Exhibit 10.2


 


SECURITIES PURCHASE AGREEMENT


 


SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of July 10, 2003, by and among Commerce
One, Inc., a Delaware corporation, with headquarters located at 4440 Rosewood
Drive, Pleasanton, California 94588 (the “Company”),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a “Buyer” and
collectively, the “Buyers”).


 


WHEREAS:


 


A.                                   The Company has
authorized a new series of convertible preferred shares of the Company, the
terms of which are set forth in the certificate of designations for such series
of preferred shares (the “Certificate of
Designations”) in the form attached hereto as Exhibit A
(together with any convertible preferred shares issued in replacement thereof
in accordance with the terms thereof, the “Preferred
Shares”), which Preferred Shares shall be convertible into shares of
the Company’s Common Stock, par value $.0001 per share (the “Common Stock”) (as converted, the “Conversion Shares”), in accordance with the
terms of the Certificate of Designations;


 


B.                                     Each Buyer wishes
to purchase, and the Company wishes to sell, upon the terms and conditions
stated in this Agreement, (i) an aggregate of 100,000 Preferred Shares in the
respective amounts set forth opposite each Buyer’s name in column (3) on the
Schedule of Buyers and (ii) warrants, in substantially the form attached hereto
as Exhibit B (the “Warrants”),
to acquire that number of shares of Common Stock set forth opposite such
Buyer’s name in column (4) on the Schedule of Buyers (as exercised,
collectively, the “Warrant Shares”);


 


C.                                     The Company and
each Buyer is executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the “1933
Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities
and Exchange Commission (the “SEC”)
under the 1933 Act to the extent necessary to issue the Preferred Shares, the
Conversion Shares, the Warrants and the Warrant Shares;


 


D.                                    Upon the
consummation of the transactions contemplated by this Agreement, the parties
hereto shall execute and deliver a Registration Rights Agreement, substantially
in the form attached hereto as Exhibit C (the “Registration Rights Agreement”), pursuant
to which the Company will agree to provide certain registration rights with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement) under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.


 


E.                                      The Preferred
Shares, the Conversion Shares, the Warrants and the Warrant Shares collectively
are referred to herein as the “Securities”.


 


NOW,
THEREFORE, the Company and each Buyer hereby agree as
follows:


 

















 


1.                                       PURCHASE
AND SALE OF PREFERRED SHARES AND WARRANTS.


 


(a)                                  Purchase
of Preferred Shares and Warrants.


 


(i)                                     Preferred
Shares and Warrants.  Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, the Company
shall issue and sell to each Buyer, and each Buyer severally, but not jointly,
agrees to purchase from the Company on the Closing Date (as defined below), the
respective number of Preferred Shares set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers,  along
with Warrants to acquire that number of Warrant Shares set forth opposite such
Buyer’s name in column (4) on the Schedule of Buyers (the “Closing”).


 


(ii)                                  Closing.  The Closing shall occur on the Closing Date
at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New
York 10022.


 


(iii)                               Purchase
Price.  The purchase price for each
Buyer (the “Purchase Price”) of
the Preferred Shares and related Warrants to be purchased by each such Buyer at
the Closing shall be equal to $100 for each Preferred Share and related
Warrants being purchased by such Buyer at the Closing.


 


(b)                                 Closing
Date.  The date and time of the
Closing (the “Closing Date”) shall
be noon, New York City Time, on the date hereof after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6(a) and 7(a) below (or such later date as is mutually agreed to by the Company
and each Buyer).


 


(c)                                  Form
of Payment.  On the Closing Date,
(A) each Buyer shall pay the Purchase Price to the Company for the Preferred
Shares and Warrants to be issued and sold to such Buyer at the Closing, by wire
transfer of immediately available funds in accordance with the Company’s
written wire instructions, less any amount withheld at the Closing for expenses
pursuant to Section 4(g), and (B) the Company shall deliver to each Buyer stock
certificates (the “Preferred Stock
Certificates”) representing such number of the Preferred Shares
which such Buyer is then purchasing hereunder along with the Warrants (in the
amounts as such Buyer shall request) such Buyer is purchasing, duly executed on
behalf of the Company and registered in the name of such Buyer.


 


2.                                       BUYER’S
REPRESENTATIONS AND WARRANTIES.


 


Each Buyer
represents and warrants with respect to only itself that:


 


(a)                                  No Public Sale or
Distribution.  Such Buyer is (i)
acquiring the Preferred Shares and the Warrants and (ii) upon conversion of the
Preferred Shares and exercise of the Warrants will acquire the Conversion
Shares issuable upon conversion of the Preferred Shares and the Warrant Shares
issuable upon exercise of the Warrants, for its own account and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act; provided,
however, that by


 


2

















 


making the representations
herein, such Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at
any time in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act.


 


(b)                                 Accredited
Investor Status.  Such Buyer is an
“accredited investor” as that term is defined in Rule 501(a) of Regulation D.


 


(c)                                  Reliance
on Exemptions.  Such Buyer
understands that the Securities are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying in part upon the
truth and accuracy of, and such Buyer’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire the Securities.


 


(d)                                 Information.  Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer.  Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. 
Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer’s right to rely on the Company’s
representations and warranties contained herein.  Such Buyer understands that its investment in the Securities
involves a high degree of risk.  Such
Buyer has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Securities.


 


(e)                                  No
Governmental Review.  Such Buyer
understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.


 


(f)                                    Transfer
or Resale.  Such Buyer understands
that: (i) except as provided in the Registration Rights Agreement, the
Securities have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
have delivered to the Company an opinion of counsel, in a form generally
acceptable to the Company, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) such Buyer shall have satisfied the
requirements of Rule 144(k) promulgated under the 1933 Act, as amended (or a
successor rule thereto); (ii) any sale of the Securities made in reliance on
Rule 144 or Rule 144A promulgated under the 1933 Act, as amended (or a
successor rule thereto) (collectively, “Rule
144”), may be made only in accordance with the terms of Rule 144 and
further, if Rule 144 is not applicable, any resale of the Securities under
circumstances in which the seller (or the Person (as defined in Section 3(r))
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company


 


3

















 


nor any other Person is under
any obligation to register the Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.  The Securities may be pledged
in connection with a bona fide margin account or other bona fide loan secured
by the Securities and such pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Buyer
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document, including, without
limitation, this Section 2(f); provided, that in order to make any sale,
transfer or assignment of Securities, such Buyer and its pledgee makes such
disposition in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act. 
Notwithstanding the foregoing, no Buyer shall transfer any Preferred
Shares or Warrants other than to an affiliate of such Buyer.


