Document:

Exhibit
10.3

 

FIRST
AMENDMENT, WAIVER AND CONSENT TO SERIES C
CONVERTIBLE PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

 

THIS
FIRST AMENDMENT,
WAIVER AND CONSENT TO SERIES C CONVERTIBLE PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT, dated as of August 14, 2006 (this “Amendment”),
is made by and among ABRY Mezzanine Partners L.P., a Delaware limited
partnership (“ABRY”), Capital Resource Partners IV, L.P., a Delaware
limited partnership (“CRP”) and SoftBrands, Inc., a Delaware corporation
(the “Company”), pursuant to the terms of the Series C Purchase
Agreement, Series C Certificate of Designations and the Series C Warrants, each
as defined below.

 

W I  T  N  E  S  S
E  T  H

 

WHEREAS,
pursuant to that certain Series C Convertible Preferred Stock and Warrant
Purchase Agreement, dated as of August 17, 2005, by and among the Company, ABRY
and CRP (the “Series C Purchase Agreement”), ABRY and CRP are the
holders of (i) all of the outstanding shares of Series C Convertible Preferred
Stock, par value $0.01 per share (the “Series C Preferred Stock”), of
the Company and (ii) warrants to purchase an aggregate of 1,200,000 shares of
common stock of the Company (the “Series C Warrants”);

 

WHEREAS, the
rights, privileges and powers of the holders of Series C Preferred Stock are
governed by the Series C Convertible Preferred Stock Certificate of
Designations, dated as of August 17, 2005 (the “Series C Certificate of
Designations”);

 

WHEREAS,
simultaneously herewith, the parties hereto are effecting an exchange of the
Series C Preferred Stock pursuant to which ABRY and CRP shall contribute,
transfer, assign and deliver to the Company, and the Company shall accept and
receive from ABRY and CRP, all right, title and interest in and to the Series C
Preferred Stock in exchange for the issuance by the Company to each Investor of
the same number of shares of Series C-1 Convertible Preferred Stock, par value
$0.01 per share (the “Series C-1 Preferred Stock”);

 

WHEREAS, to
facilitate the issuance and sale of its Series D Convertible Preferred Stock,
par value $0.01 per share (the “Series D Convertible Preferred Stock”)
and warrants to purchase shares of Common Stock (the “Series D Warrants”
and, together with the Series D Convertible Preferred Stock, the “Series D
Securities”) to ABRY, and to the extent it exercises the Purchase Option
(as defined in the Series D Purchase Agreement) CRP, pursuant to the Series D
Convertible Preferred Stock and Warrant Purchase Agreement, dated as of the
date hereof (the “Series D Purchase Agreement”), the Company desires to
obtain the consent by each of ABRY and CRP as the holders of Series C Preferred
Stock of certain rights set forth in the Series C Purchase Agreement, Series C
Certificate of Designations, Series C Warrants and the other documents executed
in connection therewith (collectively, the “Series C Governing Documents”);

 

WHEREAS, in
accordance with Section 10.6 of the Series C Purchase Agreement, ABRY, CRP and the Company desire to amend the
Purchase Agreement as set forth in this Amendment;

 

WHEREAS,
pursuant to Section 5C(ii) of the Series C Certificate of Designations,
the Company is required to obtain the consent of the holders of not less than
75% of the Series C Preferred Stock to, among other things, (i) amend, modify,
restate or repeal any provision of the Certificate of Incorporation in any
manner which would adversely alter or change the rights, preferences or
privileges of the Series C Preferred Stock and (ii) create certain additional
classes or series of shares of stock;

 

WHEREAS, ABRY
and CRP are willing to provide all such consents and/or waivers which may be
required under the Series C Governing Documents in connection with the
Company’s issuance and sale of the Series D Securities pursuant to the Series D
Purchase Agreement, upon the terms and subject to the conditions set forth
below;

 

