Exhibit 10.2


 


AMENDED AND RESTATED
INVESTORS’ RIGHTS AGREEMENT


 


AMENDED AND RESTATED
INVESTORS’ RIGHTS AGREEMENT (this “Agreement”) dated as of August 17,
2005 by and among SoftBrands, Inc., a Delaware corporation (the “Company”),
Capital Resource Partners IV, L.P., a Delaware limited partnership (“CRP”)
and ABRY Mezzanine Partners IV, L.P., a Delaware limited partnership (“ABRY”
and together with CRP, the “Investors”).


 


WHEREAS, Info-Quest SA, a
corporation organized under the laws of Greece (“Info-Quest”) and the
Company entered into that certain Investor Agreement, dated as of May 15,
2002, whereby the Company granted Info-Quest certain registration,
participation and other rights with respect to the shares of Common Stock of
the Company held by Info-Quest (as amended by that certain Amendment No. 1,
dated November 26, 2002 and that certain Amendment No. 2, dated April 5,
2005, the “Info-Quest Agreement”);


 


WHEREAS, the Investors
propose to purchase from the Company 18,000 shares of the Company’s Series C
Convertible Preferred Stock, par value $0.01 per share (the “Series C
Shares”) and warrants to purchase 1,200,000 shares of Common Stock of the
Company (the “Series C Warrants”) pursuant to a Series C
Preferred Stock and Warrant Purchase Agreement dated as of the date hereof (as
amended, restated or modified from time to time, the “Purchase Agreement”)
by and among the Company and the Investors;


 


WHEREAS, CRP and the
Company entered into that certain Investors’ Rights Agreement, dated as of November 26,
2002, as amended by that certain Amendment No. 1, dated August 18,
2004 (the “Original Agreement”) whereby the Company granted CRP certain
rights with respect to certain Equity Securities of the Company held by CRP;


 


WHEREAS, the Company and
CRP desire to amend and restate the Original Agreement in its entirety to allow
for ABRY to share in such rights and to amend certain of such rights and to set
forth certain understandings and agreements, all as more fully set forth
herein; and


 


WHEREAS, the execution
and delivery of this Agreement are conditions precedent to the transactions
contemplated by the Purchase Agreement.


 


NOW, THEREFORE, in
consideration of the premises, as an inducement to ABRY to consummate the
transactions contemplated by the Purchase Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company hereby covenants and agrees with the Investors as
follows:


 


ARTICLE I

DEFINITIONS


 


Section 1.1                                      Certain
Definitions.  As used in this Agreement,
the following terms shall have the following respective meanings:


 





















 


 “ABRY Registrable Securities” means any
shares of Common Stock issued or issuable to ABRY, including shares of Common
Stock issuable upon exercise of the Series C Warrants or upon conversion
of the Series C Shares issued pursuant to the Purchase Agreement.


 


“Affiliate” of any
particular Person means any other Person controlling, controlled by or under
common control with such particular Person and with respect to any Person that
is an investment fund, the term Affiliate shall also include any investment
fund now or hereafter existing which is controlled by or under common control
with one or more general partners of such Person, where “control” means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person whether through the ownership of voting securities,
contract or otherwise.


 


“Commission” means
the United States Securities and Exchange Commission, or any other federal
agency at the time administering the Securities Act.


 


“Common Stock”
means (i) the Company’s Common Stock, par value $0.01 per share, as
authorized on the date of this Agreement, (ii) any other capital stock of
any class or classes (however designated) of the Company, authorized on or
after the date hereof, the holders of which shall have the right, without
limitation as to amount per share, either to all or to a share of the balance
of current dividends and liquidating distributions after the payment of
dividends and distributions on any shares entitled to preference in the payment
thereof, and the holders of which shall ordinarily, in the absence of
contingencies, be entitled to vote for the election of a majority of directors
of the Company (even though the right so to vote has been suspended by the
happening of such a contingency), and (iii) any other securities into
which or for which any of the securities described in (i) or (ii) above
may be converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.


 


“CRP Purchase
Agreement” means that certain Senior Subordinated Secured Note and Warrant
Purchase Agreement, by and between the Company and Capital Resource Partners
IV, L.P. dated November 26, 2002 and amended on September 30, 2003, August 18,
2004 and September 30, 2004.


