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Exhibit 10.3  


 
 

INTRAWARE, INC.
  
    PLACEMENT AGENCY AGREEMENT    
  


[                  ]

[                  ]

[                  ] 


April 2,
2001 


Ladies
and Gentlemen: 


    This
Placement Agency Agreement (the "Agency Agreement") confirms the retention by Intraware, Inc., a Delaware corporation (the
"Company"), of [                  ], a New York limited partnership
("[                  ]," or the "Placement Agent"), to act as the
sales agent,
on a best efforts basis, in connection with the private placement of the Preferred Units (as defined below) of the Company, on the terms set forth below. 


    The
Company proposes to offer for sale solely to "accredited investors," in a private placement (the "Offering"), up to 14 units
(including fractions thereof) (the "Preferred Units") at $500,000 per Preferred Unit, each Preferred Unit consisting of (i) 50,000 shares of the
Company's Series B Convertible Preferred Stock (the "Preferred Shares") having the rights and preferences set forth in a Certificate of
Designations, Preferences and Rights of Series B Preferred Stock in the form attached hereto as Exhibit A (the
"Series B Designation"), and (ii) seven-year warrants in the form attached hereto as  Exhibit B (the "Preferred
Warrants") to purchase a number of shares of Common Stock equal to 20%
(subject to adjustment) of the number of shares of common stock, par value $0.0001 per share ("Common Stock"), of the Company issuable upon conversion
of 50,000 of the Preferred Shares (the "Warrant Shares") issued in connection herewith. 


    A
minimum of 6 Preferred Units ($3,000,000) (the "Minimum Offering") and a maximum of 14 Preferred Units ($7,000,000)
(the "Maximum Offering") will be sold in the Offering. The Preferred Units will be offered pursuant to those terms and conditions set forth herein. The
Minimum Offering will be made on a "best efforts-all-or-none" basis and the balance of the Offering will be made on a "best efforts" basis. The Preferred Units will
be offered in accordance with Regulation D promulgated by the Securities and Exchange Commission (the "SEC"). 


     (i) The
SEC Documents (as defined in Section 2(j)), and (ii) the "Confidential
Executive Summary" (as defined in the Subscription Agreement between each prospective investor subscribing to purchase Preferred Units pursuant to the Offering (each a
"Subscriber") and the Company (the "Subscription Agreement") attached hereto as  Exhibit C), are
together referred to herein as the "Offering Documents"; and (iii) the
Subscription Agreement, (iv) the Registration Rights Agreement among each Subscriber, the Company and the Placement Agent (the "Registration Rights
Agreement") attached hereto as Exhibit D, (iv) the Series B Designation, (iv) the Preferred
Warrants, (vi) this Agency Agreement, and (vii) the exhibits, schedules and appendices which are part of the Subscription Agreement, the Registration Rights Agreement, the
Series B Designation, the Preferred Warrants, and the Agency Agreement, are collectively referred to herein as the "Transaction Documents." 



    The
Company will prepare and deliver to the Placement Agent a reasonable number of copies of the Transaction Documents in form and substance satisfactory to the Placement Agent and
its counsel. 


    Each
Subscriber will be required to deliver, among other things, a Subscription Agreement and a confidential investor questionnaire ("Investor
Questionnaire") in the form to be provided to offerees. Capitalized terms used herein, unless otherwise defined or unless the context otherwise indicates, shall have the same
meanings provided in the Transaction Documents. 





 


    1.  Appointment of Placement Agent. 



    (a) [                  ]
is hereby appointed exclusive placement agent of the Company (subject to [                  ]'s
right to have selected dealers ("Selected Dealers") in good standing with the National Association of Securities Dealers
("NASD") participate in the Offering) during the offering periods for the Offering herein specified for the purposes of assisting the Company in finding
qualified Subscribers in the Offering. 


    (b) Subject
to the performance by the Company in all material respects of its obligations to be performed under this Agency Agreement and to the completeness and
accuracy of all representations and warranties of the Company contained in this Agency Agreement, the Placement Agent hereby accepts such agency and agrees to use its reasonable best efforts to assist
the Company in finding qualified Subscribers. It is understood that the Placement Agent has no commitment to sell the Preferred Units. [                  ]'s
agency hereunder
is not terminable by the Company except upon termination of the Preferred Offering Period or a material breach by [                  ] of its obligations
hereunder. 


    (c) Subscriptions
for Preferred Units shall be evidenced by the execution by Subscribers of a Subscription Agreement. No Subscription Agreement shall be effective
unless and until it is accepted by the Company. The Placement Agent shall not have any obligation to independently verify the accuracy or completeness of any information contained in any Subscription
Agreement or the authenticity, sufficiency, or validity of any check delivered by any prospective investor in payment for Preferred Units. 


    (d) The
Placement Agent and/or its affiliates may be investors in the Offering. 




    2.  Representations and Warranties of the Company. The Company represents and warrants to the Placement Agent and each
Selected Dealer, if any, as follows: 



    (a) Organization and Qualification. The Company and its "Subsidiaries"
(which for purposes of this Agency Agreement means any entity in which the Company, directly or indirectly, owns capital stock and holds a majority or similar interest) are duly organized and validly
existing in good standing under the laws of the jurisdiction in which they were organized, and have the requisite power and authorization to own their properties and to carry on their business as now
being conducted. Each of the Company and its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership of property or
the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect.
As used in this Agency Agreement, "Material Adverse Effect" means any material adverse effect on the business, properties, assets, operations, results
of operations, financial condition or prospects of the Company and its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby, or by the other Transaction Documents or the
agreements and instruments to be entered into in connection herewith or therewith, or on the authority or ability of the Company to perform its obligations under the Transaction Documents. A complete
list of all Subsidiaries of the Company with substantive business activities is set forth in Schedule 2(a). 


    (b) Authorization; Enforcement; Validity. The Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agency Agreement and other Transaction
Documents, to file and perform its obligations under the Transaction Documents, and to issue the Securities in accordance with the terms of the Transaction Documents. The execution and delivery of the
Transaction Documents by the Company and the consummation by the Company of the transactions contemplated by the Transaction Documents, including without limitation the issuance of the Securities,
have been duly authorized by the Company's board of directors and no further consent or authorization is required by the Company, its board of directors or its stockholders. The Transaction Documents
have been duly executed and delivered 



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by the Company, and constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and
remedies. 


