sc13d

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TGaLnFElfFuS1Letfj5M4AJu6uSmeersZy4053Cnhf83YOA9lF+cWAq5PoPPX6em UAMsoF5qeV4tbNPzkEwSXw== 0000950123-05-010464.txt : 20050829 0000950123-05-010464.hdr.sgml : 20050829 20050829105426 ACCESSION NUMBER: 0000950123-05-010464 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20050829 DATE AS OF CHANGE: 20050829 GROUP MEMBERS: ABRY MEZZANINE HOLDINGS LLC GROUP MEMBERS: ABRY MEZZANINE INVESTORS LP GROUP MEMBERS: ROYCE YUDKOFF SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SoftBrands, Inc. CENTRAL INDEX KEY: 0001311926 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 412021446 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-80954 FILM NUMBER: 051053721 BUSINESS ADDRESS: STREET 1: TWO MERIDIAN CROSSING, SUITE 800 CITY: MINNEAPOLIS STATE: MN ZIP: 55423 BUSINESS PHONE: 612-851-1900 MAIL ADDRESS: STREET 1: TWO MERIDIAN CROSSING, SUITE 800 CITY: MINNEAPOLIS STATE: MN ZIP: 55423 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ABRY MEZZANINE PARTNERS LP CENTRAL INDEX KEY: 0001164116 IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 111 HUNTINGTON AVENUE STREET 2: 30TH FLOOR CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: 617-859-2959 MAIL ADDRESS: STREET 1: 111 HUNTINGTON AVE, 30TH FL CITY: BOSTON STATE: MA ZIP: 02199 SC 13D 1 y12125sc13d.htm SC 13D sc13d

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

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

SOFTBRANDS, INC.

(Name of Issuer)

Common Stock, par value $0.01 per share

(Title of Class of Securities)

83402A107

(CUSIP Number)

Joshua N. Korff, Esq.
Kirkland & Ellis LLP
Citigroup Center
153 East 53rd Street
New York, NY 10022
(212)446-4943

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

August 17, 2005

(Date of Event Which Requires Filing of this Statement)

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

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

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

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

Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

CUSIP No. 83402A107

1. Name of Reporting Person:
ABRY Mezzanine Partners, L.P. I.R.S. Identification Nos. of above persons (entities only):
10-0000307

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

(a) o

(b) þ

3. SEC Use Only:

4. Source of Funds (See Instructions):
WC

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

6. Citizenship or Place of Organization:
Delaware

Number of
Shares
Beneficially
Owned by
Each Reporting
Person With

7. Sole Voting Power:
None

8. Shared Voting Power:
8,462,687 (See Item Number 5)

9. Sole Dispositive Power:
None

10. Shared Dispositive Power:
8,462,687 (See Item Number 5)

11. Aggregate Amount Beneficially Owned by Each Reporting Person:
8,462,687

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

13. Percent of Class Represented by Amount in Row (11):
21.1%

14. Type of Reporting Person (See Instructions):
PN

CUSIP No. 83402A107

1. Name of Reporting Person:
ABRY Mezzanine Investors, L.P. I.R.S. Identification Nos. of above persons (entities only):
10-0000296

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

(a) o

(b) þ

3. SEC Use Only:

4. Source of Funds (See Instructions):
Not Applicable

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

6. Citizenship or Place of Organization:
Delaware

Number of
Shares
Beneficially
Owned by
Each Reporting
Person With

7. Sole Voting Power:
None

8. Shared Voting Power:
8,462,687 (See Item Number 5)

9. Sole Dispositive Power:
None

10. Shared Dispositive Power:
8,462,687 (See Item Number 5)

11. Aggregate Amount Beneficially Owned by Each Reporting Person:
8,462,687

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

13. Percent of Class Represented by Amount in Row (11):
21.1%

14. Type of Reporting Person (See Instructions):
PN

CUSIP No. 83402A107

1. Name of Reporting Person:
ABRY Mezzanine Holdings, LLC I.R.S. Identification Nos. of above persons (entities only):
10-0000278

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

(a) o

(b) þ

3. SEC Use Only:

4. Source of Funds (See Instructions):
Not Applicable

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

6. Citizenship or Place of Organization:
Delaware

Number of
Shares
Beneficially
Owned by
Each Reporting
Person With

7. Sole Voting Power:
None

8. Shared Voting Power:
8,462,687 (See Item Number 5)

9. Sole Dispositive Power:
None

10. Shared Dispositive Power:
8,462,687 (See Item Number 5)

11. Aggregate Amount Beneficially Owned by Each Reporting Person:
8,462,687

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

13. Percent of Class Represented by Amount in Row (11):
21.1%

14. Type of Reporting Person (See Instructions):
OO

CUSIP No. 83402A107

1. Name of Reporting Person:
Royce Yudkoff I.R.S. Identification Nos. of above persons (entities only):

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

(a) o

(b) þ

3. SEC Use Only:

4. Source of Funds (See Instructions):
Not Applicable

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

6. Citizenship or Place of Organization:
United States

Number of
Shares
Beneficially
Owned by
Each Reporting
Person With

7. Sole Voting Power:
None

8. Shared Voting Power:
8,462,687 (See Item Number 5)

9. Sole Dispositive Power:
None

10. Shared Dispositive Power:
8,462,687 (See Item Number 5)

11. Aggregate Amount Beneficially Owned by Each Reporting Person:
8,462,687

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

13. Percent of Class Represented by Amount in Row (11):
21.1%

14. Type of Reporting Person (See Instructions):
IN

Item 1. Security and Issuer.

This statement (the “Statement”) on Schedule 13D relates to the Common Stock, $0.01 par value per share (the “Common Stock”) of SoftBrands, Inc, a Delaware corporation (the “Issuer”). The Issuer’s principal executive office is located at Two Meridian Crossings, Suite 8800, Minneapolis, MN 55423.

Item 2. Identity and Background.

This statement is being jointly filed by each of the following persons pursuant to Rule 13d-1(k) promulgated by the Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the “Act”):

	1)		ABRY Mezzanine Partners, L.P., a Delaware limited partnership (“AMP”), by virtue of its direct beneficial ownership of the shares of Common Stock covered by this Statement;

	2)		ABRY Mezzanine Investors, L.P., a Delaware limited partnership (“AMI”), by virtue of it being the general partner of AMP;

	3)		ABRY Mezzanine Holdings, LLC, a Delaware limited liability company (“AMH”), by virtue of it being the general partner of AMI; and

	4)		Royce Yudkoff, an individual resident of the State of Massachusetts (“Yudkoff”), by virtue of being the controlling member of AMH.

AMP, AMI, AMH and Yudkoff are sometimes referred to herein individually as a “Reporting Person” and collectively as the “Reporting Persons.” AMP, AMI and AMH are sometimes referred to herein collectively as the “ABRY Entities.”

Information with respect to each of the Reporting Persons is given solely by such Reporting Person, and no Reporting Person assumes responsibility for the accuracy or completeness of information given by another Reporting Person. By their respective signatures on this Statement, each of the Reporting Persons agrees that this Statement is filed on behalf of such Reporting Person.

The Reporting Persons may be deemed to constitute a “group” for purposes of Section 13(d)(3) of the Act. The Reporting Persons and the other parties to the Purchase Agreement (as defined in Item 4) may also be deemed to constitute a “group” for purposes of Section 13(d)(3) of the Exchange Act. The Reporting Persons expressly disclaim that they have agreed to act as a group other than as described in this Statement.

Certain information required by this Item 2 concerning the directors, executive officers and controlling persons of the ABRY Entities are set forth on Schedule A attached hereto, which is incorporated herein by reference.

The principal business of AMP is to make investments in common and preferred stock and other interests in business organizations, domestic or foreign, with the principal objective of appreciation of capital invested. The principal business of AMI is to act as the general partner of AMP and the principal business of AMH is to act as the general partner of AMI. The business address of each of the Reporting Persons is c/o ABRY Partners, LLC, 111 Huntington Avenue, Boston, MA 02199.

During the last five years, none of the Reporting Persons has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration.

AMP acquired beneficial ownership of the securities that are the subject of this filing with working capital in the ordinary course of business.

Item 4. Purpose of Transaction.

On August 17, 2005, pursuant to the Series C Convertible Preferred Stock and Warrant Purchase Agreement (the “Purchase Agreement”), the Issuer completed the sale of 18,000 shares of its Series C Convertible Preferred Stock, par value $0.01 per share (the “Preferred Stock”), and warrants (the “Warrants”) to purchase 1,200,000 shares of the Issuer’s Common Stock, for $18,000,000 million in a private placement to AMP and Capital Resource Partners V, L.P. (“CRP”). The net proceeds from the sale of the Preferred Stock and Warrants were used to repay indebtedness and for general working capital. The Purchase Agreement is set forth as Exhibit 2 hereto. The terms of the Preferred Stock are governed by the Series C Convertible Preferred Stock Certificate of Designations (the “Certificate of Designations”), set forth as Exhibit 3 hereto. The Warrants are governed by the terms and conditions substantially similar to those contained in the form of Warrant set forth as Exhibit 4 hereto. In connection with the purchase of the Preferred Stock and Warrants, the Issuer, AMP and CRP also amended and restated the Issuer’s Investors’ Rights Agreement. The amended and restated Investors Rights Agreement is set forth as Exhibit 5 hereto.

AMP acquired 15,000 shares of Preferred Stock and a warrant to purchase 1,000,000 shares of Common Stock pursuant to the Purchase Agreement.

Except as otherwise described in this Schedule 13D, none of the Reporting Persons has formulated any plans or proposals which relate to or would result in: (a) the acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries; (d) any change in the present Board of Directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the Board; (e) any material change in the present capitalization or dividend policy of the Issuer; (f) any other material change in the Issuer’s business or corporate structure; (g) any changes in the Issuer’s charter or by-laws or other actions which may impede the acquisition or control of the Issuer by any person; (h) causing a class of securities of the Issuer to

be delisted from a national securities exchange or cease to be authorized to be quoted in an interdealer quotation system of a registered national securities association; (i) causing a class of equity securities of the Issuer to become eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any action similar to those enumerated above.

The following is a description of the material terms of the Preferred Stock and Warrants:

Upon any liquidation, dissolution or winding up of the Issuer approved by the Board of Directors of the Issuer, each holder of Preferred Stock will be entitled to be paid in cash, before any distribution or payment is made on the Issuer’s Common Stock, an amount per share equal to the greater of:

(x) the liquidation value of such share, as described below, plus accrued and unpaid dividends, and

(y) the amount that the holder would be entitled to receive in connection with a liquidation event had such holder converted the Preferred Stock into shares of the Issuer’s Common Stock immediately prior to such liquidation event.

The initial liquidation value per share of the Preferred Stock is $1,000. Dividends on the Preferred Stock will accrue daily on the sum of the then applicable liquidation value and the accrued dividends thereon at an annual rate of 6% per annum. Dividends are payable semi-annually in cash

Each share of Preferred Stock is convertible at any time at the holder’s option into the number of shares of the Issuer’s Common Stock computed by multiplying the number of shares of Preferred Stock to be converted by the liquidation value, divided by the conversion price. The conversion price for the Preferred Stock initially will be $2.01, subject to certain anti-dilution adjustments described in the Certificate of Designations.

The Issuer may redeem the shares of Preferred Stock upon satisfaction of certain conditions set forth in the Certificate of Designations. A holder of Preferred Stock may elect to convert any Preferred Stock to be redeemed by the Issuer into Common Stock in lieu of such redemption.

The Preferred Stock entitles the holders thereof initially to one board seat so long as AMP and CRP continue to hold not less than 20% of the shares of Common Stock issued or issuable upon conversion of the Preferred Stock. At any time when the holders of the Preferred Stock have the right to appoint a member to the Board of Directors of the Issuer, but have not appointed any such member, such holders may have a representative attend meetings of the Board of Directors. The holders of the Preferred Stock are entitled to vote on all matters submitted to the vote of the Issuer’s stockholders, voting as a single class with the common stockholders on an as-converted basis. In addition, the Issuer may not take certain actions without the affirmative vote of the holders of not less than 50% of the Preferred Stock then outstanding.

From and after the earlier of (i) the 7th anniversary of the date of the Purchase Agreement and (ii) the breach of certain representations and/or warranties, the holders of a majority of the Preferred Stock have the right to cause the Issuer to retain an investment banker to identify and advise the Issuer regarding opportunities for a Company Sale (as defined in the Purchase Agreement). However, the ability of the holders of a majority of the Preferred Stock to cause the Issuer to retain an investment banker, and the Issuer’s obligation to consummate a Company Sale, is subject to certain conditions set forth in the Purchase Agreement.

The initial exercise price of the Warrants is $2.11 per share. The Warrants are subject to anti-dilution and other adjustments that mirror those applicable to the Preferred Stock. The Warrants are immediately exercisable and expire 10 years after issuance. The foregoing description of the Warrants is qualified in its entirety by reference to the full text of the Warrants and the Purchase Agreement.

The foregoing description of the Preferred Stock and Warrants is qualified in its entirety by reference to the full text of the Certificate of Designations, Purchase Agreement and Warrants.

AMP and CRP are party to an Amended and Restated Investor Rights Agreement with the Issuer, pursuant to which the Issuer granted registration rights to those stockholders. Under the agreement, each of the (i) holders of a majority of shares held by AMP or any of its affiliates and (ii) holders of a majority of shares held by CRP may require the Issuer, subject to certain restrictions, to effect the registration of their shares from time to time. In addition, subject to certain exceptions the stockholders party to the agreement have “piggyback” registration rights to include their shares in any registration statement the Issuer files on its behalf or on behalf of other stockholders. The foregoing description of the Amended and Restated Investor Rights Agreement is qualified in its entirety by reference to the full text of the Amended and Restated Investor Rights Agreement.

