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EXHIBIT 10(i)  

 
 

LONGS DRUG STORES CORPORATION
  NON-EXECUTIVE LONG-TERM INCENTIVE PLAN    
  

1.  PURPOSE  

    The purpose of the Non-Executive Long-Term Incentive Plan is to provide a means through which Longs Drug Stores Corporation, a Maryland
Corporation, and its Subsidiaries, may attract and retain the employment of able persons and to provide a means whereby such persons can acquire and maintain stock ownership thereby strengthening
their commitment to the welfare of the Company. A further purpose of the Plan is to provide certain non-executive employees, especially store management, with incentive and reward
opportunities designed to enhance the profitable growth of the Company. 

2.  DEFINITIONS  

    The following definitions shall be applicable throughout the Plan: 

    a.  "Award"
means, individually or collectively, any Option, Stock Appreciation Right (SAR), Restricted Stock Award or Performance Share Award. 

    b.  "Award
Period" means a period of not less than three years and relates to Performance Share Awards. 

    c.  "Board"
means the Board of Directors of the Company. 

    d.  "Cause"
means, unless otherwise provided in an Award agreement, a discharge of employment for gross and willful misconduct relating to the performance by the
employee of the employee's duties to the Company or any Subsidiary, including but not limited to theft or proven dishonesty. 

    e.  "Code"
means the Internal Revenue Code of 1986, as amended from time to time. Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under such section. 

    f.   "Committee"
means the committee of the Board appointed to administer the Plan as referred to in Section 4. 

    g.  "Company"
means Longs Drug Stores Corporation. 

    h.  "Date
of Grant" means the date on which the granting of an Award is authorized by the Committee or such later date as may be specified by the Committee in such
authorization. 

    i.   "Disability"
means a disability that totally and permanently disables the Holder and entitles the Holder to receive long-term disability plan sponsored
or maintained by the Company or a Subsidiary. 

    j.   "Eligible
Employee" means any person who satisfies the requirements of Section 6. 

    k.  "Fair
Market Value" means the fair market value of Stock, to be determined as follows: 

    (1) For
Options and SARs, it shall be the average of the highest price and the lowest price at which the Stock shall have been sold regular way on the New York Stock
Exchange—Composite Transactions (hereafter "NYSE") on a specified date, excluding any after-hours trading. 

    (2) For
Performance Share Awards, it shall be the average of the reported closing prices of the Stock on the NYSE for thirty (30) consecutive trading days prior
to the "Valuation Date." The "Valuation Date" for the purpose of granting Performance Share Awards shall be the first day of 

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the year in which the Award is made. The "Valuation Date" for the purpose of Performance Share Payments shall be the first business day following the end of the Award Period. 

    l.   "Holder"
means a person who has been granted an Option, an SAR, a Restricted Stock Award, or a Performance Share Award. 

    m.  "Normal
Retirement" means Termination by resignation of employment with the Company and any Subsidiary after attaining age sixty-five (65) or by
resignation of employment with the Company and any Subsidiary after attaining age sixty (60) if the Committee determines that such resignation constitutes a Normal Retirement for purposes of
this Plan. 

    n.  "Option"
means an Award granted under Section 7 of the Plan. 

    o.  "Performance
Share" means an Award granted under Section 9 of the Plan. 

    p.  "Plan"
means this Non-Executive Long-Term Incentive Plan. 

    q.  "Restricted
Stock Award" means an Award granted under Section 10 of the Plan. 

    r.  "SEC"
means the Securities and Exchange Commission. 

    s.  "Stock"
means Common Shares of the Company and, after substitution, such other stock as shall be substituted therefor as provided in Section 12. 

    t.   "Stock
Appreciation Right" (SAR) means an Award granted under Section 8, whether or not granted in conjunction with an Option. 

    u.  "Subsidiary"
means any corporation of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. 

    v.  "Termination"
means, with respect to any person, ceasing to be an employee of the Company or any Subsidiary, other than by death. 

    w.  "Uninvited
Change in Corporate Control" means any change in (i) the ownership or effective control of the Company or any Subsidiary, or (ii) the
ownership of a substantial portion of the assets of the Company or any Subsidiary, which constitutes a change in control within the meaning of Section 280G of the Code, regulations (including
temporary and proposed regulations) promulgated thereunder and judicial interpretations thereof. 

3.  EFFECTIVE DATE, DURATION AND BOARD APPROVAL  

    This Plan shall become effective as of the date of approval of this Plan by the Board. Subject to the provisions of Section 13, Awards may be made as
provided herein for a period of ten (10) years from the date this Plan is so approved by the Board. The Plan shall continue in effect until all matters relating to the payment of Awards and
administration of the Plan have been settled. 

4.  ADMINISTRATION  

    The Plan shall be administered by the Committee, which shall consist of two or more members of the Board and shall be appointed by the Board. A majority of the
Committee shall constitute a quorum. 

    Subject
to the provisions of the Plan, the Committee shall have exclusive, discretionary power to: 

	a.
	Select
the persons to participate in the Plan.

	b.
	Determine
the Awards to be made to each person selected.

	c.
	Determine
the time or times when Awards will be made. 

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	d.
	Determine
the conditions (including performance requirements) to which the Awards may be subject.

	e.
	Prescribe
the form or forms evidencing Awards. 

    The
Committee shall have the discretionary authority, subject to the provisions of the Plan, to establish, adopt, or revise such rules and regulations and to make all such
determinations relating to the Plan as it may deem necessary or advisable for the administration of the Plan. The Committee's interpretation of the Plan or any Awards granted pursuant thereto and all
decisions and determinations by the Committee with respect to the Plan shall be final, binding, and conclusive on all parties. 

5.  GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS, RESTRICTED STOCK AWARDS, AND PERFORMANCE SHARE AWARDS; SHARES SUBJECT TO THE PLAN  

    The Committee may, from time to time, grant Awards to one or more persons determined by it to be eligible for participation in the Plan in accordance with the
provisions of Section 6; provided however that: 

    a.  TOTAL
SHARES.  Subject to adjustment pursuant to Section 12, the aggregate number of shares of Stock made subject to Awards may not exceed One
Million (1,000,000). 

    b.  USE
OF SHARES.  Such shares of Stock shall be deemed to have been used in payment of Performance Shares and SARs whether actually delivered or the
Fair Market Value equivalent of such shares of Stock is paid in cash. To the extent that an Award lapses or the rights of its Holder
terminate, any shares of Stock subject to such Award shall again be available for the grant of an Award. 

    c.  ELIGIBLE
SHARES.  Stock delivered by the Company in settlement under the Plan may be authorized and unissued Stock or Stock held in the treasury of
the Company or may be purchased on the open market or by private purchase. 

6.  ELIGIBILITY  

    Employees of the Company or a Subsidiary who, in the opinion of the Committee, are not officers, directors or otherwise "insiders" (for purposes of
Rule 16(b) of the Securities Exchange Act of 1934) and are responsible for the continued growth and development and financial success of the business of the Company or any Subsidiary shall be
eligible to be granted Awards under the Plan. 