WHEREAS,
pursuant to that certain Senior Subordinated Secured Note and Warrant Purchase
Agreement, dated as of November 26, 2002, as amended by Amendment Number 1,
Amendment Number 2 and Amendment Number 3 thereto, between the Company and CRP
(the “CRP Purchase Agreement”), CRP is also the holder of (i) all of the
outstanding shares of Series B Convertible Preferred Stock, par value $0.01 per
share (the “Series B Preferred Stock”), of the Company and (ii) warrants
to purchase an aggregate of 4,016,518 shares of common stock of the Company
(the “Series B Warrants”);

 

WHEREAS, the
rights, privileges and powers of the holders of Series B Preferred Stock are
governed by the Series B Convertible Preferred Stock Certificate of
Designations, dated as of August 18, 2004 (the “Series B Certificate of
Designations” and together with the CRP Purchase Agreement, the Series B
Preferred Stock and the Series B Warrants, the “Series B Governing Documents”);
and

 

WHEREAS, simultaneously
herewith, CRP is providing all consents and/or waivers which may be required
under the Series B Governing Documents in connection with the issuance of the
Series D Securities.

 

NOW,
THEREFORE, the parties hereto hereby agree as follows:

 

Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Series C Purchase Agreement.

 

Each of ABRY
and CRP hereby consents to the Company’s execution and delivery of the Series D
Purchase Agreement and the Related Documents (as defined in the Series D
Purchase Agreement) and the consummation of the transactions contemplated
thereby and waives the rights with respect thereto under the Series C Governing
Documents, as follows:

 

1.                                       Amendment
to Series C Purchase Agreement. Subject to the terms and conditions of this
Amendment,

 2
 

 

 

(a)           Section
1.1 of the Purchase Agreement is hereby amended by deleting certain defined
terms and replacing such defined terms as follows:

 

(i)                                     “Remedy Event” means a Compliance Remedy Event or a Payment
Remedy Event.

 

(ii)                                  “Series C Liquidation Preference” is hereby deleted and
replaced with “Series C-1 Liquidation Preference,”
which has the meaning set forth in the Series C-1 Preferred Stock Certificate
of Designation.’

 

(iii)                               “Series C Preferred Stock Certificate of Designation”
is hereby deleted and replaced with “Series C-1 Preferred Stock
Certificate of Designation,” which means the Certificate of
Designation designating the rights and preferences of the Series C-1 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 to this Amendment.’

 

(iv)                              “Series C
Redemption Price” is hereby deleted and replaced with “Series C-1 Redemption Price,” which has the meaning set
forth in the Series C-1 Preferred Stock Certificate of Designation.

 

(v)                                 “Series C Shares” is hereby deleted and replaced with “Series C-1
Shares,” which means the
Series C-1 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-1 Preferred Stock Certificate of Designation.”

 

(b)           Section
1.1 of the Purchase Agreement is hereby amended by adding the following
definitions:

 

(i)                                     “Compliance Remedy Event” means:

 

(a)    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-1 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 8.1, 8.2(a), 8.2(f), 8.2(i), 8.2(j),
8.4, 8.5 or 8.6 of
this Agreement;

 

(c)    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;
or

 3
 

 

(d) a “Compliance Remedy Event” as defined in the
Series D Purchase Agreement shall have occurred and be continuing

 

(ii)                                  “Payment Remedy Event” means
(i) the failure of the Company to pay in full any dividends, Series C-1
Liquidation Preference or Series C-1 Redemption Price (or any amount otherwise
owing hereunder) to the holders of the Series C-1 Preferred Stock as and when
and in the form required to be paid hereunder or under the Series C-1 Preferred
Stock Certificate of Designation, or (ii) a “Payment Remedy Event” as defined
in the Series D Convertible Preferred Stock and Warrant Purchase
Agreement, dated as of August 14,
2006, by and among the Company and the purchasers party thereto.