    (c) Capitalization. The authorized, issued and outstanding capital stock of the Company prior to the consummation of the
transactions contemplated hereby is set forth in Schedule 2(c). All of such outstanding shares have been and are, or upon issuance will be duly
authorized, validly issued, fully paid and non-assessable. Except as disclosed in Schedule 2(c), (i) no shares of the
Company's capital stock are subject to preemptive rights under Delaware law or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (ii) there are no
outstanding debt securities issued by the Company; (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments 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 contracts, commitments, understandings 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 or options, warrants, scrip, rights to subscribe to,
calls or commitments 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;
(iv) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act; (v) there
are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by
which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described in the Transaction Documents; and (vii) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. All prior sales of securities of the Company were either registered under the 1933 Act and applicable state
securities laws or exempt from such registration, and no security holder has any rescission rights with respect thereto. 


    (d) Issuance of Securities; Reservation. The issuance, sale and delivery of the Securities have been duly authorized by
all requisite corporate action by the Company and, upon issuance in accordance with the Transaction Documents, shall be (a) duly authorized, validly issued, fully paid and
non-assessable, (b) free from all taxes, liens and charges with respect to the issue thereof, and (c) entitled to the rights and
preferences set forth in the Series B Designation and the Preferred Warrants. At least 12,850,000 shares of Common Stock have been duly authorized and reserved for issuance upon conversion of
the Preferred Shares and exercise of the Warrants. In the event the number of shares of Common Stock issuable upon conversion or exercise of the Preferred Shares or the Warrants exceed the number of
authorized shares of Common Stock as a result of the conversion price or exercise price reset terms of the Preferred Shares or Warrants, the Company shall use its best efforts to seek stockholder
approval of and file a Certificate of Amendment to increase the authorized number of shares of Common Stock accordingly. Upon conversion of the Preferred Shares or exercise of the Warrants in
accordance with the Series B Designation or the Warrants, as the case may be, the Conversion Shares and the Warrant Shares will be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Assuming (i) the accuracy of
the information provided by the respective Subscribers in the Subscription Agreement and Investor Questionnaires, (ii) that all of the offerees and Subscribers are "accredited investors" as
such term is defined in Rule 501 of Regulation D, 



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and (iii) that the Placement Agent has not engaged, nor will engage, in connection with the Offering, in any form of general solicitation or general advertising within the meaning of
Rule 502(c) of Regulation D, the offer and sale of the Preferred Shares and the Preferred Warrants pursuant to the terms of this Agency Agreement are and will be exempt from the
registration requirements of the 1933 Act and the rules and regulations promulgated thereunder. The Company is not disqualified from the exemption under Regulation D by virtue of the
disqualification contained in Rule 507 thereof or otherwise. 


    (e) No Conflicts. Except as set forth in Schedule 2(e), the
execution, delivery and performance of the Transaction Documents by the Company, the consummation by the Company of the transactions contemplated by the Transaction Documents, and the performance by
the Company of its obligations under the Series B Designation and the Preferred Warrants, including without limitation, the reservation for issuance and the issuance of the Securities, will not
(a) result in a violation of the Company's Certificate of Incorporation, any certificate of designations, preferences and rights of any outstanding series of preferred stock of the Company, or
the Company's bylaws, (b) conflict with, or constitute a default or an event which with notice or lapse of time or both would become a default under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement, lease, license or instrument (including without limitation, any document filed as an exhibit to any of the Company's
SEC Documents (as defined below)), or (c) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the
rules and regulations of The Nasdaq National Market, Inc.) 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. 


    (f)  Consents. Except as contemplated by this Agency Agreement, and except for the filing of the Registration Statement
(as defined in the Registration Rights Agreement) with the SEC, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction
Documents. Except as otherwise provided in the Transaction Documents, 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. The Company and its Subsidiaries are unaware of any facts or circumstances which might prevent the Company from obtaining or
effecting any of the foregoing. 


    (g) No General Solicitation. None of the Company, its Subsidiaries, any of their affiliates, and any person acting on
their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities. 


    (h) No Integrated Offering. None of the Company, its Subsidiaries, any of their affiliates, and any person acting on
their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the
Securities under the 1933 Act or cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated. None of
the Company, its Subsidiaries, their affiliates and any person acting on their behalf will take any action or steps referred to in the preceding sentence that would require registration of any of the
Securities under the 1933 Act or cause the offering of the Securities to be integrated with other offerings. 



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    (i)  Application of Takeover Protections; Rights Agreement. 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 Certificate of Incorporation or the laws of the state of its incorporation which is or could become applicable to the Subscriber as a result of the
transactions contemplated by this Agency Agreement, including without limitation, the Company's issuance of the Securities and the Subscriber's ownership of the Securities. The Company has not adopted
a shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company. 


    (j)  SEC Documents; Financial Statements. Since February 29, 2000, the Company has 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 Exchange 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 statements
and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the "SEC Documents"). The Company has made
available to the Subscriber or its representatives 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 generally accepted accounting principles, consistently applied,
during the periods involved (except (a) as may be otherwise indicated in such financial statements or the notes thereto, or (b) in the case of unaudited interim statements, to the extent
they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments that will not be material). As of the date hereof,
the Company meets the requirements for the use of Form S-3 for registration of the resale of the Common Stock issuable upon exercise of the Preferred Warrants and upon conversion of
the Preferred Shares. 


    (k) Conduct of Business; Regulatory Permits. Except as set forth on  Schedule 2(k), since February 29, 2000 the Company has not (a) incurred any debts,
obligations or liabilities, absolute, accrued,
contingent or otherwise, whether due or to become due, except current liabilities incurred in the usual and ordinary course of business, having a Material Adverse Effect, (b) made or suffered
any changes in its contingent obligations by way of guaranty, endorsement (other than the endorsement of checks for deposit in the usual and ordinary course of business), indemnity, warranty or
otherwise, (c) discharged or satisfied any liens other than those securing, or paid any obligation or liability other than, current liabilities shown on the balance sheet dated as at
February 29, 2000 and forming part of the SEC Documents, and current liabilities incurred since the February 29, 2000, in each case in the usual and ordinary course of business,
(d) mortgaged, pledged or subjected to lien any of its assets, tangible or intangible, (e) sold, transferred or leased any of its assets except in the usual and ordinary course of
business, (f) cancelled or compromised any debt or claim, or waived or released any right, of material value, (g) suffered any physical damage, destruction or loss (whether or not
covered by insurance) adversely affecting the properties, business or prospects of the Company, (h) entered into any transaction other than in the usual and ordinary course of business except
for this Agency Agreement and the related 



