Document:

Exhibit 10.1

 

CONSENT AND AMENDMENT AGREEMENT

 

This Consent and Amendment
Agreement, dated March 14, 2004, is made by BayStar Capital II, L.P. (“BayStar”) in its capacity as the sole
holder of all of the outstanding shares of Series B Preferred Stock, par value
$0.0001 per share (the “Series B Shares”),
of Commerce One, Inc. (the “Company”),
and by and between BayStar and the Company in their capacities as parties to
the Securities Purchase Agreement, dated July 10, 2003 (the “Securities Purchase Agreement”), the
Registration Rights Agreement, dated July 10, 2003 (the “Registration Rights Agreement”) and related
warrants (the “Warrants”)(collectively,
the “Financing Agreements”).

 

WHEREAS:

 

A.            The Company and BayStar desire to amend certain
provisions of the Registration Rights Agreement to provide the Company with
ninety (90) additional days before BayStar can demand that the Company redeem
the Series B Shares for the failure of the Company to have the BayStar
Registration Statement (as defined below) declared effective by the Securities
and Exchange Commission.

 

B.            The Company and BayStar desire to amend the Registration
Delay Payments provisions provided for in the Registration Rights Agreement and
settle on compensation for all accrued penalties.

 

1.             BayStar, in its capacity as both
the sole holder of all of the outstanding Series B Shares and as a party to the
Financing Agreements, together with the Company, hereby agree and consent to
the amendment of:

 

(a)           Section 2a of the Registration Rights
Agreement by substituting the following for the last sentence of such section:

 

“The Company shall use its
reasonable best efforts to have the Registration Statement declared effective
on or before April 5, 2004 (the “Effectiveness
Deadline”) or, if sooner, as soon as practicable.  For the avoidance of doubt, the lack of
effectiveness of the Registration Statement prior to or on July 4, 2004 shall
not constitute a lapse or unavailability of the Registration Statement for
purposes of Section 3(b)(ii) of the Certificate of Designations.” and

 

(b)           Section 3a of the Registration Rights
Agreement by substituting the following for the first sentence of such section:

 

“The Company shall promptly
prepare and file with the SEC a Registration Statement with respect to the
Registrable Securities (but in no event later than the applicable Filing
Deadline) and use its reasonable best efforts to have the Registration
Statement relating to the Registrable Securities declared effective on or
before the Effectiveness Deadline or, if sooner, as soon as practicable.  For the avoidance of doubt, the lack of
effectiveness of the Registration Statement prior to or on July 4, 2004 shall
not constitute a lapse or unavailability of the Registration Statement for
purposes of Section 3(b)(ii) of the Certificate of Designations.”

 

 

2.             BayStar, in its capacity as a party
to the Financing Agreements, hereby waives its right to receive Registration
Delay Payments as contemplated in Section 2f of the Registration Rights
Agreement, and any interest or penalties thereon, whether accrued now or
accruing in the future, with respect to the failure of the Registration
Statement on Form S-3 (File No. 333-108144)(the “BayStar Registration Statement”) to be effective at any time
on or before July 4, 2004.

 

3.             In consideration of BayStar’s
consent and agreements hereunder, the Company hereby agrees to pay $200,000
(the “Cash Payment”) to BayStar
and to issue to BayStar shares of its common stock, $.0001 par value per share,
having an aggregate fair market value of $947,000 (the “Common Shares”).  The Company shall make the Cash Payment to BayStar by wire
transfer on or before April 1, 2004.  In
the event that the Cash Payment is not paid in full on or before the April 1,
2004, simple interest shall accrue on the unpaid portion of the Cash Payment at
the maximum rate permitted by applicable law (but in no event more than 25% per
day).  In the event that the Cash
Payment is not paid in full on or prior to April 5, 2004, this Consent and
Amendment Agreement shall be null and void and have no further force and effect
(for purposes of clarification, the amendments as contemplated herein to the
Registration Rights Agreement shall not be effective) and the issuance of the
Common Shares shall be deemed to be a penalty and BayStar shall not have any
obligation to return such Common Shares. 
The fair market value of the Common Shares shall be determined based on
the average of the closing bid prices of the Company’s common stock on the
Nasdaq National Market for the five trading days immediately preceding the date
of this Consent and Amendment Agreement. 
The issuance of the Common Shares, and the delivery of the certificates
representing the Common Shares shall take place at a time and place to be
mutually agreed by the parties, but in no event later than five (5) business
days following the date hereof.

 

4.             Other than as set forth in the SEC
Documents (as defined below), the Company represents and warrants to BayStar
that (for the purposes of this Section 4, “knowledge”
of the Company shall mean the actual knowledge of the officers of the Company):

 

(a)           Organization and Qualification.  The Company and its “Subsidiaries” (which for purposes of this
Consent and Amendment Agreement means any entity in which the Company, directly
or indirectly, owns more than 50% of the capital stock or holds a more than 50%
equity or similar interest) are entities duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are organized,
and have the requisite corporate or other power and authorization to own their
properties and to carry on their business as now being conducted.  Each of the Company and its Subsidiaries is
duly qualified as a foreign entity to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
reasonably be expected to have a Material Adverse Effect.  As used in this Consent and Amendment
Agreement, “Material Adverse Effect”
means any material adverse effect on the business, properties, assets,
operations, results of operations or condition (financial or otherwise) of the
Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be entered into in
connection

 

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herewith, or on the authority or ability of the
Company to perform its obligations under this Consent and Amendment Agreement.