 

(c)           Section
8.1(c) of the Purchase Agreement is hereby amended by adding the following
words to clause (y) of such Section immediately after “EBITDA shall mean the
net income of the Company Group:”

 

“(including in the “Company Group” for all
purposes of this Section 8.1(c)(y), MAI Systems Corporation and its direct and
indirect subsidiaries, for the entire period being measured, regardless of
whether such period includes time periods preceding the acquisition of MAI
Systems Corporation by the Company)”

 

(d)           Section
8.1(c) of the Purchase Agreement is hereby amended by adding the following
proviso at the end of such section:

 

“provided, that notwithstanding the
foregoing provisions of this Section 8.1(c), (x) the Company may incur
Indebtedness under Capital Leases in an amount not to exceed $1,000,000 in the
aggregate outstanding at any time, and (y) the Company may incur Indebtedness
under that certain Credit Agreement, dated as of the date of this Agreement, by
and between the Company, certain Subsidiaries of the Company, the lenders named
therein, and Wells Fargo Foothill, Inc., as Arranger and Administrative Agent in effect on the date hereof (the “Senior Facility”) even though the ratio of
the Company’s Indebtedness for Borrowed Money to EBITDA will exceed 2.0 to 1.0,
if such Indebtedness is incurred to finance Permitted Acquisitions or for
working capital and general corporate purposes on or after the date of this
Amendment and either

 

(i)                                     following
such incurrence, the aggregate amount of Indebtedness outstanding under the
Senior Facility does not exceed $23,000,000; or

 

(ii)                                  such
Indebtedness under the Senior Facility (A) is incurred at any time during the
period beginning on March 31, 2007 and ending on December 31, 2007, (b) does
not exceed $30,000,000 and (c) is incurred when the Company’s EBITDA for the
twelve month period ended on the most recently ended fiscal quarter equals or
exceeds the Minimum EBITDA Targets set forth opposite the date below that
corresponds to the most recently ended fiscal quarter prior to the date of the
borrowing:

 4
 

 

 

	
  Date

  	
   

  	
  Minimum EBITDA Target

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  9,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  9,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30, 2007

  	
   

  	
  $

  	
  10,701,744

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2007

  	
   

  	
  $

  	
  11,862,744

  	
   

  

 

(e)                                  The
last paragraph of Section 8.5(a) of the Purchase Agreement (for the avoidance
of doubt, the paragraph immediately following clause 8.5(a)(ix)) is hereby
amended by deleting such paragraph and replacing it in its entirety with the
following:

 

“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-1 Shares (solely in such Purchaser’s capacity as a
holder of Series C-1 Shares) a portion of such Equity Securities equal to the
quotient determined by dividing (1) the number of shares of Common Stock
held by such Purchaser (counting for such purpose only Common Stock issuable
upon conversion of the Series C-1 Shares and exercise of the Warrants and
excluding any shares of Common Stock issuable to such Purchaser on account of
its holding any other Equity Securities) 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.”

 

(f)                                    Section
8.3 of the Purchase Agreement is hereby amended by adding the following new
subsection (h) immediately after subsection (g):

 

“(h) by no later than October 31, 2006, a
copy of a cost savings plan that has been presented to the Company’s Board of
Directors and that presents in substantial detail the Company’s strategy for
improving its profit margins.”

 

(g)                                 Section
8.7(a) of the Purchase Agreement is hereby amended by deleting the first
sentence of such section and replacing it with the following:

 

“From and after the
earlier of (x) August 17, 2012 and (y) the occurrence of a Remedy Event, so
long as any Series C-1 Shares remain outstanding and so long as any accrued and
unpaid dividends remain outstanding in respect thereof, with respect to Section 8.7(a)(y) such Remedy Event has not
been cured by the

 5
 

 

Company within (i) 30
days of the occurrence of a Compliance Remedy Event and (ii) 10 days following
the occurrence of a Payment Remedy Event or a Redemption Notice has not been
delivered by the Company in accordance with the terms of the Series C-1
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.”

 

(h)                                 Section
8.7(a) of the Purchase Agreement is hereby amended by deleting the word
“reasonably” in (iii) of the fourth sentence of such section.

 

(i)                                     Section
8.7(c) of the Purchase Agreement is hereby amended by deleting the second
sentence of such section and replacing it in its entirety with the following:

 

“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 best efforts to assist the Investment Bank in (i) investigating the
advisability of a Company Sale and (ii) soliciting interest in and negotiating
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”).”

