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Exhibit 10.(c) Engagement letter for CFOex    
  

CFOex, Inc.

401 Henley Street

Suite 300, Mezzanine Level

Knoxville, TN 37902  

July 23,
2002 

PERSONAL & CONFIDENTIAL  

Mr. Dean
Cannon

Chairman & Chief Executive Officer

Cannon Express, Inc.

1457 E. Robinson

Springdale, Arkansas 72764 

Dear
Dean: 

This
letter will serve as the agreement (the "Agreement") between Cannon Express, Inc. ("Cannon" or the "Company") and CFOex, Inc. ("CFOex") regarding the retention of CFOex as the
exclusive financial advisor to Cannon. Cannon seeks CFOex's assistance in addressing its evolving liquidity constraint and with implementing one, or several, strategic alternatives to be determined. 

CFOex's Role  

CFOex
understands that the Company seeks CFOex's assistance in addressing Cannon's current funding constraints and in determining its strategic alternatives. It is anticipated that throughout the term
of this engagement, CFOex will assist in the review of various activities, which could include, but not necessarily be limited to, the following: 

	•
	Restructuring
the company's working capital facilities 
	•
	Arranging
for a secured bridge loan/financing 
	•
	Restructuring
equipment obligations and term obligations 
	•
	Developing
merger and acquisition alternatives including the outright sale of the Company 
	•
	Identifying
and implementing a financial strategy to improve the operating performance and associated shareholder value of the Company 
	•
	Issuing
a fairness opinion ("Fairness Opinion") relating to the sale and/or merger of the Company 

CFOex's Proposed Actions  

CFOex
proposes that Cannon engage the firm via this Agreement to initiate a series of advisory actions focusing on: 

	•
	A
Needs and Situational Assessment Analysis 
	•
	Liquidity
Constraints and Renegotiated Credit Facilities 
	•
	Implementation
of Strategic Alternatives 

Needs and Situational Assessment Analysis  

CFOex
agrees to immediately initiate a Needs and Assessment Analysis by visiting the Company's Springdale, Arkansas facility. CFOex would focus on reviewing the appropriate corporate files and records
in conjunction with various management interviews and meetings. The principal objective of this exercise is to prepare and compile an assessment of Cannon's immediate operating and financial needs,
its competitive position and to present a series of strategic alternatives for consideration. It is 

 

anticipated that this process will take 3 to 4 days on-site with the report provided by the 7thcalendar day following completion of the onsite visitation. 

Liquidity Constraints and Renegotiated Credit Facilities  

The
role of CFOex, on a best efforts basis, regarding the financing or refinancing (the "Financing") of all or any portion of the Company's balance sheet, is to secure a lender(s) and/or investor(s)
which will enable Cannon to meet its immediate financing objectives and on-going operational needs. In this capacity, CFOex shall advise Cannon in regard to all structure, terms,
conditions, flexibility, timing and strategic advantages provided by various lender(s)/investor(s) relationships. 

	•
	Advise,
in light of current market conditions, on all aspects of the Financing, including timing, structure, and terms 
	•
	Conduct
due diligence and create a Financing Memorandum which describes the Financing and the Company's business, including its history and future prospects 
	•
	Approach
potential lenders and investors, including commercial banks, commercial financing companies, insurance companies and private investment funds 
	•
	Solicit
term sheets from those lenders and investors interested in the Financing 
	•
	Negotiate
with lenders and investors regarding the terms and structure of the Financing 
	•
	Advise
Cannon, its attorneys, accountants and consultants, as required, regarding documentation 

Implementation of Strategic Alternatives  

As
determined in conjunction with the Company, CFOex is prepared to assist in executing Cannon's decided strategic direction. The principal activities associated with these initiatives are highlight
in Appendix I. 

CFOex's Fees  

CFOex's
fees for acting as the Company's exclusive advisor in connection with the financial advisory and transaction services outlined herein will depend, in part, upon the strategic initiative that
Cannon elects to pursue. Such fees will consist of: 

Needs and Situational Assessment Analysis Fee  

The
fee shall be $25,000 and is due upon signing this Agreement via check or wire transfer to CFOex. 

Transaction and Execution Fees Associated with Refinancing Activities and Implementation of Strategic Alternatives  

CFOex
extends Cannon two options for the payment of transaction and execution related activity fees associated with this Agreement. 

Equity Payment—per Appendix II
 Cash Payment—per Appendix II 

Other Terms and Conditions  

To
best perform the services contemplated above, Cannon agrees to furnish or cause to be furnished to CFOex any and all such information as CFOex reasonably believes appropriate to the successful
execution of its engagement hereunder (all such information so furnished being the "Information"). The Company represents that all Information furnished to CFOex or its agents will be complete and
correct in all material respects, to the best of its knowledge, and that until the expiration of CFOex's engagement hereunder, the Company will advise CFOex immediately of the occurrence of any event
or any other change known which results in the Information ceasing to be complete and correct in all 

2

 

material respects. The Company recognizes and confirms that CFOex (a) will use and rely primarily on the Information and on information available form generally recognized public sources in
performing the services contemplated herein without having independently verified any of the same and (b) does not assume responsibility for accurateness or completeness of the Information and
such other information and (c) will not make an appraisal of any of the assets or liabilities of the Company. 

Term of Engagement  

This
Agreement shall remain in force for a period of six (6) months from the date this Agreement (the "Term"). The Term will automatically renew for an additional six (6) month period
(the "Renewal Period"), unless either the Company or CFOex serve the other party written notice 30 days prior to the end of the Term. Expiration of this Agreement shall not affect CFOex's right
(i) to indemnification under the Indemnification paragraph below, or (ii) to the Financing Fee or Advisory Fee, if subsequent to, but within a period of one (1) year from the
termination of this Agreement a financing source and/or buyer and/or seller contacted by CFOex or by the Company or by any other party during the Applicable Fee Period provides Financing and/or
acquires and/or merges with the Company. 

Indemnification  

Cannon
will indemnify CFOex, (the term "CFOex" in this paragraph shall include CFOex, its employees, agents, including its counsel, and affiliates, and each of them) and hold CFOex harmless from and
against any loss, claim, damage, expense, liability or action or any right to reimbursement which might arise in connection with CFOex's assignment and involvement in this transaction, including
reimbursement for reasonable legal fees. The indemnity agreement contained in this paragraph, however, shall not extend to any loss, claim, damage, expense, liability or action or any right to
reimbursement if and at the extent that any such loss, claim, damage, expense, liability or action or any right to reimbursement arises by reason of gross negligence or willful misconduct. 

Any
amendment, modification or other changes to this Agreement must be in writing and signed by both parties to be enforceable. This Agreement will be governed by laws of the State of Tennessee. 

Please
indicate your acceptance of the foregoing by executing and returning the enclosed copy of this Agreement. We look forward to assisting Cannon with its continuing operations. 

