of the
Registration Statement pursuant to Section 3(h) below in a reasonably prompt manner; (y) the number of months (prorated for partial months) during the Registration Period (as defined below) that sales of all of the Registrable Securities
cannot be made pursuant to the Registration Statement after the Registration Statement has been declared effective (including, without limitation, when sales cannot be made by reason of the Company’s failure to properly supplement or amend the
prospectus included therein in accordance with the terms of this Agreement (including Section 3(b) hereof or otherwise), but excluding any days during an Allowed Delay (as defined in Section 3(f)); and (z) the number of months
(prorated for partial months) that the Common Stock is not listed or included for quotation on the Nasdaq, Nasdaq SmallCap, NYSE or AMEX or that trading thereon is halted after the Registration Statement has been declared effective. (For example, if
the Registration Statement becomes effective one (1) month after the end the Registration Deadline, the Company would pay $15,000 for each $1,000,000 of Aggregate Share Price. If thereafter, sales could not be made pursuant to the Registration
Statement for an additional period of one (1) month, the Company would pay an additional $15,000 for each $1,000,000 of Aggregate Share Price.) Such amounts shall be paid in cash within five (5) business days after the end of each period
that gives rise to such obligation, provided that, if any such period extends for more than thirty (30) calendar days, interim payments shall be made for each such thirty (30) calendar day period. 
  

 3 

 d. Piggy-Back Registrations. Subject to the last sentence of this Section 2(d), if at
any time prior to the expiration of the Registration Period (as hereinafter defined) the Company shall determine to file with the SEC a Registration Statement relating to an offering for its own account or the account of others under the 1933 Act of
any of its equity securities (other than on Form S-4 or Form S-8 or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection
with stock option or other employee benefit plans), the Company shall send to each Investor who is entitled to registration rights under this Section 2(d) written notice of such determination and, if within fifteen (15) calendar days after
the effective date of such notice, such Investor shall so request in writing, the Company shall include in such Registration Statement all or any part of the Registrable Securities such Investor requests to be registered, except that if, in
connection with any underwritten public offering for the account of the Company the managing underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in
such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the
Registrable Securities with respect to which such Investor has requested inclusion hereunder as the underwriter shall permit. Any exclusion of Registrable Securities shall be made pro rata among the Investors seeking to include Registrable
Securities in proportion to the number of Registrable Securities sought to be included by such Investors; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all
outstanding securities, the holders of which are not entitled by contract to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities; and provided, further,
however, that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the contractual right to include such securities in the
Registration Statement other than holders of securities entitled to inclusion of their securities in such Registration Statement by reason of demand registration rights. No right to registration of Registrable Securities under this Section 2(d)
shall be construed to limit any registration required under Section 2(a) hereof. If an offering in connection with which an Investor is entitled to registration under this Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless otherwise agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other shares of Common Stock included in such underwritten offering. Notwithstanding anything to the contrary set forth herein, the registration rights of the Investors pursuant to
this Section 2(d) shall only be available in the event the Company fails to timely file, obtain effectiveness or maintain effectiveness of any Registration Statement to be filed pursuant to Section 2(a) in accordance with the terms of this
Agreement; provided, however, the Company shall have the right to terminate or withdraw any registration initiated under this Section 2(d) prior to the effectiveness of such registration whether or not any Investor has elected to include
Registrable Securities in such registration. 
  
 e.
Eligibility for Form S-1. The Company represents and warrants that it meets the registrant eligibility and transaction requirements for the use of Form S-1 for 
  

 4 

 registration of the sale by the Initial Investors and any other Investors of the Registrable Securities and the Company
shall file all reports required to be filed by the Company with the SEC in a timely manner so as to maintain such eligibility for the use of Form S-1. 
  
