Exhibit
10.2


INTRAWARE, INC.


PLACEMENT AGENCY
AGREEMENT


Commonwealth Associates, L.P.

830 Third Avenue

New York, New York 10022


As of May 10, 2002


Gentlemen:


This
Placement Agency Agreement (this “Agreement”) confirms the retention by
Intraware, Inc., a Delaware corporation (the “Company”), of Commonwealth
Associates, L.P., a New York limited partnership (“Commonwealth” or the
“Placement  Agent”), to act as the sales agent, on a best efforts
basis, in connection with a private placement for the Company, on the terms set
forth below.


The Company proposes to offer for sale solely to
“accredited investors,” in a private placement (the “Placement”), up to
140 units (including fractions thereof) at $100,000 per unit.  In the event that the Placement will result
in the issuance of securities representing no more than 19.9% of the Company’s
issued and outstanding common stock under applicable guidelines and policies of
the Nasdaq Stock Market (the “Issuance Limitation”), each unit (a “Share
Unit”) shall consist of: (i) that number of shares of the Company’s common
stock (the “Common Stock”) which is equal to $100,000 divided by the Per Share
Purchase Price (the “Shares”); and (ii) four-year warrants to purchase
the number of shares of Common Stock (the “Warrant Shares”) equal to 20%
of the Shares comprising a Share Unit at an exercise price per share equal to
the Market Price (the “Warrants”). In the event that the Placement of
Share Units will exceed the Issuance Limitation, each unit (a “Note Unit”)
shall instead consist of: (i) a $100,000 principal amount 8% senior secured
promissory note due August 31, 2002 substantially in the form attached hereto
as Appendix A (each, a “Note” and collectively, the “Notes”)
convertible upon receipt of the shareholder approval referenced in Section 4(h)
hereof (the “Approval”) into the number of Shares which is equal to
$100,000 divided by the Per Share Purchase Price; and (ii) Warrants to purchase
the number of Warrant Shares equal to 50% of the Shares comprising a Note Unit
at an exercise price per share equal to the Market Price. The “Per Share
Purchase Price” shall be the lower of (i) $1.00 or (ii) 85% of the Market
Price. The “Market Price” shall be the average of the closing prices of
the Common Stock for the five consecutive trading days immediately preceding
the initial closing of the Placement (the “Initial Closing”). The Share
Units and Note Units are collectively referred to herein as the “Units.”


Warrants to be issued to members of the Company’s
Board of Directors (the “Board”) or their affiliates, shall be held in
escrow until the receipt of the Approval; provided, however, that, the Company
may issue the Warrants earlier if the affected directors resign from the Board
and the Company and Commonwealth determine, after conferring with Nasdaq, that
such issuance will not violate the applicable listing requirements of the
Nasdaq.  Upon receipt of the Approval,
(i) 60% of the Warrants issued as part of the Note Units, if applicable, will be
subject to redemption by the Company for nominal consideration and (ii) the
Company will release from


 


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escrow, if not previously released, Warrants to
purchase the number of Warrant Shares equal to 20% of the Shares comprising a
Unit to any members of the Board or their affiliates who purchased a Unit in
the Placement. The Warrants shall be governed by a warrant agreement
substantially in the form attached hereto as Appendix B (the “Warrant
Agreement”).


A
minimum of 30 Units ($3,000,000) (the “Minimum Offering”), and a maximum
of 140 Units ($14,000,000) (the “Maximum Offering”) will be sold in the
Placement; provided, however that the Maximum Offering shall be subject to
reduction by the Company, on a dollar for dollar basis, to the extent of proceeds,
if any, from sales of the Company’s assets other than the ordinary course of
business (a “Sale Transaction”) consummated prior to the Termination
Date (as defined in Section 1(a) hereof), or otherwise if the issuance of
Warrants and/or Agent’s Warrants (as defined in Section 3(e) hereof) in
connection with the sale of Note Units would exceed the Issuance Limitation. In
the event there is no Sale Transaction prior to the Termination Date, the
Minimum Offering shall be increased to 85 Units ($8,500,000), of which 50 Units
must be purchased by check or wire transfer and 35 Units must be purchased upon
the cancellation of outstanding 8% senior secured promissory notes issued by
the Company in August and September 2001 (the “Bridge Notes”). Up to 70
Units of the Placement may be purchased by investors upon cancellation of
Bridge Notes.


The
Units will be offered pursuant to those terms and conditions mutually
acceptable to Commonwealth, the investors and the Company. The Units are being
offered in accordance with Section 4(2) of the Securities Act of 1933, as
amended (the “1933 Act”) and Regulation D promulgated thereunder. The
Minimum Offering will be made on a “best efforts — all or none” basis and the
balance of the Placement will be offered on a best efforts basis.