 


“CRP Registrable
Securities” means the shares of Common Stock issuable (i) pursuant to
the CRP Warrants (ii) upon conversion of the Series B Shares issued
to CRP pursuant to the CRP Purchase Agreement and (iii) upon conversion of
the Series C Shares issued to CRP pursuant to the Purchase Agreement.


 


“CRP Warrants”
means those certain warrants to purchase shares of Common Stock issued to CRP
pursuant to the CRP Purchase Agreement and the Purchase Agreement.


 


“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 


 


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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.


 


“Exchange Act”
means the Securities Exchange Act of 1934, as amended, or any similar federal
statute, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect at the time.


 


“Majority ABRY Holders”
means, at any time, the holders of a majority of the ABRY Registrable
Securities outstanding at such time.


 


“Majority CRP Holders”
means, at any time, the holders of a majority of the CRP Registrable Securities
outstanding at such time.


 


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


 


“Registrable
Securities” means, collectively, the CRP Registrable Securities and the
ABRY Registrable Securities.  As to any
particular Registrable Securities, such securities shall cease to be
Registrable Securities when they have been (i) distributed to the public
pursuant to an offering registered under the Securities Act, (ii)  sold to
the public through a broker, dealer or market maker in compliance with Rule 144,
or (iii) repurchased by the Company. 
For purposes of this Agreement, a Person shall be deemed to be a holder
of Registrable Securities, and the Registrable Securities shall be deemed to be
in existence, whenever such Person has the right to acquire directly or
indirectly such Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected, and such Person shall be entitled
to exercise the rights of a holder of Registrable Securities hereunder.


 


“Registration Expenses”
means the expenses so described in Section 2.4.


 


“Securities Act”
means the Securities Act of 1933, as amended, or any similar federal statute,
and the rules and regulations of the Commission promulgated thereunder,
all as the same shall be in effect at the time.


 


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


 


ARTICLE II

REGISTRATION RIGHTS


 


Section 2.1                                      Demand
Registrations.


 


(a)                                  At
any time (i) in the case of the holders of CRP Registrable Securities,
that the Company is or becomes subject to Section 13 or Section 15(d) of
the Exchange Act, and (ii) in the case of the holders of ABRY Registrable
Securities, on or after the earlier of (x) two 


 


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years from the date hereof and (y) the date upon which
the price for the Common Stock has reached $[     ](1), per share, each of the Majority
CRP Holders and the Majority ABRY Holders, as applicable, may cause the
Company, by delivery of written notice to the Company, to register under the
Securities Act all or any portion of the CRP Registrable Securities or ABRY
Registrable Securities, as the case may be, in the manner specified in such
notice and upon receipt of such notice the Company shall promptly deliver
notice of such request to all Persons holding Registrable Securities, including
each Person party to this Agreement who has the right to acquire Registrable
Securities, who shall then have thirty (30) days to notify the Company in
writing of their desire to be included in such registration.  The Company will use its best efforts to
expeditiously effect the registration of all Registrable Securities requested
to be included in such registration under the Securities Act, but only to the
extent provided for in the following provisions of this Agreement; provided,
however, that the Company shall not be required to effect registration pursuant
to a request under this Section 2.1(a): (i) more than (A) two
(2) times for the holders of the CRP Registrable Securities as a group and
(B) more than two (2) times for the holders of the ABRY Registrable
Securities as a group; (ii) in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, unless the Company is already subject to service
in such jurisdiction and except as may be required under the Securities Act; or
(iii) if the holders of Registrable Securities initially requesting such
registration propose to dispose of shares of Registrable Securities that may be
immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.8
below; and provided further, that a registration pursuant to a request under
this Section 2.1(a) shall be not be counted toward the maximum
number of two (2) registrations for the holders of CRP Registrable
Securities or the holders of the ABRY Registrable Securities, in the event the
Company fails to effectively register all of the Registrable Securities as to
which registration has been requested. 
Notwithstanding anything to the contrary contained herein, no request
may be made under this Section 2.1(a) within 180 days after
the effective date of a registration statement filed by the Company covering a
firm commitment underwritten public offering in which the Investors shall have
been entitled to join pursuant to Section 2.2 or Section 2.8
and in which there shall have been effectively registered all Registrable
Securities as to which registration shall have been requested.