 


(g)                                 Legends.  Such Buyer understands that the certificates
or other instruments representing the Preferred Shares and the Warrants and,
until such time as the sale of the Registrable Securities have been registered
under the 1933 Act as contemplated by the Registration Rights Agreement, the
stock certificates representing the Registrable Securities, except as set forth
below, shall bear any legend as required by the “blue sky” laws of any state
and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):


 


THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL, IN
A FORM GENERALLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT
TO RULE 144 OR RULE 144A UNDER SAID ACT. 
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER BONA FIDE LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.


 


The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act, (ii) in connection with
a sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Securities may be made without registration
under the 1933 Act, or (iii) such 


 


4

















 


holder provides the Company with reasonable assurance that the
Securities can be sold, assigned or transferred pursuant to Rule 144(k).


 


(h)                                 Authorization;
Validity; Enforcement.  This
Agreement has been, and the Registration Rights Agreement shall have been by
the Closing Date, duly and validly authorized, executed and delivered on behalf
of such Buyer and shall constitute the legal, valid and binding obligations of
such Buyer enforceable against such Buyer in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.


 


(i)                                     Residency.  Such Buyer is a resident of that country or
state specified below its address on the Schedule of Buyers.


 


(j)                                     Organization.  Such Buyer is duly organized and validly
existing in good standing under the laws of the jurisdiction of its
organization, and has the requisite power and authorization to execute and
deliver this Agreement and to consummate the transaction contemplated hereby.


 


(k)                                  No
Conflicts.  The execution, delivery
and performance of this Agreement and the Registration Rights Agreement by such
Buyer and the consummation by such Buyer of the transactions contemplated
hereby and thereby will not (i) result in a violation of the constituent
documents of such Buyer or (ii) 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, indenture or instrument to which such
Buyer is a party, or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree applicable to such Buyer or by which any property or
asset of such Buyer is bound or affected, except in the case of clauses (ii)
and (iii), for such breaches or defaults as would not be reasonably expected to
have a material adverse effect on such Buyer’s ability to consummate the
transactions contemplated hereby.


 


3.                                       REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.


 


Other than as
set forth in the SEC Documents (as defined below) and in a Schedule of
Exceptions delivered by the Company to the Buyers concurrently with the
execution of this Agreement, the Company represents and warrants to each Buyer
as of the Closing, or such other date as specified, that (for the purposes of
this Section 3, “knowledge” of the Company shall mean the actual knowledge of
the officers of the Company):


 


(a)                                  Organization
and Qualification.  The Company and
its “Subsidiaries” (which for
purposes of this Agreement means any entity in which the Company, directly or
indirectly, owns more than 50% of the capital stock or holds a more than 50%
equity or similar interest) are entities duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are organized, and
have the requisite corporate or other 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 entity to do


 


5

















 


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
reasonably be expected to have a Material Adverse Effect.  As used in this Agreement, “Material Adverse Effect” means any material
adverse effect on the business, properties, assets, operations, results of
operations or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, or on the transactions contemplated hereby or
by the agreements and instruments to be entered into in connection herewith, or
on the authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below). 
The Company has no Subsidiaries except as set forth on Schedule 3(a).


 


(b)                                 Authorization;
Enforcement; Validity.  The Company
has the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Certificate of Designations, the
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as
defined in Section 5(b)) and the Warrants (collectively, the “Transaction Documents”) and to issue the
Securities in accordance with the terms hereof and thereof.  The execution and delivery of the
Transaction Documents by the Company and the execution and filing of the
Certificate of Designations by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Preferred Shares and the Warrants and the
reservation for issuance and the issuance of the Conversion Shares  and the Warrant Shares issuable upon
conversion or exercise thereof, as the case may be, 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.  This Agreement and the other Transaction
Documents of even date herewith have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective 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 applicable
creditors’ rights and remedies.  The
Certificate of Designations has been filed on or prior to the Closing Date with
the Secretary of State of the State of Delaware and will be in full force and
effect, enforceable against the Company in accordance with its terms and shall
not have been amended unless in compliance with its terms.


 


(c)                                  Issuance
of Securities.  The Preferred Shares
and Warrants are duly authorized and, upon issuance in accordance with the
terms hereof, shall be validly issued, free from all documentary stamp, transfer
or similar taxes (provided that such taxes shall be limited to United States
federal taxes, state taxes and taxes of the jurisdiction of incorporation of
the Company), liens and charges with respect to the issue thereof (other than
restrictions on transfer contained in this Agreement and the Registration
Rights Agreement), and the Preferred Shares shall be entitled to the rights and
preferences set forth in the Certificate of Designations.  As of the Closing, a number of shares of
Common Stock shall have been duly authorized and reserved for issuance which
equals 7,300,000.  Upon conversion or
exercise in accordance with the Preferred Shares or the Warrants, as the case
may be, the Conversion Shares and the Warrant Shares, respectively, will be
validly issued, fully paid and nonassessable and free from all documentary
stamp, transfer or similar taxes (provided that such taxes shall be limited to
United States federal taxes, state taxes and taxes of the jurisdiction of
incorporation of the Company),


 


6

















 


liens and charges with respect
to the issue thereof (other than restrictions on transfer contained in this
Agreement and the Registration Rights Agreement), with the holders being
entitled to all rights accorded to a holder of Common Stock.  Assuming the accuracy of each of the
representations and warranties of Buyer contained in Section 2, the issuance by
the Company of the Securities is exempt from registration under the 1933 Act.