7.  STOCK OPTIONS  

    One or more Options can be granted to any Eligible Employee. Options shall be nonqualified stock options (Incentive Stock Options are not authorized to be
issued) and shall be subject to the following conditions: 

    a.  OPTION
PRICE.  The option price per share of Stock shall be set by the grant but shall in no instance be less than Fair Market Value at the Date of
Grant. 

    b.  FORM
OF PAYMENT.  At the time of the exercise of the Option, the option price shall be payable in (i) cash, (ii) shares of Stock held
by the Holder for the period required to avoid a charge to the Company's reported earnings (generally six months) or were not acquired directly or indirectly from the Company, and that are valued at
the Fair Market Value at the time the Option is exercised, and/or (iii) at the discretion of and on terms acceptable to the Committee, either by means of a "same day sale" pursuant to a program
developed by the Committee under Regulation T as promulgated by the Federal Reserve Board (a "cashless" exercise) or by a note signed by the Holder payable to the Company providing for simple
interest at a rate to be stipulated by the Committee. 

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    c.  OTHER TERMS AND CONDITIONS.  Each Option shall become exercisable in cumulative installments in such manner and within such period or periods, not to
exceed ten (10) years from its Date of Grant, as set forth in the Stock Option Agreement prescribed by the Committee. No Option shall be exercisable after the expiration of ten
(10) years from the Date of Grant. Except as set forth below, an Option shall terminate in the event of the Holder's Termination or death. 

    Unless
otherwise provided in the Stock Option Agreement, in the event of a Termination, the Holder shall have the right to exercise the Option for the following periods after such
Termination, but only to the extent that the Option was exercisable at the date of the Termination and does not otherwise expire by its terms. 

    (1) In
the event of Normal Retirement, the vested Options shall be exercisable for a period of two (2) years after the date of Termination. 

    (2) In
the event of the Holder's Termination by (a) discharge by the Company or any Subsidiary (except for Cause) within two (2) years after the date of
an Uninvited Change in Corporate Control, or (b) resignation of the Holder within the period commencing one-hundred and eighty (180) days from the date of an Uninvited Change
in Corporate Control and ending two (2) years after the date of an Uninvited Change in Corporate Control, the vested Options shall be exercisable for a period of one (1) year after the
date of Termination. 

    (3) In
the event of the Holder's Termination by resignation (except as provided in Section 7c(2) hereof) with the prior written consent of the Company or any
Subsidiary, the vested Options shall be exercisable for a period of three (3) months after the date of such resignation. Such prior written consent may be given only by the Chief Executive
Officer of the Company or any Subsidiary or any such officer delegated by the Chief Executive Officer (other than the resigning person) and must specify that it is given for the purpose of the
Holder's exercise of the Option. 

    (4) In
the event of the Holder's Termination by (a) discharge by the Company or any Subsidiary, with or without Cause (except as provided in
Section 7c(2), hereof), or (b) resignation of the Holder without the prior written consent of the Company or any Subsidiary, the vested Options shall cease to be exercisable on the date
of such discharge or resignation. 

    In
the event of Holder's death prior to Termination, or within three (3) months of a Normal Retirement, the vested Options may be exercised for a period of one (1) year
after the date of Holder's death or, if shorter, the remaining term of the Option. 

    d.  STOCK
OPTION AGREEMENT.  Each Option granted under the Plan shall be evidenced by a "Stock Option Agreement" between the Company and the Holder of
the Option containing provisions not inconsistent with the Plan, as determined by the Committee, and shall be subject to the following additional terms and conditions: 

    (1) Any
Option or portion thereof that is exercisable shall be exercisable for the full amount or for any part thereof, except as otherwise provided in the Stock Option
Agreement. 

    (2) Each
Option shall cease to be exercisable, as to any share, when the Holder purchases the share or exercises a related SAR or when the Option lapses. 

    (3) Leaves
of absence, approved by the Company or a Subsidiary, shall not constitute the termination of employment of the Holder. 

    e.  EXPIRED
OPTIONS.  If any Options awarded under the Plan shall be forfeited, cancelled, or not exercised in full, the Stock subject to such Options
may again be awarded under the Plan. 

    f.   TENDER
OFFER OR MERGER.  Notwithstanding any other provision, in the event of (i) a public tender offer for all or any portion of the Stock or
(ii) a proposal to merge, consolidate, or 

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otherwise combine with, or sell all or a substantial portion of the assets of the Company or a Subsidiary to, another company is submitted for shareholder approval, or (iii) any other Uninvited
Change in Corporate Control, then the Committee may in its sole discretion declare previously granted options to be immediately exercisable. 

8.  STOCK APPRECIATION RIGHTS  

    Any Option granted under the Plan may include an SAR, either at the time of grant or by amendment. SARs may also be granted to an Eligible Employee independent
of any prior or contemporaneous Option grant and shall be exercisable as provided therein without regard to any Option. In addition to
such terms and conditions not inconsistent with the Plan as the Committee shall impose, SARs shall be subject to the following terms: 

    a.  RIGHT
TO EXERCISE.  An SAR granted with an Option shall be exercisable to the extent and only to the extent the Option is exercisable. An SAR not
included in an Option shall have a "purchase price" ascribed thereto by the Committee in granting such SAR, which shall not be less than the Fair Market Value of the Stock on the Date of Grant. 

    b.  PAYMENT.  An
exercisable SAR shall entitle the Holder to surrender unexercised the SAR or the Option in which it is included, as the case may be, or
any portion thereof, and, to receive in exchange therefore that number of shares of Stock having an aggregate Fair Market Value, as hereinafter defined, equal to the excess of the Fair Market Value of
one share of Stock over the purchase price per share specified in such SAR or Option times the number of shares called for by the SAR or Option, or portion thereof, which is so surrendered. The
Committee shall be entitled to elect to settle the Company's obligation arising out of the exercise of an SAR by the payment of cash or partially by the payment of cash and partially by the delivery
of shares of Stock, the total value of which shall be in either case equal to the aggregate Fair Market Value of the shares of Stock it would otherwise be obligated to deliver. The Committee shall
also have the right to place such limitations and restrictions on the obligation to make such cash payments or deliver shares of Stock under SARs as it, in its sole discretion, deems to be in the best
interest of the Company. The Fair Market Value for SAR exercise purposes of shares shall be determined on the basis of prices on the trading day next preceding the date on which the SAR is exercised.
To the extent that an SAR included in an Option is exercised, such Option shall be deemed to have been exercised, and shall not be deemed to have lapsed. 

    c.  SPECIAL
RULES GOVERNING SARS.  An SAR not included in an Option shall be evidenced by an agreement between the Company and the Holder in a form
approved by the Committee. Any SAR granted under the Plan shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose, including the following: 

    (1) The
SAR will lapse no later than the underlying Option for SARs accompanying an Option or, for freestanding SARs, no later than ten (10) years from its Date
of Grant; and 

    (2) An
SAR accompanying an Option may be exercised only when the Fair Market Value of the Stock exceeds the option price of the Stock subject to the SAR. 

    d.  OTHER
LIMITATIONS.  An SAR shall be subject to such other limitations as the Committee shall impose. 