 


(b)                                 Whenever
a requested registration pursuant to Section 2.1(a) is for an
underwritten offering, only Registrable Securities which are to be included in
the underwriting may be included in the registration, and, if the managing
underwriter of such offering determines in good faith that the number of
Registrable Securities so included which are to be sold by the holders of the
Registrable Securities should be limited due to market conditions, the holders
of Registrable Securities to be included in such underwriting and registration
shall share pro rata in the number of such Registrable Securities being
underwritten and registered for their account, such sharing to be based on the
number of all Registrable Securities held by such holders, respectively;
provided, that in no event shall the holders of Registrable Securities entitled
to participate in such registration pursuant to Section 2.1(a) have
the number of Registrable Securities which are to be included in such
underwriting and registration reduced or limited 


 










(1)                                  Will
be an amount equal to 2.67x the Initial Conversion Price.


 


4





















 


(including pursuant to Section 2.2 hereof)
until the holders who have a contractual, incidental “piggy back” right to
include securities in the registration statement and who have requested
inclusion pursuant to such right have the number of securities requested to be
included in such registration statement reduced to zero (0).  Whenever a requested registration pursuant to
Section 2.1 is for an underwritten public offering, the holders of
a majority of the Registrable Securities initiating registration, subject to
the approval of the Company (which approval will not be unreasonably withheld,
conditioned or delayed), may designate the managing underwriter(s) of such
offering.  The Company may not cause any
other registration of securities for sale for its own account (other than in
connection with the registration of equity securities issued or issuable
pursuant to an employee stock option, stock purchase, stock bonus or similar
plan or pursuant to a merger, exchange offer or transaction of the type
specified in Rule 145(a) under the Securities Act) to become
effective less than 90 days after the effective date of any registration
required pursuant to this Section 2.1.


 


(c)                                  If
at the time of any request to register Registrable Securities pursuant to Section 2.1(a) the
Company is preparing or within thirty (30) days thereafter intends to commence
to prepare a registration statement for a public offering (other than in
connection with the registration of equity securities issued or issuable pursuant
to an employee stock option, stock purchase, stock bonus or similar plan or
pursuant to a merger, exchange offer or transaction of the type specified in Rule 145(a) under
the Securities Act) which in fact is filed and becomes effective within ninety (90)
days after the request and the Company has complied with the provisions of Section 2.2
hereof, or is engaged in any activity which, in the good faith determination of
the Company’s board of directors, would be adversely affected by the requested
registration to the material detriment of the Company, then the Company may at
its option direct that such request be delayed for a period not in excess of
four months from the effective date of such offering or the date of
commencement of such other activity, as the case may be, such right to delay a
request to be exercised by the Company not more than once in any two year
period.  Nothing in this Section 2.1(c) shall
preclude a holder of Registrable Securities from enjoying registration rights
which it might otherwise possess under Section 2.2 hereof.  If  the
Company has exercised its right to delay a registration pursuant to this Section and
the holders of Registrable Securities withdraw the demand for such
registration, such withdrawn demand shall not be counted as a demand under this
Section 2.1.


 


Section 2.2                                      Piggyback
Registration.  If the Company at any
time proposes to register any of its securities under the Securities Act
(including pursuant to a demand of any stockholder of the Company exercising
registration rights) for sale to the public (other than in connection with the
registration of equity securities issued or issuable pursuant to an employee
stock option, stock purchase, stock bonus or similar plan or pursuant to a
merger, exchange offer or transaction of the type specified in Rule 145(a) under
the Securities Act), each such time it will give written notice to all holders
of the outstanding Registrable Securities of its intention to do so not less
than twenty (20) days prior to the filing of a registration statement in
respect of such securities.  Upon the
written request of any of such holders of the Registrable Securities given
within twenty (20) days after receipt by such holder of such notice, the Company
will, subject to the limits contained in this Section 2.2, use its
reasonable efforts to cause all such Registrable Securities of said requesting
holders to be registered under the Securities Act and qualified for sale under
any state blue sky law, all to the extent requisite to permit such sale or
other disposition by such holder of the Registrable Securities so registered;
provided, however, that if 


 


