-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fk0ef7M/z2k7+xAf4qXuLOQXJvPHMqFEJLy6mzykE2cc2R4te9hpyaan2EDFt4UW gTO8ATTkuiYYDwl7Hombrw== 0001104659-05-055929.txt : 20051115 0001104659-05-055929.hdr.sgml : 20051115 20051115170802 ACCESSION NUMBER: 0001104659-05-055929 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20051115 DATE AS OF CHANGE: 20051115 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: INTRAWARE INC CENTRAL INDEX KEY: 0001025134 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 680389976 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-55963 FILM NUMBER: 051207401 BUSINESS ADDRESS: STREET 1: 25 ORINDA WAY CITY: ORINDA STATE: CA ZIP: 94563 BUSINESS PHONE: 9254468729 MAIL ADDRESS: STREET 1: 25 ORINDA WAY CITY: ORINDA STATE: CA ZIP: 94563 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL RIVER INC /DE CENTRAL INDEX KEY: 0001062530 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE [5045] IRS NUMBER: 411901640 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 9625 W 76TH STREET SUITE 150 CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 9522531234 MAIL ADDRESS: STREET 1: 9625 W 76TH STREET SUITE 150 CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 SC 13D 1 a05-20351_1sc13d.htm BENEFICIAL OWNERSHIP OF 5% OR MORE

	UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549

	SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. )*

Intraware, Inc.

(Name of Issuer)

Common Stock, $.0001 par value

(Title of Class of Securities)

46118M 10 3

(CUSIP Number)

Michael J. Sullivan, Esq.

Howard Rice Nemerovski Canady Falk & Rabkin,

A Professional Corporation

3 Embarcadero Center, 7th Floor

San Francisco, CA 94111

(415) 434-7000

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

November 9, 2005

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

^* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 46118M 10 3

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only) Digital River, Inc. 41-1901640

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) WC

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 1,000,000

			8.	Shared Voting Power 0

			9.	Sole Dispositive Power 1,000,000

			10.	Shared Dispositive Power 0

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,000,000

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 14.1%

	14.	Type of Reporting Person (See Instructions) CO

Item 1.	Security and Issuer
The class of equity security to which this statement relates is the Common Stock, $0.0001 par value per share, of Intraware, Inc. (“Intraware”). The name and address of the principal executive offices of the issuer of such securities are Intraware, Inc., 25 Orinda Way, Orinda, California 94563.
Item 2.	Identity and Background
(a), (b) and (c):
Digital River, Inc. (“Digital River”), 9625 West 76th Street, Eden Prairie, Minnesota 55344, a Delaware corporation, is a provider of comprehensive e-commerce outsourcing solutions. Information is provided below with respect to persons who are executive officers and directors of Digital River.
	Joel A. Ronning, Chief Executive Officer, Chairman and Director of Digital River, 9625 West 76th Street, Eden Prairie, Minnesota 55344.
	Thomas M. Donnelly, Chief Financial Officer of Digital River, 9625 West 76th Street, Eden Prairie, Minnesota 55344.
	Perry W. Steiner, Director of Digital River, Managing Director of Arlington Capital Partners, c/o Digital River, Inc., 9625 West 76th Street, Eden Prairie, Minnesota 55344.
	J. Paul Thorin, Director of Digital River, Vice President and General Counsel of ArrayComm, Inc., c/o Digital River, Inc., 9625 West 76th Street, Eden Prairie, Minnesota 55344.
	Thomas F. Madison, Director of Digital River, President and Chief Executive Officer of MLM Partners, c/o Digital River, Inc., 9625 West 76th Street, Eden Prairie, Minnesota 55344.
	William J. Lansing, Director of Digital River, Chief Executive Officer of ValueVision Media, Inc., c/o Digital River, Inc., 9625 West 76th Street, Eden Prairie, Minnesota 55344.
	Frederic M. Seegal, Director of Digital River, Managing Executive of Stephens Financial Group, c/o Digital River, Inc., 9625 West 76th Street, Eden Prairie, Minnesota 55344.
(d) To the knowledge of Digital River, during the last five years, neither Digital River nor any of the persons listed above has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors.
(e) To the knowledge of Digital River, during the last five years, neither Digital River nor any of the persons listed above has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of which such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
(f) All of the individuals referred to above are citizens of the United States.

Item 3.	Source and Amount of Funds or Other Consideration
On November 9, 2005, Digital River and Intraware entered into a Series B Preferred Stock Purchase Agreement (“Purchase Agreement”), whereby Digital River acquired 1,000 shares of Series B Preferred Stock of Intraware for $6,000.00 per share for an aggregate of $6,000,000, which payment was made in cash. The Series B Preferred Stock is convertible into 1,000,000 shares of Common Stock of Intraware.
Item 4.	Purpose of Transaction
Digital River has acquired the shares of Intraware Series B Preferred Stock solely for investment purposes. In connection with the Purchase Agreement, Digital River and Intraware entered into a Standstill and Stock Restriction Agreement (“Standstill Agreement”) which provides that Digital River may not acquire more than fifteen percent (15%) of the outstanding voting securities of Intraware, except under certain circumstances as provided in the Standstill Agreement. Pursuant to the Purchase Agreement and the related Investor Rights Agreement dated November 9, 2005 between Digital River and Intraware (the “Investor Rights Agreement”), Digital River has the right to designate a representative to serve as a director on Intraware’s Board of Directors. This right takes effect after the execution of a strategic alliance agreement between Digital River and Intraware and continues as long as Digital River holds ten percent (10%) or more of the outstanding Intraware voting securities. Except as set forth above, Digital River presently does not have any definitive plans or proposals that relate to or would result in transactions of the kind described in paragraphs (a) through (j) of Item 4 of Schedule 13D, but may, at any time and from time to time, review, reconsider and discuss with Intraware or others its position with respect to Intraware which could thereafter result in the adoption of such plans or proposals.
Item 5.	Interest in Securities of the Issuer
(a) Digital River is the beneficial owner of 1,000 shares of Series B Preferred Stock of Intraware, which on an as-converted basis represents approximately 14.1% of the outstanding Common Stock of Intraware. To the knowledge of Digital River, no other person named in Item 2 beneficially owns any Intraware securities.
(b) Digital River has the sole power to vote and the sole power to dispose of all shares of Intraware Common Stock beneficially owned by it.
(c) Other than the transaction set forth in Item 3 above, neither Digital River nor the persons named in Item 2 effected a transaction in the Common Stock of Intraware during the past 60 days.
(d) No other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds of the sale of, the subject securities.
(e) Not applicable.
Item 6.	Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
Pursuant to the Investor Rights Agreement, Intraware has provided Digital River with certain demand and piggyback registration rights as stated in that agreement. The Investor Rights Agreement further provides that Intraware shall use its reasonable efforts to nominate the Digital River designee to the Board of Directors of Intraware. The right to nominate a designee to the Board of Directors takes effect after the execution of a strategic alliance agreement between Digital River and Intraware and so long as Digital River holds at least ten percent (10%) or more of the outstanding voting securities of

Intraware. Pursuant to the Standstill Agreement, Digital River may not acquire more than fifteen percent (15%) of the outstanding voting securities of Intraware, except under certain circumstances as provided in the Standstill Agreement.
Item 7.	Material to Be Filed as Exhibits
Exhibit 1 – Form of Series B Preferred Stock Purchase Agreement Exhibit 2 – Form of Series B Certificate of Designations Exhibit 3 – Form of Standstill and Stock Restriction Agreement Exhibit 4 – Form of Investor Rights Agreement

Signature

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: November 14, 2005

	DIGITAL RIVER, INC.


	By:	/s/ Thomas M. Donnelly
		Thomas M. Donnelly
		Chief Financial Officer

EX-1 2 a05-20351_1ex1.htm FORM OF SERIES B PREFERRED STOCK PURCHASE AGREEMENT

EXHIBIT 1

SERIES B PREFERRED STOCK PURCHASE AGREEMENT

This SERIES B PREFERRED STOCK PURCHASE AGREEMENT (the “Agreement”), is made as of November 9, 2005, by and between Intraware, Inc., a Delaware corporation (the “Company”), and Digital River, Inc., a Delaware corporation (“Digital River”).

WHEREAS, the Company and Digital River are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 of Regulation D (“Regulation D”) as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”);

WHEREAS, Digital River wishes to purchase, upon the terms and conditions stated in this Agreement, 1,000 shares of Series B Preferred Stock, par value $0.0001 per share, of the Company (the “Shares”) which are convertible into shares of Common Stock of the Company (the “Conversion Shares”); and

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering an Investor Rights Agreement substantially in the form attached hereto as Exhibit A (the “Investor Rights Agreement”) and a Standstill and Stock Restriction Agreement substantially in the form attached hereto as Exhibit B (the “Standstill Agreement”).

NOW THEREFORE, in consideration of the covenants and promises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

PURCHASE AND SALE OF SHARES

1.1 Purchase of the Shares. Subject to the terms and conditions of this Agreement, Digital River agrees to purchase at the Closing (as defined below) and the Company agrees to sell and issue to Digital River, the Shares, at a purchase price of $6,000.00 per share, for an aggregate purchase price of $6,000,000.00 (the “Purchase Price”).

1.2 Closing Date. The purchase and sale of the Shares shall take place at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, California, at 10:00 a.m. Pacific time, on November 9, 2005, or at such other time and place as the Company and Digital River shall agree upon, orally or in writing (the “Closing”). The date and time of the Closing is hereafter referred to as the “Closing Date.”

1.3 Form of Payment. On the Closing Date, (i) Digital River shall pay the aggregate Purchase Price to the Company for the Shares to be issued and sold to Digital River at the Closing, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions, and (ii) the Company shall deliver to the Company’s transfer agent instructions to issue a stock certificates representing such number of the Shares (the “Stock Certificate”).

ARTICLE II

DIGITAL RIVER’S REPRESENTATIONS AND WARRANTIES

Digital River represents and warrants to the Company that:

2.1 Investment Purpose. Digital River is acquiring the Shares for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act.