 

(b)           Authorization; Enforcement; Validity.  The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Consent and Amendment Agreement and to issue the Common Shares in accordance
with the terms hereof.  The execution
and delivery of the Consent and Amendment Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby, including,
without limitation, the issuance of the Common Shares and the Cash Payment,
have been duly authorized by the Company’s Board of Directors and no further
consent or authorization is required by the Company, its Board of Directors or
its stockholders.  This Consent and
Amendment Agreement has been duly executed and delivered by the Company, and
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of applicable creditors’ rights and
remedies.

 

(c)           Issuance of Common Shares.  The Common Shares are duly authorized and,
upon issuance in accordance with the terms hereof, shall be validly issued,
free from all documentary stamp, transfer or similar taxes (provided that such
taxes shall be limited to United States federal taxes, state taxes and taxes of
the jurisdiction of incorporation of the Company), liens and charges with
respect to the issue thereof (other than restrictions on transfer under federal
and state securities laws and other agreements between the Company and BayStar).  Assuming the accuracy of each of the
representations and warranties of Buyer contained in Section 4, the issuance by
the Company of the Common Shares is exempt from registration under the
Securities Act of 1933, as amended (the “Act”).

 

(d)           No Conflicts. 
The execution, delivery and performance of this Consent and Amendment
Agreement, by the Company and the consummation by the Company of the
transactions contemplated hereby (including, without limitation, the issuance
of the Common Shares and the Cash Payment) will not (i) result in a violation
of the certificate of incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock or bylaws
of the Company or any Subsidiary, (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a violation
of any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Nasdaq National Market) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected.

 

(e)           Consents. 
All consents, authorizations, orders, filings and registrations which
the Company is required to obtain to execute, deliver or perform any of its
obligations under or contemplated by this Consent and Amendment Agreement in
accordance with its

 

3

 

terms have been obtained or effected on or
prior to the date hereof.  The Company
and its Subsidiaries are unaware of any facts or circumstances which might
reasonably be expected to prevent the Company from obtaining or effecting any
of the foregoing.  The Company is not to
its knowledge in violation of the listing requirements of the Nasdaq National
Market and has no knowledge of any facts which would reasonably lead to
delisting or suspension of its Common Stock in the foreseeable future.

 

(f)            No Material Misstatements or Omissions.  The information provided by the Company to
BayStar in connection with the transactions contemplated by this Consent and
Amendment Agreement, together with the Company’s Form 10-K for the year ended
December 31, 2002, and all subsequent filings by the Company with the
Securities and Exchange Commission (the “SEC
Filings”), does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make such information, in light
of the circumstances under which it was provided, not misleading.

 

5.             BayStar hereby represents to the
Company that: (a) it is an “accredited” investor within the meaning of the Act,
(b) it is acquiring the Common Shares for investment purposes without a view to
a distribution therof in violation of the Act, (c) it has received all
information that it has requested from the Company in connection with the
transactions contemplated by this Consent and Amendment Agreement, (d) it is
aware that the Common Shares are subject to restrictions on resale under
federal and state securities laws and the certificate representing such shares
will bear legends to that effect, (e) it understands that the Company is
relying on its representations and warranties contained herein to determine, in
part, the exemption from registration for the transactions contemplated by this
Consent and Amendment Agreement, (f) this Consent and Amendment Agreement has
been duly and validly authorized, executed and delivered on behalf of BayStar
and represents the legal, valid and binding obligation of BayStar, enforceable
against BayStar in accordance with its terms, except as such enforceability may
be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies, (g) the execution, delivery and performance of Consent and
Amendment Agreement by BayStar and the consummation by BayStar of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the constituent documents of Baystar or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any material agreement, indenture or instrument to which
BayStar is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree applicable to BayStar or by which any
property or asset of BayStar is bound or affected, except in the case of
clauses (ii) and (iii), for such breaches or defaults as would not be
reasonably expected to have a material adverse effect on such BayStar ability
to consummate the transactions contemplated hereby.

 

4

 

6.             The following paragraphs of Section 9 of the Securities
Purchase Agreement shall be deemed to be separately contained in the Consent
and Amendment Agreement as if included herein in a manner applicable to this
Consent and Amendment Agreement: (a)(Governing Law; Jurisdiction; Jury Trial);
(b)(Counterparts);  (c)(Headings);
(d)(Severability); (f)(Notices); (g)(Successors and Assigns); (h)(No Third
Party Beneficiaries); (j)(Further Assurances); (k)(Indemnification); (l)(No
Strict Construction); (m)(Remedies); (n) Payment Set Aside) and (o)(Independent
Nature of Buyer’s Obligations and Rights).

 

IN WITNESS WHEREOF, Commerce One and BayStar
each hereby execute this Consent and Amendment Agreement on the date first
appearing above.

 

	
  Commerce
  One, Inc.

  
	
   

  
	
  By:

  	
  /s/  Charles Boynton

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Charles Boynton

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  CFO

  	
   

  
	
   

  	
   

  	
   

  
	
  BayStar
  Capital II, L.P.

  
	
   

  
	
  By BayStar Capital
  Management, LLC,its

  General Partner

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/  Steve Lamar

  	
   

  
	
  Name: Steve Lamar

  
	
  Title: Managing Member

  
					

 

 

SIGNATURE PAGE TO CONSENT AND AMENDMENT AGREEMENT

 

5Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION
RIGHTS AGREEMENT (this “Agreement”),
dated as of March 14, 2004, by and among Commerce One, Inc., a Delaware
corporation, with headquarters located at 4440 Rosewood Dr., Pleasanton,
CA  94588 (the “Company”), and BayStar Capital II, L.P.
(the “Investor”).