 


(d)                                 No
Conflicts.  The execution, delivery
and performance of the Transaction Documents, including the Certificate of
Designations, by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Preferred Shares and Warrants and reservation for issuance
and issuance of the Conversion Shares and the Warrant Shares) will not (i)
result in a violation of the certificate of incorporation, any certificate of
designations, preferences and rights of any outstanding series of preferred
stock or bylaws of the Company or any Subsidiary, (ii) 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, indenture
or instrument to which the Company or any of its Subsidiaries is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of the Principal Market) 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.


 


(e)                                  Consents.  All consents, authorizations, orders,
filings and registrations which the Company is required as of the Closing Date
to obtain to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents in accordance with their terms have
been obtained or effected on or prior to the Closing Date.  The Company and its Subsidiaries are unaware
of any facts or circumstances which might reasonably be expected to prevent the
Company from obtaining or effecting any of the foregoing.  The Company is not in violation of the
listing requirements of the Principal Market and has no knowledge of any facts
which would reasonably lead to delisting or suspension of the Common Stock in the
foreseeable future.


 


(f)                                    Acknowledgment
Regarding Buyer’s Purchase of Securities. 
The Company acknowledges and agrees that each Buyer is acting solely in
the capacity of arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and that no Buyer is an officer or director
of the Company.  The Company
further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents, including the Certificate of Designations, and the
transactions contemplated hereby and thereby, and any advice given by a Buyer
or any of its representatives or agents in connection with the Transaction
Documents, including the Certificate of Designations, and the transactions
contemplated hereby and thereby is merely incidental to such Buyer’s purchase
of the Securities.  The Company further
represents to each Buyer that the Company’s decision to enter into the
Transaction Documents has been based solely on the independent evaluation by
the Company and its representatives.


 


(g)                                 No
General Solicitation; Placement Agent’s Fees.  Neither the Company, nor any of its affiliates, nor any Person
acting on its or their behalf, has engaged in


 


7

















 


any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Securities.  The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. 
The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, attorney’s fees and
out-of-pocket expenses) arising in connection with any such claim.  The Company has not engaged any placement
agent or other agent in connection with the sale of the Preferred Shares and
the Warrants.


 


(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.


 


(i)                                     [Reserved]


 


(j)                                     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
(as defined in Section 3(q)) or the laws of the state of its incorporation
which is or could become applicable to any Buyer as a result of the
transactions contemplated by this Agreement, including, without limitation, the
Company’s issuance of the Securities and any Buyer’s ownership of the
Securities.  Other than the Amended and
Restated Preferred Stock Rights Agreement, dated as of July 11, 2001, by and
among the Company, New Commerce One Holding, Inc. and Fleet National Bank, as
Rights Agent, the Company has not adopted a stockholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of Common Stock
or a change in control of the Company.


 


(k)                                  SEC
Documents; Financial Statements. 
Since December 31, 2002, 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 Buyers
or their respective representatives true, correct and complete copies of the
SEC Documents not available on the EDGAR system.  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 the light of the 


 


8

















 


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).  Taken as a whole, the
information provided by or on behalf of the Company to the Buyers when read together
with the SEC Documents does 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 the light of the circumstance under which they are or were made,
not misleading.


 


(l)                                     Absence
of Certain Changes.  Except as
disclosed in Schedule 3(l), since March 31, 2003, there have been no
changes or developments in the business, properties, operations, condition
(financial or otherwise) or results of operations of the Company or its
Subsidiaries that have had or would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.  Since March 31, 2003, the Company has not
(i) declared or paid any dividends, (ii) sold any assets, individually or in the
aggregate, in excess of $200,000 outside of the ordinary course of business or
(iii) had capital expenditures, individually or in the aggregate, in excess of
$200,000.  The Company has not taken any
steps to seek protection pursuant to any bankruptcy law nor does the Company
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so. 
The Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing will not be, Insolvent
(as defined below).  For purposes of
this Section 3(l), “Insolvent”
means (i) the present fair saleable value of the Company’s assets is less than
the amount required to pay the Company’s total indebtedness, contingent or
otherwise, (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured or (iii) the Company intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such debts mature.


 


(m)                               No
Undisclosed Events, Liabilities, Developments or Circumstances.  Except for the transactions contemplated
hereby, no event, liability, development or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company
under applicable securities laws on a registration statement on Form S-1 filed
with the SEC relating to an issuance and sale by the Company of its Common
Stock and which has not been publicly announced.


 


(n)                                 Conduct
of Business; Regulatory Permits. 
Neither the Company nor its Subsidiaries is in violation of any term of
or in default under its Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series


 


9

















 


of preferred stock of the
Company or Bylaws or their organizational charter or bylaws, respectively
(except, with respect to the Subsidiaries, for violations that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect).  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, reasonably be
expected to have a Material Adverse Effect. 
Without limiting the generality of the foregoing, the Company is not in
violation of any of the material rules, regulations or requirements of the
Nasdaq National Market (the “Principal Market”)
currently in effect and has no knowledge of any facts or circumstances which would
reasonably lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future.  Since
December 31, 2002, (i) the Common Stock has been designated for quotation or
listed on the Principal Market, (ii) trading in the Common Stock has not been
suspended by the SEC or the Principal Market and (iii) the Company has received
no communication, written or oral, from the SEC or the Principal Market
regarding the suspension or delisting of the Common Stock from the Principal Market.  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 reasonably be expected to 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.


 


(o)                                 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 (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; (ii)
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.


 


(p)                                 Transactions
With Affiliates.  Except as set
forth on Schedule 3(p) and in the SEC Documents filed at least ten days
prior to the date hereof and other than the grant of stock options disclosed on
Schedule 3(q), none of the officers, directors or employees of the
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for ordinary course services as employees, officers or
directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.