Item 5. Interest in Securities of the Issuer.

(a) As of the date hereof, AMP owns 15,000 shares of Preferred Stock and warrants to purchase 1,000,000 shares of Common Stock. Assuming conversion of all of the shares of Preferred Stock and exercise of all Warrants acquired pursuant to the Purchase Agreement, the Reporting Persons may be deemed to indirectly beneficially own an aggregate of 8,462,687 shares of Common Stock, or approximately 21.1% of the Common Stock outstanding.

(b) By virtue of their potential status as a “group” for purposes of Rule 13d-5, each of the members of the Reporting Group may be deemed to have shared voting and dispositive power over the shares owned by other members. Neither the filing of this Statement nor any of its contents shall be deemed to constitute an admission that any Reporting Person is the beneficial owner of any Common Stock referred to in this Statement for the purposes of Section 13(d) of the Act or for any other purpose, and such beneficial ownership is expressly disclaimed.

(c) Except for the transactions described herein, there have been no other transactions in the securities of the Issuer effected by the Reporting Persons in the last 60 days.

(d) Except as stated within Item 2 and Item 4 of this Statement, to the knowledge of the Reporting Persons, only the Reporting Persons have the right to receive or the power to direct

the receipt of dividends from, or proceeds from the sale of, the shares of Common Stock of the Issuer reported by this statement.

(e) Inapplicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

There are no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 or between such persons and any person with respect to any securities of the Issuer, other as discussed in Item 4, and as may be in effect from time to time under the Issuer’s Amended and Restated Rights Plan.

The foregoing paragraph is qualified in its entirety by reference to the Purchase Agreement, the Amended and Restated Investors’ Rights Agreement and the Amended and Restated Rights Plan, the terms of which are incorporated herein by reference to Exhibits 2, 5 and 6 hereto.

Item 7. Material to be filed as Exhibits.


		Exhibit 1		Joint Filing Agreement.
		Exhibit 2		Series C Convertible Preferred Stock and Warrant Purchase Agreement dated as of August 17, 2005, by and among SoftBrands, Inc., ABRY Mezzanine Partners, L.P., and Capital Resource Partners V, L.P.
		Exhibit 3		Certificate of Designations of the Series C Convertible Preferred Stock.
		Exhibit 4		Form of Warrant to purchase Common Stock of SoftBrands, Inc.
		Exhibit 5		Amended and Restated Investors’ Rights Agreement dated as of August 17, 2005, by and among SoftBrands, Inc., ABRY Mezzanine Partners, L.P. and Capital Resource Partners V, L.P.
		Exhibit 6		Amended and Restated Rights Plan, dated as of August 17, 2005, by and between Soft Brands Inc. and Wells Fargo Bank Minnesota, National Association.

The following table sets forth the name, address and principal occupation of the executive officer, director and principal equityholder of ABRY Mezzanine Holdings, LLC. Such person is a citizen of the United States.

Director and Officer of ABRY Mezzanine Holdings, LLC


Name, Principal Occupation, Citizenship (United States, unless otherwise indicated)		Business Address

Royce Yudkoff, Sole Member and Director		c/o ABRY Partners, LLC 111 Huntington Avenue, 30th Floor Boston, MA 02199

Peni Garber, Vice President		c/o ABRY Partners, LLC 111 Huntington Avenue, 30th Floor Boston, MA 02199

John Hunt, Vice President		c/o ABRY Partners, LLC 111 Huntington Avenue, 30th Floor Boston, MA 02199

Signature

After reasonable inquiry and to the best of each of the undersigned’s knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.


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:	Authorized Signatory

ABRY MEZZANINE INVESTORS, L.P.
By:	ABRY Mezzanine Holdings, LLC,
Its:	General Partner



By:	/s/ John Hunt
	Name:	John Hunt
	Title:	Authorized Signatory

ABRY MEZZANINE HOLDINGS, LLC.
By:	John Hunt
Its:	Authorized Signatory



By:	/s/ John Hunt
	Name:	John Hunt
	Title:	Authorized Signatory


	/s/ Royce Yudkoff
	Royce Yudkoff

EX-99.1 2 y12125exv99w1.htm EX-99.1: JOINT FILING AGREEMENT exv99w1

EXHIBIT 1

Joint Filing Agreement

In accordance with Rule 13d-1(f) under the Securities Exchange Act of 1934, the undersigned hereby (i) agree to the joint filing with all other Reporting Persons (as such term is defined the statement on Schedule 13D described below) on behalf of each of them of a statement on Schedule 13D (including amendments thereto) with respect to the Common Stock, par value $0.01 per share, of SoftBrands, Inc. and (ii) agree that this Agreement be included as an Exhibit to such joint filing. This Agreement may be executed in any number of counterparts all of which taken together shall constitute one and the same instrument.


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:	Authorized Signatory

ABRY MEZZANINE INVESTORS, L.P.
By:	ABRY Mezzanine Holdings, LLC,
Its:	General Partner



By:	/s/ John Hunt
	Name:	John Hunt
	Title:	Authorized Signatory


ABRY MEZZANINE HOLDINGS, LLC.
By:	John Hunt
Its:	Authorized Signatory



By:	/s/ John Hunt
	Name:	John Hunt
	Title:	Authorized Signatory


	/s/ Royce Yudkoff
	Royce Yudkoff

EX-99.2 3 y12125exv99w2.htm EX-99.2: SERIES C CONVERTIBLE PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT EX-99.2

EXHIBIT 2

EXECUTION COPY

SOFTBRANDS, INC.

SERIES C CONVERTIBLE PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT

Dated as of
August 17, 2005

TABLE OF CONTENTS


		Page
ARTICLE I DEFINITIONS			1

1.1	Definitions; Interpretation		1

ARTICLE II ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS			10

2.1	Number of Series C Shares, Warrants and Purchase Price		10

ARTICLE III CLOSING; CLOSING DELIVERIES			11

3.1	Closing		11
3.2	Payment for and Delivery of Series C Shares and Warrants		11

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY			11

4.1	Existence; Qualification; Subsidiaries		11
4.2	Authorization and Enforceability; Issuance of Shares		12
4.3	Capitalization		13
4.4	Private Sale; Voting Agreements		13
4.5	SEC Reports; Financial Statements		14
4.6	Absence of Certain Changes		14
4.7	Litigation		16
4.8	Licenses, Compliance with Law, Other Agreements, Etc.		16
4.9	Consents		16
4.10	Disclosure		17
4.11	Tangible Assets		17
4.12	Owned Real Property		17
4.13	Real Property Leases		17
4.14	Certificates, Authorities and Permits		17
4.15	Agreements		18
4.16	Intellectual Property		19
4.17	Employees		20
4.18	ERISA; Employee Benefits		21
4.19	Environment, Health and Safety		21
4.20	Transactions With Affiliates		21
4.21	Taxes		22
4.22	Other Investors		22
4.23	Seniority		22
4.24	Investment Company		22
4.25	Certain Fees		22
4.26	Sarbanes-Oxley Act		23
4.27	Listing and Maintenance Requirements Compliance		23
4.28	No General Solicitation		23
4.29	No Integrated Offering		23

-i-


		Page
4.30	Private Placement		23
4.31	Questionable Payments		23
4.32	Internal Controls		23
4.33	Use of Proceeds		24
4.34	Customers and Suppliers		24
4.35	Non-Material Subsidiaries		24

ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS			25

5.1	Authorization and Enforceability		25
5.2	Government Approvals		25

ARTICLE VI COMPLIANCE WITH SECURITIES LAWS			25

6.1	Investment Intent of the Purchasers		25
6.2	Status of Series C Shares and Warrants		25
6.3	Sophistication and Financial Condition of Purchasers		25
6.4	Transfer of Series C Shares, Warrants and Conversion Shares		26

ARTICLE VII CONDITIONS PRECEDENT			27

7.1	Conditions to Obligations of the Purchasers		27
7.2	Conditions to Obligations of the Company		29

ARTICLE VIII COVENANTS OF THE COMPANY			29

8.1	Restricted Actions		29
8.2	Required Actions		31
8.3	Information Rights		33
8.4	Access Rights		34
8.5	Right of First Offer		34
8.6	Board Representation		36
8.7	Appointment Right		37
8.8	Lock-up		38
8.9	Rights Plan		39
8.10	Confidentiality		39

ARTICLE IX INDEMNIFICATION			39

9.1	Survival and Indemnification		39

ARTICLE X GENERAL PROVISIONS			40

10.1	Public Announcements		40
10.2	Successors and Assigns		40
10.3	Entire Agreement		40
10.4	Notices		40
10.5	Closing Fee; Purchasers’ Fees and Expenses		41
10.6	Amendment and Waiver		41
10.7	Counterparts		42

-ii-


		Page
10.8	Headings; Construction		42
10.9	Specific Performance		42
10.10	Remedies Cumulative		42
10.11	GOVERNING LAW		42
10.12	JURISDICTION, WAIVER OF JURY TRIAL, ETC.		42
10.13	No Third Party Beneficiaries		43
10.14	Severability		43
10.15	Time of the Essence; Computation of Time		43
10.16	Consideration for Preferred Stock and Warrants		43

-iii-

SERIES C CONVERTIBLE PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT

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

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

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

ARTICLE I
DEFINITIONS

1.1 Definitions; Interpretation.

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

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

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

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

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

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

“AMEX” means the American Stock Exchange LLC.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“IRS” means the Internal Revenue Service.

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

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

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

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

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

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

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

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

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

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

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

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

“NASDAQ” means the NASDAQ National Market, Inc.

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

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

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

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

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“Permitted Lien” means:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Remedy Event” shall mean:

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

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

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

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

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

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

“SEC” means the Securities and Exchange Commission.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTICLE II
ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS

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

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ARTICLE III
CLOSING; CLOSING DELIVERIES

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

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

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

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

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

4.2 Authorization and Enforceability; Issuance of Shares.

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

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

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

4.3 Capitalization.

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

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

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

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

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

4.5 SEC Reports; Financial Statements.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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4.15 Agreements

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4.34 Customers and Suppliers.

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

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

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

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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

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

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

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

ARTICLE VI
COMPLIANCE WITH SECURITIES LAWS

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

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

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

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

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

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

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

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

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

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

ARTICLE VII
CONDITIONS PRECEDENT

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

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

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

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

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

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

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

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

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

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

(j) the Company shall have satisfied the listing requirements of Sections 101(c), 102, 121, 123, 130, 802, 803, 804 and 807 of the AMEX Company Guide;

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTICLE VIII
COVENANTS OF THE COMPANY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

8.5 Right of First Offer.

(a) Except for the issuance of:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

8.6 Board Representation.

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

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

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

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

8.7 Appointment Right.

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

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

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

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

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

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

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

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

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

ARTICLE IX
INDEMNIFICATION

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

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

ARTICLE X
GENERAL PROVISIONS

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

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

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

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

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To the Company, to:

SoftBrands, Inc.
Two Meridian Crossings
Suite 800
Minneapolis, MN 55423
Attention: David Latzke
Facsimile: (612) 851-1901

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

Dorsey & Whitney LLP
50 South Sixth Street
Suite 1500
Minneapolis, MN 55402
Attention: Tom Martin, Esq.
Facsimile No.: (612) 340-7800

To the Purchasers, to:

The addresses set forth on Schedule I hereto

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

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

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

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

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

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

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

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

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

10.12 JURISDICTION, WAIVER OF JURY TRIAL, ETC.

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

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

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

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

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

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

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

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


		SOFTBRANDS, INC.

		By:

				Name:
				Title:

		ABRY MEZZANINE PARTNERS, L.P.

		By:		ABRY MEZZANINE INVESTORS, L.P.,
				Its General Partner

		By:		ABRY MEZZANINE HOLDINGS LLC,
				Its General Partner

		By:

				Name:
				Title:

		CAPITAL RESOURCE PARTNERS IV, L.P.,

		By:		CRP PARTNERS IV, L.L.C.,
				its General Partner

		By:

				Name:
				Title: Managing Member

Exhibit A

Series C Preferred Stock Certificate of Designation

(see attached)

Exhibit B

Form of Warrants

(see attached)

Exhibit C

Amended and Restated Investor Rights Agreement

(see attached)

Exhibit D

Certificate of Incorporation and By-laws

(see attached)

Schedule I


			Number of Shares of
			Common Stock
	Shares of		Issuable Upon
	Preferred		Exercise of the		Purchase
Names and Addresses	Stock		Warrants		Price
ABRY Mezzanine Partners, L.P. 111 Huntington Avenue 30th Floor Boston, MA 02199 Attention: John Hunt Facsimile: (617) 859-8797		15,000		1,000,000	$	15,000,000

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

Kirkland & Ellis LLP Citigroup Center 153 East 53rd Street New York, NY 10022 Attention: Joshua Korff, Esq. Facsimile: (212) 446-6460

Capital Resource Partners IV, L.P. c/o Capital Resource Partners 85 Merrimac Street, Suite 200 Boston, Massachusetts 02114 Attention: Robert Ammerman Facsimile Number: (617) 723-9819		3,000		200,000	$	3,000,000

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

Choate Hall & Steward LLP Two International Place Boston, Massachusetts 02110 Attention: Andrew E. Taylor, Jr., Esq. Facsimile: (617) 248-4000


TOTAL		118,000		1,200,000	$	18,000,000

EX-99.3 4 y12125exv99w3.htm EX-99.3: CERTIFICATE OF DESIGNATIONS EX-99.3

EXHIBIT 3

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES C CONVERTIBLE PREFERRED STOCK
OF SOFTBRANDS, INC.