 

WHEREAS:

 

A.            In connection with the Consent and
Amendment Agreement by and between the parties hereto of even date herewith
(the “Amendment Agreement”), the
Company has agreed, upon the terms and subject to the conditions of the
Amendment Agreement, to issue to the Investor that number of shares of the
Company’s common stock, par value $0.0001 per share (the “Common Stock”) having an aggregate fair
market value of $947,000 as calculated in the Amendment Agreement (such shares
of Common Stock, the “Common Shares”);
and

 

B.            To induce the
Investor to execute and deliver the Amendment Agreement, the Company has agreed
to provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the “1933
Act”), and applicable state securities laws.

 

C.    The location of defined terms in this
Agreement is set forth on the Index of Terms attached hereto.

 

NOW, THEREFORE,
in consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and each of the Investors hereby agree as
follows:

 

1.               Definitions.

 

As used in
this Agreement, the following terms shall have the following meanings:

 

a.     “Business
Day” means any day other than Saturday, Sunday or any other day on
which commercial banks in The City of New York are authorized or required by
law to remain closed.

 

b.     “Investor”
means the Investor, any permitted transferee or assignee thereof to whom the
Investor assigns its rights under this Agreement in connection with a transfer
of Registrable Securities and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9 and any permitted transferee or
assignee thereof to whom a transferee or assignee assigns its rights under this
Agreement in connection with a transfer of Registrable Securities and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9.

 

c.     “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and  governmental or any department or agency
thereof.

 

1

 

d.     “register,”
“registered,” and “registration” refer to a registration
effected by preparing and filing one or more Registration Statements (as
defined below) in compliance with the 1933 Act and pursuant to Rule 415 under
the 1933 Act or any successor rule providing for offering securities on a
continuous or delayed basis (“Rule 415”),
and the declaration or ordering of effectiveness of such Registration
Statement(s) by the United States Securities and Exchange Commission (the “SEC”).

 

e.     “Registrable
Securities” means the Common Shares and any shares of capital stock
issued or issuable with respect to the Common Shares as a result of any stock
split, stock dividend, recapitalization, exchange or similar event or
otherwise.

 

f.      “Registration
Statement” means a registration statement or registration statements
of the Company filed under the 1933 Act covering the Registrable Securities.

 

Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Amendment Agreement.

 

2.               Registration.

 

a.     Mandatory Registration.  The Company shall prepare, and, as soon as
practicable but in no event later than 20 days after the date hereof (the “Filing Deadline”), file with the SEC the
Registration Statement on Form S-3 covering the resale of all of the
Registrable Securities.  In the event
that Form S-3 is unavailable for such a registration, the Company shall use
such other form as is available for such a registration, subject to the
provisions of Section 2(d); provided that the Company represents and warrants
that it is currently eligible to register the Registrable Securities on Form
S-3 and knows of no reason why it will not be eligible to so register the
Registrable Securities on Form S-3 on or before the Filing Deadline and on or
before the Effectiveness Deadline.  The
Registration Statement prepared pursuant hereto shall register for resale at
least 500,000 shares of Common Stock. 
The Company shall use its reasonable best efforts to have the
Registration Statement declared effective by the SEC as soon as practicable,
but in no event later than the date which is 120 days after the date hereof
(the “Effectiveness Deadline”).

 

b.     Allocation of Registrable Securities.  The initial number of Registrable Securities
included in any Registration Statement and each increase in the number of
Registrable Securities included therein shall be allocated pro rata among the
Investors based on the number of Registrable Securities held by each Investor
at the time the Registration Statement covering such initial number of
Registrable Securities or increase thereof is declared effective by the
SEC.  In the event that an Investor
sells or otherwise transfers any of such Investor’s Registrable Securities,
each transferee shall be allocated a pro rata portion of the then remaining
number of Registrable Securities included in such Registration Statement for
such transferor.  Any shares of Common
Stock included in a Registration Statement and which remain allocated to any
Person which ceases to hold any Registrable Securities covered by such
Registration Statement shall be allocated to the remaining Investors, pro rata
based on the number of Registrable Securities then held by such Investors which
are covered by such Registration Statement. 
The Company may include securities other than Registrable Securities on
any Registration Statement to the extent

 

2

 

the Company is contractually obligated to do
so pursuant to registration rights obligations in existence prior to the date
of this Agreement.

 

c.     Legal Counsel.  Subject to Section 5 hereof, the Investors
holding at least a majority of the Registrable Securities shall have the right
to select one legal counsel to review and oversee any offering pursuant to this
Section 2 (“Legal Counsel”), which
shall be Schulte Roth & Zabel LLP or such other counsel as thereafter
designated by the holders of at least a majority of the Registrable
Securities.  The Company and Legal
Counsel shall reasonably cooperate with each other in performing the Company’s
obligations under this Agreement.

 

d.     Ineligibility for Form S-3.  In the event that Form S-3 is not  available for the registration of the resale
of Registrable Securities hereunder, the Company shall (i) register the resale
of the Registrable Securities on another appropriate form reasonably acceptable
to the holders of at least a majority of the Registrable Securities and (ii) undertake
to register the Registrable Securities on Form S-3 as soon as such form is
available, provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.

 

e.     Sufficient Number of Shares Registered.  In the event the number of shares available
under a Registration Statement filed pursuant to Section 2(a) is insufficient
to cover all of the Registrable Securities required to be covered by such
Registration Statement or an Investor’s allocated portion of the Registrable
Securities pursuant to Section 2(b), the Company shall amend the Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover at least the number of such
Registrable Securities as of the trading day immediately preceding the date of
the filing of such amendment or new Registration Statement, in each case, as
soon as practicable, but in any event not later than fifteen (15) days after
the necessity therefor arises.  The
Company shall use its reasonable best efforts to cause such amendment and/or
new Registration Statement to become effective as soon as practicable following
the filing thereof.