5





















 


the Company is advised in
writing in good faith by any managing underwriter of the Company’s securities
being offered in a public offering pursuant to such registration statement that
the amount to be sold by persons other than the Company (collectively, “Selling
Stockholders”) is greater than the amount which can be offered without
adversely affecting the offering, the Company may reduce the amount offered for
the accounts of Selling Stockholders (including such holders of shares of
Registrable Securities) to a number deemed satisfactory by such managing
underwriter provided that no reduction shall be made in the amount of
Registrable Securities offered for the accounts of the holders of Registrable
Securities unless such reduction is imposed pro rata with respect to all
securities whose holders have a contractual right to include such securities in
the registration statement as to which inclusion has been requested pursuant to
such right; and provided, further, that there is first excluded from such
registration statement all shares of Common Stock sought to be included therein
by (i) any officer or employee of the Company or any subsidiary of the
Company, (ii) any holder thereof not having any such contractual,
incidental registration rights, and (iii) any holder thereof having
contractual, incidental registration rights subordinated and junior to the
rights of the holders of Registrable Securities.  For purposes of this Section 2.2,
holders of Registrable Securities (as defined in the Info-Quest Agreement)
shall be deemed to have contractual incidental registration rights or “piggyback”
registration rights that rank on a par with holders of Registrable Securities
and the holders of any securities issued in connection with those certain
warrants to purchase shares of Common Stock of the Company issued to MHT
Securities, L.P., Founders Equity Securities, Inc. and Silicon Valley Bank
shall be deemed to have contractual, incidental registration rights
subordinated and junior to the rights of the holders of Registrable Securities.


 


Section 2.3                                      Registration
Procedures.  If and whenever the
Company is required by the provisions of this Agreement to effect the
registration of any of its securities under the Securities Act, the Company
will, as expeditiously as possible:


 


(i)                                     prepare
and file with the Commission a registration statement with respect to such securities
and use its reasonable best efforts to cause such registration statement to
become and remain effective; provided, however, that notwithstanding any other
provision of this Agreement, the Company shall not in any event be required to
use its reasonable best efforts to maintain the effectiveness of any such
registration statement for a period in excess of nine (9) months;


 


(ii)                                  prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective and to comply with
the provisions of the Securities Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the seller or sellers of such securities shall desire to sell or otherwise
dispose of the same, but only to the extent provided in this Agreement;


 


(iii)                               furnish
to each seller and the underwriters, if any, such number of copies of such
registration statement, and any amendment thereto, any documents incorporated
by reference therein, the prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as such seller or any underwriter may reasonably request in order to
facilitate the public sale or other disposition of the securities owned by such
seller;


 


6





















 


(iv)                              use
reasonable best efforts to register or qualify the securities covered by such
registration statement under such other securities or state blue sky laws of
such jurisdictions as each seller shall reasonably request, and do any and all
other acts and things which may be necessary under such securities or blue sky
laws to enable such seller to consummate the public sale or other disposition
in such jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified;


 


(v)                                 within
a reasonable time before each filing of the registration statement or
prospectus or amendments or supplements thereto, furnish to the counsel
selected by the holders of a majority of the Registrable Securities initiating
such registration copies of such documents proposed to be filed which shall be
subject to the reasonable approval of each such counsel;


 


(vi)                              use
its reasonable efforts to furnish to each prospective seller a signed
counterpart, addressed to the prospective seller, of (A) an opinion of
counsel for the Company, dated the effective date of the registration
statement, and (B) a “comfort” letter signed by the independent public
accountants who have certified the Company’s financial statements included in
the registration statement, covering substantially the same matters with
respect to the registration statement (and the prospectus included therein) and
(in the case of the accountants’ letter) with respect to events subsequent to
the date of the financial statements, as are customarily covered (at the time
of such registration) in opinions of the Company’s counsel and in accountants’
letters delivered to the underwriters in underwritten public offerings of
securities;


 


(vii)                           immediately
notify each selling holder of Registrable Securities, such selling holder’s
counsel and any underwriter of any event which makes any statement made in the
registration statement or related prospectus untrue or which requires the
making of any changes in such registration statement or prospectus so that they
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading; and, as promptly as practicable thereafter, prepare and file with
the Commission and furnish a supplement or amendment to such prospectus so
that, as thereafter deliverable to the purchasers of such Registrable
Securities, such prospectus will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;


 


(viii)                        prevent
the issuance of any order suspending the effectiveness of a registration
statement, and if one is issued obtain the withdrawal of any order suspending
the effectiveness of a registration statement at the earliest possible moment;


 