The
form of proposed subscription agreement between the Company and each subscriber
for the Placement is referred to herein as the “Subscription Agreement.”
The SEC Documents (as defined in Section 2(e) hereof), the Subscription
Agreement and all exhibits that are part of the Subscription Agreement are
collectively referred to herein as the “Offering Documents.” The Company
will prepare and deliver to the Placement Agent a reasonable number of copies
of the Offering Documents in form and substance reasonably satisfactory to the
Placement Agent and its counsel. The Offering Documents, together with (i) this
Agreement, (ii) the Notes, (iii) the Warrant Agreement, (iv) the Registration
Rights Agreement among each Subscriber, the Company and the Placement Agent in
the form to be agreed to by the Subscribers (the “Registration Rights
Agreement”), (v) the Security Agreement and Agency Appointment Agreement in the
form to be agreed to by the Subscribers and the holders of the Bridge Notes
(the “Security Agreement”), (vi) the Fund Escrow Agreement (as defined in
Section 3(b)(ix) hereof), (vii) the Agent’s Warrants (as defined in Section
3(d) hereof), (viii) the Conversion Agreements (as defined in Section 3(c)(i)
hereof) and (ix) exhibits, schedules and appendices that are part of the
Offering Documents, the Warrant Agreement, the Registration Rights Agreement,
the Security Agreement and this Agreement are collectively referred to herein
as the “Transaction Documents.”


Each
prospective investor subscribing to purchase Units in the Placement (each a “Subscriber”)
will be required to deliver, among other things, the Subscription Agreement and
a confidential purchaser questionnaire in the form to be provided to
prospective investors.


 


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Capitalized terms used herein, unless otherwise
defined or unless the context otherwise indicates, shall have the same meanings
provided in the Offering Documents.


1.             Appointment of Placement Agent.


(a)           Commonwealth
is hereby appointed exclusive Placement Agent of the Company (subject to
subsection (f) below and the Placement Agent’s right to have selected dealers
(“Selected Dealers”) which are in good standing with the National
Association of Securities Dealers (“NASD”) participate in the Placement)
for the purposes of assisting the Company in finding qualified Subscribers for
the Placement.  The Company agrees that
Ladenburg Thalmann or its affiliates may act as Selected Dealers in connection
with the Placement. The offering period (the “Offering Period”) shall
continue until the earlier to occur of: (i) the sale of the Maximum Offering;
(ii) June 30, 2002 or (iii) such date that the Company and the Placement Agent
mutually agree upon. The day that the Offering Period terminates is hereinafter
referred to as the “Termination Date.” The Termination Date may be
extended for up to 30 days by mutual agreement of the Placement Agent and the
Company.


(b)           Subject
to the performance by the Company of all of its obligations to be performed under
this Agreement and to the completeness and accuracy of all representations and
warranties of the Company contained in this Agreement, the Placement Agent
hereby accepts such agency and agrees to use its best efforts to assist the
Company in finding qualified Subscribers for the Placement.  Except for the foregoing, it is understood
that the Placement Agent has no commitment to sell the Units.


(c)           Commonwealth’s
agency hereunder is not terminable by the Company except upon termination of
the Offering Period, because the Per Share Purchase Price will be less than
$1.00, or upon a material breach by Commonwealth of its obligations hereunder,
provided further, that the sole remedy for Commonwealth in the event the
Company terminates Commonwealth’s agency hereunder in violation of this
provision shall be the Break-Up Fees provided for in Section 4(c) hereof.


(d)           Subscriptions
for Units shall be evidenced by the execution by Subscribers of the
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 Units.


(e)           The
Placement Agent and/or its affiliates and ComVest Venture Partners, L.P. may be
investors in the Placement.


(f)            The
Company may enter into agreements with Ladenburg Thalmann or its affiliates to
serve as co-placement agent(s) on terms not more favorable than those of the
Placement.


2.             Representations
and Warranties of the Company.  The
Company represents and warrants to the Placement Agent and each Selected
Dealer, if any, as follows, except as set forth in the disclosure schedules
attached hereto:


 


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(a)           Securities
Law Compliance.  The offer, offer
for sale, and sale of the Units have not been registered under the 1933 Act. The
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 use its best
efforts to conduct the Placement in compliance with the requirements of Regulation
D of the General Rules and Regulations under the 1933 Act, and the Company will
file all appropriate notices of offering with the United States Securities and
Exchange Commission (the “SEC”). 
The Company has prepared the Offering Documents.  The Offering Documents will not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading.  If at any time prior to the completion of
the Placement or other termination of this Agreement any event shall occur as a
result of which it might become necessary to amend or supplement the Offering
Documents so that they do not include any untrue statement of any material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances then existing, not misleading, the
Company will promptly notify the Placement Agent and will supply the Placement
Agent with amendments or supplements correcting such statement or
omission.  The Company will also provide
to the Placement Agent for delivery to all offerees and purchasers and their
representatives, if any, any information, documents and instruments which the
Placement Agent deems reasonably necessary to comply with applicable state and
federal law.