 


10

















 


(q)                                 Equity
Capitalization.  As of the date
hereof, the authorized capital stock of the Company consists of (x) 950,000,000
shares of Common Stock, of which as of the date hereof, 31,398,715 are issued
and outstanding, 28,939 are issued but not outstanding as treasury shares,
10,161,504 shares are reserved for issuance pursuant to the Company’s stock
option and purchase plans and 20,000 shares are reserved for issuance pursuant
to securities (other than the Preferred Shares and the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock, and (y)
50,000,000 shares of preferred stock, of which as of the date hereof, 300,000
are designated Series A Participating Preferred Stock and none are issued or
outstanding.  All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable.  Except as disclosed
on Schedule 3(q) and under the caption “Relationship with SAP — Equity
Relationship” in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2002: (i) no shares of the Company’s capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; (ii) 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
exercisable 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 exercisable or exchangeable for, any shares of capital
stock of the Company or any of its Subsidiaries; (iii) there are no outstanding
debt securities, notes, credit agreements, credit facilities or other
agreements, documents or instruments evidencing Indebtedness (as defined in
Section 3(r)) of the Company or any of its Subsidiaries or by which the Company
or any of its Subsidiaries is or may become bound; (iv) there are no financing
statements securing obligations in any material amounts, either singly or in
the aggregate, filed in connection with the Company; (v) 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
(except the Registration Rights Agreement); (vi) there are no outstanding
securities or instruments 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; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or “phantom stock” plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents (as defined herein) but not so
disclosed in the SEC Documents, other than those incurred in the ordinary
course of the Company’s or its Subsidiaries’ respective businesses and which,
individually or in the aggregate, do not or would not reasonably be expected to
have a Material Adverse Effect.  The
Company has made available to the Buyer true, correct and complete copies of
the Company’s Restated Certificate of Incorporation, as amended and as in
effect on the date hereof (together with any certificate of designations of any
outstanding series of preferred stock of the Company, the “Certificate of Incorporation”), and the
Company’s Bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all 


 


11

















 


securities convertible into, or
exercisable or exchangeable for, Common Stock and the material rights of the
holders thereof in respect thereto.


 


(r)                                    Indebtedness
and Other Contracts.  Except as set
forth on Schedule 3(r), neither the Company nor any of its Subsidiaries
(i) has any outstanding Indebtedness in excess of $200,000 (as defined below),
(ii) is a party to any contract, agreement or instrument, the violation of
which, or default under which, by the other party(ies) to such contract,
agreement or instrument would reasonably be expected to result in a Material
Adverse Effect, other than contracts, agreements or instruments entered into in
the ordinary course of business which to the Company’s knowledge, neither it
nor any other party thereto is in default or other violation of, (iii) is in
violation of any term of or in default under any contract, agreement or
instrument relating to any Indebtedness, except where such violations and
defaults would not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company’s officers, has or is expected to have a
Material Adverse Effect.  For purposes of
this Agreement:  (x) “Indebtedness” of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations
issued, undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary course of business),
(C) all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a
capital lease, (G) all indebtedness referred to in clauses (A) through (F)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any mortgage, lien, pledge,
change, security interest or other encumbrance upon or in any property or
assets (including accounts and contract rights) owned by any Person, even
though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (H) all Contingent Obligations
in respect of indebtedness or obligations of others of the kinds referred to in
clauses (A) through (G) above; (y) “Contingent
Obligation” means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the
primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect
thereto; and (z) “Person” means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.


 


(s)                                  Absence
of Litigation.  There is no action,
suit, proceeding, inquiry or investigation before or by the Principal Market,
any court, public board, government agency,


 


12

















 


self-regulatory organization or
body 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, except (i) as disclosed in Item 3 of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2002 and in Part II, Item 1
of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2003 or (ii) such as are not reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect.  To the knowledge of the Company, none of the
directors or officers of the Company have been a party to any securities
related litigation during the past five years, other than as disclosed in the
SEC Documents.


 


(t)                                    Insurance.  The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged.  Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason
to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect.


 


(u)                                 Employee
Relations.  Neither the Company nor
any of its Subsidiaries is a party to any collective bargaining agreement or,
to its knowledge, employs any member of a union.  The Company and its Subsidiaries believe that their relations
with their employees are good.  No
executive officer of the Company (as defined in Rule 501(f) of the 1933 Act)
has notified the Company that such officer intends to leave the Company or
otherwise terminate such officer’s employment with the Company.  No executive officer of the Company, to the
knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and, to the knowledge of the
Company, the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any material liability with
respect to any of the foregoing matters. 
The Company and its Subsidiaries are in compliance with all federal,
state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours,
except where the failure to be in compliance would not reasonably expected to
result, individually or in the aggregate, in a Material Adverse Effect.


 


(v)                                 Title.
Except as set forth in Schedule 3(v), the Company and its Subsidiaries have
good and marketable title to all personal property owned by them which is
material to the business of the Company and its Subsidiaries, in each case free
and clear of all liens, encumbrances and defects except (i) immaterial liens
for taxes not yet delinquent, (ii) immaterial mechanics’ and materialmen’s
liens (and other similar liens), and immaterial liens under operating and
similar agreements, to the extent the same relate to expenses incurred in the
ordinary course of business and that are not yet due, (iii) that are routine
Governmental Approvals, or (iv) such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and any of its


 


13

















 


Subsidiaries.  Neither the Company nor any of its
Subsidiaries owns any real property. 
Any real property and facilities held under lease by the Company and any
of its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its Subsidiaries.


 


(w)                               Intellectual
Property Rights. 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
other intellectual property rights (“Intellectual
Property Rights”) necessary to conduct their respective businesses
as now conducted.  None of the Company’s
Intellectual Property Rights have expired or terminated, or are expected to
expire or terminate within two years from the date of this Agreement, except
for those which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. 
The Company does not have any knowledge of any infringement by the
Company or its Subsidiaries of Intellectual Property Rights of others.  Except as set forth in Schedule 3(w),
there is no claim, action or proceeding being made or brought, or to the
knowledge of the Company, being threatened, against the Company or its
Subsidiaries regarding its Intellectual Property Rights.  The Company does not have any knowledge of
any facts or circumstances which might give rise to any of the foregoing
infringements or claims, actions or proceedings.  The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.