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

SOFTBRANDS, INC. (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “General Corporation Law”), in accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:

That pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Corporation’s Second Restated Certificate of Incorporation, as amended, the Board of Directors on August 9, 2005, adopted the following resolution creating a series of 20,027 shares of Preferred Stock designated as “Series C Convertible Preferred Stock”:

RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of the Certificate of Incorporation, a series of Preferred Stock, par value $0.01 per share, of the Corporation be and hereby is created, and that the designation and number of shares thereof and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series and the qualifications, limitations and restrictions thereof are as follows:

Section 1. Designation and Number of Shares.

The designation of the series of Preferred Stock authorized hereby shall be “Series C Convertible Preferred Stock” (the “Series C Preferred Stock”). The maximum number of shares of Series C Preferred Stock shall be 20,027 shares.

Section 2. Dividends.

2A. General Obligation. To the extent permitted under the General Corporation Law of the State of Delaware, the Corporation shall pay preferential dividends to the holders of the Series C Preferred Stock in cash as provided in this Section 2. Except as otherwise provided herein, dividends on each share of Series C Preferred Stock (each, a “Share”) shall accrue, whether or not declared or paid, on a daily basis at the Dividend Rate on the sum of (x) the Liquidation Value thereof and (y) all dividends that have accumulated thereon in accordance with Section 2B below, from and including the Original Date of Issuance of such Share to and including the date on which (i) the Liquidation Value of such Share (plus all Unpaid Dividends thereon) is paid to the holder thereof, (ii) such Share is converted into Common Stock as provided herein, or (iii) such Share is redeemed as provided herein or otherwise acquired by the Corporation. Such dividends shall accrue whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends, and such dividends shall be cumulative such that all Unpaid Dividends shall be fully paid or declared with funds irrevocably set apart for payment before any dividends, distributions, redemptions or other payments may be made with respect to any Junior Securities or the Series B Preferred Stock. Such dividends shall be payable in cash, semi-annually in arrears (i) on the last day of June and December of each year beginning December 31, 2005, and

if such date is not a Business Day, then on the next succeeding Business Day (the “Dividend Reference Dates”) and (ii) with respect to any Share converted into Common Stock pursuant to Section 6, on the date on which such Share is converted pursuant to the terms hereof. The date on which the Corporation initially issues any Share shall be deemed to be its “Original Date of Issuance” regardless of the number of times transfer of such Share is made on the stock records maintained by or for the Corporation and regardless of the number of certificates which may be issued to evidence such Share.

2B. Dividend Reference Dates. For purposes of clarity, to the extent not paid on a Dividend Reference Date, all dividends which have accrued on each Share outstanding during the six-month period (or other period in the case of the initial Dividend Reference Date) ending upon each such Dividend Reference Date shall be accumulated and shall remain accumulated dividends with respect to such Share until paid to the holder thereof.

2C. Distribution of Partial Dividend Payments. Except as otherwise provided herein, if at any time the Corporation pays less than the total amount of dividends then accrued with respect to the Series C Preferred Stock, such payment shall be distributed pro rata among the holders thereof based upon the aggregate Unpaid Dividends on the Shares held by each such holder.

2D. Participating Dividends. In the event that the Corporation declares or pays any dividends upon the Common Stock (including the distribution of any Rights and whether any such dividends are payable in cash, securities or other property), other than dividends payable solely in shares of Common Stock, the Corporation shall also declare and pay to the holders of the Series C Preferred Stock at the same time that it declares and pays such dividends to the holders of the Common Stock, the dividends which would have been declared and paid with respect to the Common Stock issuable upon conversion of the Series C Preferred Stock had all of the outstanding Series C Preferred Stock been converted into Common Stock (without actually requiring such Series C Preferred Stock to be so converted and without regard to any limitation on conversion set forth herein or otherwise) immediately prior to the record date for such dividend, or if no record date is fixed, the date as of which the record holders of Common Stock entitled to such dividends are to be determined.

Section 3. Liquidation.

3A. Priority of Series C Preferred Stock Upon Liquidation. Upon any liquidation, dissolution or winding up of the Corporation (whether voluntary or involuntary) (a “Liquidation Event”), each holder of Series C Preferred Stock shall be entitled to be paid, before any distribution or payment is made upon any Junior Securities, an amount (the “Series C Liquidation Preference”) per Share equal to the greater of (x) the Liquidation Value of such Share (plus all Unpaid Dividends thereon), and (y) the amount which such holder would be entitled to receive in connection with the applicable Liquidation Event had such holder converted such Share into shares of Common Stock (including the amount payable with respect to any Rights then outstanding) in accordance with the terms hereof (without actually requiring such Share to be so converted and without regard to any limitation on conversion set forth herein or otherwise) immediately prior to such Liquidation Event, plus any Unpaid Dividends on such Share. If upon any such Liquidation Event, the Corporation’s assets to be distributed among the

holders of the Series B Preferred Stock and Series C Preferred Stock are insufficient to permit payment of the Series B Liquidation Preference Payments (as defined in the Series B Certificate) to all holders of Series B Preferred Stock and payment of the Series C Liquidation Preference to all holders of Series C Preferred Stock, then the entire assets available to be distributed to the Corporation’s stockholders shall be distributed among such holders of Series B Preferred Stock and Series C Preferred Stock, pro rata based upon the aggregate payment to which each such holder would be entitled if the full Series B Liquidation Payment and Series C Liquidation Preference payment were made. Not less than 60 days prior to the payment date stated therein, the Corporation shall mail written notice of any such Liquidation Event to each record holder of Series C Preferred Stock, setting forth in reasonable detail the terms, provisions and the conditions of such Liquidation Event and the amount of proceeds to be paid with respect to each Share and each Junior Security in connection with such Liquidation Event. After the payment of all preferential amounts required to be paid to the holders of Series C Preferred Stock and Series B Preferred Stock, and any other Junior Security (other than Common Stock), the holders of shares of Common Stock then outstanding shall be entitled to receive the remaining assets of the Corporation available for distribution to its stockholders. If any amounts distributed pursuant to this Section 3A are in a form other than cash, then the value of any such amounts distributed shall be deemed to be the Market Price thereof as of the date of receipt by the holder of Series C Preferred Stock.

3B. Change of Control. In connection with any Change of Control, unless a holder of Shares then outstanding elects to cause the Corporation to redeem the Series C Preferred Stock of such holder upon a Change of Control approved by the Board of Directors in accordance with Section 4B below, the consideration to be paid to such holder of the Corporation’s capital stock in connection with and simultaneously with the consummation of such Change of Control shall be allocated such that such holder of Shares receives the amounts to which it would be entitled pursuant to Section 3A above as if such Change of Control transaction were a “Liquidation Event”. The Corporation shall not approve, adopt or enter into any agreement or arrangement relating to a Change of Control (or amend or modify any such agreement) if such agreement or arrangement (or the effect of any such amendment or modification thereto) does not allocate the consideration to be paid in connection with such transaction in accordance with the immediately preceding sentence and Section 4B below.

Section 4.Redemption.

4A. Optional Redemption

(i) Subject to the right under Section 6 of the holder of any Share to convert such Share into Common Stock in lieu of redemption, the Corporation may, at any time after August 17, 2007 elect to redeem all or any portion of the Series C Preferred Stock then outstanding pro rata among the holders thereof at a redemption price in cash per Share (the “Series C Redemption Price”) equal to the Series C Liquidation Preference for such Share; provided, however, that no such redemption of any Share may be effected (the conditions set forth in subsections (a) through (e) below to be known herein as the “Redemption Conditions”):

(a) unless the average daily closing price of a share of the Common Stock on the national securities exchange on which the Common Stock is listed, or if not

listed, as quoted through the NASDAQ System, as applicable (such exchange or the NASDAQ System to be known herein as the “Exchange”), averaged over a period of thirty (30) Business Days consisting of the third Business Day prior to the date the Redemption Notice is sent pursuant to subsection (ii) of this Section 4A and the 29 consecutive Business Days prior to such day (the “30-Day Period”), is equal to or greater than 200% of the initial Conversion Price;

(b) unless the average daily reported volume of trading in the Common Stock on the Exchange during the 30-Day Period is greater than 95% of the average daily reported volume of trading in the Common Stock during the 90 Business Days consisting of the Business Day immediately prior to the commencement of the 30-Day Period and the 89 consecutive Business Days prior to such day;

(c) unless the number of shares of Underlying Common Stock issuable upon conversion of that number of shares of Series C Preferred Stock called for redemption represent no greater than 75% of the total reported volume of trading in the Common Stock on the Exchange during the 30-Day Period;

(d) unless the Corporation shall have filed a Registration Statement under the Securities Act relating to the Underlying Common Stock and such registration statement shall have been declared effective by the Securities and Exchange Commission and has remained effective; and

(e) if the Corporation has effected any Optional Redemption during the previous 120 days.

(ii) In addition to the optional redemption set forth in Section 4A(i), but subject to the right under Section 6 of the holder of any Share to convert such Share into Common Stock in lieu of redemption, the Corporation may, at any time during the Redemption Period elect to redeem (any such redemption under Section 4A(i) or this Section 4A(ii), an “Optional Redemption”) all (but not less than all) of the Series C Preferred Stock then outstanding at a redemption price in cash per Share equal to the Series C Redemption Price:

(iii) The Corporation may exercise its election to redeem the Series C Preferred Stock under this Section 4A by sending written notice (the “Redemption Notice”) to each record holder of Shares, notifying such holder of (a) the redemption to be effected, specifying the number of Shares to be redeemed from each holder (which shall be not less than all Shares in the event of an Optional Redemption pursuant to Section 4A(ii)), (b) the amount of the Series C Redemption Price (including a reasonably detailed calculation thereof) and the aggregate Series C Redemption Price to be paid to such holder, (c) the date on which such redemption shall be effected (which date shall be not more than four (4) Business Days after the date on which the Redemption Notice is sent and shall be the “Redemption Date” for all purposes of this Section 4A), and (d) the place at which payment may be obtained and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, the certificate or certificates representing such holder’s Shares. The Redemption Notice shall be deemed sent as provided in this subsection (iii) on the second Business Day after delivery to an overnight courier for delivery to each holder of record of Series B Preferred Stock, at its post

office address last shown on the records of the Corporation, provided that if any such holder has so requested in a writing specifying appropriate directions for such communication, such notice may be deemed sent when given by electronic communication in compliance with the provisions of the General Corporation Law. On or after the Redemption Date, each holder of Series C Preferred Stock to be redeemed shall surrender to the Corporation the certificate or certificates representing such Shares, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such Shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof, each surrendered certificate shall be cancelled and in the event less than all the Shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed Shares without cost to such holder within three (3) Business Days after surrender of the certificate representing the redeemed Shares.

4B. Redemption in Connection with Change of Control. In connection with any Change of Control approved by a majority of the Board of Directors of the Corporation, each holder of Shares may elect to cause the Corporation to redeem all or any portion of the Series C Preferred Stock of such holder then outstanding at a redemption price in cash per Share equal to the Series C Redemption Price which shall be paid against surrender for cancellation of the certificates representing the Shares on the date of consummation of the Change of Control (which shall be the “Redemption Date” for all purposes of this Section 4B); provided, that in the event any Change of Control is consummated pursuant to the exercise of an Appointment Right (as defined in the Purchase Agreement), each holder of Shares shall receive its Series C Redemption Price in the same form and ratio of consideration as is received by all of the Corporation’s other stockholders. Such holder may exercise its election under this Section 4B by sending written notice thereof to the Corporation not less than ten (10) Business Days prior to the scheduled closing date of the Change of Control. Within two (2) Business Days after receipt of such written notice, the Corporation shall give written notice of such request to all holders of Series C Preferred Stock, and such notice shall include the information required to confirm satisfaction of the Redemption Conditions.

4C. Redemption Payments. For each Share that is to be redeemed at the option of the Corporation pursuant to Section 4A, or at the option of the holder upon a Change of Control approved by the Board of Directors pursuant to Section 4B, the Corporation shall be obligated on the applicable Redemption Date to pay to the holder thereof against surrender of the certificate representing such Share a cash amount in immediately available funds equal to the Series C Redemption Price. If the Corporation’s funds that are legally available for redemption of Shares on any Redemption Date are insufficient to pay the aggregate Series C Redemption Price for the total number of Shares to be redeemed on such date, those funds which are legally available shall be used to redeem the maximum possible number of Shares pro rata among the holders of the Shares based upon the aggregate Series C Redemption Price of the Shares held by such holders. At any time thereafter when additional funds of the Corporation are legally available for the redemption of Shares, such funds shall immediately be used to pay the balance of the Series C Redemption Price for the Shares which the Corporation has become obligated to redeem on any Redemption Date but which it has not redeemed. From and after the Redemption Date, unless there shall have been a default in payment of the Series C Redemption Price, all rights of the holders of Shares designated for redemption in the Redemption Notice as holders of Series C Preferred Stock (except the right to receive the Series C Redemption Price without interest upon

surrender of their certificate or certificates) shall cease with respect to such Shares, and such Shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. Without limiting the generality of the foregoing, unless there shall have been a default in payment on the Series C Redemption Price, no Share shall be entitled to any dividends accruing after the Redemption Date to the holder of any such Share.

4D. Dividends After Redemption Date. No Share shall be entitled to any dividends accruing after the Redemption Date for such Share. On such date, all rights of the holder of such Share shall cease, and such Share shall no longer be deemed to be issued and outstanding.

4E. Redeemed or Otherwise Acquired Shares. Any Shares which are redeemed or otherwise acquired by the Corporation shall be canceled and retired to authorized but unissued shares and shall not be reissued, sold or transferred.

4F. Other Redemptions or Acquisitions. The Corporation shall not, nor shall it permit any Subsidiary to, redeem or otherwise acquire any Shares, except as expressly authorized herein.

Section 5. Voting Rights.

