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Exhibit 10.1    
  

 
 
 

SUBSCRIPTION AGREEMENT    
  

    THIS
Subscription Agreement is made as of this 31st day of August, 2001 between Intraware, Inc., a corporation organized under the laws of the State of Delaware with offices at
25 Orinda Way, Suite 101, Orinda, California 94563 (the "Company"), and the undersigned (the "Subscriber", and together with each of the other subscribers in the Offering (defined below), the
"Subscribers"). 

    WHEREAS,
the Company desires to issue a minimum of 60 (the "Minimum Offering") and a maximum of 70 units (including fractions thereof) (the "Maximum Offering") (such units, the
"Units") in a bridge financing (the "Offering"), each Unit consisting of (a) $100,000 principal amount of 8% senior secured promissory notes (the "Notes"), the form of which is attached to this
Subscription Agreement as Exhibit A, and (ii) warrants (the "Warrants") to purchase 100,000 shares of the Company's common stock, $.0001
par value (the "Common Stock"), subject to the redemption provisions set forth in the Warrant, the form of which is attached to this Subscription Agreement as  Exhibit B; and 

    WHEREAS,
Commonwealth Associates, L.P. is acting as placement agent (the "Placement Agent") in the Offering pursuant to a Placement Agency Agreement dated August 31 2001
between the Company and the Placement Agent (the "Agency Agreement"); and 

    WHEREAS,
each Warrant represents the right to purchase one share of Common Stock (the "Warrant Shares") on the terms set forth in the Warrant; and 

    WHEREAS,
the Warrant Shares are entitled to registration rights on the terms set forth in this Subscription Agreement and in the Registration Rights Agreement (the "Registration
Rights
Agreement"), attached hereto as Exhibit C and incorporated herein by reference and made a part hereof; and 

    WHEREAS,
the Notes are secured by a lien on the Company's assets pursuant to the terms set forth in the security agreement (the "Security Agreement") and the Subscriber is appointing
the Placement Agent to act as agent for the Subscriber in connection with the Security Agreement on the terms set forth in the agency appointment agreement (the "Appointment Agreement"), the forms of
which agreements are attached to this Subscription Agreement as Exhibit D; 

    WHEREAS,
the Subscriber is delivering simultaneously herewith a completed confidential investor questionnaire (the "Questionnaire"). 

    NOW,
THEREFORE, for and in consideration of the promises and the mutual covenants hereinafter set forth, the parties hereto do hereby agree as follows: 

I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY AND COVENANTS OF SUBSCRIBER  

    1.1  Subscription for Units.  Subject to the terms and conditions hereinafter set forth, the Subscriber
hereby subscribes for and agrees to purchase from the Company such number of Units as is set forth upon the signature page hereof at a price equal to $100,000 per Unit and the Company agrees to sell
such Units to the Subscriber for said purchase price subject to the Company's right to sell to the Subscriber such lesser number of Units as the Company may, in its sole discretion, deem necessary or
desirable. The purchase price is payable by certified or bank check made payable to "American Stock Transfer & Trust Company as escrow agent for Intraware, Inc." (American Stock
Transfer & Trust Company is referred to as the "Escrow Agent") or by wire transfer of funds, contemporaneously with the execution and delivery of this Subscription Agreement. The Escrow Agent
shall act as such in accordance with the terms and conditions of an Escrow Agreement to be entered into among the Placement Agent, the Company and the Escrow Agent. The Notes and Warrants shall be
delivered by the Company within five (5) business days following the consummation of the Offering as set forth in 

 

Article III hereof; provided that, the Warrants shall be subject to the terms of the warrant escrow agreement by and among the Company, Commonwealth and Loeb & Loeb LLP (the "Warrant
Escrow Agreement"). Provided further that in the event that prior to the 17th day following the initial closing of the Bridge Financing (the "Initial Closing"), the Company enters into a
definitive merger or acquisition agreement with the entity set forth in Schedule 1 hereto pursuant to which such entity acquires more
than 50% of the Company at a price per share greater than $1.00, and provided that as a result of such acquisition or other agreement with such entity the Notes are repaid in full within
90 days after the Initial Closing, the Company shall have the right to redeem 50% of the Warrants, on a pro-rata basis, at a price of $.01 per Warrant.. 

    1.2  Reliance on Exemptions.  The Subscriber acknowledges that this offering of Units has not been
reviewed by the United States Securities and Exchange Commission (the "SEC") or any state agency because of the Company's representations that this is intended to be a nonpublic offering exempt from
the registration requirements of the Securities Act of 1933, as amended (the "1933 Act") and state securities laws. The Subscriber understands that the Company is relying in part upon the truth and
accuracy of, and the Subscriber's compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Subscriber set forth herein in order to determine the
availability of such exemptions and the eligibility of the Subscriber to acquire the Units. 

    1.3  Investment Purpose.  The Subscriber represents that the Notes and Warrants comprising its Units are
being purchased for its own account, for investment purposes only and not for distribution or resale to others in contravention of the registration requirements of the 1933 Act. The Subscriber agrees
that it will not sell or otherwise transfer the Notes, the Warrants or the Warrant Shares (collectively, the "Securities") unless they are registered under the 1933 Act or unless an exemption from
such registration is available. 

    1.4  Accredited Investor.  The Subscriber represents and warrants that it is an "accredited investor" as
such term is defined in Rule 501 of Regulation D promulgated under the 1933 Act, as indicated by its responses to the Questionnaire, and that it is able to bear the economic risk of any
investment in the Units. The Subscriber further represents and warrants that the information furnished in the Questionnaire is accurate and complete in all material respects. 

    1.5  Risk of Investment.  The Subscriber recognizes that the purchase of Units involves a high degree of
risk in that: (i) the Company has incurred substantial losses from operations; (ii) an investment in the Company is highly speculative and only investors who can afford the loss of their
entire investment should consider investing in the Company and the Units; (iii) an investment in the Units is illiquid; (iv) transferability of the securities comprising the Units is
extremely limited; (v) the Company will require substantial additional funds to operate its business and there can be no assurance that the Maximum Offering will be completed or that any other
funds will be available to the Company and (vi) the Company will be unable to repay the Notes without obtaining additional financing. 

    1.6  Information.  The Subscriber acknowledges receipt and careful review of: (a) the Annual
Report of the Company for the fiscal year ended February 28, 2001 filed with the SEC on Form 10-K on June 13, 2001, (b) the Quarterly Report of the Company for
the fiscal quarter ended May 31, 2001 filed with the SEC on Form 10-Q on July 13, 2001, (c) the Note, (d) the Warrant, (e) this Subscription
Agreement, (f) the Registration Rights Agreement, (g) the Security Agreement, (h) the Appointment Agreement, and (i) all exhibits, schedules and appendices which are part
of the aforementioned documents (collectively, the "Offering Documents"), and hereby represents that: (i) the Subscriber has been furnished by the Company during the course of this transaction
with all information regarding the Company which it has
requested; (ii) that the Subscriber has been afforded the opportunity to ask questions of and receive answers from duly authorized officers of the Company concerning the terms and conditions of
the Offering, and any additional information which it has requested; and (iii) the 

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Subscriber has been given the opportunity by the Placement Agent to review the Agency Agreement if it has requested. 

    1.7  No Representations.  The Subscriber hereby represents that, except as expressly set forth in the
Offering Documents, no representations or warranties have been made to the Subscriber by the Company or any agent, employee or affiliate of the Company, including the Placement Agent, and in entering
into this transaction the Subscriber is not relying on any information other than that contained in the Offering Documents and the results of independent investigation by the Subscriber. 

    1.8  Tax Consequences.  The Subscriber acknowledges that this offering of Units may involve tax
consequences and that the contents of the Offering Documents do not contain tax advice or information. The Subscriber acknowledges that he must retain his own professional advisors to evaluate the tax
and other consequences of an investment in the Units. 

    1.9  Transfer or Resale.  The Subscriber understands that, except as set forth in the Registration Rights
Agreement: (a) the Units have not been and are not being registered under the 1933 Act or any state securities laws; (b) the Securities may not be offered for sale, sold, assigned,
transferred or otherwise disposed of (each a "Disposition") unless, prior to effecting any such Disposition, (i) (A) such Securities, or the offering of such Securities, as applicable, are or
is subsequently registered under the 1933 Act, (B) the Subscriber delivers to the Company an opinion of counsel, in a reasonably acceptable form, that a Disposition of the Securities may be
made pursuant to an exemption from such registration, or (C) the Subscriber provides the Company with reasonable assurance that a Disposition of the Securities may be made pursuant to
Rule 144 promulgated under the 1933 Act (the "Rule") and (ii) the Subscriber and all direct or indirect transferees in any such Disposition have agreed in writing upon the aggregate
number of shares of Common Stock (the "Issuable Shares") that each such direct or indirect transferee may receive upon the exercise of the Warrants transferred to such transferee so that such exercise
does not, when aggregated with exercises allocated to the Subscriber and any other transferees of such Subscriber, exceed the Per Subscriber Limit (defined below); (c) any Disposition of
Securities made in reliance upon the Rule may be made only in accordance with the terms of the Rule and further, if the Rule is not applicable, any Disposition of the Securities under circumstances in
which the seller (or the person through whom the Disposition is made) may be deemed to be an underwriter (as such 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 promulgated thereunder; and (d) the Company is under no obligation to register the Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any registration exemption thereunder. 

    1.10  No Hedging Transactions.  The Subscriber hereby agrees not to engage in any Hedging Transaction
until such time as the Warrant Shares have been registered for resale under the 1933 Act or may otherwise be sold in the public market without an effective registration statement under the 1933 Act.
"Hedging Transaction" means any short sale (whether or not against the box) or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any
security (other than a broad-based market basket or index) that includes, relates to or derives any significant part of its value from the Company's Common Stock or any rights, warrants, options or
other securities that are convertible into, or exercisable or exchangeable for, Common Stock. 