 3. OBLIGATIONS OF THE COMPANY. 
  
 In connection with the registration of the Registrable Securities, the Company shall have the following obligations: 
  
 a. The Company shall prepare promptly, and file with the SEC as soon
as practicable after the Closing Date (but in no event later than the Filing Date), a Registration Statement with respect to the number of Registrable Securities provided in Section 2(a), and thereafter use its reasonable best efforts to cause
such Registration Statement relating to Registrable Securities to become effective as soon as possible after such filing, (but in no event later than the Registration Deadline), and keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on which all of the Registrable Securities have been sold and (ii) the date on which is twenty (20) calendar days after the date on which the Investors receive notice from
the Company that the Registrable Securities may be immediately sold to the public without registration or restriction (including without limitation as to volume by each holder thereof) under the 1933 Act unless an Investor receives written advice
from its counsel, in such counsel’s reasonable opinion, that such registration is required or restrictions continue to exist with respect to sale of the Registrable Securities (the “Registration Period”), which Registration
Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the
statements therein not misleading. 
  
 b. Subject to
Allowed Delays as provided in Section 3(f), the Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statements and the prospectus used in connection with the
Registration Statements as may be necessary to keep the Registration Statements effective at all times during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statements until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statements. Notwithstanding the foregoing, if (i) a post-effective amendment to the Registration Statement (the “Post-Effective Amendment”) is required to be filed by the Company to include audited
financial statements and (ii) the Company has used its reasonable best efforts to obtain effectiveness of the Post-Effective Amendment, the Company will not be deemed in breach of this Section 3(b) in the event the Investors are unable to
sell the Registrable Securities solely because the SEC has not declared the Post-Effective Amendment effective; provided, however, that the occurrence of such event shall be deemed an Allowed Delay to the extent of the period provided pursuant to
Section 3(f) and the remedies set forth in Section 2(c) will be available to the Investors to the extent thereafter applicable. In the event that on any Trading Day (as defined in the Purchase Agreement) the number of shares available
under a Registration Statement filed pursuant to this Agreement is insufficient to cover all of the Registrable Securities issued or issuable upon exercise of or otherwise pursuant to the Warrants or the Options, without giving effect to any
limitations on the Investors’ ability to 
  

 5 

 exercise the Warrants or the Options (the “Registration Trigger Date”), the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form available therefore, if applicable), or both, so as to cover one hundred twenty-five percent (125%) of all of the Registrable Securities so issued or issuable
(without giving effect to any limitations on exercise contained in the Warrants or the Options) as of the Registration Trigger Date, in each case, as soon as practicable, but in any event within twenty (20) business days after the necessity
therefor arises (based on the market price of the Common Stock and other relevant factors on which the Company reasonably elects to rely). The Company shall use its reasonable best efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof, but in any event within sixty (60) business days of the Registration Trigger Date. The provisions of Section 2(c) above shall be applicable with respect to the
Company’s obligations under this Section 3(b). 
  
 c.
The Company shall furnish to each Investor whose Registrable Securities are included in a Registration Statement and its legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the
Company, one copy of each Registration Statement and any amendment thereto, each preliminary prospectus and prospectus and each amendment or supplement thereto, and, in the case of the Registration Statement referred to in Section 2(a), each
letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential treatment), and (ii) such number of copies of a prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as such
Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor. The Company will immediately notify each Investor by facsimile of the effectiveness of each Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all comments received from the SEC, with a view towards causing each Registration Statement or any amendment thereto to be declared effective by the SEC as soon as practicable
and shall file an acceleration request as soon as practicable following the resolution or clearance of all SEC comments or, if applicable, following notification by the SEC that any such Registration Statement or any amendment thereto will not be
subject to review. 
  
 d. The Company shall use reasonable
efforts to (i) register and qualify the Registrable Securities covered by the Registration Statements under such other securities or “blue sky” laws of such jurisdictions in the United States as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a
condition thereto to (a) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (b) subject itself to general taxation in any such jurisdiction, (c) file a
general consent to service of process in any such jurisdiction, (d) provide any undertakings that cause the Company undue expense or burden, or (e) make any change in its charter or bylaws, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its stockholders. 
  