5A. Voting with Common Stock. The holders of the Series C Preferred Stock shall be entitled to notice of all meetings of stockholders as and when such notice is provided to the holders of the Common Stock, and except as provided below in this Section 5A or in Section 5B and Section 5C or as otherwise required by applicable law, the holders of the Series C Preferred Stock shall be entitled to vote on all matters (including the election of directors) submitted to the stockholders for a vote together with the holders of the Common Stock voting together as a single class with each share of Common Stock entitled to one vote per share, and each Share of Series C Preferred Stock entitled to one vote for each share of Common Stock issuable upon conversion of such Share pursuant to Section 6 hereof as of the record date for such vote or, if no record date is specified, as of the date of such vote.

5B. Election of Directors. So long as ABRY and CRP continue to own not less than 20% of the shares of Common Stock issued or issuable upon conversion of the Series C Preferred Stock, at all times the Board of Directors shall include the director elected by the holders of a majority of the Underlying Common Stock pursuant to this Section 5B.

(i) From and after the Original Date of Issuance in the election of members of the Board of Directors, the holders of a majority of the shares of Underlying Common Stock, voting separately as a single class to the exclusion of all other classes or series of the Corporation’s capital stock and with each share of Underlying Common Stock entitled to one vote, shall be entitled to nominate and elect one (1) individual to serve as a member of the Board of Directors.

(ii) Each director nominated and elected by the holders of a majority of the shares of Underlying Common Stock in accordance with this Section 5B shall serve on the Board of Directors for a term of office to expire at the third succeeding annual meeting of stockholders after such director’s election. Each such director shall serve until such director’s successor is duly elected by the holders of the Shares or such director resigns, dies, becomes disqualified or is

removed from office by such holders. If the holders of the shares of Underlying Common Stock, for any reason fail to nominate and elect anyone to fill any such directorship, such position shall remain vacant until such time as the holders of the shares of Underlying Common Stock nominate and elect a director to fill such position and shall not be filled by resolution or vote of the Board of Directors or the Corporation’s other stockholders. The right of the holders of shares of Underlying Common Stock to elect members of the Board of Directors may be exercised (i) at any special meeting of the holders of the shares of Underlying Common Stock, (ii) at any annual or other special meeting of stockholders, and (iii) to the extent and in the manner permitted by applicable law and the Certificate of Incorporation of the Company, pursuant to a written consent in lieu of a meeting of the holders of shares of Underlying Common Stock. At any meeting or at any adjournment thereof at which the holders of shares of Underlying Common Stock elect directors pursuant to this Section 5B, the presence, in person or by proxy, of the holders of a majority of the shares of Underlying Common Stock then outstanding shall be required to constitute a quorum for the election or removal of any director pursuant to this Section 5B. The vote of a majority of such quorum shall be required to elect or remove any such director.

5C. Special Voting Rights. In addition to any other rights provided by law, the Corporation shall not, without first obtaining the affirmative vote or consent in lieu of a meeting of the holders of not less than 75% of the Shares then outstanding:

(i) amend, modify, restate or repeal (by merger, consolidation or otherwise) any provision of, or add to (by merger, consolidation or otherwise) the certificate of incorporation or bylaws of the Corporation in any manner which would adversely alter or change the rights, preferences or privileges of the Series C Preferred Stock;

(ii) authorize or issue (by merger, consolidation or otherwise) any share of stock of any class (including any Series B Preferred Stock but excluding the Info-Quest Shares), or any bonds, debentures, notes or other obligations convertible into or exchangeable for, or having rights to purchase, any shares of stock of the Corporation having any preference or priority as to the payment of dividends or the distribution of assets upon a redemption, Liquidation Event, Organic Change or Change of Control or other transaction senior to or on parity with any such preference or priority of the Series C Preferred Stock;

(iii) amend, modify, restate or repeal this Certificate of Designation;

(iv) reclassify (by merger, consolidation or otherwise) any capital stock into shares having any preference or priority as to the payment of dividends or the distribution of assets upon a redemption, Liquidation Event, Organic Change, Change of Control or other transaction senior to or on parity with any such preference or priority of the Series C Preferred Stock; or

(v) pay or declare any dividend or distribution on any shares of its capital stock (other than dividends payable on the Series C Preferred Stock, dividends payable in accordance with the Rights Agreement and dividends on the Common Stock payable in additional shares of Common Stock for which an adjustment will be made pursuant to Section 6) or apply any of its assets to the redemption, retirement, purchase or other acquisition, directly or indirectly, through Subsidiaries or otherwise, of any shares of its capital stock (other than

redemptions, retirements, purchases or acquisitions of the Series C Preferred Stock in accordance with the terms of this Certificate of Designations and redemptions authorized in accordance with the Rights Agreement).

Section 6.Conversion; Exchange.

6A. Conversion Procedure.

(i) Subject to the terms of this Section 6, at any time and from time to time any holder of Series C Preferred Stock may convert all or any portion of the Series C Preferred Stock (including any fraction of a Share) held by such holder into a number of shares of Common Stock (which shall include any associated Rights) computed by multiplying the number of Shares to be converted by the quotient of (x) Liquidation Value, and (y) the Conversion Price then in effect. If the Corporation elects to redeem any Share pursuant to Section 4A, the holder of such Share may elect in lieu of such Optional Redemption to convert such Share pursuant to this Section 6.

(ii) Except as otherwise provided herein, each conversion of Series C Preferred Stock shall be deemed to have been effected as of the close of business on the date on which the certificate or certificates representing the Series C Preferred Stock to be converted have been surrendered for conversion at the principal office of the Corporation or of any transfer agent for the Series C Preferred Stock and Common Stock, duly endorsed or accompanied by a written instrument of transfer from the record holder in a form reasonably satisfactory to the Corporation, together with written notice to the Corporation at such office that such holder elects to convert the same and stating therein the number of shares of Series C Preferred Stock being converted and such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. At the time any such conversion has been effected, the rights of the holder of the Shares converted as a holder of Series C Preferred Stock shall cease and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Common Stock represented thereby. Upon conversion of any Share into Common Stock, the Corporation shall pay Unpaid Dividends on such Share in accordance with Section 2 hereof.

(iii) The conversion rights of any Share subject to redemption or exchange hereunder shall terminate on the Redemption Date for such Share unless the Corporation shall default in its obligation to pay the holder thereof the Series C Redemption Price for such Share in accordance with the provisions of Section 4A.

(iv) Notwithstanding any other provision hereof, if a conversion of Series C Preferred Stock is to be made in connection with an Organic Change, a Change of Control, an Optional Redemption or other transaction affecting the Corporation, the conversion of any Shares may, at the election of the holder thereof, be conditioned upon the consummation of such transaction, in which case such conversion shall not be deemed to be effective until such transaction has been consummated.

(v) As soon as possible after a conversion has been effected (but in any event within three (3) Business Days), the Corporation shall deliver to the converting holder:

(a) a certificate or certificates representing the number of shares of Common Stock and any associated Rights issuable by reason of such conversion in such name or names and such denomination or denominations as the converting holder has specified; and

(b) a certificate representing any shares of Series C Preferred Stock which were represented by the certificate or certificates delivered to the Corporation in connection with such conversion but which were not converted.

(vi) The issuance of certificates for shares of Common Stock and any associated Rights upon conversion of Series C Preferred Stock shall be made without charge to the holders of such Series C Preferred Stock for any issuance tax in respect thereof if issued in the name of such holder or other cost incurred by the Corporation in connection with such conversion and the related issuance of shares of Common Stock and any associated Rights. Upon conversion of each Share, the Corporation shall insure that the Common Stock and any associated Rights issuable with respect to such conversion shall be validly issued, fully paid and nonassessable, free and clear of all taxes, liens, charges and encumbrances with respect to the issuance thereof.

(vii) The Corporation shall not close its books against the transfer of Series C Preferred Stock or of Common Stock issued or issuable upon conversion of Series C Preferred Stock in any manner which interferes with the timely conversion of Series C Preferred Stock. The Corporation shall reasonably assist and cooperate with any holder of Shares required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of Shares hereunder (including, without limitation, making any filings required to be made by the Corporation but excluding the filing of any registration statement with the Securities and Exchange Commission unless the Corporation is contractually or otherwise required to file any such registration statement).

(viii) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of issuance upon the conversion of the Series C Preferred Stock, such number of shares of Common Stock issuable upon the conversion of all outstanding Series C Preferred Stock. All shares of Common Stock and associated Rights which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall assure that all such shares of Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any Exchange upon which shares of Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance and excluding the filing of any registration statement with the Securities and Exchange Commission unless the Corporation is contractually or otherwise required to file any such registration statement). The Corporation shall not take any action which would cause the number of authorized but unissued shares of Common Stock to be less than the number of such shares required to be reserved hereunder for issuance upon conversion of the Series C Preferred Stock.

(ix) If the shares of Common Stock issuable by reason of conversion of Series C Preferred Stock are convertible into or exchangeable for any other stock or securities of the Corporation or any Rights, the Corporation shall, at the converting holder’s option, upon surrender of the Shares to be converted by such holder as provided herein together with any notice, statement or payment required to effect such conversion or exchange of Common Stock, deliver to such holder or as otherwise specified by such holder a certificate or certificates representing the stock, securities or Rights into which the shares of Common Stock issuable by reason of such conversion are so convertible or exchangeable, registered in such name or names and in such denomination or denominations as such holder has specified.

6B. Conversion Price.

(i) To prevent dilution of the conversion rights granted under this Section 6, the Conversion Price shall be subject to adjustment from time to time pursuant to this Section 6B.

(ii) If and whenever after the Original Date of Issuance of the Series C Preferred Stock, the Corporation issues or sells, or in accordance with Section 6C is deemed to have issued or sold, any share of Common Stock for a consideration per share less than (x) eighty percent (80%) of the Market Price of the Common Stock at such time or (y) the Conversion Price in effect immediately prior to such time (the greater of such amounts being referred to herein as the “Adjustment Multiplier”), then immediately upon such issue or sale or deemed issue or sale, the Conversion Price shall be reduced to the Conversion Price determined by multiplying (x) the Conversion Price in effect immediately prior to such issue or sale by (y) the quotient obtained by dividing (i) the sum of (A) the product determined by multiplying the Adjustment Multiplier by the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale, plus (B) the consideration, if any, received by the Corporation upon such issue or sale, by (ii) the product determined by multiplying the Adjustment Multiplier by the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale.

(iii) Notwithstanding the foregoing, there shall be no adjustment to the Conversion Price hereunder with respect to a Permitted Issuance.

6C. Effect on Conversion Price of Certain Events. For purposes of determining the adjusted Conversion Price under Section 6B, the following shall be applicable:

(i) Issuance of Rights or Options. If the Corporation in any manner grants or sells any Options and the price per share for which Common Stock is issuable upon the exercise of such Options, or upon conversion or exchange of any Convertible Securities issuable upon exercise of such Options, is less than the Adjustment Multiplier, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to be outstanding and to have been issued and sold by the Corporation at the time of the granting or sale of such Options for such price per share. For purposes of this paragraph, the “price per share for which Common Stock is issuable” shall be determined by dividing (A) the total amount, if any, received or receivable by the Corporation as

consideration for the granting or sale of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon exercise of all such Options, plus in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the issuance or sale of such Convertible Securities and the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options. No further adjustment of the Conversion Price shall be made when Convertible Securities are actually issued upon the exercise of such Options or when Common Stock is actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(ii) Issuance of Convertible Securities. If the Corporation in any manner issues or sells any Convertible Securities and the price per share for which Common Stock is issuable upon conversion or exchange thereof is less than the Adjustment Multiplier, then the maximum number of shares of Common Stock issuable upon conversion or exchange of such Convertible Securities shall be deemed to be outstanding and to have been issued and sold by the Corporation at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this paragraph, the “price per share for which Common Stock is issuable” shall be determined by dividing (A) the total amount received or receivable by the Corporation as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment of the Conversion Price shall be made when Common Stock is actually issued upon the conversion or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustments of the Conversion Price had been or are to be made pursuant to other provisions of this Section 6, no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

(iii) Change in Option Price or Conversion Rate. If, in the case of Options and Convertible Securities issued on or after the Original Date of Issuance, the purchase price provided for in any such Options, the additional consideration, if any, payable upon the conversion or exchange of any such Convertible Securities or the rate at which any such Convertible Securities are convertible into or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be immediately adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of Section 6C, if the terms of any Option or Convertible Security which was outstanding as of the Original Date of Issuance are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change.

(iv) Treatment of Expired Options and Unexercised Convertible Securities. Upon the expiration of any Option or the termination of any right to convert or exchange any

Convertible Security without the exercise of any such Option or right, the Conversion Price then in effect hereunder shall be adjusted immediately to the Conversion Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Security, to the extent outstanding immediately prior to such expiration or termination, never been issued. For purposes of Section 6C the expiration or termination of any Option or Convertible Security which was outstanding as of the Original Date of Issuance shall not cause the Conversion Price hereunder to be adjusted unless, and only to the extent that, a change in the terms of such Option or Convertible Security caused it to be deemed to have been issued after the Original Date of Issuance.