 

(j)                                     Article
8 of the Purchase Agreement is hereby amended by adding the following new
Section 8.11 to the Purchase Agreement:

 

“Section 8.11 
Default Dividends.. (a) If the Senior Facility is
outstanding, from and after the date on which the Company fails to pay in full
any dividends, Series C-1 Liquidation Preference or Series D Redemption Price
to the holders of the Series C-1 Preferred Stock as and when due and in the
form required to be paid hereunder or under the Series C-1 Preferred Stock
Certificate of Designation through the end of the fiscal quarter in which such
dividend, Series C-1 Liquidation Preference or Series C-1 Redemption Price
payment is made and (b) if the Senior Facility is no longer outstanding, from
and after the beginning of the fiscal quarter in which a Remedy Event occurs
until the end of the fiscal quarter in which the Remedy Event is cured, in each
case the dividend rate on the Series C-1 Preferred Stock shall be increased in
accordance with the Series C-1 Preferred Stock Certificate of Designation.”

 6
 

 

2.                                       Waiver
of Restricted Actions.

 

(a)                                  ABRY
and CRP hereby (a) waive compliance by the Company with Section 8.1(c) of the
Series C Purchase Agreement with respect to the Acquisition (as defined below)
and (b) consent to:

 

(i)                                     the
Company’s execution and delivery of the Merger Agreement, by and among the
Company, SBN Acquisition Corp., MAI Systems Corporation and William Brian
Kretzmer, as Stockholders’ Representative, dated as of July 28, 2006, and the
consummation of the transactions contemplated thereby (the “Acquisition”);
and

 

(ii)                                  the
ratio of the Company’s Indebtedness for Borrowed Money to EBTIDA being greater
than 2.0 to 1.0 as of immediately after giving effect to the Acquisition and as
a result thereof.

 

(b)                                 ABRY
and CRP hereby waive compliance by the Company with Section 8.1(e) of the
Series C Purchase Agreement with respect to the Company’s execution and
delivery of the Senior Facility and acknowledge that the Senior Facility (i)
prohibits the payment of any dividends on the Series C-1 Preferred Stock and
the Series D Preferred Stock while there is a Default or an Event of Default
and (ii) prohibits any Redemptions and would prohibit an optional redemption
after a Change of Control (were the Indebtedness under the Senior Facility to
remain outstanding after a Change of Control). Capitalized terms used in this
Section 2(b) and not otherwise defined shall have the meanings set forth in the
Senior Facility as in effect on the date hereof.

 

3.                                       Waiver
of Exercise Price Adjustment. Each of ABRY and CRP hereby waives (i) its
rights under Section 2B(ii) of the Series C Warrants to any adjustment to
the Exercise Price (as defined in the Series C Warrants) and (ii) its rights
under Section 4 of the Series C Warrants to acquire Purchase Rights, in
each case, which may be triggered by the issuance and sale of the Series D
Securities pursuant to the Series D Purchase Agreement.

 

4.                                       Amendment
to Certificate of Incorporation.

 

(a)                                  Each
of ABRY and CRP hereby consents, as required by Section 5C of the Series
C Certificate of Designations, to the filing of the Company’s Series D
Certificate of Designations and the filing of the Series C-1 Certificate of
Designations.

 

(b)                                 Each
of ABRY and CRP hereby waives its rights under Section 6B of the Series
C Certificate of Designations to any adjustment to the Conversion Price (as
defined in the Series C Certificate of Designations, which may be triggered by
the issuance and sale of the Series D Securities pursuant to the Series D
Purchase Agreement.

 

5.                                       No
Other Amendments, Waivers or Consent. Except for the amendment expressly
set forth and referred to in Section 1 hereof, the Series C Purchase
Agreement shall remain unchanged and in full force and effect.

 7
 

 

6.                                       Representations
and Warranties. To induce ABRY and CRP to enter into this Amendment, the
Company hereby warrants, represents and covenants to and with ABRY and CRP
that: (a) this Amendment has been duly authorized, executed and delivered by
the Company; and (b) after giving effect to this Amendment, no Remedy Event has
occurred and is continuing as of this date.

 

7.                                       Reimbursement
of Expenses. The Company hereby agrees to reimburse ABRY and CRP on demand
for all reasonable fees and reasonable out-of-pocket costs and expenses
(including without limitation the reasonable and actual fees and expenses of
its counsel) incurred by ABRY and CRP in connection with the negotiation,
documentation and consummation of this Amendment and the other documents
executed in connection herewith and the transactions contemplated hereby.