 

f.      Effect of Failure to File and Obtain
and Maintain Effectiveness of Registration Statement.  If (i) a Registration Statement covering all
the Registrable Securities and required to be filed by the Company pursuant to
this Agreement is not declared effective by the SEC on or before the
Effectiveness Deadline or (ii) on any day after the Registration Statement has
been declared effective by the SEC and prior to the termination of the
Registration Period sales of all the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined in Section 3(r)) pursuant to the
Registration Statement (including, without limitation, because of a failure to
keep the Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to the Registration Statement or to
register sufficient shares of Common Stock), then, as partial relief for the
damages to any holder by reason of any such delay in or reduction of its
ability to sell the underlying shares of Common Stock (which remedy shall not
be exclusive of any other remedies available at law or in equity), the Company
shall pay to each holder of Common Shares relating to such Registration
Statement an amount in cash per such Common Share held equal to the product of
(i) $1.894 multiplied by (ii) the product of (I) .0005 multiplied by (II) the
sum of (x) the number of days after the Effectiveness Deadline that the
Registration

 

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Statement is not declared effective by the
SEC, plus (y) the number of days after the Registration Statement has been
declared effective by the SEC that such Registration Statement is not available
(other than during an Allowable Grace Period) for the sale of at least all the
Registrable Securities required to be included on such Registration
Statement.  The payments to which a
holder shall be entitled pursuant to this Section 2(f) are referred to herein
as “Registration Delay Payments.”  Registration Delay Payments shall be paid on
the earlier of (I) the last day of the calendar month during which such
Registration Delay Payments are incurred and (II) the third Business Day after
the event or failure giving rise to the Registration Delay Payments is
cured.  In the event the Company fails
to make Registration Delay Payments in a timely manner, such Registration Delay
Payments shall bear interest at the rate of 1.5% per month (prorated for
partial months) until paid in full.

 

3.     Related Obligations.

 

At such time
as the Company is obligated to file a Registration Statement with the SEC
pursuant to Section 2(a) or 2(e), the Company will use its reasonable best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, pursuant thereto, the
Company shall have the following obligations:

 

a.     The Company shall promptly prepare and file
with the SEC a Registration Statement with respect to the Registrable
Securities (but in no event later than the applicable Filing Deadline) and use
its reasonable best efforts to cause such Registration Statement relating to
the Registrable Securities to become effective as soon as practicable after
such filing (but in no event later than the Effectiveness Deadline).  The Company shall keep each Registration
Statement effective pursuant to Rule 415 at all times until the earlier of (i)
the date as of which the Investors may sell all of the Registrable Securities
covered by such Registration Statement without restriction pursuant to Rule
144(k) (or successor thereto) promulgated under the 1933 Act or (ii) the date
on which the Investors shall have sold all the Registrable Securities covered by
such Registration Statement (the “Registration
Period”), which Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein, or necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading.  The term “reasonable best efforts” shall
mean, among other things, that the Company shall submit to the SEC, within two
(2) Business Days after the Company learns that no review of a particular
Registration Statement will be made by the staff of the SEC or that the staff
has no further comments on the Registration Statement, as the case may be, and the
approval of Legal Counsel pursuant to Section 3(c), a request for acceleration
of effectiveness of such Registration Statement to a time and date not later
than 48 hours after the submission of such request.

 

b.     The Company shall prepare and file with the
SEC such amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as 

 

4

 

all of such Registrable Securities shall have
been disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof as set forth in such Registration Statement.  In the case of amendments and supplements to
a Registration Statement which are required to be filed pursuant to this
Agreement (including pursuant to this Section 3(b)) by reason of the Company filing
a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the “1934 Act”),
the Company shall have incorporated such report by reference into the
Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act report is filed
which created the requirement for the Company to amend or supplement the
Registration Statement.

 

c.     The Company shall (A) permit Legal Counsel
to review and comment upon (i) the Registration Statement at least five (5)
Business Days prior to its filing with the SEC and (ii) all other Registration
Statements and all amendments and supplements to all Registration Statements
(except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K and any similar or successor reports) within a
reasonable number of days prior to their filing with the SEC, and (B) not file
any Registration Statement or amendment or supplement thereto in a form to
which Legal Counsel reasonably objects. 
The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement or any amendment or supplement
thereto without the prior approval of Legal Counsel, which consent shall not be
unreasonably withheld.  The Company
shall furnish to Legal Counsel, without charge, (i) copies of any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, (ii) promptly after the
same is prepared and filed with the SEC, one copy of any Registration Statement
and any amendment(s) thereto and (iii) upon the effectiveness of any
Registration Statement, one copy of the prospectus included in such Registration
Statement and all amendments and supplements thereto.  The Company shall reasonably cooperate with Legal Counsel in
performing the Company’s obligations pursuant to this Section 3.

 

d.     The Company shall furnish to each Investor
whose Registrable Securities are included in any Registration Statement,
without charge,  (i) promptly after the
same is prepared and filed with the SEC, at least one copy of such Registration
Statement and any amendment(s) thereto and each preliminary prospectus, (ii)
upon the effectiveness of any Registration Statement, such number of copies of
the prospectus included in such Registration Statement and all amendments and
supplements thereto as such Investor may reasonably request and (iii) such
other documents, including copies of any preliminary or final prospectus, as
such Investor may reasonably request from time to time in order to facilitate
the disposition of the Registrable Securities owned by such Investor.

 

e.     The Company shall use its reasonable best
efforts to (i) register and qualify, unless an exemption from registration and
qualification applies, the resale by Investors of the Registrable Securities
covered by a Registration Statement under such other securities or “blue sky”
laws of all applicable jurisdictions in the United States, (ii) prepare and
file in those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take

 

5

 

all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such
jurisdiction.  The Company shall
promptly notify Legal Counsel and each Investor who holds Registrable
Securities of the receipt by the Company of any notification with respect to
the suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or “blue sky” laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.