2.2 Accredited Investor Status. Digital River is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

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

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

2.5 No Governmental Review. Digital River understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Shares or the fairness or suitability of the investment in the Shares nor have such authorities passed upon or endorsed the merits of the offering of the Shares.

2.6 Transfer or Resale. Digital River understands that except as provided in the Investor Rights Agreement: (i) the Shares have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred, unless in

accordance with the terms of the Standstill Agreement, and additionally (A) subsequently registered thereunder, (B) Digital River shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) Digital River provides the Company with reasonable assurance that such Shares can be sold, assigned or transferred pursuant to Rule 144 promulgated under the Securities Act (or a successor rule thereto) (“Rule 144”); (ii) any sale of the Shares made in reliance on 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 Shares under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities 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 Shares for resale under the Securities Act or any state securities laws or to comply with the terms and conditions of any resale exemption thereunder.

2.7 Legends. Digital River understands that the certificates or other instruments representing the Shares, until such time as the sale of the Shares have been registered under the Securities Act as contemplated by the Investor Rights Agreement, the stock certificates representing the Shares, shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates and warrants):

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

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Shares upon which it is stamped, if, unless otherwise required by state securities laws, (i) such Shares are registered for sale under the Securities Act, (ii) in connection with a sale, assignment or other transfer, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Shares may be made without registration under the Securities Act, or (iii) such holder provides the Company with reasonable assurance that the Shares can be sold, assigned or transferred pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold.

2.8 Validity; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of Digital River and is a valid and binding agreement of Digital River enforceable against Digital River in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to Digital River, except as set forth in the Schedule of Exceptions attached hereto as Exhibit C, that:

3.1 Organization and Qualification. The Company and its “Subsidiaries” (which for purposes of this Agreement means any entity in which the Company, directly or indirectly, owns capital stock or holds a majority or similar interest) are corporations duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated, and have the requisite corporate 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 corporation to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on the business, properties, assets, operations, results of operations or financial condition of the Company and its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements and instruments to be entered into in connection herewith, or on the authority or ability of the Company to perform its obligations under the Transaction Documents (as defined below) or the Certificate of Designation (as defined below).

3.2 Authorization; Enforcement; Validity. The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Investor Rights Agreement and the Standstill Agreement, (together, the “Transaction Documents”) and to file, and perform its obligations under, the Transaction Documents, and to issue the Shares in accordance with the terms hereof and thereof. The execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including without limitation the issuance of the Shares, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders. The Transaction Documents of even date herewith have been duly executed and delivered by the Company, and constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies.

3.3 Issuance of Securities. The Shares are duly authorized and, upon issuance at the Closing, shall be (i) validly issued, fully paid and non-assessable, (ii) free from all taxes, liens and charges with respect to the issue thereof and (iii) entitled to the rights and preferences set forth in the Company’s form of Certificate of Designations, Preferences and Rights of Series B Preferred Stock attached hereto as Exhibit D (the “Certificate of Designations”). At least 1,000,000 shares of Common Stock have been duly authorized and reserved for issuance upon conversion of the Shares. Upon conversion or exercise in accordance with the Certificate of Designations, the Conversion Shares will be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. The issuance by the Company of the Shares is exempt from registration under the Securities Act.

3.4 No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company, the performance by the Company of its obligations under the Certificate of Designations and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the reservation for issuance and issuance of the Conversion Shares) will not (i) result in a violation of the Company’s certificate of incorporation, any certificate of designations, preferences and rights of any outstanding series of preferred stock of the Company or the Company’s bylaws 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 filed as an exhibit to any of the Company’s SEC Documents (as defined below), 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 Stock Market, Inc. (“Nasdaq”)) 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.

3.5 Consents. Except for the filing of (i) the Registration Statement (as defined in the Investor Rights Agreement) with the SEC, (ii) the Certificate of Designations with the State of Delaware and (iii) the Form D with the SEC, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company and its Subsidiaries are unaware of any facts or circumstances which might prevent the Company from obtaining or effecting any of the foregoing.

3.6 No General Solicitation; Placement Agent. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Shares. The Company acknowledges that it has not engaged a placement agent in connection with the sale of the Shares.

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

3.8 Application of Takeover Protections; Rights Agreement. The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation or the laws of the state of its incorporation which is or could become applicable to Digital River as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Shares (or upon conversion or exercise, the Conversion Shares) and Digital River’s ownership of the Shares or the Conversion Shares.

3.9 SEC Documents; Financial Statements. Since July 1, 2004, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). The Company has made available to Digital River or its respective representatives copies of the SEC Documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

3.10 Conduct of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except for possible violations which would not, individually or in the aggregate, have a Material Adverse Effect. The Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

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

3.12 Absence of Litigation. There is no material action, suit, proceeding, inquiry or investigation before or by Nasdaq, any court, public board, government agency, self-regulatory organization or body pending against the Company, the Common Stock or any of the Company’s Subsidiaries or any of the Company’s or the Company’s Subsidiaries’ officers or directors in their capacities as such. There is no action, suit, proceeding or investigation pending, or to the Company’s knowledge, threatened against the Company that questions the validity of the Transaction Documents or the right of the Company to enter such agreements or consummate the transactions contemplated thereby.

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

ARTICLE IV

COVENANTS.

4.1 Form D and Blue Sky. The Company agrees to file a Form D with respect to the Shares as required under Regulation D and to provide upon request a copy thereof to Digital River promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Shares for sale to Digital River pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of any such action so taken to Digital River on or prior to the Closing Date. The Company shall make all filings and reports relating to the offer and sale of the Securities required under applicable securities or “Blue Sky” laws of the states of the United States following the Closing Date.

4.2 Expenses; Fees. Each party shall each pay their own expenses in connection with the transactions contemplated by this Agreement.

ARTICLE V

CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

The obligation of the Company hereunder to issue and sell the Shares to Digital River at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing Digital River with prior written notice thereof:

5.1 Digital River shall have executed and delivered to the Company each of the Transaction Documents.

5.2 Digital River shall have delivered to the Company the Purchase Price for the Shares being purchased by Digital River at the Closing by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company.

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

5.4 The Company shall have filed the Certificate of Designations with the Secretary of State of the State of Delaware.

ARTICLE VI

CONDITIONS TO DIGITAL RIVER’S OBLIGATION TO PURCHASE.

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

6.1 The Company shall have executed and delivered to Digital River each of the Transaction Documents.

6.2 Digital River shall have received the opinion of the Company’s counsel dated as of the Closing Date, in substantially the form attached hereto as Exhibit E.

6.3 The representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that reference a specific date which shall have been true and correct in all material respects as of such date) and the Company shall have performed, satisfied and complied in all respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

6.4 The Company shall have filed the Certificate of Designations with the Secretary of State of the State of Delaware.

ARTICLE VII

MISCELLANEOUS

7.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

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

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

7.4 Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of

the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

7.5 Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between Digital River, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein, together with that certain Mutual Confidentiality Agreement dated as of June 11, 2001 (which agreement the parties hereby acknowledge and agree (i) is in full force and effect and has been in full force and effect at all times since June 11, 2001, and (ii) for purposes thereof, the term “Potential Transaction” shall be deemed to include the investment by Digital River in the Company’s Series B Preferred Stock and the potential strategic alliance agreement to be entered into between the Company and Digital River) contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor Digital River makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and Digital River, and no provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought.

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

If to the Company:

Intraware, Inc.

25 Orinda Way

Orinda, CA 94563

Telephone:		(925) 253-4500
Facsimile:		(925) 253-4541
Attention:		President and Chief Executive Officer
		General Counsel

With a copy to:

Wilson Sonsini Goodrich & Rosati, Professional Corporation

650 Page Mill Road

Palo Alto, CA 94304

Telephone:		(650) 493-9300
Facsimile:		(650) 493-6811
Attention:		David J. Segre, Esq.
		N. Anthony Jeffries, Esq.

If to Digital River:

Digital River, Inc.

9625 West 76th Street, Suite 150

Eden Prairie, MN 55344

Telephone:		952-253-1234
Facsimile:		952-253-8370
Attention:		Joel Ronning

With a copy to:

Robins, Kaplan, Miller & Ciresi L.L.P.

2800 LaSalle Plaza

800 LaSalle Avenue

Minneapolis, Minnesota 55402

Attention:		Kevin L. Crudden, Esq.
Telephone:		(612) 349-8500
Facsimile:		(612) 339-4181

Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.

7.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of the Shares. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of Digital River. Digital River may assign some or all of its rights hereunder without the consent of the Company, provided, however, that any such assignment shall not release Digital River from its obligations hereunder unless such obligations are assumed by such assignee and the Company has consented to such assignment and assumption, which consent shall not be unreasonably withheld.

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

7.9 Survival. The representations and warranties of the Company and Digital River contained in Sections 2 and 3 and the agreements set forth this Article VII shall survive the Closing.

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

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

7.12 Legal Representation. Digital River acknowledges that: (a) it has read this Agreement and the exhibits hereto; (b) it understands that the Company has been represented in the preparation, negotiation, and execution of this Agreement by Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to the Company; (c) it has either been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of its own choice, or has chosen to forego such representation by legal counsel after being advised to seek such legal representation; (d) it understands the terms and consequences of this Agreement and is fully aware of its legal and binding effect.

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

	INTRAWARE, INC.

	By:
		Name:
		Title:

	DIGITAL RIVER, INC.

	By

		Name:
		Title:

[Signature Page to Series B Preferred Stock Purchase Agreement]

Exhibit A

Investor Rights Agreement

Exhibit B

Standstill Agreement

Exhibit C

Schedule of Exceptions

Exhibit D

Certificate of Designations

Exhibit E

Form of Opinion of Company Counsel

EX-2 3 a05-20351_1ex2.htm FORM OF SERIES B CERTIFICATE OF DESIGNATIONS

EXHIBIT 2

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

SERIES B CONVERTIBLE PREFERRED STOCK

INTRAWARE, INC.