 

8.                                       Binding
Nature and Benefit. This Amendment shall be binding upon and inure to the
benefit of each party hereto and their respective successors and assigns.

 

9.                                       Signatures.
Delivery of an executed signature page of this Amendment (which may be by
electronic facsimile transmission) shall be effective as delivery of a manually
executed counterpart hereof.

 

10.                                 GOVERNING
LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

 8

 

                IN WITNESS WHEREOF, the parties
have caused this Amendment to be duly executed by their respective officers or
representatives thereunto duly authorized, as of the date first above written.

 

 

	
  

  	
  SOFTBRANDS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ GREGG A. WALDON

  
	
   

  	
   

  	
  Name: Gregg A.
  Waldon

  
	
   

  	
   

  	
  Title: CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CAPITAL RESOURCE PARTNERS IV,

  L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  CRP Partners IV, L.L.C.

  
	
   

  	
   

  	
  Its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ALEXANDER MCGRATH

  
	
   

  	
   

  	
  Name: Alexander
  McGrath

  
	
   

  	
   

  	
  Title: Managing
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ABRY MEZZANINE PARTNERS IV, 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

  
				

 

[Signature Page to Series C Consent]Exhibit 10.4

 

EXCHANGE
AGREEMENT

THIS EXCHANGE AGREEMENT (this “Agreement”)
is made and entered as of August 14,
2006, by and among SoftBrands, Inc., a Delaware corporation (the “Company”),
ABRY Mezzanine Partners L.P., a Delaware limited partnership (“ABRY”)
and Capital Resource Partners IV, L.P., a Delaware limited partnership (“CRP”
and together with ABRY, the “Investors”).

WHEREAS, pursuant to that certain Series C
Convertible Preferred Stock and Warrant Purchase Agreement, dated as of August
17, 2005, by and among the Company and the Investors (the “Series C Purchase
Agreement”), the Investors are the holders of (i) all of the outstanding
shares of Series C Convertible Preferred Stock, par value $0.01 per share (the “Series
C Preferred Stock”), of the Company and (ii) warrants to purchase an
aggregate of 1,200,000 shares of common stock of the Company (the “Series C
Warrants”); and

WHEREAS, the rights, privileges and powers
of the holders of Series C Preferred Stock are governed by the Series C
Convertible Preferred Stock Certificate of Designations, dated as of August 17,
2005 (the “Series C Certificate of Designations”);

WHEREAS, to facilitate the Company’s
issuance and sale of its Series D Convertible Preferred Stock, par value $0.01
per share and warrants to purchase shares of common stock to ABRY and, to the
extent it exercises the Purchase Option (as defined in the Series D Purchase
Agreement), CRP, pursuant to the Series D Convertible Preferred Stock and
Warrant Purchase Agreement, dated as of the date hereof (the “Series D
Purchase Agreement”), the parties hereto desire to effect an exchange of
the Series C Preferred Stock pursuant to which the Investors shall contribute,
transfer, assign and deliver to the Company, and the Company shall accept and receive
from the Investors, all right, title and interest in and to the Series C
Preferred Stock in exchange for the issuance by the Company to each Investor of
the same number of shares of Series C-1 Convertible Preferred Stock, par value
$0.01 per share (the “Series C-1 Preferred Stock”), of the Company as
set forth on Exhibit A hereto.

NOW, THEREFORE, the parties agree as
follows:

Capitalized
terms used but not defined herein shall have the meanings ascribed to such
terms in the Series C Purchase Agreement.

1.             EXCHANGE.

1.1          Exchange.  At the Closing (as defined in Section 1.2
below), each Investor shall contribute, transfer, assign and deliver to the
Company, and the Company shall accept and receive from each Investor, all
right, title and interest in and to the Series C Preferred Stock indicated
opposite such Investor’s name under the caption “Series C Preferred Stock” on Exhibit
A hereto in exchange (the “Exchange”) for the issuance by the
Company to each Investor of the number of shares of Series C-1 Preferred Stock
indicated opposite such Investor’s name under the caption “Series C-1 Preferred
Stock” on Exhibit A hereto.  The
Company and the Investors hereby agree that the Series C-1 Preferred Stock
shall have all of the rights, designations and

 

preferences granted to the Series C Preferred
Stock pursuant to the Series C Purchase Agreement.