(v) Calculation of Consideration Received. If any Common Stock, Option or Convertible Security is issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Corporation therefor (net of discounts, commissions and related expenses). If any Common Stock, Option or Convertible Security is issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Corporation shall be the Market Price thereof as of the date of receipt. If any Common Stock, Option or Convertible Security is issued to the owners of the non-surviving entity in connection with any merger in which the Corporation is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Option or Convertible Security, as the case may be. The fair value of any consideration other than cash and securities shall be as reasonably determined by the Board of Directors of the Company in good faith; provided, however, that in the event that any Common Stock, Options or Convertible Securities are issued or sold or deemed to be issued or sold and such Common Stock, Options or Convertible Securities represent (on an as-converted basis) greater than 10% of the Common Stock Deemed Outstanding as of the date of such issuance, then the fair value of such Common Stock, Options or Convertible Securities, as the case may be, shall be determined by a majority of the Board of Directors of the Corporation in good faith; provided, that the Corporation shall notify the holders of a majority of the outstanding Series C Preferred Stock of such determination in writing and such holders may, within five (5) Business Days of such notification advise the Corporation that they dispute the fair value. If such parties are unable to reach agreement within a reasonable period of time after notification of such disputed valuation, such fair value of such consideration shall be determined by an independent appraiser experienced in valuing such type of consideration jointly selected by the Corporation and the holders of a majority of the outstanding Series C Preferred Stock. The determination of such appraiser shall be final and binding upon the parties, and the fees and expenses of such appraiser shall be borne equally by the Corporation and the holders of the Series C Preferred Stock who have disputed the valuation.

(vi) Integrated Transactions. In case any Option is issued in connection with the issue or sale of other securities of the Corporation, together comprising one integrated transaction in which no specific consideration is allocated to such Option by the parties thereto, the consideration for the Option shall be deemed to be $0.01.

(vii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Corporation or any Subsidiary, and the disposition of any shares so owned or held shall be considered an issuance or sale of Common Stock.

(viii) Record Date. If the Corporation takes a record of the holders of Common Stock for the purpose of entitling them (a) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (b) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or upon the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

6D. Subdivision or Combination of Common Stock. If the Corporation at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced (and any other appropriate actions shall be taken by the Corporation) so that the holder of any share of Series C Preferred Stock thereafter surrendered for conversion (without actually requiring such Series C Preferred Stock to be so converted and without regard to any limitation on conversion set forth herein or otherwise) shall be entitled to receive the number of shares of Common Stock or other securities of the Corporation that such holder would have owned or would have been entitled to receive upon or by reason of the events described above, had such share of Series C Preferred Stock been converted (without actually requiring such Series C Preferred Stock to be so converted and without regard to any limitation on conversion set forth herein or otherwise) immediately prior to the occurrence of such event. If the Corporation at any time combines (by reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased (and any other appropriate actions shall be taken by the Corporation) so that the holder of any share of Series C Preferred Stock thereafter surrendered for conversion (without actually requiring such Series C Preferred Stock to be so converted and without regard to any limitation on conversion set forth herein or otherwise) shall be entitled to receive the number of shares of Common Stock or other securities of the Corporation that such holder would have owned or would have been entitled to receive upon or by reason of the events described above, had such share of Series C Preferred Stock been converted (without actually requiring such Series C Preferred Stock to be so converted and without regard to any limitation on conversion set forth herein or otherwise) immediately prior to the occurrence of such event.

6E. Reorganization, Reclassification, Consolidation, Merger or Sale. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Corporation’s assets or other transaction, in each case which is effected in such a manner that the holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, is referred to herein as an “Organic Change”. Prior to the consummation of any Organic Change (other than an Organic Change that is also a Change in Control), the Corporation shall insure that each of the holders of Series C Preferred Stock shall thereafter have the right to

acquire and receive, in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such holder’s Series C Preferred Stock, such shares of stock, securities or assets as such holder would have received in connection with such Organic Change if such holder had converted its Series C Preferred Stock (without actually requiring such Series C Preferred Stock to be so converted and without regard to any limitation on conversion set forth herein or otherwise) immediately prior to such Organic Change. In each such case, the Corporation shall also insure that the provisions of this Section 6 shall thereafter be applicable to the Series C Preferred Stock (including, in the case of any such consolidation, merger or sale in which the successor entity or purchasing entity is other than the Corporation, an immediate adjustment of the Conversion Price to the value for the Common Stock reflected by the terms of such consolidation, merger or sale, and a corresponding immediate adjustment in the number of shares of Common Stock acquirable and receivable upon conversion of Series C Preferred Stock, if the value so reflected is less than the Conversion Price in effect immediately prior to such consolidation, merger or sale). The Corporation shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor entity (if other than the Corporation) resulting from consolidation or merger or the entity purchasing such assets assumes by written instrument (in form and substance satisfactory to the holders of a majority of the Series C Preferred Stock then outstanding), the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire.

6F. Certain Events. If any event occurs of the type contemplated by the provisions of this Section 6 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Board of Directors shall make an appropriate adjustment in the Conversion Price so as to protect the rights of the holders of Series C Preferred Stock; provided, that no such adjustment shall increase the Conversion Price as otherwise determined pursuant to this Section 6 or decrease the number of shares of Common Stock issuable upon conversion of each Share of Series C Preferred Stock.

6G. Notices.

(i) Immediately upon any adjustment of the Conversion Price, the Corporation shall give written notice thereof to all holders of Series C Preferred Stock, setting forth in reasonable detail and certifying the calculation of such adjustment.

(ii) The Corporation shall give written notice to all holders of Series C Preferred Stock at least twenty (20) Business Days prior to the date on which the Corporation closes its books or takes a record (a) with respect to any dividend or distribution upon Common Stock, (b) with respect to any pro rata subscription offer to holders of Common Stock, or (c) for determining rights to vote with respect to any Change of Control, Organic Change or Liquidation Event.

(iii) The Corporation shall also give written notice to the holders of Series C Preferred Stock at least twenty (20) Business Days prior to the date on which any Organic Change or Change of Control shall take place.

6H. Conversion at Election of Corporation(i) . Subject to the restrictions set forth below, at any time and from time to time after August 17, 2007 the Corporation may elect to require holders of Series C Preferred Stock to convert such Shares into shares of Common Stock at the then applicable Conversion Price. The Corporation may exercise its election to convert shares of Series C Preferred Stock pursuant to this Section 6H by sending written notice (the “Conversion Notice”) of such conversion to all holders of Shares at least ten (10) Business Days prior to the date of consummation of such conversion (such date of consummation, the “Mandatory Conversion Date”); provided, however, that: (A) the Corporation may not deliver a Conversion Notice and no conversion of Shares may occur pursuant to this Section 6H at any time when (i) a Remedy Event (as defined in the Purchase Agreement) has occurred and is continuing, or there is any other material breach of a representation, warranty or covenant contained in the Purchase Agreement that has occurred and is continuing, (ii) the proposed conversion would occur within 120 days of another notice delivered by the Corporation pursuant to this Section 6H, or (iii) any of the Redemption Conditions are not satisfied (determined by replacing, for purposes of such conditions, the Conversion Notice for the Redemption Notice in Section 4A(i)(a)). Each conversion of Shares pursuant to this Section 6H shall be made pro rata among the holders of the Shares based upon the number of Shares then held by each such holder. Not later than three (3) Business Days following receipt of a Conversion Notice, each holder of shares of Series C Preferred Stock shall surrender his, her or its certificate or certificates for all such Shares to be converted to the Corporation at the Corporation’s principal offices, and shall within two (2) Business Days thereafter receive certificates for the number of shares of Common Stock to which such holder is entitled pursuant to this Section 6. On the Mandatory Conversion Date, all outstanding shares of Series C Preferred Stock elected to be converted by the Corporation in the Conversion Notice shall be deemed to have been converted into shares of Common Stock, which shall be deemed to be outstanding of record, and all rights with respect to the Series C Preferred Stock so converted, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate, except only the rights of the holders thereof, upon surrender of their certificate or certificates therefore, to receive any Unpaid Dividends and certificates for the number of shares of Common Stock into which such Series C Preferred Stock has been converted. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. As soon as practicable after the Mandatory Conversion Date and the surrender of the certificate or certificates for Series C Preferred Stock and in any event written two (2) Business Days thereafter, the Corporation shall cause to be issued and delivered to such holder, or on his, her or its written order, a certificate or certificates for the number of shares of Common Stock issuable on such conversion in accordance with the provisions hereof. All certificates evidencing shares of Series C Preferred Stock which are required to be surrendered for conversion in accordance with the provisions hereof shall, from and after the Mandatory Conversion Date, be deemed to have been retired and cancelled and the shares of Series C Preferred Stock represented thereby converted into Common Stock for all purposes, notwithstanding the failure of the holder or holders thereof to surrender such certificates on or prior to such date. Such converted Series C Preferred Stock may not be reissued and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series C Preferred Stock accordingly.

Section 7. Registration of Transfer. The Corporation shall keep at its principal office or at the office of any transfer agent for the Series C Preferred Stock, a register for the registration of Series C Preferred Stock. Upon the surrender of any certificate representing Series C Preferred Stock at such place, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of Shares represented by the surrendered certificate. Each such new certificate shall be registered in such name and shall represent such number of Shares as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate, and dividends shall accrue on the Series C Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such Series C Preferred Stock represented by the surrendered certificate.

Section 8. Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing Shares, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation or its transfer agent, or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of Shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Series C Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate.

Section 9. Definitions.

“ABRY” means ABRY Mezzanine Partners, L.P. and ABRY Investment Partnership, L.P., together with their Affiliates.

“Adjustment Multiplier” has the meaning set forth in Section 6B(ii).

“Affiliate” of any particular Person means any other Person controlling, controlled by or under common control with such particular 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.

“Business Day” means any day other than a Saturday, Sunday, or any day on which banks in New York, New York are authorized or obligated by applicable law to close.

“Change of Control” means: (i) any sale, transfer, conveyance or other disposition (other than by way of merger or consolidation) of all or substantially all of the Corporation’s assets, on a consolidated basis, in one transaction or a series of related transactions, to any Person (including any group that is deemed to be a Person); (ii) the consummation of any transaction involving the Corporation, including, without limitation, any merger or consolidation, whereby any Person (including any group that is deemed to be a Person) is or becomes the “beneficial owner,” directly or indirectly, of more than 35% of the aggregate voting equity securities of the

Corporation or the surviving entity or entities of such transaction if other than the Corporation; (iii) the members of the Board of Directors prior to any transaction cease for any reason to constitute a majority of the members of the Board of Directors following consummation of such transaction; or (iv) the Corporation adopts a plan of liquidation; provided, however, any transaction contemplated by this definition of “Change of Control” shall constitute a Change of Control only if it is approved by a majority of the Board of Directors of the Corporation.

“Common Stock” means the Corporation’s Common Stock, par value $0.01 per share (including any associated Rights), and any capital stock of any class of the Corporation hereafter authorized which is not limited to a fixed sum or percentage of par or stated value in respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any Liquidation of the Corporation.

“Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such time or upon conversion of Convertible Securities (including the Series C Preferred Stock) outstanding immediately prior to such time.

“Conversion Price” of any Share shall be equal to $2.01, as the same may be adjusted pursuant to Section 6.

“Convertible Securities” means any stock or securities directly or indirectly convertible into or exchangeable for Common Stock.

“Corporation” means SoftBrands, Inc., a Delaware corporation.

“CRP” means Capital Resource Partners V, L.P., together with its Affiliates.

“Dividend Rate” of any Share shall be equal to 6.0% per annum.

“Dividend Reference Date” has the meaning set forth in Section 2A.

“Exchange” has the meaning set forth in Section 4A(i)(a).

“Indebtedness” has the meaning set forth in the Purchase Agreement.

“Info-Quest Shares” means any Shares that may be issued to Info-Quest SA, a corporation organized under the laws of Greece, within the (10) days of the date of the Purchase Agreement, in accordance and in compliance with the participation rights granted to Info-Quest SA pursuant to that certain Investor Agreement, dated as of May 15, 2002, as amended, by and between the Company and Info-Quest SA, as in effect on the date hereof.

“Junior Securities” means any capital stock or other equity securities of the Corporation, except for the Series C Preferred Stock and Series B Preferred Stock.

“Liquidation Event” has the meaning set forth in Section 3A (including the Series A Preferred Stock).

“Liquidation Value” of any Share shall be equal to $1,000, as the same may be adjusted to reflect any stock split, stock dividend, reclassification, recapitalization or other transaction having a similar effect.

“Market Price” of any security means the average of the closing prices of such security’s sales on all securities exchanges on which such security may at the time be listed, or, if there has been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case (i) averaged over a period of 30 days consisting of the day as of which “Market Price” is being determined and the 29 consecutive Business Days prior to such day, and (ii) averaged on a volume-weighted basis based on the trading volume for each such Business Day. If at any time such security is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, or if at any time this Certificate of Designation requires the determination of the Market Price of any asset which does not constitute a security, the “Market Price” shall be the fair value of such security or asset determined by the Board of Directors of the Corporation in good faith; provided that the Corporation shall notify the holders of a majority of the outstanding Series C Preferred Stock of such determination in writing and such holders may within five days of such notification advise the Corporation that they dispute the fair value. If such parties are unable to reach agreement within a reasonable period of time after notification of such disputed valuation, such fair value shall be determined by an independent appraiser experienced in valuing securities jointly selected by the Corporation and the holders of a majority of the Series C Preferred Stock. The determination of such appraiser shall be final and binding upon the parties, and the fees and expenses of such appraiser shall be borne equally by the Corporation and the holders of the Series C Preferred Stock who have disputed the valuation.

“Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

“Organic Change” has the meaning set forth in Section 6E.