9.  PERFORMANCE SHARES  

    One or more Awards of Performance Shares may be made to an Eligible Employee. Performance Shares shall be credited to a Performance Share account to be
maintained for each such Holder. Each Performance Share shall be deemed to be the equivalent of one share of Stock of the Company. The Award of Performance Shares under the Plan shall not entitle the
Holder to any interest in or to any dividend, voting, or other rights of a shareholder. The value of the Performance Shares in a Holder's 

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Performance Share account at the time of Award or the time of payment shall be the Fair Market Value at any such time of an equivalent number of shares of Stock (subject to the limitation provided in
Section 9c). 

    If
any Performance Shares awarded under the Plan shall be forfeited, cancelled, or not paid out in full, such Performance Shares may again be awarded under the Plan. Shares of Stock
delivered upon payment of Performance Shares may be either treasury shares, shares purchased for the account of the participant or authorized and unissued shares, or any combination thereof. 

    a.  AWARD
GRANTS.  Grants of Performance Shares may be made by the Committee in any fiscal year during the term of the Plan. Such shares will be paid out
in full or in part on the basis of the Company's performance of such criteria as may be determined by the Committee. In determining the size of Awards, the Committee shall take into account a Holder's
responsibility level, performance, potential, cash compensation level, and the Fair Market Value of the Stock at the time of Awards, as well as such other considerations as it deems appropriate. 

    Unless
otherwise provided in the Award agreement, in the event a Holder terminates employment during an Award Period, payout would be as follows: 

    (1) Normal
Retirement: 

    The
Award would be prorated (based upon the number of completed calendar months in the Award Period) for service during the period through the Normal Retirement date, and the Award
would be paid as soon as practicable following the end of the Award Period. 

    (2) Resignation
or discharge: 

    For
resignation with the prior written consent of the Company or a Subsidiary, the Award would be prorated (based upon the number of completed calendar months in the Award Period) for
service during the period through such resignation date, and the Award would be paid as soon as practicable following the end of the Award Period. For resignation other than with such consent (and not
constituting Normal Retirement or Disability) or for discharge with or without Cause, the Award would be completely forfeited. 

    (3) Death
or Disability: 

    The
Award would be prorated (based upon the number of completed calendar months in the Award Period) for service during the period through the date of death or Disability, and the
Award would be paid as soon as practicable following the end of the Award Period. 

    Awards
cancelled or portions of Awards not paid out in full for any single Holder shall not be included for purposes of this limitation. 

    Unless
otherwise provided in the Award agreement, grants of Performance Shares shall be deemed to have been on January 1 of the year in which grants are made. 

    b.  RIGHT
TO PAYMENT OF PERFORMANCE SHARES.  Following the end of the Award Period, the Holder of a Performance Share shall be entitled to receive
payment of an amount based on the achievement of the performance measures for such Award Period, as determined by the Committee. 

    c.  FORM
AND TIMING OF PAYMENT.  No payment of Performance Shares shall be made prior to the end of an Award Period. Payment therefore shall be made as
soon as practicable after the receipt of audited financial statements relating to the last year of such period. The Committee may establish for each Award Period a Fair Market Value for purposes of
payments of Performance Shares, but in no event shall it exceed by more than two hundred percent (200%) the Fair Market Value of a share of Stock on the Date of Grant. 

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    The payment to which a Holder shall be entitled at the end of an Award Period shall be a dollar amount equal to the Fair Market Value at the Valuation Date (as defined in
Section 2k(2) hereof) of the number of shares of Stock equal to the number of Performance Shares earned and payable to him in accordance with Section 9b. Payment shall normally be made
one-half in cash and one-half in Stock; however, the Committee may authorize payment in such other combinations of cash and Stock or all in cash or all in Stock, as it deems
appropriate. 

    The
number of shares of Stock to be paid in lieu of cash will be determined by dividing the portion of the payment not paid in cash by the price per share of Stock (the average of the
highest price and the lowest price at which the Stock shall have been sold regular way on the NYSE during normal trading hours) on the date on which the shares of Stock are issued. 

    d.  TENDER
OFFER OR MERGER.  Notwithstanding any other provision of the Plan, in the event of (i) public tender offer for all or any portion of
the Stock, or (ii) a proposal to merge, consolidate or otherwise combine with, or sell all or a substantial portion of the assets of the Company or a Subsidiary to, another company is submitted
for shareholder approval, or (iii) any other Uninvited Change in Corporate Control, then the Committee may in its sole discretion declare any Award Period ended as of a specific date and
accelerate full payments of such awards accordingly. For awards based on performance criteria, the Committee shall determine the performance for the reduced Award Period and may estimate the
performance for any periods for which audited financial statements are not yet available. 

10.  RESTRICTED STOCK AWARDS  

    a.  RESTRICTION
PERIOD TO BE ESTABLISHED BY THE COMMITTEE.  One or more Awards of Restricted Stock may be made to an Eligible Employee. At the time a
Restricted Stock Award is made, the Committee shall establish a period of time (the "Restriction Period") applicable to such Award which shall be not less than one (1) year. Each Restricted
Stock Award may have a different Restriction Period, at the discretion of the Committee. In the event of (i) a public tender offer for all or any portion of the Stock, or (ii) any
proposal to merge, consolidate or otherwise combine with, or sell all or a substantial portion of the assets of the Company or a Subsidiary to, another company is submitted for shareholder approval,
or (iii) any other Uninvited Change in Corporate Control, then the Committee may in its sole discretion change or eliminate the Restriction Period. Except as permitted above, the Restriction
Period applicable to a particular Restricted Stock Award shall not be changed. 

    b.  OTHER
TERMS AND CONDITIONS.  Stock awarded pursuant to a Restricted Stock Award shall be represented by a stock certificate registered in the name of
the Holder of such Restricted Stock Award. The Holder shall have the right to enjoy all shareholder rights during the Restriction Period with the exception that: 

    (1) The
Holder shall not be entitled to delivery of the stock certificate until the Restriction Period shall have expired. 

    (2) The
Company may either issue shares subject to such restrictive legends and/or stop-transfer instructions as it deems appropriate or provide for
retention of custody of the Stock during the Restriction Period. 

    (3) A
breach of the terms and conditions established by the Committee pursuant to the Restricted Stock Award shall cause a forfeiture of the Restricted Stock Award, and
any dividends withheld thereon. 