(ix)                                if
requested by the managing underwriter or underwriters (if any), any selling
holder, or such selling holder’s counsel, promptly incorporate in a prospectus
supplement or post-effective amendment such information as such Person
reasonably requests to be included therein, including, without limitation, with
respect to the securities being sold by such selling holder to such underwriter
or underwriters, the purchase price being paid therefor by such underwriter or
underwriters and with respect to any other terms of an underwritten offering 


 


7





















 


of the securities to be sold in such offering, and
promptly make all required filings of such prospectus supplement or
post-effective amendment;


 


(x)                                   make
available to each selling holder, any underwriter participating in any
disposition pursuant to a registration statement, and any attorney, accountant
or other agent or representative retained by any such selling holder or
underwriter all financial and other records, pertinent corporate documents and
properties of the Company as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company’s officers,
directors and employees to supply all information requested by any such Person
in connection with such registration statement or due diligence responsibility;


 


(xi)                                provide
a transfer agent and registrar for all such Registrable Securities not later
than the effective date of such registration statement;


 


(xii)                             enter
into any customary arrangements (including underwriting agreements in customary
form) and take all such other actions as the selling holder or underwriters, if
any, request in order to expedite or facilitate the disposition of such
Registrable Securities (including effecting a stock split or combination of
shares);


 


(xiii)                          otherwise
use its best efforts to comply with all applicable rules and regulations
of the Commission relating to such registration and the distribution of the
securities being offered (including, without limitation, Regulation M, with
respect to which the Company shall also use its best efforts timely to apprise
each Holder of any bids and purchases by the Company, and of any known bids and
purchases by each “affiliated purchaser” (as defined in Regulation M) of the
Company, that would in the opinion of the Company be prohibited under
Regulation M in connection with a “distribution” (as so defined) by such
Holder) and make generally available to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act, no
later than 60 days after the end of any 12-month period (or 90 days, if such
period is a fiscal year) commencing at the end of any fiscal quarter in which
the Registrable Securities are sold to underwriters in a firm commitment or
best efforts underwritten offering, or, if not sold to underwriters in such an
offering, beginning with the first month of the Company’s first fiscal quarter
commencing after the effective date of such registration statement, which
earning statements shall cover such 12-month periods;


 


(xiv)                         otherwise
cooperate with the underwriter(s), the Commission and other regulatory agencies
and take all actions and execute and deliver or cause to be executed and
delivered all documents necessary to effect the registration of any securities
under this Agreement;


 


(xv)                            during
the period when the prospectus is required to be delivered under the Securities
Act, promptly file all documents required to be filed with the Commission
pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act; and


 


(xvi)                         use its
reasonable best efforts to cause the Registrable Securities covered by such
registration statement to be listed on the securities exchange or quoted on the
quotation system on which the Common Stock of the Company is then listed or
quoted.


 


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Section 2.4                                      Expenses.  All expenses incurred in effecting the
registrations provided for in Section 2.1, Section 2.2
and Section 2.8, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company and fees of one counsel for all of the selling holders of Registrable
Securities (chosen by the holders of a majority of the Registrable Securities
initiating each such registration), underwriting expenses (other than fees,
commissions or discounts attributable to the sale of the Registrable
Securities), expenses of any audits incident to or required by any such
registration and expenses of complying with the securities or blue sky laws of
any jurisdictions pursuant to Section 2.3(iv) hereof (all of
such expenses referred to as “Registration Expenses”), shall be paid by
the Company; provided, that if an offering pursuant to any registration
commenced pursuant to Section 2.1 or Section 2.2 is
abandoned by the holders of Registrable Securities or Info-Quest, respectively
(other than by reason of adverse information pertaining to the Company’s
business affairs or financial position, as opposed to stock market conditions,
unknown to the holders of Registrable Securities or Info-Quest prior to the
commencement of such registration proceedings, in which event the Company shall
bear all Registration Expenses), the holders of Registrable Securities or
Info-Quest, respectively, shall bear any costs incurred by the Company in
conjunction with such registration.  In
either event, the number of registrations to which the holders of Registrable
Securities is entitled pursuant to Section 2.1 or Section 2.2,
respectively, shall not be reduced thereby.