(b)           Organization.  The Company is duly organized and validly
existing in good standing under the laws of the jurisdiction in which it was
organized, and has the requisite power and authorization to own its properties
and to carry on its business as now being conducted.  The Company 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 Agreement, “Material
Adverse Effect” means any event or change in circumstance, whether or not
directly or indirectly caused by management or arising independently of
management’s control, that has or could reasonably be deemed by the Placement
Agent to have in the future, a material adverse effect on the business,
properties, assets, operations, results of operations, financial condition or
prospects of the Company or on the transactions contemplated hereby, or on 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.  The Company does not have any operating
subsidiaries and all of the non-operating subsidiaries are wholly-owned by the
Company.


(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 contracts,
commitments, understandings or arrangements by which the


 


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Company is or may become bound to issue additional
shares of capital stock of the Company 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; (iv) there are no agreements or arrangements
under which the Company is obligated to register the sale of any of their
securities under the 1933 Act; (v) there are no outstanding securities of the
Company that contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company is
or may become bound to redeem a security of the Company; (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 that shall not have been waived prior to the Initial
Closing; 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, to the knowledge of the Company,  no security holder has any rescission rights
with respect thereto.


(d)           Subsidiaries
and Investments.  Other than as set
forth in Schedule 2(d) to this Agreement, the Company has no
subsidiaries, and the Company does not own, directly or indirectly, any capital
stock or other equity ownership or proprietary interests in any other
corporation, association, trust, partnership, joint venture or other entity.


(e)           SEC
Documents; Financial Statements. 
Since November 30, 2001, 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 (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
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 Shares and the Warrant Shares.


 


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(f)            Absence
of Changes.  Since November 30,
2001, except with respect to matters of which the Company has notified the
Placement Agent in writing or publicly disclosed and other than as set forth in
Schedule 2(f) to this Agreement, the Company has not (i) 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 and consistent with past practices, having
individually or in the aggregate a Material Adverse Effect, (ii) 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, (iii)
discharged or satisfied any liens or paid any obligation or liability other
than current liabilities shown on the balance sheet dated as of November 30,
2001, and current liabilities incurred since the date of the balance sheet
dated as of November 30, 2001, in each case in the usual and ordinary course of
business and consistent with past practices, (iv) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, (v) sold,
transferred or leased any of its assets except in the usual and ordinary course
of business and consistent with past practices, (vi) cancelled or compromised
any debt or claim, or waived or released any right, of material value, (vii)
suffered any physical damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties, business or prospects of the
Company, (viii) entered into any transaction other than in the usual and
ordinary course of business except for this Agency Agreement, the other
Transaction Documents and the related agreements referred to herein and
therein, (ix) encountered any labor difficulties or labor union organizing
activities, (x) made or granted any wage or salary increase or entered into any
employment agreement, (xi) 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, (xii) declared or paid any dividends on or made any
other distributions with respect to, or purchased or redeemed, any of its
outstanding equity securities, (xiii) 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 and consistent with past practices, having (either by itself or in
conjunction with all such other changes, events and conditions) a Material
Adverse Effect, (xiv) made any change in the accounting principles, methods or
practices followed by it or depreciation or amortization policies or rates
theretofore adopted, or (xv) entered into any agreement, or otherwise obligated
itself, to do any of the foregoing.


(g)           Title.  Except as set forth in or contemplated by Schedule
2(g) to this Agreement, the Company has good and marketable title to all
properties and assets owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except 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 or leases all such
properties as are necessary to its operations as described in the Offering
Documents.


 


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(h)           Proprietary
Rights.  To the Company’s knowledge
after due investigation, the Company owns, or is duly licensed to use or
possess, or possesses exclusive and enforceable rights to use all patents,
patent applications, trademarks, service marks, copyrights, trade secrets,
processes, formulations, technology or know-how used in the conduct of its
business (the “Proprietary Rights”). 
Except as set forth on Schedule 2(h) to this Agreement, the
Company has not received any notice of any claims, nor does it have any
knowledge of any threatened claims, and knows of no facts which would form the
basis of any claim, asserted by any person to the effect that the sale or use
of any product or process now used or offered by the Company or proposed to be
used or offered by the Company infringes on any patents or infringes upon the
use of any such Proprietary Rights of another person and, to the best of the
Company’s knowledge, no others have infringed the Company’s Proprietary Rights.


(i)            Litigation.  Except as set forth in or contemplated by Schedule
2(i) to this Agreement, there is no material action, suit, investigation,
customer complaint, claim or proceeding at law or in equity by or before any
arbitrator, court, governmental instrumentality or agency, self-regulatory
organization or body or public board now pending or, to the knowledge of the
Company, threatened against the Company of any of the Company’s officers or
directors in their capacities as such (or basis therefor known to the Company),
the adverse outcome of which would have a Material Adverse Effect.  The Company is not subject to any judgment,
order, writ, injunction or decree of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign that have a Material Adverse Effect.