	
 Bruce W. Jones

President

CFOex, Inc.	 	
 Dean Cannon

Chairman, Chief Executive Officer

Cannon Express, Inc.

3

  

 
 

APPENDIX I    
  

Selling the Company  

Prepare
an Offering Memorandum describing Cannon, its historical performance and prospects, including existing contracts, marketing and sales, labor/driver force, management and anticipated proforma
financial results of the Company. This Offering Memorandum shall not be given to any potential buyer without the prior consent of the Company and only after execution of a confidentiality agreement
from the prospective buyer. 

	•
	Develop
a list of potential buyers to be contacted on a discreet and confidential basis after approval by the Company. 
	•
	Draft
and monitor the execution of all confidentiality agreements for those potential buyers wishing to review the Offering Memorandum. 
	•
	Coordinate
site visits for interested buyers and develop presentation material. 
	•
	Solicit
competitive offers from potential buyers. 
	•
	Advise
and assist Cannon in structuring and negotiating the transaction agreements. 

Upon
execution of a letter of intent or similar documents, CFOex will assist in negotiating the transaction and assist Cannon's attorneys, accountants and consultants, as necessary, through closing,
on a best efforts basis. In addition, if requested by Cannon, CFOex will provide a fairness opinion
("Fairness Opinion") relating to the sale of the Company to be included in the appropriate Security and Exchange Commission filings. 

Implementation of a Merger or Acquisition  

Contact
on a confidential basis and at the appropriate level, those companies identified by CFOex or the Company as potential targets to assess the level of interest in a sale or divestiture; 

	•
	Develop
a list of potential merger candidates to be contacted on a discreet and confidential basis after approval by the Company. 
	•
	Draft
and monitor the execution of all confidentiality agreements for those potential merger candidates. 
	•
	Advise
and assist in the related discussions, negotiations and structuring of the supporting transactions; 
	•
	Assist
Cannon in arranging the necessary financing to consummate a transaction; 
	•
	Advise
Cannon, its attorneys, accountants and consultants, as required, regarding documentation; and 
	•
	On
a best efforts basis, move toward closing the transaction. 

In
addition, if requested by Cannon, CFOex will provide a Fairness Opinion relating to the merger by the Company to be included in the appropriate Security and Exchange Commission filings. 

4

  

 
 

APPENDIX II    
  

Equity Payment  

Regarding
transaction and execution fees associated with refinancing activities and implementation of strategic alternatives, CFOex extends Cannon the following equity-based fee schedule payable in
common stock/options of the Company. 

	To CFOex	 	500,000 shares of Cannon common stock/options
	To mgmt.	 	up to 250,000 shares of Cannon common stock/options

Financing Fees  

A
financing fee (the "Financing Fee"') with respect to any Senior Debt Financing which was initiated by CFOex and/or any Subordinated Debt/Equity linked Financing that was initiated by any party that
the Company, in its sole discretion, chooses to accept during the Applicable Fee Period. The Financing
Fee will be payable in cash, in federal funds via wire transfer or certified check, at, and as a condition of, closing of such Financing, regardless of whether the Company chooses to draw down the
full amount of the committed Financing at that time, equal to the greater of: 

	•	 	Senior Debt	 	1.5% of proposed Financing
	•	 	Subordinated Debt	 	4.0% of proposed Financing
	•	 	Subordinated/Equity-linked	 	8.0% of proposed Financing
	or	 	 	 	 
	•	 	$75,000	 	 

In
the event the financing source increases the total Financing amount made available to the Company within eighteen months (18) months of a Financing Closing, CFOex shall be entitled to
receive an additional Financing Fee based upon the above formulas in Section (iv)(a) above only; no minimum fee will apply in such case. In the event that Financing is provided to the Company
during the Applicable Fee Period by the Company's existing lender(s) (the "Existing Lender(s)), on better terms than exist as of the date of this agreement (i.e. including, but not limited to,
additional availability, and/or lower interest rates or lower all in costs and/or less restrictive loan covenants), then CFOex will be owed a full Financing Fee as it relates to the Existing Lender(s)
Financing. 

Merger and Sale Fees  

CFOex
will receive a fee (the "Advisory Fee") on a roll up merger or acquisition (i.e. Cannon's common stock outstanding, as of the date of this Agreement, is not diluted by more than 50%) that was
initiated by either CFOex or Cannon or any other party during the Applicable Fee Period, due and payable in cash, in federal funds via wire transfer or certified check, at and as a condition of,
closing of such merger or acquisition (the "Roll Up Closing") equal to the greater of: 

	•
	1%
of merger/target company's annual gross revenue 
	•
	$100,000

CFOex
will receive a fee (the "Advisory Fee") on a reverse merger or acquisition (i.e. Cannon's common stock outstanding, as of the date of this Agreement is diluted by more than 50%) that was
initiated by either CFOex or Cannon or any other party during the Applicable Fee Period, due and payable in cash, in federal funds via wire transfer or certified check, at and as a condition of,
closing of such merger or acquisition (the "M&A Closing") equal to the greater of: 

	•
	2.5%
of the first $5.0 million or any portion thereof of reverse merger consideration; and 1.5% of reverse merger consideration in excess of
$5.0 million 
	•
	$100,000

5

 

Fairness Opinion  

If
requested by the Company, CFOex will provide the Company with a Fairness Opinion as it relates to the sale of the Company or a merger entered into by the Company during the Applicable Fee Period.
Upon CFOex providing the Company with the final Fairness Opinion CFOex will receive a fee (the "Fairness Opinion Fee") of $50,000. 

Other  

Cannon
will be responsible for all legal and transaction support expenses associated with CFOex performing hereunder. In addition, the Company will reimburse CFOex for all reasonable
out-of-pocket expenses incurred in performing its duties hereunder not to exceed $15,000 without prior permission from the Company. 

6

  

  
 

    APPENDIX III    
  

Definitions  

For
the purpose of this agreement, 

Senior Debt means funds (i) received or to be received by the Company, or any entity acquired, or controlled by, or under common control with the
Company, in the form of revolving credit facilities, notes, term loans, lines of credit, offering lines, purchase and sale of accounts receivable facilities, or any other type of credit facility, for
which the Company or any entity acquired, or controlled, by or under common control with the Company, is obligated to repay the funds on a fixed schedule with interest on the unpaid balance thereof at
a fixed interest rate or a floating interest rate, without any profit participation or yield enhancement as a return on the repayment of the funds received by the Company, or any entity acquired, or
controlled by, or under common control with the Company, and (ii) for which the lender has a claim to the assets of the Company, or any entity acquired, or controlled by, or under common
control with the Company, superior or prior to the claim of the holders of Subordinated Debt. 