Intraware, Inc. (the “Company”), a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that, pursuant to authority conferred upon the Board of Directors of the Company by the Amended and Restated Certificate of Incorporation of the Company (the “Certificate of Incorporation”), and pursuant to Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Company at a meeting duly held, adopted resolutions (i) authorizing a series of the Company’s previously authorized preferred stock, par value $0.0001 per share, and (ii) providing for the designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof, of one thousand (1,000) shares of Series B Preferred Stock of the Company, as follows:

RESOLVED, that the Company is authorized to issue one thousand (1,000) shares of “Series B Preferred Stock,” par value $0.0001 per share, which shall have the powers, designations, preferences and other special rights set forth below.

(1) Voting Rights. Except as otherwise provided herein or the Company’s Certificate of Incorporation or required by law, the holders of the Company’s Series B Preferred Stock, the holders of the Company’s Series A Preferred Stock par value $0.0001 per share (the “Series A Preferred Stock”) and the holders of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”) shall vote together as a single class on all matters. Each holder of Series B Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which the shares of Series B Preferred Stock held by such holder could be converted as of the record date for such vote.

(2) Conversion of Series B Preferred Stock. The Series B Preferred Stock shall be convertible into shares of the Company’s Common Stock, on the terms and conditions set forth in this Section 2.

(a) Original Issue Price. Each share of Series B Preferred Stock shall have an “Original Issue Price” of $6,000.00 per share.

(b) Conversion Price. Each share of Series B Preferred Stock shall initially have a “Conversion Price” of $6.00 per share, and shall be subject to adjustment as provided in Section 2(g).

(c) Conversion Rate. Subject to Section 2(g), each share of Series B Preferred Stock shall be convertible into that number of shares of Common Stock determined by dividing the Original Issue Price by the Conversion Price (the “Conversion Rate”).

(d) Conversion Right. At any time or times on or after the date of issuance of any share of Series B Preferred Stock (the “Issuance Date”), any holder of Series B Preferred Stock may, in its sole discretion, elect to convert all or part of its shares of Series B Preferred Stock into fully paid and nonassessable shares of Common Stock in accordance with Section 2(f) at the Conversion Rate.

(e) Automatic Conversion. Each share of Series B Preferred Stock shall automatically, without any further action, convert into fully paid and nonassessable shares of Common Stock at the Conversion Rate upon the Transfer by a holder of such share of Series B Preferred Stock, other than a Transfer to any Affiliate of the initial purchaser of the Series B Preferred Stock (Digital River, Inc.) or a Transfer to the Company pursuant to a redemption under Section 8 below (an “Automatic Conversion”). For purposes hereof:

(i) “Affiliate” shall have the meaning set forth in Rule 12b-2 of the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended; and

(ii) “Transfer” shall mean any sale, assignment, transfer, lease, pledge, conveyance, hypothecation or other transfer or disposition of such share, whether or not for value and whether voluntary or involuntary.

In the event of an Automatic Conversion pursuant to this Section 2(e), such Automatic Conversion shall be deemed to have been made at the time that the Transfer of such shares occurred. On the date of an Automatic Conversion, the outstanding shares of Series B Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent (the “Transfer Agent”). The Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such Automatic Conversion unless the certificates evidencing such shares of Series B Preferred Stock are delivered to the Company as provided in Section 2(f). On the date of the occurrence of an Automatic Conversion, each holder of record of shares of Series B Preferred Stock shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, notwithstanding that the certificates representing such shares of Series B Preferred Stock shall not have been surrendered at the office of the Company, that notice from the Company shall not have been received by any holder of record of shares of Series B Preferred Stock, or that the certificates evidencing such shares of Common Stock shall not then be actually delivered to such holder.

(f) Mechanics of Conversion.

(i) The Company shall not issue any fraction of a share of Common Stock upon any conversion. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series B Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of a fraction of a share of Common Stock. If, after the aforementioned aggregation, the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall, in lieu of issuing such fractional share, pay to the holder the fair value thereof in cash.

(ii) The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of shares of Series B Preferred Stock unless such taxes result from the issuance of Common Stock upon conversion to a person other than the holder of Series B Preferred Stock.

(iii) To convert shares of Series B Preferred Stock into shares of Common Stock on any date (a “Conversion Date”), the holder thereof shall (i) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., California time on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit A (the “Conversion Notice”) to the Company, and (ii) surrender to a common carrier for delivery to the Company as soon as practicable following such date the original certificates representing the shares of Series B Preferred Stock being converted (or an indemnification undertaking with respect to such shares in the case of their loss, theft or destruction) (the “Preferred Stock Certificates”). As soon as practicable and in no event later than the tenth (10^th) business day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall (1) issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the holder or its designee, for the number of shares of Common Stock to which the holder shall be entitled, or (2) provided that the Company’s Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, upon the request of the holder, credit such aggregate number of shares of Common Stock to which the holder shall be entitled to the holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system. If the number of shares of Series B Preferred Stock represented by the Preferred Stock Certificate(s) submitted for conversion pursuant to Section 2(f)(iii) is greater than the number of Preferred Shares being converted, then the Company shall, as soon as practicable and in no event later than ten (10) business days after receipt of the Preferred Stock Certificate(s) (the “Preferred Stock Delivery Date”) and at its own expense, issue and deliver to the holder a new Preferred Stock Certificate representing the number of shares of Series B Preferred Stock not converted. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of shares of Series B Preferred Stock shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

(g) Adjustments for Subdivisions or Combinations of Common Stock. In the event the outstanding shares of Common Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise) into a greater number of shares of Common Stock, the Conversion Price of the Series B Preferred Stock in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionally decreased. In the event the outstanding shares of Common Stock shall be combined (by reclassification or otherwise) into a lesser number of shares of Common Stock, the Conversion Price of the Series B Preferred Stock in effect immediately prior to such combination shall, concurrently with the effectiveness of such subdivision, be proportionally increased.

(h) Adjustments for Reclassification, Exchange and Substitution. Subject to Section 4 below, if the Common Stock issuable upon conversion of the Series B Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock (or into the right to receive cash or other property), whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), then, in any such event, in lieu of the number of shares of Common Stock which the

holders would otherwise have been entitled to receive each holder of such Series B Preferred Stock shall have the right thereafter to convert such shares of Series B Preferred Stock into a number of shares of such other class or classes of stock, cash or other property which a holder of the number of shares of Common Stock deliverable upon conversion of such series of Series B Preferred Stock immediately before that change would have been entitled to receive in such reorganization or reclassification, all subject to further adjustment as provided herein with respect to such other shares.

(i) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 2, the Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series B Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of any holder of Series B Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the shares of Series B Preferred Stock held by such holder.

(j) Status of Converted Stock. In the event any shares of Series B Preferred Stock shall be converted pursuant to Section 2 hereof, the shares so converted shall be canceled and shall not be reissued as shares of Series B Preferred Stock but shall resume the status of preferred stock of the Company, undesignated as to series.

(k) Certain Notices. In the event that the Company shall propose at any time (i) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or (ii) to merge or consolidate with or into any other corporation, or sell, lease or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; then, in connection with each such event, the Company shall send to the holders of Series B Preferred Stock at least twenty (20) days prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event). Any public disclosure (as “public disclosure” is defined in Regulation FD promulgated under the Securities Exchange Act of 1934, as amended) shall be considered “written notice” for purposes of this paragraph, notwithstanding anything to the contrary in Section 10 hereof.

(3) Reservation of Authorized Shares. The Company shall, so long as any of shares of Series B Preferred Stock are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Series B Preferred Stock, 100% of such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all of the shares of Series B Preferred Stock then outstanding.

(4) Liquidation Rights. In the event of (i) the acquisition of the Company by any other entity by means of any transaction or series of related transactions to which the Company is

a party (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity), as a result of shares in the Company held by such holders prior to such transaction, at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such transaction or series of transactions, (ii) a sale, lease or other conveyance of all or substantially all of the assets of the Company, or (iii) any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary (each of (i), (ii) and (iii), a “Liquidation Event”), the holders of each share of Series B Preferred Stock shall be entitled to receive in cash out of the assets of the Company legally available for distribution to stockholders therefrom (the “Liquidation Funds”), before any amount shall be paid to the holders of shares of any capital stock of the Company of any class junior in rank to the Series B Preferred Stock in respect of the preferences as to the distributions and payments on a Liquidation Event, an amount per share equal to the greater of (A) (x) the Original Issue Price and (y) all declared but unpaid dividends (if any) on such share of Series B Preferred Stock, or (B) the amount per share as would have been payable had each such share been converted to Common Stock immediately prior to such Liquidation Event, with the shares of Series B Preferred Stock being treated for this purpose as if they had been converted to Common Stock at the then-applicable Conversion Rate (such sum being referred to as the “Liquidation Preference”). If the Liquidation Funds are insufficient to pay the full amount due to holders of Series B Preferred Stock and holders of shares of other classes or series of preferred stock of the Company that are of equal rank with the Series B Preferred Stock as to payments of the Liquidation Funds (the “Pari Passu Shares”), then each holder of Series B Preferred Stock and Pari Passu Shares shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such holder as a liquidation preference, in accordance with their respective Certificate of Designations, Preferences and Rights, as a percentage of the full amount of Liquidation Funds payable to all holders of Series B Preferred Stock and Pari Passu Shares. After the Liquidation Preference has been paid, the Series B Preferred Stock shall receive no additional portion of the remaining Liquidation Funds. Notwithstanding anything to the contrary contained herein, the purchase or redemption by the Company of any of the capital stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a Liquidation Event. No holder of Series B Preferred Stock shall be entitled to receive any amounts with respect thereto upon any Liquidation Event other than the amounts provided for herein; provided, however, that a holder of Series B Preferred Stock shall be entitled to all amounts previously accrued with respect to amounts owed hereunder.

(5) Series B Preferred Rank. All shares of Series A Preferred Stock shall be of equal rank to all shares of Series B Preferred Stock in respect to the preferences as to distributions and payments upon a Liquidation Event. All shares of Common Stock shall be of junior rank to all shares of Series B Preferred Stock in respect to the preferences as to distributions and payments upon a Liquidation Event.

(6) Dividends.

(a) Dividend Rate. Each share of Series B Preferred Stock shall have a

“Dividend Rate” of $300.00 per share (subject to appropriate adjustment for stock dividends, stock splits, consolidations and the like of the Series B Preferred Stock).