(j)            Non-Defaults;
Non-Contravention.  Except as set
forth in or contemplated by Schedule 2(j) to this Agreement, the Company
is not in violation of or default under, nor will the execution and delivery of
this Agreement or any of the Transaction Documents or consummation of the
transactions contemplated herein or therein result in a violation of or
constitute a default in the performance or observance of any obligation under:
(i) its Certificate of Incorporation, or its By-laws; or (ii) any indenture,
mortgage, contract, material purchase order or other agreement or instrument to
which the Company is a party or by which it or its property is bound, where
such violation or default would have a Material Adverse Effect; or (iii) any
material order, writ, injunction or decree of any court of any Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, where such violation or default would
have a Material Adverse Effect, and there exists no condition, event or act
that constitutes, nor which after notice, the lapse of time or both, could
constitute a default under any of the foregoing, which in either case would
have a Material Adverse Effect.


(k)           Taxes.  The Company has filed all tax returns that
are required to be filed by it or otherwise met its disclosure obligations to
the relevant agencies and all such returns are true and correct. The Company
has paid or adequately provided for all tax liabilities of the Company as
reflected on such returns or pursuant to any assessments received by it or that
it is obligated to withhold from amounts owing to any employee, creditor or
third party.  The Company has properly
accrued all taxes required to be accrued by GAAP consistently applied.  The income tax returns of the Company have
never been audited by any government or regulatory authorities.  The Company has not waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to any tax assessment or deficiency.


 


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(l)            Compliance
With Laws; Licenses, Etc.  The
Company has not received notice of any violation of or noncompliance with any
laws, ordinances, regulations and orders applicable to its business that would
have a Material Adverse Effect and that has not been cured.  The Company has all material licenses and
permits and other governmental certificates, authorizations and permits and
approvals (collectively, “Licenses”) required by every government or
regulatory body for the operation of its business as currently conducted and
the use of its properties.  The Licenses
are in full force and effect and to the Company’s knowledge no violations
currently exist in respect of any License and no proceeding is pending or
threatened to revoke or limit any thereof.


(m)          Authorization
of Agreement, Etc.  The Company has
the requisite corporate power and authority to enter into and perform its
obligations under this Agreement and the other 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 have been duly authorized by the Board and no further consent or
authorization is required by the Company, the Board or the Company’s
stockholders.  The Transaction Documents
have been duly executed and delivered 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.


(n)           Authorization
of Securities.  The issuance, sale
and delivery of the Notes, the Shares, the Warrants, and the Agent’s Warrants
(as defined herein) shall, prior to the Initial Closing,  have been duly authorized by all requisite
corporate action of the Company.  When
so issued, sold and delivered in accordance with the Transaction Documents for
the consideration set forth therein, the Notes, the Shares, the Warrants, and
the Agent’s Warrants will be duly executed, issued and delivered and will
constitute valid and legal obligations of the Company enforceable in accordance
with their respective terms and, in each case, will not be subject to
preemptive or any other similar rights of the stockholders of the Company or
others which rights shall not have been waived prior to the Initial Closing.


(o)           Authorization
of Reserved Shares.  The issuance,
sale and delivery by the Company of the common shares issuable upon exercise of
the Warrants and the Agent’s Warrants  (the “Reserved
Shares”) shall, prior to the Initial Closing, have been duly authorized by
all requisite corporate action of the Company, and the Reserved Shares shall
(to the extent permissible out of the authorized capital of the Company), prior
to the Initial Closing, have been duly reserved for issuance upon exercise of
all or any of the Warrants and Agent’s Warrants and when so issued, sold, paid
for and delivered for the consideration set forth in the Transaction Documents,
the Reserved Shares will be validly issued and outstanding, fully paid and
nonassessable, and not subject to preemptive or any other similar rights of the
stockholders of the Company or others which rights shall not have been waived
prior to the Initial Closing.


(p)           Exemption
from Registration.  Assuming
(i) the accuracy of the information provided by the respective Subscribers
in the Subscription Documents and (ii) that the Placement Agent has complied
in all material respects with the provisions of Regulation D promulgated under
the 1933 Act, the offer and sale of the Units pursuant to the terms of this


 


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Agreement are 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 disqualifications contained in
Rule 505(b)(2)(iii) or Rule 507 promulgated thereunder.


(q)           Registration
Rights. Except as set forth in or contemplated by Schedule 2(c) to
this Agreement, no person has any right to cause the Company to effect
registration under the 1933 Act of any securities of the Company.


(r)            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 this Agreement other than the
Placement Agent, and Ladenburg Thalmann.


(s)           Title
to Securities.  When certificates
representing the Notes, the Shares and the Warrants have been duly delivered to
the purchasers participating in the Placement and payment shall have been made
therefor, the several purchasers shall receive from the Company good and
marketable title to such securities free and clear of all liens, encumbrances
and claims whatsoever (with the exception of claims arising through the acts or
omissions of the purchasers and except as arising from applicable federal and
state securities laws), and the Company shall have paid all taxes, if any, in
respect of the original issuance thereof.


