Exhibit 10.1


 


SOFTBRANDS, INC.


 


 


SERIES C CONVERTIBLE PREFERRED STOCK

AND WARRANT PURCHASE AGREEMENT


 


 


Dated as of

August 17, 2005


 





















 


TABLE OF CONTENTS


 


	
  ARTICLE I
  DEFINITIONS

  	
   

  
	
  1.1

  	
  Definitions; Interpretation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II
  ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS

  	
   

  
	
  2.1

  	
  Number of Series C Shares,
  Warrants and Purchase Price

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III CLOSING; CLOSING DELIVERIES

  	
   

  
	
  3.1

  	
  Closing

  	
   

  
	
  3.2

  	
  Payment for and Delivery of Series C
  Shares and Warrants

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV
  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

  	
   

  
	
  4.1

  	
  Existence; Qualification;
  Subsidiaries

  	
   

  
	
  4.2

  	
  Authorization and Enforceability;
  Issuance of Shares

  	
   

  
	
  4.3

  	
  Capitalization

  	
   

  
	
  4.4

  	
  Private Sale; Voting Agreements

  	
   

  
	
  4.5

  	
  SEC Reports; Financial Statements

  	
   

  
	
  4.6

  	
  Absence of Certain Changes

  	
   

  
	
  4.7

  	
  Litigation

  	
   

  
	
  4.8

  	
  Licenses, Compliance with Law, Other
  Agreements, Etc

  	
   

  
	
  4.9

  	
  Consents

  	
   

  
	
  4.10

  	
  Disclosure

  	
   

  
	
  4.11

  	
  Tangible Assets

  	
   

  
	
  4.12

  	
  Owned Real Property

  	
   

  
	
  4.13

  	
  Real Property Leases

  	
   

  
	
  4.14

  	
  Certificates, Authorities and
  Permits

  	
   

  
	
  4.15

  	
  Agreements

  	
   

  
	
  4.16

  	
  Intellectual Property

  	
   

  
	
  4.17

  	
  Employees

  	
   

  
	
  4.18

  	
  ERISA; Employee Benefits

  	
   

  
	
  4.19

  	
  Environment, Health and Safety

  	
   

  
	
  4.20

  	
  Transactions With Affiliates

  	
   

  
	
  4.21

  	
  Taxes

  	
   

  
	
  4.22

  	
  Other Investors

  	
   

  
	
  4.23

  	
  Seniority

  	
   

  
	
  4.24

  	
  Investment Company

  	
   

  
	
  4.25

  	
  Certain Fees

  	
   

  
	
  4.26

  	
  Sarbanes-Oxley Act

  	
   

  
	
  4.27

  	
  Listing and Maintenance
  Requirements Compliance

  	
   

  
	
  4.28

  	
  No General Solicitation

  	
   

  
	
  4.29

  	
  No Integrated Offering

  	
   

  



 


i





















 


	
  4.30

  	
  Private Placement

  	
   

  
	
  4.31

  	
  Questionable Payments

  	
   

  
	
  4.32

  	
  Internal Controls

  	
   

  
	
  4.33

  	
  Use of Proceeds

  	
   

  
	
  4.34

  	
  Customers and Suppliers

  	
   

  
	
  4.35

  	
  Non-Material Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V
  REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

  	
   

  
	
  5.1

  	
  Authorization and Enforceability

  	
   

  
	
  5.2

  	
  Government Approvals

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI
  COMPLIANCE WITH SECURITIES LAWS

  	
   

  
	
  6.1

  	
  Investment Intent of the Purchasers

  	
   

  
	
  6.2

  	
  Status of Series C Shares and
  Warrants

  	
   

  
	
  6.3

  	
  Sophistication and Financial
  Condition of Purchasers

  	
   

  
	
  6.4

  	
  Transfer of Series C Shares,
  Warrants and Conversion Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII CONDITIONS PRECEDENT

  	
   

  
	
  7.1

  	
  Conditions to Obligations of the
  Purchasers

  	
   

  
	
  7.2

  	
  Conditions to Obligations of the
  Company

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII COVENANTS OF THE COMPANY

  	
   

  
	
  8.1

  	
  Restricted Actions

  	
   

  
	
  8.2

  	
  Required Actions

  	
   

  
	
  8.3

  	
  Information Rights

  	
   

  
	
  8.4

  	
  Access Rights

  	
   

  
	
  8.5

  	
  Right of First
  Offer

  	
   

  
	
  8.6

  	
  Board
  Representation

  	
   

  
	
  8.7

  	
  Appointment Right

  	
   

  
	
  8.8

  	
  Lock-up

  	
   

  
	
  8.9

  	
  Rights Plan

  	
   

  
	
  8.10

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX
  INDEMNIFICATION

  	
   

  
	
  9.1

  	
  Survival and
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X
  GENERAL PROVISIONS

  	
   

  
	
  10.1

  	
  Public
  Announcements

  	
   

  
	
  10.2

  	
  Successors and Assigns

  	
   

  
	
  10.3

  	
  Entire Agreement

  	
   

  
	
  10.4

  	
  Notices

  	
   

  
	
  10.5

  	
  Closing Fee; Purchasers’
  Fees and Expenses

  	
   

  
	
  10.6

  	
  Amendment and Waiver

  	
   

  
	
  10.7

  	
  Counterparts

  	
   

  



 


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  10.8

  	
  Headings; Construction

  	
   

  
	
  10.9

  	
  Specific Performance

  	
   

  
	
  10.10

  	
  Remedies Cumulative

  	
   

  
	
  10.11

  	
  GOVERNING LAW

  	
   

  
	
  10.12

  	
  JURISDICTION,
  WAIVER OF JURY TRIAL, ETC.

  	
   

  
	
  10.13

  	
  No Third Party
  Beneficiaries

  	
   

  
	
  10.14

  	
  Severability

  	
   

  
	
  10.15

  	
  Time of the Essence;
  Computation of Time

  	
   

  
	
  10.16

  	
  Consideration for
  Preferred Stock and Warrants

  	
   

  



 


iii





















 


SERIES C CONVERTIBLE PREFERRED STOCK

AND WARRANT PURCHASE AGREEMENT


 


THIS SERIES C CONVERTIBLE PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT (this “Agreement”) is
dated as of August 17, 2005 between SoftBrands, Inc., a Delaware
corporation (the “Company”), and
the Persons set forth on Schedule I
hereto (each a “Purchaser” and collectively, the “Purchasers”).


 


The Purchasers desire to purchase from the Company,
and the Company desires to sell and issue to the Purchasers, 18,000 shares of
the Company’s Series C Convertible Preferred Stock, par value $0.01 per
share, and warrants to purchase shares of the Company’s common stock, par value
$0.01 per share (including any associated Rights as defined in and issued
pursuant to the Rights Agreement (as defined herein), the “Common Stock”).


 


In consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this Agreement,
the parties hereto agree as follows:


 


ARTICLE I

DEFINITIONS


 


1.1                               Definitions;
Interpretation.


 


(a)                                  For
purposes of this Agreement, the following terms have the indicated meanings:


 


“Accrued Amount”
means, for any Series C Share at any time, the Liquidation Value, plus all
Unpaid Dividends thereon.


 


“Affiliate” of a
Person means any other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
such Person, where “control” means the possession of the power to direct the
management and policies of a Person, whether through the ownership of voting
securities, contract or otherwise.


 


“Affiliate
Transaction” has the meaning set forth in Section 8.1(f) hereof.


 


“Agreement”
has the meaning set forth in the preamble hereof.


 


“Amended and
Restated Investor Rights Agreement” means the Amended and Restated
Investor Rights Agreement between the Company and the Purchasers, substantially
in the form of Exhibit C hereto.


 


“AMEX”
means the American Stock Exchange LLC.


 


“Appointment Right”
has the meaning set forth in Section 8.7(a) hereof.


 


“Appointment Notice”
has the meaning set forth in Section  8.7(a) hereof.


 


“Board of Directors” means the board of directors of the Company.


 





















 


“Capital Lease” means any lease of property (real, personal or mixed) which, in
accordance with GAAP, should be capitalized on the lessee’s balance sheet or
for which the amount of the asset and liability thereunder as if so capitalized
should be disclosed in a note to such balance sheet.


 


“Claim”
means any action, claim, lawsuit, demand, suit, charge, complaint, hearing,
investigation, notice of a violation or noncompliance, litigation, proceeding,
arbitration, official action, appeals or other dispute, whether civil,
criminal, administrative or otherwise.


 


“Closing” has
the meaning set forth in Section 3.1
hereof.


 


“Closing Date”
has the meaning set forth in Section 3.1
hereof.


 


“Closing Fee”
has the meaning set forth in Section 10.5
hereof.


 


“Code” means the
Internal Revenue Code of 1986, as amended.


 


“Common Stock”
has the meaning set forth in the recitals hereof.


 


“Common Stock
Equivalents” means any capital or securities (other than options)
directly or indirectly convertible into or exchangeable for Common Stock.


 


“Company” has
the meaning set forth in the preamble hereof.


 


“Company Counsel”
has the meaning set forth in Section  8.7(a) hereof.


 


“Company Group”
means, collectively, the Company and the Company Subsidiaries.


 


“Company
Intellectual Property” has the meaning set forth in Section 4.16 hereof.


 


“Company Products”
has the meaning set forth in Section 4.16
hereof.


 


“Company Reports”
has the meaning set forth in Section 4.5(a) hereof.


 


“Company Sale” means a transaction (whether in one or a
series of related transactions) pursuant to which a Person or Persons (a) acquire
(whether by merger, amalgamation, consolidation, recapitalization,
reorganization, redemption, transfer or issuance of Equity Securities or
otherwise) Equity Securities of the Company (or any surviving or resulting
corporation) possessing the voting power to elect a majority of the Board of
Directors (or such surviving or resulting corporation), (b) acquire assets
constituting all or substantially all of the assets of the Company Group or (c) merge
or consolidate (or agree to merge or consolidate) with or into any member of
the Company Group (other than in a merger involving only the Company and one of
its Wholly-Owned Subsidiaries or, to the extent the Company is the surviving
company and the rights of the holders of the Securities under this Agreement
and the Related Documents are not adversely affected thereby, or in connection
with an acquisition of another company or business which has been approved by
the Board of Directors).


 


2





















 


“Company
Subsidiaries” means all direct and indirect Subsidiaries of the
Company.


 


“Conversion Shares”
has the meaning set forth in Section 4.2(b) hereof.


 


“Current Balance
Sheet” has the meaning set forth in Section 4.6(b) hereof.


 


“Disclosure Schedules”
has the meaning set forth in Article IV
hereof.


 


“Environmental and Safety
Requirements” means all federal, state, local and foreign statutes,
regulations, ordinances and other provisions having the force or effect of law,
all judicial and administrative orders and determinations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or by-products, asbestos,
polychlorinated biphenyls, noise or radiation.


 


“Equity Security”
means (a) any capital stock or other equity security, or ownership
interests (including limited liability company, partnership and joint venture
interests), (b) any security directly or indirectly convertible into or
exchangeable for any capital shares or other equity security or security
containing any profit participation features, (c) any warrants, options or
other rights, directly or indirectly, to subscribe for or to purchase any
capital shares, other equity security or security containing any profit
participation features or directly or indirectly to subscribe for or to
purchase any security directly or indirectly convertible into or exchangeable
for any capital shares or other equity security or security containing profit
participation features or (d) any share appreciation rights, phantom share
rights or other similar rights.


 


“ERISA” has the
meaning set forth in Section 4.18
hereof.


 


“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.


 


“Exempt Issuance”
has the meaning set forth in Section 8.5(a) hereof.


 


“EULAs”
has the meaning set forth in Section 4.15(a)(x)
hereof.


 


“Evaluation Date”
has the meaning set forth in Section 4.32
hereof.


 


“Financial Officer” means the chief financial officer, principal accounting
officer, treasurer or controller of the Company.


 


“Financial
Statements” has the meaning set forth in Section 4.5(b) hereof.


 


“Fully-Diluted
Common Stock” has the meaning set forth in Section 8.5 hereof.


 


3





















 


“GAAP” means
United States generally accepted accounting principles as in effect from time
to time, consistently applied; provided, that for the purpose of performing the
calculation in Section 8.1(c) hereof,
references to GAAP shall be to such principles as in effect on the Closing
Date.  All accounting terms used herein
without definition shall be used as defined under GAAP.


 


“Governmental Agency”
means any federal, state, local, foreign or other governmental agency,
instrumentality, commission, authority, board or body.


 


“Guarantee”
means any guarantee of the payment or performance of any indebtedness or other
obligation and any other arrangement whereby credit is extended to one or more
obligor on the basis of any promise of such Person, whether that promise is
expressed in terms of any obligation owned by such obligor, or to purchase
goods and services from such obligor pursuant to a take-or-pay contract, or to
maintain the capital, working capital, solvency of general financial condition
of such obligor, whether or not any such arrangement is listed in the balance
sheet of such Person or referred to in a footnote thereto, but shall not
include endorsements of items for collection in the Ordinary Course of
Business.


 


“Indebtedness”
of any Person means, without duplication, (a) all obligations of such
Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of
such Person upon which interest charges are customarily paid (including margin
debt), (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property acquired by such Person, (e) all
obligations of such Person in respect of the deferred purchase price of
property or services (excluding current accounts payable incurred in the
Ordinary Course of Business), (f) all Indebtedness of others secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (g) all
Guarantees by such Person of Indebtedness of others, (h) all capital lease
obligations of such Person, (i) all obligations, contingent or otherwise,
of such Person as an account party in respect of letters of credit and letters
of guaranty, (j) all obligations, contingent or otherwise, of such Person in
respect of bankers’ acceptances, (k) the principal balance outstanding under
any synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product of the Company or any of its
Subsidiaries where such transaction is considered borrowed money indebtedness
for tax purposes but is classified as an operating lease under GAAP and (l) all
obligations of such Person to pay a specified purchase price for goods or
services whether or not delivered or accepted (e.g., take-or-pay obligations)
or similar obligations. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.


 


“Indemnified Liabilities” has the meaning set forth in Section 9.1 hereof.


 


“Indemnitees” has the meaning set forth in Section 9.1 hereof.