1.2          Closing Date.  The closing of the
transactions contemplated by this Agreement (the “Closing”) shall occur
concurrently with the consummation of the transactions contemplated by the
Series D Purchase Agreement (the “Closing Date”). At the Closing, the
transactions described in Section 1.1 above will be consummated.

2.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company hereby represents and
warrants to the Investors that:

2.1          Corporate Organization, Power and
Standing.   The
Company was duly organized, is validly existing and in good standing under the
laws of the State of Delaware and has full power and authority to conduct its
business and own and operate its properties as now conducted, owned and
operated.

2.2          Capital Stock.  Schedule 2.2
sets forth as of the date hereof, and upon the consummation of the transactions
contemplated by the Series D Purchase Agreement, (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 shares of Series C-1 Preferred Stock 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.

2.3          Authority for Agreement; No Breach.  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
to perform the terms hereof and to issue and
deliver the shares of Series C-1 Preferred Stock and the Conversion 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.  This Agreement constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company 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 be limited by
applicable federal securities laws.

2.4          Issuance of Shares.  The shares of Series
C-1 Preferred Stock 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 Investor, any
restrictions on transfer under state and/or federal securities laws or Liens
created by such Investor or under this Agreement).  When issued, the shares of Common Stock
issuable upon conversion of the Series C-1 Preferred Stock in accordance with
the terms of the Series C-1 Preferred Stock Certificate of Designation (the “Conversion
Shares”) will be duly authorized, validly issued, fully paid and
nonassessable, and will be free of any Liens (other than, with respect to any
Investor, any restrictions on transfer under state and/or federal securities
laws or Liens created by such Investor or under this Agreement).  The Conversion Shares have been duly reserved
for issuance upon the conversion of the shares of Series C-1 Preferred
Stock.  Neither the issuance and delivery
of the Series C-1 Preferred Stock nor the issuance and delivery of any
Conversion Shares 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.

3.             REPRESENTATIONS AND WARRANTIES
OF THE INVESTORS. 
Each Investor, severally and not jointly, hereby represents and warrants
to the Company that:

3.1          Authority for
Agreement.  Such Investor 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 Investor, enforceable against such Investor 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.

4.             COMPLIANCE WITH SECURITIES LAWS.

4.1          Investment Intent of the Investors.
Each Investor, severally and not jointly, represents and warrants to the
Company that it understands that the Series C-1 Preferred Stock and the
Conversion Shares (collectively, the “Securities”) are “restricted
securities” and have not been registered under the Securities Act and such
Investor is acquiring the Series C-1 Preferred Stock in the ordinary course of
business for its own account, with no present intention of selling or otherwise
distributing the same to the public.

4.2          Status of Series C-1 Preferred Stock.  Each Investor has been informed by the
Company that the Series C-1 Preferred Stock 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
Investor 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.

4.3          Sophistication and Financial Condition
of Investors. Each Investor 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 Investor 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 matters as are necessary to
evaluate the merits and risks of an investment in the  Series C-1 Preferred Stock.  Each Investor has received information
concerning the Company, including the Company Reports and the risks relating to
the Company described in the Company’s Form 10-K filed December 31, 2005 and
the Company’s quarterly report on Form 10-Q for the quarter ended March 31,
2006.  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
(under Article IX of the Series C Purchase Agreement).

4.4  Transfer of Series C-1 Shares and Conversion
Shares.

4.4.1       Each Investor
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 4.4.2, pursuant to any other legally-available means
of transfer.

4.4.2       In connection
with any transfer of any Securities (other than a transfer described in Section 4.41(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 4.4.2 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 4.4.4.