(b) Series B Preferred Stock Dividends. In any calendar year, the holders of outstanding shares of Series B Preferred Stock shall be entitled to receive dividends, when, as and if declared by the Board of Directors, out of any assets at the time legally available therefor, at the Dividend Rate, payable in preference and priority to any declaration or payment of any dividends or distributions on Common Stock. No dividends or distributions shall be made with respect to Common Stock until all declared dividends on the Series B Preferred Stock at the Dividend Rate have been paid or set aside for payment to the holders of Series B Preferred Stock. The right to receive dividends on shares of Series B Preferred Stock shall not be cumulative, and no right to such dividends shall accrue to holders of Series B Preferred Stock by reason of the fact that dividends on said shares are not declared or paid in any calendar year.

(c) Additional Dividends. The holders of the Series B Preferred Stock shall be entitled to such dividends paid and distributions made to the holders of Common Stock to the same extent as if such holders of Series B Preferred Stock had converted the Series B Preferred Stock into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common Stock.

(d) Pari Passu with Series A Preferred Stock. Any dividends payable to the holders of Series B Preferred Stock under this Section 6 shall be payable, pari passu, with any dividends to which the holders of the Series A Preferred Stock may be entitled.

(7) Amendments and Changes. As long as any of the Series B Preferred Stock shall be issued and outstanding, the Company shall not, either directly or indirectly through merger, consolidation, amendment or otherwise, without first obtaining the approval (by vote or written consent as provided by law) of the holders of more than fifty percent (50%) of the outstanding shares of Series B Preferred Stock:

(a) amend, alter or repeal any provision of the Company’s Certificate of Incorporation or this Certificate of Designations, Preferences and Rights if such action would adversely alter the rights, preferences, privileges or powers of, or restrictions provided for the benefit of the Series B Preferred Stock without so affecting the outstanding shares of all series of the Company’s preferred stock;

(b) increase or decrease (other than for decreases resulting from the conversion of the Series B Preferred Stock) the authorized number of shares of Series B Preferred Stock;

(c) authorize, create (by reclassification or otherwise) or obligate itself to issue any new class or series of shares having rights, preferences or privileges with respect to payments upon a Liquidation Event senior to the Series B Preferred Stock; or

(d) take any action that results in the redemption of any shares of Common Stock (other than repurchases of Common Stock issued to or held by employees, officers,

directors or consultants of the Company or its subsidiaries (i) upon termination of their employment or services pursuant to agreements providing for the right of said repurchase, or (ii) pursuant to rights of first refusal contained in agreements providing for such right).

(8) Redemption.

(a) The “Original Issue Date” shall be the date the first share of Series B Preferred Stock is initially issued.

(b) At any time after the two (2) year anniversary of the Original Issue Date, the Company may redeem, out of funds legally available therefor, all (but not less than all) outstanding shares of Series B Preferred Stock that have not been converted into Common Stock pursuant to Section 3 hereof (the “Redemption Date”). The Company may redeem the shares of Series B Preferred Stock by paying in cash an amount per share equal to the greater of (i) one and a half (1.5) times the Original Issue Price plus all declared and unpaid dividends thereon, or (ii) the amount of Liquidation Funds payable to holders of the Series B Preferred Stock immediately prior to such redemption, with the shares of Series B Preferred Stock being treated for this purpose as if they had been converted to Common Stock at the then-applicable Conversion Rate (the “Redemption Price”).

(c) Any redemption effected pursuant to Section 8(b) shall be made on a pro rata basis among the holders of the Series B Preferred Stock in proportion to the shares of Series B Preferred Stock then held by them.

(d) At least fifteen (15), but no more than thirty (30) days prior to the Redemption Date, written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series B Preferred Stock to be redeemed, at the address last shown on the records of the Company for such holder, notifying such holder of the redemption to be effected, specifying the number of shares to be redeemed from such holder, the Redemption Date, the Redemption Price, the place at which payment may be obtained and calling upon such holder to surrender to the Company, in the manner and at the place designated, the holder’s certificate or certificates representing the shares to be redeemed (the “Redemption Notice”). Except as provided herein and subject to the holder’s right to convert the Series B Preferred Stock into Common Stock prior to the Redemption Date, on or after the Redemption Date each holder of Series B Preferred Stock to be redeemed shall surrender to this Company the certificate or certificates representing such shares, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled.

(e) From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of shares of Series B Preferred Stock designated for redemption in the Redemption Notice as holders of Series B Preferred Stock (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to the shares designated

for redemption on such date, and such shares shall not thereafter be transferred on the books of the Company or be deemed to be outstanding for any purpose whatsoever.

(f) On or prior to the Redemption Date, the Company may deposit the Redemption Price of all shares of Series B Preferred Stock not yet redeemed with a bank or trust corporation as a trust fund for the benefit of the respective holders of the shares designated for redemption and not yet redeemed, with irrevocable instructions and authority to the bank or trust corporation to pay the Redemption Price for such shares to their respective holders on or after the Redemption Date upon receipt of notification from the Company that such holder has surrendered a share certificate to the Corporation pursuant to Section 8(d) above. As of the Redemption Date, the deposit shall constitute full payment of the shares to their holders, and from and after the Redemption Date the shares so called for redemption shall be redeemed and shall be deemed to be no longer outstanding, and the holders thereof shall cease to be stockholders with respect to such shares and shall have no rights with respect thereto except the right to receive from the bank or trust corporation payment of the Redemption Price of the shares, without interest, upon surrender of their certificates therefor. Such instructions shall also provide that any moneys deposited by the Company pursuant to this Section 8(f) for the redemption of shares thereafter converted into shares of the Company’s Common Stock pursuant to Section 3 hereof prior to the Redemption Date shall be returned to the Company forthwith upon such conversion. The balance of any moneys deposited by the Company pursuant to this Section 8(f) remaining unclaimed at the expiration of two (2) years following the Redemption Date shall thereafter be returned to the Company upon its request expressed in a resolution of its Board of Directors.

(9) Lost or Stolen Certificates. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Preferred Stock Certificates representing the Series B Preferred Stock, and, in the case of loss, theft or destruction, of any indemnification undertaking by the holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of the Series B Preferred Stock Certificate(s), the Company shall execute and deliver new preferred stock certificate(s) of like tenor and date.

(10) Notices. Whenever notice is required to be given under this Certificate of Designations, Preferences and Rights, unless otherwise provided herein, such notice shall be given in accordance with the notice provisions set forth in the purchase agreement pursuant to which the Series B Preferred Stock were issued. The Company shall provide such holder of Series B Preferred Stock with written notice at least ten (10) days prior to the date on which the Company closes its books or takes record with respect to any pro rata subscription offer to holders of Common Stock.

[Remainder of Page Intentionally Left Blank.]

IN WITNESS WHEREOF, the Company has caused this Certificate of Designation, Preferences and Rights to be signed by Peter H. Jackson, its Chairman, Chief Executive Officer and President, this 9th day of November, 2005.

	INTRAWARE, INC.


	By:
	Name:		Peter H. Jackson
	Title:		Chairman, Chief Executive Officer and President

EXHIBIT A

INTRAWARE, INC.

CONVERSION NOTICE

Reference is made to the Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock of Intraware, Inc. (the “Certificate of Designations”). In accordance with and pursuant to the Certificate of Designations, the undersigned hereby elects to convert the number of shares of Series B Preferred Stock, par value $0.0001 per share (the “Series B Preferred Shares”), of Intraware, Inc., a Delaware corporation (the “Company”), indicated below into shares of Common Stock, par value $0.0001 per share (the “Common Stock”), of the Company, as of the date specified below.

Date of Conversion:

Number of Series B Preferred Shares to be converted:

Stock certificate no(s). of Preferred Shares to be converted:

Please deliver the Common Stock into which the Series B Preferred Shares are being converted to the following address:

EX-3 4 a05-20351_1ex3.htm FORM OF STANDSTILL AND STOCK RESTRICTION AGREEMENT

EXHIBIT 3

STANDSTILL AND STOCK RESTRICTION AGREEMENT

This STANDSTILL AND STOCK RESTRICTION AGREEMENT (the “Agreement”) is made as of November 9, 2005, by and between Intraware, Inc., a Delaware corporation (the “Company”) and Digital River, Inc., a Delaware corporation (“Digital River”).

WHEREAS, the Company and Digital River have executed a Preferred Stock Purchase Agreement, dated November 9, 2005, by and among the Company and Digital River (the “Purchase Agreement) pursuant to which Digital River is purchasing 1,000 shares of the Company’s Series B Preferred Stock;

WHEREAS, the Company and Digital River desire, in connection with the execution of the Purchase Agreement, to make certain covenants and agreements with one another pursuant to this Agreement;

ARTICLE I

DEFINITIONS

1.1 Definitions. For the purpose of this Agreement, the following terms shall have the meanings specified with respect thereto below:

(a) “13D Group” means any group of persons formed for the purpose of acquiring, holding, voting or disposing of Voting Stock which would be required under Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder, to file a statement on Schedule 13D pursuant to Rule 13d-1(a) or a Schedule 13G pursuant to Rule 13d-1(c) with the SEC as a “person” within the meaning of Section 13(d)(3) of the Exchange Act.

(b) “Affiliate” shall have the meaning set forth in Rule 12b-2 of the rules and regulations promulgated under the Exchange Act.

(c) “Beneficially Own,” “Beneficially Owned,” or “Beneficial Ownership” shall have the meaning set forth in Rule 13d-3 of the rules and regulations promulgated under the Exchange Act.

(d) “Board Approval” shall mean the affirmative vote or written consent of a majority of the Board of Directors of the Company duly obtained in accordance with the applicable provisions of the Company’s bylaws and applicable law.

(e) “Change of Control of the Company” shall mean any of the following: (A) a merger, consolidation or other business combination or transaction to which the Company

is a party if the stockholders of the Company immediately prior to the effective date of such merger, consolidation or other business combination or transaction, as a result of such share ownership, have Beneficial Ownership of voting securities representing less than fifty percent (50%) of the Total Current Voting Power of the surviving or successor entity (or its ultimate parent company) following such merger, consolidation or other business combination or transaction; (B) an acquisition by any person, entity or 13D Group of direct or indirect Beneficial Ownership of Voting Stock of the Company representing fifty percent (50%) or more of the Total Current Voting Power of the Company; (C) a sale of all or substantially all the assets of the Company; (D) a liquidation or dissolution of the Company; or (E) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in the preceding clauses) cease for any reason to constitute a majority of the Board of Directors of the Company then in office.