 

f.      The Company shall notify Legal Counsel and
each Investor in writing, including via facsimile or e-mail, of the happening
of any event, as promptly as practicable after becoming aware of such event, as
a result of which the prospectus included in a Registration Statement, as then
in effect, includes an untrue statement of a material fact or omission to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and, subject to Section 3(r), promptly
prepare a supplement or amendment to such Registration Statement to correct
such untrue statement or omission, and deliver such number of copies as Legal
Counsel or such Investor may reasonably request.  The Company shall also promptly notify Legal Counsel and each
Investor in writing, including via facsimile or e-mail, (i) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and
when a Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Investor by facsimile or e-mail on the same day of such
effectiveness), (ii) of any request by the SEC for amendments or supplements to
a Registration Statement or related prospectus or related information, and
(iii) of the Company’s reasonable determination that a post-effective amendment
to a Registration Statement would be appropriate.

 

g.     The Company shall use its reasonable best
efforts to prevent (except by the Company during an Allowable Grace Period) the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and each Investor who
holds Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.

 

h.     If any Investor is required under
applicable securities law to be described in the Registration Statement as an
underwriter, at the reasonable request of such Investor, the Company shall
furnish to such Investor, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as an Investor may
reasonably request (i) a letter, dated such date, from the Company’s
independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the Investors, and (ii) an
opinion, dated as of such date, of counsel representing the Company for
purposes of such

 

6

 

Registration Statement, in form, scope and
substance as is customarily given in an underwritten public offering, addressed
to the Investors.

 

i.      Upon the written request of any Investor
in connection with any Investor’s due diligence requirements, if any, the
Company shall make available for inspection by (i) any Investor, (ii) Legal
Counsel and (iii) one firm of accountants or other agents retained by the
Investors (collectively, the “Inspectors”),
all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each
Inspector, and cause the Company’s officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall agree to hold in strict confidence and shall not make
any disclosure (except to an Investor) or use of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement or is otherwise required under the 1933
Act, (b) the release of such Records is ordered pursuant to a final,
non-appealable subpoena or order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement of which the Inspector has knowledge.  Each Investor agrees that it shall, upon learning that disclosure
of such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and
allow the Company, at its expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, the Records deemed confidential.  Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investors’ ability to sell Registrable Securities in a manner
which is otherwise consistent with applicable laws and regulations.

 

j.      The Company shall hold in confidence and
not make any disclosure of information concerning an Investor provided to the
Company unless (i) disclosure of such information is necessary to comply with
federal or state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other final, non-appealable order from a court or governmental body
of competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this Agreement
or any other agreement.  The Company
agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor’s expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.

 

k.     The Company shall use its reasonable best
efforts either to (i) cause all the Registrable Securities covered by a
Registration Statement to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed,
if any, if the listing of such Registrable Securities is then permitted under the
rules of such exchange, or (ii) secure designation and quotation of all the
Registrable Securities covered by the Registration Statement on the Nasdaq
National Market, or (iii) if, despite the Company’s reasonable best efforts to
satisfy the preceding clause (i) or (ii), the Company is unsuccessful in

 

7

 

satisfying the preceding clause  (i) or (ii), to secure the inclusion for
quotation on the Nasdaq SmallCap Market for such Registrable Securities and, without
limiting the generality of the foregoing, to use its reasonable best efforts to
arrange for at least two market makers to register with the National
Association of Securities Dealers, Inc. 
(“NASD”) as such with
respect to such Registrable Securities. 
The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(k).

 

l.      The Company shall cooperate with the
Investors who hold Registrable Securities being offered and, to the extent
applicable and in compliance with applicable securities laws, facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Investors may reasonably request and
registered in such names as the Investors may request.

 

m.    If requested by an Investor, the Company
shall (i) as soon as practicable incorporate in a prospectus supplement or
post-effective amendment such information as an Investor reasonably requests to
be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the number
of Registrable Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable Securities to
be sold in such offering; (ii) as soon as practicable make all required filings
of such prospectus supplement or post-effective amendment after being notified
of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii) as soon as practicable, supplement or make
amendments to any Registration Statement if reasonably requested by an Investor
holding any Registrable Securities.

 

n.     The Company shall use its reasonable best
efforts to cause the Registrable Securities covered by the Registration
Statement to be registered with or approved by such other governmental agencies
or authorities as may be necessary to consummate the disposition of such
Registrable Securities.

 

o.     The Company shall make generally available
to its security holders as soon as practical, but not later than 90 days after
the close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company’s
fiscal quarter next following the effective date of the Registration Statement.

 

p.     The Company shall otherwise use its
reasonable best efforts to comply with all applicable rules and regulations of
the SEC in connection with any registration hereunder.

 

q.     Within two (2) Business Days after a
Registration Statement which covers Registrable Securities is ordered effective
by the SEC, the Company shall deliver, and shall cause the general counsel for
the Company to deliver, to the transfer agent for such Registrable Securities
(with copies to the Investors whose Registrable Securities are included in

 

8

 

such Registration Statement) confirmation
that such Registration Statement has been declared effective by the SEC in the
form attached hereto as Exhibit A.