    (4) Cash
and stock dividends may be either currently paid or withheld by the Company for the Holder's account until the Restriction Period expires, as provided in the
Restricted Stock Award Agreement. At the discretion of the Committee, interest may be paid on the amount of 

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cash dividends withheld, including cash dividends on stock dividends, at a rate and subject to such terms as determined by the Committee. 

    c.  FORFEITURE
PROVISIONS.  Unless otherwise provided in a Restricted Stock Award agreement, in the event a Holder terminates employment during a
Restriction Period, an Award would be forfeited as follows: 

    (1) Normal
Retirement: 

    The
Award would be prorated (based upon the number of completed calendar months in the Restriction Period) for service during the period through the Normal Retirement date, and the
vested
Award would be distributed as soon as practicable following retirement; the non-vested Award would be immediately forfeited. 

    (2) Resignation
or discharge: 

    For
resignation with the prior written consent of the Company or a Subsidiary, the Award would be prorated (based upon the number of completed calendar months in the Restriction
Period) for service during the period through such resignation date, and the vested Award would be distributed as soon as practicable following such resignation; the non-vested Award would
be immediately forfeited. For resignation other than with such consent (and not constituting Normal Retirement or Disability) or for discharge, with or without Cause, the Award would be completely
forfeited. 

    (3) Death
or Disability: 

    The
Award would be prorated (based upon the number of completed calendar months in the Restriction Period) for service during the period through the date of death or Disability, and
the vested Award would be distributed as soon as practicable following death or Disability; the non-vested Award would be immediately forfeited. 

    Dividends
withheld by the Company on Restricted Stock that is forfeited shall be retained by the Company. 

    d.  PAYMENT
FOR RESTRICTED STOCK.  A Holder shall not be required to make any payment for Stock received pursuant to a Restricted Stock Award. 

11.  GENERAL  

    a.  GOVERNMENT
AND OTHER REGULATIONS.  The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by governmental agencies as may be required. The Company shall be under no obligation to register under the Securities Act of 1933, as amended
("Act") any of the shares of Stock
distributed under the Plan. If the shares of Stock distributed under the Plan may in certain circumstances be exempt from registration under the Act, the Company may restrict the transfer of such
shares of Stock in such manner as it deems advisable to ensure the availability of any such exemption. 

    b.  TAX
WITHHOLDING.  The Company or a Subsidiary, as appropriate, shall have the right to deduct from all Awards paid in cash any federal, state or
local taxes as required by law to be withheld with respect to such cash payments. In the case of Awards paid in Stock, the employee or other person receiving such Stock may be required to pay to the
Company or a Subsidiary, as appropriate, the amount of any such taxes which the Company or Subsidiary is required to withhold with respect to such Stock. The Company or the Subsidiary may withhold the
amount of such taxes on any Award from any other wages payable by the Company or any Subsidiary to the Holder. 

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    c.  CLAIM TO AWARDS AND EMPLOYMENT RIGHTS.  No employee of the Company or any Subsidiary or other person on their behalf shall have any claim or right to
be granted an Award under the Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of the Company or a Subsidiary or
limit the right of the Company or any Subsidiary to terminate an employee at anytime, with or without Cause. A holder of any right hereunder to receive cash or Stock in respect of any Award shall have
no rights other than those of a general creditor of the Company. Awards represent unfunded and unsecured obligations of the Company, subject to the terms and conditions of the applicable Award. 

    d.  BENEFICIARIES.  Any
payment of Awards due under this Plan to a deceased Holder shall be paid to the beneficiary duly designated by the Holder in
accordance with the Company's practices. If no such beneficiary has been designated or survives the Holder, payment shall be made to the Holder's legal representative. A beneficiary designation may be
changed or revoked by a Holder at any time provided the change or revocation is filed with the Committee prior to the Holder's death. 

    e.  NONTRANSFERABILITY.  A
person's rights and interests under the Plan, including any Award previously made to such person or any amounts payable under
the Plan, may not be assigned, pledged, or transferred except, in the event of an employee's death, to a designated beneficiary as provided in the Plan, or in the absence of such designation, by will
or the laws of descent and distribution. 

    f.   INDEMNIFICATION.  Each
person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the
Company from and against any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action or failure to act under the Plan and against and from any and all amounts
paid by him in satisfaction of judgment in any such action, suit, or proceeding against him. He shall give the Company an opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under
the Company's Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. 

    g.  RELIANCE
ON REPORTS.  Each member of the Committee and each member of the Board shall be fully justified in relying or acting in good faith upon any
report made by the independent public accountant of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan by any person or persons other than himself.
In no event shall any person who is or shall have been a member of the Committee or of the Board be liable for any determination made or other action taken or any omission to act in reliance upon any
such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith. 

    h.  RELATIONSHIP
TO OTHER BENEFITS.  No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company or any Subsidiary. 

    i.   EXPENSES.  The
expenses of administering the Plan shall be borne by the Company and its Subsidiaries. 

    j.   PRONOUNS.  Masculine
pronouns and other words of masculine gender shall refer to both men and women. 

    k.  TITLES
AND HEADINGS.  The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control. 

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12.  CHANGES IN CAPITAL STRUCTURE  

    Options, SARs, Restricted Stock Awards, Performance Share Awards and any agreements evidencing such Awards shall be subject to adjustment by the Committee as
to the number and price per share of Stock or other considerations subject to such Awards in the event of changes in the outstanding Stock by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the Date of Grant of any such Awards. In the event of
any such change in the outstanding Stock, the aggregate number of shares available under the Plan shall be appropriately adjusted by the Committee, whose determination shall be conclusive. 

13.  AMENDMENTS AND TERMINATION  

    The Board may at any time terminate the Plan or, with the express written consent of an individual participant, cancel or reduce or otherwise alter his
outstanding Awards thereunder if, in its judgment, the tax, accounting, or other effects of the Plan or potential payouts thereunder would not be in the best interest of the Company. The Board may, at
any time, or from time to time, amend or suspend and, if suspended, reinstate, the Plan in whole or in part, provided, however, that any amendment of the Plan shall be subject to the approval of the
Company's shareholders to the extent required by applicable laws, regulations or rules. 

14.  CLAIMS PROCEDURES  

    Claims for benefits under the Plan shall be filed in writing with the Committee in a form approved by or acceptable to the Committee. Written notice of the
disposition of a claim shall be furnished to the claimant within a reasonable period of time after the claim is filed. If the claim is denied, the notice of disposition shall set forth the reasons for
the denial. If the claimant wishes further consideration of his or her claim, the claimant may appeal a denied claim to the Committee (or to a person designated by the Committee) for further review.
Such appeal shall be filed in writing with the Committee, together with a written statement of the claimant's position, no later than 90 days following receipt by the claimant of written notice
of the denial of his or her claim. A decision on review shall be made after a full and fair review of the claim and shall be delivered in writing to the claimant within a reasonable period of time
after the Committee's receipt of the notice of appeal. All determinations of the Committee shall be final and binding on Holders and their beneficiaries, agents or legal representatives. 

10

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Exhibit 4.1    
    

THIS
WARRANT AND ANY SHARES OF COMMON STOCK ISSUED UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. 