 


Section 2.5                                      Indemnification.  (a)  The Company shall indemnify and
hold harmless each seller of Registrable Securities (including partners and
shareholders of such persons), each underwriter (as defined in the Securities
Act), and each other Person who participates in the offering of such securities
and each other Person, if any, who controls (within the meaning of the
Securities Act) such seller, underwriter or participating Person (individually
and collectively the “Indemnified Person”) against any losses, claims,
damages or liabilities (collectively the “liability”), joint or several, to
which such Indemnified Person may become subject under the Securities Act or
any other statute or at common law, insofar as such liability (or action in
respect thereof) arises out of or is based upon (i) any untrue statement
or alleged untrue statement of any material fact contained, on the effective
date thereof, in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or (ii) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading.  Except as otherwise provided in Section 2.5(d),
the Company shall reimburse each such Indemnified Person in connection with
investigating or defending any such liability; provided, however, that the
Company shall not be liable to any Indemnified Person in any such case to the
extent that any such liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, preliminary or final prospectus, or amendment or
supplement thereto in reliance upon and in conformity with information
furnished in writing to the Company by such Person specifically for use
therein, or upon such statement or omission therein based on the authority of
an expert within the meaning of that term as defined in the Securities Act (but
only if the Company had no reasonable ground to believe, and did not believe,
that the statements made on the authority of an expert were untrue or that
there was an omission to state a material fact); and provided further, that the
Company shall not be required to indemnify any Person against any liability
arising from any untrue or misleading statement or omission contained in any
preliminary prospectus if such deficiency is corrected in the final 


 


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prospectus or for any
liability which arises out of the failure of any Person to deliver a prospectus
as required by the Securities Act regardless of any investigation made by or on
behalf of such Indemnified Person and shall survive transfer of such securities
by such seller.


 


(b)                                 Each
holder of any Registrable Securities shall, by acceptance thereof, indemnify
and hold harmless each other holder of any Registrable Securities, the Company,
its directors and officers, each underwriter and each other Person, if any, who
controls the Company or such underwriter (individually and collectively also
the “Indemnified Person”), against any liability, joint or several, to
which any such Indemnified Person may become subject under the Securities Act
or any other statute or at common law, insofar as such liability (or actions in
respect thereof) arises out of or is based upon (i) any untrue statement
or alleged untrue statement of any material fact contained, on the effective
date thereof, in any registration statement under which securities were
registered under the Securities Act at the request of such holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or (ii) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in the case of (i) and (ii) to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such registration
statement, preliminary or final prospectus, amendment or supplement thereto in
reliance upon and in conformity with information furnished in writing to the
Company by such holder specifically for use therein, and then only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission by the holder was not based on the authority of an expert as
to which the holder had no reasonable ground to believe, and did not believe,
that the statement made on the authority of such expert was untrue or that
there was an omission to state a material fact. 
Such holder shall reimburse any Indemnified Person for any legal fees
incurred in investigating or defending any such liability; provided, however,
that such holder’s obligations hereunder shall be limited to an amount equal to
the proceeds to such holder of the Registrable Securities sold in any such
registration; and provided further, however, that no holder of Registrable
Securities shall be required to indemnify any Person against any liability
arising from any untrue or misleading statement or omission contained in any
preliminary prospectus if such deficiency is corrected in the final prospectus
or for any liability which arises out of the failure of any Person to deliver a
prospectus as required by the Securities Act.


 


(c)                                  Indemnification
similar to that specified in Section 2.5(a) and (b) shall
be given by the Company and each holder of any Registrable Securities (with
such modifications as may be appropriate) with respect to any required
registration or other qualification of the Registrable Securities under any
federal or state law or regulation of governmental authority other than the Securities
Act.


 


(d)                                 In
the event the Company, any holder or other Person receives a complaint, claim
or other notice of any liability or action, giving rise to a claim for
indemnification under Section 2.5(a), Section 2.5(b) or
Section 2.5(c), the Person claiming indemnification under such
paragraphs shall promptly notify the Person against whom indemnification is
sought of such complaint, notice, claim or action, and such indemnifying Person
shall have the right to investigate and defend any such loss, claim, damage,
liability or action.  The Person claiming
indemnification shall have the right to employ separate counsel in any such
action and to participate in the defense thereof but the fees and expenses of
such 


 


10





















 


counsel shall not be at the expense of the Person
against whom indemnification is sought (unless the indemnifying party fails to
promptly defend, in which case the fees and expenses of such separate counsel
shall be borne by the Person against whom indemnification is sought).  In no event shall a Person against whom
indemnification is sought be obligated to indemnify any Person for any
settlement of any claim or action effected without the indemnifying Person’s
prior written consent.