Subordinated Debt means (a) funds (i) received or to be received by the Company, or any entity acquired, or controlled by, or under common
control with the Company, or for which the Company, or any entity acquired, or controlled by, or under common control with the Company, is obligated to repay the funds on a fixed schedule with
interest on the unpaid balance therefore at a fixed interest rate or a floating rate, and (ii) for which the lender does not have a senior claim to the assets of the Company, or any entity
acquired, or controlled by, or under common control with the Company, on parity with or prior to the claim of the holder-, of Senior Debt, or (b) funds (i) received or to be received by
the Company, or any entity acquired, or controlled by, or under common control with the Company, is obligated to repay the funds on a fixed schedule with interest on the unpaid balance thereof at a
fixed interest rate or a floating interest rate, and (ii) for which part of the overall return to the investor on these funds is anticipated to consist of a participation in the profits of the
Company and/or some other type of income enhancement (whether realized through equity warrants conversions of the debt to equity, or otherwise) which has the effect of raising the overall return on
these funds to the investors above the level that could be realized solely due to the receipt of stated interest income. 

Equity
shall include, but not be limited to, common stock preferred stock, convertible stock, and the proceeds "from any joint venture agreement, including contributions by a joint venture partner
involving cash, stock, property, plant and equipment or any other assets, or asset sale, 

Reverse Merger Consideration shall mean the aggregate consideration paid for all or a portion of the ABC stock plus the assumption or payoff of ABC
interest bearing debt in a stock transaction by a reverse merger partner or the purchase price paid for all or a portion of the ABC's net assets of the business (i.e., assets less
non-interest bearing liabilities) plus the assumption or payoff of ABC interest bearing debt if assets are acquired by a reverse merger partner. The aggregate consideration shall be deemed
to be the total amount received-upon consummation of the merger and shall include those amounts paid in cash, note, stock or other evidence of indebtedness and the assumption or payoff of
interest bearing debt. In the event that the consideration is paid in whole or in part in the form of securities, the value of such securities, for purposes of calculating CFOex's fee, shall be the
fair market value thereof as of the date of the purchase agreement. If such aggregate consideration may be increased by contingent payments such as an "earnout", or any other monetary agreement in the
transaction (e.g., non-compete agreement), the portion of CFOex's fee relating thereto shall be calculated and paid when and as such contingent payments or other monetary amounts are
received. 

Total Consideration shall mean the purchase price paid for the stock plus the assumption or payoff of interest bearing debt if stock is sold or the
purchase price paid for the net assets of the business (i.e., assets less non-interest bearing liabilities) plus the assumption or payoff of interest bearing debt if assets are sold. Total
Consideration received by the Company shall include those amounts paid in cash, notes, stock or other evidence of indebtedness and the assumption or payoff of interest bearing debt. In the event that
the consideration is paid in whole or in part in the form of securities of the acquiring entity, the value of such securities, for the purposes of calculating CFOex's fee, shall be the fair market
value thereof as of the date of the purchase agreement. If such aggregate consideration may be increased by contingent payments such as an "earnout" or any other monetary agreement in the transaction
(e.g., non-compete agreement), the portion of CFOex's fee relating thereto shall be calculated and paid when and as such contingent payments or other monetary amounts are received. 

7

    CFOex, Inc.

401 Henley Street

Suite 300, Mezzanine Level

Knoxville, TN 37902  

August 17,
2002 

PERSONAL & CONFIDENTIAL  

Mr. Dean
Cannon

Chairman & Chief Executive Officer

Cannon Express, Inc.

1457 E. Robinson

Springdale, Arkansas 72764 

Dear
Dean: 

This
letter will serve as an amendment (the "Amendment") to the agreement dated July 23, 2002 (the "Agreement") between Cannon Express, Inc. ("Cannon" or the "Company") and
CFOex, Inc. ("CFOex") regarding the retention of CFOex as the exclusive financial advisor to Cannon. 

Whereas, Cannon seeks CFOex's assistance in addressing its operations and immediate financial needs, including but not limited to, a liquidity, freight
rates, equipment utilization, driver standards, maintenance expense, as well as, in determining and potentially implementing one, or several, strategic alternatives, as they may be determined; and, 

Whereas, Cannon acknowledges that the distressed nature of the Company does not permit a customary advisory relationship to address the depth and
breadth of its issues; and, 

Whereas, Cannon acknowledges and accepts in full the presentation by CFOex of a Needs and Situational Assessment addressing the Company's operational
and financial challenges; and, 

Whereas, Cannon desires to engage industry experienced executives to address its operations and immediate financial needs; 

Therefore be it known, that Cannon hereby further engages CFOex and expressly agrees to the following terms and conditions which shall be an amendment
to and therefore become part of the Agreement to be fully incorporated therein. 

CFOex's Role  

Under
the Agreement, the Company engaged CFOex to: 1) initiate a Needs and Situational Assessment Analysis; 2) on a best efforts basis, to secure lenders and/or investors to permit the
Company to meet its immediate financing needs, and, 3) to determine with the Company and subsequently assist in executing a decided strategic direction focusing a sale or merger of the Company,
in the normal course of operations. 

In
executing these contractual commitments, CFOex delivered the Needs and Situational Assessment by compiling a team of five professionals who assembled at the Company's Springdale facilities for the
required field work and making a presentation to the Company. CFOex advised the Company in regard to its immediate financing needs and provided guidance, counsel and document review, the result of
which was an immediate increase in free cash of approximately $1.9mm. These actions permitted Cannon to meet its cash commitments for another 30 to 45 days. Finally, the Company's serious
financial condition and poor base operations does not permit a developed strategic direction other than a decision based on some form of a cessation of operations and a resulting liquidation of
assets. Such a strategic direction was not contemplated in the Agreement. 

Short
of a near-term decision to cease operations, the Company must take immediate actions to address its multiple operating and financial challenges. 

8

 

CFOex's Proposed Actions  

CFOex
proposes that Cannon engage the firm via this Amendment and initiate a series of immediate actions focusing on: 

	1.
	Change
in the leadership and culture of the company 
	a)
	An
immediate change in executive leadership—August 19th

	•
	Dean
Cannon is named Chairman of the Board and steps down from all day-to-day managerial responsibilities 
	•
	Termination
fee of $600,000 less payments made to date 

	b)
	CFOex
is retained as the Company's Crisis Management Team—August 19th

	•
	CFOex
assumes all chief executive responsibilities and corporate authorities via an interim President reporting to the Board—Bruce Jones 
	•
	An
interim Chief Operating Officer—Calvin Turner is named by CFOex 
	•
	An
interim Maintenance Department Head is named by CFOex 
	•
	Duane
Wormington retains the CFO position reporting to the interim President 

	c)
	Other
key executive/senior positions to be assessed on a go forward basis 
	d)
	Solicit
input from previous company consultants and use services ad hoc as needed 
	e)
	Communicate
with company employees regarding changes and required company direction 