 


(x)                                   Environmental
Laws.  The Company and its
Subsidiaries (i) are in compliance with any and all Environmental Laws (as
hereinafter defined), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval where, in each of the foregoing clauses
(i), (ii) and (iii), the failure to so comply could be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect.  The term “Environmental
Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or
toxic or hazardous substances or wastes (collectively, “Hazardous Materials”)  into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.


 


(y)                                 Tax
Status.  The Company and each of its
Subsidiaries (i) 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, (ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to


 


14

















 


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 specific basis for any such particular claim.


 


(z)                                   Internal
Accounting Controls.  The Company
and each of its Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference.


 


(aa)                            Sarbanes-Oxley
Act.  The Company is in compliance
with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that
are effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof, except where such noncompliance would not have a Material Adverse
Effect.


 


(bb)                          Investment
Company Status.  The Company is not,
and upon consummation of the sale of the Securities will not be, an “investment
company,” a company controlled by an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter” for, an “investment
company” as such terms are defined in the Investment Company Act of 1940, as
amended.


 


4.                                       COVENANTS.


 


(a)                                  Reasonable
Best Efforts.  Each party shall use
its reasonable best efforts to satisfy timely each of the conditions to be
satisfied by it as provided in Sections 6 and 7 of this Agreement.


 


(b)                                 Form
D and Blue Sky.  The Company agrees
to file a Form D with respect to the Securities as required under Regulation D
and to provide a copy thereof to each Buyer promptly after such filing.  The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is necessary
in order to obtain an exemption for or to qualify the Securities for sale to
the Buyers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to the Buyers on or prior to the Closing Date.  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 Date.


 


(c)                                  Reporting
Status.  Until the date on which the
Investors (as defined in the Registration Rights Agreement) shall have sold all
the Conversion Shares and Warrant Shares  and
none of the Preferred Shares  or
Warrants is outstanding, (the “Reporting
Period”), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and


 


15

















 


the Company shall not terminate
its status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would otherwise permit such
termination.


 


(d)                                 Use
of Proceeds.  The Company will use
the proceeds from the sale of the Securities for working capital purposes.


 


(e)                                  Financial
Information.  The Company agrees to
send the following to each Investor during the Reporting Period unless the
following are filed with the SEC through EDGAR and are available to the public
through the EDGAR system, within one (1) Business Day after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports
on Form 10-Q, any Current Reports on Form 8-K and any registration statements
(other than on Form S-8) or amendments filed pursuant to the 1933 Act;
provided, that in no case will the Company be required to furnish any exhibits
to such reports or other materials that are subject to a confidential treatment
request.  “Business Day” means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.


 


(f)                                    Listing.  The Company shall promptly secure the
listing of all of the Registrable Securities (as defined in the Registration
Rights Agreement) upon each national securities exchange and automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents.  The Company shall maintain
the Common Stock’s authorization for quotation on the Principal Market or the
Nasdaq SmallCap Market.  Neither the
Company nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the Common Stock not being listed on the
Principal Market or the Nasdaq SmallCap Market.  The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f).


 


(g)                                 Fees.  Subject to Section 8 below, at the Closing,
the Company shall pay BayStar Capital II, L.P. or its designee(s) for its
reasonable, accountable expenses in connection with the transactions
contemplated hereby in an amount up to $60,000 (of which $25,000 has previously
been paid), which amount shall be withheld by such Buyer from its Purchase
Price at the Closing.  Each party shall
be responsible for the payment of any placement agent’s fees, financial
advisory fees, or broker’s commissions incurred by it and relating to or
arising out of the transactions contemplated hereby.  The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, reasonable attorney’s
fees and out-of-pocket expenses) arising in connection with claim relating to
any such payment.  Except as otherwise
set forth in this Agreement or in the Registration Rights Agreement, each party
to this Agreement shall bear its own expenses in connection with the sale of
the Securities to the Buyers.


 


(h)                                 Pledge
of Securities.  The Company
acknowledges and agrees that nothing in this Agreement will prevent an Investor
(as defined in the Registration Rights Agreement) from pledging the Securities
in connection with a bona fide margin agreement or other bona fide loan or
financing arrangement that is secured by such Securities.  The pledge of


 


16

















 


the Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, and no
Investor effecting a pledge of Securities shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document, including,
without limitation, Section 2(f) of this Agreement; provided that an Investor
and its pledgee shall be required to comply with the provisions of Section 2(f)
hereof in order to effect a sale, transfer or assignment of Securities to such
pledgee.  The Company hereby agrees to
execute and deliver such documentation as a pledgee of Securities may
reasonably request in connection with a pledge of such Securities to such
pledgee by an Investor.


 


(i)                                     Disclosure
of Transactions and Other Material Information.  On or before 8:30 a.m., New York City time, on  the Business Day following the Closing
Date, the Company shall file a Current Report on Form 8-K describing the terms
of the transactions contemplated by the Transaction Documents in the form required
by the 1934 Act, and attaching the material Transaction Documents (including,
without limitation, this Agreement, the form of the Certificate of
Designations, the form of Warrant and the form of the Registration Rights
Agreement) as exhibits to such filing (the “8-K
Filing”).  From and after the
filing of the 8-K Filing with the SEC, so long as a Buyer does not exercise its
right to have an observer at meetings of the Company’s Board of Directors, such
Buyer shall not be in possession of any material, nonpublic information
actually provided by the Company, any of its Subsidiaries or any of its
respective officers, directors, employees or agents, that was not specifically
requested by such Buyer and that is not disclosed in the 8-K Filing.  The Company shall not, and shall cause each
of its Subsidiaries and its and each of their respective officers, directors,
employees and agents, not to, provide any Buyer with any material, nonpublic
information regarding the Company or any of its Subsidiaries from and after the
filing of the 8-K Filing with the SEC not directly solicited by such Buyer,
except in connection with such Buyer’s exercise of its right to have an
observer attend meetings of the Company’s Board of Directors.  Subject to the foregoing, neither the
Company nor any Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval
of any Buyer, to make any press release or other public disclosure with respect
to such transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations, including the applicable rules and regulations of the Principal
Market (provided that in the case of clause (i) each Buyer shall be consulted
by the Company (although the consent of such Buyer shall not be required) in
connection with any such press release or other public disclosure prior to its
release).