    1.11  Placement Agent.  The Subscriber agrees that neither the Placement Agent or any of its directors,
officers, employees or agents shall be liable to any Subscriber for any action taken or omitted to be taken by it in connection therewith, except for willful misconduct or gross negligence. 

    1.12  Legends.  The Subscriber understands that the certificates or other instruments representing the
Securities, until such time as they have been registered under the 1933 Act as contemplated by the 

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Registration Rights Agreement, shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such certificates or other
instruments): 

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, OR APPLICABLE STATE
SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS, OR (II) UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT. 

The
legend set forth above shall be removed and the Company shall issue a certificate or other instrument without such legend to the holder of the Securities upon which it is stamped, if
(a) such Securities are registered under the 1933 Act, (b) such holder delivers to the Company an opinion of counsel, in a reasonably acceptable form, to the Company that a Disposition
of the Securities may be made pursuant to an exemption from such registration, or (c) such holder provides the Company with reasonable assurance that a Disposition of the Securities may be made
pursuant to the Rule without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold. 

    1.13  Validity; Enforcement.  If the Subscriber is a corporation, partnership, trust or other entity, the
Subscriber represents and warrants that: (a) it is authorized and otherwise duly qualified to purchase and hold the Units; and (b) that this Subscription Agreement has been duly and
validly authorized, executed and delivered and constitutes the legal, binding and enforceable obligation of the undersigned. 

    1.14  Residency.  The Subscriber represents that its principal address is furnished at the end of this
Subscription Agreement. 

    1.15  Foreign Subscriber.  If the Subscriber is not a United States person, such Subscriber hereby
represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Notes and Warrants comprising the Units or any
use of this Subscription Agreement, including: (a) the legal requirements within its jurisdiction for the purchase of the Units; (b) any foreign exchange restrictions applicable to such
purchase; (c) any governmental or other consents that may need to be obtained; and (d) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding,
redemption, sale or transfer of the securities comprising the Units. Such Subscriber's subscription and payment for, and his or her continued beneficial ownership of the Units, will not violate any
applicable securities or other laws of the Subscriber's jurisdiction. 

    1.16  NASD Member.  The Subscriber acknowledges that if it is a Registered Representative of a NASD
member firm, the Subscriber must give such firm notice required by the NASD's Rules of Fair Practice, receipt of which must be acknowledged by such firm on the signature page hereof. 

II. REPRESENTATIONS BY THE COMPANY  

    The Company represents and warrants to the Subscriber, except as set forth in the disclosure schedules attached hereto: 

    2.1  Organization and Qualification.  The Company is duly organized and validly existing in good standing
under the laws of the jurisdiction in which it is organized, and has the requisite power and 

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authorization to own its properties and to carry on its business as now being conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good
standing would not have a Material Adverse Effect. As used in this Subscription Agreement, "Material Adverse Effect" means any material adverse effect on the business, properties, assets, operations,
results of operations,
financial condition or prospects of the Company, or on the transactions contemplated hereby, or by the other Offering Documents or the agreements and instruments to be entered into in connection
herewith or therewith, or on the authority or ability of the Company to perform its obligations under the Offering Document. The Company does not have any operating subsidiaries and all of the
non-operating subsidiaries are wholly-owned by the Company. 

    2.2  Authorization; Enforcement; Validity.  The Company has the requisite corporate power and authority
to enter into and perform its obligations under this Subscription Agreement and other Offering Documents, to file and perform its obligations under the Offering Documents, and to issue the Securities
in accordance with the terms of the Offering Documents. The execution and delivery of the Offering Documents by the Company and the consummation by the Company of the transactions contemplated by the
Offering Documents, including without limitation the issuance of the Securities, have been duly authorized by the Company's board of directors and no further consent or authorization is required by
the Company, its board of directors or its stockholders. The Offering Documents have been duly executed and delivered by the Company, and constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies. 

    2.3  Capitalization.  The authorized, issued and outstanding capital stock of the Company prior to the
consummation of the transactions contemplated hereby is set forth in Schedule 2.3. All of such outstanding shares have been and are, or upon
issuance will be duly authorized, validly issued, fully paid and non-assessable. Except as disclosed in Schedule 2.3, (i) no
shares of the Company's capital stock are subject to preemptive rights under Delaware law or any other similar rights or any liens or encumbrances suffered or permitted by the Company;
(ii) there are no outstanding debt securities issued by the Company; (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or exchangeable for, any shares of capital stock of the Company, or contracts, commitments, understandings or arrangements by
which the Company is or may become bound to issue additional shares of capital stock of the Company or options, warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable for, any shares of capital stock of the Company; (iv) there are no agreements or arrangements under which the
Company is obligated to register the sale of any of their securities under the 1933 Act; (v) there are no outstanding securities of the Company which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem a security of the Company; (vi) there are no securities
or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described in the Offering Documents; and (vii) the Company
does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. All prior sales of securities of the Company were either registered under the 1933
Act and applicable state securities laws or exempt from such registration, and no security holder has any rescission rights with respect thereto. 

    2.4  Issuance of Securities; Reservation.  The issuance, sale and delivery of the Securities have been
duly authorized by all requisite corporate action by the Company and, upon issuance in 

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accordance with the Offering Documents, shall be (a) duly authorized, validly issued, fully paid and non-assessable, (b) free from all taxes, liens and charges with respect
to the issue thereof, and (c) entitled to the rights and preferences set forth in the Notes and the Warrants. At least 7,700,000 shares of Common Stock have been duly authorized and reserved
for issuance upon exercise of the Warrants and Agent's Warrants. In the event the number of shares of Common Stock issuable upon exercise of the Warrants exceeds the number of authorized shares of
Common Stock as a result of the exercise terms of the Warrants, the Company shall use its reasonable best efforts to seek stockholder approval of and file a Certificate of Amendment to increase
the authorized number of shares of Common Stock accordingly. Upon exercise of the Warrants in accordance with the terms thereof, the Warrant Shares will be duly authorized, validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Assuming
(i) the accuracy of the information provided by the respective Subscribers in the Subscription Agreement and Questionnaire, (ii) that all of the offerees and Subscribers are "accredited
investors" as such term is defined in Rule 501 of Regulation D, and (iii) that the Placement Agent has not engaged, nor will engage, in connection with the Offering, in any form
of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D, the offer and sale of the Notes and the Warrants pursuant to the terms of this
Subscription Agreement are and will be exempt from the registration requirements of the 1933 Act and the rules and regulations promulgated thereunder. The Company is not disqualified from the
exemption under Regulation D by virtue of the disqualification contained in Rule 507 thereof or otherwise. 

    2.5  No Conflicts.  Except as set forth in  Schedule 2.5, the execution, delivery and performance of the
Offering Documents by the Company, the consummation by the Company of the
transactions contemplated by the Offering Documents, and the performance by the Company of its obligations under the Notes and the Warrants, including without limitation, the reservation for issuance
and the issuance of the Securities, will not (a) result in a violation of the Company's Certificate of Incorporation, any certificate of designations, preferences and rights of any outstanding
series of preferred stock of the Company, or the Company's bylaws, (b) conflict with, or constitute a default or an event which with notice or lapse of time or both would become a default
under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, lease, license or instrument (including without limitation, any document filed
as an exhibit to any of the Company's SEC Documents (as defined below)), or (c) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of The Nasdaq National Market, Inc.) applicable to the Company or by which any property or asset of the Company is bound or
affected. 

    2.6  Consents.  Except as contemplated by the Agency Agreement, and except for the filing of the
Registration Statement (as defined in the Registration Rights Agreement) with the SEC, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the
Offering Documents. Except as otherwise provided in the Offering Documents, all consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date hereof. The Company is unaware of any facts or circumstances which might prevent the Company from obtaining or effecting any
of the foregoing. 

    2.7  No General Solicitation.  Neither the Company nor any of its affiliates, and any person acting on
its behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities. 

    2.8  No Integrated Offering.  None of the Company, any of its affiliates, and any person acting on its
behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers 

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to buy any security, under circumstances that would require registration of any of the Securities under the 1933 Act or cause this offering of the Securities to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including without limitation, under the rules and regulations of any exchange or automated quotation system
on which any of the securities of the Company are listed or designated. None of the Company, its affiliates and any person acting on its behalf will take any action or steps referred to in the
preceding sentence that would require registration of any of the Securities under the 1933 Act or cause the Offering of the Securities to be integrated with other offerings. 

    2.9  Application of Takeover Protections; Rights Agreement.  The Company and its board of directors have
taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Certificate of Incorporation or the laws of the state of its incorporation which is or could become applicable to the Subscriber as a result of
the transactions contemplated by this Subscription Agreement, including without limitation, the Company's issuance of the Securities and the Subscriber's ownership of the Securities. The Company has
not adopted a shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company. 

    2.10  SEC Documents; Financial Statements.  Since February 28, 2001, the Company has filed all
reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934
Act") (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC Documents"). The Company has made available to the Subscriber or its representatives copies of the SEC Documents. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents,
at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents
complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with
generally accepted accounting principles, consistently applied, during the periods involved (except (a) as may be otherwise indicated in such financial statements or the notes thereto, or
(b) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments that will not be material). As of the date hereof, the Company meets the requirements for the use of Form S-3 for registration of the resale
of the Warrant Shares. 