	2.
	Development
and implement a six month survival plan 
	a)
	Reduce
cash burn rates to the targeted levels in four and eight months 
	b)
	Investigate
the feasibility of prepackaged filing 
	c)
	Downsize
freight network and fleet size 
	d)
	Monetize
excess resources and unproductive assets 
	e)
	Communicate
with key creditors and gain their support for plan 
	f)
	Develop
required financial reporting and analytical tools 

	•
	Cash
projection for 30 days 
	•
	Profit
projections for 6 to 12 months 
	•
	Freight
network analysis and profitability 
	•
	Operational
key factor reporting 

	g)
	Visit
key customers (new and existing) to gain their support 

	3.
	Develop
and implement longer term financial options 12 to 24 months 
	a)
	Reconfigure
existing freight network 
	b)
	Secure
required freight rate increases 
	c)
	Recast
the company's cost structure to match its freight base 
	d)
	Restructure
company's capital structure 
	e)
	Find
and retain an appropriate management team 
	f)
	Investigate
the opportunities of a sale and/or merger 

	4.
	Execute
on behalf of Cannon Express, Inc. any filings required to be made by the Chief Executive Officer of Cannon Express, Inc. with the Securities and Exchange
Commission or other regulatory agencies, to the extent so named by Cannon's Board. 

CFOex's Fees  

Given
the Company's immediate need to address its liquidity challenges as well as the need to install a Crisis Management Team, CFOex proposes the fee structure highlighted in Appendix I. These
fees are in addition to any and all fees associated with the Agreement. 

Other Terms and Conditions  

To
best perform the services contemplated herein, Cannon agrees to furnish or cause to be furnished to CFOex any and all such information as CFOex reasonably believes appropriate to the successful
execution of its engagement hereunder (all such information so furnished being the "Information"). The 

9

 

Company represents that all Information furnished to CFOex or its agents will be complete and correct in all material respects, to the best of its knowledge, and that until the expiration of CFOex's
engagement hereunder, the Company will advise CFOex immediately of the occurrence of any event or any other change known which results in the Information ceasing to be complete and correct in all
material respects. The Company recognizes and confirms that CFOex (a) will use and rely primarily on the Information and on information available form generally recognized public sources in
performing the services contemplated herein without having independently verified any of the same and (b) does not assume responsibility for accurateness or completeness of the Information and
such other information and (c) will not make an appraisal of any of the assets or liabilities of the Company. 

Term of Engagement  

This
Amendment modifies the Agreement and shall remain in force for a period of twelve (12) months from the date of the Agreement (the "Term"). The Term will automatically renew for an
additional six (6) month period (the "Renewal Period"), unless either the Company or CFOex serve the other party written notice 30 days prior to the end of the Term. Expiration of this
Agreement shall not affect CFOex's right to indemnification under the Indemnification paragraph below. 

Issuer
and Grantee agree and acknowledge that, notwithstanding any provision herein or in the Engagement Letter, the sole consideration payable by Issuer under the Engagement Letter, as amended
hereby, or for the services referred to therein consists of the payment by the Issuer of a $15,000 Needs and Situational Assessment Analysis Fee and the grant of options to acquire 1,500,000 shares of
the Issuer's common stock pursuant to option agreements dated the date hereof. 

Indemnification  

Cannon
will indemnify CFOex, (the term "CFOex" in this paragraph shall include CFOex, its employees, agents, including its counsel, and affiliates, and each of them) and hold CFOex harmless from and
against any loss, claim, damage, expense, liability or action or any right to reimbursement which might arise in connection with CFOex's assignment and involvement in this transaction, including
reimbursement for reasonable legal fees. The indemnity agreement contained in this paragraph, however, shall not extend to any loss, claim, damage, expense, liability or action or any right to
reimbursement if and at the extent that any such loss, claim, damage, expense, liability or action or any right to reimbursement arises by reason of gross negligence or willful misconduct. 

CFOex
hereby expressly acknowledges and agrees that this agreement has been negotiated with Cannon Express, Inc. and that Cannon Express, Inc. is solely responsible to perform its
obligations hereunder. Without limiting the foregoing, CFOex hereby expressly acknowledges and agrees Mr. Dean Cannon shall have no personal obligation for performing any of duties or
obligations of Cannon Express, Inc. hereunder, and Mr. Dean Cannon shall incur no liability with respect to any such duties or obligations of Cannon Express, Inc. CFOex hereby
releases Mr. Dean Cannon from any liability or obligation to perform any duties or obligations hereunder. 

Any
amendment, modification or other changes to this Amendment or the related Agreement must be in writing and signed by both parties to be enforceable. This Amendment will be governed by laws of the
State of Tennessee. 

Please
indicate your acceptance of the foregoing by executing and returning the enclosed copy of this Amendment. We look forward to assisting Cannon with its operations. 

	
 Bruce W. Jones

President

CFOex, Inc.	 	
 Dean Cannon

Chairman, Chief Executive Officer

Cannon Express, Inc.

10

  

 
 

APPENDIX I    
  

Crisis Management Fees  

Reflecting
the need for the immediate actions contemplated by this Amendment, the following fees are required: 

	•
	CFOex Retainer Fee

	a.
	A
monthly fee of $50,000, paid in advance, on the first of each month during the term of the Term. 

	•
	Expenses

	a.
	All
reasonable and necessary expenses for CFOex personnel and associates, including travel to and from the Company's Springdale, Arkansas facility, as well as any other location
necessary to perform under the Agreement and/or this Amendment. 
	b.
	Such
expenses to be repaid on a weekly basis. However, CFOex has the right to establish an imprest account of $5,000 for the purpose of timely settlement of such expenses. 

	•
	Stock/Options

	a.
	Per
Stock Option Agreements executed concurrently herewith. 

	•
	Termination Fee

	a.
	Cannon
agrees that, if for any reason other than gross negligence, if the Agreement or Amendment is terminated prior August 15, 2003, the Company shall pay CFOex a termination
fee of $600,000 less the retainer fees paid CFOex during the Term hereunder. 

11

QuickLinks

Exhibit 10.(c) Engagement letter for CFOex

APPENDIX I

APPENDIX II

APPENDIX III

APPENDIX IQuickLinks
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Exhibit 10.1    
  

EMPLOYMENT AGREEMENT  

        This is an Agreement between Intraware, Inc., a Delaware corporation, having its principal place of business in the City of Orinda, California (hereinafter
referred to as "Intraware" or "Employer") and Frost R. R. Prioleau, currently residing in Alameda County, California (hereinafter referred to as "Employee"). The parties agree and represent as
follows: 

        A.    BACKGROUND

        1.    Employee
has been an employee and executive of Employer since December 1998, and has been the President of Employer since December 2000. 

        2.    Employee
has announced his resignation from his full-time duties as President of Employer effective on August 31, 2002. 

        3.    Employer
wishes to continue to obtain the services and advice of Employee, on a reduced-time basis, in the area of company strategy. 