“Permitted Issuance” means (i) the granting of Options to purchase Common Stock, or other stock-based benefits, to employees, directors or consultants of the Corporation or the exercise thereof, pursuant to any reservation under any employee benefit plan to the extent and as in effect as of the date of the Purchase Agreement, or approved thereafter by the Board of Directors and shareholders of the Corporation, including the holders of at least a majority of the outstanding Series C Preferred Stock, (ii) the issuance of Common Stock upon conversion of the Shares or the conversion of Shares of Series B Preferred outstanding on the date hereof, (iii) the issuance of Common Stock upon the exercise of the Warrants, (iv) the issuance of Common Stock pursuant to the exercise of Options, Convertible Securities or other rights to acquire Common Stock that are outstanding on the date of the Purchase Agreement, (v) shares of Common Stock issued or issuable by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock, or a recapitalization, to the extent covered by

Subsection 6D or 6E above, (vi) shares of Common Stock issued or issuable to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation in an aggregate amount not to exceed 1% of the Common Stock Deemed Outstanding as of the date of the Purchase Agreement, (vii) the issuance of shares of Common Stock, or Options or warrants to purchase Common Stock, in licensing or collaborative arrangements, or in strategic partnerships, to the other party to such arrangement or partnership in connection with the licensing of technology approved by the Board of Directors of the Corporation in an aggregate amount not to exceed 1% of the Common Stock Deemed Outstanding as of the date of the Purchase Agreement, and (viii) the issuance of Common Stock in connection with any acquisition or merger to the extent approved by the Board of Directors, including the Series C Director (as defined in the Purchase Agreement) to the seller in such acquisition or merger.

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

“Preferred Directors” means the member of the Board of Directors elected by the holders of the Series C Shares pursuant to Section 5B.

“Purchase Agreement” means the Series C Convertible Preferred Stock and Warrant Purchase Agreement, dated as of August 17, 2005, by and between the Corporation, ABRY Mezzanine Partners, L.P., ABRY Investment Partnership, L.P. and Capital Resource Partners V, L.P., as such agreement may from time to time be amended, restated or modified in accordance with its terms.

“Redemption Date” means any date on which shares of Series C Preferred Stock are scheduled to be redeemed pursuant to any of Section 4A or Section 4B.

“Redemption Period” has the meaning set forth in Section 8.7 of the Purchase Agreement.

“Registration Statement” shall mean any shelf registration statement of the Corporation filed under the Securities Act that covers the resale of the Underlying Common Stock, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement.

“Right” has that meaning set forth in the Rights Agreement.

“Rights Agreement” means the Rights Agreement, dated as of November 27, 2002, by and between the Corporation and Wells Fargo Bank Minnesota, National Association, as Rights Agent, as amended, restated or modified from time to time.

“Scheduled Redemption Date” has the meaning set forth in Section 4C.

“Scheduled Redemption Price” has the meaning set forth in Section 4C.

“Securities” has the meaning assigned to it in the Purchase Agreement.

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

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

“Series B Certificate” means the Certificate of Designations of Preferences, Privileges, Powers and Rights of Series B Preferred Stock, as filed with the Secretary of State of Delaware on August 18, 2004.

“Series C Certificate” means this Certificate Of Designations, Preferences And Rights Of Series C Convertible Preferred Stock.

“Series C Liquidation Preference” has the meaning set forth in Section 3A.

“Series C Preferred Stock” has the meaning set forth in Section 1.

“Series C Redemption Price” has the meaning set forth in Section 4A.

“Share” has the meaning set forth in Section 2A.

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

“Unpaid Dividends” means, with respect to each Share, as of any date of determination, all accumulated dividends and accrued and unpaid but not yet accumulated dividends thereon from and including the Original Date of Issuance of such Share to and including such date of determination.

“Underlying Common Stock” means (i) the Common Stock issued or issuable upon conversion of the Series C Preferred Stock, (ii) the Common Stock issued or issuable upon exercise of the Warrants, and (ii) any Common Stock issued or issuable with respect to the securities referred to in clauses (i) and (ii) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other

reorganization. For purposes of this Agreement, any Person who holds any Series C Preferred Stock or Warrants shall be deemed to be the holder of the Underlying Common Stock issuable upon the conversion of such Series C Preferred Stock and upon the exercise of such Warrants, regardless of any restriction or limitation on the exercise of such Series C Preferred Stock or Warrants and such Underlying Common Stock shall be deemed to be in existence and such Person shall be entitled to exercise the rights of a holder of such Underlying Common Stock hereunder.

“Warrants” means the warrants to purchase shares of Common Stock issued pursuant to the Purchase Agreement, as they may be amended, restated or modified from time to time.

Section 10. Amendment and Waiver. No amendment, modification or waiver of any provision hereof shall be binding or effective without the prior written consent of the holders of at least 75% of the Series C Preferred Stock outstanding at the time such action is taken; provided, that any amendment, modification or waiver of any provision hereof that disproportionately affects the rights of any holder of Series C Preferred Stock in an adverse manner relative to any other holder of Series C Preferred Stock shall require the consent of such adversely affected holder.

Section 11. Notices. Except as otherwise expressly provided hereunder, all notices referred to herein shall be in writing and shall be delivered by registered or certified mail, return receipt requested and postage prepaid, or by reputable overnight courier service, charges prepaid, and shall be deemed to have been given when so mailed or sent (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder’s address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder).

* * * *

IN WITNESS WHEREOF, the undersigned has executed this Certificate and does affirm the foregoing as of the date and year first written above.


SOFTBRANDS, INC.

By:

	Name:	David G. Latzke
	Title:	Senior Vice President, Chief
		Financial Officer and Secretary

EX-99.4 5 y12125exv99w4.htm EX-99.4: FORM OF WARRANT EX-99.4

EXHIBIT 4

EXECUTION COPY

THIS WARRANT WAS ORIGINALLY ISSUED ON AUGUST 17, 2005, AND WAS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW. THIS WARRANT AND THE SECURITIES OBTAINABLE UPON EXERCISE HEREOF 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 THIS WARRANT AND THE SECURITIES OBTAINABLE UPON EXERCISE HEREOF 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.

SOFTBRANDS, INC.

STOCK PURCHASE WARRANT


Date of Issuance: August 17, 2005		Certificate No. W-1

FOR VALUE RECEIVED, SoftBrands, Inc., a Delaware corporation (the “Company”), hereby grants to ABRY Mezzanine Partners, L.P., a Delaware limited partnership, or its registered assigns (the “Registered Holder”) the right to purchase from the Company 1,000,000 shares of the Company’s Common Stock at a price per share equal to $2.11 (as adjusted from time to time hereunder, the “Exercise Price”). This Warrant is one of several warrants (collectively, the “Warrants”) issued by the Company to certain investors (the “Investors”) pursuant to the Series C Convertible Preferred Stock and Warrant Purchase Agreement, dated as of August 17, 2005 (the “Purchase Agreement”). Certain capitalized terms used herein are defined in Section 5 hereof. The amount and kind of securities obtainable pursuant to the rights granted hereunder and the purchase price for such securities are subject to adjustment pursuant to the provisions contained in this Warrant.

This Warrant is subject to the following provisions:

Section 1. Exercise of Warrant.

1A. Exercise Period. The Registered Holder may exercise, in whole or in part (but not as to a fractional share of Common Stock), the purchase rights represented by this Warrant at any time and from time to time after the Date of Issuance to and including the 10th anniversary thereof (the “Exercise Period”). The Company shall give the Registered Holder written notice of the expiration of the rights hereunder at least 30 days but not more than 90 days prior to the end of the Exercise Period.

1B. Exercise Procedure.

(i) This Warrant shall be deemed to have been exercised when the Company has received all of the following items (the “Exercise Time”):

(a) a completed Exercise Agreement, as described in Section 1C below, executed by the Person exercising all or part of the purchase rights represented by this Warrant (the “Purchaser”);

(b) this Warrant;

(c) if this Warrant is not registered in the name of the Purchaser, an Assignment or Assignments in the form set forth in Exhibit II hereto evidencing the assignment of this Warrant to the Purchaser, in which case the Registered Holder shall have complied with the provisions set forth in Section 7 hereof in connection with such transfer; and

(d) either (1) a check payable to the Company in an amount equal to the product of the Exercise Price multiplied by the number of shares of Common Stock being purchased upon such exercise (the “Aggregate Exercise Price”), or (2) a written notice to the Company that the Purchaser is exercising the Warrant (or a portion thereof) by authorizing the Company to withhold from issuance a number of shares of Common Stock issuable upon such exercise of the Warrant which when multiplied by the Market Price of the Common Stock is equal to the sum of the Aggregate Exercise Price plus the aggregate Exercise Price for any such shares of Common Stock requested to be withheld (and such withheld shares shall no longer be issuable under this Warrant).

(ii) Certificates for shares of Common Stock purchased upon exercise of this Warrant shall be delivered by the Company to the Purchaser within five Business Days after the date of the Exercise Time. Unless this Warrant has expired or all of the purchase rights represented hereby have been exercised, the Company shall prepare a new Warrant, substantially identical hereto, representing the rights formerly represented by this Warrant which have not expired, been withheld or been exercised, and shall within such five-day period, deliver such new Warrant to the Person designated for delivery in the Exercise Agreement.

(iii) The Common Stock issuable upon the exercise of this Warrant shall be deemed to have been issued to the Purchaser at the Exercise Time, and the

Purchaser shall be deemed for all purposes to have become the record holder of such Common Stock at the Exercise Time.

(iv) The issuance of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Registered Holder or the Purchaser for any issuance tax in respect thereof if issued to the Registered Holder or other cost incurred by the Company in connection with such exercise and the related issuance of shares of Common Stock. Each share of Common Stock issuable upon exercise of this Warrant shall upon payment of the Exercise Price therefor, be fully paid and nonassessable and free from all liens and charges with respect to the issuance thereof.

(v) The Company shall not close its books against the transfer of this Warrant or of any share of Common Stock issued or issuable upon the exercise of this Warrant in any manner which interferes with the timely exercise of this Warrant. The Company shall from time to time take all such action as may be necessary to assure that the par value per share of the unissued Common Stock acquirable upon exercise of this Warrant is at all times equal to or less than the Exercise Price then in effect.

(vi) The Company shall reasonably assist and cooperate with any Registered Holder or Purchaser required to make any governmental filings or obtain any governmental approvals prior to or in connection with any exercise of this Warrant (including, without limitation, making any filings required to be made by the Company, but excluding the filing of any registration statement with the Securities and Exchange Commission, other than any registration statement which the Company is contractually or otherwise required to file).

(vii) Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a registered public offering or the sale of the Company, the exercise of any portion of this Warrant may, at the election of the holder hereof, be conditioned upon the consummation of the public offering or sale of the Company in which case such exercise shall not be deemed to be effective until the consummation of such transaction.

(viii) The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of issuance upon the exercise of the Warrants, such number of shares of Common Stock issuable upon the exercise of all outstanding Warrants. All shares of Common Stock which are so issuable shall, when issued against payment of the Aggregate Exercise Price therefor, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Company shall take all such actions as may be reasonably necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance, and excluding the filing of any registration statement, other than any registration statement with the Securities and Exchange Commission which the Company is contractually or otherwise required to file). The Company shall not take any action

which would cause the number of authorized but unissued shares of Common Stock to be less than the number of such shares required to be reserved hereunder for issuance upon exercise of the Warrants.

1C. Exercise Agreement. Upon any exercise of this Warrant, the Exercise Agreement shall be substantially in the form set forth in Exhibit I hereto, except that if the shares of Common Stock are not to be issued in the name of the Registered Holder of this Warrant, the Exercise Agreement shall also state the name of the Person to whom the certificates for the shares of Common Stock are to be issued, and if the number of shares of Common Stock to be issued does not include all the shares of Common Stock purchasable hereunder, it shall also state the name of the Person to whom a new Warrant for the unexercised portion of the rights hereunder is to be delivered, and shall, unless such transfer or assignment of shares or this Warrant has been registered under applicable securities laws, be accompanied by an opinion of counsel reasonably satisfactory to the Company that such transfer may be made without such registration. Such Exercise Agreement shall be dated the actual date of execution thereof.

1D. Fractional Shares. If a fractional share of Common Stock would, but for the provisions of Section 1A, be issuable upon exercise of the rights represented by this Warrant, the Company shall, unless prohibited by any agreement to which the Company is a party, within five Business Days after the date of the Exercise Time, deliver to the Purchaser a check payable to the Purchaser in lieu of such fractional share in an amount equal to the difference between Market Price of such fractional share as of the date of the Exercise Time and the Exercise Price of such fractional share.

Section 2. Adjustment of Exercise Price and Number of Shares. In order to prevent dilution of the rights granted under this Warrant, the Exercise Price shall be subject to adjustment from time to time as provided in this Section 2, and the number of shares of Common Stock obtainable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 2.

2A. Adjustment of Exercise Price and Number of Shares upon Issuance of Common Stock.

(i) If and whenever after the Date of Issuance of this Warrant, the Company issues or sells, or in accordance with Section 2B is deemed to have issued or sold, any share of Common Stock for a consideration per share less than (x) eighty percent (80%) of the Market Price of the Common Stock at such time or (y) the Exercise Price in effect immediately prior to such time (the greater of such amounts being referred to herein as, the “Adjustment Multiplier”), then immediately upon such issue or sale or deemed issue or sale, the Exercise Price shall be reduced to the Exercise Price determined by multiplying (x) the Exercise Price in effect immediately prior to such issue or sale by (y) the quotient obtained by dividing (i) the sum of (A) the product determined by multiplying the Adjustment Multiplier by the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale, plus (B) the consideration, if any, received by the Company upon such issue or sale, by (ii) the product determined by multiplying the Adjustment Multiplier by the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale. Upon each such adjustment of

the Exercise Price hereunder, the number of shares of Common acquirable upon exercise of this Warrant shall be adjusted to the number of shares determined by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock acquirable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment.

(ii) Notwithstanding the foregoing, there shall be no adjustment to the Exercise Price or the number of shares of Common Stock obtainable upon exercise of this Warrant with respect to a Permitted Issuance.