(f) “Common Stock” shall mean Shares of the Common Stock, $0.0001 par value per share, of the Company.

(g) “Control” or “Controlled by” shall have the meaning set forth in Rule 12b-2 of the rules and regulations promulgated under the Exchange Act.

(h) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(i) “Fair Market Value” means, as of any date of determination, (A) in the case of any security, the average of the closing sale prices of such security during the 10 trading days immediately preceding such date of determination on the principal U.S. or foreign securities exchange on which such security is listed or, if such security is not listed or primarily traded on any such exchange, the average of the closing sale prices or the closing bid quotations of such security during the 10-day period preceding such date of determination on Nasdaq or any comparable system then in use or, if no such quotations are available, the fair market value of such security as of such date of determination as determined pursuant to clause (B) below, and (B) in the case of property other than cash or any security the Fair Market Value of which can be determined pursuant to the foregoing clause (A), the fair market value of such property on such date of determination as determined in good faith by a majority of Independent Directors; provided, however, if Digital River disputes such determination, then the fair market value shall be as determined by two Investment Banks, with one Investment Bank to be selected by each of the Company and Digital River for such purpose. Each such Investment Bank shall determine the fair market value and shall deliver its written valuation to the Company and Digital River within thirty (30) days after selection. In the event that such Investment Banks do not agree on the fair market value, the fair market value shall be the average of the two valuations, except that if the higher of the two valuations is greater than twice the lower valuation, the Investment Banks shall select another Investment Bank of similar qualifications who shall determine the fair market value independently of such selection in accordance with the procedures specified in the

foregoing sentence. None of the Company, Digital River or the initial Investment Banks shall provide the third Investment Bank with information regarding the valuation of the initial Investment Banks. The valuation of the third Investment Bank shall be arithmetically averaged with the two prior valuations and the valuation farthest from the average of the three valuations shall be disregarded. The fair market value shall be the average of the two remaining valuations. The Company and Digital River shall each pay one-half of the expense of the valuation.

(j) “Digital River Shares” shall mean the shares of Series B Preferred Stock of the Company issued to Digital River pursuant to the Purchase Agreement (including shares of Common Stock issuable upon conversion of the Series B Preferred Stock).

(k) “Independent Director” shall mean a director of the Company who qualifies as an independent director under the listing standards of Nasdaq, excluding any director nominated by Digital River pursuant to the Investor Rights Agreement.

(l) “Investment Bank” means any nationally recognized investment-banking firm that has not had any significant relationship with the Company or Digital River or their respective Affiliates in the last twelve (12) months.

(m) “Investor Rights Agreement” shall mean the Investor Rights Agreement dated as of November 9, 2005, between the Company and Digital River.

(n) “Nasdaq” shall mean The Nasdaq Stock Market.

(o) “Non-Voting Convertible Securities” shall mean any securities of the Company which are convertible into, exchangeable for or otherwise exercisable to acquire Voting Stock of the Company, including convertible securities, warrants, rights or options to purchase Voting Stock of the Company.

(p) “person” shall mean an individual, corporation, partnership, limited liability company, association, trust, or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

(q) “Rule 144” shall mean Rule 144 as promulgated under the Exchange Act.

(r) “SEC” shall mean the U.S. Securities and Exchange Commission.

(s) “Securities Act” shall mean the Securities Act of 1933, as amended.

(t) “Series B Preferred Stock” shall mean Shares of the Series B Preferred Stock, $0.0001 par value per share, of the Company.

(u) “Shares” shall mean any shares of Voting Stock that are then Beneficially Owned by Digital River.

(v) “Standstill Limit” shall mean fifteen percent (15%) of the Total Current Voting Power of the Company.

(w) “Standstill Period” shall mean the period beginning on the date hereof and ending on the occurrence of a Standstill Termination Event, except for any period beginning on the date of a Standstill Suspension Event and ending on the date of a Standstill Reinstatement Event.

(x) “Standstill Reinstatement Event” shall mean either (A) with respect to a Suspending Acquisition, such person, entity or 13D Group directly or indirectly Beneficially Owning Voting Stock of the Company representing less than fifteen percent (15%) of the Total Current Voting Power of the Company; (B) with respect to a Suspending Merger, the withdrawal or termination (including, without limitation, as a result of a temporary restraining order or an injunction issued by a governmental entity) of such merger, consolidation or other business combination or transaction or a sale of all or substantially all the assets of the Company; or (C) with respect to a Tender Offer Commencement, the withdrawal or termination (including, without limitation, as a result of a temporary restraining order or an injunction issued by a governmental entity) by such person, entity or 13D Group of the Third Party Tender Offer.

(y) “Standstill Suspension Event” shall mean either: (A) a Suspending Acquistion; (B) a Suspending Merger; or (C) a Tender Offer Commencement.

(z) “Standstill Termination Event” shall mean the earliest to occur of the following: (A) Digital River Beneficially Owning less than ten percent (10%) of the Total Current Voting Power of the Company; provided, however, that such event occurs or is continuing more than one (1) year following the date of this Agreement; or (B) a Change of Control of the Company (other than a Change of Control of the Company involving Digital River).

(aa) “Suspending Acquisition” shall mean an acquisition by any person, entity or 13D Group of direct or indirect Beneficial Ownership of Voting Stock of the Company representing more than fifteen percent (15%) but less than fifty percent (50%) of the Total Current Voting Power of the Company.

(bb) “Suspending Merger” shall mean the entry into by the Company of any merger, consolidation or other business combination or transaction with any person, entity or 13D Group or a sale of all or substantially all the assets of the Company to any person, entity or 13D Group pursuant to which the Common Stock of the Company would be converted into cash or securities of another person, entity or 13D Group or which would result in all or substantially all of the Company’s assets being sold to another person, entity or 13D Group.

(cc) “Tender Offer Commencement” shall mean the announcement or commencement by any person, entity or 13D Group of a Third Party Tender Offer.

(dd) “Third Party Tender Offer” shall mean a bona fide public tender offer subject to the provisions of Regulation 14D when first commenced within the meaning of Rule 14d-2(a) of the rules and regulations under the Exchange Act, by a person, entity or 13D Group (which is not made by and does not include the Company or Digital River) to purchase or exchange for cash or other consideration any Voting Stock, which, if successful, would result in such person, entity or 13D Group owning, when combined with any other Voting Stock owned

by such person, entity or 13D Group, fifteen percent (15%) or more of the Total Current Voting Power of the Company.

(ee) “Total Current Voting Power” shall mean, with respect to any entity, at the time of determination of Total Current Voting Power, the total number of votes which may be cast in the election of members of the board of directors of the corporation if all securities entitled to vote in the election of such directors are present and voted (or, in the event the entity is not a corporation, the governing members, board or other similar body of such entity).

(ff) “Transfer” shall mean any sale, assignment, transfer, lease, pledge, conveyance, hypothecation or other transfer or disposition of such share, whether or not for value and whether voluntary or involuntary.

(gg) “Voting Stock” shall mean shares of the Common Stock and shares of any class of capital stock of the Company which are then entitled to vote generally in the election of the Board of Directors of the Company.

ARTICLE II

STANDSTILL OBLIGATIONS, TRANSFER RESTRICTIONS
AND OTHER OBLIGATIONS

2.1 Digital River’s Standstill Obligations. Digital River agrees that, during the Standstill Period:

(a) Neither it nor any of its Affiliates shall, directly or indirectly, acquire or Beneficially Own Voting Stock or authorize or make a tender offer, exchange offer or other offer to acquire Voting Stock, if the effect of such acquisition would be to increase the percentage of Total Current Voting Power of the Company represented by all Shares Beneficially Owned by Digital River and its Affiliates to more than the Standstill Limit. Digital River shall not be deemed to have violated its respective covenants under this Section 2.1 by virtue of any increase in the aggregate percentage of the Total Current Voting Power of the Company represented by Shares Beneficially Owned by Digital River or its Affiliates if such increase is the result of a recapitalization of the Company, a repurchase of securities by the Company or other actions taken by the Company or any of the Company’s Affiliates that have the effect of reducing the Total Current Voting Power of the Company. Notwithstanding the foregoing, if the Shares Beneficially Owned by Digital River and its Affiliates is ever less than the Standstill Limit due to the issuance and sale by the Company of its Voting Stock or for any reason other than by Digital River’s own action, Digital River may, at any time, purchase from third parties in normal broker transactions an amount of Common Stock sufficient to raise Digital River’s relative ownership of the Company’s capital stock to the Standstill Limit, subject to applicable laws and any applicable trading restrictions or black-out periods under the Company’s insider trading policies.

(b) It shall promptly notify the Company if its aggregate Beneficial Ownership of Voting Stock exceeds the aggregate Beneficial Ownership of Voting Stock specified in Digital River’s most recent prior notice to the Company under this Section 2.1 (or if no such notice has yet been given, the aggregate Beneficial Ownership of Voting Stock on the date of this

Agreement) by more than 1% of the outstanding Voting Stock. Such notice shall specify the amount of Voting Stock Beneficially Owned by Digital River as of the date of the notice. Notwithstanding any provision of this Section 2.1(b) to the contrary, the provisions of this Section 2.1(b) requiring notice to the Company may be satisfied by the delivery by Digital River to the Company of an amendment to any Schedule 13D filed by Digital River with respect to the Shares.

(c) It shall not, without first obtaining Board Approval, solicit proxies with respect to any Voting Stock or make any recommendation regarding the voting of any Voting Stock.

(d) It shall not, without first obtaining Board Approval, (i) deposit any Voting Stock or Non-Voting Convertible Securities in a voting trust or, except as otherwise provided or contemplated herein, subject any Voting Stock or Non-Voting Convertible Securities to any arrangement or agreement with any third party with respect to the voting of such Voting Stock or (ii) join a 13D Group, partnership, limited partnership, syndicate or other group, or otherwise act in concert with any third person for the purpose of acquiring, holding, voting or disposing of Voting Stock or Non-Voting Convertible Securities.