 6 

 e. In the event of an underwritten offering, the Company shall enter into and perform its
obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the underwriters of such offering. 
  
 f. During the period in which a prospectus relating to the
Registration Statement must be delivered in connection with a sale or distribution of Registrable Securities under the 1933 Act, the Company shall notify each Investor of the happening of any event as promptly as practicable after becoming aware of
such event of which the Company has knowledge, as a result of which the prospectus included in any Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and use its reasonable best efforts promptly to prepare a supplement or amendment to any Registration Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may reasonably request; provided that, for not more than fifteen (15) consecutive Trading Days (as defined in the Purchase Agreement) (or a total of not more than forty
(40) Trading Days in any twelve (12) month period), the Company may delay the disclosure of material non-public information concerning the Company (as well as prospectus or Registration Statement updating) the disclosure of which at the
time is not, in the good faith opinion of the Company, in the best interests of the Company and may refuse to permit the Investors to sell under such Registration Statement (an “Allowed Delay”); provided, further, that the Company
shall promptly (i) notify the Investors in writing of the existence of (but in no event, without the prior written consent of an Investor, shall the Company disclose to such Investor any of the facts or circumstances regarding) material
non-public information giving rise to an Allowed Delay and (ii) advise the Investors in writing to cease all sales under such Registration Statement until the end of the Allowed Delay, in which case the Investors agree to cease all sales under
such Registration Statement until the end of the Allowed Delay. Upon expiration of the Allowed Delay, the Company shall again be bound by the first sentence of this Section 3(f) with respect to the information giving rise thereto. 

 
 g. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of any Registration Statement, and, if such an order is issued, to obtain the withdrawal of such order at the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance of such order and the resolution thereof. 
  
 h. The Company shall permit a single firm of counsel designated by the Initial Investors to review such Registration Statement, and all amendments
and supplements thereto (as well as all requests for acceleration or effectiveness thereof and any correspondence between the Company and the SEC relating to the Registration Statement) (collectively, the “Registration Documents”) a
reasonable period of time prior to their filing with the SEC, and not file (or send) any Registration Documents in a form to which such counsel reasonably objects and will not request acceleration of such Registration Statement without prior notice
to such counsel. The sections of such Registration Statement covering information with respect to the 
  

 7 

 Investors, the Investor’s beneficial ownership of securities of the Company or the Investors intended method of
disposition of Registrable Securities shall conform to the information provided to the Company by each of the Investors. 
  
 i. The Company shall make generally available to its security holders as soon as practicable, but not later than ninety (90) calendar days
after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter
next following the effective date of the Registration Statement. 
  
 j. At the request of any Investor, in an underwritten offering, the Company shall furnish, on the date that Registrable Securities are delivered to an underwriter for sale in connection with any Registration Statement (i) an
opinion, dated as of such date, from counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the underwriters, if any, and
the Investors and (ii) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and the Investors, in each case to the extent that such opinion and letter are required to be delivered to such underwriters. 
  
 k. The Company shall make available for inspection by (i) any Investor, (ii) any underwriter participating
in any disposition pursuant to a Registration Statement, (iii) one firm of attorneys and one firm of accountants or other agents retained by the Initial Investors, and (iv) one firm of attorneys retained by all such underwriters
(collectively, the “Inspectors”) all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by
each Inspector to enable each Inspector to exercise its due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in confidence and shall not make any disclosure (except to an Investor) of any Record or other information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement, (b) the release of such Records is ordered pursuant
to a subpoena or other order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement;
and provided further that the Company shall not be responsible for paying the fees and expenses of any Inspectors. The Company shall not be required to disclose any confidential information in such Records to any Inspector until and unless such
Inspector shall have entered into confidentiality agreements (in form and substance satisfactory to the Company) with the Company with respect thereto, substantially in the form of this Section 3(k). Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein (or in any other confidentiality agreement between the Company and any Investor) shall be deemed to limit the Investor’s ability to sell
Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations. 
  