(t)            Application
of Takeover Protections; Rights Agreement. 
The Company and the Board 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.


(u)           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 by the Company.


(v)           Exchange
Listing. The Company’s Common Stock has been designated for quotation or
listed on the Nasdaq National Market (“Nasdaq”), trading in the Common
Stock has not been suspended by the SEC or Nasdaq and the Company has received
no communication, written or oral, from the SEC or Nasdaq regarding the
suspension or delisting of the Common Stock from Nasdaq.  Except as disclosed on Schedule 2(v),
the Company is not in violation of the listing requirements of Nasdaq 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 Nasdaq in the
foreseeable future.


(w)          Consents.  Except as contemplated by this Agreement,
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


 


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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 that 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 is unaware of any facts or circumstances that might prevent
the Company from obtaining or effecting any of the foregoing.


(x)            No
General Solicitation.  None of the
Company, any of its affiliates, and any person acting on its 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.


(y)           No
Integrated Offering.  None of the
Company, any of its affiliates, and any person acting on its 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 the Securities under the 1933 Act or cause the Placement 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 affiliates and any
person acting on its 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 Placement to be integrated with other
offerings.


(z)            Foreign Corrupt Practices.  Neither the Company nor any director,
officer, agent, employee or other person acting on behalf of the Company has,
in the course of its actions for, or on behalf of, the Company, (i) 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, (ii) violated or is in violation of any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.


3.             Closing; Placement and Fees.


(a)           Closing
of the Placement.  Provided the
Minimum Offering shall have been subscribed for and funds representing the sale
thereof shall have cleared, the Initial Closing of the Placement shall take
place at the offices of the Placement Agent, 830 Third Avenue, New York, New
York no later than three business days following the Termination Date, which
closing date may be accelerated or adjourned by agreement between the Company
and the Placement Agent (the “Closing Date”).  In addition, subsequent closings of the Placement (if applicable)
may be scheduled at the discretion of the Company and Placement Agent, each of
which shall be deemed a “Closing” hereunder. At each Closing, payment
for the Units issued and sold by the Company shall be made against delivery of
the Shares and Warrants comprising the Share Units or the Notes and Warrants
comprising the Note Units.


 


10

















 


(b)           Conditions
to Placement Agent’s Obligations. 
The obligations of the Placement Agent hereunder with respect to the
Placement will be subject to the accuracy of the representations and warranties
of the Company herein contained as of the date hereof and as of each Closing,
to the performance by the Company of its obligations hereunder and to the
following additional conditions:


(i)         Due
Qualification or Exemption. 
(A) The Placement will become qualified or be exempt from
qualification under the securities laws of the several states pursuant to
paragraph 4(d) below not later than the Closing Date, and (B) at the
Closing Date no stop order suspending the sale of  the Units shall have been issued, and no proceeding for that
purpose shall have been initiated or threatened;


(ii)        No
Material Misstatements.  Neither the
Blue Sky qualification materials nor the Offering Documents, nor any supplement
thereto, will contain any untrue statement of a fact which in the opinion of
the Placement Agent is material, or omits to state a fact which 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 with all agreements and satisfied all conditions on its part to
be performed or satisfied hereunder at or prior to each Closing;


(iv)       Corporate
Action.  The Company will have taken
all necessary corporate action, including, without limitation, obtaining the
approval of the Company’s board of directors (the “Board”), for the
execution and delivery of this Agreement and the other Offering Documents
required to be entered into at or prior to such Closing, the performance by the
Company of its obligations hereunder and thereunder and the Placement;


(v)        Opinion
of Counsel.  The Placement Agent
shall receive the opinion of Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation, counsel to the Company, dated the Closing(s),
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 this Agreement and each of the other Transaction Documents, including
issuance of the Notes, the 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 Board and, to the extent
required, by the shareholders of the Company (other than the Company’s
obligation to comply with NASD Marketplace Rules).  The Transaction Documents have been duly executed and delivered
by the Company.


 


11

















 


(C)           The issuance and sale of the Notes,
the Shares and the Warrants have been duly authorized.  The Shares and the Warrant Shares are duly
authorized and reserved for issuance in accordance with the Transaction
Documents, and when issued and paid for in accordance with the Transaction Documents,
the 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
I of the Subscription Agreement, the Notes, the 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)           Other than the Company’s obligation
to comply with NASD Marketplace Rules, 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 such
counsel’s 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 Notes and the Warrants as contemplated by the Transaction
Documents, except such as have been made or will be made by the Company.