2B. Effect on Exercise Price of Certain Events. For purposes of determining the adjusted Exercise Price under Section 2A, the following shall be applicable:

(i) Issuance of Rights or Options. If the Company in any manner grants or sells any Options and the price per share for which Common Stock is issuable upon the exercise of such Options, or upon conversion or exchange of any Convertible Securities issuable upon exercise of such Options, is less than the Adjustment Multiplier, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Options for such price per share. For purposes of this paragraph, the “price per share for which Common Stock is issuable” shall be determined by dividing (A) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of such Options, plus the minimum aggregate amount of additional consideration payable to the Company upon exercise of all such Options, plus in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of such Convertible Securities and the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options. No further adjustment of the Exercise Price or the number of shares of Common Stock issuable hereunder shall be made when Convertible Securities are actually issued upon the exercise of such Options or when Common Stock is actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the price per share for which Common Stock is issuable upon conversion or exchange thereof is less than the Adjustment Multiplier, then the maximum number of shares of Common Stock issuable upon conversion or exchange of such Convertible Securities shall be deemed to be outstanding and to have been issued and sold by the Company the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this paragraph, the “price per share for which Common Stock is issuable” shall be determined by dividing (A) the total amount received or receivable by the Company as consideration for the issue

or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment of the Exercise Price or the number of shares of Common Stock issuable hereunder shall be made when Common Stock is actually issued upon the conversion or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustments of the Exercise Price or the number of shares of Common Stock issuable hereunder had been or are to be made pursuant to other provisions of this Section 2, no further adjustment of the Exercise Price or the number of shares of Common Stock issuable hereunder shall be made by reason of such issue or sale.

(iii) Change in Option Price or Conversion Rate. If, in the case of Options and Convertible Securities issued on or after the Date of Issuance, the purchase price provided for in any such Options, the additional consideration, if any, payable upon the conversion or exchange of any such Convertible Securities or the rate at which any such Convertible Securities are convertible into or exchangeable for Common Stock changes at any time, the Exercise Price in effect at the time of such change shall be immediately adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold, and the number of shares of Common Stock issuable hereunder shall be correspondingly adjusted. For purposes of Section 2B, if the terms of any Option or Convertible Security which was outstanding as of the Date of Issuance are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change.

(iv) Treatment of Expired Options and Unexercised Convertible Securities. Upon the expiration of any Option or the termination of any right to convert or exchange any Convertible Security without the exercise of any such Option or right, the Exercise Price then in effect hereunder shall be adjusted immediately to the Exercise Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Security, to the extent outstanding immediately prior to such expiration or termination, never been issued, and the number of shares of Common Stock issuable hereunder shall be correspondingly adjusted. For purposes of Section 2B, the expiration or termination of any Option or Convertible Security which was outstanding as of the Date of Issuance shall not cause the Exercise Price or the number of shares Common Stock issuable hereunder to be adjusted unless, and only to the extent that, a change in the terms of such Option or Convertible Security caused it to be deemed to have been issued after the Date of Issuance.

the Company therefor (net of discounts, commissions and related expenses). If any Common Stock, Option or Convertible Security is issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company shall be the Market Price thereof as of the date of receipt. If any Common Stock, Option or Convertible Security is issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Option or Convertible Security, as the case may be. The fair value of any consideration other than cash and securities shall be reasonably determined by the Board of Directors of the Company in good faith; provided, however, that in the event any Common Stock, Options or Convertible Securities are issued or sold or deemed to be issued or sold and such Common Stock, Options or Convertible Securities represent (on an as-converted basis) greater than 10% of the Common Stock Deemed Outstanding, then the fair value of such Common Stock, Options or Convertible Securities, as the case may be, shall be the fair value determined by the Board of Directors of the Company in good faith; provided that the Company shall notify the Registered Holder of such determination in writing and such Registered Holder may, within five (5) Business Days of such notification, advise the Company that it disputes fair value. If such parties are unable to reach agreement within a reasonable period of time after notification of such disputed valuation, such fair value shall be determined by an independent appraiser experienced in valuing such type of consideration jointly selected by the Company and the Registered Holder. The determination of such appraiser shall be final and binding upon the parties, and the fees and expenses of such appraiser shall be borne equally by the Company, on the one hand, and the Registered Holder and the other holders of Warrants disputing such fair value, on the other hand.

(vi) Integrated Transactions. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Option by the parties thereto, the consideration for the Option shall be the Market Price thereof.

(vii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any Subsidiary, and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock.

(viii) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (a) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (b) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or upon the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

2C. Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of shares of Common Stock obtainable upon exercise of this Warrant shall be proportionately increased (and any other appropriate actions shall be taken by the Company) so that the holder of any Warrant thereafter surrendered for exercise (without actually requiring this Warrant to be exercised and without regard to any limitations on exercise set forth in this Warrant or otherwise) shall be entitled to receive the number of shares of Common Stock or other securities of the Company that such holder would have owned or would have been entitled to receive upon or by reason of the events described above, had such Warrant been exercised immediately (without actually requiring this Warrant to be exercised and without regard to any limitations on exercise set forth in this Warrant or otherwise) prior to the occurrence of such event. If the Company at any time combines (by reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of shares of Common Stock obtainable upon exercise of this Warrant (without actually requiring this Warrant to be exercised and without regard to any limitations on exercise set forth in this Warrant or otherwise) shall be proportionately decreased (and any other appropriate actions shall be taken by the Company) so that the holder of any Warrant thereafter surrendered for exercise shall be entitled to receive the number of shares of Common Stock or other securities of the Company that such holder would have owned or would have been entitled to receive upon or by reason of the events described above, had such Warrant been exercised immediately (without actually requiring this Warrant to be exercised and without regard to any limitations on exercise set forth in this Warrant or otherwise) prior to the occurrence of such event.

2D. Reorganization, Reclassification, Consolidation, Merger or Sale. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets or other transaction, in each case which is effected in such a manner that the holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, is referred to herein as an “Organic Change.” Prior to the consummation of any Organic Change, the Company shall make appropriate provisions (in form and substance satisfactory to the Registered Holder) to insure that each of the holders of the Warrants shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the exercise of such holder’s Warrant, such shares of stock, securities or assets as such holder would have received in connection with such Organic Change if such holder had exercised its Warrant (without actually requiring this Warrant to be exercised and without regard to any limitations on exercise set forth in this Warrant or otherwise) immediately prior to such Organic Change. In each such case, the Company shall also make appropriate provisions (in form and substance satisfactory to the Registered Holder) to insure that the provisions of this Section 2 and Sections 3 and 4 hereof shall thereafter be applicable to the Warrants (including, in the case of any such consolidation, merger or sale in which the successor entity or purchasing entity is other than the Company, an immediate adjustment of the Exercise Price to the value for the Common Stock reflected by the terms of such consolidation, merger or sale, and a corresponding immediate adjustment in the

number of shares of Common Stock acquirable and receivable upon exercise of the Warrants, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger or sale). The Company shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor entity (if other than the Company) resulting from consolidation or merger or the entity purchasing such assets assumes by written instrument (in form and substance satisfactory to the Registered Holder), the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire.

2E. Certain Distributions. In case the Company shall at any time or from time to time, prior to exercise of this Warrant, distribute to all holders of shares of the Common Stock (including any such distribution made in connection with a merger or consolidation in which the Company is the resulting or surviving Person and the Common Stock is not changed or exchanged) cash, evidences of indebtedness of the Company or another issuer, securities of the Company or another issuer or other assets (excluding dividends payable in shares of Common Stock for which adjustment is made under another paragraph of this Section 2, any distribution in connection with a Permitted Issuance and any Liquidating Dividend) or rights or warrants to subscribe for or purchase of any of the foregoing, then, and in each such case, the Exercise Price then in effect shall be adjusted (and any other appropriate actions shall be taken by the Company) by multiplying the Exercise Price in effect immediately prior to the date of such distribution by a fraction (x) the numerator of which shall be the Market Price of the Common Stock immediately prior to the date of distribution less the then fair market value (as determined by the Board of Directors in the exercise of their fiduciary duties) of the portion of the cash, evidences of indebtedness, securities or other assets so distributed or of such rights or warrants applicable to one share of Common Stock and (y) the denominator of which shall be the Market Price of the Common Stock immediately prior to the date of distribution (but such fraction shall not be greater than one); provided, however, that no adjustment shall be made with respect to any distribution of rights or warrants to subscribe for or purchase securities of the Company if the holder of this Warrant would otherwise be entitled to receive such rights or warrants upon exercise at any time of Warrants into Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective retroactively to a date immediately following the close of business on the record date for the determination of stockholders entitled to receive such distribution.

2F. Certain Events. If any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of Directors shall make an appropriate adjustment in the Exercise Price and the number of shares of Common Stock obtainable upon exercise of this Warrant so as to protect the rights of the holders of the Warrants; provided that no such adjustment shall increase the Exercise Price as otherwise determined pursuant to this Section 2 or decrease the number of shares of Common Stock obtainable as otherwise determined pursuant to this Section 2.

2G. Notices.

(i) Immediately upon any adjustment of the Exercise Price, the Company shall give written notice thereof to the Registered Holder, setting forth in reasonable detail and certifying the calculation of such adjustment.

(ii) The Company shall give written notice to the Registered Holder at least 20 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to vote with respect to any Organic Change, dissolution or liquidation.

(iii) The Company shall also give written notice to the Registered Holders at least 20 days prior to the date on which any Organic Change, dissolution or liquidation shall take place.

Section 3. Liquidating Dividends. If the Company declares or pays a dividend upon the Common Stock payable otherwise than in cash out of earnings or earned surplus (determined in accordance with generally accepted accounting principles, consistently applied) except for a stock dividend payable in shares of Common Stock (a “Liquidating Dividend”), then the Company shall pay to the Registered Holder of this Warrant at the time of payment thereof the Liquidating Dividend which would have been paid to such Registered Holder on the Common Stock had this Warrant been fully exercised (without actually requiring this Warrant to be exercised and without regard to any limitations on exercise set forth in this Warrant or otherwise) immediately prior to the date on which a record is taken for such Liquidating Dividend, or, if no record is taken, the date as of which the record holders of Common Stock entitled to such dividends are to be determined.

Section 4. Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights (including any Rights) to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Registered holder of this Warrant shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

Section 5. Definitions. The following terms have meanings set forth below:

“Business Day” means any day other than a Saturday, Sunday, or any day on which banks in New York City are authorized or obligated by applicable law to close.

“Common Stock” means, collectively, the Company’s Common Stock, par value $0.01 per share (and any associated Rights) and any capital stock of any class of the Company hereafter authorized which is not limited to a fixed sum or percentage of par or stated value in respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Company.

“Common Stock Deemed Outstanding” means at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock issuable upon exercise of Options outstanding at such time or upon conversion of Convertible Securities (including the Series C Preferred Stock and this Warrant) outstanding at such time.

“Convertible Securities” means any stock or securities (directly or indirectly) convertible into or exchangeable for Common Stock.

“Market Price” of any security means the average of the closing prices of such security’s sales on all securities exchanges on which such security may at the time be listed, or, if there has been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case (i) averaged over a period of 30 days consisting of the day as of which “Market Price” is being determined and the 29 consecutive Business Days prior to such day, and (ii) averaged on a volume-weighted basis based on the trading volume for each such Business Day. If at any time such security is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the “Market Price” shall be the fair value thereof determined by the Board of Directors of the Company in good faith; provided that the Company shall notify the Registered Holder of such determination in writing and such Registered Holder may, within five (5) Business Days of such notification, advise the Company that it disputes fair value. If such parties are unable to reach agreement within a reasonable period of time after notification of such disputed valuation, such fair value shall be determined by an independent appraiser experienced in valuing securities jointly selected by the Company and the Registered Holder. The determination of such appraiser shall be final and binding upon the parties, and the fees and expenses of such appraiser shall be borne equally by the Company, on the one hand, and the Registered Holder and the other holders of Warrants disputing such fair value, on the other hand.

“Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

“Permitted Issuance” means (i) the granting of Options to purchase Common Stock, or other stock-based benefits, to employees, directors or consultants of the Company or the exercise thereof, pursuant to any reservation under any employee benefit plan to the extent and as in effect on the date of this Warrant, or approved thereafter by the Board of Directors and stockholders of the Company, including the holders of at least a majority of the Common Stock issuable upon exercise of the Warrants issued under the Purchase Agreement, (ii) the issuance of Common Stock upon conversion of the Series C Preferred Stock or Series B Preferred Stock, (iii) the issuance of Common Stock pursuant to the exercise of Options, Convertible Securities or other rights to acquire Common Stock that are outstanding on the date of this Warrant, (iv) shares of Common Stock, or Options or Convertible Securities to purchase shares of Common Stock, issued or issuable by reason of a dividend, stock split, split-up or other distribution on

shares of Common Stock, or a recapitalization, to the extent covered by Subsection 2C, 2D, 3 or 4 above, (v) shares of Common Stock, or Options or Convertible Securities to purchase shares of Common Stock, issued or issuable to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Company in an aggregate amount not to exceed 1% of the Common Stock Deemed Outstanding as of the date hereof, (vi) the issuance of shares of Common Stock, or Options or Convertible Securities to purchase shares of Common Stock, in licensing or collaborative arrangements, or in strategic partnerships, to the other party to such arrangement or partnership in connection with the licensing of technology approved by the Board of Directors of the Company in an aggregate amount not to exceed 1% of the Common Stock Deemed Outstanding as of the date hereof, and (viii) the issuance of Common Stock, or Options or Convertible Securities to purchase shares of Common Stock, in connection with any acquisition or merger to the extent approved by the Board of Directors, including the ABRY Director (as defined in the Purchase Agreement) to the seller in such acquisition or merger.

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

“Right” has that meaning set forth in that certain Rights Agreement dated as of November 27, 2002, by and between the Company and Wells Fargo Bank Minnesota, National Association, as Rights Agent, as amended, restated or modified from time to time.