    2.11  Conduct of Business; Regulatory Permits.  Except as set forth on  Schedule 2.11, since February 28,
2001, the Company has not (a) incurred any debts, obligations or liabilities, absolute, accrued,
contingent or otherwise, whether due or to become due, except current liabilities incurred in the usual and ordinary course of business and consistent with past practices, having individually or in
the aggregate a Material Adverse Effect, (b) made or suffered any changes in its contingent obligations by way of guaranty, endorsement (other than the endorsement of checks for deposit in the
usual and ordinary course of business), indemnity, warranty or otherwise, (c) discharged or satisfied any liens other than those securing, or paid any obligation or liability other than,
current liabilities shown on the balance sheet dated as at February 28, 2001 and forming part of the SEC Documents, and current 

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liabilities incurred since the February 28, 2001, in each case in the usual and ordinary course of business and consistent with past practices, (d) mortgaged, pledged or subjected to
lien any of its assets, tangible or intangible, (e) sold, transferred or leased any of its assets except in the usual and ordinary course of business and consistent with past practices,
(f) cancelled or compromised any debt or claim, or waived or released any right, of material value, (g) suffered any physical damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties, business or prospects of the Company, (h) entered into any transaction other than in the usual and ordinary course of business except for this
Subscription Agreement and the related agreements referred to herein, (i) encountered any labor difficulties or labor union organizing activities, (j) made or granted any wage or salary
increase or entered into any employment agreement, (k) issued or sold any shares of capital stock or other securities or granted any options with respect thereto, or modified any equity
security of the Company, (l) declared or paid any dividends on or made any other distributions with respect to, or purchased or redeemed, any of its outstanding equity securities,
(m) suffered or experienced any change in, or condition affecting, its condition (financial or otherwise), properties, assets, liabilities, business operations, results of operations or
prospects other than changes, events or conditions in the usual and ordinary course of its business and consistent with past practices, having (either by itself or in conjunction with all such other
changes, events and conditions) a Material Adverse Effect, (n) made any change in the accounting principles, methods or practices followed by it or depreciation or amortization policies or
rates theretofore adopted, or (o) entered into any agreement, or otherwise obligated itself, to do any of the foregoing. The Company is not in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company, and the Company will not conduct its business in violation of any of the foregoing, except for possible violations which would not,
individually or in the aggregate, have a Material Adverse Effect. The Company's Common Stock has been designated for quotation or listed on the Nasdaq National Market, trading in the Common Stock has
not been suspended by the SEC or the Nasdaq National Market and the Company has received no communication, written or oral, from the SEC or the Nasdaq National Market regarding the suspension or
delisting of the Common Stock from the Nasdaq National Market. Except as disclosed on Schedule 2.11, the Company is not in violation of the
listing requirements of the Nasdaq National
Market as in effect on the date hereof and has no actual knowledge of any facts which would reasonably lead to delisting or suspension of the Common Stock by the Nasdaq National Market in the
foreseeable future. The Company possesses all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and the Company has not
received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. 

    2.12  Foreign Corrupt Practices.  Neither the Company nor any director, officer, agent, employee or other
person acting on behalf of the Company has, in the course of its actions for, or on behalf of, the Company, (a) used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds,
(b) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or (c) made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government official or employee. 

    2.13  Absence of Litigation.  Except as set forth in  Schedule 2.13, there is no action, suit, proceeding,
inquiry or investigation before or by the Nasdaq National Market, any court, public board,
government agency, self-regulatory organization or body, or arbitrator pending or, to the knowledge of the Company, threatened against the Company or any of the Company's officers or
directors in their capacities as such. 

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    2.14  Tax Status.  The Company has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject, and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to
be due on such returns, reports and declarations or otherwise due and payable, except those being contested in good faith and has set aside on its books reserves in accordance with GAAP reasonably
adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. 

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

    2.16  Title.  Except as set forth in or contemplated by  Schedule 2.16, the Company has good and marketable
title to all material properties and tangible assets owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except as such as are not significant or important in relation to the Company's business; all of the material leases and subleases under which the Company is the
lessor or sublessor of properties or assets or under which the Company holds properties or assets as lessee or sublessee are in full force and effect, and the Company is not in default in any material
respect with respect to any of the terms or provisions of any of such leases or subleases, and no material claim has been asserted by anyone adverse to rights of the Company as lessor, sublessor,
lessee or sublessee under any of the leases or subleases mentioned above, or affecting or questioning the right of the Company to continued possession of the leased or subleased premises or assets
under any such lease or sublease. The Company owns, leases or licenses all such properties as are necessary to its operations as described in the Offering Documents. 

    2.17  Intellectual Property Rights.  To the Company's knowledge after due investigation, the Company owns
or possesses adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights necessary to conduct its business as now conducted. Except as set forth on  Schedule 2.17, to the Company's knowledge after due
investigation, none of the Company's trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or
terminated, or are expected to expire or terminate within two years from the date of this Subscription Agreement, except where such expiration or termination would not have either individually or in
the aggregate a Material Adverse Effect. After due investigation, the Company does not have any knowledge of any infringement by the Company of trademarks, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secrets or other similar rights of others, or of any such development of similar or identical trade
secrets or technical information by others and, except as set forth on Schedule 2.17, no claim, action or proceeding has been made or brought
against, or to the Company's knowledge, has been threatened against, the Company regarding trademarks, trade name rights, patents, patent rights, inventions, copyrights, licenses, service names,
service marks, service mark registrations, trade secrets or other infringement, except where such infringement, claim, action or proceeding would not reasonably be expected to have either individually
or in the aggregate a Material Adverse Effect. Except as set forth on Schedule 2.17, the Company is unaware, after due investigation, of any
facts or circumstances which might give rise to any of the foregoing. The Company has taken reasonable security measures to 

9

 

protect the secrecy, confidentiality and value of all of its intellectual properties except where the failure to do so would not have either individually or in the aggregate a Material Adverse Effect. 

    2.18  Registration Rights.  Except with respect to holders of the Units and the Warrants, and except as
set forth in Schedule 2.18, no person has any right to cause the Company to effect the registration under the 1933 Act of any securities of the
Company. 

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

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

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

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

III. TERMS OF SUBSCRIPTION  

    3.1  Closing and Termination of Offering.  Provided the Minimum Offering shall have been subscribed for,
funds representing the sale thereof shall have cleared, all conditions to closing set forth in Section 3 of the Agency Agreement and Articles V and VI hereof have been satisfied or waived and
neither the Company nor the Placement Agent have notified the other that they do not intend to effect the closing of the Minimum Offering, a closing (the "Initial Closing") shall take place at the
offices of counsel to the Placement Agent, Loeb & Loeb, 345 Park Avenue, New York, New York 10154, within one (1) business day thereafter (but in no event later than five days following
the Termination Date, as defined below), which closing date may be accelerated or adjourned by agreement between the Company and the Placement Agent. At the Initial Closing, payment for the Units
issued and sold by the Company shall be made against delivery of the Notes and Warrants comprising such Units. The Warrants shall be subject to the Warrant Escrow Agreement. The Company and the
Placement Agent may consummate subsequent closings of the Offering, upon mutual agreement only, each of which shall be subject to satisfaction or waiver of the conditions to closing set forth in
Articles V and VI hereof and in Section 3 of the Agency Agreement, and each of which shall be deemed a "Closing" hereunder. The date of the last closing of the Offering is hereinafter referred
to as the "Final Closing" and the
date of any Closing hereunder is hereinafter referred to as a "Closing Date". The offering period for the Offering (the "Offering Period") shall commence on the day the Transaction Documents (as
defined in the Agency Agreement) relating thereto are first made available to Commonwealth by the Company for delivery in connection with the offering for sale of the Units and shall continue until
the earlier to occur of: (i) the sale of the Maximum Offering; or (ii) 5:00 p.m. (New York time) on September 7, 2001, provided the Minimum Offering has been completed on
or prior to 5:00 p.m. (New York time) on August 31, 2001 and Company has proceeded in good faith to complete the Bridge 

10

 

Financing on or prior to such date. If the Minimum Offering is not sold by 5:00 p.m. (New York time) on August 31, 2001, the Offering will be terminated and all funds received from
Subscribers will be returned, without interest and without any deduction. The day that the Offering Period terminates is hereinafter referred to as the "Termination Date." The Termination Date may be
extended for up to thirty (30) days by mutual agreement of the Placement Agent and the Company. 

    3.2  Expenses; Fees.  Simultaneously with payment for and delivery of the Units at each Closing, the
Company shall: (A) pay to the Placement Agent a cash fee equal to 5% of the gross proceeds of the Units sold; (B) reimburse the Placement Agent for its actual
out-of-pocket expenses incurred in connection with the Offering, including, without limitation, the reasonable fees and expenses of its counsel (Loeb & Loeb LLP), due
diligence investigation expenses, travel and mailing expenses, up to a maximum of $35,000, which amount may be increased with the prior written consent of the Company, and (C) pay all expenses
in connection with the qualification of the Securities under the blue sky laws of the states which the Placement Agent shall designate, including legal fees, filing fees and disbursements of Placement
Agent's counsel in connection with such blue sky matters. 

    3.3  Escrow.  Pending the sale of the Units, all funds paid hereunder shall be deposited by the Company
in escrow with American Stock Transfer & Trust Company. If the Company shall not have obtained subscriptions (including this subscription) for purchases of at least 60 Units ($6,000,000) on or
before the Termination Date, then this subscription shall be void and all funds paid hereunder by the Subscriber, without interest, shall be promptly returned to the Subscriber, subject to
Section 3.5 hereof. If at least 60 Units ($6,000,000) are sold on or prior to the Termination Date, then all subscription proceeds shall be paid over to the Company within three
(3) business days thereafter at the Initial Closing. In such event, placements of additional Units may continue until the Termination Date, with subsequent releases of funds to be at the mutual
consent of the Company and the Placement Agent. 

    3.4  Certificates.  The Subscriber hereby authorizes and directs the Company, upon each closing in the
Offering, to deliver the Notes and Warrants to be issued to such Subscriber pursuant to this Subscription Agreement either (a) to the Subscriber's address indicated in the Questionnaire, or
(b) directly to the Subscriber's account maintained with the Placement Agent, if any. 

    3.5  Return of Funds.  The Subscriber hereby authorizes and directs the Company to return any funds for
unaccepted subscriptions to the same account from which the funds were drawn, including any customer account maintained with the Placement Agent. 