 

r.      Notwithstanding
anything to the contrary herein, the Company may suspend a Registration
Statement, if the Company shall furnish to the Investors a certificate signed
by the Chief Executive Officer of the Company stating that in the good faith
judgment of the Board of Directors it would be seriously detrimental to the
Company or its stockholders for such a registration statement not to be
suspended (a “Grace Period”).  In such event, the Company’s obligation
under this Agreement to keep a registration statement effective shall be
deferred for a Grace Period not to exceed 30 consecutive days during any 90 day
period, provided, that the Company may not exercise this right of deferral for
an aggregate of in excess of 75 days in any one year period (an “Allowable Grace Period”).  If the Company suspends the effectiveness of
a Registration Statement, the Company will promptly deliver notice to the
Investors of such suspension and will again deliver notice to the Investors
when such suspension is no longer necessary.  The Company shall not accrue any Registration Delay Payments
during an Allowable Grace Period.

 

4.     Obligations Of The Investors.

 

a.     At least five (5) Business Days prior to
the first anticipated filing date of a Registration Statement, the Company
shall notify each Investor in writing of the information the Company requires
from each such Investor if such Investor elects to have any of such Investor’s
Registrable Securities included in such Registration Statement.  It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it, as shall be reasonably
required to effect and maintain the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.

 

b.     Each Investor, by such Investor’s
acceptance of the Registrable Securities, agrees to cooperate with the Company
as reasonably requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such Investor has
notified the Company in writing of such Investor’s election to exclude all of
such Investor’s Registrable Securities from such Registration Statement.

 

c.     Each Investor agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 3(g), the first sentence of 3(f) or during an Allowable Grace
Period, such Investor will immediately discontinue disposition of Registrable
Securities pursuant to any Registration Statement(s) covering such Registrable
Securities until such Investor’s receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(g), the first sentence of 3(f) or
during an Allowable Grace Period or receipt of notice that no supplement or
amendment is required.  Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in accordance
with applicable securities laws and the terms of the Amendment Agreement, in
connection with any sale of Registrable

 

9

 

Securities with respect to which an Investor
has entered into a contract for sale prior to the Investor’s receipt of a
notice from the Company of the happening of any event of the kind described in
Section 3(g), the first sentence of 3(f) or during an Allowable Grace Period
and for which the Investor has not yet settled.

 

5.     Expenses Of Registration.

 

All reasonable
expenses, other than underwriting discounts and commissions, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of counsel for
the Company shall be paid by the Company. 
The Company shall also reimburse the BayStar Capital II, L.P. for the
fees and disbursements of Legal Counsel in connection with registrations,
filings or qualifications pursuant to Sections 2 and 3 of this Agreement which
amount shall be limited to $10,000 in the aggregate.

 

6.     Indemnification.

 

In the event
any Registrable Securities are included in a Registration Statement under this
Agreement:

 

a.     To the fullest extent permitted by law, the
Company will, and hereby does, indemnify, hold harmless and defend each
Investor, the directors, officers, partners, employees, agents, representatives
of, and each Person, if any, who controls any Investor within the meaning of
the 1933 Act or the 1934 Act (each, an “Indemnified
Person”), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, reasonable attorneys’ fees,
amounts paid in settlement or expenses, joint or several, (collectively, “Claims”) incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not an indemnified party is or may be
a party thereto (“Indemnified Damages”),
to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon:  (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
“blue sky” laws of any jurisdiction in which Registrable Securities are offered
(“Blue Sky Filing”), or the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the matters in the

 

10

 

foregoing clauses (i) through (iii) being,
collectively, “Violations”).  Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred
by them in connection with investigating or defending any such Claim.  Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
6(a):  (i) shall not apply to a Claim by
an Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person for such Indemnified Person expressly for
use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto, if such prospectus was timely
made available by the Company pursuant to Section 3(d); (ii) with respect to
any preliminary prospectus, shall not inure to the benefit of any such person
from whom the person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any person
controlling such person) if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 3(d), and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use giving
rise to a Violation and such Indemnified Person, notwithstanding such advice,
used it or failed to deliver the correct prospectus as required by the 1933 Act
and such correct prospectus was timely made available pursuant to Section 3(d);
(iii) shall not be available to the extent such Claim is based on a failure of
the Investor to deliver or to cause to be delivered the prospectus made
available by the Company, including a corrected prospectus, if such prospectus
or corrected prospectus was timely made available by the Company pursuant to
Section 3(d); and (iv) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld or delayed.  Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.

 

b.     In connection with any Registration
Statement in which an Investor is participating, each such Investor agrees to
severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the Registration
Statement each Person, if any, who controls the Company within the meaning of
the 1933 Act or the 1934 Act (each, an “Indemnified
Party”), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(c), such Investor will
reimburse any legal or other expenses reasonably incurred by an Indemnified
Party in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Investor

 

11

 

as a result of the sale of Registrable
Securities pursuant to such Registration Statement.  Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.  Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected on a timely
basis in the prospectus, as then amended or supplemented.

 

c.     Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 6 of notice of the commencement
of any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses of not more than
one counsel for such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding.  In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement
to which the Claim relates.  The
Indemnified Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or Claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or Claim.  The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto.  No indemnifying party shall be liable for
any settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent.  No indemnifying party shall, without the
prior written consent of the Indemnified Party or Indemnified Person, consent
to entry of any judgment or enter into any settlement or other compromise which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party or Indemnified Person of a release from all
liability in respect to such Claim or litigation.  Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party
or Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made.  The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this

 

12

 

Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.

 

d.     The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.

 

e.     The indemnity agreements contained herein
shall be in addition to  (i) any cause
of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

 

7.     Contribution.

 

To the extent
any indemnification by an indemnifying party is prohibited or limited by law,
the indemnifying party agrees to make the maximum contribution with respect to
any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that:  (i) no person involved in the sale of
Registrable Securities which person is guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) in connection with such
sale shall be entitled to contribution from any person involved in such sale of
Registrable Securities who was not guilty of fraudulent misrepresentation; and
(ii) contribution by any seller of Registrable Securities shall be limited in
amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities pursuant to such Registration Statement.