 


4





















 


“Intellectual
Property” means and includes (a) all past, present, and future
rights of the following types, which may exist or be created under the laws of
any jurisdiction in the world: (i) rights associated with works of
authorship, including exclusive exploitation rights, copyrights, moral rights,
and mask works; (ii) trademark and trade name rights, domain name rights,
similar rights, and related goodwill; (iii) trade secret rights and rights
in confidential information; (iv) patent and industrial property rights; (v) privacy
and publicity rights; and (vi) all other intellectual property rights and
proprietary rights of every kind and nature including database rights; (b) all
patents, registrations, renewals, extensions, combinations, divisions, reissues
of, applications for, and other filings related to, any of the foregoing; (c) all
claims and rights in and to any of the foregoing; and (d) all copies and
tangible embodiments of any of the foregoing (in whatever form or medium)
including information.


 


“Investment Bank”
has the meaning set forth in Section 8.7(a) hereof.


 


“IRS” means the
Internal Revenue Service.


 


“Knowledge” when
used with respect to the Company means the actual knowledge of George H. Ellis,
Randal Tofteland and David B. Latzke, in each case, after reasonable investigation.


 


“Liability”
means any liability, loss, expense or obligation of whatever kind or nature
(whether known or unknown, whether assert or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability or obligation for
Taxes.


 


“Lien” means any mortgage, charge, pledge, lien (statutory or
otherwise), security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired.


 


“Liquidation Value”
means, with respect to any Series C Share, $1,000.


 


“Lock-up Agreements” has the meaning set
forth in Section 8.8 hereof.


 


“Lock-up Period” has the meaning set
forth in Section 8.8 hereof.


 


“Market Price” of any security means the average of the
closing prices of such security’s sales on all securities exchanges on which
such security may at the time be listed, or, if there has been no sales on any
such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if
on any day such security is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau, Incorporated,
or any similar successor organization, in each such case (i) averaged over
a period of 30 days consisting of the day as of which “Market Price” is being
determined and the 29 consecutive Business Days prior to such day, and (ii) averaged
on a volume-weighted basis based on the trading volume for each such Business
Day.  If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, or if at 


 


5





















 


any time this Agreement
requires the determination of the Market Price of any asset which does not
constitute a security, the “Market Price” shall be the fair value of such
security or asset determined jointly by the Company and the holders of a
majority of the Underlying Common Stock. 
If such parties are unable to reach agreement within a reasonable period
of time, such fair value shall be determined by an independent appraiser
experienced in valuing securities jointly selected by the Company and the
holders of a majority of the Underlying Common Stock.  The determination of such appraiser shall be
final and binding upon the parties, and the Company shall pay the fees and
expenses of such appraiser.


 


“Material
Acquisition” means an
acquisition of assets or equity of another Person or group of related Persons
or of any facility, division or product line and/or business operated by
any Person involving consideration paid
by members of the Company Group, or Indebtedness assumed by members of the Company
Group, in the aggregate exceeding $5,000,000.


 


“Material Adverse Effect”
means a material adverse effect on the business, assets, condition (financial
or otherwise), results of operations, cash flows or properties of the Company
and its Subsidiaries taken as a whole.


 


“Material Contracts” has the meaning set forth in Section 4.15.


 


“Material
Subsidiaries” means SoftBrands Manufacturing, Inc., a Minnesota
corporation, Fourth Shift Asia Computer Corp. (China) Ltd., a company organized
under the laws of China, SoftBrands Europe Limited, a company organized under
the laws of the United Kingdom and SoftBrands Research PVT. Ltd., a company
organized under the laws of India.


 


“Most Recent Balance Sheet
Date” has the meaning set forth in Section 4.6 hereof.


 


“NASDAQ”
means the NASDAQ National Market, Inc.


 


“Non-Material
Subsidiaries” means all of the Subsidiaries of the Company other
than the Material Subsidiaries.


 


“Ordinary Course of
Business” means the ordinary course of business consistent with past
practice.


 


“Permitted
Acquisition” means any acquisition of assets or equity of another
Person or group of related Persons or
of any facility, division or product line and/or business operated by
any Person that is not a Material Acquisition or that is approved by the Board
of Directors, including the written consent of the Series C Director.


 


“Permitted Affiliate
Transaction” means any Affiliate Transaction (a) entered into
by the Company Group with its employees in the Ordinary Course of Business as
part of a customary employment relationship or (b) entered into pursuant
to the Stock Option Plan.


 


6





















 


“Permitted Lien”
means:


 


(a)                                  Liens
existing on the Closing Date and securing indebtedness of the Company and its
Subsidiaries to the extent such indebtedness is disclosed on the Most Recent
Balance Sheet Date or incurred since such date in the Ordinary Course of
Business;


 


(b)                                 Liens
imposed by Governmental Agencies for Taxes, assessments or other charges not
yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP;


 


(c)                                  statutory
liens of carriers, warehousemen, mechanics, material men, landlords, repairmen
or other like Liens arising by operation of law in the Ordinary Course of
Business; provided, that (A) the
underlying obligations are not overdue for a period of more than 60 days, or (B) such
Liens are being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the books of the
Company in accordance with GAAP;


 


(d)                                 easements,
rights-of-way, zoning, similar restrictions and other similar encumbrances or
minor imperfections of title which, in the aggregate, do not in any case
materially detract from the value of the property subject thereto (as such
property is used by the Company Group) or interfere with the ordinary conduct
of the business of the Company and any of its Subsidiaries taken as a whole;
and


 


(e) pledges or deposits made in the Ordinary
Course of Business in connection with workers’ compensation, unemployment
insurance and other types of social security legislation.


 


“Person” or “person” means any corporation, individual, limited liability
company, joint stock company, joint venture, partnership, unincorporated
association, governmental regulatory entity, country, state or political
subdivision thereof, trust, municipality or other entity.


 


“Plan” has the
meaning set forth in Section 4.18
hereof.


 


“Purchase Price”
has the meaning set forth in Section 2.1
hereof.


 


“Purchaser Expenses”
has the meaning set forth in Section 10.5
hereof.


 


“Purchasers” has the meaning set forth in the preamble hereof.


 


“Redemption Notice”
has the meaning set forth in the Series C Preferred Stock Certificate of
Designation.


 


“Redemption Period”
has the meaning set forth in Section 8.7(d).


 


“Rejected Sale”
has the meaning set forth in Section 8.7(c) hereof.


 


7





















 


“Related Documents”
means all documents, certificates and instruments to be executed or adopted by
the Company in connection herewith, including the Series C Preferred Stock
Certificate of Designation, the certificates evidencing the Series C
Shares, the Warrants and the Amended and Restated Investor Rights Agreement.


 


“Remedy Event”
shall mean:


 


(a)                                  the
failure of the Company to pay in full any dividends, Series C Liquidation
Preference or Series C Redemption Price (or any amount otherwise owing
hereunder) to the holders of the Series C Preferred Stock as and when and
in the form required to be paid hereunder or under the Series C Preferred
Stock Certificate of Designation;


 


(b)                                 the
breach by the Company Group or failure to perform or observe in any material
respect any covenant or agreement set forth in Section 5C of the Series C
Preferred Stock Certificate of Designation;


 


(c)                                  the
breach by the Company Group or failure to perform or observe in any material
respect any covenant or agreement set forth in Section 8.1, 8.2(a),
8.2(f), 8.2(i), 8.2(j), 8.4, 8.5
or 8.6 of this Agreement; or


 


(d)                                 a
Material Adverse Effect that occurs within 18 months of this Agreement and the
cause of such Material Adverse Effect breaches any representation or warranty
made by the Company or any Subsidiary thereof in Section 4.3, 4.5,
4.9, 4.10, 4.16, 4.20, 4.23,
4.25 or 4.27 of this Agreement as of the date made.


 


“Rights Agreement”
means the Rights Agreement by and between the Company and Wells Fargo Bank
Minnesota, National Association, dated November 26, 2002.


 


“Rights Plan” means that certain Rights Plan in effect
pursuant to the Rights Agreement.


 


“SEC” means the
Securities and Exchange Commission.


 


“Securities”
has the meaning set forth in Section 6.1
hereof.


 


“Securities Act”
means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.


 


“Series A
Shares” means the Company’s Series A Preferred Stock, par value
$0.01 per share.


 


“Series B
Shares” means the Company’s Series B Convertible Preferred
Stock, par value $0.01 per share.


 


“Series C
Director” has the meaning set forth in Section 7.1(g) hereof.


 


8





















 


“Series C
Liquidation Preference” has the meaning set forth in the Series C
Preferred Stock Certificate of Designation.


 


“Series C Preferred
Stock Certificate of Designation” means the Certificate of
Designation designating the rights and preferences of the Series C Shares
adopted by the Board of Directors, filed with the Secretary of State of the
State of Delaware, as substantially in the form set forth in Exhibit A attached hereto.


 


Series C Redemption Price”
has the meaning set forth in the Series C Preferred Stock Certificate of
Designation.


 


“Series C Shares” means the Series C
Convertible Preferred Stock, $0.01 par value per share, of the Company having
the rights, designations and preferences as set forth in the Series C
Preferred Stock Certificate of Designation.


 


“Shrinkwrap
Agreements” has the meaning set forth in Section 4.15(a)(x) hereof.


 


“Stock Option Plan” means the capital
stock plan for the benefit of the Company’s officers, employees or directors
which is in effect on the date hereof and has been approved by the Board of
Directors.


 


“Subordinated Notes”
means that certain senior subordinated secured note due 2008, dated October 1,
2003, of the Company payable to Capital Resource Partners IV, L.P. in the
principal amount of $20,000,000.


 


“Subsidiary”
means any corporation, limited liability company, partnership, association or
other business entity of which (a) if a corporation, a majority of the
total voting power of shares of stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by the Company or (b) if a partnership, limited liability company,
association or other business entity, a majority of the partnership or other
similar ownership interest thereof is at the time owned or controlled, directly
or indirectly, by the Company.  For
purposes hereof, the Company shall be deemed to have a majority ownership
interest in a partnership, limited liability company, association or other
business entity if the Company, directly or indirectly, is allocated a majority
of partnership, limited liability company, association or other business entity
gains or losses, or is or controls the managing director or general partner of
such partnership, limited liability company, association or other business
entity.


 


“Survival Period”
has the meaning set forth in Section 9.1.


 


“Tax” means any
federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code §59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.


 


9





















 


“Tax Returns”
means any return, declaration, report, claim for refund, or information return
or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.


 


“Underlying Common
Stock” means (a) the Common Stock issued or issuable upon
conversion of the Series C Shares, (b) the Common Stock issued or
issuable upon exercise of the Warrants and (c) any Common Stock issued or
issuable with respect to the securities referred to in clauses (a) and (b) above
by way of a stock dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other
reorganization.  For purposes of this
Agreement, any Person who holds any Series C Shares or Warrants shall be
deemed to be the holder of the Underlying Common Stock issuable upon the
conversion of such Series C Shares and upon the exercise of such Warrants,
regardless of any restriction or limitation on the exercise of such Series C
Shares or Warrants and such Underlying Common Stock shall be deemed to be in
existence and such Person shall be entitled to exercise the rights of a holder
of such Underlying Common Stock hereunder.


 


“Unpaid Dividends”
means, with respect to any Series C Share, as of any date of
determination, the accumulated dividends and accrued and unpaid but not yet
accumulated dividends that have accumulated or accrued on such Series C
Share in accordance with Section 2 of the Series C Preferred Stock
Certificate of Designation from the date of issuance of such Series C
Share through and including such date of determination.


 


“Warrants” has the meaning set forth in Section 3.2 hereof.


 


“Warrant Shares” has the meaning set forth in Section 4.2(a) hereof.


 


“Wholly-Owned
Subsidiary” means, with respect to any Person, a Subsidiary of which
all of the outstanding capital or other ownership interests are owned by such
Person or another Wholly-Owned Subsidiary of such Person.


 


(b)                                 The
words “herein”, “hereof”
and “hereunder” refer to this Agreement as a
whole and not to any particular article, section or other subdivision of
this Agreement.  The use of the word “including”
or any variation or derivative thereof in this Agreement or in any Related
Document is by way of example rather than by limitation.


 


ARTICLE II

ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS


 


2.1                               Number of Series C  Shares,
Warrants and Purchase Price. 
On the terms and subject to the conditions of this Agreement, at the
Closing, the Company shall issue and sell to each Purchaser, and each Purchaser
shall purchase from the Company, that number of Series C Shares and
Warrants to purchase that number of shares
of Common Stock set forth on Schedule I
hereto on the terms and subject to the conditions set forth therein, for an
aggregate purchase price of $18,000,000 (the
“Purchase Price”).


 


10





















 


ARTICLE III

CLOSING; CLOSING DELIVERIES


 


3.1                               Closing.  The closing
of the transactions contemplated hereby (the “Closing”)
shall take place at 10:00 a.m. on August 17, 2005, at the offices of Kirkland & Ellis LLP, New York,
New York or at such other time, place and/or date as shall be agreed upon by
the parties hereto.  The date upon which
the Closing occurs is referred to herein as the “Closing Date.”


 


3.2                               Payment for and Delivery of Series C Shares and Warrants.  At the Closing, the Company shall issue and
deliver to each Purchaser (i) a stock certificate duly executed and
registered in the name of such Purchaser evidencing ownership of the Series C
Shares, and (ii) the warrants described in Section 2.1 above, duly executed in favor of such
Purchaser and substantially in the form attached as Exhibit B
hereto (together with any common stock purchase warrant issued in substitution
or exchange thereof, the “Warrants”), in
each case against payment by such Purchaser of the Purchase Price payable by
such Purchaser as set forth on Schedule I
by wire transfer of immediately-available funds to the account designated by
the Company.


 


ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


The Company hereby represents and warrants to each
Purchaser that, except as set forth on the disclosure schedules attached hereto
(the “Disclosure Schedules”),
which exceptions shall be deemed to be part of the representations and
warranties made hereunder, the following representations are true and complete
as of the date hereof and as of the Closing. 
The Disclosure Schedules shall be arranged in sections corresponding to
the numbered and lettered sections and subsections contained in this Article IV,
and the disclosures in any section or subsection of the Disclosure
Schedules shall qualify other sections and subsection in this Article IV
to the extent the applicability of such disclosure to the representation and
warranty in this Article IV corresponding to such other section is
reasonably apparent from such disclosure; provided that nothing set
forth on any schedule shall be deemed adequate to disclose an exception to
a representation and warranty in this Article IV unless the applicable
Disclosure Schedule identifies the exception with reasonably particularity
and describes the relevant facts in reasonable detail.