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agreements referred to herein, (i) encountered any labor difficulties or labor union organizing activities, (j) made or granted any wage or salary increase or entered into any employment
agreement, (k) issued or sold any shares of capital stock or other securities or granted any options with respect thereto, or modified any equity security of the Company, (l) declared or
paid any dividends on or made any other distributions with respect to, or purchased or redeemed, any of its outstanding equity securities, (m) suffered or experienced any change in, or
condition affecting, its condition (financial or otherwise), properties, assets, liabilities, business operations, results of operations or prospects other than changes,
events or conditions in the usual and ordinary course of its business, having (either by itself or in conjunction with all such other changes, events and conditions) a Material Adverse Effect,
(n) made any change in the accounting principles, methods or practices followed by it or depreciation or amortization policies or rates theretofore adopted, or (o) entered into any
agreement, or otherwise obligated itself, to do any of the foregoing. Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule
or regulation applicable to the Company or its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except for possible
violations which would not, individually or in the aggregate, have a Material Adverse Effect. The Company's Common Stock has been designated for quotation or listed on the Nasdaq National Market,
trading in the Common Stock has not been suspended by the SEC or the Nasdaq National Market and the Company has received no communication, written or oral, from the SEC or the Nasdaq National Market
regarding the suspension or delisting of the Common Stock from the Nasdaq National Market. Except as disclosed on Schedule 2(k), the Company is
not in violation of the listing requirements of the Nasdaq National Market as in effect on the date hereof and has no actual knowledge of any facts which would reasonably lead to delisting or
suspension of the Common Stock by the Nasdaq National Market in the foreseeable future. The Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any
such certificate, authorization or permit. 


    (l)  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 of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company, (a) 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, (b) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or (c) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. 


    (m) Absence of Litigation. Except as set forth in Schedule 2(m),
there is no action, suit, proceeding, inquiry or investigation before or by the Nasdaq National Market, any court, public board, government agency, self-regulatory organization or body, or
arbitrator pending or, to the knowledge of the Company, threatened against the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such. 


    (n) Tax Status. The Company and each of its Subsidiaries has made or filed all federal and state income and all other
tax returns, reports and declarations required by any jurisdiction to which it is subject, 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 or 



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otherwise due and payable, except those being contested in good faith and has set aside on its books reserves in accordance with GAAP 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. 


    (o) Securities Law Compliance. The offer, offer for sale, and sale of the Preferred Units has not been registered with
the SEC. The Preferred Units are to be offered, offered for sale and sold in reliance upon the exemptions from the registration requirements of Section 5 of the 1933 Act. The Company will
conduct the Offering in compliance with the requirements of Regulation D under the 1933 Act, and the Company will file all appropriate notices of offering with the SEC. 


    (p) Title. Except as set forth in or contemplated by  Schedule 2(p), the Company has good and marketable title to all material properties and tangible assets owned by
it, free and clear of all liens,
charges, encumbrances or restrictions, except as such as are not significant or important in relation to the Company's business; all of the material leases and subleases under which the Company is the
lessor or sublessor of properties or assets or under which the Company holds properties or assets as lessee or sublessee are in full force and effect, and the Company is not in default in any material
respect with respect to any of the terms or provisions of any of such leases or subleases, and no material claim has been asserted by anyone adverse to rights of the Company as lessor, sublessor,
lessee or sublessee under any of the leases or subleases mentioned above, or affecting or questioning the right of the Company to continued possession of the leased or subleased premises or assets
under any such lease or sublease. The Company owns, leases or licenses all such properties as are necessary to its operations as described in the Transaction Documents. 


    (q) Intellectual Property Rights. To the Company's knowledge after due investigation, the Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth on  Schedule 2(q), to the Company's knowledge
after due investigation, none of the Company's trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or
terminated, or are expected to expire or terminate within two years from the date of this Agency Agreement, except where such expiration or termination would not have either individually or in the
aggregate a Material Adverse Effect. After due investigation, the Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademarks, trade
name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secrets or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by others and, except as set forth on Schedule 2(q), no
claim, action or proceeding has been made or brought against, or to the Company's knowledge, has been threatened against, the Company or its Subsidiaries regarding trademarks, trade name rights,
patents, patent rights, inventions, copyrights, licenses, service names, service marks, service mark registrations, trade secrets or other infringement, except where such infringement, claim, action
or proceeding would not reasonably be expected to have either individually or in the aggregate a Material Adverse Effect. Except as set forth on  Schedule 2(q), the Company and its Subsidiaries are
unaware, after due investigation, of any facts or circumstances which might give rise to any
of the foregoing. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties except where the
failure to do so would not have either individually or in the aggregate a Material Adverse Effect. 



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    (r) Registration Rights. Except with respect to holders of the Preferred Units and the Preferred Warrants, and except as
set forth in Schedule 2(r), no person has any right to cause the Company to effect the registration under the 1933 Act of any securities of the
Company. 


    (s) Brokers. Neither the Company nor any of its officers, directors, employees or stockholders has employed any broker
or finder in connection with the transactions contemplated by the Agency Agreement other than the Placement Agent. 


    (t)  Right of First Refusal. No person, firm or other business entity is a party to any agreement, contract or
understanding, written or oral entitling such party to a right of first refusal with respect to offerings of securities by the Company. 


    (u) Interim Financial Statements. Attached hereto as  Schedule 2(u) are complete and accurate copies of the Company's unaudited, consolidated financial statements as of
and for the three
(3) month period and as of and for the year ended February 28, 2001 (the "Financial Statements"). To the best of the Company's knowledge
as of the date hereof, and except as set forth in Schedule 2(u) or in any notes to the Financial Statements, the Financial Statements (including
any notes thereto) were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the period indicated and prior periods and present fairly and
accurately the consolidated financial position, results of operations and cash flows of the Company as of and for the three (3) month period and as of and for the year ended February 28,
2001 (in each case, subject to normal year-end audit adjustments). 


    (v) Disclosure. None of the representations and warranties of the Company appearing in this Agency Agreement or any
information appearing in any Exhibit or Schedule hereto or in any of the Transaction Documents or Offering Documents contains, or on any Closing Date will contain, any
untrue statement of a material fact or omits, or on any Closing Date will omit, to state any material fact required to be stated herein or therein in order for the statements herein or therein, in
light of the circumstances under which they were made, not to be misleading. 


    (w) Certain Officers. As of the date hereof, Peter Jackson, Frost Prioleau, James Brentano, David Dunlap, Paul
Martinelli and Norman Pensky (the "Key Executives") are employed by the Company on a full-time basis, and, to the Company's knowledge, none
of the Key Executives is planning to cease being employed by the Company on a full-time basis in their current capacity and the Company is not aware of any circumstances related to the
employment of the Key Executives, apart from circumstances related to the operations of the Company as a whole, that could result in cessation of full-time employment of any of the Key
Executives in their current capacities. 