IV. COVENANTS  

    4.1  Registration Rights Agreement.  The Company shall provide for the registration of the Warrant Shares
for resale under the 1933 Act, as provided herein and in the Registration Rights Agreement. The Company and the Subscriber agree to the terms and provisions of Registration Rights Agreement attached
hereto as Exhibit C, which terms and provisions are incorporated herein by reference in their entirety and made a part hereof. 

    4.2  Best Efforts.  Each party shall use its best efforts timely to satisfy each of the conditions to be
satisfied by it as provided in Articles V and VI of this Subscription Agreement. 

    4.3  Form D and Blue Sky.  The Company shall file a Form D with respect to the Notes
and Warrants as required under Regulation D under the 1933 Act and, upon request, provide a copy thereof to the Subscriber promptly after such filing. The Company shall, on or before the
Closing, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Notes and the Warrants for sale to the Subscriber pursuant to
this Subscription Agreement under applicable securities or "Blue Sky" laws of the states of the United States, and shall provide evidence of any such action so taken to the Subscriber on or prior to
the Closing. The 

11

 

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. 

    4.4  Use of Proceeds.  The Company shall only use the proceeds of the sale of the Units for repayment in
full of amounts outstanding under the Company's line of credit with Imperial Bank, with any remaining proceeds being used for the purposes set forth on  Schedule 4.4 hereto. 

V. CONDITIONS TO CLOSING IN FAVOR OF THE COMPANY  

    The obligation of the Company hereunder to issue and sell Units to the Subscriber at the Closing is subject to the satisfaction, at or before the Closing, 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 the Subscriber with
prior written notice thereof: 

    5.1  Offering Documents.  The Subscriber shall have executed a Questionnaire, a Subscription Agreement
and the Registration Rights Agreement and delivered the same to the Company. 

    5.2  Purchase Price.  The Subscriber shall have delivered to the Escrow Agent the purchase price for the
Units being purchased by the Subscriber at the Closing in the manner set forth in Section 1.1. 

    5.3  Representations and Warranties.  The representations and warranties of the Subscriber shall be true
and correct in all material respects as of the date when made and as of the Closing as though made at that time, and the Subscriber shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this Subscription Agreement to be performed, satisfied or complied with by the Subscriber at or prior to the Closing. 

    5.4  Series B Preferred Stock Exchange.  The Company and the holders of the Company's
Series B Preferred Stock shall have completed an exchange for Series B-1 Preferred Stock and no shares of the Company's Series B Preferred Stock shall be outstanding. 

VI. CONDITIONS TO CLOSING IN FAVOR OF THE SUBSCRIBER  

    The obligation of the Subscriber hereunder to purchase the Units is subject to the satisfaction, at or before the Closing, of each of the following conditions,
provided that these conditions are for the Subscriber's sole benefit and may be waived by the Subscriber at any time in its sole discretion by providing the Company with prior written notice thereof: 

    6.1  Offering Documents.  The Company shall have executed and delivered to the Subscriber each of the
Offering Documents to which its signature is required. 

    6.2  Lock-Up Agreements.  The Company shall have delivered to the Placement Agent
lock-up agreements in form and substance satisfactory to the Placement Agent executed by Mark Hoffman. 

    6.3  Legal Opinion.  The Subscriber shall have received the opinion of the Company's counsel dated as of
the Closing, in substantially the form provided for in Section 3(c)(v) of the Agency Agreement. 

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

12

 

    6.5  Due Diligence.  The Placement Agent shall have completed its due diligence investigation of the
Company, including without limitation, its review of the Company's financial statements, projections, business prospects, capital structure, and contractual arrangements, to the Placement Agent's
reasonable satisfaction. 

    6.6  Satisfaction of Bank Obligation.  At the Closing, the Company shall have delivered to the Placement
Agent the following: (A) instructions for the wire transfer directly from the Placement Agent to Imperial Bank (the "Bank") of Offering proceeds sufficient to repay in full amounts outstanding
under the Company's line of credit with the Bank, together with accrued and unpaid interest thereon and (B) evidence of the Bank's release of its security interest in the Company's assets
effective upon the Bank's receipt of such wire transfer. 

    6.7  Closing Documents.  At the Closing, the Company shall have delivered to the Placement Agent the
following: (A) a certificate of the Chief Executive Officer stating that (I) except as set forth in the any Schedule or Exhibit to this Subscription Agreement or the Agency Agreement,
since May 31, 2001, there has been no event, condition or circumstance that has had or could reasonably be expected to have a Material Adverse Effect, and (II) the Company has complied
with its covenants and agreements set forth in the Transaction Documents, and (B) a certificate of the Secretary of the Company containing: (I) true and complete copies, as of the
Closing Date, of the Certificate of Incorporation and by-laws of the Company and of the certificates of designations of all series of preferred stock of the Company, (II) true and
complete copies of the resolutions of the Board of Directors of the Company approving the Transaction Documents and all documents and matters incident thereto, and (III) a certification of
authenticity of the signatures of the officers of the Company who have executed and delivered the documentation for this Offering. 

    6.8  Conditions of Agency Agreement.  All of the conditions to closing set forth in Section 3 of
the Agency Agreement shall have been satisfied. 

    6.9  Other Matters.  All opinions, certificates and documents and all proceedings related to this
Offering shall be in form and content satisfactory to the Placement Agent and its counsel. 

    6.10  Series B Preferred Stock Exchange.  The Company and the holders of the Company's
Series B Preferred Stock shall have completed an exchange for Series B-1 Preferred Stock and no shares of the Company's Series B Preferred Stock shall be outstanding. 

VII. RIGHTS OF TERMINATION  

    7.1  Termination by Subscriber or Company.  This Subscription Agreement may be terminated at any time
prior to the Closing: (a) by mutual written consent of the parties hereto; (b) by either the Company or the Placement Agent upon written notice to the other party if the Closing of the
Minimum Offering shall not have been consummated by 5:00 p.m. on August 31, 2001, unless such failure of consummation shall be due to the failure of the party seeking to terminate to
perform or observe in all material respects the covenants and agreements hereof to be performed or observed by such party; or (c) by the Company or the Subscriber upon written notice to the
other party if any court or governmental authority of competent jurisdiction shall have issued a final, non-appealable order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Subscription Agreement. Termination of this Subscription Agreement under this Section 7.1 shall result in this Subscription Agreement
becoming void and of no further force and effect, except that a termination shall not release, or be construed as so releasing, any party hereto from any liability or damage to the other party hereto
arising out of the breaching party's willful and material breach of the warranties and representations made by it, or willful and material failure in performance of any of its covenants, agreements,
duties or obligations provided hereunder, and the obligations under Section 8.8 shall survive such termination. 

13

 

    7.2  Termination by the Placement Agent.  In the event the Placement Agent decides for any reason prior
to the Closing not to proceed with the Offering, upon notice to the Company and the Subscriber, this Subscription Agreement shall be terminated and become void and of no further force and effect, and
none of the Company, the Placement Agent, or the Subscriber shall have any further obligations pursuant to this Subscription Agreement, including without limitation, the obligation to consummate the
Offering, provided, however, that the obligations under Section 9.8 shall survive such termination. 

VIII. INVESTMENT IN SUBSEQUENT FINANCING  

    8.1 Provided the Shareholder Approval (as defined in the Notes) has been obtained, in the event that prior to the
Maturity Date (as defined in the Notes) the Company completes any bona fide private placement of equity securities for the purpose of raising capital for the Company and excluding, among other things,
(a) the issuance or exercise of options, warrants or other securities issued to officers, directors, employees or consultants of the Company pursuant to plans and arrangements approved by the
Company's board of directors, (b) the issuance of securities upon the exercise or conversion of currently outstanding securities, or (c) securities issued in connection with a stock
split, stock dividend or similar transaction (a "Subsequent Financing"), the holders of at least a majority of the outstanding principal amount of the Notes shall have the right, but not the
obligation, to elect to have the outstanding principal amount of the Notes converted into an investment in the securities sold in the Subsequent Financing. In such event, all of the Notes shall be
converted without any further action on the part of the Subscriber. 

    8.2 The Subscriber agrees that its investment in the Subsequent Financing will be made without any further action on the
part of the Subscriber; however, the Subscriber agrees to execute and deliver all documents reasonably requested by the Company to effectuate such investment. 

    8.3 The Subscriber understands that the Company will rely on the representations and warranties of the Subscriber
contained in this Subscription Agreement and the Investor Questionnaire in connection with the Subscriber's investment in the Subsequent Financing. 

IX. MISCELLANEOUS  

    9.1  Notice.  Any notices, consents, waivers or other communications required or permitted to be given
under the terms of this Subscription Agreement must be in writing and will be deemed to have been delivered: (a) upon receipt, when delivered personally, (b) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party), or (c) one (1) 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: 

Intraware, Inc.

25 Orinda Way

Orinda, CA 94563

Telephone: (925) 253-4500

Facsimile: (925) 253-4541

Attention: General Counsel 

14

 

    With
a copy to: 

Wilson
Sonsini Goodrich & Rosati, Professional Corporation

650 Page Mill Road

Palo Alto, CA 94304

Telephone: (650) 493-9300

Facsimile: (650) 493-6811

Attention: Adam R. Dolinko, Esq. 

    If
to the Subscriber, to its address and facsimile number set forth at the end of this Subscription Agreement, or to such other address and/or facsimile number and/or to the attention
of such other person as specified by written notice given to the Company 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 (a), (b) or (c) above, respectively. 

    9.2  Entire Agreement; Amendment.  This Subscription Agreement supersedes all other prior oral or written
agreements between the Subscriber, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Subscription 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 the Subscriber makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Subscription Agreement may be amended or waived other than by an
instrument in writing signed by the Company and the holders of at least a majority of the Securities then outstanding (or if prior to the Closing, the Subscribers purchasing at least a majority of the
Units
to be purchased at the Closing). No such amendment shall be effective to the extent that it applies to less than all of the holders of the Securities then outstanding. 