 


(j)                                     No
Integrated Offering.  None of the
Company, its Subsidiaries, their affiliates and any Person acting on their
behalf will, directly or indirectly, make any offers or sales of any security
or solicit any offers to buy any security, under circumstances that would
require registration of the Company’s sale of any of the Securities under the
1933 Act or cause this offering to be subject to 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.


 


17

















 


(k)                                  Reservation
of Shares.  The Company shall take
all action necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than the number of shares of Common Stock needed
to provide for the issuance of the shares of Common Stock upon conversion of
all outstanding Preferred Shares, including payment of paid-in-kind dividends
(without regard to any limitations on conversions) and the number of shares of
Common Stock needed to provide for the issuance of the shares of Common Stock
upon exercise of all outstanding Warrants (without regard to any limitations on
exercises).


 


(l)                                     Observer
Rights.  So long as the Buyers
(together with their affiliates) hold at least 50% of the Preferred Shares
initially issued to them hereunder, the Buyers shall have the right, but not
the obligation, to appoint one individual mutually agreeable to the Buyers and
the Company (a “Preferred Observer”)
to observe and participate in the discussion of any proceeding of the Company’s
Board of Directors in a nonvoting observer capacity; provided, that the
Preferred Observer may not be a member of or observer of the board of directors
of a competitor of the Company.  Each
Preferred Observer shall have the right to receive (i) any written material or
other information provided to members of the Board of Directors (or that any
director has the right to request); provided, that such Preferred
Observer shall acknowledge and agree that he or she will be bound to satisfy
the same duties and obligations of confidentiality with respect to such
information that members of the Board of Directors must satisfy and (ii) any
notice provided to the Board of Directors of the Company at the same time in
the same manner as such Board of Directors. 
If the Company proposes to take any action by written consent in lieu of
a meeting of its Board of Directors, the Company shall give written notice
thereof to each Preferred Observer promptly following the effective date of
such consent describing in reasonable detail the nature and substance of such
action.  Each Preferred Observer shall
be entitled to be the same reimbursement for expenses associated with attending
board meetings provided to the members of the Board of Directors.  Notwithstanding the foregoing, if the
Company determines in good faith that participation by the Preferred Observer
in any meeting or the distribution to the Preferred Observer of any written
materials described in this Section 4(l) relates to information deemed
confidential,  proprietary or
attorney-client privileged (“Protected
Information”), the Company shall have the right to exclude the
Preferred Observer from the portion of such meeting and from access to such
information in which Protected Information is discussed or presented.


 


5.                                       REGISTER;
TRANSFER AGENT INSTRUCTIONS.


 


(a)                                  Register.  The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to each holder of Preferred Shares or Warrants), a register
for the Preferred Shares and the Warrants, in which the Company shall record
the name and address of the Person in whose name the Preferred Shares  and the Warrants have been issued
(including the name and address of each transferee), the number of Preferred
Shares held by such Person and the number of Warrant Shares issuable upon
exercise of the Warrants held by such Person. 
The Company shall keep the register open and available at all times
during business hours for inspection of any Buyer or its legal representatives.


 


(b)                                 Transfer
Agent Instructions.  The Company
shall issue irrevocable instructions to its transfer agent, and any subsequent
transfer agent, to issue certificates or credit


 


18

















 


shares to the applicable
balance accounts at DTC, registered in the name of each Buyer or its respective
nominee(s), for the Conversion Shares and the Warrant Shares  in such amounts as specified from time to
time by each Buyer to the Company upon conversion of the Preferred Shares or
exercise of the Warrants in the form of Exhibit D attached hereto (the “Irrevocable Transfer Agent Instructions”).  The Company warrants that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5(b), and stop transfer instructions to give effect to Sections 2(f)
and 2(g) hereof, will be given by the Company to its transfer agent, and that
the Securities shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the other
Transaction Documents.  If a Buyer
effects a sale, assignment or transfer of the Securities in accordance with
Section 2(f), the Company shall permit the transfer and shall promptly instruct
its transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment.  In the event that such sale, assignment or
transfer involves Conversion Shares or Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or in compliance
with Rule 144, the transfer agent shall issue such Securities to the Buyer,
assignee or transferee, as the case may be, without any restrictive
legend.  The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to a
Buyer.  Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5(b) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5(b), that a
Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.


 


6.                                       CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL. 
The obligation of the Company hereunder to issue and sell the Preferred
Shares  and the related Warrants to
each Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:


 


(i)                                     Such
Buyer and each other Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.


 


(ii)                                  Such
Buyer and each other Buyer shall have delivered to the Company the Purchase
Price (less, in the case of BayStar Capital II, L.P., the amounts withheld
pursuant to Section 4(g)) for the Preferred Shares and the related Warrants
being purchased by such Buyer and each other Buyer at the Closing by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Company.


 


(iii)                               The
representations and warranties of such Buyer shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date), and such Buyer shall have performed, satisfied and complied in
all material respects (except for covenants, agreements and conditions that are
qualified by


 


19

















 


materiality, which shall be complied with in
all respects) with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date.


 


(iv)                              No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.


 


7.                                       CONDITIONS
TO EACH BUYER’S OBLIGATION TO PURCHASE. 
The obligation of each Buyer hereunder to purchase the Preferred Shares  and the related Warrants at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer’s sole
benefit and may be waived by such Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:


 


(i)                                     The
Company shall have executed and delivered to such Buyer each of the Transaction
Documents.


 


(ii)                                  The
Certificate of Designations shall have been filed with the Secretary of State
of the State of Delaware, and a copy thereof certified by the Secretary of
State of the State of Delaware shall have been delivered to such Buyer.


 


(iii)                               The
Company shall have executed and delivered to such Buyer the Preferred Stock
Certificates (in such denominations as such Buyer shall request) for the
Preferred Shares being purchased by such Buyer at the Closing.