        4.    Employee
is willing to accept such reduced-time employment for one year, subject to extension as provided herein, under the terms hereof. 

        B.    EMPLOYMENT

        Employer
hereby employs Employee and Employee hereby accepts employment with Employer as Senior Advisor for an Employment Term as set out herein. 

        C.    DUTIES OF EMPLOYEE

        1.    Position

        During
the Employment Term hereunder, Employee shall serve as Senior Advisor of Employer. 

        2.    Duties and Responsibilities

        (a)  Employee
shall be responsible for researching potential alternatives for Employer with respect to "rolling up" Employer's business and other similar and/or complementary
businesses in a combined entity. Such research shall include, but not be limited to, detailed conversations with executives of similar and/or complementary businesses and of potential investors in
such a combined entity. On or before May 31, 2003, Employee shall deliver to Employer an initial version of a detailed written report describing such research, containing an analysis including
various alternatives, and recommending one or more courses of action (the "Roll-Up Strategy Report"). Within a reasonable time after delivering it to Employer, Employee shall orally
present the Roll-Up Strategy Report to Employer. Employee shall work diligently with Employer to make such modifications to the Roll-Up Strategy Report as Employer may
reasonably request, and shall deliver a final version of the Roll-Up Strategy Report to Employer by August 31, 2002. During the Employment Term and prior to delivery of the initial
version of the report, Employee will periodically provide to Employer's Chief Executive Officer, orally or in writing, updates on his research and analysis regarding this project. 

        (b)  In
addition to the duties described in paragraph C.2.a above, Employee shall work on various other projects and provide advice to the Chief Executive Officer and
other members of senior management of Employer in the area of corporate strategy, as the Chief Executive Officer of Employer may request from time to time during the Employment Term. Employee 

1

 

agrees to be reasonably available for telephonic consultations with the Chief Executive Officer and other senior officers of Employer from time to time, and to return telephone calls from those
officers reasonably promptly. 

        (c)  Employee
shall be permitted to work from remote locations. 

        (d)  In
view of the rapidly changing business environment in which Employer operates, the parties agree that the duties of Employee may be modified from time to time by
mutual written agreement of the Employee and Employer. 

        (e)  It
is the intent of the parties that Employee shall continue to serve as a member of Employer's Board of Directors during the Employment Term, subject to the
re-nomination of Employee as a director by Employer's Board of Directors, and election by the Employer's shareholders, as required, and provided that the Company does not materially breach
this Agreement or terminate Employee's employment for any reason. 

        3.    Outside Investments

        Employee
shall not directly or indirectly make, obtain or retain any investment of more than $10,000 in any business which, in Employer's reasonable discretion, competes with Employer. 

        4.    Noncompetition by Employee

        During
Employee's employment, Employee shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or organization, whether
for compensation or otherwise, which would (in Employer's reasonable discretion) be in competition with Employer or with any entities owned or controlled by Employer, or which would prevent Employee
from rendering his agreed services to Employer during the Employment Term. 

        5.    Confidentiality and Invention Assignment

        As
a condition of employment under this Agreement, Employee shall continue to comply with the Employment, Confidential Information, Invention Assignment and Arbitration Agreement entered
into between Company and Employee on December 9, 1998 (the "December 9, 1998 Agreement"). 

        6.    Education and Charitable Activities

        Employee
is encouraged to spend a reasonable amount of time for educational, charitable and professional activities. Participation in such activities will not be deemed a breach of this
Agreement so long as it does not interfere with full and diligent performance of the services required under this Agreement. 

        D.    TERMS OF EMPLOYMENT

        1.    Duration

        Employee's
employment under this Agreement shall commence on September 1, 2002 and shall terminate on August 31, 2003 (the "Employment Term"). Any extension of the
Employment Term shall be subject to written agreement by Employer and Employee. 

        2.    Termination of Employment—Generally

        Employee
is and remains free to terminate his employment at any time, for any reason, with or without Cause. In the event of such a voluntary termination by Employee, he shall provide
Employer with notice of termination at least ten (10) days prior to the effective date of his termination. Employer shall, in such event, remain free to accept such notice and 

2

 

continue Employee's employment up to the effective date of termination, or to pay Employee ten (10) days' pay in lieu of accepting notice and require his immediate termination. 

        Employer
is and remains free to terminate Employee's employment at any time, for any reason, with or without Cause. In the event of a termination for Cause, as defined in
paragraph D. 3 below, no notice of termination shall be required, provided such termination shall have been approved by the Employer's Board of Directors prior to the termination date. In the
event of a termination without Cause, Employee shall be entitled to the benefits specified in paragraph D.5 below. 

        3.    Termination of Employment—Cause

        Termination
may be effected for any of the following reasons ("Cause"): 

        (a)  any
act of personal dishonesty taken by Employee in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of
Employee, 

        (b)  the
conviction of a felony, 

        (c)  a
willful act by Employee that constitutes gross misconduct and that is injurious to Employer, or 

        (d)  for
a period of not less than thirty (30) days following delivery to Employee of a written demand for performance from Employer that describes the basis for
Employer's belief that Employee has not substantially performed his duties, continued violations by Employee of Employee's obligations to Employer that are demonstrably willful and deliberate on
Employee's part. 

        4.    Benefits upon Termination of Employment for Cause

        In
the event of a termination for Cause, Employee shall be entitled only to that compensation and those benefits earned by and vested in him as of the effective date of such termination,
calculated on a pro-rated basis. 

        5.    Benefits upon Termination of Employment without Cause

        In
the event of a termination without cause, Employer shall pay to Employee all salary that would have become due through the end of the Employment Term as if the termination had not
occurred, plus, at Employee's election, Employer will either (a) pay on behalf of Employee his COBRA premiums for Employee's maintenance of his then-current health and medical
benefits through the end of the Employment Term, or (b) pay to Employee a sum equal to the aggregate premiums that would be payable under COBRA had Employee elected COBRA for maintenance of his
then current health and medical benefits through the end of the Employment Term In addition, in the event of a termination without Cause, Employer shall pay to Employee the bonus described in
Section E.2 below in accordance with the schedule and subject to the conditions specified in that Section as if Employee had remained an employee of Employer through the end of the Employment
Term, provided Employee continuously remains a member of Employer's Board of Directors between the date hereof and the end of Employer's fiscal quarter which is the subject of the public announcement
described in Section E.2 below, and provided further that Employee attends (in person or via teleconference) no fewer than 75% of Board meetings that take place during such period. In addition,
Employer stock option grant no. 253 dated November 5, 2001 for 600,000 shares of Employer stock, a copy of which is attached hereto as Exhibit A ("Option Grant 253"), shall vest
in full immediately upon the effective date of such termination without Cause. Other than the terms described in this paragraph, Employer shall have no further obligation to pay 

3

 

Employee any other compensation or benefits whatsoever in the event of termination without Cause. 