 


4.1                               Existence; Qualification; Subsidiaries.  Each of the Company and each Material
Subsidiary was duly organized, is validly existing and in good standing under
the laws of the jurisdiction in which it was incorporated or formed and has
full power and authority to conduct its business and own and operate its
properties as now conducted, owned and operated.  The copies of the Certificate of
Incorporation and by-laws of the Company and all amendments thereto and
certificates of designation filed in connection therewith are attached hereto
as Exhibit D and are true, correct
and complete copies of such documents. 
Each of the Company and each Material Subsidiary is licensed or qualified
as a foreign corporation and is in good standing in all jurisdictions where
such Person is required to be so licensed or qualified, except where the
failure to be so licensed, qualified or in good standing would not have a
Material Adverse Effect.  Schedule 4.1 lists all Subsidiaries of
the Company and their respective 


 


11





















 


jurisdictions of
incorporation or formation.  Except as
set forth on Schedule 4.1, the Company has
no Subsidiaries and owns no capital stock or other securities of, and has not
made any other investment in, any other entity. 
All of the issued shares of capital stock of each Subsidiary have been
duly and validly authorized and issued, are fully paid and non-assessable and
are owned directly or indirectly by the Company, free and clear of all Liens,
except Permitted Liens.


 


4.2                               Authorization
and Enforceability; Issuance of Shares.


 


(a)                                  The
Company has full power and authority and has taken all required corporate and
other action necessary to authorize it to execute and deliver this Agreement
and the Related Documents and to perform the terms hereof and thereof and to issue and deliver the Series C
Shares, the Conversion Shares, the Warrants and the shares of Common Stock
issuable upon exercise of the Warrants (the “Warrant
Shares”), and none of such actions will (i) violate or conflict
with any provision of the Certificate of Incorporation of the Company, the
by-laws of the Company or of any applicable law, regulation, order, judgment or
decree or rule of the stock exchange where the Common Stock is listed, (ii) result
in the breach of or constitute a default (or an event which, with notice or
lapse of time or both would constitute a default) under any agreement,
instrument or understanding to which any member of the Company Group is a party
or by which it is bound or by which it will become bound as a result of the
transaction contemplated by this Agreement or (iii) result in or
constitute a “change of control” under any agreement, instrument or
understanding to which any member of the Company Group is a party or by which
it is bound or by which it will become bound as a result of the transaction
contemplated by this Agreement or any Related Document.  This Agreement and each of the Related
Documents constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with their terms, except to the
extent limited by applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws of general application related to the enforcement of creditor’s
rights generally and except as rights to indemnity thereunder may be limited by
applicable federal securities laws.


 


(b)                                 The
Series C Shares have been duly authorized and, when issued and delivered
in accordance with this Agreement, will be validly issued, fully paid and
nonassessable, and will be free of any Liens (other than, with respect to any
Purchaser, any restrictions on transfer under state and/or federal securities
laws or Liens created by such Purchaser or under this Agreement or any Related
Document).  The Warrants have been duly
authorized and, when issued and delivered in accordance with this Agreement,
will be validly issued and will be free of any Liens (other than, with respect
to any Purchaser, any restrictions on transfer under state and/or federal
securities laws or Liens created by such Purchaser or under this Agreement or
any Related Document).  When issued, the
shares of Common Stock issuable upon conversion of the Series C Shares in
accordance with the terms of the Series C Preferred Stock Certificate of
Designation (the “Conversion Shares”)
and the Warrant Shares when issued upon due exercise of the Warrant will be
duly authorized, validly issued, fully paid and nonassessable, and will be free
of any Liens (other than, with respect to any Purchaser, any restrictions on
transfer under state and/or federal securities laws or Liens created by such
Purchaser or under this Agreement or any Related Document).  The Conversion Shares and the Warrant Shares
have been duly reserved for issuance upon the conversion of the Series C
Shares or exercise of the Warrants, as the case may be.  Neither the issuance and delivery of the Series C
Shares or Warrants nor the issuance and delivery of any Conversion Shares or
Warrant Shares 


 


12





















 


is subject to any
preemptive right of any stockholder of the Company or to any right of first
refusal or other similar right in favor of any Person.


 


4.3                               Capitalization.


 


(a)                                  Schedule 4.3 sets forth as of the date
hereof, and upon the acceptance for filing of the Series C Preferred Stock
Certificate of Designation, (i) the authorized capital stock of the
Company; (ii) the number of shares of capital stock issued and
outstanding; (iii) the number of shares of capital stock issuable pursuant
to options or other rights outstanding under the Stock Option Plan and (iv) the
number of shares of capital stock issuable and reserved for issuance pursuant
to Equity Securities (other than the Series C Shares, the Warrants and
options or other rights outstanding under the Stock Option Plan) exercisable
for, or convertible into or exchangeable for any shares of capital stock of the
Company.  All of the issued and outstanding
shares of the Company’s and each Subsidiary’s Equity Securities have been duly
authorized and validly issued and are fully paid, nonassessable and free of
pre-emptive rights and were issued in full compliance with applicable state and
federal securities law and any rights of third parties.  Except as described on Schedule 4.3, no Person is entitled to
pre-emptive or similar statutory or contractual rights with respect to any
Equity Securities of the Company or any Company Subsidiary.  Except as described on Schedule 4.3, there are no outstanding
warrants, options, convertible securities or other rights, agreements or
arrangements of any character under which the Company or any of its
Subsidiaries is or may be obligated to issue any Equity Securities of any kind
and except as contemplated by this Agreement, neither the Company nor any of
its Subsidiaries is currently in negotiations for the issuance of any Equity
Securities of any kind.  Except as
described on Schedule 4.3 and
except for the Amended and Restated Investor Rights Agreement, there are no
voting agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among the Company or any Company
Subsidiary and any of the securityholders of the Company or any Company
Subsidiary relating to the securities of the Company or any Company Subsidiary
held by them.  Except as described on Schedule 4.3, no Person has the right
to require the Company or any Company Subsidiary to register any securities of
the Company under the Securities Act, whether on a demand basis or in
connection with the registration of securities of the Company or any Company
Subsidiary for its own account or for the account of any other Person.


 


(b)                                 The
issuance and sale of the Series C Shares and the Warrants hereunder will
not obligate the Company to issue any Equity Securities to any other Person
(other than the Purchasers) and will not result in the adjustment of the
exercise, conversion, exchange or reset price of any outstanding security.


 


(c)                                  Except
for the Rights Plan, the Company does not have outstanding stockholder purchase
rights or a “poison pill” or any similar arrangement in effect giving any
Person the right to purchase any equity interest in the Company upon the
occurrence of certain events.  The
issuance and sale of the Securities hereunder will not trigger any of the
provisions of the Rights Plan.


 


4.4                               Private Sale; Voting Agreements.  Assuming the accuracy
of each Purchaser’s representations contained herein, neither the offer, sale and
issuance of the Series C Shares and Warrants hereunder nor the issuance
and delivery of any Conversion Shares or Warrant Shares 


 


13





















 


(assuming that the
Conversion Shares and Warrant Shares are issued to such Purchaser) requires
registration under the Securities Act or any state securities laws.


 


4.5                               SEC
Reports; Financial Statements.


 


(a)                                  The
Company has filed all forms, reports and documents required to be filed by it
with the SEC since March 15, 2005 (assuming, for the purposes of this Section 4.5, the Company has been
subject to the filing requirements of the Exchange Act since March 15,
2005), and has made available to the Purchasers in the form filed with the SEC (i) its
Form 10-A filed June 24, 2005 and (ii) all other forms, reports
and other registration statements filed by the Company with the SEC after March 15,
2005 and before the Closing Date, including the Form 10-Q for the quarter
ended March 31, 2005 (the forms, reports and other documents referred to
in clauses (i) and (ii) above, together with any amendments or
supplements thereto being referred to herein, collectively, as the “Company Reports”). 
Regardless of whether the Company Reports were required to be filed
under the Securities Act or Exchange Act, the Company Reports (i) were
prepared, in all material respects, in accordance with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be,
and (ii) did not as subsequently amended contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.  No Subsidiary is required to file reports
with the SEC under Section 13 or 15(d) of the Exchange Act.


 


(b)                                 Each
of the financial statements (including any notes thereto) contained in the
Company Reports and the unaudited consolidated balance sheet of the Company as
of June 30, 2005 and the related statements of changes in stockholders’
equity and comprehensive loss for the nine-month period then ended
(collectively, the “Financial Statements”),
complies as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto and was prepared in all material respects in accordance with
GAAP applied on a consistent basis throughout the periods indicated (except as
may be indicated in the notes thereto) and each fairly presented in all
material respects (subject to, in the case of the unaudited statements, to
normal, recurring audit adjustments, none of which are material individually or
in the aggregate) the consolidated financial position, results of operations,
stockholders’ equity and cash flows of the Company Group as at the respective
dates thereof and for the respective periods indicated therein.  As of the dates of the Financial Statements,
the Company had no Indebtedness or other Liability, which was not reflected or
reserved against in the balance sheets thereto which are part of the Financial
Statements, except for (i) Liabilities incurred in the Ordinary Course of
Business subsequent to March 31, 2005 and (ii) Liabilities incurred
under contracts entered into in the Ordinary Course of Business and not
required under GAAP to be reflected in the Financial Statements.


 


4.6                               Absence of Certain Changes. 
Except as set forth on Schedule 4.6,
since March 31, 2005 (the “Most Recent Balance Sheet Date”), no member of the Company
Group has:


 


(a)                                  incurred
any Liabilities other than current Liabilities incurred, or Liabilities under
contracts entered into, in the Ordinary Course of Business and for individual
amounts not greater than $350,000;


 


14





















 


(b)                                 paid,
discharged or satisfied any Claim, Lien or Liability, other than any Claim,
Lien or Liability (A) reflected or reserved against on the balance sheet
contained in the Financial Statements as of the Most Recent Balance Sheet Date
(the “Current Balance Sheet”) and paid,
discharged or satisfied in the Ordinary Course of Business or (B) incurred
since the Most Recent Balance Sheet Date and paid, discharged or satisfied, in
each case in the Ordinary Course of Business;


 


(c)                                  except
as contemplated by this Agreement or any Related Document, made any change or
amendments to its Certificate of Incorporation or by-laws or material change to
any material contract or arrangement by which it is bound or which any of its
assets or properties are subject;


 


(d)                                 exclusively
licensed any material Company Intellectual Property to any Person;


 


(e)                                  permitted
any of its material assets, tangible or intangible, to become subject to any
Lien (other than any Permitted Lien);


 


(f)                                    written
off as uncollectible any accounts receivable other than (i) in the
Ordinary Course of Business or (ii) for amounts not greater than $350,000;


 


(g)                                 terminated
or amended or suffered the termination or amendment of, other than in the
Ordinary Course of Business, or failed to perform in all material respects all
of its obligations or suffered or permitted any material default to exist
under, any Material Contract, license or permit;


 


(h)                                 suffered
any damage, destruction or loss (whether or not covered by insurance) to any assets
or properties of the Company Group which in the aggregate exceeds $350,000;


 


(i)                                     made
any loan (other than intercompany advances) to any other Person (other than
advances to employees in the Ordinary Course of Business) which exceed $100,000
individually or $200,000 in the aggregate;


 


(j)                                     canceled,
waived or released any debt, claim or right in an amount or having a value
exceeding $350,000;


 


(k)                                  other
than a Permitted Affiliate Transaction, paid any amount to or entered into any
agreement, arrangement or transaction with any Affiliate (including its
officers, directors and employees) outside the Ordinary Course of Business;


 


(l)                                     declared,
set aside, or paid any dividend or distribution with respect to any Equity
Security or redeemed, purchased or otherwise acquired any Equity Security;


 


(m)                               other
than in the Ordinary Course of Business, granted any increase in the
compensation of any officer or employee or made any other change in employment
terms of any officer or employee;


 


15





















 


(n)                                 made
any change in any method of accounting or any material change in any accounting
practice;


 


(o)                                 failed
to maintain, or permitted the loss, lapse or abandonment of, any material
Company Intellectual Property;


 


(p)                                 to
the Knowledge of the Company, suffered or caused any other occurrence, event or
transaction known to the Company which, individually or together with each
other occurrence, event or transaction, has had or could reasonably be expected
to have a Material Adverse Effect; or


 


(q)                                 agreed,
in writing or otherwise, to any of the foregoing.


 


4.7                               Litigation.  Except as set forth on Schedule 4.7, there are no Claims
pending or, to the Knowledge of the Company, threatened against or affecting
the Company or any other member of the Company Group at law or in equity, or
before or by any Governmental Agency (including any Claim with respect to the
transactions contemplated by this Agreement and the Related Documents), which
if determined adversely to the Company would have a Material Adverse Effect,
and, to the Knowledge of the Company, there is no basis for any such Claim (in
each case, other than any Claim or Claims not pending and, to the Knowledge of
the Company, not threatened against or affecting the Company or any of its Subsidiaries
as of the Closing Date).  Neither the
Company nor any member of the Company Group is subject to any judgment, order
or decree of any court or other Governmental Agency (other than any such item
that is not in effect as of the Closing Date and that could not reasonably be
expected to have a Material Adverse Effect). 
Neither the Company nor any other member of the Company Group has
received any opinion or memorandum from legal counsel to the effect that it is
exposed, from a legal standpoint, to any Liability that would have a Material
Adverse Effect.


 


4.8                               Licenses, Compliance with Law, Other Agreements, Etc.  The Company has, directly or through members
of the Company Group, all material franchises, permits, licenses and other
rights necessary to conduct its business and is not in violation in any
material respect of any order or decree of any court, or of any law, order or
regulation of any Governmental Agency, or of the provisions of any Material
Contract or agreement to which it is a party or by which it is bound, and
neither this Agreement nor the Related Documents nor the transactions
contemplated hereby or thereby will result in any such violation, except where
the failure to have any such franchise, permit or license or any such violation
would not in the aggregate be expected to have a Material Adverse Effect.  Each of the Company and each other member of
the Company Group are in compliance with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings and
charges thereunder, including the Foreign Corrupt Federal Practices Act, 15
U.S.C. 78dd-1 et/ seq.) of federal, state, local and foreign governmental (and
all agencies thereof), except to the extent the failure to comply would not have
a Material Adverse Effect, and no Claim or notice has been filed or commenced
against any of them alleging any failure to so comply.