 8 

 l. The Company shall hold in confidence and not make any disclosure of information concerning an
Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in
any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to
the public other than by disclosure in violation of this or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior to making such disclosure, and allow the Investor, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such
information. 
  
 m. The Company shall (i) cause all
the Registrable Securities covered by the Registration Statement to be listed on each national securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) to the extent the securities of the same class or series are not then listed on a national securities exchange, secure the designation and quotation of all the Registrable
Securities covered by the Registration Statement on Nasdaq and, without limiting the generality of the foregoing, to arrange for at least two market makers to register with the National Association of Securities Dealers, Inc.
(“NASD”) as such with respect to such Registrable Securities. 
  
 n. The Company shall provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities not later than the effective date of the Registration Statement. 
  
 o. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities to be offered pursuant to such
Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the managing underwriter or underwriters, if any, or the Investors may reasonably request and registered in such names as the managing
underwriter or underwriters, if any, or the Investors may request, and, within three (3) business days after a Registration Statement which includes Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent for the Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) an instruction in the form attached
hereto as Exhibit 1 and an opinion of such counsel in the form attached hereto as Exhibit 2; provided that before delivering such instruction and opinion, the Company shall be entitled to first receive a written undertaking signed
by each Investor confirming that it will only resell such Registrable Securities (a) in compliance with the prospectus delivery requirements of the 1933 Act (b) in a transaction in which such Investor shall have delivered to the Company an
opinion of counsel (which opinion shall be in form, substance and scope reasonably acceptable to the Company) to the effect that the Registrable Securities to be sold or transferred may be so sold or transferred pursuant to an exemption from such
registration, or (c) pursuant to Rule 144(k) under the 1933 Act. 
  

 9 

 p. At the request of the holders of a majority-in-interest of the Registrable Securities, the
Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and any prospectus used in connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement. 
  
 q. The Company shall not, and shall not agree to, allow the holders of any securities of the Company to include any of their securities in any Registration Statement under Section 2(a) hereof or any
amendment or supplement thereto under Section 3(b) hereof without the consent of the holders of a majority-in-interest of the Registrable Securities. In addition, the Company shall not offer any securities for its own account or the account of
others in any Registration Statement under Section 2(a) hereof or any amendment or supplement thereto under Section 3(b) hereof without the consent of the holders of a majority-in-interest of the Registrable Securities. 
  
 r. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities pursuant to a Registration Statement. 
  
 s. The Company shall comply with all applicable laws related to a Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith (including without limitation the 1933 Act and the 1934 Act and the rules and regulations promulgated by the SEC). 
  
 4. OBLIGATIONS OF THE INVESTORS. 
  
 In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations: 
  
 a. It
shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such
information regarding itself in a Selling Holder Questionnaire, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. At least three (3) business days prior to the first anticipated filing date of the Registration Statement, the
Company shall notify each Investor of the information the Company requires from each such Investor. 
  
 b. Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of the Registration Statements hereunder, unless such Investor has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable
Securities from the Registration Statements. 
  

 10 

 c. In the event that Registrable Securities are offered and sold in an underwritten offering, each
Investor agrees to enter into and perform such Investor’s obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the managing
underwriter of such offering and take such other actions as are reasonably required in order to expedite or facilitate the disposition of the Registrable Securities, unless such Investor has notified the Company in writing of such Investor’s
election to exclude all of such Investor’s Registrable Securities from such Registration Statement. 
  
 d. Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Investor’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) and, if so directed by the Company, such Investor shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in
such Investor’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. 
  
 e. No Investor may participate in any underwritten registration hereunder unless such Investor (i) agrees to sell such Investor’s
Registrable Securities on the basis provided in any underwriting arrangements in usual and customary form entered into by the Company, (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting arrangements, and (iii) agrees to pay its pro rata share of all underwriting discounts and commissions and any expenses in excess of those payable by the Company pursuant
to Section 5 below. 
  