    3.  Closing and Fees. 



    (a) Closing of the Offering. Provided the Minimum Offering shall have been subscribed for, funds representing the sale
thereof shall have cleared, all conditions to closing set forth in Section 3 hereof and Articles V and
VI of the Subscription Agreement have been satisfied or waived and neither the Company nor the Placement Agent have notified the other that they do not intend to effect the
closing of the Minimum Offering, a closing (the "Initial Preferred Closing") shall take place at the offices of counsel to the Placement Agent, Paul,
Hastings, Janofsky & Walker LLP, 345 California Street, 29th Floor, San Francisco, California, within three (3) business days thereafter (but in no event later than
five days following the Preferred Termination Date), which closing date may be accelerated or adjourned by agreement between the Company and the Placement Agent. At the Initial Preferred Closing,
payment for the Preferred Units issued and sold by the Company shall be made against delivery of the Preferred Shares and Preferred Warrants comprising such Preferred Units. The Company and the
Placement Agent may consummate subsequent closings of the Offering, upon mutual agreement only, each of which shall be subject to satisfaction or waiver of the conditions to closing set forth in  Articles V and
VI of the 



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Subscription Agreement and in Section 3 hereof, and each of which shall be deemed a "Preferred
Closing" hereunder. The date of the last closing of the Offering is hereinafter referred to as the "Final Closing" and the date
of any Preferred Closing hereunder is hereinafter referred to as a "Closing Date". The offering period for the Offering (the
"Preferred Offering Period") shall commence on the day the Transaction Documents relating thereto are first made available to
[                  ] by the Company for delivery in connection with the offering for sale of the Preferred Units and shall continue until the earlier to occur
of:
(i) the sale of the Maximum Offering; or (ii) 5:00 p.m. (New York time), April 26, 2001. In any event, however, the Placement Agent shall use its reasonable best efforts to
close at least $3,000,000 of gross proceeds of the Offering by 11:59 p.m. (New York time) on April 3, 2001. If the Minimum Offering is not sold by 11:59 p.m.
(New York time) on April 3, 2001, the Offering will be terminated and all funds received from Subscribers will be returned, without interest and without any deduction. The day that the
Preferred Offering Period terminates is hereinafter referred to as the
"Preferred Termination Date." The Preferred Termination Date may be extended for up to thirty (30) days by mutual agreement of the Placement
Agent and the Company. 


    (b) Conditions to Placement Agent's Obligations. The obligations of the Placement Agent hereunder will be subject to the
accuracy in all material respects of the representations and warranties of the Company herein contained as of the date hereof and as of each Closing Date of the Placements, to the performance by the
Company of its obligations hereunder and to the following additional conditions: 



     (i) Due Qualification or Exemption. (A) The Offering will become qualified or be exempt from qualification under
the securities or "blue sky" laws of the several states pursuant to Section 4(d) below not later than the Initial Preferred Closing Date, and
(B) at any Closing Date no stop order suspending the sale of the Preferred Units shall have been issued and no proceedings by any governmental authority, self regulatory organization or any
securities exchange for that purpose shall have been initiated or threatened in writing; 


    (ii) No Material Misstatements. Neither the blue sky qualification materials nor the Transaction Documents, nor any
supplement thereto, will contain any untrue statement of a fact which in the reasonable opinion of the Placement Agent is material, or omits to state a fact, which in the reasonable opinion of the
Placement Agent is material and is required to be stated therein, or is necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; 



    (iii) Compliance with Agreements. The Company will have complied in all material respects with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder at or prior to each Preferred Closing; 


    (iv) Corporate Action. The Company has or will have taken all necessary corporate action, including, without limitation,
obtaining the approval of its Board of Directors and stockholders, for the execution and delivery of this Agency Agreement, the performance by the Company of its obligations hereunder and the Offering
contemplated hereby (including any approval of the issuance of the Preferred Shares and Preferred Warrants in the Offering by the Company's stockholders required by the rules of the Nasdaq National
Market unless a waiver therefrom has been obtained; provided that, if the terms of such waiver require stockholder ratification of the issuance, the Placement Agent shall receive an irrevocable proxy
from each of the Company's executive officers and directors solely for the purpose of voting in favor of such ratification); 


    (v) Opinion of Company Counsel. At each Preferred Closing, the Placement Agent shall receive the opinion of Wilson,
Sonsini, Goodrich & Rosati, Professional Corporation, counsel 




9





 



to the Company, addressed to the Placement Agent and the Subscribers substantially to the effect that: 



    (A) The
Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company is duly qualified as a
foreign corporation to do business and is in good standing in the State of California. 


    (B) The
Company has the requisite corporate power and authority to execute, deliver and perform its obligations under the Placement Agency Agreement, the Subscription
Agreement, the Series B Designation, the Warrant and the Registration Rights Agreement (collectively, the "Transaction Documents"), including issuance of the Preferred Shares and the Warrants
in accordance with the terms thereof. The execution and delivery of the Transaction Documents by the Company, the performance of the obligations of the Company thereunder and the consummation by it of
the transactions contemplated therein have been duly authorized by the Company's Board of Directors. The Transaction Documents have been duly executed and delivered by the Company. 


    (C) The
issuance and sale of the Preferred Shares and the Warrants has been duly authorized, and when issued and paid for in accordance with the terms of the Placement
Agency Agreement, the Preferred Shares will be validly issued, fully paid and non-assessable and free of all liens, encumbrances and preemptive rights with respect to the issue thereof.
The Common Stock issuable upon the conversion of the Preferred Shares (the "Conversion Shares") and the Common Stock issuable upon the exercise of the Warrants (the "Warrant Shares") are duly
authorized and reserved for issuance in accordance with the Placement Agency Agreement, the Series B Designation and the Warrants, and when issued and paid for in accordance with the Placement
Agency Agreement, the Series B Designation and the Warrants, the Conversion Shares and the Warrant Shares will be validly issued, fully paid and non-assessable and free of all
taxes, liens, charges and preemptive rights with respect to the issue thereof. 


    (D) Based
in part upon, and subject to the accuracy as to factual matters of, the Subscribers' representations in Article II of the Subscription Agreement, the
Preferred Shares and the Warrants may be issued to the Subscribers pursuant to the Transaction Documents without registration under the Securities Act of 1933, as amended. 


    (E) No
authorization, approval, consent, filing or other order of any Federal or state governmental body, regulatory agency, self-regulatory organization or
stock exchange or market, or to our knowledge, any court, is required to be obtained by the Company to enter into and perform its obligations under the Transaction Documents or for the issuance and
sale of the Preferred Shares and the Warrants as
contemplated by the Transaction Documents, except such as have been made or will be made by the Company. 