 


(e)                                  Contribution.


 


(i)                                     If
the indemnification provided for in this Section 2.5 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations; provided, however, that in no event shall
the liability of any holder or Registrable Securities for contribution under
this Section 2.5(e) exceed the proceeds received by such
holder from the sale of Registrable Securities under the applicable
registration statement.  The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such action.  The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth above, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.


 


(ii)                                  The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 2.5(e) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding
paragraph.  No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.


 


(iii)                               If
indemnification is available under this Section 2.5, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 2.5(a) and Section 2.5(b) hereof
without regard to the relative fault of said indemnifying party or indemnified
party or any other equitable consideration provided for in this Section 2.5(e).


 


Section 2.6                                      Compliance
with Rule 144.  In the event
that the Company (i) registers a class of securities under Section 12
of the Exchange Act or (ii) shall commence to file reports under Section 13
or 15(d) of the Exchange Act, thereafter, at the request of any holder of
the Registrable Securities who proposes to sell the Registrable Securities in
compliance with Rule 144 


 


11





















 


of the Commission, the
Company shall forthwith file with the Commission such information as is
required under the Exchange Act for so long as there are holders of Registrable
Securities and, in such event, the Company shall take all actions as may be
required as a condition to the availability of Rule 144 under the
Securities Act (or any comparable successor rules).


 


Section 2.7                                      Consent
to be Bound.  Each subsequent holder
of Registrable Securities must consent in writing to be bound by the terms and
conditions of this Agreement in order to acquire the rights granted pursuant to
this Agreement.


 


Section 2.8                                      Form S-3.  After the first public offering of its
securities registered under the Securities Act, the Company shall use its best
efforts to qualify and remain qualified to register securities on Form S-3
(or any successor form) under the Securities Act.  The holders of the Registrable Securities
shall have the right to request any number of registrations on Form S-3
(such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended method of disposition
of such shares by such holder or holders). 
The Company shall not be required to effect a registration pursuant to
this Section 2.8 if, in the good faith judgment of the Company,
such registration will hinder or interfere with a concurrent or proposed
security issuance of, or acquisition by, the Company or if the holder or
holders requesting registration propose to dispose of shares of the Registrable
Securities having an aggregate disposition price (before deduction of
underwriting discounts and expenses of sale) of less than $500,000.  This Section shall not be interpreted to
restrict the Company from acquiring its own shares or to require the Company to
sell its own shares.  The Company shall
give notice to all holders of the Registrable Securities of the receipt of a
request for registration pursuant to this Section 2.8 and shall
provide a reasonable opportunity for other holders of Registrable Securities to
participate in the registration.  The
Company shall not permit to be registered in any such registration under this Section 2.8
any Equity Securities of the Company which are not Registrable Securities
unless the holders of Registrable Securities are able to register and sell all
Registrable Securities which they desire to register and sell in such
registration.  Subject to the foregoing,
the Company will use its best efforts, in each case, to effect promptly the
registration of all shares of the Registrable Securities on Form S-3 to
the extent requested by the holder or holders thereof for purposes of
disposition.


 


Section 2.9                                      Assignability
of Registration Rights.  Subject to Section 2.7
hereof, the registration rights set forth in this Agreement are assignable to
each assignee as to each share of Registrable Securities conveyed in accordance
herewith who agrees in writing to be bound by the terms and conditions of this
Agreement.  The term “seller” as used in
this Agreement refers to a holder of the Registrable Securities selling such
shares.


 


Section 2.10                                Rights
Which May Be Granted to Subsequent Investors.  Without the written consent of the Majority
ABRY Holders and Majority CRP Holders the Company shall not grant subsequent
registration rights to third parties superior or equal to the registration
rights granted pursuant to this Agreement so long as any of the registration
rights under this Agreement remain in effect.


 


Section 2.11                                Damages.  The Company recognizes and agrees that each
holder of Registrable Securities will not have an adequate remedy if the
Company fails to comply with the terms and provisions of this Agreement and
that damages will not be readily ascertainable, and 


 


12





















 


the Company expressly
agrees that, in the event of such failure, it shall not oppose an application
by any holder of Registrable Securities or any other Person entitled to the
benefits of this Agreement requiring specific performance of any and all
provisions hereof or enjoining the Company from continuing to commit any such
breach of this Agreement.