2.2 The Company’s Right of First Refusal

(a) Digital River’s right to Transfer (other than a Transfer to any Affiliate of such holder or a Transfer to the Company pursuant to a redemption or otherwise) the shares shall be subject to the Company’s right of first refusal to purchase such Shares on the following terms and conditions:

(i) Digital River shall give prior notice (the “Transfer Notice”) to the Company in writing of any intention to Transfer Shares, specifying the name of the proposed purchaser or transferee, the number of Shares proposed to be the subject of such Transfer, the proposed price therefor and the other material terms upon which such disposition is proposed to be made.

(ii) The Company shall have the right, exercisable by written notice given by the Company to Digital River within ten (10) business days after receipt of such Transfer Notice (the “Response Notice”), to purchase all or any portion of the Shares specified in such Transfer Notice for cash at the price per share specified in the Transfer Notice or, if consideration other than cash is specified in the Transfer Notice, in an amount equal to the Fair Market Value of such non-cash consideration. Such right shall not be conditional upon the Company having sufficient financing, at the time the right arises, to purchase the Shares; provided, however, in any event the Company is required to obtain such financing within the time period set forth in Section 2.2(a)(iii).

(iii) If the Company exercises its right of first refusal hereunder, the closing of the purchase of the Shares with respect to which such right has been exercised shall take place within sixty (60) calendar days after the Company gives the Response Notice to Digital River or, if later, within five (5) business days of the determination of the Fair Market Value of any non-cash consideration. Subject to Section 2.2(a)(iv), upon exercise of its right of

first refusal, the Company and Digital River shall be legally obligated to consummate the purchase and sale contemplated thereby and shall use their reasonable best efforts to secure any approvals required in connection therewith.

(iv) If the Company does not exercise its right of first refusal hereunder within the time specified for such exercise in Section 2.2(a)(ii) above or close within the time period specified in Section 2.2(a)(iii) with respect to all of the Shares specified in such Transfer Notice, Digital River shall be free, during the period of ninety (90) calendar days following the expiration of such time for exercise or close, as the case may be, to Transfer or tender for Transfer those Shares specified in such Transfer Notice with respect to which the Company has not exercised its first refusal rights to the proposed purchaser or transferee specified in such Transfer Notice, and on terms not materially less favorable to Digital River than the terms specified in such Transfer Notice.

(b) The Company may assign its right of first refusal under this Section 2.2 to any other person or persons in connection with any proposed Transfer.

2.3 Digital River’s Other Obligations

(a) Quorum. So long as Digital River Beneficially Owns at least one percent (1%) of the Total Current Voting Power of the Company, Digital River, as the holder of Shares, shall be present, in person or by proxy, at all meetings of stockholders of the Company so that all shares of Voting Stock held by Digital River may be counted for purposes of determining the presence of a quorum at such meetings.

(b) No Exercise of Dissenter’s Rights. Until the fifth (5^th) anniversary of the date of this Agreement, at any time that Digital River Beneficially Owns at least one percent (1%) of the Total Current Voting Power of the Company, Digital River agrees not to exercise any dissenter’s rights, if any, that it may have under applicable law in connection with any merger, consolidation, reorganization or other transaction that is approved by the Company’s Board of Directors, regardless of the manner in which Digital River may have voted or cast Shares of Voting Stock with respect to such transaction.

ARTICLE III

MISCELLANEOUS

3.1 Governing Law; Jurisdiction and Venue

(a) This Agreement is to be construed in accordance with and governed by the internal laws of the State of Delaware without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Delaware to the rights and duties of the parties.

(b) Any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement may be brought or otherwise commenced in any state or federal court located in the State of Delaware. Each party to this Agreement:

(i) expressly and irrevocably consents and submits to the jurisdiction of each state and federal court located in the State of Delaware (and each appellate court located in the State of Delaware) in connection with any such legal proceeding, including to enforce any settlement, order or award;

(ii) agrees that each state and federal court located in the State of Delaware shall be deemed to be a convenient forum; and

(iii) waives and agrees not to assert (by way of motion, as a defense or otherwise), in any such legal proceeding commenced in any state or federal court located in the State of Delaware, any claim that such party is not subject personally to the jurisdiction of such court, that such legal proceeding has been brought in an inconvenient forum, that the venue of such proceeding is improper or that this Agreement or the subject matter hereof or thereof may not be enforced in or by such court.

(c) Each party hereto agrees to the entry of an order to enforce any resolution, settlement, order or award made pursuant to this Section 3.1 by the state and federal courts located in the State of Delaware and in connection therewith hereby waives, and agrees not to assert by way of motion, as a defense, or otherwise, any claim that such resolution, settlement, order or award is inconsistent with or violative of the laws or public policy of the laws of the State of Delaware or any other jurisdiction.

3.2 Assignment. No party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other parties. Except as provided herein, any assignment of rights or delegation of duties under this Agreement by a party without the prior written consent of other parties shall be void ab initio. Subject to the preceding two sentences, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

3.3 Entire Agreement; No Third Party Beneficiaries; Amendment. This Agreement, the Purchase Agreement, the Investor Rights Agreement and the agreements referred to herein and therein constitute the full and entire understanding and agreement between the parties with regard to the subject hereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein and in the agreements referred to herein. This Agreement is not intended to confer upon any other person any rights or remedies hereunder. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought.

3.4 Notices. All notices and other communications required or permitted hereunder shall be made in the manner and to the addresses set forth in the Purchase Agreement.

3.5 Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to a party under this Agreement shall impair any such right, power or remedy nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter

occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.

3.6 Expenses. Except as otherwise specifically provided herein, the Company and Digital River shall bear their own expenses incurred with respect to this Agreement and the transactions contemplated hereby.

3.7 Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific intent or were otherwise breached. It is accordingly agreed that the parties shall not be entitled to an injunction or injunctions, without bond, to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they may be entitled by law or equity, and any party sued for breach of this Agreement expressly waives any defense that a remedy in damages would be adequate.

3.8 Further Assurances. The parties hereto 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 or documents as any other party may reasonably request from time to time in order to carry out the intent and purposes of this Agreement and the consummation of the transactions contemplated hereby. Neither the Company nor Digital River shall voluntarily undertake any course of action inconsistent with satisfaction of the requirements applicable to them set forth in this Agreement and each shall promptly do all such acts and take all such measures as may be appropriate to enable them to perform as early as practicable the obligations herein and therein required to be performed by them.

3.9 Facsimile; Counterparts. This Agreement may be executed by facsimile and in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.

3.10 Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided, that no such severability shall be effective if it materially changes the economic impact of this Agreement on any party.

3.11 Interpretation.

(a) The various section headings are inserted for purposes of reference only and shall not affect the meaning or interpretation of this Agreement or any provision hereof. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms.

(b) Each party hereto acknowledges that it has been represented by competent counsel and participated in the drafting of this Agreement, and agrees that any applicable rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in connection with the construction or interpretation of this Agreement.

(c) When a reference is made in this Agreement to a Section, Exhibit or Schedule, such reference shall be to a Section of, Exhibit to or Schedule to this Agreement unless otherwise indicated.

(d) Any reference to a statute, rule, regulation, form or schedule under either the Exchange Act or the Securities Act contained in this Agreement shall be deemed to include any to successor or replacement statute, rule, regulation, form or schedule.

3.12 Attorneys’ Fees. In any action at law or suit in equity in relation to this Agreement, the prevailing party in such action or suit shall be entitled to receive a reasonable sum for its attorneys’ fees and all other reasonable costs and expenses incurred in such action or suit.

[Remainder of this page intentionally left blank.]

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

	INTRAWARE, INC.

	By:
		Name:
		Title:

	DIGITAL RIVER, INC.

	By
		Name:
		Title:

[Signature Page to Standstill and Stock Restriction Agreement]

EX-4 5 a05-20351_1ex4.htm FORM OF INVESTOR RIGHTS AGREEMENT

EXHIBIT 4

INVESTOR RIGHTS AGREEMENT

This INVESTOR RIGHTS AGREEMENT (the “Agreement”) is made as of November 9, 2005, by and between Intraware, Inc., a Delaware corporation (the “Company”) and Digital River, Inc., a Delaware corporation (“Digital River”).

WHEREAS, the Company and Digital River are parties to the Series B Preferred Stock Purchase Agreement, dated November , 2005 (the “Purchase Agreement”), pursuant to which Digital River is purchasing 1,000 shares of the Company’ Series B Preferred Stock (the “Shares”); and

WHEREAS, subject to the terms and conditions set forth herein, the Company has agreed to grant certain registration rights and other rights to Digital River with respect to the Shares.

ARTICLE I

DEFINITIONS

1.1 Definitions. For the purpose of this Agreement, the following terms shall have the meanings specified with respect thereto below:

(a) “Board of Directors” shall mean the Board of Directors of the Company.

(b) “Common Stock” shall mean the Common Stock, par value $0.0001 per share, of the Company.

(c) “Eligible Period” shall mean the period commencing on the second anniversary of this Agreement.

(d) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(e) “Register,” “registered,” and “registration” refers to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

(f) “Registrable Shares” shall mean the shares of Common Stock (including shares of Common Stock issuable upon conversion of the Series B Preferred Stock) issued or issuable to Stockholder in accordance with the terms and conditions of the Purchase Agreement, and

any securities of the Company issued as a dividend on or other distribution with respect to, or in exchange for or replacement of, such Common Stock.

(g) “Registration Statement” shall mean any registration statement described in Sections 2.1 or 2.2 of this Agreement.

(a) “Rule 144” shall mean Rule 144 as promulgated under the Exchange Act.

(h) “Rule 145” shall mean Rule 145 as promulgated under the Securities Act.

(i) “SEC” shall mean the U.S. Securities and Exchange Commission.

(j) “Securities Act” shall mean the Securities Act of 1933, as amended.

(k) “Series B Preferred Stock” shall mean the Series B Preferred Stock, $0.0001 par value per share, of the Company.