 f. In the event that the
Company amends or supplements the prospectus relating to the Registration Statement and delivers to an Investor a copy of such amended or supplemented prospectus, the Investor agrees that it shall thereafter use such amended or supplemented
prospectus, and shall no longer use the prospectus previously provided by the Company, for any offers or sales of Registrable Securities. 
  
 g. Each Investor agrees to maintain in confidence and shall not disclose any material nonpublic information (within the meaning of SEC Regulation
F-D) regarding the Company received pursuant to this Agreement, including without limitation, any information contained in the notice pursuant to Section 4(d) above, and the fact of such delay imposed by the Company pursuant thereto.

  
 5. EXPENSES OF REGISTRATION. 
  
 All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualification fees, printers and accounting fees, the fees and disbursements of counsel
for the Company, and the reasonable fees and disbursements of one counsel selected by the Initial Investors pursuant to Sections 2(b) and 3(h) hereof shall be borne by the Company. 
  

 11 

 6. INDEMNIFICATION. 
  
 In the event any Registrable Securities are included in a Registration Statement under this Agreement: 
  
 a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities, (ii) the directors, officers, partners, employees, agents and each person who controls any Investor within the meaning of the 1933 Act or the Securities Exchange
Act of 1934, as amended (the “1934 Act”), if any, (iii) any underwriter (as defined in the 1933 Act) for the Investors, and (iv) the directors, officers, partners, employees and each person who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any (each, an “Indemnified Person”), against any joint or several losses, claims, damages, liabilities or expenses (collectively, together with actions, proceedings
or inquiries by any regulatory or self-regulatory organization, whether commenced or threatened, in respect thereof, “Claims”) to which any of them may become subject insofar as such Claims arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not
misleading; (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under
which the statements therein were made, not misleading; or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation
thereunder relating to the offer or sale of the Registrable Securities (the matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”). Subject to the restrictions set forth in Section 6(c)
with respect to the number of legal counsel, the Company shall reimburse the Indemnified Person, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim arising solely out of or
based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by any Indemnified Person or underwriter for such Indemnified Person expressly for use in connection with the preparation of
such Registration Statement or any such amendment thereof or supplement thereto; (ii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent
shall not be unreasonably withheld; and (iii) with respect to any preliminary prospectus, shall not inure to the benefit of any Indemnified Person if the untrue statement or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented, such corrected prospectus or amendment or supplement to the prospectus was timely made available by the Company pursuant to Section 3(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a Violation and such Indemnified Person, notwithstanding such advice, used it. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9. 
  

 12 

 b. In connection with any Registration Statement in which an Investor is participating, each such
Investor agrees severally and not jointly to indemnify, hold harmless and defend, to the same extent and in the same manner set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration
Statement, each person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act, any underwriter and any other stockholder selling securities pursuant to the Registration Statement or any of its directors or officers or
any person who controls such stockholder or underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and together with an Indemnified Person, an “Indemnified Party”), against any Claim to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out of or is based upon any Violation by such Investor, in each case to the extent (and only to the extent) that such Violation occurs solely in reliance
upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and subject to Section 6(c), such Investor will reimburse any legal or other expenses
(promptly as such expenses are incurred and are due and payable) reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Agreement (including this Section 6(b) and Section 7) for only that amount as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(b) with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented. 
  
 c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action (including any governmental action), such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however,
that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The indemnifying party shall pay for only one separate legal counsel for the Indemnified Persons or the Indemnified Parties, as applicable, and such legal counsel shall be selected by Investors holding
a majority-in-interest of the Registrable Securities included in the Registration Statement to which the Claim relates (with the approval of a majority-in-interest of 
  

 13 

 the Initial Investors), if the Investors are entitled to indemnification hereunder, or the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is actually prejudiced in its ability to defend such action. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable. The Indemnified Person or Indemnified Party shall use commercially reasonable
efforts to cooperate with the indemnifying party in connection with any negotiation or defense of any Proceeding or Loss by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified
Person or Indemnified Party which relates to the Claims. 
  