 


4.9                               Consents.  The
execution, delivery and performance by the Company of this Agreement and the
Related Documents and the offer, issuance and sale of the Series C Shares
and the Warrants require no consent of, action by or in respect of, or filing
with, any Person,


 


16





















 


Governmental Agency
having jurisdiction over the Company or any of its Affiliates that has not been
obtained, except filings with the Securities and Exchange Commission required
after the execution and delivery of this Agreement.  Subject to the accuracy of the representations
and warranties of the Purchasers set forth in Article V hereof, the
Company has taken all action necessary to exempt (i) the issuance and sale
of the Series C Shares and the Warrants, (ii) the issuance of the
Conversion Shares and Warrant Shares upon due conversion and exercise of the Series C
Shares and Warrants, respectively and (iii) the other transactions
contemplated by the Related Documents from the provisions of the Rights Plan
and any other “poison pill” arrangement, and any anti-takeover, business
combination or control share law or statute binding on the Company Group or to
which the Company Group or any of its assets and properties may be subject.


 


4.10                        Disclosure.  This
Agreement, together with all exhibits and schedules hereto, and the agreements,
certificates and other documents (including the Company Reports) furnished or
made available to the Purchasers by the Company and each other member of the
Company Group in connection with the transactions contemplated under this
Agreement and the Related Documents, do not contain any untrue statement of a
material fact or, as supplemented by the Company Reports, omit to state a
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.


 


4.11                        Tangible Assets.  The
Company, directly or through a member of the Company Group, owns or leases all
tangible assets used in or reasonably necessary for the operation of the
business of the Company Group, taken as a whole.


 


4.12                        Owned Real Property.  No member of the Company Group owns any real
property.


 


4.13                        Real Property Leases. 
There exists no event of default (nor, to the Company’s Knowledge, any
event which with notice or lapse of time would constitute an event of default)
with respect to the Company, any Material Subsidiary and, to the Company’s
Knowledge, with respect to any other party thereto under any agreement pursuant
to which the Company or any Material Subsidiary is the lessee or lessor of any
real property, and all such agreements are in full force and effect and
enforceable against the lessor or lessee in accordance with their terms except
for such defaults and defects in enforceability as would not in the aggregate
be expected to have a Material Adverse Effect.


 


4.14                        Certificates, Authorities and Permits.  The Company Group possesses adequate
certificates, authorities or permits issued by appropriate Governmental
Agencies necessary to conduct the business now operated by them, except where
the failure to possess the same would not have a Material Adverse Effect, and
neither the Company nor any Material Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to the Company or such
Material Subsidiary, could reasonably be expected to have a Material Adverse
Effect, individually or in the aggregate.


 


17





















 


4.15                        Agreements


 


(a)                                  Except
as expressly contemplated by this Agreement, as disclosed in the Company
Reports, or as set forth on Schedule 4.15
as of the Closing Date, no member of the Company Group is a party to or bound
by any written or oral:


 


(i)                                     contract
for the employment or retainer of any officer, individual employee or other Person
on a full-time, part-time, consulting or other basis providing annual
compensation in excess of $150,000 or which cannot be terminated without cause
and without post-termination liability by providing only reasonable notice at
common law;


 


(ii)                                  contract
under which any member of the Company Group has advanced or loaned any other
Person amounts in the aggregate exceeding $200,000;


 


(iii)                               agreement
or indenture relating to borrowed money or other Indebtedness (excluding
Guarantees) or the mortgaging, pledging or otherwise placing a Lien on any
material asset or material group of assets of the Company Group;


 


(iv)                              Guarantee
of any obligation in excess of $150,000;


 


(v)                                 agreement
under which it has granted any Person any registration rights (including demand
or piggyback registration rights);


 


(vi)                              agreement
with a term of more than twelve months which contains executory obligations in
excess of $150,000 and which is not terminable by the member of the Company
Group party thereto upon 60 days or less notice without penalty;


 


(vii)                           any
agreement or arrangement pursuant to which another Person is engaged as a
finder, broker, agent or in any other capacity in respect of the sale of Equity
Securities or debt securities of the Company or a Company Sale;


 


(viii)                        contract
or agreement prohibiting it from freely engaging in any business or competing
anywhere in the world;


 


(ix)                                any
other agreement which is material to its operations and business prospects,
involves a consideration in excess of $300,000 annually or the termination of
which could result in a Material Adverse Effect; or


 


(x)                                   contract,
license or permission (i) pursuant to which any Intellectual Property is
licensed, transferred or otherwise made available, including on a contingent
basis, to any third party (other than non-exclusive, internal use, object code
software licenses granted by the Company to an end user customer of the Company
in the Ordinary Course of Business pursuant to the Company’s standard form of
end user license agreement set forth in Schedule 4.15(a)(x)
(“EULAs”)), or (ii) pursuant
to which any third party has licensed, transferred or otherwise made available
any Intellectual Property, including on a contingent basis, to any member of
the Company Group (except for non-exclusive, internal use written software
licenses solely under which non-customized


 


18





















 


software is
licensed to the Company solely in executable or object code form, where such
software is not incorporated into, or used directly in the development,
manufacturing, or distribution of, any of the products or services of any
Company Group member, and is generally available on standard terms for less
than $15,000 (“Shrinkwrap Agreements”)).


 


(b)                                 All
of the contracts, agreements and instruments required to be set forth on Schedule 4.15 (the “Material Contracts”) and all EULAs and
Shrinkwrap Agreements are valid, binding and enforceable in accordance with
their respective terms.  Each member of
the Company Group has performed all material obligations required to be
performed by it under the contracts to which it is a party and is not in
material default under or in material breach of nor has Knowledge of any claim
of material default or material breach under any such contract; no event has
occurred which with the passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance by any member of the
Company Group under any material contract to which it is a party.  The Company has no Knowledge of any breach or
anticipated breach by the other party to any material contract to which it is a
party.


 


(c)                                  The
Purchasers’ special counsel has been given access to a true and correct copy of
each Material Contract, or such Material Contract is available in the Company
Reports, together with all amendments, waivers or other changes thereto.


 


4.16                        Intellectual
Property.  Each member of the Company
Group owns and possesses, directly or through another member of the Company
Group, free and clear of all Liens (other than nonexclusive licenses granted by
a Company Group member to its customers, or distribution rights granted by a
Company Group member to persons in the distribution chain, in each case, in the
Ordinary Course of Business), all right, title and interest in and to, or has
the right to use pursuant to a valid and enforceable written agreement set
forth in Schedule 4.15(a)(x),
all Intellectual Property necessary to the conduct of its business as now
conducted and as presently proposed to be conducted (including all right, title
and interest in and to the Intellectual Property required to be disclosed in Schedule 4.16, the “Company Intellectual Property”).  To the Knowledge of the Company, no member of
the Company Group has infringed, misappropriated or conflicted with, and to the
Knowledge of the Company, the conduct of each Company Group member’s business
as now conducted and as presently proposed to be conducted will not violate any
license (or other agreement concerning Intellectual Property), or infringe,
misappropriate or conflict with, any Intellectual Property of any other person
or entity.  No Company Group member has
received any communications (including demands or offers to license) alleging
that a Company Group member has infringed, misappropriated or conflicted with
or, by conducting its business, would infringe, misappropriate or conflict with
any Intellectual Property of any other person or entity.  To the Knowledge of the Company, there are no
facts which indicate a likelihood of any of the foregoing two (2) sentences.
There are no claims against any Company Group Member that were either made
within the past four (4) years or are presently pending contesting the
validity, use, ownership or enforceability of any of the Company Intellectual
Property (including any interference, reissue, reexamination, invalidation,
cancellation or opposition proceeding), and, to the Knowledge of the Company,
there is no basis for any such claim.  To
the Knowledge of the Company, no third party has infringed, misappropriated or
otherwise conflicted with any of the Company Intellectual Property.  Except as set forth in Schedule 4.16, no loss or expiration
(other than, in 


 


19





















 


the case of patents and
copyrights, natural expiration at the end of their respective statutory terms)
of any Company Intellectual Property is pending, threatened or reasonably
foreseeable.  All registered or issued
Company Intellectual Property (or applications therefor) is in compliance with
applicable formal legal requirements (including, as applicable, timely payment
of filing, examination and maintenance fees, and timely filings of proofs of
working or use, affidavits of use and incontestability and renewal
applications), and is valid and enforceable. 
Except as otherwise provided in this Agreement, the transactions
contemplated by this Agreement shall not impair the right, title or interest of
any Company Group member in and to the Company Intellectual Property and all of
the Company Intellectual Property shall be owned or available for use by the
Company Group members immediately after Closing on terms and conditions
identical to those under which the Company Group member owned or used the
Company Intellectual Property immediately prior to the Closing.  No Company Group Member jointly owns any
material Intellectual Property with any third party.  Except as set forth on Schedule 4.16, no
source code for any product or service developed, marketed or sold by any
Company Group member (a “Company Product”)
has been made available or licensed to any Person, and no member of the Company
Group is under any obligation (including contingent) to do so.  No Company Group member is subject to any
settlement or coexistence agreement that restricts its use of any Intellectual
Property owned by or exclusively licensed to such member.  No funding, facilities, or personnel of any
Governmental Agency were used, directly or indirectly, to develop any Company
Intellectual Property, and no Company Intellectual Property is subject to any “march in”
or similar rights.  Each member of the
Company Group has complied with, and the performance of this Agreement will
comply with, all applicable privacy policies, laws and regulations.  Each Company Group member has and enforces a
policy requiring all employees and independent contractors likely to
participate in the development or creation of Intellectual Property to execute
appropriate assignment agreements, pursuant to which each such employee or
independent contractor has assigned to the Company all of its rights, including
all Intellectual Property, in and to all ideas, inventions, processes, works of
authorship and other work products that relate to the business of a Company
Group member and that, in the case of employees, were conceived, created,
authored or developed during the term of such employee’s employment by the
Company.  Each Company Group member has
and enforces a policy requiring all employees 
and independent contractors with access to any confidential information
of a Company Group member (or of a third party to which a Company Group member
owes a duty of confidentiality) to execute appropriate non-disclosure
agreements.  No current or former
employee or contractor (including RekSoft) of any Company Group member has any
ownership or other rights in or to any Company Intellectual Property.  Schedule 4.16
lists all patents, patent applications, registered trademarks, trademark
applications, registered service marks, service mark applications, material
unregistered trademarks or service marks, trade names, registered copyrights,
material unregistered copyrights, and domain names owned by or exclusively
licensed to the Company.  No Company
Product is subject to any open source, public source, freeware, shareware, copyleft,
community source or similar obligation or condition that could require the
disclosure of any source code to any person or entity or otherwise limit the
right of any Company Group member to use or distribute any Company Product.  Each Company Group member has taken all
commercially reasonable action to establish, maintain, protect, preserve and
enforce its rights in the Company Intellectual Property.


 


4.17                        Employees.  Since the
Most Recent Balance Sheet Date, no key employees and no group of employees has
terminated, or to the Knowledge of the Company, plans to terminate, 


 


20





















 


employment with the
Company Group.  The Company Group is not
a party to or bound by any collective bargaining agreement, nor has it
experienced any strike, material grievance, material claim of unfair labor
practice or other collective bargaining dispute.  To the Knowledge of the Company, there is no
organizational effort being made or threatened by or on behalf of any labor
union with respect to the Company Group’s employees.  To the Knowledge of the Company, the Company
Group has not committed any unfair labor practice or materially violated any
federal, state or local law or regulation regulating employers or the terms and
conditions of its employees’ employment, including laws regulating employee
wages and hours, employment discrimination, employee civil rights, equal
employment opportunity and employment of foreign nationals, except for such
violations as would not in the aggregate be expected to have a Material Adverse
Effect.


 


4.18                        ERISA; Employee Benefits. 
Section 4.18 of the Disclosure Schedules sets forth a
complete and correct list of each employee benefit plan (as such term is
defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”))
and each other benefit plan, program or arrangement maintained, established,
sponsored, contributed or required to be contributed to by any member of the
Company Group, or with respect to which the Company Group has any material
liability (each a “Plan” and
collectively, the “Plans”).  The Company Group does not maintain,
contribute to, or have any liability under (or with respect to) any “defined
benefit plan” (as defined in Section 3(35) of ERISA), or any “multiemployer
plan” (as defined in Section 3(37) of ERISA), and does not otherwise have
any current or potential liability under Title IV of ERISA.  No Plan has any unfunded or underfunded
liabilities.  Each Plan that is intended
to be qualified under Section 401(a) of the Code is so
qualified.  Each of the Plans has been
maintained, funded and administered in material compliance with its terms and
with the applicable provisions of ERISA, the Code, and any other applicable
laws.  The Company Group has no current
or potential liability under ERISA or the Code by reason of being considered a
single employer under Section 414 of the Code with any Person other than a
member of the Company Group.


 


4.19                        Environment, Health and Safety.  Except as set forth on Schedule 4.19:


 


(a)                                  Each
member of the Company Group has complied and is in compliance in all material
respects with all Environmental and Safety Requirements that are applicable to
the Company Group’s business, except where the failure to comply could not
reasonably be expected to have a Material Adverse Effect;


 


(b)                                 No
member of the Company Group has received any written notice, report or other
information regarding any Liabilities or potential Liabilities, including any
investigatory, remedial or corrective obligations, relating to such member of
the Company Group or such member’s facilities and arising under Environmental
and Safety Requirements; and


 


(c)                                  No
member of the Company Group has, either expressly or by operation of law,
assumed or undertaken any Liability, including any obligation for corrective or
remedial action, of any other Person relating to Environmental and Safety
Requirements.


 


4.20                        Transactions With Affiliates.  Except for Permitted Affiliate Transactions
and except as described in the Company Reports, neither the Company nor any of
the other members 


 


21





















 


of the Company Group is
party to any agreement, arrangement or transaction with any Affiliate which is
material to the Company’s and the Company Group’s business, taken as a whole.