    9.3  Severability.  If any provision of this Subscription 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 Subscription Agreement in that jurisdiction or the validity or
enforceability of any provision of this Subscription Agreement in any other jurisdiction. 

    9.4  Governing Law; Jurisdiction; Jury Trial.  All questions concerning the construction, validity,
enforcement and interpretation of this Subscription Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts sitting in the Southern District of New York, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. 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 Subscription 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 

15

 

request, a jury trial for the adjudication of any dispute hereunder or in connection with or arising out of this Subscription Agreement or any transaction contemplated hereby. 

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

    9.6  Successors And Assigns.  This Subscription Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns, including any purchasers of the Notes and the Warrants. The Company shall not assign this Subscription Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at least a majority the Securities then outstanding, except by merger or consolidation. The Subscriber may assign some or all
of its rights hereunder without the consent of the Company, provided, however, that any such assignment shall not release the Subscriber from its obligations hereunder unless such obligations are
assumed by such assignee and the Company has consented to such assignment and assumption, which consent shall not be unreasonably withheld. 

    9.7  No Third Party Beneficiaries.  This Subscription 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. 

    9.8  Survival.  The representations and warranties of the Company and the Subscriber contained in
Articles I and II and the agreements set forth this Article VIII shall survive the Closing for a period of two years. 

    9.9  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 Subscription Agreement and the consummation of the transactions contemplated hereby. 

    9.10  No Strict Construction.  The language used in this Subscription 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. 

    9.11  Legal Representation.  The Subscriber acknowledges that: (a) it has read this Subscription
Agreement and the exhibits hereto; (b) it understands that the Company has been represented in the preparation, negotiation, and execution of this Subscription Agreement by Wilson Sonsini
Goodrich & Rosati, Professional Corporation, counsel to the Company; (c) it understands that the Placement Agent has been represented by Loeb & Loeb LLP, counsel to the Placement
Agent, and that such counsel has not represented and is not representing the Subscriber; (d) it has either been represented in the preparation, negotiation, and execution of this Subscription
Agreement by legal counsel of its own choice, or has chosen to forego such representation by legal counsel after being advised to seek such legal representation; and (e) it understands the
terms and consequences of this Subscription Agreement and is fully aware of its legal and binding effect. 

    9.12  Expenses of Enforcement.  The Company shall pay all fees and expenses (including reasonable fees
and expenses of counsel and other professionals) incurred by the Subscriber or any successor holder of Securities in enforcing any of its rights and remedies under this Subscription Agreement, the
Notes, the Warrants, the Security Agreement or the Registration Rights Agreement. 

    9.13  Confidentiality.  The Subscriber agrees that, at all times during the period ending five
(5) business days after the filing by the Company with the SEC of its next Quarterly Report on Form 10-Q or Current Report on Form 8-K following the date
hereof, it shall keep confidential and not divulge, furnish or make accessible to anyone, the confidential information concerning or relating 

16

 

to the business or financial affairs of the Company contained in the Offering Documents to which it has become privy by reason of this Subscription Agreement. 

    9.14  Counterparts.  This Subscription 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. 

17

 

    IN WITNESS WHEREOF, the parties have executed this Subscription Agreement as of the day and year first written above. 

	
 Signature of Subscriber	 	
 Signature of Co-Subscriber
	

 Name of Subscriber

[please print]	
 	

 Name of Co-Subscriber

[please print]
	

 Address of Subscriber	
 	

 Address of Co-Subscriber
	

 Social Security or Taxpayer

Identification Number of Subscriber	
 	

 Social Security or Taxpayer Identification

Number of Co-Subscriber
	

 Subscriber's Account Number

at Commonwealth Associates	
 	

 
	

 Principal Amount of Bridge Note Subscribed For	
 	

 

	 	 	Subscription Accepted:
	

 	
 	

INTRAWARE, INC.
	

 	
 	

By:	

 
	 	 	 	
 Name:

Title
	

 	
 	

 Principal Amount of Subscription Accepted
	

 	
 	

 Number of Bridge Warrants Subscribed For

18

 
 
 

EXHIBIT A    
    
    8% Senior Secured Promissory Note    
  

19

 
 
 

EXHIBIT B    
    
    Warrant    
  

20

 
 
 

EXHIBIT C    
    
    Registration Rights Agreement    
  

21

 
 
 

EXHIBIT D    
    
    Security Agreement and Agency Appointment Agreement    
  

22

QuickLinks

Exhibit 10.1

FORM OF SUBSCRIPTION AGREEMENT

EXHIBIT A 8% Senior Secured Promissory Note

EXHIBIT B Warrant

EXHIBIT C Registration Rights Agreement

EXHIBIT D Security Agreement and Agency Appointment AgreementPrepared by MERRILL CORPORATION

QuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.2    
  

 
 

INTRAWARE, INC.    
    
    PLACEMENT AGENCY AGREEMENT    
  

Commonwealth
Associates, L.P.

830 Third Avenue

New York, New York 10022 

    August 31,
2001 

Ladies
and Gentlemen: 

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

    The
Company proposes to offer for sale solely to "accredited investors," in a private placement (the "Bridge Financing"), up to 70 units (including fractions thereof) (the "Units") at
$100,000 per Unit, each Unit consisting of (i) $100,000 principal amount of 8% senior secured promissory notes in the form attached hereto as Exhibit A (the "Notes"), and
(ii) five-year warrants in the form attached hereto as Exhibit B (the "Warrants") to purchase 100,000 shares of the Company's common stock, par value
$0.0001 per share (the "Common Stock"). In the event that prior to the 17th day following the initial closing of the Bridge Financing (the "Initial Closing"), the Company enters into a
definitive merger or acquisition agreement with the entity set forth in Schedule 1 hereto pursuant to which such entity acquires more than 50% of the Company at a price per share greater than
$1.00, and provided that as a result of such acquisition or other agreement with such entity the Notes are repaid in full within 90 days after the Initial Closing, the Company shall have the
right to redeem 50% of the Warrants, on a pro-rata basis, at a price of $.01 per Warrant. 

    A
minimum of 60 Units ($6,000,000) (the "Minimum Offering") and a maximum of 70 Units ($7,000,000) (the "Maximum Offering") will be sold in the Bridge Financing. The Units will be
offered pursuant to those terms and conditions set forth herein. The Minimum Offering will be made on a "best efforts-all-or-none" basis and the balance of the
Bridge Financing will be made on a "best efforts" basis. The Units will be offered in accordance with Regulation D promulgated by the Securities and Exchange Commission (the "SEC"). 

    The
SEC Documents (as defined in Section 2(j)) and the Subscription Agreement between each prospective investor subscribing to purchase Units in the Bridge Financing (each a
"Subscriber") and the Company (the "Subscription Agreement") attached hereto as Exhibit C are together referred to herein as the "Offering Documents." The (i) Notes,
(ii) Registration Rights Agreement among each Subscriber, the Company and the Placement Agent (the "Registration Rights Agreement") attached hereto as Exhibit D, (iii) Security
Agreement between the Company and the Placement Agent (the "Security Agreement") attached hereto as Exhibit E, (iv) Warrants, (vi) Agency Agreement, (vii) escrow agreement
among the Company, the Placement Agent and a bank or trust company acceptable to the Placement Agent (the "Fund Escrow Agreement"), (viii) the Agent's Warrant (as defined in
Section 3(d)(i) hereof), (ix) the Warrant Escrow Agreement (as defined in Section 3(b)(xvii) hereof and (x) exhibits, schedules and appendices which are part
of the Subscription Agreement, the Notes, the Registration Rights Agreement, the Security Agreement, the Warrants, the Agent's Warrant, the Warrant Escrow Agreement and the Agency Agreement are
collectively referred to herein as the "Transaction Documents." 

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

 

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

    1.  Appointment of Placement Agent.  

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

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

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

    (d) The
Placement Agent and/or its affiliates may be Subscribers in the Bridge Financing. 

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

    (a)  Organization and Qualification.  The Company is duly organized and validly existing in good standing
under the laws of the jurisdiction in which it was organized, and has the requisite power and authorization to own its properties and to carry on its business as now being conducted. The Company is
duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agency Agreement, "Material Adverse
Effect" means any material adverse effect on the business, properties, assets, operations, results of operations, financial condition or prospects of the Company or on the transactions contemplated
hereby, or on the other Transaction Documents or the agreements and instruments to be entered into in connection herewith or therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents. The Company does not have any operating subsidiaries and all of the non-operating subsidiaries are wholly-owned by the Company 

    (b)  Authorization; Enforcement; Validity.  The Company has the requisite corporate power and authority
to enter into and perform its obligations under this Agency Agreement and the other Transaction Documents, to file and perform its obligations under the Transaction Documents, and to issue the Notes,
the Warrants and the shares of Common Stock upon exercise of the Warrants and the Agent's Warrants (the "Warrant Shares") (the Notes, Warrants and Warrant Shares being collectively referred to herein
as the "Securities") in accordance with the terms of the Transaction Documents. The execution and delivery of the Transaction Documents by the Company and the 

2

 

consummation by the Company of the transactions contemplated by the Transaction Documents, including without limitation the issuance of the Securities, have been duly authorized by the Company's Board
of Directors (the "Board") and no further consent or authorization is required by the Company, the Board or the Company's stockholders. The Transaction Documents have been duly executed and delivered
by the Company, and constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and
remedies. 