INTRAWARE, INC.  

No.              

 
 

WARRANT TO PURCHASE
                     SHARES (SUBJECT TO ADJUSTMENT) OF
  COMMON STOCK    
  

void
after April     , 2008 

    This
certifies that for value             , or registered assigns ("Holder"), is entitled, subject
to the terms set forth below, at any time from and after April  , 2001 (the "Original Issuance Date") and before 5:00 P.M.,
Eastern Time, on April     , 2008, to purchase from Intraware, Inc., a Delaware corporation (the
"Company"),              shares (subject to adjustment as described herein), of the Common Stock, par value $0.0001
per share (which authorized class of shares is herein called the "Common Stock") of the Company, as constituted on the Original Issuance Date, upon
surrender hereof, at the principal office of the Company referred to below, with a duly executed subscription form in the form attached hereto as  Exhibit A and simultaneous payment therefor in
lawful money of the United States or otherwise as hereinafter provided, at the price per share
(the "Purchase Price") equal to $1.125 per share. The
number and character of such shares of Common Stock are subject to further adjustment as provided below, and the term "Common Stock" shall include,
unless the context otherwise requires, the stock and other securities and property at the time receivable upon the exercise of this Warrant. The term
"Warrants" as used herein shall include this Warrant and any warrants delivered in substitution or exchange therefor as provided herein. The term
"Series B Warrants" shall mean those warrants, other than this Warrant, issued concurrently with the Series B Preferred (defined below). 

     1. Exercise. 

     A. Except
as provided in Section 1(B), this Warrant may be exercised at any time or from time to time from and after the Original Issuance Date and before
5:00 P.M., Eastern Time, on April     , 2008, on any business day, for the full number of shares of Common Stock called for hereby, by surrendering it
at the principal office of the Company, at 25 Orinda Way, Orinda CA 94563, with the subscription form duly executed, together with payment in an amount equal to (a) the number of shares of
Common Stock called for on the face of this Warrant, as adjusted in accordance with the preceding paragraph of this Warrant (without giving effect to any further adjustment herein) multiplied
(b) by the Purchase Price. Payment of this amount may be made at Holder's choosing either (1) by payment in cash or by corporate check, payable to the order of the Company, or
(2) by the Company not issuing that number of shares of Common Stock subject to this Warrant having a Fair Market Value (as defined below) on the date of exercise equal to such sum. This
Warrant may be exercised for less than the full number of shares of Common Stock at the time called for hereby, except that the number of shares receivable upon the exercise of this Warrant as a
whole, and the sum payable upon the exercise of this Warrant as a whole, shall be proportionately reduced. Upon a partial exercise of this Warrant in accordance with the terms hereof, this Warrant
shall be surrendered, and a new Warrant of the same tenor and for the purchase of the number of such shares not purchased upon such exercise shall be issued by the 

 

Company to Holder without any charge therefor. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above,
and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such
date. Within two business days after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of full shares of
Common Stock issuable upon such exercise, together with cash, in lieu of any fraction of a share, equal to such fraction of the then Fair Market Value on the date of exercise of one full share of
Common Stock. 

     B. The
exercise of this Warrant is subject to the restrictions and limitations upon exercise set forth in Section 4.6 of the Subscription Agreement entered into
as of the Original Issuance Date between the original holder hereof and the Company. 

    "Fair Market Value" shall mean, as of any date, (i) if shares of the Common Stock are listed on a national securities exchange,
the average of the closing prices as reported for composite transactions during the ten (10) consecutive trading days preceding the trading day immediately prior to such date or, if no sale
occurred on a trading day, then the mean between the closing bid and asked prices on such exchange on such trading day; (ii) if shares of the Common Stock are not so listed but are traded on
the Nasdaq National Market ("NNM"), the average of the closing prices as reported on the NNM during the ten (10) consecutive trading days
preceding the trading day immediately prior to such date or, if no sale occurred on a trading day, then the mean between the highest bid and lowest asked prices as of the close of business on such
trading day, as reported on the NNM; or if applicable, the Nasdaq SmallCap Market, or if not then included for quotation on the NNM or the Nasdaq SmallCap Market, the average of the highest reported
bid and lowest reported asked prices as reported by the OTC Bulletin Board or the National Quotations Bureau, as the case may be, or (iii) if the shares of the Common Stock are not then
publicly traded, the fair market price, not less than book value thereof, of the Common Stock as determined in good faith by the independent members of the Board of Directors of the Company (the
"Board"). 

     2. Payment of Taxes. All shares of Common Stock issued upon the exercise of a Warrant shall be validly issued, fully
paid and non-assessable, and the Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof. 

     3. Transfer and Exchange. This Warrant and all rights hereunder are transferable, in whole or in part, on the books of
the Company maintained for such purpose at its principal office referred to above by Holder in person or by duly authorized attorney, upon surrender of this Warrant together with a completed and
executed assignment form in the form attached as Exhibit B and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer. Upon any partial transfer, the
Company will issue and deliver to Holder a new Warrant or Warrants with respect to the shares of Common Stock not so transferred. Each taker and holder of this Warrant, by taking or holding the same,
consents and agrees that this Warrant when endorsed in blank shall be deemed negotiable and that when this Warrant shall have been so endorsed, the holder hereof may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented hereby, or to the transfer hereof on the books of the
Company, any notice to the contrary notwithstanding; but until such transfer on such books, the Company may treat the registered Holder hereof as the owner for all purposes. 

    This
Warrant is exchangeable at such office for Warrants for the same aggregate number of shares of Common Stock, each new Warrant to represent the right to purchase such number of
shares as the Holder shall designate at the time of such exchange. 

2

 

     4. Adjustment for Dividends in Other Stock and Property; Reclassifications. 

     A. In
case at any time or from time to time the holders of the Common Stock (or any shares of stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received, or, on or after the record date fixed for the determination of eligible shareholders, shall have become entitled to receive, without payment therefor, 

    (1) other
or additional stock or other securities or property (other than cash) by way of dividend, 

    (2) any
cash or other property paid or payable out of any source other than retained earnings (determined in accordance with generally accepted accounting principles),
or 

    (3) other
or additional stock or other securities or property (including cash) by way of stock-split, spin-off, reclassification, combination of shares or
similar corporate rearrangement, (other than (x) additional shares of Common Stock or any other stock or securities into which such Common Stock shall have been changed, (y) any other
stock or securities convertible into or exchangeable for such Common Stock or such other stock or securities or (z) any Stock Purchase Rights, issued as a stock dividend or stock-split,
adjustments in respect of which shall be covered by the terms of Section 4.C, 4.D, 4.E or 4.I), then and in each such case Holder, upon the exercise hereof as provided in Section 1,
shall be entitled to receive the amount of stock and other securities and property (including cash in the cases referred to in clauses (2) and (3) above) which such Holder would hold on
the date of such exercise if on the Original Issuance Date Holder had been the holder of record of the number of shares of Common Stock called for on the face of this Warrant, as adjusted in
accordance with the first paragraph of this Warrant, and had thereafter, during the period from the Original Issuance Date to and including the date of such exercise, retained such shares and/or all
other or additional stock and other securities and property (including cash in the cases referred to in clause (2) and (3) above) receivable by it as aforesaid during such period, giving
effect to all adjustments called for during such period by Sections 4.A and 4.B. 