4.4.3       Except as
provided in Section 4.4.2, until transferred
pursuant to Section 4.41(i) or (iii), each certificate
evidencing the ownership of Series C-1 Preferred Stock or Conversion Shares
shall be imprinted with a legend substantially in the following form:

4.4.4       THE SECURITIES
REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON AUGUST 17, 2005, 2006 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 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.

5.             CONDITIONS OF OBLIGATIONS OF THE PARTIES.  The obligation of each of the parties to
consummate the transactions contemplated hereby is subject to the execution and
delivery by each of the Investors and the Company of the Series D Purchase
Agreement and the Series D Purchase Agreement shall be in full force and effect
as of the Closing. 

6.             MISCELLANEOUS.

6.1          Notices.  Any notices permitted or required to be made
under this Agreement shall be in writing and shall be given as follows (unless
and until changed by written notice):

If to the Company, to:

SoftBrands, Inc.

Two Meridian Crossings

Suite 800

Minneapolis, MN 55423

Attention:  Gregg A. Waldon

Facsimile:  (612) 851-1901

with a copy to:

Dorsey & Whitney LLP

50 South Sixth Street

Suite 1500

Minneapolis, MN 55402

Attention:  Tom Martin, Esq.

Facsimile No.:  (612) 340-7800

If to the Investors, to:

The addresses set forth on Exhibit A hereto

Notices shall be
sent in writing and shall be deemed to have been given one day after being sent
by Federal Express or similar reliable overnight courier service, or when sent
by telecopy (with a confirmation copy by overnight courier service).

6.2          Further Assurances.  The parties agree to
take such other actions and assurances, and make, execute and deliver such
other documents, as may be reasonably necessary in order to consummate and
complete the transactions contemplated hereby.

 

6.3          Interpretation; Miscellaneous.  This Agreement (including all Exhibits
hereto) and those other agreements of even date herewith, contain the complete
agreement concerning the subject matter hereof, and supersede any and all other
agreements, understandings, and representations between the parties, written or
oral, prior to the date hereof. The headings in this Agreement are for
convenience of reference only and shall not control or affect its interpretation.
No waiver or modification of this Agreement or of any covenant, condition or
limitation of this Agreement shall be valid unless memorialized in a writing
executed by the party or parties to be charged therewith. No waiver of any
breach of this Agreement shall constitute a waiver of any other breach. This
Agreement shall be construed and interpreted in accordance with the law of the
State of Delaware without regard to conflicts of law. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their heirs,
representatives, successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement. This Agreement may be executed in counterparts and shall be
binding and effective upon execution by all parties.

*          *          *          *          *          *

 

IN WITNESS WHEREOF, the parties have
executed this Agreement as of the date first written above.

	
  

  	
  SOFTBRANDS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ GREGG A. WALDON

  
	
   

  	
   

  	
  Name: Gregg A.
  Waldon

  
	
   

  	
   

  	
  Title: CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CAPITAL RESOURCE PARTNERS IV,

  L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  CRP Partners IV, L.L.C.

  
	
   

  	
   

  	
  Its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ALEXANDER MCGRATH

  
	
   

  	
   

  	
  Name: Alexander
  McGrath

  
	
   

  	
   

  	
  Title: Managing
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ABRY MEZZANINE PARTNERS IV, 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

  
				

 

 

EXHIBIT
A

 

	
  Names and Addresses

  	
   

  	
  Shares of Series

  C Preferred

  Stock

  	
   

  	
  Shares of Series

  C-1 Preferred

  Stock

  	
   

  
	
  ABRY Mezzanine Partners, L.P.

  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 Investor)

  to:

  

  Kirkland & Ellis LLP

  Citigroup Center

  153 East 53rd Street

  New York, NY  10022

  Attention:  Joshua Korff, Esq.

  Facsimile:  (212) 446-6460

  	
   

  	
  15,000

  	
   

  	
  15,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Capital Resource Partners IV, L.P.

  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 Investor)

  to:

  

  Choate Hall & Steward LLP

  Two International Place

  Boston, Massachusetts 02110

  Attention:  Andrew E. Taylor, Jr.,

  Esq.

  Facsimile:  (617) 248-4000

  	
   

  	
  3,000

  	
   

  	
  3,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  18,000,000

  	
   

  	
  18,000,000

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