 7.
CONTRIBUTION. 
  
 To the extent any indemnification by
an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that (i) no contribution shall be made under circumstances where the indemnifying party would not have been liable for indemnification under the fault standards set forth in Section 6, (ii) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or other obligations under this Agreement) by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities. An Indemnified Party may not enter into any settlement with respect to any Claim without the prior written consent of the indemnifying party; provided, however, that such consent may not be unreasonably
withheld, conditioned or delayed. 
  
 8. REPORTS UNDER THE
1934 ACT. 
  
 With a view to making available to the
Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the investors to sell securities of the Company to the public without registration (“Rule
144”), the Company agrees to: 
  
 a. make and
keep public information available, as those terms are understood and defined in Rule 144; 
  
 b. file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company’s obligations under Section 4.3 of the Purchase Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and 
  

 14 

 c. furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon
written request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration. 
  
 9. ASSIGNMENT OF REGISTRATION RIGHTS. 
  
 The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion more than 150,000 shares of Registrable Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (ii) the Company is, within ten (10) business days after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee,
and (b) the securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted
under the 1933 Act and applicable state securities laws, (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein, (v) such transfer shall have been made in accordance with the applicable requirements of the Purchase Agreement, and (vi) such transferee shall be an “accredited investor”
as that term defined in Rule 501 of Regulation D promulgated under the 1933 Act. 
  
 10. AMENDMENT OF REGISTRATION RIGHTS. 
  
 Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with written consent of the Company
and the Investor to be bound by such amendment or waiver. 
  

 15 

 11. MISCELLANEOUS. 
  
 a. A person or entity is deemed to be a holder of Registrable Securities whenever such person or entity owns of
record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable Securities. 
  
 b. Any notices required or permitted to be given under the terms hereof shall be sent by certified or registered mail (return receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five (5) calendar days after being placed in the mail, if mailed by regular United States mail, or upon receipt, if delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a party. The addresses for such communications shall be: 
  
 If to the Company: 
  
 Kana Software, Inc. 
 181 Constitution Drive 
 Menlo Park, California 94025 
 Attention: Chief Financial Officer 
 Facsimile: (650) 614-8301 
  
 With copy to: 
  
 Fenwick & West LLP 
 275 Battery Street 
 San Francisco, CA 94111 
 Attention: David K. Michaels, Esq. 
 Facsimile: (415) 281-1350 
  
 If to an Investor: to the address set forth immediately below such Investor’s name on
the signature pages to the Purchase Agreement. 
  
 c.
Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. 
  
 d. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable
to agreements made and to be performed in the State of Delaware (without regard to principles of conflict of laws). Both parties irrevocably consent to the exclusive jurisdiction of the United States federal courts and the state courts located in
Delaware with respect to any suit or proceeding based on or arising under this Agreement, the agreements entered into in connection herewith or the transactions contemplated hereby or thereby and irrevocably agree that all claims in respect of such
suit or proceeding may be determined in such courts. Both parties irrevocably waive the defense of an inconvenient forum to the maintenance of such suit or proceeding. Both parties further agree that service of process upon a party mailed by first
class mail shall be deemed in every respect effective service of 
  

 16 

 process upon the party in any such suit or proceeding. Nothing herein shall affect either party’s right to serve
process in any other manner permitted by law. Both parties agree that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful
manner. 
  
 e. This Agreement and the Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Purchase Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof. 
  
 f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. 
  
 g. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 
  
 h. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement. 
  
 i.
Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 
  
 j. Except as otherwise provided herein, all consents and other determinations to be made by the Investors pursuant to this Agreement shall be made
by Investors holding a majority of the Registrable Securities. 
  
 k. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to each Investor by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for breach of its obligations hereunder will be inadequate and agrees, in the event of a breach or threatened breach by the Company of any of the provisions hereunder, that each Investor shall be entitled, in
addition to all other available remedies in law or in equity, to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of
showing economic loss and without any bond or other security being required. 
  
 l. 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. 