     B. Adjustment for Reorganization, Consolidation and Merger. In case of any reorganization of the Company (or any other
corporation the stock or other securities of which are at the time receivable on the exercise of this Warrant) after the Original Issuance Date, or in case, after such date, the Company (or any such
other corporation) shall consolidate with or merge into another corporation or entity or convey all or substantially all its assets to another corporation or entity, then and in each such case Holder,
upon the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the
stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property to which such Holder would have been entitled
upon such
consummation if Holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Sections 4.A, 4.B, 4.C, 4.D and 4.E; in each such case, the terms of this
Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such consummation. 

     C. Sale of Shares Below Purchase Price. 

    (1) If
at any time or from time to time during the twelve-month period immediately following the Original Issuance Date, the Company issues or sells, or is deemed by
the express provisions of this Section 4.C to have issued or sold, Additional Shares of Common Stock (as hereinafter defined), other than as a dividend or other distribution on any class of
stock as provided in Section 4.D and other than upon a subdivision or combination of shares of Common Stock as provided in Section 4.E, for an Effective Price (as hereinafter defined)
less 

3

 

than the Purchase Price or, if an adjustment in the Purchase Price has theretofore been made, then less than the existing Purchase Price, then and in each such case 

    (A) the
Holder of this Warrant shall be entitled to receive, in lieu of the number of shares theretofore receivable upon the exercise of this Warrant, a number of
shares of Common Stock determined by (i) dividing the original Purchase Price by the Purchase Price as adjusted as a result of such issue or sale (as provided below), and
(ii) multiplying the resulting quotient by the number of shares of Common Stock called for on the face of this Warrant, as adjusted in accordance with the first paragraph of this Warrant; and 

    (B) the
then existing Purchase Price shall be reduced, as of the opening of business on the date of such issue or sale, as follows: the Purchase Price shall be reduced
to a price determined by multiplying that Purchase Price by a fraction (i) the numerator of which shall be (a) the number of shares of Common Stock outstanding at the close of business
on the day next preceding the date of such issue or sale, plus (b) the number of shares of Common Stock which the aggregate consideration received (or by the express provisions hereof deemed to
have been received) by the Company for the total number of Additional Shares of Common Stock so issued would purchase at such Purchase Price, plus (c) the number of shares of Common Stock into
which all outstanding shares of Series A Preferred Stock, par value $0.0001 per share, of the Company (the "Series A Preferred") are
convertible at the close of business on the date next preceding the date of such issue or sale, plus (d) the number of shares of Common Stock into which all outstanding shares of
Series B Preferred are convertible at the close of business on the date next preceding the date of such issue or sale, plus (e) the number of shares of Common Stock for which all
Series B Warrants and all other warrants outstanding as of the Original Issuance Date that are exercisable for shares of Common Stock are exercisable at the Purchase Price in
effect at the close of business on the date next preceding the date of such issue or sale, plus (f) the number of shares of Common Stock underlying all Other Securities (as hereinafter defined)
at the close of business on the date next preceding the date of such issue or sale, and (ii) the denominator of which shall be (a) the number of shares of Common Stock outstanding at the
close of business on the date of such issue or sale after giving effect to such issue of Additional Shares of Common Stock, plus (b) the number of shares of Common Stock into which all
outstanding shares of Series B Preferred of the Company are convertible at the close of business on the date next preceding the date of such issue or sale, plus (c) the number of shares
of Common Stock into which all outstanding shares of all Series A Preferred of the Company are convertible at the close of business on the date next preceding the date of such issue or sale,
plus (d) the number of shares of Common Stock for which all Series B Warrants and all other warrants outstanding on the Original Issuance Date that are exercisable for shares of Common
Stock are exercisable at the Purchase Price in effect at the close of business on the date next preceding the date of such issue or sale, plus (e) the number of shares of Common Stock
underlying the Other Securities at the close of business on the date next preceding the date of such issue or sale. 

    (2) For
the purpose of making any adjustment required under this Section 4.C, the consideration received by the Company for any issue or sale of securities shall
(i) to the extent it consists of cash be computed at the amount of cash received by the Company, (ii) to the extent it consists of property other than cash, be computed at the fair value
of that property as determined in good faith by the Board, (iii) if Additional Shares of Common Stock, Convertible Securities (as hereinafter defined) or rights or options to purchase either
Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers 

4

 

both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or options, and (iv) be computed after reduction for all expenses payable by the Company in connection with such issue or sale. 

    (3) For
the purpose of the adjustment required under this Section 4.C, if the Company issues or sells any rights or options for the purchase of, or stock or
other securities convertible into or exchangeable for, Additional Shares of Common Stock (such convertible or exchangeable stock or securities being hereinafter referred to as
"Convertible Securities") and if the Effective Price of such Additional Shares of Common Stock is less than the Purchase Price then in effect, then in
each case the Company shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable
upon exercise, conversion or exchange thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the
Company for the issuance of such rights or options or Convertible Securities, plus, in the case of such rights or options, the minimum amounts of consideration, if any, payable to the Company upon the
exercise of such rights or options, plus, in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company (other than by cancellation of liabilities or
obligations evidenced by such
Convertible Securities) upon the conversion or exchange thereof. No further adjustment of the Purchase Price, adjusted upon the issuance of such rights, options or Convertible Securities, shall be
made as a result of the actual issuance of Additional Shares of Common Stock on the exercise of any such rights or options or the conversion or exchange of any such Convertible Securities. If any such
rights or options or the conversion or exchange privilege represented by any such Convertible Securities shall expire without having been exercised, the Purchase Price adjusted upon the issuance of
such rights, options or Convertible Securities shall be readjusted to the Purchase Price which would have been in effect had an adjustment been made on the basis that the only Additional Shares of
Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion or exchange of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually
received by the Company for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted
or exchanged, plus the consideration, if any, actually received by the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion or
exchange of such Convertible Securities. 

    (4) For
the purpose of the adjustment required under this Section 4.C, if the Company issues or sells, or is deemed by the express provisions of this subsection
to have issued or sold, any rights or options for the purchase of Convertible Securities and if the Effective Price of the Additional Shares of Common Stock underlying such Convertible Securities is
less than the Purchase Price then in effect, then in each such case the Company shall be deemed to have issued at the time of the issuance of such rights or options the maximum number of Additional
Shares of Common Stock issuable upon conversion or exchange of the total amount of Convertible Securities covered by such rights or options and to have received as consideration for the issuance of
such Additional Shares of Common Stock an amount equal to the amount of consideration, if any, received by the Company for the issuance of such rights or options, plus the minimum amounts of
consideration, if any, payable to the Company upon the exercise of such rights or options and plus the minimum amount of consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the conversion or exchange of such Convertible 

5

 

Securities. No further adjustment of the Purchase Price, adjusted upon the issuance of such rights or options, shall be made as a result of the actual issuance of the Convertible Securities upon the
exercise of such rights or options or upon the actual issuance of Additional Shares of Common Stock upon the conversion or exchange of such Convertible Securities. The provisions of
paragraph (3) above for the readjustment of the Purchase Price upon the expiration of rights or options or the rights of conversion or exchange of Convertible Securities shall apply  mutatis mutandis to the rights, options and Convertible Securities referred to in this paragraph (4).
 