    (F) To
our knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body or any governmental agency or
self-regulatory organization pending or threatened against the Company or any of its subsidiaries or any of the properties of the Company or any of its subsidiaries which might reasonably
be expected to prevent the transactions contemplated by the Transaction Documents. 


    (G) The
execution, delivery and performance by the Company of the Transaction Documents, the consummation by the Company of the transactions contemplated thereby and
the compliance by the Company with the terms thereof does not violate, conflict with or constitute a default under the Restated Certificate, Series B Designation, the Bylaws or any other
material contract, agreement arrangement by which the Company is bound. 





10





 


    (vi) Representations and Warranties. The representations and warranties of the Company set forth in  Section 2 hereof shall be true and correct as of the date when made
and as of the Closing as though made at that time (except for representations
and warranties that reference a specific date which shall have been true and correct in all material respects as of such date), and the Company shall have performed, satisfied and complied in all
respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Closing, except where the
failure of such representations and warranties to be true and correct as stated above, and except for such nonperformance, failure to satisfy or comply as would not, individually or in the aggregate,
have a Material Adverse Effect. 


   (vii) Closing Documents. At the Closing, the Company shall have delivered to the Subscriber the following: (A) a
certificate of the Chief Executive Officer stating that (I) the condition set forth in Section 3(b)(vi) has been satisfied,
(II) except as expressly set forth in any Schedule or Exhibit to the Subscription Agreement or this Agency Agreement, since November 30, 2000, there has been no event, condition or
circumstance that has had or could reasonably be expected to have a Material Adverse Effect, and (III) the Company has complied with its covenants and agreements set forth in the Transaction
Documents, and (B) a certificate of the Secretary of the Company containing: (I) true and complete copies, as of the Closing Date, of the Certificate of Incorporation and
by-laws of the Company and of the certificates of designations of all series of preferred stock of the Company, (II) true and complete copies of the resolutions of the Board of
Directors of the Company approving the Transaction Documents and all documents and matters incident thereto, and (III) a certification of authenticity of the signatures of the officers of the
Company who have executed and delivered the documentation for this Offering. 


   (viii) Designation of Preferred. The Series B Designation shall have been accepted for filing by the Secretary of
State of the State of Delaware, and a certified copy thereof shall have been delivered to the Placement Agent. 


    (ix) Fund Escrow Agreement. The Placement Agent shall receive a copy of a duly executed escrow agreement in the form
previously delivered to the Placement Agent regarding the deposit of funds pending the closing(s) of the Offering with a bank or trust company (the "Escrow
Agent") acceptable to the Placement Agent. 


    (x) Minimum Offering. The Minimum Offering shall have been sold in the Offering and the Escrow Agent shall have received
proceeds from such offering of at least $3,000,000. 


    (xi) Series B Director. Upon the Initial Preferred Closing, the Board will consist of seven (7) directors
which shall include one (1) member designated by the Placement Agent on behalf of the holders of the Preferred Shares (the "Series B
Director"). In the event that the holders of the Preferred Shares do not exercise their right to designate a member of the Board, then the failure to do so shall not constitute
a waiver of such right and the holders of the Preferred Shares may then appoint any person to be an observer who shall be entitled to attend and observe meetings of the Board and any committees
thereof (an receive notices, communications and other information provided in connection with such meetings). 




11











  




   (xii) Directors and Officers Insurance. The Company shall purchase and maintain in full force and effect, to the extent
permitted by law and with such coverage as is customary, directors and officers liability insurance. 


   (xiii) No Adverse Changes. There shall not have occurred, at any time prior to the applicable closing (i) a
general suspension of, or a general limitation on prices for, trading in securities on the New York Stock Exchange, the Nasdaq, the Amex Stock Exchange, or in the
over-the-counter market; (ii) any outbreak of major hostilities or other national or international calamity; (iii) any banking moratorium declared by Federal or
New York authorities; (iv) any material adverse change in the business, properties, assets, results of operations, or financial condition of the Company which materially impairs the investment
quality of the Preferred Units; or (v) any material adverse change in the market for securities in general or in political, financial, or economic conditions which, in the Placement Agent's
reasonable judgment, makes it inadvisable to proceed with the Offering. 


   (xiv) Due Diligence Investigation Complete. The Placement Agent shall have concluded its due diligence investigation of
the Company to the Placement Agent's reasonable satisfaction, including, without limitation, an investigation of the Company's financial statements, projections, business prospects, capital structure,
and other contractual arrangements. 


   (xv) Conditions of Subscription Agreement. All of the conditions to closing set forth in Section 6 of the
Subscription Agreement shall have been satisfied. 


   (xvi) Lock-Up Agreements. The Placement Agent shall have received a signed lock-up agreement
from Frost Prioleau in substantially the form attached as Exhibit D to the Subscription Agreement, a signed lock-up agreement from
Peter Jackson in substantially the form attached as Exhibit E to the Subscription Agreement and the Other Lock-Ups (as defined in the
Subscription Agreement) executed by the individuals specified in Section 1.10(iii) of the Subscription Agreement. 




    (c) Blue Sky. Counsel to the Placement Agent will prepare and file the necessary documents so that offers and sales of
the securities to be offered in the Offering may be made in certain jurisdictions in the United States. It is understood that such filings may be based on or rely upon: (i) the representations
of each Subscriber set forth in the Subscription Agreement delivered by such Subscriber; (ii) the representations, warranties and agreements of the Company set forth in  Section 2 of this
Agency Agreement; and (iii) the representations of the Company set forth in the certificate to be delivered at each
Preferred Closing pursuant to Section 3(b)(vii). 


    (d) Placement Fee and Expenses. 



     (i) Offering. Simultaneously with payment for and delivery of the Preferred Units at each Preferred Closing, the Company
shall: (A) pay to the Placement Agent a cash fee equal to 6% of the gross proceeds of the Preferred Units sold (the "Cash Fee");
(B) reimburse the Placement Agent for its actual out-of-pocket expenses incurred in connection with the Offering, including, without limitation, the reasonable fees and
expenses of its counsel (Paul, Hastings, Janofsky & Walker LLP), including, due diligence investigation expenses, travel and mailing expenses, up to a maximum of $60,000, which amount may be
increased with the prior written consent of the Company, and (C) pay all expenses in connection with the qualification of the Securities under the blue sky laws of the states which the
Placement Agent shall designate, including legal fees, filing fees and disbursements of Placement Agent's counsel in connection with such blue sky matters (the reimbursement and payment obligations of
the Company set forth in clauses (B) through (C) above, the "Placement Agent Expenses"). 