(F)           To such counsel’s knowledge, there is
no action, suit, proceeding, inquiry or investigation before or by any
arbitrator, court, public board or body or any governmental agency or
self-regulatory organization pending or threatened against the Company or any
of the properties of the Company that might materially and adversely affect the
Company or its business, operations, properties or financial condition, or that
might materially adversely affect the transactions or other acts 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 Company’s Certificate of Incorporation, as amended to date,
the Company’s Bylaws as currently in effect or any other material contract,
agreement or arrangement by which the Company is bound, or any applicable law,
rule, regulation, judgment, order or decree actually known to the Company’s
counsel of any governmental agency or court having jurisdiction over the
Company or any of its properties or business, in each case, other than as set
forth in the Schedules to this Agreement and other than the Company’s
obligation to comply with NASD Marketplace Rules.


(vi)       Officers’
Certificate.  The Placement Agent
shall receive a certificate of the Company, signed by the Chief Executive
Officer and Chief Financial Officer thereof, that the representations and
warranties contained in Section 2 hereof are true and accurate in all
material respects at such closing with the same effect as though expressly made
at such closing.


 


12

















 


(vii)      Due
Diligence.  The Placement Agent
shall have completed and been satisfied with the results of its due diligence
investigation of the Company, including, without limitation, the Company’s
financial statements, expense budgets, business prospects, capital structure
and contractual arrangements.


(viii)     Transaction
Documents.  The Placement Agent
shall have received duly executed copies of the Warrant Agreement, the Registration
Rights Agreement and the Security Agreement.


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


(x)        Shareholder
Meeting; Proxies. In the event that the Placement consists of Note Units,
the Placement Agent shall have received evidence satisfactory to it from the
Company that the Company has initiated the obtaining of the Approval. In
addition, to the extent permitted by federal and state securities laws, the
Company shall have received proxies from each of the executive officers and
directors of the Company agreeing to vote in favor of the Approval.


(c)           Conditions
to Company’s Obligations.  The
obligations of the Company hereunder with respect to the Placement will be
subject to the following conditions:


(i)         Bridge
Note Amendment and Conversions.  In
the event that there is no Sale Transaction prior to the Termination Date, the
obligations of the Company hereunder with respect to the Placement will be
subject to the receipt, on or prior to the Initial Closing, of signatures by the
holders of more than $3,500,000 principal amount of the Bridge Notes to the
Note Financing Amendment and Conversion Agreement (in the form agreed to by the
Company and Commonwealth) agreeing: (x) to cancel at least $3,500,000 principal
amount of the Bridge Notes in consideration for Units in the Placement and (y)
on behalf of all holders of the Bridge Notes, to consent to the issuance of the
Notes, to add the Notes to the Security Agreement, to extend the maturity date
of the Bridge Notes which are not cancelled to August 31, 2002 (subject to
receipt of the Approval), and to extend the filing date to May 31, 2002 for the
registration statement related to the warrants issued in connection with the
Bridge Notes.


(ii)        Proxies.
In the event that the Company is required to seek the Approval, to the extent
permitted by federal and state securities laws, the Company shall have received
proxies from each of Commonwealth, ComVest Venture Partners, L.P., Robert
Priddy and Shea Ventures/J.F. Shea & Co. agreeing to vote in favor of the
Approval.


(d)           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 Placement may be made in certain jurisdictions.  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 Agreement; and (iii) the representations of the Company set forth
in the


 


13

















 


certificate to be delivered at each closing pursuant
to paragraph (vi) of Section 3(b). Counsel to the Placement Agent
shall advise the Company as to which jurisdictions offers and sales of the
Securities have been made.


(e)           Placement
Fee and Expenses.


(i)         Placement.
Simultaneously with payment for and delivery of the Units at the closing of the
Placement and subject to the following sentence, the Company shall: (A) pay to
the Placement Agent a placement agent fee equal to 6% of the gross proceeds of
Units sold in the Placement; and (B) issue to the Placement Agent or its
designees five-year warrants in the form to be agreed to by the Company and the
Placement Agent to purchase that number of Shares as equals 8% of the Shares
and Warrant Shares underlying the Units sold in the Placement at exercise
prices per Share equal to the Per Share Purchase Price and Market Price,
respectively (the “Agent’s Warrants”); provided, however, that if
affiliates of the Placement Agent have been appointed to the Board prior to the
Closing pursuant to the provisions of Section 4(j) hereof,  the Agent’s Warrants will be placed into escrow
and issued to the Placement Agent upon receipt of the Approval; provided,
however, that the Company may issue the Agent’s Warrants earlier if the
directors affiliated with the Placement Agent thereafter resign from the Board
and the Company and Commonwealth determine, after conferring with Nasdaq, that
such issuance will not violate the applicable listing requirements of the
Nasdaq.  The Company shall also, upon
presentation of appropriate receipts and invoices, reimburse the Placement
Agent for up to $50,000 of its accountable expenses, including legal fees. With
respect to Units purchased upon the conversion of Bridge Notes held by ComVest,
the fees due to the Placement Agent pursuant to clauses (A) and (B) above shall
be 4% and 6%, respectively; with respect to Units purchased by Kinecta
Corporation, the fees due to the Placement Agent pursuant to clauses (A) and
(B) above shall be 3% and 4%, respectively; and with respect to Units purchased
by any of the investors listed on Exhibit A to the Term Sheet dated April 12,
2002, no fees shall be due to the Placement Agent pursuant to clauses (A) and
(B) above unless the Placement Agent and the Company have entered into a
fee-sharing arrangement with Ladenburg Thalmann. The Company shall also pay all
expenses in connection with the qualification of the Units under the securities
or Blue Sky laws of the states which the Placement Agent shall designate,
including reasonable legal fees, filing fees and disbursements of Placement
Agent’s counsel in connection with such Blue Sky matters.