        6.    Cooperation with Employer at Termination of Agreement

        Following
the termination of this Agreement by either party, Employee shall cooperate fully with Employer in all matters relating to providing for an orderly transition of all his
pending work on behalf of Employer. 

        7.    Effect of Merger, Consolidation or Sale

        In
the event of a merger or consolidation of Employer with any other entity, the divestiture by Employer of a major portion of its assets, business or good will, or any other corporate
reorganization involving Employer, this Agreement may be assigned or transferred to the successor in interest as an asset of Employer upon the assignee's assuming Employer's obligation and in the
discretion of the successor in interest, subject to section 8 below. In that event, Employee agrees to continue to perform his duties and discharge his responsibilities according to the terms
of this Agreement for such successor in interest, subject to Section 8 below. In the event that of any such transaction which is a sale, exchange or other disposition of substantially all of
the assets or outstanding common shares of Employer at an implied enterprise value of not less than $1.25 per outstanding common share, then Employer or its successor shall pay to Employee the bonus
described in Section E.2 below. 

        8.    Benefits Upon Severance Termination

        In
the event of a Severance Termination of Employee (as defined in Option Grant 253), Employer shall pay to Employee all salary that would have become due through the end of the
Employment Term if the Severance Termination had not occurred, plus a sum equal to the aggregate premiums payable under COBRA for Employee's maintenance of his then-current health and
medical benefits through the end of the Employment Term. In addition, Employee shall receive one (1) year of additional vesting, in addition to any vesting acceleration provided under
section 11(c) of Employer's 1996 Stock Option Plan, on the Termination Date (as defined in Option Grant 253) of any Severance Termination of Employee; such additional vesting shall apply to all
600,000 shares subject to Option Grant 253 notwithstanding the second paragraph under "Acceleration Upon Severance Termination" in Option Grant 253. Other than the terms described in this paragraph,
Employer shall have no further obligation to pay Employee any other compensation or benefits whatsoever in the event of a Severance Termination. 

        9.    Assignment

        The
rights and obligations of the Employee under this Agreement are not assignable except to the extent set forth in paragraph 7 hereof. Any attempt to assign such rights and
obligations, in whole or in part, will be void and of no effect unless prior written consent of Employee is obtained. The rights and obligations of Employer may be assigned or transferred without the
consent of the Employee. 

        E.    COMPENSATION AND BENEFITS OF EMPLOYEE

        1.    Salary

        As
compensation for his services hereunder, Employee shall receive a salary at the rate of Sixty Two Thousand Five Hundred Dollars ($62,500) per annum. 

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        2.    Bonus

        In
addition to such salary, Employee shall receive a bonus of Sixty Two Thousand Five Hundred Dollars ($62,500) upon any public announcement by Employer that it has achieved positive net
income on a GAAP basis for its fiscal quarter ending August 31, 2003 or any prior fiscal quarter, provided Employee has remained an employee of Employer through the end of such fiscal quarter.
Any such bonus shall accrue on the last day of such fiscal quarter and shall be due and payable to Employee within thirty (30) after the public announcement. 

        3.    Benefits

        During
the Employment Term, Employee shall remain entitled to the same benefits that Employer provides to its other senior executives. As of the date hereof, such benefits include
medical, dental and vision coverage for the Employee and his dependents; long term disability insurance; term life insurance; a 401(k) plan; an employee stock purchase plan; and flexible spending
account programs for health care and dependent care. Notwithstanding the foregoing, if Employee relocates to a location in which Employer has not contracted for health insurance coverage, Employer
shall reimburse Employee's reasonable premiums for health insurance coverage for himself and his dependents in such location during the Employment Term, up to the same percentage at which Employer
pays the health insurance premiums of its other executives. In addition, upon commencement of the Employment
Term, Employee shall receive a payment for accrued and unused vacation up to the last day of his employment prior to the commencement of the Employment Term (less applicable withholdings). 

        F.    ARBITRATION OF CONTROVERSIES

        Employee
agrees that any and all past or present disputes with anyone (including Employer and any employee, officer, director, shareholder or benefit plan of Employer in their capacity
as such or otherwise) arising out of, relating to, or resulting from Employee's employment with Employer or the termination of Employer's employment with Employer shall be subject to binding
arbitration held in San Francisco City and County, California, under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including
section 1283.05 (the "Rules") and pursuant to California law. 

        Disputes
which Employee agrees to arbitrate include any potential claims of harassment, discrimination or wrongful termination and any statutory claims. Employee understand that this
Agreement to arbitrate, the Rules and California law also apply to any disputes which Employer may have with Employer. 

        Any
arbitration will be held before an arbitrator from a list provided by JAMS (Judicial Arbitration and Mediation Service) Endispute. To initiate arbitration, Employee may either
contact Employer's Human Resources Department for a form or contact JAMS directly. To choose an arbitrator, each party to the arbitration will select five names from the list, and beginning with
Employee, will alternatively strike names from the list until a single arbitrator is remaining who is available to decide the dispute. Employer will pay for any administrative or hearing fees charged
by the arbitrator or JAMS. The arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions requesting that a judgment be awarded on any claims
raised in arbitration. Employee also agrees that the arbitrator shall have the power to award any remedies, including attorneys' fees and costs, available under applicable law. 

        In
addition to the right under the Rules to petition the court to confirm, correct or vacate the arbitrator's award, any party to the arbitration may appeal the arbitrator's award in any
appropriate court on any grounds which would exist for an appeal of a decision of a trial court sitting without a jury. 

5

 

        In
addition to the right under the Rules to petition the court for provisional relief, Employee agrees that any party may petition the court for injunctive relief, in lieu of or in
addition to arbitration proceedings, under any circumstances where an injunction (including a temporary restraining order) would be appropriate under state or federal law. 

        Employee
understands that this Agreement does not prohibit him from pursuing an administrative claim with a local, state or federal administrative body such as the Department of Fair
Employment and Housing, the Equal Employment Opportunity Commission or the workers' compensation board. 

        G.    GENERAL PROVISIONS

        1.    Notices

        Any
notices to be given under this Agreement by either party to the other may be effected by personal delivery in writing or by mail, registered or certified, postage prepaid with return
receipt requested, or by a national overnight courier. Mailed or couriered notices shall be addressed to the parties at the addresses appearing below their signatures and each party may change his
address by written notice, in accordance with this paragraph. Mailed notices shall be deemed communicated as of three (3) days after mailing; notices couriered overnight shall be deemed
communicated as of the next business day after mailing. 