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

    (d)  Issuance of Securities; Reservation.  The issuance, sale and delivery of the Securities have been
duly authorized by all requisite corporate action by the Company and, upon issuance in accordance with the Transaction Documents, shall be (i) duly authorized, validly issued, fully paid and
non-assessable, (ii) free from all taxes, liens and charges with respect to the issue thereof, and (iii) entitled to the rights and preferences set forth in the Notes and the
Warrants. At least 7,700,000 shares of Common Stock have been duly authorized and reserved for issuance upon exercise of the Warrants. In the event the number of shares of Common Stock issuable upon
exercise of the Warrants exceeds the number of authorized shares of Common Stock as a result of the exercise terms of the Warrants, the Company shall use its reasonable best efforts to seek
stockholder approval of and file a Certificate of Amendment to increase the authorized number of shares of Common Stock accordingly. Upon exercise of the Warrants in accordance with their
terms, the Warrant Shares will be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of Common Stock. Assuming (i) the accuracy of the information provided by the respective Subscribers in the Subscription Agreement and Investor
Questionnaires, (ii) that all of the offerees and Subscribers are "accredited investors" as such term is defined in Rule 501 of Regulation D, and (iii) that the Placement
Agent has not engaged, nor 

3

 

will engage, in connection with the Bridge Financing, in any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D, the offer and sale of
the Notes and the Warrants pursuant to the terms of this Agency Agreement are and will be exempt from the registration requirements of the 1933 Act and the rules and regulations promulgated
thereunder. The Company is not disqualified from the exemption under Regulation D by virtue of the disqualification contained in Rule 507 thereof or otherwise. 

    (e)  No Conflicts.  Except as set forth in Schedule 2(e), the execution, delivery and performance
of the Transaction Documents by the Company, the consummation by the Company of the transactions contemplated by the Transaction Documents, and the performance by the Company of its obligations under
the Notes and the Warrants, including without limitation, the reservation for issuance and the issuance of the Securities, will not (1) result in a violation of the Company's Certificate of
Incorporation, any certificate of designations, preferences and rights of any outstanding series of preferred stock of the Company, or the Company's bylaws, (2) conflict with, or constitute a
default or an event which with notice or lapse of time or both would become a default under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material
agreement, lease, license or instrument to which the Company is a party (including without limitation, any document filed as an exhibit to any of the Company's SEC Documents (as defined below)), or
(3) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of The Nasdaq
National Market, Inc.) applicable to the Company or by which any property or asset of the Company is bound or affected. 

    (f)  Consents.  Except as contemplated by this Agency Agreement, and except for the filing of the
Registration Statement (as defined in the Registration Rights Agreement) with the SEC, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the
Transaction Documents. Except as otherwise provided in the Transaction Documents, all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is unaware of any facts or
circumstances which might prevent the Company from obtaining or effecting any of the foregoing. 

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

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

    (i)  Application of Takeover Protections; Rights Agreement.  The Company and the Board have taken all
necessary action, if any, in order to render inapplicable any control share acquisition, 

4

 

business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation or the laws of the
state of its incorporation which is or could become applicable to the Subscriber as a result of the transactions contemplated by this Agency Agreement, including without limitation, the Company's
issuance of the Securities and the Subscriber's ownership of the Securities. The Company has not adopted a shareholder rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company. 

    (j)  SEC Documents; Financial Statements.  Since February 28, 2001, the Company has filed all
reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934
Act") (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC Documents"). The Company has made available to the Subscriber or its representatives copies of the SEC Documents. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents,
at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the
statements therein,
in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments that will not be material). As of the date hereof, the Company meets the requirements for the use of Form S-3 for registration of the resale
of the Warrant Shares. 

    (k)  Conduct of Business; Regulatory Permits.  Except as set forth on Schedule 2(k), since
February 28, 2001 the Company has not (i) incurred any debts, obligations or liabilities, absolute, accrued, contingent or otherwise, whether due or to become due, except current
liabilities incurred in the usual and ordinary course of business and consistent with past practices, having individually or in the aggregate a Material Adverse Effect, (ii) made or suffered
any changes in its contingent obligations by way of guaranty, endorsement (other than the endorsement of checks for deposit in the usual and ordinary course of business), indemnity, warranty or
otherwise, (iii) discharged or satisfied any liens other than those securing, or paid any obligation or liability other than, current liabilities shown on the balance sheet dated as at
February 28, 2001 and forming part of the SEC Documents, and current liabilities incurred since the February 28, 2001, in each case in the usual and ordinary course of business and
consistent with past practices, (iv) mortgaged, pledged or subjected to lien any of its assets, tangible or intangible, (v) sold, transferred or leased any of its assets except in the
usual and ordinary course of business and consistent with past practices, (vi) cancelled or compromised any debt or claim, or waived or released any right, of material value,
(vii) suffered any physical damage, destruction or loss (whether or not covered by insurance) adversely affecting the properties, business or prospects of the Company, (viii) entered
into any transaction other than in the usual and ordinary course of business except for this Agency Agreement, the other Transaction Documents and the related agreements referred to herein and
therein, (ix) encountered any labor difficulties or labor union organizing activities, (x) made or 

5

 

granted any wage or salary increase or entered into any employment agreement, (xi) issued or sold any shares of capital stock or other securities or granted any options with respect thereto, or
modified any equity security of the Company, (xii) declared or paid any dividends on or made any other distributions with respect to, or purchased or redeemed, any of its outstanding equity
securities, (xiii) suffered or experienced any change in, or condition affecting, its condition (financial or otherwise), properties, assets, liabilities, business operations, results of
operations or prospects other than changes, events or conditions in the usual and ordinary course of its business and consistent with past practices, having (either by itself or in conjunction with
all such other changes, events and conditions) a Material Adverse Effect, (xiv) made any change in the accounting principles, methods or practices followed by it or depreciation or amortization
policies or rates theretofore adopted, or (xv) entered into any agreement, or otherwise obligated itself, to do any of the foregoing. The Company is not in violation of any judgment, decree or
order or any statute, ordinance, rule or regulation applicable to the Company, and the Company will not conduct its business in violation of any of the foregoing, except for possible violations which
would not, individually or in the aggregate, have a Material Adverse Effect. The Company's Common Stock has been designated for quotation or listed on the Nasdaq National Market,
trading in the Common Stock has not been suspended by the SEC or the Nasdaq National Market and the Company has received no communication, written or oral, from the SEC or the Nasdaq National Market
regarding the suspension or delisting of the Common Stock from the Nasdaq National Market. Except as disclosed on Schedule 2(k), the Company is not in violation of the listing requirements of
the Nasdaq National Market as in effect on the date hereof and has no actual knowledge of any facts which would reasonably lead to delisting or suspension of the Common Stock by the Nasdaq National
Market in the foreseeable future. The Company possesses all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct
their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and the
Company has not received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. 

    (l)  Foreign Corrupt Practices.  Neither the Company nor any director, officer, agent, employee or other
person acting on behalf of the Company has, in the course of its actions for, or on behalf of, the Company, (i) used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds,
(ii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government official or employee. 

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

    (n)  Tax Status.  The Company has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject, and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to
be due on such returns, reports and declarations or otherwise due and payable, except those being contested in good faith and has set aside on its books reserves in accordance with GAAP reasonably
adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material 

6

 

amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. 

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

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

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

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

7

 

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

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

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

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

    3.  Closing and Fees.  

    (a)  Closing of the Bridge Financing.  Provided the Minimum Offering shall have been subscribed for,
funds representing the sale thereof shall have cleared, all conditions to closing set forth in Section 3 hereof and Articles V and VI of the Subscription Agreement have been satisfied or waived
and neither the Company nor the Placement Agent have notified the other that they do not intend to effect the closing of the Minimum Offering, the Initial Closing shall take place at the offices of
counsel to the Placement Agent, Loeb & Loeb LLP, 345 Park Avenue, New York, New York, within one (1) business day thereafter (but in no event later than five days following the
Termination Date, as defined herein), which closing date may be accelerated or adjourned by agreement between the Company and the Placement Agent. At the Initial Closing, payment for the Units issued
and sold by the Company shall be made against delivery of the Notes and Warrants comprising such Units. The Warrants shall be subject to the terms of the Warrant Escrow Agreement. The Company and the
Placement Agent may consummate subsequent closings of the Bridge Financing, upon mutual agreement only, each of which shall be subject to satisfaction or waiver of the conditions to closing set forth
in Articles V and VI of the Subscription Agreement and in Section 3 hereof, and each of which shall be deemed a "Closing"
hereunder. The date of the last Closing of the Bridge Financing is hereinafter referred to as the "Final Closing" and the date of any Closing hereunder is hereinafter referred to as a "Closing Date".
The offering period for the Bridge Financing (the "Offering Period") shall commence on the date hereof and shall continue until the earlier to occur of: (i) the sale of the Maximum Offering; or
(ii) 5:00 p.m. (New York time) on September 7, 2001, provided the Minimum Offering has been completed on or prior to 5:00 p.m. (New York time) on August 31, 2001 and
Company has proceeded in good faith to complete the Bridge Financing on or prior to such date. If the Minimum Offering is not sold by 5:00 p.m. (New York time) on August 31, 2001, the
Bridge Financing will be terminated and all funds received from Subscribers will be returned, without interest and without any deduction. The day that the Offering Period terminates is hereinafter
referred to as the "Termination Date." The Termination Date may be extended for up to thirty (30) days by mutual agreement of the Placement Agent and the Company. 

8

 

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

    (i)  Due Qualification or Exemption.  (1) The Bridge Financing will become qualified or be exempt
from qualification under the securities or "blue sky" laws of the several states pursuant to Section 4(d) below not later than the Initial Closing Date, and (2) at any Closing Date no
stop order suspending the sale of the Units shall have been issued and no proceedings by any governmental authority, self regulatory organization or any securities exchange for that purpose shall have
been initiated or threatened in writing; 

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

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

    (iv)  Corporate Action.  The Company has or will have taken all necessary corporate action, including,
without limitation, obtaining the approval of its stockholders and the Board, for the execution and
delivery of this Agency Agreement, the performance by the Company of its obligations hereunder and the Bridge Financing contemplated hereby; 

    (v)  Opinion of Company Counsel.  At each Closing, the Placement Agent shall receive the opinion of
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, counsel to the Company, addressed to the Placement Agent and the Subscribers substantially to the effect that: 

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

    (2) The
Company has the requisite corporate power and authority to execute, deliver and perform its obligations under the Agency Agreement and each of the other
Transaction Documents, including issuance of the Notes and the Warrants in accordance with the terms thereof. The execution and delivery of the Transaction Documents by the Company, the performance of
the obligations of the Company thereunder and the consummation by it of the transactions contemplated therein have been duly authorized by the Board. The Transaction Documents have been duly executed
and delivered by the Company. 