    (ii) Interest. In the event that for any reason the Company shall fail to pay to the Placement Agent all or any portion
of the fees payable hereunder when due, interest shall 




12





 



accrue and be payable on the unpaid cash balance due hereunder from the date when first due through and including the date when actually collected by the Placement Agent, at a rate equal to four
percent above the prime rate of Citibank, N.A., in New York, New York, computed on a daily basis and adjusted as announced from time to time. 




    (e) Bring-Down Opinions and Certificates. If there is more than one Preferred Closing, then at each such
Closing there shall be delivered to the Placement Agent updated opinions and certificates as described in Section 3(b)(v) and (vii) above,
respectively. 




    4.  Covenants of the Company. 



    (a) Use of Proceeds. The net proceeds of the Offering will be used by the Company substantially as set forth in
Section 4.5 of the Subscription Agreement. 


    (b) Expenses of Offering, Other Payments and Option



     (i) The
Company shall be responsible for, and shall bear all expenses directly incurred in connection with, the Offering including, but not limited to, (i) legal
fees of the Company's counsel relating to the costs of preparing the Transaction Documents and all amendments, supplements and exhibits thereto delivering all Preferred Units and (ii) the
Placement Agent Expenses. 


    (ii) Prior
to the Initial Preferred Closing, if the Company unilaterally decides not to effect the Initial Preferred Closing for any reason (other than Placement
Agent's inability to close the Minimum Offering prior to 11:59 p.m. (New York time) on April 3, 2001 for reasons other than the Company's refusal to close the Minimum Offering, or upon
mutual written agreement with the Placement Agent not to proceed with the Offering), the Placement Agent and its affiliates shall have the irrevocable option for the Option Period (defined below) to
purchase Preferred Units from the Company under the otherwise applicable terms of the Transaction Documents in any amount up to $5 million; provided however, that in such case the Cash Fee
shall be only 3% of the gross proceeds of the Preferred Units purchased (which option and fee the Company agrees is a fair measure of the compensation to be received by the Placement Agent in respect
of, among other things its advice, time and effort in respect of the Offering), and the Company will be obligated to reimburse the Placement Agent and counsel for Placement Agent, as applicable, for
the Placement Agent Expenses as set in Section 3(d)(i) above within ten business days of the occurrence of any event described in this Section 4(b)(ii). 



    (iii) The
"Option Period" shall be the 45 day period beginning on the earlier of (x) the date of
termination of this Agency Agreement pursuant to Section 7(h), (y) the date on which the Company provides notice to the Placement Agent that it has unilaterally elected not to proceed
with the Offering and (z) 11:59 p.m. (New York time) on April 3, 2001, if the Minimum Offering shall not have been sold by such date. 


    (iv) The
Placement Agent shall have no liability to the Company for any reason should the Placement Agent choose not to proceed with the Offering contemplated hereby.
Notwithstanding any of the foregoing provisions of this Section 4(c), if the Minimum Offering has not been sold by 11:59 p.m. on
April 3, 2001, and the Company has been willing and prepared to sell the Preferred Units as provided in this Agency Agreement at all times during the period between the date of this Agency
Agreement and 11:59 p.m. on April 3, 2001, then the Company shall not be obligated to proceed with the Offering or pay the Cash Fee to the Placement Agent. 




    (c) Notification. The Company shall notify the Placement Agent immediately, and in writing, (i) when any event
shall have occurred during the period commencing on the date hereof and 



13





 


ending on the later of the Final Closing or the Preferred Termination Date as a result of which the Transaction Documents would include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) of the receipt of any notification with respect to the modification, rescission,
withdrawal or suspension of the qualification or registration of the Preferred Shares, Common Stock or Warrants, or of any exemption from such registration or qualification, in any jurisdiction. The
Company will use its reasonable best efforts to prevent the issuance of any such modification, rescission, withdrawal or suspension and, if any such modification, rescission, withdrawal or suspension
is issued and the Placement Agent so requests, to obtain the lifting thereof as promptly as possible. 


    (d) Form D and Blue Sky. The Company shall file a Form D with respect to the Preferred Shares and
Preferred Warrants as required under Regulation D under the 1933 Act and, upon request, provide a copy thereof to the Placement Agent promptly after such filing. The Company shall, on or before
the Closing, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Preferred Shares and the Warrants for sale to the Subscriber
pursuant to this Agency Agreement under applicable securities or "Blue Sky" laws of the states of the United States, and shall provide evidence of any such action so taken to the Placement Agent on or
prior to the Closing. The Company shall make all filings and reports relating to the offer and sale of the Securities required under applicable securities or "Blue Sky" laws of the states of the
United States following the Closing. 


    (e) Press Releases, Etc. To the extent practicable, the Company shall provide two business days prior written notice of
any proposed press release or other communication, or any press conference with respect to any material development concerning the Company, its financial condition, results of operations, business,
properties, assets, or liabilities; provided however, the Company may issue any press release without such prior notice if in the reasonable opinion of counsel to the Company issuance before such
notice can be provided is required for compliance with any governmental agency or exchange on which the Company's securities are listed. Furthermore, the Company shall not at any time include
information with respect to the use of the Placement Agent's name in any press release, advertisement or on any website maintained by the Company without the prior written consent of the Placement
Agent. 


    (f)  Restrictions on Issuances of Securities. During the period commencing on the date hereof and ending on the later of
(i) the Final Closing or (ii) the Preferred Termination Date, provided the Placement Agent shall not have breached any material covenant, representation or warranty contained in this
Agency Agreement and the Placement Agent is actively conducting the Offering, the Company will not, without the prior written consent of the Placement Agent, issue additional shares of Common Stock,
other than pursuant to the exercise of options, warrants or rights outstanding on the date hereof, or issue or grant any warrants, options or other securities of the Company or any debt convertible,
redeemable or exchangeable for any equity security of the Company. 


    (g) Board Designee. In the event the Minimum Offering is completed, the Company agrees that as long as there shall be
Preferred Shares outstanding (the "Board Representation Period"), it shall cause the Board to have the composition set forth in  Section 3(b)(xi) hereof, and the number of directors comprising the Board shall not increase without the consent of the Series B Director.
It shall be a condition of the appointment of the Series B Director that such person agree in advance to resign from the Board of Directors at the expiration of the Board Representation Period,
notwithstanding that the term of office for such director has not yet expired. The class of this directorship will be determined at the time of appointment. The Series B Director may be
replaced at any time by the holders of the Preferred Shares. In addition, in the event that the 



14





 


Series B Director resigns or for any reason no longer serves as a director, then the holders of the Preferred Shares shall designate a replacement for such director. 