    (5) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Company on or after the
Original Issuance Date, whether or not subsequently reacquired or retired by
the Company other than (i) shares of Common Stock issued upon conversion of the Series A Preferred and the Series B Preferred in accordance with the Company's certificate of
incorporation, (ii) shares of Common Stock issuable upon exercise of this Warrant and the Series B Warrants, (iii) shares of Common Stock issuable upon exercise of warrants to
purchase Common Stock issued and outstanding as of the Original Issuance Date (provided that the exercise price and other terms of such warrants are not modified after the Original Issuance Date to
adjust the exercise price), (iv) shares of Common Stock issued to individuals who are or were employees or directors of or consultants and advisors to the Company or any subsidiary pursuant to
stock purchases or stock option plans or other arrangements approved by the compensation committee of the Board or pursuant to guidelines approved by the compensation committee of the Board and not
vetoed by the Director designated by the holders of the Series B Preferred, (v) shares of Common Stock issued in connection with bona fide acquisitions, mergers, joint ventures and other
similar transactions approved by the Board and (vi) shares of Common Stock issued pursuant to any event for which adjustment is made to the conversion price under the anti-dilution
provisions provided for in Section 3(d) of the Company's certificate of designations for the Series B Preferred (the "Series B
Designation"), or to the Purchase Price under the anti-dilution provisions under Section 4 of this Warrant or the Series B Warrants. The
"Effective Price" of Additional Shares of Common Stock shall mean the quotient determined by dividing the total number of Additional Shares of Common
Stock issued or sold, or deemed to have been issued or sold by the Company under this Section 4.C, into the aggregate consideration received, or deemed to have been received, by the Company for
such issue under this Section 4.C, for such Additional Shares of Common Stock. "Other Securities" with respect to an issue or sale of Additional
Shares of Common Stock shall mean (1) Convertible Securities (other than the Series B Preferred and the Series A Preferred (provided that the terms of the Series A
Preferred are not modified after the Original Issuance Date to adjust the conversion price thereof), and (2) the Series B Warrants and this Warrant); "the number
of shares of Common Stock underlying Other Securities" on a particular date shall mean the number of shares of Common Stock issuable upon the exercise, conversion or exchange,
as the case may be, of such Other Securities at the close of business on such date. 

    (6) Any
reduction in the conversion price of any Convertible Security, whether outstanding on the Original Issuance Date or thereafter, or the subscription price of any
option, warrant or right to purchase Common Stock or any Convertible Security (whether such option, warrant or right is outstanding on the Original Issuance Date or thereafter), to an Effective Price
less than the then Purchase Price shall be deemed to be an issuance of such Convertible Security and the issuance of all such options, warrants or subscription rights, and the provisions of
Section 4.C.(3), (4) and (5) shall apply thereto mutatis mutandis. 

    (7) Dilution in Case of Other Stock or Securities. In case any shares of stock or other securities, other than Common
Stock of the Company, shall at the time be receivable upon 

6

 

the exercise of this Warrant, and in case any additional shares of such stock or any additional such securities (or any stock or other securities convertible into or exchangeable for any such stock or
securities) shall be issued or sold for a consideration per share such as to dilute the purchase rights
evidenced by this Warrant, then and in each such case the Purchase Price shall forthwith be adjusted, substantially in the manner provided for above in this Section 4.C, so as to protect the
Holder of this Warrant against the effect of such dilution. 

    (8) Record Date Deemed Date of Issuance. In case the Company shall take a record of the holders of shares of its stock
of any class for the purpose of entitling them (a) to receive a dividend or a distribution payable in Common Stock or in Convertible Securities, or (b) to subscribe for, purchase or
otherwise acquire Common Stock or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the Additional Shares of Common Stock issued or sold or deemed to
have been issued or sold upon the declaration of such dividend or the making of such other distribution, or the date of the granting of such rights of subscription, purchase or other acquisition, as
the case may be. 

    (9) No
adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one cent ($0.01) in such price;  provided, however, that any adjustments which
by reason of this Section 4 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made hereunder. All calculations under this Section 4 shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be. 

     D. Adjustment for Certain Dividends and Distributions. If the Company at any time or from time to time makes, or fixes a
record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event 

    (1) the
Purchase Price then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such
record date, by multiplying the Purchase Price then in effect by a fraction (A) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record date, and (B) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date as the case may be, plus the number of shares of Common Stock issuable in payment of such dividend or distribution;  provided,
however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Purchase Price shall be recomputed accordingly as of the close of business on such record date, and thereafter the Purchase Price shall be adjusted pursuant to this Section 4.D as
of the time of actual payment of such dividends or distributions; and 

    (2) the
number of shares of Common Stock theretofore receivable upon the exercise of this Warrant shall be increased, as of the time of such issuance or, in the event
such record date is fixed, as of the close of business on such record date, in inverse proportion to the decrease in the Purchase Price. 

     E. Stock Split and Reverse Stock Split. If the Company at any time or from time to time effects a reverse stock split or
subdivision of the outstanding Common Stock, the Purchase Price then in effect immediately before that stock split or subdivision shall be proportionately decreased and the number of shares of Common
Stock theretofore receivable upon the exercise of this Warrant shall be proportionately increased. If the Company at any time or from time to time effects a reverse stock split or combines the
outstanding shares of Common Stock into a smaller number of shares, the Purchase Price then in effect immediately before that reverse stock split or 

7

 

combination shall be proportionately increased and the number of shares of Common Stock theretofore receivable upon the exercise of this Warrant shall be proportionately decreased. Each adjustment
under this Section 4.E shall become effective at the close of business on the date the stock split, subdivision, reverse stock split or combination becomes effective. 

    F.  No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holders of the Warrants against impairment. 

    G.  Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price
pursuant to this Section 4, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of a Warrant a
certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time
of any holder of a Warrant, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) Purchase Price at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the exercise of the Warrant. 

    5.  Notices of Record Date. In case 

    A.  the
Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of the Warrants) for the
purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other
right, or 

    B.  of
any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into
another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation, or 

    C.  of
any voluntary dissolution, liquidation or winding-up of the Company, 

then,
and in each such case, the Company will mail or cause to be mailed to each holder of a Warrant at the time outstanding a notice specifying, as the case may be, (a) the date on which a
record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (b) the date on which such
reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is expected to take place, and the time, if any is to be fixed, as of which the
holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of the Warrants) shall be entitled to exchange their shares of Common Stock (or such other stock
or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up, such
notice shall be mailed at least 30 days prior to the date therein specified. 