 


Section 2.12                                Information.  It shall be a condition precedent to the
obligations of the Company to register any Registrable Securities of any
selling holder pursuant to this Section 2 that such holder shall furnish
to the Company, in writing, such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such
securities as shall be legally required to effect the registration of such
holder’s Registrable Securities.


 


ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


Section 3.1                                      Representations
and Warranties of the Company.  The
Company represents and warrants to the Investors as follows:


 


(a)                                  The
execution, delivery and performance of this Agreement by the Company have been
duly authorized by all requisite corporate action and will not violate any
provision of law, any order of any court or other agency of government, the
Certificate of Incorporation or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties
or assets is bound, conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any such indenture,
agreement or other instrument or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the properties
or assets of the Company.


 


(b)                                 This
Agreement has been duly and validly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms.


 


ARTICLE IV

MISCELLANEOUS


 


Section 4.1                                      Miscellaneous.


 


(a)                                  All
notices, requests, demands and other communications provided for hereunder
shall be in writing and mailed (by first class registered or certified mail,
postage prepaid), sent by express overnight courier service or electronic
facsimile transmission (with a copy by mail), or delivered to the applicable
party at the addresses indicated below:


 


If to the Company:


 


Softbrands, Inc.


Two
Meridian Crossing


Suite 800


Minneapolis,
Minnesota  55423


Attention:  David Latzke


Facsimile No.: 
(612) 851-6280


 


13





















 


With a copy to:


 


Dorsey &
Whitney LLP


50
South Street, Suite 1500


Minneapolis,
Minnesota  55402


Attention:  Thomas Martin, Esq.


Facsimile No.: 
(612) 340-7800


 


If to CRP:


 


Capital
Resource Partners


85 Merrimac
Street


Suite 200


Boston,
Massachusetts  02114


Attention:  Robert Ammerman


Telecopy
No.:  (617) 723-9819


 


With a
copy to:


 


Choate
Hall & Stewart LLP


Two
International Place


Boston,
Massachusetts 02110


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


Facsimile
No.: (617) 248-4000


 


If to ABRY:


 


c/o
ABRY Partners, LLC


111
Huntington Avenue


30th
Floor


Boston,
Massachusetts 02199


Attn:  John Hunt


Facsimile No.: 
(617) 859-9879


 


With a copy to:


 


Kirkland &
Ellis LLP


Citigroup
Center


153
East 53rd Street


New
York, NY  10022-4675


Attention:  Joshua N. Korff


Facsimile No.: 
(212) 446-6460


 


If to any other holder of
Registrable Securities:


 


at such holder’s address
for notice as set forth

in the books and records of the Company,


 


14





















 


or, as to each of the
foregoing, at such other address as shall be designated by such Person in a
written notice to the other parties complying as to delivery with the terms of
this subsection (a).  All such
notices, requests, demands and other communications shall, when mailed or
otherwise sent be effective (i) two days after being deposited in the
mails or (ii) one day after being deposited with the express overnight
courier service or sent by electronic facsimile transmission (with receipt
confirmed), respectively, addressed as aforesaid.


 


(b)                                 This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Delaware.


 


(c)                                  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.


 


(d)                                 If
any provision of this Agreement shall be held to be illegal, invalid or
unenforceable, such illegality, invalidity or unenforceability shall attach
only to such provision and shall not in any manner affect or render illegal,
invalid or unenforceable any other provision of this Agreement, and this
Agreement shall be carried out as if any such illegal, invalid or unenforceable
provision were not contained herein.


 


Section 4.2                                      Amendments.  The provisions of this Agreement may be
amended, and the Company may take any action herein prohibited or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the Majority CRP Holders and the Majority ABRY
Holders.  For the purposes of this
Agreement and all agreements executed pursuant hereto, no course of dealing
between or among any of the parties hereto and no delay on the part of any
party hereto in exercising any rights hereunder shall operate as a waiver of
the rights hereof  and thereof.


 


Section 4.3                                      Termination.  This Agreement shall terminate at such time
as the holders of Registrable Securities are able to sell, within any three
month period, all of the Registrable Securities pursuant to Rule 144 under
the Securities Act.


 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]


 


15





















 


IN WITNESS WHEREOF, the
parties hereto have caused this Investors’ Rights Agreement to be duly executed
as of the date first set forth above.


 


	
   

  	
  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