 


4.21                        Taxes.  Except as set forth on Schedule 4.22, each of member of the
Company Group has filed all Tax Returns which it is required to file under
applicable laws.  All such Tax Returns
are complete and correct and have been prepared in compliance with all
applicable laws in all material respects. 
Each member of the Company Group has paid all Taxes due and owing by it
(whether or not such Taxes are required to be shown on a Tax Return) and have
withheld and paid over to the appropriate taxing authority all Taxes which they
were or are required to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third party. 
No member of the Company Group has waived any statute of limitations
with respect to any Taxes or agreed to any extension of time with respect to
any Tax assessment or deficiency.  There
are no Liens for Taxes (other than Permitted Liens) upon any of the assets of
any member of the Company Group.  Since January 1,
2002, no written Claim has ever been made by a Governmental Agency in a
jurisdiction where no member of the Company Group files Tax Returns that any
member of the Company Group is or may be subject to Taxation by that
jurisdiction.


 


4.22                        Other Investors.  Set
forth on Schedule 4.23 is a list of all
stockholders of the Company who as of the date hereof and to the Company’s
Knowledge, based upon SEC filings of stockholders, after giving effect to the
terms hereof, own more than 5% of the fully diluted common equity of the
Company and sets forth such percentage ownership.


 


4.23                        Seniority.  No class
of equity securities of the Company is senior or, other than the Series B
Shares, pari passu to, the Series C Shares
in right of payment, whether upon liquidation, dissolution or otherwise.


 


4.24                        Investment Company. 
The Company is not, and is not controlled by or under common control
with an affiliate of, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.


 


4.25                        Certain Fees.  Other
than (i) the Closing Fee to be paid to the Purchasers in accordance with Section 10.5 and (ii) the fee in
an amount not to exceed $1,000,000 to be paid to Piper Jaffray & Co. (“Placement Agent”), no fees or commissions
will be payable by the Company to any broker, financial advisor, finder,
investment banker, or bank with respect to the transactions contemplated by
this Agreement.  No Purchaser shall have
any Liability resulting from commitments by the Company Group or its directors,
officers or employees with respect to any fees or with respect to any claims
made by or on behalf of any Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by this
Agreement.  The Company Group shall
indemnify and hold harmless each Purchaser, its employees, officers, directors,
agents and partners, and their respective affiliates (as such term is defined
under Rule 405 promulgated under the Securities Act), from and against all
claims, losses, damages, costs (including the costs of preparation and attorney’s
fees) and expenses suffered in respect to any fees due the Placement Agent or
any other Person with which the Company or its directors, officers or employees
has contracted in connection with the transactions contemplated hereby.


 


22





















 


4.26                        Sarbanes-Oxley Act. 
The Company is in compliance in all material respects with all
provisions of the Sarbanes-Oxley Act of 2002 that are applicable to it as of
the date hereof.


 


4.27                        Listing and Maintenance Requirements Compliance.  The Common Stock is quoted on the “pink
sheets.”  The authorization and issuance
of the Series C Shares, the Warrants, the Conversion Shares and the
Warrant Shares will not violate any listing or maintenance requirement of any
exchange or market on which the Common Stock is traded, or prevent the Company
from listing the Common Stock on AMEX. 
After giving effect to the consummation of the transactions contemplated
by this Agreement, the Company shall have satisfied the listing requirements of
Sections 101(c), 102, 121, 123, 130, 802, 803, 804 and 807 of the AMEX
Company Guide.


 


4.28                        No General Solicitation. 
Neither the Company nor any Person acting on its behalf has conducted
any general solicitation or general advertising (as those terms are used in
Regulation D) in connection with the offer or sale of any of the Securities.


 


4.29                        No Integrated Offering. 
Neither the Company nor any of its Affiliates, nor any Person acting on
its or their behalf, has, directly or indirectly, made any offers or sales of
any Company security or solicited any offers to buy any security under
circumstances that would cause the offer and/or sale of the Securities pursuant
to this Agreement to be integrated with prior offerings by the Company for
purposes of the Securities Act or any applicable stockholder approval
provisions, or that would otherwise adversely affect reliance by the Company on
Section 4(2) for the exemption from registration for the transactions
contemplated hereby or would require registration of the Securities under the
Securities Act.


 


4.30                        Private Placement. 
Subject to the accuracy of the representations and warranties of the
Purchasers in Article V, the offer and sale of the Series C Shares
and the Warrants to the Purchasers as contemplated hereby is exempt from the
registration requirements of the Securities Act and is being made pursuant to
the exemption afforded by Section 4(2) of the Securities Act and/or Rule 506
of Regulation D promulgated thereunder.


 


4.31                        Questionable Payments.  To
the Knowledge of the Company, no member of the Company Group nor any of their
directors or officers or any other Persons acting on behalf of the Company
Group, has on behalf of any member of the Company Group or in connection with
their respective businesses: (i) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any direct or indirect unlawful payments to
any governmental officials or employees from corporate funds, (iii) established
or maintained any unlawful or unrecorded fund of corporate monies or other
assets, (iv) made any false or fictitious entries on the books and records
of the Company Group or (v) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment of any nature.


 


4.32                        Internal Controls. 
The Company Group maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (a) transactions are executed
in accordance with management’s general or specific authorizations, (b) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with generally 


 


23





















 


accepted accounting
principles and to maintain asset accountability, (c) access to assets is
permitted only in accordance with management’s general or specific
authorization and (d) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences. The Company Group has established
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the Company and designed such disclosure controls and
procedures to ensure that material information relating to the Company Group is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company’s most recently filed
periodic report under the Exchange Act, as the case may be, is being
prepared.  The Company’s certifying
officers have evaluated the effectiveness of the Company’s controls and
procedures as of a date within 90 days prior to the filing date of the most
recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).  The Company presented in its most recently
filed periodic report under the Exchange 
Act the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date.  Since the Evaluation
Date, there have been no significant changes in the Company Group’s internal
controls (as such term is defined in Item 307(b) of Regulation S-K) or, to
the Knowledge of the Company, in other factors that could significantly affect
the Company Group’s internal controls. 
The Company Group maintains and will continue to maintain a standard
system of accounting established and administered in accordance with GAAP and
the applicable requirements of the Exchange Act.


 


4.33                        Use of Proceeds.  The
Company will use the proceeds from the sale of the Series C Shares and the
Warrants hereunder solely (i) to repay the Indebtedness of the Company
outstanding under the Subordinated Notes, (ii) to pay the Closing Fee and
other fees and expenses associated with the transactions contemplated by this
Agreement and the Related Documents, (iii) Permitted Acquisitions and (iv) for
working capital and general corporate purposes.


 


4.34                        Customers
and Suppliers.


 


(a)                                  Schedule 4.35 lists the ten largest
customers of the Company Group (on a consolidated basis) for each of the two
most recent fiscal years and sets forth opposite the name of each such customer
the percentage of consolidated net sales attributable to such customer.


 


(b)                                 Since
the Most Recent Balance Sheet Date, no material supplier of the Company Group
has indicated that it shall stop, or materially decrease the rate of, supplying
materials, products or services to the Company Group, and no customer listed on
Schedule 4.35 has indicated in writing that it shall stop, or materially
decrease the rate of, buying materials, products or services from the Company
Group.


 


4.35                        Non-Material Subsidiaries. 
To the actual knowledge of the Company (without investigation), the
representations and warranties of any Material Subsidiary made in this Article IV
are true and complete as applied to each Non-Material Subsidiary.


 


24





















 


ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS


 


Each Purchaser, severally and not jointly, hereby
represents and warrants to the Company as follows:


 


5.1                               Authorization and Enforceability.  Such Purchaser has full power and authority
and has taken all action necessary to permit it to execute and deliver this
Agreement and the other documents and instruments to be executed by it pursuant
hereto and to carry out the terms hereof and thereof.  This Agreement and such other documents and
instruments each constitutes a legal, valid and binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with its terms,
except to the extent limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application related to
the enforcement of creditor’s rights generally and except as rights to
indemnity thereunder may by limited by applicable federal securities laws.


 


5.2                               Government Approvals. 
Such Purchaser is not required to obtain any order, consent, approval or
authorization of, or to make any declaration or filing with, any Governmental
Agency in connection with the execution and delivery of this Agreement and the
other documents and instruments to be executed by it pursuant hereto or the
consummation of the transactions contemplated hereby and thereby, except for
such order, consent, approval, authorization, declaration or filing as which
has been or will be obtained or made.


 


ARTICLE VI

COMPLIANCE WITH SECURITIES LAWS


 


6.1                               Investment Intent of the Purchasers.  Each Purchaser, severally and not jointly,
represents and warrants to the Company that it understands that the Series C
Shares, the Warrants, the Conversion Shares and the Warrant Shares
(collectively, the “Securities”)
are “restricted securities” and have not been registered under the Securities
Act and such Purchaser is acquiring the Series C Shares and Warrants in
the ordinary course of business for its own account, with no present intention
of selling or otherwise distributing the same to the public.


 


6.2                               Status of Series C Shares and Warrants.  Each Purchaser has been informed by the
Company that the Series C Shares and Warrants have not been registered
under the Securities Act or under any state securities laws and are being
offered and sold in reliance upon federal and state exemptions for transactions
not involving any public offering.  Each
Purchaser represents and warrants, severally and not jointly, that it will not,
directly or indirectly, offer, sell or otherwise dispose of (or solicit any
offers to buy, purchase or otherwise acquire) any of the Securities except in
compliance with the Securities Act, applicable state securities laws and the rules and
regulations promulgated thereunder.


 


6.3                               Sophistication and Financial Condition of Purchasers.  Each Purchaser represents and warrants,
severally and not jointly, to the Company that it is an “accredited investor”
as defined in Regulation D under the Securities Act.  Each Purchaser represents and warrants,
severally and not jointly, to the Company that it considers itself to be an
experienced and sophisticated investor and to have such knowledge and
experience in financial and business 


 


25





















 


matters as are necessary
to evaluate the merits and risks of an investment in the Series C Shares
and the Warrants.  Each Purchaser has
received information concerning the Company, including the Company Reports and
the risks relating to the Company described in the Company’s Form 10-A
filed June 26, 2005 and the Company’s quarterly report on Form 10-Q
for the quarter ended March 31, 2005. 
The representations set forth in the preceding sentence shall not affect
any representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto, nor shall it affect the
Company’s indemnification obligations arising under Article IX hereof.


 


6.4                               Transfer
of Series C Shares, Warrants and Conversion Shares.


 


(a)                                  Each
Purchaser has been informed by the Company and hereby agrees that the
Securities may be transferred only (i) pursuant to public offerings
registered under the Securities Act, (ii) pursuant to Rule 144
promulgated under the Securities Act (or any similar rule then in force), (iii) to
an Affiliate of the transferor, or (iv) subject to the conditions set
forth in Section 6.4(b),
pursuant to any other legally-available means of transfer.


 


(b)                                 In
connection with any transfer of any Securities (other than a transfer described
in Section 6.4(a)(i) or (iii)),
the holder of such shares shall deliver written notice to the Company
describing in reasonable detail the proposed transfer, together with an opinion
of counsel (Kirkland & Ellis LLP or such other counsel which, to the
Company’s reasonable satisfaction, is knowledgeable in securities law matters)
to the effect that such transfer may be effected without registration of such
shares under the Securities Act.  The
holder of the Securities being transferred shall not consummate the transfer
until (i) the prospective transferee has confirmed to the Company in
writing its agreement to be bound by the provisions of this Section 6.4 or (ii) such holder
shall have delivered to the Company an opinion of such counsel that no
subsequent transfer of such Securities shall require registration under the
Securities Act.  Promptly upon receipt of
any opinion described in clause (ii) of the preceding sentence, the
Company shall prepare and deliver in connection with the consummation of the
proposed transfer, new certificates for the Securities being transferred that
do not bear the legend set forth in Section 6.4(c).


 


(c)                                  Except
as provided in Section 6.4(b),
until transferred pursuant to clauses (a)(i) or (a)(ii) above, each
certificate evidencing the ownership of Series C Shares, Warrants,
Conversion Shares or Warrant Shares shall be imprinted with a legend
substantially in the following form:


 


THE
SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON AUGUST 17, 2005 AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE
STATE SECURITIES LAW.  THESE SECURITIES MAY NOT
BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE 


 


26





















 


STATE
SECURITIES LAW.   THE TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SET
FORTH IN THE SERIES C CONVERTIBLE PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT DATED AS OF AUGUST 17, 2005 BETWEEN THE ISSUER (THE “COMPANY”)
AND THE OTHER PARTIES THERETO. THE COMPANY RESERVES THE RIGHT TO REFUSE ANY
TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER.  A COPY OF SUCH
CONDITIONS SHALL BE FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN
REQUEST TO THE COMPANY.