    (3) The
issuance and sale of the Notes and the Warrants has been duly authorized. The Warrant Shares are duly authorized and reserved for issuance in accordance with
the Agency Agreement and the Warrants, and when issued and paid for in accordance with the Agency Agreement and the Warrants, the Warrant Shares will be validly issued, fully paid and
non-assessable and free of all taxes, liens, charges and preemptive rights with respect to the issue thereof. 

9

 

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

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

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

    (7) The
execution, delivery and performance by the Company of the Transaction Documents, the consummation by the Company of the transactions contemplated thereby and
the compliance by the Company with the terms thereof does not violate, conflict with or constitute a default under the Company's Certificate of Incorporation, as amended to date, the Company's Bylaws
as currently in effect or any other material contract, agreement arrangement by which the Company is bound, other than as set forth in the Schedules to this Agreement. 

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

    (vii)  Officer's Certificate.  At each Closing, the Company shall have delivered to the Placement Agent a
certificate of the Chief Executive Officer stating that (1) the condition set forth in Section 3(b)(vi) has been satisfied, (2) except as expressly set forth in any
Schedule or Exhibit to the Subscription Agreement or this Agency Agreement, since May 31, 2001, there has been no event, condition or circumstance that has had or could reasonably be expected
to have a Material Adverse Effect, (3) the Company has no more than 45 million shares of Common Stock outstanding on a fully-diluted basis as set forth in its most recently filed SEC
Document, (4) other than accounts payable and capital lease obligations in the ordinary course of its business and consistent with past practices, the Company has no debt outstanding (assuming
repayment in full of the bank debt described in Section 3(b)(ix) below) and (5) the Company has complied with its covenants and agreements set forth in the Transaction Documents,
and 

    (viii)  Secretary's Certificate.  At each Closing, the Company shall have delivered to the Placement
Agent a certificate of the Secretary of the Company containing: (1) true and complete copies, as of the Closing Date, of the Certificate of Incorporation and Bylaws of the Company and of the
certificates of designations of all series of preferred stock of the 

10

 

Company, (2) true and complete copies of the resolutions of the Board approving the Transaction Documents and all documents and matters incident thereto, and (3) a certification of
authenticity of the signatures of the officers of the Company who have executed and delivered the documentation for the Bridge Financing. 

    (ix)  Satisfaction of Bank Obligation.  At the Initial Closing, the Company shall have delivered to the
Placement Agent the following: (1) instructions for the wire transfer directly from the Placement Agent to Imperial Bank (the "Bank") of Bridge Financing proceeds sufficient to repay in full
amounts outstanding under the Company's line of credit with the Bank, together with accrued and unpaid interest thereon and (2) evidence of the Bank's release of its security interest in the
Company's assets effective upon the Bank's receipt of such wire transfer. 

    (x)  Minimum Offering.  The Minimum Offering shall have been sold in the Bridge Financing and the Escrow
Agent shall have received gross proceeds from such offering of at least $6,000,000. 

    (xi)  No Adverse Changes.  There shall not have occurred, at any time prior to the applicable closing
(1) a general suspension of, or a general limitation on prices for, trading in securities on the New York Stock Exchange, the Nasdaq Stock Market, the American Stock Exchange, or in the
over-the-counter market; (2) any outbreak of major hostilities or other national or international calamity; (3) any banking moratorium declared by Federal or New
York authorities; (4) any material adverse change in the business, properties, assets, results of operations, or financial condition of the Company which materially impairs the investment
quality of the Units; or (5) any material adverse change in the market for securities in general or in political, financial, or economic conditions which, in the Placement Agent's reasonable
judgment, makes it inadvisable to proceed with the Bridge Financing. 

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

    (xiii)  Lock-Up Agreements.  The Placement Agent shall have received a signed
lock-up agreement from Mark Hoffman in substantially the form attached as Exhibit F hereto. 

    (xiv)  Additional Director.  Effective as of the Initial Closing, either Lee Provow or Harold Blue (the
"Designee") shall have been appointed to the Board. The Company shall use its reasonable best efforts to cause the Designee (or any replacement designee chosen by Commonwealth to fill a vacancy left
by the Designee) to be nominated as a member of the Board to serve until the earlier of (i) his resignation or removal, (ii) the repayment or conversion of the Notes, (iii) his
failure to be elected by the shareholders at a duly convened meeting, or (iv) the date on which a designee of the investors in the Subsequent Placement (as defined in Section 4(j)) is
appointed to the Board. In the event that the Placement Agent does not exercise its right to designate a member of the Board or the Designee is no longer a director, then the Placement Agent may
appoint any person to be an observer who shall be
entitled to attend and observe meetings of the Board and any committees thereof (and receive notices, communications and other information provided in connections with such meetings) until the earlier
of the repayment or conversion of the Notes. 

    (xv)  Sun Microsystems Restructuring.  The Placement Agent shall have received evidence of the
restructuring of the agreement between the Company and SunMicrosystems and the amounts payable thereunder satisfactory to the Placement Agent and its counsel. 

11

 

    (xvi)  Series B Preferred Stock Exchange.  The Company and the holders of the Company's
Series B Preferred Stock shall have completed and exchange for Series B-1 Preferred Stock and no shares of the Company's Series B Preferred Stock shall be outstanding.
Satisfaction of the foregoing shall also be a condition to the Company's obligation to consummate the Bridge Financing. 

    (xvii)  Warrant Escrow Agreement.  The Placement Agent shall have received a counterpart signature page
to the escrow agreement substantially in the form attached hereto as Exhibit H (the "Warrant Escrow Agreement") duly executed by the Company. 

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

    (d)  Placement Fee and Expenses.  

    (i)  Bridge Financing.  Simultaneously with payment for and delivery of the Units at each Closing, the
Company shall: (1) pay to the Placement Agent a cash fee equal to 5% of the gross proceeds of the Units sold (the "Cash Fee"); (2) issue to the Placement Agent a warrant to purchase 10%
of the Warrant Shares underlying the Units sold in the Bridge Financing (the "Agent's Warrant") which Agent Warrant shall be subject to the terms of the Warrant Escrow Agreement; (3) reimburse
the Placement Agent for its actual out-of-pocket expenses incurred in connection with the Bridge Financing, including, without limitation, the reasonable fees and expenses of
its counsel (Loeb & Loeb LLP), including, due diligence investigation expenses, travel and mailing expenses, up to a maximum of $35,000, which amount may be increased with the prior written
consent of the Company, and (4) pay all expenses in connection with the qualification of the Securities under the blue sky laws of the states which the
Placement Agent shall designate, including legal fees, filing fees and disbursements of Placement Agent's counsel in connection with such blue sky matters (the reimbursement and payment obligations of
the Company set forth in clauses (3) and (4) above, the "Placement Agent Expenses"). 

    (ii)  Interest.  In the event that for any reason the Company shall fail to pay to the Placement Agent
all or any portion of the fees payable hereunder when due, interest shall accrue and be payable on the unpaid cash balance due hereunder from the date when first due through and including the date
when actually collected by the Placement Agent, at a rate equal to four percent above the prime rate of Citibank, N.A., in New York, New York, computed on a daily basis and adjusted as announced from
time to time. 

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

    4.  Covenants of the Company.  

    (a)  Use of Proceeds.  The net proceeds of the Bridge Financing will be used by the Company substantially
as set forth in Section 4.4 of the Subscription Agreement. The Company shall not use any of the proceeds from the Bridge Financing to repay any indebtedness of the Company to any current
executive officers, directors or principal stockholders of the Company. 

12

 

    (b)  Expenses of Offering.  

     (i) The
Company shall be responsible for, and shall bear all expenses directly incurred in connection with, the Bridge Financing including, but not limited to,
(i) legal fees of the Company's counsel relating to the costs of preparing the Transaction Documents and all amendments, supplements and exhibits thereto delivering all Units and
(ii) the Placement Agent Expenses. The Placement Agent shall have no liability to the Company for any reason should the Placement Agent choose not to proceed with the Bridge Financing
contemplated hereby. 

    (ii) Prior
to the Initial Closing, if the Company unilaterally decides not to effect the Initial Closing (for any reason other than the Placement Agent's inability to
close the Minimum Offering) prior to 5:00 p.m. (New York time) on August 31, 2001 except upon mutual written agreement with the Placement Agent not to proceed with the Offering), the
Company shall pay the Placement Agent
$200,000 (which fee the Company agrees is a fair measure of the compensation to be received by the Placement Agent in respect of, among other things, its advice, time and effort in respect of the
Offering), and the Company will be obligated to reimburse the Placement Agent and counsel for the Placement Agent, as applicable, for the Placement Agent Expenses as set forth in Sections 3(d)(i)(3)
and 3(d)(i)(4) above within ten business days of the occurrence of any event described in this Section 4(b)(ii). 

    (c)  Notification.  The Company shall notify the Placement Agent immediately, and in writing,
(i) when any event shall have occurred during the period commencing on the date hereof and ending on the later of the Final Closing or the Termination Date as a result of which the Transaction
Documents would include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and
(ii) of the receipt of any notification with respect to the modification, rescission, withdrawal or suspension of the qualification or registration of any of the Securities, or of any exemption
from such registration or qualification, in any jurisdiction. The Company will use its reasonable best efforts to prevent the issuance of any such modification, rescission, withdrawal or suspension
and, if any such modification, rescission, withdrawal or suspension is issued and the Placement Agent so requests, to obtain the lifting thereof as promptly as possible. 

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

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

13

 

of the Placement Agent's name in any press release, advertisement or on any website maintained by the Company without the prior written consent of the Placement Agent. 