 


(iv)                              Such
Buyer shall have received the opinion of Wilson Sonsini Goodrich & Rosati,
the Company’s counsel, dated as of the Closing Date, in substantially the form
of Exhibit E attached hereto.


 


(v)                                 The
Company shall have reserved out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Preferred Shares and
exercise of the Warrants, at least 7,300,000 shares of Common Stock.


 


(vi)                              The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit D attached hereto, which
instructions shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.


 


(vii)                           The
Company shall have delivered to such Buyer a certificate evidencing the
incorporation and good standing of the Company in such corporation’s state of
incorporation issued by the Secretary of State of such state of incorporation
as of a date within 10 days of the Closing Date.


 


20

















 


(viii)                        The
Company shall have delivered to such Buyer a certificate evidencing the
Company’s qualification as a foreign corporation and good standing issued by
the Secretary of State of the State of California as of a date within 10 days
of the Closing Date.


 


(ix)                                The
Company shall have delivered to such Buyer a certified copy of the Certificate
of Incorporation as certified by the Secretary of State of the State of
Delaware within 10 days of the Closing Date.


 


(x)                                   The
Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the resolutions
consistent with Section 3(b) as adopted by the Company’s Board of Directors in
a form reasonably acceptable to such Buyer, (ii) the Certificate of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit F.


 


(xi)                                The
representations and warranties of the Company shall be true and correct as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all material
respects (except for covenants, agreements and conditions that are qualified by
materiality, which shall be complied with 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
Date.  Such Buyer shall have received a
certificate, executed by the Chief Executive Officer or the Chief Financial
Officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer in
the form attached hereto as Exhibit G.


 


(xii)                             The
Company shall have delivered to such Buyer a letter from the Company’s transfer
agent certifying the number of shares of Common Stock outstanding as of a date
within five days of the Closing Date.


 


(xiii)                          The
Common Stock (x) shall be designated for quotation or listed on the Principal
Market and (y) shall not have been suspended by the SEC or the Principal Market
from trading on the Principal Market nor shall suspension by the SEC or the
Principal Market have been threatened either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market; and the Conversion Shares issuable upon
conversion of the Preferred Shares (without regard to any limitations on
conversions) and the Warrant Shares issuable upon exercise of the Warrants
(without regard to any limitations on exercise) shall be listed (subject filing
an official notice of issuance of additional shares) upon the Principal Market.


 


(xiv)                         The
Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Preferred Shares
and the Warrants.


 


21

















 


(xv)                            No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.


 


8.                                       TERMINATION.  In the event that the Closing shall not have
occurred with respect to a Buyer on or before five (5) Business Days from the
date hereof due to the Company’s or such Buyer’s failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party’s
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party; provided, however, this if this Agreement is
terminated pursuant to this Section 8, the Company shall remain obligated to
reimburse the non-breaching Buyers for the expenses described in Section 4(g)
above.


 


9.                                       MISCELLANEOUS.


 


(a)                                  Governing
Law; Jurisdiction; Jury Trial.  All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of
Delaware, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than
the State of Delaware.  Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts sitting in Delaware, 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.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address for such notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of
process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.


 


(b)                                 Counterparts.  This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original,
not a facsimile signature.


 


22

















 


(c)                                  Headings.  The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.


 


(d)                                 Severability.  If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction.


 


(e)                                  Entire
Agreement; Amendments.  This
Agreement supersedes all other prior oral or written agreements between the
Buyers, the Company, their affiliates and Persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters.  No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the
holders of a majority or more of the Preferred Shares, or, if prior to the
Closing Date, the Company and the Buyers listed on the Schedule of Buyers as
being obligated to purchase a majority or more of the Preferred Shares.  No provision hereof may be waived other than
by an instrument in writing signed by the party against whom enforcement is
sought.  No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Preferred Shares then outstanding.  No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, holders of Preferred Shares or holders of the Warrants,
as the case may be.  The Company has
not, directly or indirectly, made any agreements with any Buyers relating to
the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.


 


(f)                                    Notices.  Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same.  The addresses and facsimile
numbers for such communications shall be:


 


	
  If to the Company:

  
	
   

  
	
  Commerce One, Inc.

  
	
  4440 Rosewood Drive

  
	
  Pleasanton, California 94588

  
	
  Telephone:

  	
  (925) 520-6000

  
	
  Facsimile:

  	
  (925) 520-6060

  
	
  Attention:

  	
  Chief Financial Officer

  
	
   

  
	
  and a separate notice to

  



 


23

















 


	
   

  
	
  Commerce One, Inc.

  
	
  4440 Rosewood Drive

  
	
  Pleasanton, California  94588

  
	
  Telephone:

  	
  (925) 520-6000

  
	
  Facsimile:

  	
  (925) 520-6060

  
	
  Attention:

  	
  General Counsel

  
	
   

  
	
  with a copy to:

  
	
   

  
	
  Wilson Sonsini Goodrich & Rosati

  
	
  650 Page Mill Road

  
	
  Palo Alto, California 
  94304-1050

  
	
  Telephone:

  	
  (650) 849-3223

  
	
  Facsimile:

  	
  (650) 493-6811

  
	
  Attention:

  	
  N. Anthony Jeffries, Esq.

  
	
   

  
	
  If to the Transfer Agent:

  
	
   

  
	
  Equiserve

  
	
  150 Royall
  Street

  
	
  Canton,
  Massachusetts

  
	
  Telephone:

  	
  (781)
  575-2394

  
	
  Facsimile:

  	
  (781) 575-2149

  
	
  Attention:

  	
  Norris Richardson

  



 


If to a Buyer, to its address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer’s representatives as set forth on
the Schedule of Buyers, or to such other address and/or facsimile number and/or
to the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change.  Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by
an overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.