 


ARTICLE VII

CONDITIONS PRECEDENT


 


7.1                               Conditions to Obligations of the Purchasers.  The obligation of each Purchaser to purchase
the Series C Shares and the Warrants to be purchased by such Purchaser at
the Closing in accordance with Section 3.2
shall be subject to the satisfaction or waiver by such Purchaser of the
following conditions precedent on or prior to the Closing Date:


 


(a)                                  the
Series C Preferred Stock Certificate of Designation shall have been filed
with the Secretary of State of the State of Delaware and shall be in full force
and effect and shall not have been modified in any manner;


 


(b)                                 as
of the Closing Date there shall be an absence of (i) any general
suspension of trading in, or limitation on prices for securities on any
national securities or bulletin board exchange or over-the-counter market, (ii) the declaration of any banking
moratorium or any suspension of payments in respect of banks or any material
limitation (whether or not mandatory) on the extension of credit by lending
institutions in the United States, or (iii) the commencement or escalation
of a war or material armed hostilities or other international or national
calamity involving the United States and having an adverse effect on the
functioning of the financial markets in the United States;


 


(c)                                  the
representations and warranties made by the Company in Article IV hereof
shall be true and correct in all respects to the extent they are qualified by
materiality or Material Adverse Effect, and to the extent not so qualified
shall be true and correct in all material respects;


 


(d)                                 the
Company shall have paid the Closing Fee and the Purchaser Expenses to such
Purchaser, in each case as contemplated under Section 10.5
of this Agreement;


 


(e)                                  the
authorization and issuance of the Series C Shares, the Warrants, the
Conversion Shares and the Warrant Shares will not prevent the Company from
listing the Common Stock on AMEX;


 


27





















 


(f)                                    the
Company shall have received all consents and approvals, including Board of
Director, stockholder, Governmental Agency and third party consents or approvals,
that are required to be obtained in connection with the transactions
contemplated under this Agreement and the Related Documents, including the
issuance of the Securities in accordance with the terms of this Agreement and
the Related Documents;


 


(g)                                 one
individual designated by the Purchasers holding a majority of the number of
shares of Underlying Common Stock (the “Requisite
Purchasers”) as contemplated by Section 8.6
(the “Series C Director”)
shall have been duly nominated and elected to serve as a member of the Board of
Directors, effective as of the Closing Date;


 


(h)                                 since
March 31, 2005, no Material Adverse Effect shall have occurred;


 


(i)                                     such
Purchaser shall have received evidence satisfactory to such Purchaser that the
Company has satisfied in full all of its obligations under the Subordinated
Notes and the Subordinated Notes shall no longer be issued or outstanding;


 


(j)                                     the
Company shall have satisfied the listing requirements of Sections 101(c),
102, 121, 123, 802, 803, 804 and 807 of the AMEX Company Guide;


 


(k)                                  no
stop order or suspension of trading shall have been imposed by the SEC or any
other governmental regulatory body with respect to public trading in the Common
Stock on the pink sheets;


 


(l)                                     the
following documents and items shall have been delivered to such Purchaser at or
prior to the Closing:


 


(i)                                     fully
executed and delivered Warrants providing for the purchase upon exercise
thereof of the Warrant Shares satisfactory in form and substance to such
Purchaser, which Warrants shall be in full force and effect on the Closing Date
without further amendment or modification thereto;


 


(ii)                                  the
written opinion of Dorsey & Whitney LLP, counsel to the Company, dated
as of the Closing Date and satisfactory in form and substance to the Purchasers;


 


(iii)                               a
counterpart of the Amended and Restated Investor Rights Agreement duly executed
and delivered by the Company and each Person required to amend and restate the
Amended and Restated Investor Rights Agreement, and the Amended and Restate
Investor Rights Agreement shall be in full force and effect;


 


(iv)                              certificates
evidencing ownership of the Series C Shares, duly executed and delivered
by the Company;


 


(v)                                 a
certificate of a duly authorized officer of the Company dated as of the Closing
Date certifying that (A) the closing conditions described in Sections 7.1(a), (b), (c), (e), (f),
(g), (h), (j) and (k) have been satisfied and (B) the resolutions of the
Board of Directors attached thereto (which resolutions shall have, 


 


28





















 


among other
things, (x) authorized all of the transactions contemplated by this Agreement
and the Related Documents, approved the Related Documents (including the filing
of the Series C Preferred Stock Certificate of Designation and the
issuance of the Securities) and (y) duly nominated and elected the Series C
Director to the Board of Directors effective as of the Closing Date;


 


(vi)                              fully
executed consent of the holders of the Series B Shares to the consummation
of the transactions contemplated by this Agreement and the Related Documents
and the waiver of any pre-emptive or anti-dilution rights such Persons may have
in respect of the transactions contemplated by this Agreement and the Related
Documents;


 


(vii)                           a fully
executed amendment to the Rights Plan satisfactory in form and substance to
such Purchaser, which amendment shall be in full force and effect on the
Closing Date without further amendment or modification thereto;


 


(viii)                        fully
executed copies of the Lock-Up Agreements required by Section 8.8 and such Lock-Up Agreements shall be in full
force and effect; and


 


(ix)                                such
other documents relating to the transactions contemplated hereby as the
Purchasers may reasonably request.


 


7.2                               Conditions to Obligations of the Company.  The obligation of the Company to sell and
issue the Series C Shares and the Warrants to any Purchaser at the Closing
in accordance with Section 3.2
shall be subject to the delivery of the Purchase Price by such Purchaser
accordance with Section 3.2.


 


ARTICLE VIII

COVENANTS OF THE COMPANY


 


8.1                               Restricted Actions. 
Prior to the conversion of, or redemption of, the Series C Shares
(other than with respect to Section 8.1(e) which
shall survive the conversion of the Series C Shares and shall terminate on
the date that no Securities are outstanding), without the prior written consent
of the holders of a majority of the Series C Shares (other than with
respect to Section 8.1(e) which
shall require the prior written consent of the holders of a majority of the
Underlying Common Stock), the Company shall not, nor shall the Company suffer
or permit any member of the Company Group to, directly or indirectly:


 


(a)                                  use
the proceeds from the sale of the Series C Shares and the Warrants
hereunder other than (x)(i) to payoff the indebtedness of the Company and
its Subsidiaries outstanding under the Subordinated Notes, and (ii) to pay
the Closing Fee and other fees and expenses associated with the transactions
contemplated by this Agreement and the Related Documents, (y) to the extent the
Company has paid in full the indebtedness of the Company and its Subsidiaries
under the Subordinated Notes and the Closing Fee,  (i) for Permitted Acquisitions and (ii) for
working capital and general corporate purposes;


 


29





















 


(b)                                 prior
to the third anniversary of the Closing Date, consummate a Company Sale unless
the amount of cash consideration and the Market Price (as of the date of
receipt) of any other consideration received by the holders of the Underlying
Common Stock, in the aggregate, in such Company Sale, plus the aggregate value
of any cash hereafter distributed or issued as a dividend or distribution with
respect to any of the Securities is equal to 175% of the aggregate amount of capital
invested in the Securities;


 


(c)                                  incur,
create, assume or in any way become liable for any Indebtedness for Borrowed
Money, Capital Leases or Guarantees unless at the time of and after giving pro
forma effect to such incurrence and the application of proceeds therefrom, the
ratio of the Company’s Indebtedness for Borrowed Money to EBITDA would be less
than or equal to 2.0 to 1.0.  Solely for
purposes of this Section 8.1(c),
(x) Indebtedness for Borrowed Money shall mean all obligations of the Company
Group for borrowed money which should be classified upon the obligor’s balance
sheet as liabilities, the present value of any Capital Leases and the amount of
all Guarantees (whether or not required to be reflected on such obligor’s
balance sheet as liabilities), in each case as determined in accordance with
GAAP, and (y) EBITDA shall mean the net income of the Company Group, (A) adjusted
for the elimination of the following items if, and only if, such items shall
never require the expenditure of cash by any member of the Company Group: (1) non-cash
interest; (2) non-cash employee compensation expense and (3) nonrecurring
non-cash charges, (B) minus any extraordinary gains and other
non-recurring gains and (C) plus to the extent deducted from net
income (1) income tax expense; (2) depreciation and amortization
expense and (3) the aggregate cash interest expense of the Company Group
paid, payable or accrued for such period, all of which calculations shall be
determined in accordance with GAAP based on the consolidated financial
statements of the Company Group for the 12 month period ending on the last day
of the fiscal quarter for which the most recent financial statements have been
delivered to the Purchasers pursuant to Section 8.3;


 


(d)                                 from
and after the third anniversary of the Closing Date, consummate a Company Sale
unless the amount of cash consideration and the Market Price (as of the date of
receipt) of any other consideration received by the holders of the Series C
Preferred Stock, in the aggregate, in such Company Sale is at least equal to
the Series C Redemption Price for all such shares of Series C
Preferred Stock;


 


(e)                                  enter
into any agreement, instrument, arrangement or understanding (or amend or
modify the terms of any existing agreement, instrument, arrangement or
understanding), which by its terms would restrict the Company’s ability to
comply with the terms of this Agreement or any of the Related Documents in any
material respect;


 


(f)                                    enter
into or suffer to exist any contract, agreement, arrangement or transaction
with any Affiliate (an “Affiliate Transaction”),
other than a Permitted Affiliate Transaction, without the prior consent of the
members of the Board of Directors with no interest in such Affiliate
Transaction;


 


(g)                                 sell,
transfer or otherwise dispose of the capital stock of any Subsidiary;


 


(h)                                 in
the case of any Company Subsidiary, authorize, issue or enter into an agreement
providing for the issuance of (contingent or otherwise) of any Equity
Securities, 


 


30





















 


 


unless after giving effect to such issuance, such Subsidiary is
Wholly-Owned Subsidiary of the Company;


 


(i)            materially
alter its principal line of business as conducted on the Closing Date or engage
in any business unless such business is reasonably related to such principal
line of business of the Company Group as conducted on the Closing Date;


 


(j)            complete
a Material Acquisition that is not approved by the Board of Directors,
including the consent of the Series C Director; or


 


(k)           with
respect to the Company or any Material Subsidiary, make an assignment for the
benefit of creditors or admit in writing its inability to pay its debts
generally as they become due, or petition or apply to any tribunal for the
appointment of a custodian, trustee, receiver or liquidator of the Company or
any Material Subsidiary or of any substantial part of the assets of the Company
or any Material Subsidiary, or commence any proceeding (other than a proceeding
for the voluntary liquidation and dissolution of a Subsidiary) relating to the
Company or any Material Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law
of any jurisdiction; or approve, consent to or acquiescence in any such
petition or application filed, or any such proceeding commenced, by any third
party against the Company or any Subsidiary.


 


8.2          Required Actions.  Prior to the conversion or redemption of all
the Series C Shares, each of the Company and each other member of the
Company Group shall:


 


(a)           use
its reasonable efforts to become listed and thereafter use its reasonable efforts to maintain at
all times, or to reapply for, a valid listing for the Common Stock on a
national securities exchange or NASDAQ and as promptly as possible following
the listing of the Common Stock on a national securities exchange or NASDAQ,
secure the listing of all of the Conversion Shares and Warrant Shares upon such
national securities exchange or NASDAQ and maintain such listing of all
Conversion Shares and Warrant Shares from time to time issuable under the terms
hereof and the Series C Preferred Stock Certificate of Designation and
pursuant to the Warrant, and maintain the Common Stock’s authorization for
trading on a national securities exchange or quotation on NASDAQ;


 


(b)           maintain
and keep its properties in good repair, working order and condition, and from
time to time make all necessary or desirable repairs, renewals and
replacements, so that its businesses may be properly and advantageously
conducted in all material respects at all times;


 


(c)           maintain
or cause to be maintained with financially sound and reputable insurers (i) public
liability and property damage insurance with respect to their respective
businesses and properties against loss or damage of the kinds and in amounts
customarily carried or maintained by companies of established reputation
engaged in similar businesses, and (ii) with respect to the Company only,
directors’ and officers’ liability insurance providing at least the same
coverage and amounts and containing terms and conditions which are not less
advantageous in any material respect, in each case than the directors’ and
officers’ liability insurance maintained by the Company as of the Closing Date;


 


31





















 


(d)           pay
and discharge when due all Tax Liabilities, assessments and governmental
charges or levies imposed upon its properties or upon the income or profits
therefrom (in each case before the same become delinquent and before penalties
accrue thereon), unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP, are
being maintained by the Company;


 


(e)           at
all times cause to be done all things necessary to maintain, preserve and renew
its corporate existence and all material licenses, authorizations and permits
necessary to the conduct of its businesses;


 


(f)            maintain,
protect and enforce, and not permit the loss, lapse or abandonment of, any Company
Intellectual Property (other than in the Ordinary Course of Business with
respect to Intellectual Property not material to the business of any Company
Group member); provided, however, that the foregoing is not intended to
restrict the Company from entering into a pledge of the Company Intellectual
Property or selling for value a portion of the Company Intellectual Property,
if such activities would otherwise be permitted hereunder);


 


(g)           comply
with all applicable laws, rules and regulations of all Government
Agencies, the violation of which could reasonably be expected to have a
Material Adverse Effect;


 


(h)           maintain
proper books of record and account which present fairly in all material
respects the Company’s financial condition on a consolidated basis and results
of operations and make provisions on its financial statements for all such
proper reserves as in each case are required in accordance with GAAP;


 


(i)            reserve
and keep available out of the Company’s authorized but unissued shares of
Common Stock, solely for the purposes of issuance upon conversion of the Series C
Shares and exercise of the Warrants, such number of shares of Common Stock as
are issuable upon the conversion of all outstanding shares of the Series C
Shares or exercise of the Warrants.  All
shares of Common Stock which are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable and free from all Taxes and Liens,
other than Liens created by the holder. 
The Company shall use commercially reasonable efforts to assure that all
such shares of Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed (except for
official notice of issuance which shall be immediately delivered by the Company
upon each such issuance and excluding the filing of any registration statement
with the SEC unless the Company is contractually or otherwise required to file
any such registration statement); and


 


(j)            use
its best efforts to at all times file all reports (including annual reports,
quarterly reports and the information, documentation and other reports)
required to be filed by the Company under the Exchange Act and Sections 13 and
15 of the rules and regulations adopted by the SEC thereunder, and the
Company shall use its reasonable best efforts to file each of such reports on a
timely basis, and take such further action as any holder or holders of
Securities may reasonably request, all to the extent required to enable such
holders to sell Securities pursuant to Rule 144 adopted by the SEC under
the Securities Act (as such rule may


 


32





















 


be amended from time to time) or any similar rule or regulation
hereafter adopted by the SEC and to enable the Company to register securities
with the SEC on Form S-3 or any similar short-form registration statement
(or, if the Company is no longer subject to the requirements of the Exchange
Act, provide reports in substantially the same form and at the same times as
would be required if it were subject to the Exchange Act).