(l) “Standstill Agreement” shall mean that Standstill and Stock Restriction Agreement, dated November , 2005, by and between the Company and Digital River.

(m) “Stockholder” shall mean Digital River, any transferee or assignee thereof to whom Digital River assigns its rights under the Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 6.5, and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 6.5.

(n) “Voting Stock” shall mean shares of the Common Stock and shares of any class of capital stock of the Company which are then entitled to vote generally in the election of the Board of Directors of the Company.

ARTICLE II

REGISTRATION RIGHTS

2.1 Demand Registration.

(a) If at any time during the Eligible Period the Stockholder requests in writing (the “Stockholder Demand”) that the Company file a registration statement on Form S-3 (or any successor form to Form S-3) for a public offering of shares of the Registrable Shares the Company shall, subject to Section 2.4, file such Registration Statement with the SEC within forty-five (45) days after its receipt of such request. The Company shall use commercially reasonable efforts to cause such Registration Statement to be declared effective as soon thereafter as practicable and keep such registration statement effective until the Stockholder notifies the Company in writing that the Company is no longer required to keep such Registration Statement effective. In no event, however, shall the Company be required to (i) effect more than two (2) registrations pursuant to this section or (ii) keep one or more registration statements filed pursuant to this section effective for more than an aggregate of one hundred twenty (120) days. In the event the registration is proposed to be part of a

firm commitment underwritten public offering, the substantive provisions of Section 2.3 shall be applicable to each such registration initiated under this Section 2.1 and the piggyback registration rights of Stockholder shall be applicable to a registration effected pursuant to this Section 2.1.

(b) Notwithstanding the foregoing, the Company shall not be obligated to take any action pursuant to subparagraph (a):

(i) if the Company, within ten (10) days of the receipt of the Stockholder Demand, gives notice of its bona fide intention to effect the filing of a registration statement with the SEC within sixty (60) days of receipt of such demand (other than a registration relating primarily to the sale of securities to participants in a Company stock plan or employee benefit plan, a transaction covered by Rule 145 under the Securities Act or the resale of securities issued in such a transaction, a registration in which the only stock being registered is Common Stock issuable upon conversion or exchange of debt securities which are also being registered, or any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Shares); provided, however, that if such registration statement is not filed by the Company within 60 days of receipt of such Stockholder Demand and declared effective by the SEC within 120 days after the Company’s receipt of such Stockholder Demand, the Company shall be obligated to cause such Registrable Shares of the Stockholder to be registered in accordance with the provisions of this Section 2.1 provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or

(ii) during the period starting with the Company’s date of filing of, and ending on the date ninety (90) days immediately following, the effective date of any registration statement pertaining to securities of the Company (other than a registration of securities in a Rule 145 transaction or with respect to an offering solely to employees or consultants, or any other registration which is not appropriate for the registration of Registrable Shares), which registration was either filed as a result of the exercise by Stockholder of its rights pursuant to Section 2.1 hereof or was subject to Section 2.2 hereof.

2.2 Piggyback Registration. If at any time, the Company proposes to register any of its Common Stock under the Securities Act in connection with a public offering of such Common Stock solely for cash (other than a registration relating primarily to the sale of securities to participants in a Company stock plan of employee benefit plan, a transaction covered by Rule 145 under the Securities Act or the resale of securities issued in such a transaction, a registration in which the only stock being registered is Common Stock issuable upon conversion or exchange of debt securities which are also being registered or any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Shares), the Company shall, at such time, give the Stockholder notice of such registration. Upon the written request of the Stockholder, given within twenty (20) days after notice has been given by the Company in accordance with Section 6.1, the Company shall, subject to Section 2.3, cause to be registered under the Securities Act all of the Registrable Shares that the Stockholder has requested to be registered.

2.3 Underwriting Requirements.

(a) In connection with any underwritten public offering, the Company shall not be required to include any of the Registrable Shares in such underwriting unless the Stockholder accepts the terms of the underwriting as agreed upon between the Company and the underwriters for the offering (which underwriters shall be selected by the Company).

(b) If the total amount of securities, including Registrable Shares, requested to be included in an underwritten public offering exceeds the amount of securities that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required subject to the requirements of this Section 2.3(b) to include in the offering only that number of such securities, including Registrable Shares, which the underwriters determine in their sole discretion will not jeopardize the success of the offering. In such event, the Company may reduce the number of Registrable Shares to be included in the offering.

2.4 Conditions and Limitations on Registration Rights. The registration rights granted by this agreement are subject to the following additional conditions and limitations:

(a) Delays and Suspension. The Company may delay the filing of, or suspend or delay the effectiveness of a Registration Statement for up to thirty (30) days, if the Company shall furnish to the Stockholder 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 to be filed or declared effective or for an effective registration statement not to be suspended. In such event, the Company’s obligation under this Agreement to file a registration statement, seek effectiveness of a registration statement or keep such registration statement effective shall be deferred for a period not to exceed sixty (60) days from the receipt of the request to file such registration by the Stockholder, provided that the Company may not exercise this right of deferral for an aggregate of in excess of seventy-five (75) days in any one year period. If the Company suspends the effectiveness of a Registration Statement, the Company will promptly deliver notice to the Stockholder of such suspension and will again deliver notice to the Stockholder when such suspension is no longer necessary. The duration for which the Company is required to keep a Registration Statement effective shall be extended by an additional number of days equal to the length of any suspension period.

(b) Amended or Supplemented Prospectus. The Stockholder agrees that, upon receipt of any notice from the Company described in Section 2.4(a) hereof that suspends an effective registration statement, the Stockholder shall forthwith discontinue disposition of Registrable Shares until such Stockholder’s receipt of copies of a supplemented or amended prospectus from the Company, or until it is advised in writing by the Company that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the prospectus. If so directed by the Company, the Stockholder will deliver to the Company all copies of the prospectus covering such Registrable Shares current at the time of receipt of such notice of suspension.

2.5 Information from Stockholder. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement with respect to the Registrable Shares

of the Stockholder that the Stockholder shall furnish to the Company such information regarding itself, the Registrable Shares held by it, and the intended method of disposition of such securities, as shall be required to effect the registration of the Registrable Shares.

2.6 Expenses of Registration. The Company shall pay all registration, filing and qualification fees (including SEC filing fees and the listing fees of the quotation system or any stock exchange on which the Company securities are traded) attributable to the Registrable Shares registered under this Agreement, and any legal, accounting or other professional fees or expenses incurred by the Company. The Stockholder shall pay all underwriting discounts, selling commissions and stock transfer taxes, if any, attributable to the sale of such securities registered by the Stockholder and any legal, accounting or other professional fees incurred by the Stockholder.

2.7 Reports Under the Exchange Act. The Company agrees to file with the SEC in a timely manner all reports and other documents and information required of the Company under the Exchange Act, and take such other actions as may be necessary to assure the availability of Form S-3 for use in connection with the registration rights provided in this Agreement and Rule 144 for use in connection with resales of the Registrable Shares.

2.8 Rule 144. In the event that all of the Stockholder’s Registrable Shares may, under Rule 144, be resold or otherwise disposed of in a ninety (90) day period without registration under the Securities Act, the registration rights granted under this Agreement to such Stockholder and the obligations of the Company hereunder (other than its obligations under Section 2.7 and Article IV) to such Stockholder, shall automatically terminate in their entirety and be of no further force and effect whatsoever without any further action on the part of the Company or the Stockholder.

2.9 Market Stand-Off. The Stockholder agrees that, upon the request of the underwriters managing any underwritten public offering of the Company’s securities in connection with an effective registration statement under the Securities Act, it will not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, the Registrable Shares other than those included in the registration, without the prior written consent of such underwriters, for such period of time, not to exceed ninety (90) days (or such lesser period as executive officers or directors of the Company are so restricted with respect to the transfer of shares of Common Stock held by them) after the effective date of the registration statement relating thereto, provided that such registration was filed as a result of the exercise by Stockholder of its rights pursuant to Section 2.1 hereof or was subject to Section 2.2 hereof. The Stockholder agrees that, if requested by the underwriters for such an offering, it will enter into a lock-up agreement directly with the underwriters under substantially the same terms and conditions and for the same time period as entered into by the executive officers and directors of the Company. The Stockholder agrees that the Company may instruct its transfer agent to place stop-transfer notations in its records to enforce the provisions of this Section 2.9.

ARTICLE III

FURTHER OBLIGATIONS OF THE COMPANY AFTER REGISTRATION

3.1 Blue Sky Compliance. The Company shall, as soon as reasonably possible after the effectiveness of a Registration Statement, use its best efforts to register and qualify the Registrable Shares covered by the Registration Statement under such other securities or “blue sky” laws of such jurisdictions as shall be reasonably requested by the Stockholder, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act.

3.2 Furnishing of Prospectus. With respect to a Registration Statement filed pursuant to Sections 2.1 or 2.2, the Company shall furnish to the Stockholder copies of any preliminary prospectus and, as soon as reasonably possible after the effectiveness of the Registration Statement, furnish to the Stockholder such numbers of copies of a final prospectus in conformity with the requirements of the Securities Act, and such other documents as the Stockholder may reasonably request, in order to facilitate the resale or other disposition of Registrable Shares owned by it.

3.3 Amendments. With respect to a Registration Statement filed pursuant to Section 2.1 or 2.2 of this Agreement, and subject to any events contemplated by or actions taken under Section 2.4 of this Agreement, the Company shall prepare and file with the SEC such amendments to the Registration Statement and amendments or supplements to the prospectus contained therein as may be necessary to keep such Registration Statement effective and such Registration Statement and prospectus accurate and complete for the entire period for which the Registration Statement remains effective.