 


(g)                                 Successors
and Assigns.  This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Preferred Shares or the
Warrants.  The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the holders of a majority or more of the Preferred Shares then
outstanding, including by merger or consolidation, except pursuant to a Change
of Control (as defined in Section 4(a) of the Certificate of Designations) with
respect to which the Company is in compliance with such section and Section
4(b) of the Warrants.  A Buyer may
assign some or all of its rights hereunder in connection with a transfer of
such Buyer’s Securities to any affiliate or lender without the


 


24

















 


consent of the Company; provided
that such assignment is in compliance with applicable securities laws and this
Agreement, and upon consummation of a permitted assignment and the written
agreement of such assignee (in form and substance reasonably satisfactory to
the Company) to the terms and conditions of this Agreement, such assignee shall
be deemed to be a Buyer hereunder with respect to such assigned rights.


 


(h)                                 No
Third Party Beneficiaries.  This Agreement
is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.


 


(i)                                     Survival.  Unless this Agreement is terminated under
Section 8, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9 shall survive the Closing. 
Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.


 


(j)                                     Further
Assurances.  Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order
to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.


 


(k)                                  Indemnification.  In consideration of each Buyer’s execution
and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company’s other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold harmless
each Buyer and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons’ agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’ fees and
disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(a) any material inaccuracy of any representation or warranty made by the
Company in the Transaction Documents, (b) any material breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of the Transaction Documents,
(ii) any transaction financed or to be financed in whole or in part, directly
or indirectly, with the proceeds of the issuance of the Securities, (iii) any disclosure
made by such Buyer pursuant to Section 4(i), or (iv) the status of such Buyer
or holder of the Securities as an investor in the Company (other than, in each
of (i) through (iv) above, in connection with any action such Buyer may have
taken or resulting from any gross negligence or willful misconduct by the
Buyer).  To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the


 


25

















 


payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable
law.  Except as otherwise set forth
herein, the mechanics and procedures with respect to the rights and obligations
under this Section 9(k) shall be the same as those set forth in Section 6 of
the Registration Rights Agreement.


 


(l)                                     No
Strict Construction.  The language
used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction will be
applied against any party.


 


(m)                               Remedies.  Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law.  Any Person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. 
Furthermore, the Company recognizes that in the event that it fails to
perform, observe, or discharge any or all of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to the
Buyers.  The Company therefore agrees
that the Buyers shall be entitled to seek temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages and
without posting a bond or other security.


 


(n)                                 Payment
Set Aside.  To the extent that the
Company makes a payment or payments to the Buyers hereunder or pursuant to any
of the other Transaction Documents or the Buyers enforce or exercise their
rights hereunder or thereunder, and such payment or payments or the proceeds of
such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.


 


(o)                                 Independent
Nature of Buyers’ Obligations and Rights. 
The obligations of each Buyer under any Transaction Document are several
and not joint with the obligations of any other Buyer, and no Buyer shall be
responsible in any way for the performance of the obligations of any other
Buyer under any Transaction Document. 
Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents.  Each Buyer confirms that it has
independently participated in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors.  Each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitations,
the rights arising out of this Agreement or out of any other


 


26

















 


Transaction Documents, and it
shall not be necessary for any other Buyer to be joined as an additional party
in any proceeding for such purpose.


 


[Signature Page Follows]


 


27

















 


IN
WITNESS WHEREOF, each Buyer and the Company have
caused this Securities Purchase Agreement to be duly executed as of the date
first written above.


 


 


	
  COMPANY:

  	
   

  	
  BUYERS:

  
	
   

  	
   

  	
   

  
	
  COMMERCE ONE, INC.

  	
   

  	
  BAYSTAR CAPITAL II, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  BayStar Capital
  Management LLC

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Charles
  Boynton

  	
   

  	
   

  	
   

  
	
  Name: 
  Charles Boynton

  	
   

  	
  By:

  	
  /s/ Steven M. Lamar

  	
   

  
	
  Title:   
  Senior Vice President and

  	
   

  	
  Name: 
  Steven M. Lamar

  
	
  Chief Financial Officer

  	
   

  	
  Title:   
  Managing Member

  
							



 

















 


SCHEDULE OF BUYERS


 


	
  (1)

  	
   

  	
  (2)

  	
   

  	
  (3)

  	
   

  	
  (4)

  	
   

  	
  (5)

  	
   

  
	
  Buyer

  	
   

  	
  Address
  and Facsimile Number

  	
   

  	
  Number
  of

  Preferred

  Shares

  	
   

  	
  Aggregate
  

  Amount of

  Warrants

  	
   

  	
  Legal
  Representative’s

  Address and Facsimile

  Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BayStar
  Capital II, L.P.

  	
   

  	
  80
  E. Sir Francis Drake Boulevard,

  Suite 2B

  Larkspur, California 94939

  Attention:  Steven M. Lamar

  Facsimile: (415) 834-4601

  Telephone: (415) 834-4620

  Residence:  California

  	
   

  	
  100,000

  	
   

  	
  2,209,945

  	
   

  	
  Schulte
  Roth & Zabel LLP

  919 Third Avenue

  New York, New York 10022

  Attention:  Eleazer Klein, Esq.

  Facsimile: (212) 593-5955

  Telephone:  (212) 756-2376

  	
   

  



 

















 


EXHIBITS


 


	
  Exhibit A

  	
   

  	
  Form of
  Certificate of Designations

  
	
  Exhibit B

  	
   

  	
  Form of
  Warrants

  
	
  Exhibit C

  	
   

  	
  Form of
  Registration Rights Agreement

  
	
  Exhibit D

  	
   

  	
  Form of
  Irrevocable Transfer Agent Instructions

  
	
  Exhibit E

  	
   

  	
  Form of
  Opinion

  
	
  Exhibit F

  	
   

  	
  Form of
  Secretary’s Certificate

  
	
  Exhibit G

  	
   

  	
  Form of
  Officers Certificate

  



 


SCHEDULES


 


	
  Schedule 3(a)

  	
   

  	
  Subsidiaries

  
	
  Schedule 3(l)

  	
   

  	
  Absence of Certain Changes

  
	
  Schedule 3(p)

  	
   

  	
  Transactions with Affiliates

  
	
  Schedule 3(q)

  	
   

  	
  Capitalization

  
	
  Schedule 3(r)

  	
   

  	
  Indebtedness and Other Contracts

  
	
  Schedule 3(w)

  	
   

  	
  Intellectual Property