 

8.     Reports Under The 1934 Act.

 

Until the date
on which the Investors shall have sold all the Common Shares, with a view to
making available to the Investors the benefits of Rule 144 promulgated under
the 1933 Act or any other similar rule or regulation of the SEC that may at any
time permit the Investors to sell securities of the Company to the public
without registration (“Rule 144”),
the Company agrees to:

 

a.     make and keep public information available,
as those terms are understood and defined in Rule 144;

 

b.     file with the SEC in a timely manner all
reports and other documents required of the Company under the 1933 Act and the
1934 Act so long as the Company remains subject to such requirements and the
filing of such reports and other documents is required for the applicable
provisions of Rule 144; and

 

c.     furnish to each Investor so long as such
Investor owns Registrable Securities, promptly upon request, (i) a written
statement by the Company, if true, that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.

 

13

 

9.     Transfer Restrictions and Assignment of
Registration Rights.

 

a.     The Investor understands that: (i) except
as provided in the this Agreement, the Registrable Securities have not been and
are not being registered under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Investor shall have delivered to
the Company an opinion of counsel, in a form generally acceptable to the
Company, to the effect that such Registrable Securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such Investor shall have satisfied the requirements
of Rule 144(k) promulgated under the 1933 Act, as amended (or a successor rule
thereto); (ii) any sale of the Registrable Securities made in reliance on Rule
144 or Rule 144A promulgated under the 1933 Act, as amended (or a successor
rule thereto) (collectively, “Rule 144”),
may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Registrable Securities under
circumstances in which the seller (or the Person (as defined in Section 1(c))
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other Person is under any obligation to
register the Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.  The Registrable Securities may be pledged in
connection with a bona fide margin account or other bona fide loan secured by
the Registrable Securities and such pledge of Registrable Securities shall not
be deemed to be a transfer, sale or assignment of the Registrable Securities
hereunder, and the Investor effecting a pledge of Registrable Securities shall
be required to provide the Company with any notice thereof or otherwise make
any delivery to the Company pursuant to this Agreement or the Amendment
Agreement , including, without limitation, this Section 9a.; provided,
that in order to make any sale, transfer or assignment of Registrable
Securities, such Investor and its pledgee makes such disposition in accordance
with or pursuant to a registration statement or an exemption under the 1933
Act.  Notwithstanding the foregoing, no
Investor shall transfer any Registrable Securities other than to an affiliate
of such Investor.

 

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

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF

 

14

 

COUNSEL, IN A
FORM GENERALLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT
TO RULE 144 OR RULE 144A UNDER SAID ACT. 
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER BONA FIDE LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.

 

c.     The rights under this Agreement shall be
automatically assignable by the Investors to any transferee of Registrable
Securities if:  (i) the Investor agrees
in writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment; (ii) the Company is furnished with written notice of (a) the name
and address of such transferee or assignee, and (b) the securities with respect
to which such registration rights are being transferred or assigned; (iii)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the 1933 Act
and applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; and (v) such transfer shall have been made in
accordance with the applicable securities laws and the transfer restrictions
set forth in this section 9.

 

10.   Amendment of Registration Rights.

 

Provisions of
this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
then hold at least a majority of the Registrable Securities.  Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.  No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Registrable Securities.  No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of this Agreement unless the
same consideration also is offered to all of the parties to this Agreement.

 

11.   Miscellaneous.

 

a.     A Person is deemed to be a holder of
Registrable Securities whenever such Person owns or is deemed to own of record
such Registrable Securities.  If the
Company receives conflicting instructions, notices or elections from two or
more Persons with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the such
record owner of such Registrable Securities.

 

b.     Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally; (ii) upon receipt,
when sent by facsimile (provided confirmation of transmission is mechanically
or electronically generated and kept on file by the sending party); or (iii)
one Business Day after deposit with a nationally

 

15

 

recognized overnight delivery service, in
each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such
communications shall be:

 

If to the
Company:

 

Commerce One,
Inc.

One Market
Street

Steuart Tower,
Suite 1300

San Francisco,
CA  94105

Telephone:            (415) 644-8700

Facsimile:               (415) 644-8750

Attention:              Chief Financial Officer

 

and a separate
notice to:

 

Commerce One,
Inc.

One Market
Street

Steuart Tower,
Suite 1300

San Francisco,
CA  94105

Telephone:            (415) 644-8700

Facsimile:               (415) 644-8799

Attention:              General Counsel

 

With a copy
to:

 

Wilson Sonsini
Goodrich & Rosati

650 Page Mill
Road

Palo Alto,
CA  94304

Telephone:            (650) 849-3223

Facsimile:               (650) 493-6811

Attention: N. Anthony Jeffries, Esq.

 

If to Legal
Counsel:

 

Schulte Roth
& Zabel LLP

919 Third
Avenue

New York, New
York 10022

Telephone:  (212) 756-2000

Facsimile:  (212) 593-5955

Attention:  Eleazer Klein, Esq.

 

If to an Investor, to its
address and facsimile number set forth on the Schedule of Investors attached
hereto, with copies to such Investor’s representatives as set forth on the
Schedule of Investors, or to such other address and/or facsimile number and/or
to the attention of such other person as the recipient party has specified by
written notice given to each other party five (5) days prior to the effectiveness
of such change.  Written confirmation of
receipt (A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or

 

16

 

electronically generated by the
sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by a
courier or overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

 

c.     Failure of any party to exercise any right
or remedy under this Agreement or otherwise, or delay by a party in exercising
such right or remedy, shall not operate as a waiver thereof.