 


8.3          Information Rights.  So long as the Purchasers or one or more of
their Affiliates hold at least 50% of the number of shares of Common Stock
issued or issuable upon conversion of the Series C Shares purchased at the
closing, the Company shall furnish to each holder of Underlying Common Stock:


 


(a)           within
90 days after the end of each fiscal year, its Form 10-K (or, if the
Company is no longer subject to the requirements of the Exchange Act, provide
reports in substantially the same form and at the same times as would be
required if it were subject to the Exchange Act) containing its audited
consolidated balance sheet and related statements of income, stockholders’
equity and cash flows as of the end of and for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all reported
on by PricewaterhouseCoopers LLP or other independent public accountants of
recognized national standing (without a “going concern” or similar
qualification relating to the questionable value of assets because of concerns
regarding survivability and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of
operations of the Company Group on a consolidated basis in accordance with
GAAP, all certified by one of its Financial Officers as presenting fairly in
all material respects the results of operations of the Company on a
consolidating basis in accordance with GAAP, subject to normal year-end audit
adjustments and the absence of footnotes;


 


(b)           within
45 days after the end of each of the first three fiscal quarters of each fiscal
year, its Form 10-Q (or, if the Company is no longer subject to the
requirements of the Exchange Act, provide reports in substantially the same
form and at the same times as would be required if it were subject to the
Exchange Act) containing its consolidated balance sheet and related statements
of income, stockholders’ equity and cash flows as of the end of and for such
fiscal quarter and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the results of operations of the
Company on a consolidating basis in accordance with GAAP, subject to normal
year-end audit adjustments and the absence of footnotes;


 


(c)           within
30 days after the end of each month, a consolidated balance sheet and related
statements of income, stockholders’ equity and cash flows as of the end of and
for such month and the then elapsed portion of the fiscal year, setting forth
in each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the results of operations of the
Company on a consolidating basis in accordance with GAAP, subject to normal
year-end audit adjustments and the absence of footnotes;


 


33





















 


(d)           concurrently
with any delivery of financial statements under clauses (a) or (b) above,
a certificate of a Financial Officer of the Company (i) certifying as to
whether a Remedy Event has occurred or any other material breach of a
representation, warranty or covenant contained in this Agreement has occurred
and, if a Remedy Event or any such breach has occurred, specifying the details
thereof and any action taken or proposed to be taken with respect thereto and (ii) stating
whether any change in GAAP or in the application thereof has occurred since the
Most Recent Balance Sheet Date and, if any such change has occurred, specifying
the effect of such change on the financial statements accompanying such
certificate;


 


(e)           by
no later than September 30 of each fiscal year, a budget and business plan
for the immediately succeeding fiscal year in the form approved by the Board of
Directors;


 


(f)            promptly
after the same become publicly available, copies of all periodic and other
reports, proxy statements and other materials filed by any member of the
Company Group with the SEC, or any Governmental Agency succeeding to any or all
of the functions of the SEC, or with any national securities exchange
(including AMEX), or distributed by the Company to its stockholders generally,
as the case may be; and


 


(g)           promptly
following any request therefor, such other information regarding the operations,
business affairs and financial condition of any member of the Company Group, or
compliance with the terms of this Agreement or any Related Document, as any
Purchaser may reasonably request.


 


8.4          Access Rights.  So long as the Purchasers or one or more of
their Affiliates hold at least 50% of the number of shares of Common Stock
issued or issuable upon conversion of the Series C Shares purchased at the
Closing, the Company shall permit each Purchaser, its agents and
representatives to have reasonable access to the management personnel,
premises, books and records of the Company Group upon reasonable notice during
regular business hours.


 


8.5          Right
of First Offer.


 


(a)           Except
for the issuance of:


 


(i)            Series A Shares and rights to
acquire common stock issued pursuant to the Rights Plan;


 


(ii)           options to purchase, and shares of
Common Stock, issued pursuant to any employee benefit plan under a reservation
existing as of the date of this Agreement or under the additional reservation
pending at the 2005 annual meeting of stockholders in an amount not to exceed
1,000,000 shares of Common Stock or hereafter approved by the Board of
Directors, including the Series C Director;


 


(iii)          Equity Securities issued upon exercise
of the Warrant or conversion of the Series B Shares or Series C
Shares;


 


(iv)          Equity Securities issued pursuant to
the exercise or conversion of any other option, warrant, convertible security
or right to acquire Equity Securities outstanding as of the date of this
Agreement;


 


34





















 


(v)           Equity Securities issued and sold in
an offering registered under the Securities Act;


 


(vi)          Common Stock issued or issuable by
reason of a dividend, stock split, split-up or other distribution on shares of
Common Stock, or a recapitalization;


 


(vii)         Common Stock or options or warrants to
acquire Common Stock, issued or issuable to banks, equipment lessors or other
financial institutions, or to real property lessors, pursuant to a debt
financing, equipment leasing or real property leasing transactions approved by
the Board of Directors in an aggregate amount not to exceed 1% of the Company’s
Fully-Diluted Common Stock as of the date of this Agreement;


 


(viii)        Common Stock or options or warrants to
acquire Common Stock, issued in licensing or collaborative arrangements, or in
strategic partnerships, to the other party to such arrangement or partnership
in connection with the licensing of technology approved by the Board of
Directors of the Company in an aggregate amount not to exceed 1% of the Company’s
Fully-Diluted Common Stock as of the date of the Purchase Agreement;


 


(ix)           Common Stock or options or warrants
to acquire Common Stock issued in connection with any acquisition or merger to
the seller in such acquisition or merger that is approved by the Board of
Directors (including the Series C Director), provided that such
securities are not issued to a stockholder of the Company or any Affiliate
thereof (subclauses (i)-(viii) above, an “Exempt Issuance”),


 


if the Company, at any time after the Closing
authorizes the issuance or sale of, or proposes to issue or sell, any Equity
Securities, the Company shall first offer to sell to each Purchaser holding Series C
Shares a portion of such Equity Securities equal to the quotient determined by
dividing (1) the number of shares of Common Stock (assuming all Series C
Shares and Warrants have been converted to or exercised for, as the case may
be, Common Stock) held by such Purchaser by (2) the total number of shares
of Common Stock then outstanding immediately prior to such issuance (assuming
all Warrants have been exercised for Common Stock and all options and Common
Stock Equivalents have been exercised or exchanged for or converted into Common
Stock in accordance with their terms) (“Fully-Diluted
Common Stock”).  Each
Purchaser shall be entitled to purchase all or any portion of such Equity
Securities at the most favorable price and on the most favorable terms as such
Equity Securities are to be offered to any other Person.


 


(b)           Any
Purchaser wishing to exercise its purchase rights under this Section 8.5 must within 15 business
days after receipt of written notice from the Company describing in reasonable
detail the Equity Securities being offered, the purchase price thereof, the
payment terms and such holder’s percentage allotment, deliver a written notice
to the Company describing its election hereunder.  Any rights under this Section 8.5 that can be exercised by
the Purchasers may also be exercised by the Purchasers’ respective Affiliates.


 


(c)           Upon
the expiration of the offering periods described above, the Company shall be
entitled to sell such Equity Securities which the Purchasers have not elected
to purchase 


 


35





















 


during the 90 days following such expiration on terms and conditions no
more favorable to the purchasers thereof than those offered to such
holders.  Any Equity Securities offered
or sold by the Company after such 90-day period must be reoffered to the
Purchasers pursuant to the terms of this Section 8.5.


 


(d)           Nothing
contained in this Section 8.5
shall be deemed to amend, modify or limit in any way the restrictions on the
issuance of Equity Securities set forth elsewhere in this Agreement or in any
other agreement to which the Company Group is bound.


 


8.6          Board
Representation.


 


(a)           So
long as the Purchasers or one or more of their Affiliates hold at least 20% of
the number of shares of Common Stock issued or issuable upon conversion of the Series C
Shares, the Company shall take all necessary or desirable actions within its
control (including calling special board and stockholder meetings and
nominating any individual appointed by the holders of a majority of the number
of shares of Common Stock issued or issuable upon conversion of the Series C
Shares to the Board of Directors and recommending the election of such
individual to the Board of Directors), to cause the Series C Director to
be elected to serve as a member of the Board of Directors.  The Company shall at all times maintain a
Compensation Committee and an Audit Committee of its Board of Directors.  The Company shall reimburse the Series C
Director for all reasonable costs incurred by him or her in connection with
traveling to and from and attending meetings of the Board of Directors and
committees of the Board of Directors, in addition to any directors fees
regularly paid to any members of the Board of Directors.


 


(b)           At
such time as the appointment rights in Section 8.6(a) would
apply and the Series C Director is not a member of the Board of Directors
as provided in this Agreement, the Company shall permit the Requisite
Purchasers to appoint one observer attend each meeting of the Board of
Directors and any committee thereof.  The
Company will send to any such observer notice of the time and place of any such
meeting in the same manner and at the same time as notice is sent to the
directors or committee members, as the case may be; provided, however,
that each such observer shall always receive at least three (3) days’
prior notice of any meeting.  The Company
shall also provide to such observer copies of all notices, reports, minutes,
consents and other documents at the time and in the manner as they are provided
to the Board of Directors or committees. 
The Company shall reimburse each such observer for all reasonable costs
incurred by the observer.


 


(c)           Notwithstanding
the foregoing, a majority of the Board of Directors shall have the right to
exclude the Series C Director, or the observer permitted to be in attendance
at each meeting of the Board of Directors pursuant to Section 8.6(b) hereof, from
portions of meetings of the Board of Directors (or meetings of committees
thereof) or omit to provide the observer with certain information if such
majority of the Board of Directors believes in good faith, based on the advice
of the Company’s outside counsel, that such exclusion or omission is necessary
to avoid a conflict of interest or to prevent a breach of attorney-client
privilege; provided, that the Series C Director and the observer
shall not be so excluded or withheld information unless all other persons whose
presence at a meeting or receipt of such materials 


 


36





















 


would result in a conflict of interest or a breach of attorney-client
privilege are also excluded or withheld information.


 


8.7          Appointment
Right. 


 


(a)           From
and after the earlier of (x) the 7th anniversary of the Closing Date and (y)
the occurrence of a Remedy Event, so long as any Series C Shares remain
outstanding and, with respect to Section 8.7(a)(y)
such Remedy Event has not been cured by the Company or a Redemption Notice has
not been delivered by the Company in accordance with the terms of the Series C
Preferred Stock Certificate of Designation, the Requisite Purchasers shall have
the right to cause the Company to retain an investment banker to identify and
advise the Company regarding opportunities for a Company Sale and participate
on the Company’s behalf in negotiations for, and to assist the Company in
conducting, such Company Sale (the “Appointment
Right”), the consummation of which shall be subject to the Requisite
Purchasers’ consent.  To exercise their
Appointment Right, the Requisite Purchasers shall give prompt written notice to
the Company (the “Appointment Notice”)
of their intention to cause, to the extent consistent with Section 8.7(c), a Company Sale, which
Appointment Notice shall identify three investment banks chosen by the
Requisite Purchasers to conduct such Company Sale.  Within thirty (30) days of the Company’s
receipt of the Appointment Notice, the Company shall retain one of the
investment banks (the “Investment Bank”)
identified by the Requisite Purchasers in the Appointment Notice to investigate
the advisability of, solicit interest in and, to the extent consistent with Section 8.7(c), negotiate for an
orderly Company Sale with the objective of achieving the highest practicable
value for the Company’s stockholders within a reasonable period of time.  The Company shall cause its Board of
Directors and officers to (i) cooperate with the Investment Bank in
accordance with the procedures established by the Investment Bank and the Board
of Directors of the Company, to solicit interest in an orderly Company Sale, (ii) use
their reasonable efforts, consistent with their fiduciary obligations, to reach
an agreement on the optimum structure and the terms and conditions for a
Company Sale (including whether such Company Sale will be consummated by
merger, sale of assets or sale of capital stock) and (iii) retain
independent legal counsel, which shall be chosen by the Board of Directors but
shall be reasonably acceptable to the Requisite Purchasers (“Company Counsel”), to advise the Company on
such Company Sale.  The Company shall pay
all fees and expenses incurred in connection with the Company Sale, including
all fees and expenses of the Investment Bank, the Company Counsel and one law
firm retained by the Requisite Purchasers in connection with the investigation,
documentation, negotiation and consummation of the Company Sale.  Notwithstanding the foregoing, the Company
shall not be required to reimburse the Purchasers for any legal fees or
expenses incurred in connection with any judicial proceeding primarily arising
as a result of the consummation of the Company Sale contemplated by this Section 8.7 in which the Purchasers
and the Company are adversaries.


 


(b)           In
furtherance of the foregoing and to the extent consistent with Section 8.7(c), the Company shall (i) take
all necessary or desirable actions reasonably requested by the Requisite
Purchasers or the Investment Bank in connection with the consummation of the
Company Sale and (ii) make any representations, warranties, indemnities
and agreements reasonably requested by the Requisite Purchasers and take such
other actions as the Requisite Purchasers may reasonably request in connection
with such Company Sale.


 


37





















 


(c)           The
Purchasers acknowledge the fiduciary obligations of the Board of Directors in
considering, negotiating, approving and recommending to stockholders, any
transaction that would result in a Company Sale and acknowledge that such
fiduciary obligations require that the Board of Directors act on an informed
basis to secure the best value reasonably available to the Company’s
stockholders under the circumstances. 
The Purchasers acknowledge that, although the Company shall be obligated
to cause its Board of Directors to retain an Investment Bank pursuant to this Section 8.7 and use its reasonable
efforts to assist the Investment Bank in investigating the advisability of a
Company Sale, and to solicit interest in and negotiate the terms of a Company
Sale, the Board of Directors shall be under no obligation or compulsion to
approve or recommend any Company Sale and may reject any or all offers with
respect to any such potential Company Sale, if, in the exercise of its
fiduciary obligations, the Board of Directors reasonably determines that the
same is not in the best interest of, or fair to, the stockholders of the
Company (a “Rejected Sale”).  In the event of a Rejected Sale, the Board of
Directors shall give the Purchasers prompt (and in any event within 5 days)
written notice thereof, which notice shall further specify in reasonable detail
each reason or reasons that formed the basis for the Board of Director’s
determination that such Rejected Sale was not in the best interest of, or fair
to, the stockholders of the Company.


 


(d)           Immediately
upon the occurrence of any additional Remedy Event (or the continuation of any
then-existing Remedy Event), and provided that the Requisite Purchasers have
not delivered an Appointment Notice within 12 months prior to the delivery of
the Appointment Notice for such new or then-existing Remedy Event, the
Requisite Purchasers shall have the right to deliver an Appointment Notice to
the Company.  In the event that the
Requisite Purchasers deliver an Appointment Notice that does not result in a
Company Sale, and the Remedy Event that gave rise to such Appointment Event has
not been cured within twelve months from the date of the original Appointment
Notice, the Requisite Purchasers may deliver additional Appointment Notice(s)
any time following twelve months after delivery of any prior Appointment Notice.  At any time within ninety (90) days following
delivery of an Appointment Notice (the “Redemption
Period”), the Company may elect by delivery of a Redemption Notice
(as defined in the Series C Preferred Stock Certificate of Designation) to
the Purchasers, to redeem (subject to each Purchaser’s right to convert to
Common Stock pursuant to Section 6 of the Series C Preferred Stock
Certificate of Designation) all, but not less than all, of the shares of Series C
Preferred Stock then outstanding in accordance with the terms of Section 4A
of the Series C Preferred Stock Certificate of Designation and following
the redemption of all such shares of Series C Preferred Stock in
accordance with the Series C Preferred Stock Certificate of Designation
the Company shall no longer be required to comply with the provisions of this Section 8.7.


 


(e)           Nothing
in this Section 8.7, or in
the definition of Remedy Event, shall limit or imply limitation of any other
remedy, at law or in equity, available to the Purchasers under this Agreement
or the Related Documents or otherwise, for breach of any provision of this
Agreement, the Series C Preferred Stock Certificate of Designation, or any
Related Document.