 

 17 

 m. In the event that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of any other provision hereof. 
  
 n. The initial number of Registrable Securities included in any Registration Statement and each increase to the number of Registrable Securities
included therein shall be allocated pro rata among the Investors based on the number of Registrable Securities held by each Investor at the time of such establishment or increase, as the case may be. In the event an Investor shall sell or otherwise
transfer any of such holder’s Registrable Securities, each transferee shall be allocated a pro rata portion of the number of Registrable Securities included in a Registration Statement for such transferor. Any shares of Common Stock included on
a Registration Statement and which remain allocated to any person or entity which does not hold any Registrable Securities shall be allocated to the remaining Investors, pro rata based on the number of shares of Registrable Securities then held by
such Investors. For the avoidance of doubt, the number of Registrable Securities held by an Investor shall be determined as if all Warrants then outstanding and held by an Investor were exercised for Registrable Securities. 
  
 o. The Company acknowledges that the obligations of each Investor
under this Agreement, 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 this Agreement. The decision of each
Investor to enter into to this Agreement has been made by such Investor independently of any other Investor. The Company further acknowledges that nothing contained in this Agreement, and no action taken by any Investor pursuant hereto (including,
but not limited to, the (i) inclusion of an Investor in a Registration Statement and any amendments or supplements thereto and (ii) review by, and consent to, such Registration Statement and any amendments or supplements thereto by an
Investor), 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 hereby. Each Investor shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose. 
  
 Each Investor has been represented by its own separate legal counsel in their review and negotiation of this Agreement. For reasons of administrative convenience only, this Agreement have been prepared by counsel for
one of the Investors. Such counsel does not represent all of the Investors but only such Investor and the other Investors have retained their own individual counsel with respect to the transactions contemplated hereby. The Company has
elected to provide all Investors with the same terms and Agreement for the convenience of the Company and not because it was required or requested to do so by the Investors. The Company acknowledges that such procedure with respect to this Agreement
in no way creates a presumption that the Investors are in any way acting in concert or as a group with respect to this Agreement or the transactions contemplated hereby or thereby. 
  
 [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 
  

 18 

 IN WITNESS WHEREOF, the Company and the undersigned Initial Investors have caused this Agreement
to be duly executed as of the date first above written. 
  

			
	KANA SOFTWARE, INC.
		
	 By:
	 	 /S/    JOHN THOMPSON

	 Name:
	 	 John Thompson

	 Title:
	 	 Executive Vice President & Chief Financial Officer

  

			
	NIGHTWATCH CAPITAL PARTNERS, LP
		
	 By:
	 	 NightWatch Capital Management, LLC,

	 	 	     its General Partner

		
	 By:
	 	 /S/    JOHN F. NEMELKA

		
	 	 	 John F. Nemelka

	 	 	 Managing Principal

	
	NIGHTWATCH CAPITAL PARTNERS II, LP
		
	 By:
	 	 NightWatch Capital Management, LLC,

	 	 	     its General Partner

		
	 By:
	 	 /S/    JOHN F. NEMELKA

		
	 	 	 John F. Nemelka

	 	 	 Managing Principal

	
	RHP MASTER FUND, LTD.
		
	 By:
	 	 Rock Hill Investment Management, L.P.,

	 	 	     its investment manager

		
	 By:
	 	 RHP General Partner, LLC

		
	 By:
	 	 /S/    KEITH S. MARLOWE

		
	 	 	 Keith S. Marlowe

	 	 	 Director

  

 19

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