 

d.     All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of Delaware, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of Delaware
or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Delaware.  Each party hereby irrevocably submits to the non- exclusive
jurisdiction of the state and federal courts sitting Delaware, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.  If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

e.     This Agreement and the Amendment Agreement
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. 
There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein.  This Agreement and the Amendment Agreement
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.

 

f.      Subject to the requirements of Section 9,
this Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.

 

g.     The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

 

17

 

h.     This Agreement may be executed in identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. 
This Agreement, once executed by a party, may be delivered to the other
party hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.

 

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

 

j.      All consents and other determinations
required to be made by the Investors pursuant to this Agreement shall be made,
unless otherwise specified in this Agreement, by Investors holding at least a
majority of the Registrable Securities.

 

k.     The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent
and no rules of strict construction will be applied against any party.

 

l.      This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns,
and is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.

 

* * * * * *

 

18

 

IN WITNESS
WHEREOF, the parties have caused this Registration Rights Agreement to be duly
executed as of day and year first above written.

 

 

	
  COMPANY:

  	
  INVESTOR:

  
	
   

  	
   

  
	
  COMMERCE ONE, INC.

  	
  BAYSTAR CAPITAL II, L.P.

  
	
   

  	
   

  
	
   

  	
  By: BayStar
  Capital Management, LLC

  
	
  By:

  	
  /s/  Charles Boynton

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   /s/ 
  Steven M. Lamar

  
	
  Name:

  	
  Charles
  Boynton

  	
   

  	
   

  	
  Name:  Steven M. Lamar

  
	
   

  	
   

  	
   

  	
  Title:    Managing Member

  
	
  Title:

  	
  CFO

  	
   

  	
   

  	
   

  
							

 

 

SCHEDULE OF INVESTORS

 

 

	
  Investor

  	
   

  	
  Investor
  Address

  and Facsimile Number

  	
   

  	
  Investor’s
  Representative’s Address

  and Facsimile Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BayStar
  Capital II, L.P.

  	
   

  	
  c/o BayStar Capital
  Management, LLC

  80 E Sir Francis Drake Blvd.

  Suite 2B

  Larkspur, California 94939

  Attention:  Steven M. Lamar

  Facsimile:  (415) 834-4601

  Telephone: (415) 834-4620

  	
   

  	
  Schulte Roth & Zabel
  LLP

  919 Third Avenue
New York, NY 10022
Attn: 
  Eleazer Klein, Esq.
Facsimile:  (212) 593-5955
Telephone:  (212) 756-2000

  

 

 

INDEX OF TERMS

 

	
  1933 Act

  	
   

  
	
  1934 Act

  	
   

  
	
  Agreement

  	
   

  
	
  Allowable
  Grace Period

  	
   

  
	
  Amendment
  Agreement

  	
   

  
	
  Blue Sky
  Filing

  	
   

  
	
  Business Day

  	
   

  
	
  Investor

  	
   

  
	
  Claims

  	
   

  
	
  Common Stock

  	
   

  
	
  Company

  	
   

  
	
  Effectiveness
  Deadline

  	
   

  
	
  Filing
  Deadline

  	
   

  
	
  Grace Period

  	
   

  
	
  Indemnified
  Damages

  	
   

  
	
  Indemnified
  Party

  	
   

  
	
  Indemnified
  Person

  	
   

  
	
  Inspectors

  	
   

  
	
  Investor

  	
   

  
	
  Legal Counsel

  	
   

  
	
  NASD

  	
   

  
	
  Person

  	
   

  
	
  Records

  	
   

  
	
  Register

  	
   

  
	
  Registrable
  Securities

  	
   

  
	
  Registration
  Delay Payments

  	
   

  
	
  Registration
  Period

  	
   

  
	
  Registration
  Statement

  	
   

  
	
  Rule 144

  	
   

  
	
  Rule 415

  	
   

  
	
  SEC

  	
   

  
	
  Violations

  	
   

  

 

 

EXHIBIT A

 

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

 

 

EquiServe

150 Royall Street

Canton, MA 02021

Attention: Norris Richardson

 

Re:          Commerce One, Inc.

 

Ladies and Gentlemen:

 

I am the
General Counsel to Commerce One, Inc., a Delaware corporation (the “Company”), and have represented the Company
in connection with that certain Consent and Amendment Agreement (the “Amendment Agreement”) entered into by and
among the Company and the Investor named therein (the “Holder”) pursuant to which the Company
issued to the Holder shares of the Company’s Common Stock, par value $.0001  per share (the “Common Stock”). 
Pursuant to the Amendment Agreement, the Company also has entered into a
Registration Rights Agreement with the Holder (the “Registration Rights Agreement”) pursuant to which the Company
agreed, among other things, to register the Registrable Securities (as defined
in the Registration Rights Agreement) under the Securities Act of 1933, as
amended (the “1933 Act”).  In connection with the Company’s obligations
under the Registration Rights Agreement, on                          ,
2004, the Company filed a Registration Statement on Form S-3 (File No.
333-                 )
(the “Registration Statement”)
with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names the
Holder as a selling stockholder thereunder.

 

In connection with the
foregoing, I advise you that a member of the SEC’s staff has advised me by
telephone that the SEC has entered an order declaring the Registration
Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on
[ENTER DATE OF EFFECTIVENESS] and I have no knowledge, after telephonic inquiry
of a member of the SEC’s staff, that any stop order suspending its
effectiveness has been issued or that any proceedings for that purpose are
pending before, or threatened by, the SEC and the Registrable Securities are
available for resale under the 1933 Act pursuant to the Registration Statement.

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  [ISSUER’S
  COUNSEL]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  

 

CC:          [LIST NAMES OF HOLDERS]

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