    (h) Veto Right of Series B Director. The Company agrees that it will not award or grant any stock options,
warrants or shares of capital stock of the Company or any other stock-based incentive if such award or grant does not fully comply with the Company's New Hire and Existing Employee Guidelines attached
hereto as Schedule 3(h), unless the Company's Board Compensation Committee, including the Series B Director, approves of such award or
grant. The restrictions set forth in this Section 3(h) shall not apply to the Company's employee stock purchase plan. 


    (i)  Independent Auditors. During the three-year period following the Initial Preferred Closing, the Company
will not switch auditors, other than to a "Big Five" accounting firm, without the approval of a majority of the independent members of the Board of Directors. 


    (j)  Quarterly Communications. Within forty-five (45) days after the end of each fiscal quarter, the
Company shall (i) send to the Placement Agent (x) a letter setting forth the results of operations for the fiscal quarter and management's analysis thereof (which delivery obligation
shall be satisfied by timely filing with the SEC the applicable quarterly report on Form 10-Q) and (y) a schedule of all securities issuances by the Company, including the
issuances of shares pursuant to the cashless exercise provisions of any options or warrants, and (ii) present an update on the affairs of the Company at the offices of the Placement Agent for
the Subscribers and employees of the Placement Agent, ensuring that such update complies with Regulation FD under the Securities Act. In addition, within ninety (90) days after the end of each
fiscal year, the Company shall send to the Subscribers a stockholders letter in form and substance reasonably satisfactory to the Placement Agent setting forth the results of operations for the fiscal
year and management's analysis thereof (which delivery obligation shall be satisfied by timely filing with the SEC the applicable annual report on Form 10-K). 


    (k) Transmittal Letters. Within five days after each closing of the Offering, the Placement Agent shall receive copies
of all letters from the Company to the Subscribers transmitting the securities sold in the Offering and shall receive a letter from the Company confirming transmittal of the securities to the
Subsidiaries. 


    (l)  Committees. The Company will not create any committees of its Board of Directors that are not composed of a
majority of the independent members of the Board of Directors unless it has received the approval of a majority of the independent members of the Board of Directors to do so. 


    (m) Transfer Agent. The Company shall provide a transfer agent and registrar in respect of its capital stock, which
transfer agent and registrar shall be reasonably acceptable to the Placement Agent. 


    (n) Purchase or Redemption. Unless approved by the vote or written consent of the holders of a majority of the Preferred
Shares (treating for this purpose, the holders of Conversion Shares issued upon conversion of the Preferred Shares as holders of the Preferred Shares), and except as otherwise provided in the
Transaction Documents, the Company shall not purchase or redeem any capital stock of the Company or any Subsidiary or any indebtedness of the Company or any Subsidiary convertible
into or exchangeable for its capital stock or any option, warrant or right to purchase any such capital stock or convertible. Notwithstanding the foregoing, the Company may repurchase from its
employees shares of Common Stock purchased by its employees pursuant to early exercises of stock options or restricted stock purchases if such employees terminated their employment with the Company
prior to the vesting of ownership of such shares and if the Company pays no more per share of Common Stock than the purchase price per share paid by such employees. 



15





 

    5.  Indemnification. 



    (a) The
Company agrees to indemnify and hold harmless the Placement Agent and each selected dealer, if any, and their respective stockholders, directors, officers,
agents and controlling persons (an "Indemnified Party") against any and all loss, liability, claim, damage and expense whatsoever (and all actions in
respect thereof), and to reimburse the Placement Agent for reasonable legal fees and related expenses as incurred (including, but not limited to the costs of investigating, preparing or defending any
such action or claim whether or not in connection with litigation in which the Placement Agent is a party and the costs of giving testimony or furnishing documents in response to a subpoena or
otherwise), caused by or arising out of (i) any untrue statement or alleged untrue statement of a material fact contained in the Transaction Documents or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading (provided, however, that the Company shall not
be liable in any such case to the extent that any such loss, liability, claim, damage or expense arises out of or is based upon any untrue statement of a material fact or alleged untrue statement or a
material fact provided by the Placement Agent in writing to the Company specifically for use in the Transaction Documents), (ii) any violation by the Company of the federal securities laws or
the securities laws of any states, or otherwise arising out of the Placement Agent's engagement hereunder, except in respect of any matters as to which the Placement Agent shall have been adjudicated
to have acted with gross negligence, or (iii) any breach by the Company of any of its representations, warranties or covenants contained in this Agency Agreement. 


    (b) Promptly
after receipt by an Indemnified Party under this Section of notice of the commencement of any action, the indemnified party will, if a claim in respect
thereof is to be made against the Company under this Section, notify in writing the Company of the commencement thereof; but the omission so to notify the Company will not relieve it from any
liability which it may have to the Indemnified Party otherwise than under this Section except to the extent the defense of the claim is prejudiced. In case any such action is brought against an
Indemnified Party, and it notifies the Company of the commencement thereof, the Company will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the provisions herein stated, with counsel reasonably satisfactory to the Indemnified Party, and after notice from the Company to
the Indemnified Party of its election so to assume the defense thereof, the Company will not be liable to the Indemnified Party under this Section for any legal or other expenses subsequently incurred
by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation (provided the Company has been advised in writing that such investigation is being
undertaken). The Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be
at the expense of the Company if the Company has assumed the defense of the
action with counsel reasonably satisfactory to the Indemnified Party; provided that the fees and expenses of such counsel shall be at the expense of the Company if (i) the employment of such
counsel has been specifically authorized in writing by the Company (which it shall have no obligation to do) or (ii) the named parties to any such action (including any impleaded parties)
include both the Indemnified Party or Parties and the Company and, in the reasonable judgment of counsel for the Indemnified Party, it is advisable for the Indemnified Party or Parties to be
represented by separate counsel due to material conflict of interest (in which case the Company shall not have the right to assume the defense of such action on behalf of an Indemnified Party or
Parties), it being understood, however, that the Company shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for all the Indemnified Parties. No settlement by an
Indemnified 



16





 


Party of any action against an Indemnified Party shall be made without the Company's consent which shall not be unreasonably withheld. No settlement of any action against an Indemnified Party by the
Company shall be made unless such an Indemnified Party is fully and completely released in connection therewith. 