(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 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.


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


(g)           No
Adverse Changes.  There shall not
have occurred, at any time prior to the applicable Closing (i) any
domestic or international event, act or occurrence that has


 


14

















 


materially disrupted, or in the Placement Agent’s
opinion will in the immediate future materially disrupt, the securities
markets; (ii) a general suspension of, or a general limitation on prices
for, trading in securities on the New York Stock Exchange, the Nasdaq - Amex
Stock Exchange or the TSE; (iii) any outbreak of major hostilities or
other national or international calamity; (iv) any banking moratorium
declared by a state or federal authority; (v) any moratorium declared in
foreign exchange trading by major international banks or other persons;
(vi) any material interruption in the mail service or other means of
communication within the United States; (vii) any material adverse change
in the business, properties, assets, results of operations, or financial
condition of the Company; or (viii) any 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 Placement.


4.             Covenants
of the Company.


(a)           Use
of Proceeds.  The net proceeds of
the Placement will be used for general working capital purposes.  Other than as set forth on Schedule 4(a)
to this Agreement, the Company shall not use any of the proceeds from the
Placement to repay any indebtedness of the Company (other than trade payables
in the ordinary course), including but not limited to indebtedness to any
current executive officers, directors or principal stockholders of the Company.


(b)           Expenses
of Offering.  The Company shall be
responsible for, and shall bear all expenses directly incurred in connection
with, the Placement, including, but not limited to, (A) legal fees of the
Company’s counsel relating to the costs of preparing the Offering Documents and
all amendments, supplements and exhibits thereto and preparing and delivering
all Placement Agent and selling documents, Share and Warrant certificates; and
(B) blue sky fees, filing fees and the reasonable fees and disbursements of
Placement Agent’s counsel in connection with blue sky matters (the “Company
Expenses”). The Company shall also be responsible for its own expenses
incurred in connection with the Placement, including, without limitation, legal
and accounting fees and travel and lodging expenses in connection with the
roadshow or other investor presentations, and shall also be responsible for all
printing expenses for the executive overview and other supporting documents. In
addition, the Company shall reimburse the Placement Agent, upon presentation of
appropriate receipts or invoices, for up to $50,000 of its reasonable
out-of-pocket expenses incurred in connection with the Placement, including,
without limitation, the Placement Agent’s mailing, printing, copying,
telephone, travel, background searches, due diligence investigations, legal and
consulting fees or other similar expenses (the “Placement Agent Expenses”).


(c)           Break-Up
Fee. If the Company decides not to proceed with the Placement for any
reason (other than the Placement Agent’s failure to complete the Minimum
Offering prior to the Minimum Deadline (as defined below) or because the Per
Share Purchase Price will be less than $1.00) or if the Placement Agent decides
not to proceed with the Placement because of a material breach by the Company
of its representations, warranties, or covenants in this Agreement, the Company
will be obligated to pay the Placement Agent liquidated damages of $350,000,
payable at the Company’s option (the “Payment Option”) either in cash or in
shares of Common Stock valued at the average closing price of the Common Stock
for the 20 consecutive trading days immediately prior to the decision not to
proceed and to reimburse the Placement


 


15

















 


Agent for the Placement Agent Expenses (collectively,
the “Break-Up Fee”); provided, however, that if the Company decides not to
proceed with the Placement and either prior thereto or within 90 days
thereafter completes a Sale Transaction, the Company shall be obligated to pay
the Placement Agent the Break-Up Fee in cash irregardless of the Per Share
Purchase Price or the Placement Agent’s ability to complete the Minimum
Offering prior to the Minimum Deadline. The Company must exercise the Payment
Option within 24 hours after the decision not to proceed with the Placement. In
the event the Company fails to notify the Placement Agent of its option with
the 24-hour time period, the method of payment of the break-up fee shall be at
the sole discretion of the Placement Agent. 
The Placement Agent shall have no liability to the Company for any
reason should the Placement Agent choose not to proceed with the
Placement.  For purposes of the Break-Up
Fee only, the closing of the Minimum Offering shall take place no later than
(x) two (2) business days after the closing of the Sale Transaction or (y) two
(2) business days after the Company notifies the Placement Agent in writing
that the Company will not be consummating a Sale Transaction (the “Minimum
Deadline”); provided, however, that in no event shall the Minimum Deadline
be earlier than May 24, 2002. Any amounts the Company pays to the Placement
Agent under this section shall be credited towards any future fees payable to
the Placement Agent or its affiliates for assisting the Company with a future
transaction


(d)           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 ending on the later of the last
Closing or the Termination Date as a result of which the Offering 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 Units, or of any exemption from such
registration or qualification, in any jurisdiction, as applicable.  The Company will use its 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.