    6.  Stock Purchase Rights. If at any time or from time to time, the Company grants or issues to the record holders of
the Common Stock any options, warrants or subscription rights (collectively, the "Stock Purchase Rights") entitling a holder to purchase Common Stock or
any security convertible into or exchangeable for Common Stock or to purchase any other stock or securities of the Company, the Holder shall be entitled to acquire, upon the terms applicable to such
Stock Purchase Rights, the aggregate Stock Purchase Rights which Holder could have acquired if Holder had been the record holder of the maximum number of shares of Common Stock issuable upon exercise
of this Warrant on 

8

 

both (x) the record date for such grant or issuance of such Stock Purchase Rights, and (y) the date of the grant or issuance of such Stock Purchase Rights. 

    7.  Loss or Mutilation. Upon receipt by the Company of evidence satisfactory to it (in the exercise of reasonable
discretion) of the ownership of and the loss, theft, destruction or mutilation of any Warrant
and (in the case of loss, theft or destruction) of indemnity satisfactory to it (in the exercise of reasonable discretion), and (in the case of mutilation) upon surrender and cancellation thereof, the
Company will execute and deliver in lieu thereof a new Warrant of like tenor. 

    8.  Reservation of Common Stock. The Company shall at all times reserve and keep available for issue upon the exercise
of Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. 

    9.  Securities Purchase Agreement and Registration Rights Agreement. This Warrant has been issued pursuant to the
Subscription Agreement dated as of April     , 2001 between the Company and the original holder hereof (the "Subscription
Agreement"), and the transferability of this Warrant and the Common Stock issuable upon the exercise hereof are subject to the Subscription Agreement. In addition, the Holder
of this Warrant and the Common Stock issuable upon the exercise hereof are entitled to have such Common Stock registered under the Securities Act of 1933 in accordance with the Registration Rights
Agreement referred to in the Subscription Agreement and to such remedies for breaches of, or defaults under, such Registration Rights Agreement, as are provided below in Section 8. 

    10. Remedies for Breaches of Certain Registration Rights. 

    (a) As
partial relief for a Registration Statement Default, and for the damages to any Holder by reason of any such delay in or reduction of its ability to sell the
Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity), (i)the exercise price of the Preferred Warrants as set forth herein shall be reduced
by 5% for each aggregate thirty (30) day period (or pro rated amounts thereof for partial thirty (30) day periods) that (A) the Registration Statement is not (I) filed with
the SEC on or before the Filing Deadline, or (II) declared effective by the SEC following the Effectiveness Deadline, and (B) after the Registration Statement is declared effective by
the SEC, such Registration Statement is not available for the sale of at least all of the Registrable Securities required to be included in such Registration Statement; and (ii) the number of
Warrant Shares shall be increased to a number determined by multiplying the number of the applicable Warrant Shares purchasable immediately prior to the applicable exercise price reduction hereunder
by a fraction, the numerator of which shall be the exercise price per share in effect prior to the applicable exercise price reduction hereunder and the denominator of which shall be the exercise
price as so reduced. The capitalized terms used in this Section 8(a) but not defined herein shall have the meanings given such terms in the Registration Rights Agreement entered into in
connection with the issuance of the Series B Preferred by the Company, [                  ] and the other investors parties thereto (the
"Registration Rights Agreement"), or in the Subscription Agreement (as defined in the Registration Rights Agreement). 

    (b) In
the event of any Rule 144 Default by the Company, then, as partial relief for damages to any Holder by reason of any delay or inability to sell the
Registrable Securities (which remedy shall not be
exclusive of any other remedies available at law or in equity), (x) the exercise price of the Preferred Warrants as set forth herein shall be reduced by 5% for each aggregate thirty
(30) day period (or pro rated amounts thereof for partial thirty (30) day periods) that the Holder is delayed from selling, or unable to sell, Registrable Securities under
Rule 144 due to (i) the Company's failure to promptly provide the requisite legal opinion as described in Section 3.8 of the Registration Rights Agreement, or (ii) the
Company's failure to comply with the filing and other requirements under Rule 144 necessary to make such Rule available to the Holders, and (y) the number of Warrant Shares shall be
increased to a number determined by multiplying the 

9

 

number of applicable Warrant Shares purchasable immediately prior to the applicable exercise price reduction hereunder by a fraction, the numerator of which shall be the exercise price per share in
effect prior to the applicable exercise price reduction hereunder and the denominator of which shall be the exercise price as so reduced.. The capitalized terms used in this Section 8(b) but
not defined herein shall have the meanings given such terms in the Registration Rights Agreement. 

    11. Notices. All notices and other communications from the Company to the Holder of this Warrant shall be mailed by
first-class registered or certified mail, postage prepaid, to the address furnished to the Company in writing by the last holder of this Warrant who shall have furnished an address to the Company in
writing. 

    12. Change; Waiver. Neither this Warrant nor any term hereof may be changed, waived, discharged or terminated orally but
only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 

    13. Headings. The headings in this Warrant are for purposes of convenience in reference only, and shall not be deemed to
constitute a part hereof. 

    14. Law Governing. This Warrant shall be construed and enforced in accordance with and governed by the internal laws,
and not the law of conflicts of laws, of the State of New York. 

    DATED:
April     , 2001 

	 	 	INTRAWARE, INC.
	

 	
 	

By:	

 
	 	 	 	

10

  

 
 

EXHIBIT A
  
    SUBSCRIPTION FORM
  
    (To be executed only upon exercise of Warrant)    
  

    The undersigned registered owner of this Warrant irrevocably exercises this Warrant and purchases            of the number
of shares of Common Stock of Intraware, Inc., purchasable with this Warrant, and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant. 

DATED:                                     
       

	 	 	
 (Signature of Registered Owner)
	

 	
 	

 (Street Address)
	

 	
 	

 (City)                        (State)       
                  (Zip)

1

  

 
 

EXHIBIT B
  
    FORM OF ASSIGNMENT    
  

    FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the
undersigned under the within Warrant, with respect to the number of shares of Common Stock set forth below: 

Name
of Assignee                                    Address  
                                  No. of Shares 

and
does hereby irrevocably constitute and appoint                          Attorney to make such transfer on the books of
Intraware, Inc., maintained for the purpose,
with full power of substitution in the premises. 

DATED:                                    

	

 	
 	

 (Signature)
	

 	
 	

 (Witness)

1

QuickLinks

Exhibit 4.1

WARRANT TO PURCHASE SHARES (SUBJECT TO ADJUSTMENT) OF COMMON STOCK

EXHIBIT A SUBSCRIPTION FORM (To be executed only upon exercise of Warrant)

EXHIBIT B FORM OF ASSIGNMENT

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