“Series C Preferred Stock Certificate of Designations” means the Certificate of Designations designating the rights and preferences of the Series C Preferred Stock adopted by the Board of Directors.

Other capitalized terms used in this Warrant but not defined herein shall have the meanings set forth in the Purchase Agreement.

Section 6. No Voting Rights; Limitations of Liability. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company. No provision hereof, in the absence of affirmative action by the Registered Holder to purchase Common Stock, and no enumeration herein of the rights or privileges of the Registered Holder shall give rise to any liability of such holder for the Exercise Price of Common Stock acquirable by exercise hereof or as a stockholder of the Company.

Section 7. Warrant Transfer. Neither this Warrant, nor the shares of Common Stock issued upon exercise of this Warrant, may be transferred except pursuant to registration under the Securities Act of 1933, as amended, or an opinion of counsel reasonably acceptable to the Company that such registration is not required. Subject to such transfer conditions, this Warrant and all rights hereunder are transferable, in whole or in part, without charge to the Registered Holder, upon surrender of this Warrant with a properly executed Assignment (in the form of Exhibit II hereto) at the principal office of the Company.

Section 8. Warrant Exchangeable for Different Denominations. This Warrant is exchangeable, upon the surrender hereof by the Registered Holder at the principal office of the

Company, for new Warrants of like tenor representing in the aggregate the purchase rights hereunder, and each of such new Warrants shall represent such portion of such rights as is designated by the Registered Holder at the time of such surrender. The date the Company initially issues this Warrant shall be deemed to be the “Date of Issuance” hereof regardless of the number of times new certificates representing the unexpired and unexercised rights formerly represented by this Warrant shall be issued. All Warrants representing portions of the rights hereunder are referred to herein as the “Warrants.”

Section 9. Replacement. Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of the Registered Holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing the Warrant, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Company (provided that if the holder is a financial institution or other institutional investor its own agreement shall be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Company shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of Warrants of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.

Section 10. Notices. Except as otherwise expressly provided hereunder, all notices referred to herein shall be in writing and shall be delivered by registered or certified mail, return receipt requested and postage prepaid, or by reputable overnight courier service, charges prepaid, and shall be deemed to have been given when so mailed or sent (i) to the Company, at its principal executive offices and (ii) to any Registered Holder, at such holder’s address as it appears in the stock records of the Company (unless otherwise indicated by any such holder).

Section 11. Amendment and Waiver. Except as otherwise provided herein, the provisions of this Warrant 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 Registered Holder of this Warrant.

Section 12. Descriptive Headings; Governing Law. The descriptive headings of the several Sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The corporation laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and its Stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by the internal law of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware.

* * * * * *

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and attested by its duly authorized officers under its corporate seal and to be dated the Date of Issuance hereof.


		SOFTBRANDS, INC.

		By

		Its

[Corporate Seal]


Attest:


Title:

EXHIBIT I

EXERCISE AGREEMENT


To:		Dated:

The undersigned, pursuant to the provisions set forth in the attached Warrant (Certificate No. W-[ ]), hereby agrees to subscribe for the purchase of shares of the Common Stock covered by such Warrant and makes payment herewith in full therefor at the price per share provided by such Warrant.


		Signature


		Address

EXHIBIT II

ASSIGNMENT

FOR VALUE RECEIVED, hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant (Certificate No. W-[ ]) with respect to the number of shares of the Common Stock covered thereby set forth below, unto:


Names of Assignee	Address	No. of Shares


		Signature




		Witness

EX-99.5 6 y12125exv99w5.htm EX-99.5: AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT EX-99.5

EXHIBIT 5

EXECUTION COPY

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

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

years from the date hereof and (y) the date upon which the price for the Common Stock has reached $5.36, 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 (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 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;

(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 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.

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 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 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 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 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

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,

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]

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:
		Name:
		Title:


	CAPITAL RESOURCE PARTNERS IV, L.P.
	By:
		Name:
		Title:


	CRP Partners IV, L.L.C. Its General Partner
	By:
		Name:
		Title:


	ABRY MEZZANINE PARTNERS IV, L.P.

	By:		ABRY MEZZANINE INVESTORS,
			L.P., Its General Partner

	By:		ABRY MEZZANINE HOLDINGS
			LLC, Its General Partner



	By:
		Name:
		Title:

EX-99.6 7 y12125exv99w6.htm EX-99.6: AMENDED AND RESTATED RIGHTS PLAN EX-99.6

EXHIBIT 6

FIRST AMENDMENT

FIRST AMENDMENT, dated as of August 17, 2005 (the “Amendment”), to the Rights Agreement, dated as of November 26, 2002 (the “Rights Agreement”), by and between SoftBrands, Inc., a Delaware corporation (the “Company”) and WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Rights Agent”).

WHEREAS, the Board of Directors has deemed it to be in the best interests of the Company to amend the Rights Agreement to accommodate the purchase of shares of Series C Convertible Preferred Stock of the Company by ABRY Partners LLC and its managed and affiliated investment vehicles; and

WHEREAS, pursuant to the terms of the Rights Agreement, the Company has delivered an officer’s certificate to the Rights Agent which states that the proposed amendment has been approved by a majority of the Board of Directors of the Company and is in compliance with the terms of the section of the Rights Agreement regarding supplements and amendments.

NOW, THEREFORE, in consideration of the premises and mutual agreements hereinafter set forth, the Company and the Rights Agent agree to amend the Rights Agreement as follows:

The definition of “Acquiring Person” contained in Section 1 of the Rights Agreement is hereby amended to read in its entirety as follows:

“Acquiring Person” shall mean any Person that Beneficially Owns 10% or more of the Voting Shares of the Company then outstanding; provided, however, that the term “Acquiring Person” shall not include:

(i) an Exempt Person;

(ii) any Person that would not otherwise be an Acquiring Person but for a reduction in the number of outstanding Voting Shares resulting from a stock repurchase program or other similar plan of the Company or from a self tender offer of the Company, which plan or tender offer commenced on or after the date hereof; provided, however, that the term “Acquiring Person” shall include such Person described in this subclause (ii) from and after the first date upon which (A) such Person, since the date of the commencement of such plan or tender offer, shall have acquired Beneficial Ownership of, in the aggregate, a number of Voting Shares of the Company equal to 1% or more of the Voting Shares of the Company then outstanding and (B) such Person, together with all Affiliates and Associates of such Person, shall Beneficially Own 10% or more of the Voting Shares of the Company then outstanding;

(iii) any Person that would not otherwise be an Acquiring Person but for its Beneficial Ownership of Rights;

(iv) any Person that becomes the Beneficial Owner of 10% or more of the outstanding Voting Shares of the Company solely as the result of the distribution to such person of Voting Shares pursuant to the AremisSoft Plan of Reorganization; provided, however, that the term Acquiring Person shall include any such Person (A) who, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner or 10% or more of the outstanding Voting Shares of the Company because of the purchase, acquisition or transfer of the right to receive such a distribution pursuant to the AremisSoft Plan of Reorganization after the Distribution Record Date (as defined in the AremisSoft Plan of Reorganization), or (B) who shall have acquired, without the prior approval of the Board of Directors of the Company, Beneficial Ownership of additional Voting Shares after November 26, 2002, other than as a result of such AremisSoft Plan of Reorganization equal to 1% of the then outstanding Voting Shares of the Company and, together with all Affiliates and Associates of such Person, shall Beneficially Own more than 10% or more of the Voting Shares of the Company then outstanding;

(v) any transferee, assignee or purchaser from CRP of any of those certain Common Stock Purchase Warrants dated August 18, 2004, or any replacement or substitute warrants or any Voting Shares issued or issueable under those certain Common Stock Purchase Warrants dated August 18, 2004, or any transferee, assignee or purchaser from CRP of shares of Series B Convertible Preferred Stock, or of any replacement or substitute warrants or shares of Series B Convertible Preferred Stock, each to the extent such Person would, absent the operation of this clause (v), have become an Acquiring Person solely because of the acquisition of warrants, Series B Convertible Preferred Stock or Voting Shares from CRP; provided, however, that the term “Acquiring Person” shall include such Person described in this subclause (v) from and after the first date upon which (A) such Person, since the date of acquisition from CRP, shall have acquired Beneficial Ownership of, in the aggregate, a number of additional Voting Shares of the Company equal to 1% or more of the Voting Shares of the Company then outstanding and (B) such Person, together with all Affiliates and Associates of such Person, shall Beneficially Own 10% or more of the Voting Shares of the Company then outstanding;

(vi) any transferee, assignee or purchaser from ABRY or CRP of any of those certain Common Stock Purchase Warrants dated August 17, 2005, or any replacement or substitute warrants or any Voting Shares issued or issueable under those certain Common Stock Purchase Warrants dated August 17, 2005, or any transferee, assignee or purchaser from ABRY or

CRP of shares of Series C Convertible Preferred Stock, or of any replacement or substitute shares of Series C Convertible Preferred Stock or any Voting Shares issued or issuable upon conversion of such Series C Convertible Preferred Stock, each to the extent such Person would, absent the operation of this clause (vi), have become an Acquiring Person solely because of the acquisition of warrants, Series C Convertible Preferred Stock or Voting Shares from ABRY or CRP; provided, however, that the term “Acquiring Person” shall include such Person described in this subclause (vi) from and after the first date upon which (A) such Person, since the date of acquisition from ABRY or CRP shall have acquired Beneficial Ownership of, in the aggregate, a number of additional Voting Shares of the Company equal to 1% or more of the Voting Shares of the Company then outstanding and (B) such Person, together with all Affiliates and Associates of such Person, shall Beneficially Own 10% or more of the Voting Shares of the Company then outstanding; or

(vii) any Person that is the Beneficial Owner of 10% or more of the outstanding Voting Shares of the Company solely as the result of the operation of clause (iv) of the definition of “Beneficial Owner” if and during such period as the Board of Directors shall have determined that the operation of such clause should be waived in the best interests of the Company and its stockholders; provided, however, that any determination pursuant to this clause (vii) shall have been made prior to any change in the composition of the Board of Directors following the date that such Person shall have become the Beneficial Owner of such Voting Shares if such change in composition involved the election of two or more new members of the Board of Directors.

In calculating the percentage of the outstanding Voting Shares that are Beneficially Owned by a Person for purposes of this definition, Voting Shares that are Beneficially Owned by such Person shall be deemed outstanding, and Voting Shares that are not Beneficially Owned by such Person and that are subject to issuance upon the exercise or conversion of outstanding conversion rights, exchange rights, rights, warrants or options shall not be deemed outstanding. Any determination made by the Board of Directors of the Company as to whether any Person is or is not an Acquiring Person shall be conclusive and binding upon all holders of Rights.

The definition of “Exempt Person” contained in Section 1 of the Rights Agreement is hereby amended to read in its entirety as follows:

“Exempt Person” shall mean (i) AremisSoft Corporation; (ii) any disbursing agent for the shares of the Company pursuant to the AremisSoft Plan of Reorganization; (iii) any Trustee, Lead Class Counsel or Class Representative pursuant to the AremisSoft Trust Agreement; (iv) any other person who receives Voting Shares of the Company temporarily pursuant to the AremisSoft Plan of

Reorganization solely to facilitate the redistribution of such securities to their ultimate beneficial owner (but Exempt Person shall not include such ultimate beneficial owner), (v) any wholly-owned Subsidiary of the Company, (vi) any employee benefit plan of the Company or of a Subsidiary of the Company, (vii) any Person holding Voting Shares for or pursuant to the terms of any such employee benefit plan, (viii) Capital Resource Partners IV, L.P., a Delaware limited partnership, CRP Investment Partners IV, LLC, a Delaware limited partnership, CRP Partners IV, L.L.C., Capital Resource Management, Inc. and their respective Associates or Affiliates (collectively, “CRP”), and (ix) ABRY Mezzanine Partners, L.P., ABRY Mezzanine Investors, L.P., ABRY Mezzanine Holdings LLC, ABRY Investment Partnership, L.P., ABRY Investment GP, LLC, ABRY Partners LLC and their respective Associates and Affiliates (collectively “ABRY”).

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


		WELLS FARGO BANK, NATIONAL ASSOCIATION

		By

		Its


		SOFTBRANDS, INC.

		By:

		Its

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


CUSIP No. 83402A107

	1.	Name of Reporting Person: ABRY Mezzanine Partners, L.P.			I.R.S. Identification Nos. of above persons (entities only): 10-0000307

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

	3.	SEC Use Only:

	4.	Source of Funds (See Instructions): WC

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

	6.	Citizenship or Place of Organization: Delaware

Number of Shares Beneficially Owned by Each Reporting Person With
			7.	Sole Voting Power: None

			8.	Shared Voting Power: 8,462,687 (See Item Number 5)

			9.	Sole Dispositive Power: None

			10.	Shared Dispositive Power: 8,462,687 (See Item Number 5)

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person: 8,462,687

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

	13.	Percent of Class Represented by Amount in Row (11): 21.1%

	14.	Type of Reporting Person (See Instructions): PN


CUSIP No. 83402A107

	1.	Name of Reporting Person: Royce Yudkoff			I.R.S. Identification Nos. of above persons (entities only):

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

	3.	SEC Use Only:

	4.	Source of Funds (See Instructions): Not Applicable

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

	6.	Citizenship or Place of Organization: United States

Number of Shares Beneficially Owned by Each Reporting Person With
			7.	Sole Voting Power: None

			8.	Shared Voting Power: 8,462,687 (See Item Number 5)

			9.	Sole Dispositive Power: None

			10.	Shared Dispositive Power: 8,462,687 (See Item Number 5)

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person: 8,462,687

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

	13.	Percent of Class Represented by Amount in Row (11): 21.1%

	14.	Type of Reporting Person (See Instructions): IN