        2.    Entire Agreement

        This
agreement supersedes any and all other agreements, either oral or in writing, express or implied, between the parties hereto with respect to the employment of Employee by Employer,
and contains all of the covenants and agreements between the parties with respect to such employment in any manner whatsoever. Without limiting the generality of the foregoing, this Agreement
expressly supersedes any Change of Control Severance Agreement between Employee and Employer, and any such Change of Control Severance Agreement shall cease to be of any force or effect beginning on
the date hereof. However, this Agreement shall supersede the December 9, 1998 Agreement only to the limited extent specified in paragraph C.5 above, shall supersede Option Grant 253 only
to the limited extent specified in paragraphs D.5 and D.8 above, and shall not supersede or otherwise affect the terms of any other stock option agreement in effect between Employer and Employee
immediately prior to the date hereof. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, oral or written, express or implied, with regard to
Employee's employment, have been made or intended by any party, or anyone acting on behalf of any party, which are not embodied herein and that no other agreement, statement, or promise regarding
employment, either oral or written, express or implied, not contained in this Agreement shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing and
signed by both parties. 

        3.    Partial Invalidity

        If
any provision of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force
without being impaired or invalidated in any way. 

        4.    Waiver of Breach

        A
waiver by either party of a breach of this Agreement by the other party shall neither constitute nor be construed as a waiver by that party of later similar breaches. 

6

 

        5.    Law Governing Agreement

        This
Agreement shall be governed by and construed in accordance with the laws of the State of California. 

        Executed
at Orinda, California on July 17, 2002. 

	 	 	EMPLOYER:

Intraware, Inc.
	

 	
 	

By:	
 	

/s/  PETER H. JACKSON      

        Executed
at Orinda, California on July 17, 2002. 

	 	 	EMPLOYEE:

Frost R. R. Prioleau
	

 	
 	

By:	
 	

/s/  FROST R. R. PRIOLEAU      
 (Employee Name)

7

   EXHIBIT A  

Option Grant 253  

INTRAWARE, INC.  

 1996 STOCK OPTION PLAN  

 STOCK OPTION AGREEMENT  

Unless
otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement. 

NOTICE OF STOCK OPTION GRANT  

        Frost Prioleau, 

        You
have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows: 

	Grant Number	 	253
	

Date of Grant	
 	

November 5, 2001
	

Vesting Commencement Date	
 	

November 5, 2001
	

Exercise Price per Share	
 	

$0.559
	

Total Number of Shares Granted	
 	

600,000
	

Total Exercise Price	
 	

$335,400
	

Type of Option:	
 	

        Incentive Stock Option
	

 	
 	

X    Nonstatutory Stock Option
	

Term/Expiration Date:	
 	

November 5, 2011

 Vesting Schedule:  

        This Option may be exercised, in whole or in part, in accordance with the following schedule: 

        1/24th
of the Shares subject to the Option shall vest each month, beginning in November 2001, subject to the Optionee continuing to be an Employee or Consultant on such dates. 

 Acceleration Upon Severance Termination:  

        As to 450,000 of the Shares subject to the Option, the Optionee shall receive one (1) year of additional vesting, in addition to any vesting acceleration
provided under section 11(c) of the Plan, on the Termination Date (as defined below) of any Severance Termination (as defined below) of the Optionee. 

        As
to 150,000 of the Shares subject to the Option, the Optionee shall receive one (1) year of additional vesting, in addition to any vesting acceleration provided under
section 11(c) of the Plan, on the Termination Date of any Severance Termination of the Optionee, provided that the applicable Change of Control (as defined below) is pursuant to a sale,
exchange or other disposition of substantially all of the assets or outstanding common shares of the Company at an implied enterprise value of not less than $1.25 per outstanding common share. 

1

 

        Any
successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be
required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and/or assets which
executes and delivers the assumption agreement described in this paragraph or which becomes bound by the terms of this Agreement by operation of law. 

        As
used herein: 

        "Cause"
shall mean (i) any act of personal dishonesty taken by the Optionee in connection with his responsibilities as an employee and intended to result in substantial personal
enrichment of the Optionee, (ii) the conviction of a felony, (iii) a willful act by the Optionee that constitutes gross misconduct and that is injurious to the Company, or
(iv) for a period of not less than thirty (30) days following delivery to the Optionee of a written demand for performance from the Company that describes the basis for the Company's
belief that the Optionee has not substantially performed his duties, continued violations by the Optionee of the Optionee's obligations to the Company that are demonstrably willful and deliberate on
the Optionee's part. Any dismissal for cause in accordance with Subsection (iv) of the preceding sentence must be approved by the Board prior to the dismissal date. 

        "Change
of Control" means the occurrence of any of the following events: 

          (i)  Any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the "beneficial owner" (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then
outstanding voting securities; 

        (ii)  A
change in the composition of the Board occurring within a twelve-month period, as a result of which fewer than a majority of the directors are Incumbent Directors.
"Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with
an actual or threatened proxy contest relating to the election of directors to the Company); 

        (iii)  The
consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the voting
securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or such
surviving entity's parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or such surviving entity's parent
outstanding immediately after such merger or consolidation; 

        (iv)  The
consummation of the sale or disposition by the Company of all or seventy-five percent (75%) or more of the Company's assets. 

        "Involuntary
Termination" shall mean (i) without the Optionee's express written consent, the significant reduction of the Optionee's duties, authority or responsibilities,
relative to the Optionee's duties, authority or responsibilities as in effect immediately prior to such reduction, or the assignment to Optionee of such reduced duties, authority or responsibilities;
(ii) without the Optionee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to
the Optionee immediately prior to such reduction; (iii) a reduction by the Company in the base salary or target bonus of the Optionee as in effect 

2

 

immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits, including bonuses, to which the Optionee was entitled immediately prior
to such reduction with the result that the Optionee's overall benefits package is significantly reduced; (v) the relocation of the Optionee to a facility or a location more than
twenty-five (25) miles from the Optionee's then present location, without the Optionee's express written consent; (vi) any purported termination of the Optionee by the
Company that is not effected for Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; (vii) the failure of the Company to obtain the assumption
of this Agreement by any successors contemplated herein; or (viii) any act or set of facts or circumstances that would, under California case law or statute constitute a constructive
termination of the Optionee. 

        "Severance
Termination" means a termination of the Optionee's employment with the Company as a result of Involuntary Termination other than for Cause at any time after the announcement
of a Change of Control or twelve (12) months following a Change of Control or the announcement of a Change of Control, whichever comes later. 

        "Termination
Date" shall mean (i) if the Optionee's employment is terminated by the Company, the date on which a notice of termination is given, provided that if within thirty
(30) days after the Company gives the Optionee notice of termination, the Optionee notifies the Company that a dispute exists concerning the termination or the benefits due pursuant to this
Agreement, then the Termination Date shall be the date on which such dispute is finally determined, either by mutual written agreement of the parties, or a by final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected), or (ii) if the Agreement is terminated by the Optionee, the date on which the
Optionee delivers the notice of termination to the Company. 