(e)           Blue
Sky.  The Company will use its best
efforts to assist the Placement Agent to qualify or register the Securities for
offering and sale under, or establish an exemption from such qualification or
registration under, the securities or “blue sky” laws of such jurisdictions as
the Company may reasonably request; provided however, that the Company will not
be obligated to qualify as a dealer in securities in any jurisdiction in which
it is not so qualified.  The Company
will not consummate any sale of Securities in any jurisdiction in which it is
not so qualified or in any manner in which such sale may not be lawfully made.


(f)            Form
D Filing.  The Company shall file
five copies of a Notice of Sales of Securities on Form D with the SEC no
later than 15 days after the first issuance of the Units.  The Company shall file promptly such
amendments to such Notices on Form D as shall become necessary and shall
also comply with any filing requirement imposed by the laws of any state or
jurisdiction in which offers and sales are made.  The Company shall furnish the Placement Agent with copies of all
such filings.


 


16

















 


(g)           Press
Releases, Etc.  The Company shall
not, during the period commencing on the date hereof and ending on the later of
the last Closing or Termination Date, issue any press release or other
communication, or hold any press conference with respect to the Company, its
financial condition, results of operations, business, properties, assets, or
liabilities, without the prior consent of the Placement Agent, which consent
shall not be unreasonably withheld, provided, however, the Company may issue
any such releases which in the reasonable opinion of counsel to the Company are
required for compliance with applicable legal and regulatory requirements.  Furthermore, the Company shall not at any
time include information with respect to the Placement or use 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, which
consent, with respect to information regarding the Placement only, shall not be
unreasonably withheld.


(h)           Shareholder
Meeting; Redemption of Warrants.  In
the event that the Placement consists of Note Units, the Company shall use its
best efforts to obtain, within 60 days following the Initial Closing,
shareholder approval of (i) the terms and conditions of the Placement,
including the Per Share Purchase Price, (ii) the conversion of the Bridge Notes
into an investment in the Placement and (ii) the issuance of securities,
including the Warrants and the Agent’s Warrants, to the Placement Agent or any
of its affiliated persons or entities.


(i)            Resale
Registration. The Company shall file a registration statement with the SEC
covering the resale of the Shares and the Reserved Shares pursuant to the terms
of the Registration Rights Agreement.


(j)            Appointment
of Directors. In the event the Bridge Notes are not repaid in full prior to
the Termination Date, the Board shall appoint two designees of the Placement
Agent reasonably acceptable to the Board to fill the vacancies left by the
resignations, prior to the date of this Agreement, of Michael Falk and Lee
Provow.


5.             Indemnification.


(a)           The
Company agrees to indemnify and hold harmless the Placement Agent and each
Selected Dealer, if any, and their respective shareholders, 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), 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


 


17

















 


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 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 as expressed in writing to the Indemnified
Party and the Company, it is advisable for the Indemnified Party or Parties to
be represented by separate counsel due to an actual 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
of any action against an Indemnified Party shall be made without the Company’s
consent (which shall not be unreasonably withheld) 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 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


 


18

















 


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 pursuant
to Section 3 hereof 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, stockholder, 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 Placement in
accordance with the terms of this Agreement 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 later
of the final Closing of the Placement or the Termination Date 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 Agreement and delivery of the Units and the termination of
this Agreement for a period of two years after such respective event.


(c)           No
Other Beneficiaries.  This 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.


(d)           Governing
Law; Resolution of Disputes.  This
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


 


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claim or controversy arising out of this 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 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 months of the date of the initial
demand for it by one of the parties may then be submitted to the courts for
resolution, in which event each of the parties hereto hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the Southern District of New York, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. 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 paragraph 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 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 Commonwealth Associates,
830 Third Avenue, New York, New York 
10022, Att: Carl Kleidman, with a copy to Loeb & Loeb LLP, 345 Park
Avenue, New York, New York 10154, Att: Fran Stoller 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: John Moss, 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 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.
Neither this 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.


 


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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:

  	
  /s/ Peter H. Jackson

  
	
   

  	
   

  	
  Name: Peter H. Jackson

  
	
   

  	
   

  	
  Title: Chief Executive
  Officer

  



 


	
  Agreed: 
  COMMONWEALTH ASSOCIATES, L.P.

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  Commonwealth Associates Management Company, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Joseph Wynne

  	
   

  
	
   

  	
  Name: Joseph Wynne

  	
   

  
	
   

  	
  Title: Secretary

  	
   

  



 


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Schedules


 


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