    6.  Contribution.


    To
provide for just and equitable contribution, if (i) an Indemnified Party makes a claim for indemnification pursuant to  Section 5 but it is found in a final judicial determination, not subject
to further appeal, that such indemnification may not be enforced in such
case, even though this Agency Agreement expressly provides for indemnification in such case, or (ii) any indemnified or indemnifying party seeks contribution under the 1933 Act, the 1934 Act,
or otherwise, then the Company (including for this purpose any contribution made by or on behalf of any officer, director, employee or agent for the Company, or any controlling person of the Company),
on the one hand, and the Placement Agent and any Selected Dealers (including for this purpose any contribution by or on behalf of an indemnified party), on the other hand, shall contribute to the
losses, liabilities, claims, damages, and expenses whatsoever to which any of them may be subject, in such proportions as are appropriate to reflect the relative benefits received by the Company, on
the one hand, and the Placement Agent and the Selected Dealers, on the other hand; provided, however, that if applicable law does not permit such allocation, then other relevant equitable
considerations such as the relative fault of the Company and the Placement Agent and the Selected Dealers in connection with the facts which resulted in such losses, liabilities, claims, damages, and
expenses shall also be considered. In no case shall the Placement Agent or a Selected Dealer be responsible for a portion of the contribution obligation in excess of the compensation received by it or
the Selected Dealer Agreement, as the case may be. No person guilty of a fraudulent misrepresentation shall be entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person, if any, who controls the Placement Agent or a Selected Dealer within the meaning
of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act and each officer, director, shareholder, employee and agent of the Placement Agent or a Selected Dealer, shall have the
same rights to contribution as the Placement Agent or the Selected Dealer, and each person, if any who controls the Company within the meaning of Section 15 of the 1933 Act or
Section 20(a) of the 1934 Act and each officer, director, employee and agent of the Company, shall have the same rights to contribution as the Company, subject in each case to the provisions of
this Section 6. Anything in this Section 6 to the contrary notwithstanding, no party shall
be liable for contribution with respect to the settlement of any claim or action effected without its written consent.
This Section 6 is intended to supersede any right to contribution under the 1933 Act, the 1934 Act, or otherwise. 


    7.  Miscellaneous. 



    (a) Survival. Any termination of the Offering without consummation thereof shall be without obligation on the part of
any party except that the indemnification provided in Section 5 hereof and the contribution provided in  Section 6 hereof shall survive any
termination and shall survive the Final Closing for a period of two years. 



    (b) Representations, Warranties and Covenants to Survive Delivery. The respective representations, warranties,
indemnities, agreements, covenants and other statements as of the date hereof shall survive execution of this Agency Agreement and delivery of the Preferred Units and the termination of this Agency
Agreement for a period of three (3) years after such respective event. 


    (c) No Other Beneficiaries. This Agency Agreement is intended for the sole and exclusive benefit of the parties hereto
and their respective successors and controlling persons, and no other person, firm or corporation shall have any third-party beneficiary or other rights hereunder. 



17





 


    (d) Governing Law; Resolution of Disputes. This Agency Agreement shall be governed by and construed in accordance with
the law of the State of New York without regard to conflict of law provisions. The Placement Agent and the Company will attempt to settle any claim or controversy arising out of this Agency Agreement
through consultation and negotiation in good faith and a spirit of mutual cooperation. Should such attempts fail, then the dispute will be mediated by a mutually acceptable mediator to be chosen by
the Placement Agent and the Company within fifteen (15) days after written notice from either party demanding mediation. Neither party may unreasonably withhold consent to the selection of a
mediator, and the parties will share the costs of the mediation equally. Any dispute which the parties cannot resolve through negotiation or mediation within six (6) months of the date of the
initial demand for it by one of the parties may then be submitted to the courts for resolution. The use of mediation will not be construed under the doctrine of latches, waiver or estoppel to affect
adversely the rights of either party. Nothing in this Section will prevent either party from resorting to judicial proceedings if (a) good faith efforts to resolve the dispute under these
procedures have been unsuccessful or (b) interim relief from a court is necessary to prevent serious and irreparable injury. 


    (e) Counterparts. This Agency Agreement may be signed in counterparts with the same effect as if both parties had signed
one and the same instrument. 


    (f)  Notices. Any communications specifically required hereunder to be in writing, if sent to the Placement Agent, will
be sent by overnight courier providing a receipt of delivery or by certified or registered mail to it at [               ], with a copy to Paul, Hastings, Janofsky &
Walker LLP, 29th Floor, 345 California Street, San Francisco, California 94104-2635, Att: Thomas R. Pollock, and if sent to the Company, will be sent by overnight courier providing a
receipt of delivery or by certified or registered mail to it at 25 Orinda Way, Orinda, California 94563, Att: Frost Prioleau, with a copy to Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation, 650 Page Mill Road, Palo Alto, California 94304, Attention: Adam R. Dolinko. 


    (g) Entire Agreement. This Agency Agreement constitutes the entire agreement of the parties with respect to the matters
herein referred and supersedes all prior agreements and understandings, written and oral, between the parties with respect to the subject matter hereof including, but not limited to, that certain
engagement letter agreement, dated March 7, 2001, as amended, between the Company and [                  ]. Neither this Agency Agreement nor any term
hereof may be
changed, waived or terminated orally, except by an instrument in writing signed by the party against which enforcement of the change, waiver or termination is sought. 


    (h) Termination. This Agency Agreement is subject to termination by notice given by the Placement Agent to the Company,
if (i) after the execution and delivery of this Agency Agreement and prior to the Initial Preferred Closing (A) trading generally shall have been suspended or materially limited on or
by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (B) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter
market, (C) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (D) there shall have occurred
any outbreak or escalation of hostilities or any change in financial markets or any calamity or crises that, in the Placement Agent's judgement, is material and adverse and (ii) in the case of
any of the events specified in Sections 7(h)(i)(A) through 7(h)(i)(D), such event, singly or together with any other such event, makes it, in the
Placement Agent's judgement, impracticable to offer the Preferred Units on the terms and in the manner contemplated herein. 



18







    (i)  If you find the foregoing is in accordance with our understanding, kindly sign and return to us a counterpart hereof, whereupon this instrument along with all
counterparts will become a binding agreement between us. 



	 	 	Very truly yours,
	

 	
 	

Intraware, Inc.
	

 	
 	

By:	

 
	 	 	 	
 Name:

Title:





Agreed:



[                  ]




	 	 	By:	 	[                  ] Management Company, Inc., its general partner
	

 	
 	

By:	
 	

 	

 
	 	 	 	 	
 Name:

Title:	 









	Exhibit A	 	Form of Series B Designation
	

Exhibit B	
 	

Form of Preferred Warrants
	

Exhibit C	
 	

Form of Subscription Agreement
	

Exhibit D	
 	

Form of Registration Rights Agreement











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INTRAWARE, INC. PLACEMENT AGENCY AGREEMENT