3.4 Notices. The Company shall:

(a) Notify the Stockholder, promptly after it shall receive notice thereof, of the date and time when any Registration Statement and each post-effective amendment thereto has become effective;

(b) Notify the Stockholder promptly of any request by the SEC for the amending or supplementing of any Registration Statement or prospectus or for additional information;

(c) Notify the Stockholder, at any time when a prospectus relating to the Registrable Shares is required to be delivered under the Securities Act, of any event which would cause any such prospectus or any other prospectus as then in effect to include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and promptly prepare and file with the SEC, and promptly notify the Stockholder of the filing of, such amendments or supplements to any Registration Statement or prospectus as may be necessary to correct any such statements or omissions; and

(d) Notify Stockholder, promptly after it shall receive notice, of the issuance of any stop order by the SEC suspending the effectiveness of any Registration Statement or the initiation or threatening of any proceeding for that purpose and promptly use commercially

reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued.

ARTICLE IV

INDEMNIFICATION

4.1 Indemnification.

(a) To the extent permitted by law, the Company will indemnify the Stockholder, each of its officers, directors and partners, legal counsel, agents and each person controlling the Stockholder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, (commenced or threatened), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or any violation by the Company of the Securities Act, the Exchange Act, and any state securities laws or any rule, regulation or qualification promulgated thereunder, and the Company will reimburse the Stockholder, each of its officers, directors, and partners, legal counsel, agents and each person controlling the Stockholder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred, in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided, however, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by the Stockholder, controlling person or underwriter expressly for use therein.

(b) The foregoing indemnity is subject to the condition that, insofar as it relates to any such untrue statement, alleged untrue statement, omission or alleged omission made in a preliminary prospectus on file with the SEC at the time the registration statement becomes effective or the amended prospectus filed with the SEC pursuant to Rule 424(b), as amended from time to time (the “Final Prospectus”), such indemnity shall not inure to the benefit of: (a) the Stockholder (i) if a copy of the Final Prospectus was not furnished by the Stockholder to the person asserting the loss, liability, claim or damage at or prior to the time such action as required by the Securities Act and such Final Prospectus would have cured the defect giving rise to the loss, liability, claim or damage or (ii) to the extent that such untrue statement, alleged untrue statement, omission or alleged omission is made in reliance upon and in conformity with written information furnished to the Company by the Stockholder expressly for use therein, or (b) any underwriter (i) if a copy of the Final Prospectus was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action as required by the Securities Act and the Final Prospectus would have

cured the defect giving rise to the loss, liability, claim or damage or (ii) to the extent that such untrue statement, alleged untrue statement, omission or alleged omission is made in reliance on and in conformity with written information furnished to the Company by the underwriter for use therein.

(c) The Stockholder will, if Registrable Shares held by the Stockholder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers, each underwriter, if any, of the Company’s securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation (commenced or threatened), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to such registration, qualification or compliance, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and, severally, and not jointly, will reimburse the Company, such directors, officers, persons, underwriters or control persons for any legal and any other expenses reasonably incurred, in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by the Stockholder expressly for use therein. Notwithstanding the foregoing, the liability of the Stockholder under this Section 4.1 shall be limited to an amount equal to the net proceeds received by the Stockholder from the sale of shares in such registration.

(d) Each party entitled to indemnification under this Section 4.1 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement, unless the failure to give such notice is prejudicial to an Indemnifying Party’s ability to defend such action, and provided further that an Indemnified Party shall have the right to retain its own counsel, with the fees and expenses of such counsel to be paid by the Indemnifying Party, if representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between such Indemnified Party and any other party represented by such counsel in such proceeding. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

(e) If the indemnification provided for in this Section 4.1 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any losses, claims, damages or liabilities referred to herein, the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by the Stockholder hereunder exceed the net proceeds from the offering received by the Stockholder.

(f) The obligations of the Company and the Stockholder under this Section 4.1 shall survive completion of any offering of Registrable Securities in a registration statement and the termination of this Agreement.

ARTICLE V

BOARD OF DIRECTORS

5.1 Election of Director. After the date of execution of a strategic alliance agreement between Digital River and the Company and for so long as Digital River continues to own ten percent (10%) or more of the outstanding shares of Voting Stock, the Company will nominate and use its reasonable efforts to have one individual designated by Digital River and reasonably acceptable to the Board of Directors (the “Digital River Designee”) elected to the Board of Directors (including filling any vacancy created as the result of the resignation, removal, incapacitation or death of a Digital River Designee with another Digital River Designee as permitted by the Company’s certificate of incorporation and bylaws, and at each annual or special meeting of stockholders of the Company at which the applicable class of directors are to be elected, causing the Board of Directors to recommend to the stockholders of the Company that such Digital River Designee be elected as a member of the Board of Directors and soliciting proxies and voting such proxies in favor of the election of such Digital River Designee).

5.2 Resignation of Director. In the event that Digital River owns less than ten percent (10%) of the outstanding shares of Voting Stock, then the Company may at such time request the Digital River Designee to resign from the Board of Directors, and within ten (10) days following such request, the Digital River Designee shall resign from the Board of Directors.

5.3 Conflicts of Interest. The Digital River Designee may be excluded from any meeting or portion thereof of the Board of Directors or from access to any notices, minutes, consents or other materials provided to the Board of Directors if the Board of Directors determines such exclusion is necessary to avoid conflicts of interest or where the Board of Directors or its chairman

determines that the business interests of Digital River are inconsistent with the business interests of the Company.

5.4 Indemnification. The Company shall indemnify its directors to the full extent permitted by law and shall maintain coverage under directors and officers insurance in customary form and coverage levels and payable to the Company as beneficiary.

5.5 Reimbursment of Expenses. The Company shall reimburse the Digital River Designee for reasonable expenses incurred in connection with the attendance of the Digital River Designee at meetings of the Board of Directors, upon presentation of appropriate documentation therefor.

ARTICLE VI

MISCELLANEOUS

6.1 Notices. All notices and other communications required or permitted hereunder shall be made in the manner and to addresses set forth in the Purchase Agreement.

6.2 Interpretation. The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

6.3 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.

6.4 Entire Agreement. This Agreement, the Purchase Agreement, the Standstill Agreement and the documents and instruments and other agreements among the parties hereto referenced herein: (a) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; and (b) are not intended to confer upon any other person any rights or remedies hereunder.

6.5 Assignment. Digital River may transfer or assign its rights and obligations hereunder together with any Registrable Shares transferred or assigned in accordance with the terms of the Standstill Agreement, as long as such transferee or assignee of the Registrable Shares executes and delivers a counterpart copy of this Agreement thereby agreeing to be bound by the terms and provisions set forth herein. Except as permitted herein, any assignment of rights or delegation of duties under this Agreement by a party without the prior written consent of the other parties, if such consent is required hereby, shall be void ab initio. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

6.6 Severability. In the event that any provision of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or

unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.

6.7 Attorneys’ Fees. In any action at law or suit in equity in relation to this Agreement, the prevailing party in such action or suit shall be entitled to receive a reasonable sum for its attorneys’ fees and all other reasonable costs and expenses incurred in such action or suit.

6.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

[Remainder of this page intentionally left blank.]

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

	INTRAWARE, INC.

	By:
		Name:
		Title:

	DIGITAL RIVER, INC.

	By
		Name:
		Title:

[Signature Page to Investor Rights Agreement]

-----END PRIVACY-ENHANCED MESSAGE-----

Under the Securities Exchange Act of 1934 (Amendment No. )*

ARTICLE I

PURCHASE AND SALE OF SHARES

ARTICLE II

DIGITAL RIVER’S REPRESENTATIONS AND WARRANTIES

2.1 Investment Purpose. Digital River is acquiring the Shares for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act.

2.2 Accredited Investor Status. Digital River is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

2.6 Transfer or Resale. Digital River understands that except as provided in the Investor Rights Agreement: (i) the Shares have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred, unless in

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

ARTICLE IV

COVENANTS.

4.2 Expenses; Fees. Each party shall each pay their own expenses in connection with the transactions contemplated by this Agreement.

ARTICLE V

CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

5.1 Digital River shall have executed and delivered to the Company each of the Transaction Documents.

5.2 Digital River shall have delivered to the Company the Purchase Price for the Shares being purchased by Digital River at the Closing by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company.

5.4 The Company shall have filed the Certificate of Designations with the Secretary of State of the State of Delaware.

ARTICLE VI

CONDITIONS TO DIGITAL RIVER’S OBLIGATION TO PURCHASE.

6.1 The Company shall have executed and delivered to Digital River each of the Transaction Documents.

6.2 Digital River shall have received the opinion of the Company’s counsel dated as of the Closing Date, in substantially the form attached hereto as Exhibit E.

6.4 The Company shall have filed the Certificate of Designations with the Secretary of State of the State of Delaware.

ARTICLE VII

MISCELLANEOUS

7.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

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

7.4 Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of

the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

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

7.9 Survival. The representations and warranties of the Company and Digital River contained in Sections 2 and 3 and the agreements set forth this Article VII shall survive the Closing.

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

(a) The “Original Issue Date” shall be the date the first share of Series B Preferred Stock is initially issued.

(c) Any redemption effected pursuant to Section 8(b) shall be made on a pro rata basis among the holders of the Series B Preferred Stock in proportion to the shares of Series B Preferred Stock then held by them.

for redemption on such date, and such shares shall not thereafter be transferred on the books of the Company or be deemed to be outstanding for any purpose whatsoever.

ARTICLE I DEFINITIONS

ARTICLE II STANDSTILL OBLIGATIONS, TRANSFER RESTRICTIONS AND OTHER OBLIGATIONS

(c) It shall not, without first obtaining Board Approval, solicit proxies with respect to any Voting Stock or make any recommendation regarding the voting of any Voting Stock.

(a) Digital River’s right to Transfer (other than a Transfer to any Affiliate of such holder or a Transfer to the Company pursuant to a redemption or otherwise) the shares shall be subject to the Company’s right of first refusal to purchase such Shares on the following terms and conditions:

first refusal, the Company and Digital River shall be legally obligated to consummate the purchase and sale contemplated thereby and shall use their reasonable best efforts to secure any approvals required in connection therewith.

(b) The Company may assign its right of first refusal under this Section 2.2 to any other person or persons in connection with any proposed Transfer.

Under the Securities Exchange Act of 1934
(Amendment No. )*

ARTICLE I

DEFINITIONS

ARTICLE II

STANDSTILL OBLIGATIONS, TRANSFER RESTRICTIONS
AND OTHER OBLIGATIONS