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

    (g)  Executive Compensation.  The compensation of the Company's executive officers (as identified by the
Company for purposes of compliance with Section 16 under the 1934 Act) shall not increase by more than 10% per annum while any of the Notes remain outstanding without the approval of a majority
of the independent members of the Board. 

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

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

    (j)  Shareholder Approval.  Within 90 days after the Initial Closing Date, the Company shall seek
shareholder approval of (1) the issuance of shares of Common Stock upon the exercise of the Warrants and the Agent's Warrant, (2) the conversion provisions of Section 5 of the
Notes, and (3) the private placement of convertible preferred stock through Commonwealth contemplated by the term sheet dated August 23, 2001 (the "Subsequent Placement"). 

    (k)  Rule 144 Opinions.  The Company shall cause its legal counsel to issue appropriate
Rule 144 opinions by facsimile to the Company's transfer agent (with a copy to the person requesting such opinion) within one business day after counsel's receipt of the following completed
documentation: (a) seller's representation letter, (b) broker's representation letter, and (c) copy of the Form 144, unless counsel determines that such documentation is
insufficient or has other reasonable grounds for delaying the issuance of the requested opinion. 

    (l)  Certificates for Securities.  The Company shall maintain at the offices of its transfer agent at
least 250 printed Common Stock certificates to enable the issuance of certificates in connection with the conversion of the Notes and exercise of the Warrants. 

    (m)  Transmittal Letters.  Within five days after each Closing of the Bridge Financing, the Placement
Agent shall receive copies of all letters from the Company to the Subscribers 

14

 

transmitting the securities sold in the Bridge Financing and shall receive a letter from the Company confirming transmittal of the securities to the Subscribers. 

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

    (o)  Finder's Agreement.  In the event the Board authorizes the Company to seek a senior secured lender,
the Company shall enter into a non-exclusive finder's agreement with the Placement Agent substantially in the form attached hereto as Exhibit G, pursuant to which the Placement
Agent shall be entitled to a 2% success fee. 

    (p)  Transfer of Assets; Subsidiary Guaranty.  Within six months following the Initial Closing Date, if
the majority of the principal amount of the Notes issued in the Bridge Financing has not been repaid or converted, the Company shall transfer the assets of the Company's SubscribeNet division (the
"Asset Transfer") to a wholly-owned subsidiary (the "Subsidiary") of the Company, and concurrently with the completion of the Asset Transfer, the Company shall deliver to the Placement Agent evidence
satisfactory to the Placement Agent that the Asset Transfer has been completed, including (1) Board authorization of the Asset Transfer, (2) incorporation documents for, and approval of
the Asset Transfer by, the board of directors of the Subsidiary, and (3) the executed asset transfer agreement. The Placement Agent shall also have received concurrently with the completion of
the Asset Transfer duly executed copies of a guaranty by the Subsidiary, a security agreement securing the obligations under the guaranty, and a stock pledge agreement by the Company, each in a form
reasonably satisfactory to the parties and their counsel. 

    (q)  Chief Financial Officer.  The Company will use its reasonable best efforts to hire a Chief Financial
Officer of the Company reasonably acceptable to the Placement Agent as promptly as practicable following the date hereof. 

    (r)  Shareholder Notice.  The Company shall send out a notice to its shareholders which complies with the
Nasdaq Stock Market's interpretations of the NASD Rules as promptly as practicable following the date hereof notifying the shareholders that the audit committee of the Company has expressly approved
reliance on an exception to the Nasdaq Stock Market's shareholder approval requirement as to the issuance of certain Warrants and the Agent Warrants to the Subscribers and Commonwealth, respectively. 

    5.  Indemnification.  

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

15

 

as to which the Placement Agent shall have been adjudicated to have acted with gross negligence, or (iii) any breach by the Company of any of its representations, warranties or covenants
contained in this Agency Agreement. 

    (b) Promptly
after receipt by an Indemnified Party under this Section of notice of the commencement of any action, the indemnified party will, if a claim in respect
thereof is to be made against the Company under this Section, notify in writing the Company of the commencement thereof; but the omission so to notify the Company will not relieve the Company from any
liability which it may have to the Indemnified Party otherwise than under this Section except to the extent the defense of the claim is prejudiced. In case any such action is brought against an
Indemnified Party, and it notifies the Company of the commencement thereof, the Company will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the provisions herein stated, with counsel reasonably satisfactory to the Indemnified Party, and after notice from the Company to
the Indemnified Party of its election so to assume the defense thereof, the Company will not be liable to the Indemnified Party under this Section for any legal or other expenses subsequently incurred
by the Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation (provided the Company has been advised in writing that such investigation is being undertaken). The Indemnified Party shall have the right
to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the Company if the Company has assumed
the defense of the action with counsel reasonably satisfactory to the Indemnified Party; provided that the fees and expenses of such counsel shall be at the expense of the Company if (i) the
employment of such counsel has been specifically authorized in writing by the Company (which it shall have no obligation to do) or (ii) the named parties to any such action (including any
impleaded parties) include both the Indemnified Party or Parties and the Company and, in the reasonable judgment of counsel for the Indemnified Party, it is advisable for the Indemnified Party or
Parties to be represented by separate counsel due to material conflict of interest (in which case the Company shall not have the right to assume the defense of such action on behalf of an Indemnified
Party or Parties), it being understood, however, that the Company shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for all the Indemnified Parties. No settlement
by an Indemnified Party of any action against an Indemnified Party shall be made without the Company's consent which shall not be unreasonably withheld. No settlement of any action against an
Indemnified Party by the Company shall be made unless such an Indemnified Party is fully and completely released in connection therewith. 

    6.  Contribution.  

    To
provide for just and equitable contribution, if (i) an Indemnified Party makes a claim for indemnification pursuant to Section 5 but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not be enforced in such case, even though this Agency Agreement expressly provides for indemnification in such case, or
(ii) any indemnified or indemnifying party seeks contribution under the 1933 Act, the 1934 Act, or otherwise, then the Company (including for this purpose any contribution made by or on behalf
of any officer, director, employee or agent for the Company, or any controlling person of the Company), on the one hand, and the Placement Agent and any Selected Dealers (including for this purpose
any contribution by or on behalf of an indemnified party), on the other hand, shall contribute to the losses, liabilities, claims, damages, and expenses whatsoever to which any of them may be subject,
in such proportions as are appropriate to reflect the relative benefits received by the Company, on the one hand, and the Placement Agent and the Selected Dealers, on the other hand; provided,
however, that if applicable law does not permit such allocation, then other relevant equitable considerations such as the relative fault of the Company and the Placement Agent and the Selected Dealers
in connection with the facts which resulted in such 

16

 

losses, liabilities, claims, damages, and expenses shall also be considered. In no case shall the Placement Agent or a Selected Dealer be responsible for a portion of the contribution obligation in
excess of the compensation received by it or the Selected Dealers, as the case may be. No person guilty of a fraudulent misrepresentation shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 6, each person, if any, who controls the Placement Agent or a Selected Dealer within the meaning of Section 15
of the 1933 Act or Section 20(a) of the 1934 Act and each officer, director, shareholder, employee and agent of the Placement Agent or a Selected Dealer, shall have the same rights to
contribution as the Placement Agent or the Selected
Dealer, and each person, if any who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act and each officer, director, employee and agent
of the Company, shall have the same rights to contribution as the Company, subject in each case to the provisions of this Section 6. Anything in this Section 6 to the contrary
notwithstanding, no party shall be liable for contribution with respect to the settlement of any claim or action effected without its written consent. This Section 6 is intended to supersede
any right to contribution under the 1933 Act, the 1934 Act, or otherwise. 

    7.  Miscellaneous.  

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

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

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

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

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

    (f)  Notices.  Any communications specifically required hereunder to be in writing, if sent to the
Placement Agent, will be sent by overnight courier providing a receipt of delivery or by certified or registered mail to it at Commonwealth Associates, 830 Third Avenue, New York, New 

17

 

York 10022, Att: Christopher W. Young, Jr., with a copy to Loeb& Loeb LLP, 345 Park Avenue, New York, New York 10154-0037, Att: Fran Stoller, and if sent to the Company, will be sent by
overnight courier providing a receipt of delivery or by certified or registered mail to it at 25 Orinda Way, Orinda, California 94563, Att: Frost Prioleau, with a copy to Wilson, Sonsini,
Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304, Attention: Adam R. Dolinko. 

    (g)  Entire Agreement.  This Agency Agreement constitutes the entire agreement of the parties with
respect to the matters herein referred and supersedes all prior agreements and understandings, written and oral, between the parties with respect to the subject matter hereof including, but not
limited to, that certain term sheet dated August 22, 2001 between the Company and Commonwealth. Neither this Agency Agreement nor any term hereof may be changed, waived or terminated orally,
except by an instrument in writing signed by the party against which enforcement of the change, waiver or termination is sought. 

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

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

	 	 	Very truly yours,
	

 	
 	

INTRAWARE, INC.
	

 	
 	

By:	

/s/ PETER H. JACKSON   
 Name: Peter H. Jackson

Title: Chief Executive Officer

	Agreed:	 
	

COMMONWEALTH ASSOCIATES, L.P.	

 
	

By:	
 	

Commonwealth Associates Management Company, Inc., its general partner	

 
	

By:	
 	

/s/ JOSEPH P. WYNNE   
 Name: Joseph P. Wynne

Title: Secretary	

 

18

	Exhibit A	 	Form of Note
	

Exhibit B	
 	

Form of Warrants
	

Exhibit C	
 	

Form of Subscription Agreement
	

Exhibit D	
 	

Form of Registration Rights Agreement
	

Exhibit E	
 	

Form of Security Agreement
	

Exhibit F	
 	

Form of Lock-Up Agreement
	

Exhibit G	
 	

Form of Finder's Agreement
	

Exhibit H	
 	

Form of Warrant Escrow Agreement

QuickLinks

Exhibit 10.2

INTRAWARE, INC. PLACEMENT AGENCY AGREEMENT

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