 


8.8          Lock-up.  The Company shall cause the directors and
executive officers of the Company who own stock in the Company during the
Lock-up Period to enter into agreements (the “Lock-up
Agreements”) with the Company not to sell or otherwise transfer or
dispose of any shares of the Company’s Equity Securities, except as otherwise
permitted by the Lock-up 


 


38





















 


Agreements, for a period commencing on the Closing Date and terminating
90 days following the listing of the Common Stock (the “Lock-up Period”).


 


8.9          Rights Plan.  The Company shall cause the Rights Agent (as
defined in the Rights Plan) to deliver Rights Certificates (as defined in the
Rights Plan) to the holders of Underlying Common Stock if Rights Certificates
are or have been delivered to other holders of Common Stock.  The Company shall not amend the Rights Plan
in any manner which could cause any Purchaser to become an “Acquiring Person”
thereunder as a result of the consummation of the transactions contemplated by
this Agreement and the exercise of such Purchaser of its rights hereunder,
without the prior written consent of the holders of a majority of the
Underlying Common Stock.


 


8.10        Confidentiality.  Each Purchaser agrees that such Purchaser
will keep confidential and will not disclose, divulge or use for any purpose, other
than to monitor its investment in the Company, any confidential information
obtained from any member of the Company Group pursuant to the terms of this
Agreement, unless such confidential information (i) is known or becomes
known to the public in general (other than as a result of a breach of this Section 8.10 by the Purchaser), (ii) is
or has been independently developed or conceived by the Purchaser without use
of the Company’s confidential information or (iii) is or has been made
known or disclosed to the Purchaser by a third party without a breach of any
obligation of confidentiality such third party may have to the Company; provided,
however, that a Purchaser may disclose confidential information to its
limited partners and advisory board, and attorneys, accountants, consultants,
and other professionals to the extent necessary to obtain their services in
connection with monitoring its investment in the Company, or as may otherwise
be required by law.


 


ARTICLE IX

INDEMNIFICATION


 


9.1          Survival and Indemnification.  The representations and warranties of the
Purchasers and the Company contained herein shall survive for a period of
eighteen months following Closing (the “Survival
Period”).  In consideration of
the Purchasers’ execution and delivery of this Agreement and acquiring the Series C
Shares and Warrants hereunder and in addition to all of the Company’s other
obligations under this Agreement, the Company shall, and shall cause the
Company Group to, defend, protect, indemnify and hold harmless the Purchasers
and all of their Affiliates, officers, managers, advisors, directors, employees
and agents (including those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all Claims, losses,
costs, penalties, fees, Liabilities, damages and expenses (including costs of
suit and all reasonable attorneys’ fees and expenses) in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought) or other liabilities, losses, or
diminution in value (the “Indemnified
Liabilities”), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (i) the breach of any
representation or warranty contained in this Agreement or in any Related
Document, (ii) the breach of any promise, agreement or covenant contained
in this Agreement or in any Related Document, or (iii) the execution,
delivery, performance or enforcement of this Agreement and any other
instrument, 


 


39





















 


document or agreement executed pursuant hereto by any of the
Indemnitees.  The Company shall, and
shall cause the Company Group to, reimburse the Indemnitees for the Indemnified
Liabilities as such Indemnified Liabilities are incurred.  To the extent that the foregoing undertaking
by the Company may be unenforceable for any reason, the Company shall, and
shall cause the Company Group to, make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.  The indemnification
provided for under this Agreement will remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnitee or any
officer, director or controlling Person of such Indemnitee and will survive the
transfer of Securities.


 


ARTICLE X

GENERAL PROVISIONS


 


10.1        Public
Announcements.  Neither
the Purchasers nor the Company shall make, or permit any agent or Affiliate to
make, any public statements, including any press releases, with respect to this
Agreement and the transactions contemplated hereby without the prior written
consent of the other, except as may be required by law or the rules of any
exchange on which the Company’s securities may be listed or any inter-dealer
quotation system in which the Company’s securities may be authorized to be
quoted.  The Company and the Requisite
Purchasers shall jointly agree on the content and substance of all public
announcements concerning the transactions contemplated hereby; provided,
that the Purchasers acknowledge that, in accordance with the SEC’s Form 8-K,
Item 302, the Company intends to issue a press release announcing the
transactions contemplated by this Agreement as soon as possible after the
Closing, and that the Company shall file a Form 8-K describing the
transaction, and filing this Agreement and the Related Documents as exhibits,
within four business days of the Closing Date.


 


10.2        Successors and Assigns.  This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns,
including each subsequent holder of Securities. 
This Agreement shall not be assignable by the Company without the prior
written consent of the other parties hereto.


 


10.3        Entire Agreement.  This Agreement, the Related Documents and
each other writing referred to herein or delivered pursuant hereto constitute
the entire agreement among the parties with respect to the subject matter
hereof and supersede all prior arrangements or understandings.


 


10.4        Notices.  All notices, requests, consents and other
communications provided for herein shall be in writing and shall be (i) delivered
in person, (ii) transmitted by telecopy, (iii) sent by first-class,
registered or certified mail, postage prepaid, or (iv) sent by reputable
overnight courier service, fees prepaid, to the recipient at the address or
telecopy number set forth below, or such other address or telecopy number as
may hereafter be designated in writing by such recipient.  Notices shall be deemed given upon personal
delivery, seven days following deposit in the mail as set forth above, upon
acknowledgment by the receiving telecopier or one day following deposit with an
overnight courier service.


 


40





















 


To
the Company, to:


 


SoftBrands, Inc.


Two Meridian Crossings


Suite 800


Minneapolis, MN 55423


Attention: 
David Latzke


Facsimile: 
(612) 851-1901


 


With
a copy, which shall not constitute notice to the Company, to:


 


Dorsey & Whitney LLP


50 South Sixth Street


Suite 1500


Minneapolis, MN 55402


Attention:  Tom
Martin, Esq.


Facsimile No.: 
(612) 340-7800


 


To
the Purchasers, to:


 


The
addresses set forth on Schedule I
hereto


 


or, in each case, to such
other address or to the attention of such other person as the recipient party
shall have specified by prior written notice to the sending party.


 


10.5        Closing Fee; Purchasers’ Fees and
Expenses.  On the
Closing Date, in consideration for the services the Purchasers performed in
structuring and arranging the transactions contemplated by this Agreement and
the Related Documents, the Company will pay to ABRY Mezzanine Partners L.P. (or
its Affiliate) a transaction fee equal to $150,000 in connection with the
purchase and sale of the Preferred Stock and Warrants hereunder (the “Closing Fee”), by wire transfer of
immediately available funds to an account indicated to the Company by such
Purchaser.  In addition, the Company
shall reimburse the Purchasers for (i) the reasonable fees and expenses of
Kirkland & Ellis LLP incurred by Purchasers in connection with the
documentation, negotiation and consummation of the transactions contemplated by
this Agreement and the Related Documents and (ii) all other reasonable
fees and out-of-pocket expenses incurred by the Purchasers in connection with
the transactions contemplated hereunder (collectively, “Purchaser Expenses”); provided, that
the amount of such Purchaser Expenses shall not exceed $350,000.  After the Closing Date, the Company agrees to
reimburse the Purchasers for all fees and expenses (including legal fees of
Kirkland & Ellis LLP) incurred in connection with any future amendment
to, waiver of or the enforcement by the Purchasers of any of their rights
arising under this Agreement or any of the Related Documents, or in connection
with the review of the Company’s proxy statement for any meeting of the Company’s
stockholders.


 


10.6        Amendment and Waiver.  No amendment or waiver of any provision of
this Agreement shall be effective, unless the same shall be in writing and
signed by the Company and the holders of a majority of the Underlying Common
Stock outstanding at the time such amendment or waiver is proposed; provided,
that the amendment or waiver of any provision of 


 


41





















 


this Agreement that disproportionately affects the rights of any
Purchaser in an adverse manner relative to any other Purchaser shall require
the consent of such adversely affected Purchaser.  No such waiver shall operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.  No failure by any party to take any action
against any breach of this Agreement or default by any other party shall
constitute a waiver of such party’s right to enforce any provision hereof or to
take any such action.


 


10.7        Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one agreement. 
Any party hereto may execute this Agreement by facsimile signature and
the other parties hereto will be entitled to rely upon such facsimile signature
as conclusive evidence that this Agreement has been duly executed by such
party.


 


10.8        Headings; Construction.  The headings of the various sections of this
Agreement have been inserted for reference only and shall not be deemed to be a
part of this Agreement or any Related Document.


 


10.9        Specific Performance.  The Company, on the one hand, and the
Purchasers, on the other hand, acknowledge that money damages would not be a
sufficient remedy for any breach of this Agreement.  It is accordingly agreed that the parties
shall be entitled to specific performance and injunctive relief as remedies for
any such breach, these remedies being in addition to any of the remedies to
which they may be entitled at law or equity.


 


10.10      Remedies Cumulative.  Except as otherwise provided herein, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by any party hereto of any other rights or the seeking of any other
remedies against any other party hereto.


 


10.11      GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED IN ACCORDANCE WITH, AND ENFORCED UNDER, THE LAW OF THE STATE OF
DELAWARE APPLICABLE TO AGREEMENTS OR INSTRUMENTS ENTERED INTO AND PERFORMED
ENTIRELY WITHIN SUCH STATE.


 


10.12      JURISDICTION, WAIVER OF JURY TRIAL, ETC.


 


(a)           EACH
PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AGREES THAT THE ANY LEGAL ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE SERIES C SHARES,
WARRANTS, CONVERSION SHARES OR WARRANT SHARES OR ANY AGREEMENTS OR TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF
SUCH COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER
VENUE AND ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM.  EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED 


 


42





















 


OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 10.4, SUCH SERVICE TO BECOME
EFFECTIVE 10 DAYS AFTER SUCH MAILING.


 


(b)           EACH
PARTY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR
CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE SERIES
C SHARES, WARRANTS, CONVERSION SHARES OR WARRANT SHARES OR ANY OF THE RELATED
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS. THE COMPANY (I) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE PURCHASERS HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE PURCHASERS WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS AND (II) ACKNOWLEDGES THAT THE PURCHASERS HAVE BEEN INDUCED
TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH THEY
ARE PARTY BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED
HEREIN.


 


10.13      No Third Party Beneficiaries.  Except as specifically set forth or referred
to herein, nothing herein is intended or shall be construed to confer upon any
person or entity other than the parties hereto and their successors or assigns,
any rights or remedies under or by reason of this Agreement.


 


10.14      Severability.  If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.


 


10.15      Time of the Essence; Computation of Time.  Time is of the essence for each and every
provision of this Agreement.  Whenever
the last day for the exercise of any privilege or the discharge or any duty
hereunder shall fall upon a business day, the party having such privilege or
duty may exercise such privilege or discharge such duty on the next succeeding
business day.


 


10.16      Consideration
for Preferred Stock and Warrants.  Each of the Purchasers and the Company
acknowledge and agree that (i) the fair market value of the Warrants
purchased by ABRY Mezzanine Partners L.P. shall equal $500,000, (ii) the
fair market value of the Warrants purchased by Capital Resource Partners IV,
L.P. shall equal $100,000 and (iii) the
fair market value of any shares of Preferred Stock issued at Closing hereunder
is the aggregate Liquidation Value for the shares of Preferred Stock issued at
Closing minus the aggregate value of the Warrants issued at Closing.  Each Purchaser and the Company shall file
their respective federal, state and local Tax returns in a manner which is
consistent with such valuation and allocation and shall not take any contrary
position with any Taxing authority.


 


43





















 


IN
WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Series C Convertible Preferred Stock and Warrant Purchase
Agreement as of the date first above written.


 


	
   

  	
  SOFTBRANDS, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David G.
  Latzke

  	
   

  
	
   

  	
   

  	
  Name: David G.
  Latzke

  
	
   

  	
   

  	
  Title: Senior Vice
  President, Chief Financial 

  Officer and Secretary

  



 





















 


	
   

  	
  ABRY MEZZANINE
  PARTNERS, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ABRY MEZZANINE
  INVESTORS, L.P.,

  
	
   

  	
   

  	
  Its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ABRY MEZZANINE
  HOLDINGS LLC,

  
	
   

  	
   

  	
  Its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Hunt

  	
   

  
	
   

  	
   

  	
  Name: John Hunt

  
	
   

  	
   

  	
  Title: Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CAPITAL RESOURCE
  PARTNERS IV, L.P.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  CRP PARTNERS IV,
  L.L.C.,

  
	
   

  	
   

  	
  its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert
  Ammerman

  	
   

  
	
   

  	
   

  	
  Name: Robert
  Ammerman

  
	
   

  	
   

  	
  Title: Managing
  Member

  



 





















 


Schedule I


 


	
  Names and
  Addresses

  	
   

  	
  Shares of 

  Preferred 

  Stock

  	
   

  	
  Number of Shares of

  Common Stock

  Issuable Upon 

  Exercise of the 

  Warrants

  	
   

  	
  Purchase

  Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ABRY Mezzanine Partners, L.P.

  	
   

  	
  15,000

  	
   

  	
  1,000,000

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
  111 Huntington
  Avenue 

  30th Floor 

  Boston, MA 02199 

  Attention: John Hunt 

  Facsimile:(617) 859-8797 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  with a copy
  (which shall not constitute notice to the Purchaser) to: 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kirkland &
  Ellis LLP 

  Citigroup Center 

  153 East 53rd Street 

  New York, NY 10022 

  Attention: Joshua Korff, Esq. 

  Facsimile: (212) 446-6460

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Capital Resource
  Partners IV, L.P. 

  	
   

  	
  3,000

  	
   

  	
  200,000

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  c/o Capital
  Resource Partners 

  85 Merrimac Street, Suite 200 

  Boston, Massachusetts 02114 

  Attention: Robert Ammerman 

  Facsimile Number: (617) 723-9819 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  with a copy
  (which shall not constitute notice to the Purchaser) to: 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Choate
  Hall & Steward LLP 

  Two International Place 

  Boston, Massachusetts 02110 

  Attention: Andrew E. Taylor, Jr., Esq. 

  Facsimile: (617) 248-4000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  118,000

  	
   

  	
  1,200,000

  	
   

  	
  $

  	
  18,000,000