 Termination Period:  

        This Option may be exercised for three months after Optionee ceases to be an Employee or Consultant. Upon the death or Disability of the Optionee, this Option may
be exercised for twelve months after Optionee ceases to be an Employee or Consultant. In no event shall this Option be exercised later than the Term/Expiration Date as provided above. 

AGREEMENT  

        A.    Grant of Option. 

        The
Plan Administrator of the Company hereby grants to the Optionee named in the Notice of Grant attached as Part I of this Agreement (the "Optionee") an option (the "Option") to
purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the "Exercise Price"), subject to the terms and conditions of the
Plan, which is incorporated herein by reference. Subject to Section 13 of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this
Option Agreement, the terms and conditions of the Plan shall prevail. 

        If
designated in the Notice of Grant as an Incentive Stock Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However,
if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO"). 

3

 

        B.    Exercise of Option. 

        (a)  Right to Exercise. This Option is exercisable during its term in accordance with the Vesting Schedule set out in the
Notice of Grant and the applicable provisions of the Plan and this Option Agreement. 

        (b)  Method of Exercise. This Option is exercisable by delivery of an exercise notice, in the form attached as
Exhibit A (the "Exercise Notice"), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be completed by the Optionee and delivered to the Stock
Administrator of the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt
by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price. 

        No
Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the Option is exercised with respect to such Exercised Shares. 

        C.    Method of Payment. 

        Payment
of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee: 

        1.    cash;
or 

        2.    check;
or 

        3.    consideration
received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; or 

        4.    surrender
of other Shares which (i) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six (6) months
on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares. 

        D.    Non-Transferability of Option. 

        This
Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by the
Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 

        E.    Term of Option. 

        This
Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option
Agreement. 

        F.    Tax Consequences. 

        Some
of the federal tax consequences relating to this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS
ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES. 

4

 

        G.    Exercising the Option.

        1.    Nonstatutory Stock Option. The Optionee may incur regular federal income tax liability upon exercise of a NSO. The
Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Exercised Shares on the date of
exercise over their aggregate Exercise Price. If the Optionee is an Employee or a former Employee, the Company will be required to withhold from his or her compensation or collect from Optionee and
pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares
if such withholding amounts are not delivered at the time of exercise. 

        2.    Incentive Stock Option. If this Option qualifies as an ISO, the Optionee will have no regular federal income tax liability
upon its exercise, although the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price will be treated as an adjustment to
alternative minimum taxable income for federal tax purposes and may subject the Optionee to alternative minimum tax in the year of exercise. In the event that the Optionee ceases to be an Employee but
remains a Service Provider, any Incentive Stock Option of the Optionee that remains unexercised shall cease to qualify as an Incentive Stock Option and will be treated for tax purposes as a
Nonstatutory Stock Option on the date three (3) months and one (1) day following such change of status. 

        3.    Disposition of Shares. 

        (a)  NSO. If the Optionee holds NSO Shares for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes. 

        (b)  ISO. If the Optionee holds ISO Shares for at least one year after exercise and two years after the grant date, any gain
realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. If the Optionee disposes of ISO Shares within one year after exercise or
two years after the grant date, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the lesser of
(A) the difference between the Fair Market Value of the Shares acquired on the date of exercise and the aggregate Exercise Price, or (B) the difference between the sale price of such
Shares and the aggregate Exercise Price. Any additional gain will be taxed as capital gain, short-term or long-term depending on the period that the ISO Shares were held. 

        (c)  Notice of Disqualifying Disposition of ISO Shares. If the Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to an ISO on or before the later of (i) two years after the grant date, or (ii) one year after the exercise date, the Optionee shall immediately notify the Company in
writing of such disposition. The Optionee agrees that he or she may be subject to income tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares
by payment in cash or out of the current earnings paid to the Optionee. 

        H.    Entire Agreement; Governing Law. 

        The
Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in
their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means
of a writing signed by the Company and Optionee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of California. 

5

 

        I.    NO GUARANTEE OF CONTINUED SERVICE. 

        OPTIONEE
ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY
(AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER
AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND
SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS AN EMPLOYEE OR CONSULTANT AT ANY TIME, WITH OR WITHOUT CAUSE. 

By
your signature and the signature of the Company's representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this
Option Agreement. Optionee has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully
understands all provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions
relating to the Plan and Option Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated below. 

	OPTIONEE:	 	INTRAWARE, INC.
	

/s/  FROST R. R. PRIOLEAU      
 Signature	
 	

/s/  JOHN J. MOSS      
 By
	

Frost R. R. Prioleau
 Print Name	
 	

John J. Moss
 Name
	

    
 Residence Address	
 	

Vice President and General Counsel
 Title
	

    
	
 	

 

6

   CONSENT OF SPOUSE  

The
undersigned spouse of Optionee has read and hereby approves the terms and conditions of the Plan and this Option Agreement (Grant # 253). In consideration of the Company's granting his or her
spouse the right to purchase Shares as set forth in the Plan and this Option Agreement, the undersigned hereby agrees to be irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be similarly bound. The undersigned hereby appoints the undersigned's spouse as attorney-in-fact for the
undersigned with respect to any amendment or exercise of rights under the Plan or this Option Agreement. 

	 	 	/s/  MARTHA PRIOLEAU      
 Spouse of Optionee

1

   EXHIBIT A

INTRAWARE, INC.

1996
STOCK OPTION PLAN 

EXERCISE
NOTICE 

Intraware, Inc.

25 Orinda Way

Orinda, California 94563 

Attention:    Stock
Administrator 

        1.    Exercise of Option. Effective as of today,                        ,
            , the undersigned ("Purchaser") hereby elects
to purchase                        shares (the "Shares") of the Common Stock of Intraware, Inc. (the "Company") under and
pursuant to the 1996 Stock Option Plan (the "Plan") and the Stock Option
Agreement dated,            (the "Option Agreement"). The purchase price for the Shares shall be $            , as required by the
Option Agreement. 

        2.    Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price for the Shares. 

        3.    Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan and the
Option Agreement and agrees to abide by and be bound by their terms and conditions. 

        4.    Rights as Shareholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date of issuance, except as provided in Section 11 of the Plan. 

        5.    Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser's
purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares
and that Purchaser is not relying on the Company for any tax advice. 

        6.    Entire Agreement; Governing Law. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the
Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the
Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser's interest except by means of a writing signed by the Company 

1

 

and Purchaser. This agreement is governed by the internal substantive laws, but not the choice of law rules, of California. 

	Submitted by:	 	Accepted by:
	

PURCHASER:	
 	

INTRAWARE, INC.
	

    
 Signature	
 	

    
 By
	

    
 Print Name	
 	

Stock Administrator
 Its
	

Address:	
 	

Address:
	

    
    
	
 	

Intraware, Inc.

25 Orinda Way

Orinda, California 94563
	

 	
 	

    
 Date Received

2

QuickLinks

Exhibit 10.1

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