DIVIDEND
PAYMENT AGREEMENT
THIS AGREEMENT , is made and entered into as of the
31 st
day of
December 2008, by and between SoftBrands, Inc., a Delaware
corporation (“ SoftBrands ”), ABRY Mezzanine
Partners, L.P. (“ ABRY ”) and Capital Resource
Partners IV, L.P. (“ CRP ” and together with
ABRY, the “ Holders ”).
WHEREAS , the Holders hold all (100%) of the shares of the
outstanding Series C-1 Convertible Preferred Stock (“
Series C-1 Stock ”) and Series D Convertible
Preferred Stock (“ Series D Stock ”) of
SoftBrands;
WHEREAS , the Series C-1 Stock and Series D Stock
require SoftBrands to pay cash dividends equal to 8% per annum of
their Liquidation Value semi-annually on the last day of December
and June of each year and the dividends due on each of
December 31, 2008 and June 30, 2009 on such stock would
aggregate $981,333 for December 31, 2008 and $965,333 for
June 30, 2009; and
WHEREAS , SoftBrands desires to conserve cash during the
current economic downturn and both of the Holders are willing to
accept the dividends due on December 31, 2008 by delivery of
shares of SoftBrands common stock, $.01 par value (the “
Common Stock ”) having a value, based on the average
closing price of such common stock during the thirty calendar days
preceding such date, equal to the cash dividend, provided that they
both also have the option, but not the obligation, to elect to
receive the dividend due June 30, 2009 on the same
basis.
NOW, THEREFORE , in consideration of the foregoing recitals,
and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties agree as
follows:
1.
December 31, 2008 Dividend . Notwithstanding
Section 2A of the Certificate of Designations, Preferences and
Rights of the Series C-1 Convertible Preferred Stock of
SoftBrands, Inc. (the “ C-1 Designations ”) and
Section 2A of the Certificate of Designations, Preferences and
Rights of the Series D Convertible Preferred Stock of
SoftBrands, Inc. (the “ D Designations ”), each
of the Holders hereby accepts, in payment in full of the dividend
due under the C-1 Designations and the D Designations at
December 31, 2008, and in lieu of the cash dividend due on
such date, the number of shares of Common Stock (the “
12/31 Shares ”) of SoftBrands equal to the cash
dividend otherwise payable to each Holder on such date as set forth
on the attached Exhibit A, divided by the average closing
price of the Common Stock as reported on the NYSE AlterNext (the
“ Trading Market ”) for the thirty calendar days
ended on, and including, December 30, 2008 (the “
Purchase Price ”). SoftBrands agrees to issue, and is
issuing simultaneous herewith by instruction to its transfer agent,
certificates representing the 12/31 Shares, such certificates to be
promptly delivered to the Holders by the transfer agent at the
addresses set forth under Section 5.1, below. The Holders
agree that all obligations of SoftBrands with respect to the
dividend due under the C-1 Designations and D Designations with
respect to their Series C-1 Stock and Series D Stock
shall be satisfied by issuance of the 12/31 Shares and that
SoftBrands shall be in full compliance with any covenant or
agreement contained in the Series C Convertible Preferred
Stock and Warrant Purchase Agreement dated as of August 17,
2005, as amended by the First Amendment, Waiver and Consent to
Series C Convertible Preferred Stock and Warrant Purchase
Agreement dated August 14, 2006 (as amended, the “
Series C-1 Agreement ”), and the Series D
Convertible Preferred Stock and Warrant Purchase Agreement dated as
of August 14, 2006 (the “ Series D Agreement
”), with respect to dividend payments through
December 31, 2008.
2.
June 30, 2009 Dividend . SoftBrands agrees that,
provided that they continue to hold all of their Series C-1
Stock and Series D Stock at all times through June 30,
2009, either or both of the Holders may, but shall not be obligated
to, elect to receive the cash dividend due with respect to the
Series C-1 Stock and Series D Stock on June 30, 2009
by delivery of the number of shares of Common Stock (the
“
6/30 Shares ” and together with the 12/31 Shares, the
“ Shares ”) equal to amount of the dividend to
be so paid to such holder, as set forth on the attached
Exhibit A, divided by the Purchase Price. Each Holder may
exercise such election with respect to all, but not less than all,
of the Series C-1 and Series D Stock that such Holder holds by
notifying SoftBrands in writing prior to 5:00 p.m. Central Time on
May 15, 2009. To the extent a Holder so elects, SoftBrands
shall promptly issue on June 30, 2009 by instruction to its
transfer agent for delivery to ABRY or CRP, or both of them, the
6/30 Shares, and upon such issuance, the cash dividend due under
the C-1 Designations and the D Designations at December 31,
2008, with respect to the electing Holder shall be deemed paid in
full, and SoftBrands shall be deemed in compliance under the
Series C-1 Agreement and Series D Agreement with respect
to the payment of such dividend.
3.
Private Placement . The Holders acknowledge that the 12/31
Shares are being, and any of the 6/30 Shares will be, issued
without registration under the Securities Act of 1933, as amended
(the “ Securities Act ”), and applicable state
securities laws in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act and under state
securities laws. Each Holder represents and warrants to SoftBrands
that: (i) the Holder is an “accredited investor”
as defined in Regulation D under the Securities Act, is
knowledgeable, sophisticated and experienced in making, and is
qualified to make decisions with respect to, investments in
securities presenting an investment decision similar to that
involved in the purchase of the Shares, (ii) the Holder has
received and reviewed the reports filed by SoftBrands with the
Securities and Exchange Commission (the “ SEC
”), including, without limitation, the risks relating to
SoftBrands described in SoftBrands’s annual report on Form
10-K for the year ended September 30, 2008, and has requested,
received, reviewed and considered all other information it deemed
relevant in making an informed decision to purchase the Shares;
(iii) the Holder understands that the Shares are
“restricted securities” and have not been registered
under the Securities Act and is acquiring the Shares in the
ordinary course of its business and for its own account for
investment only, and has no arrangement or understanding with any
other persons regarding the distribution of such Shares (this
representation and warranty not limiting the Holder’s right
to sell Shares pursuant to the Registration Statement (as defined
below) or otherwise); and (iv) the Holder will not, directly
or indirectly, offer, sell or otherwise dispose of (or solicit any
offers to buy, purchase or otherwise acquire) any of the Shares
except in compliance with the Securities Act, applicable state
securities laws and the respective rules and regulations
promulgated thereunder. Each Holder acknowledges and agrees that
any certificates representing the Shares will be imprinted with the
following restrictive legend:
THESE
SECURITIES HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) AND APPLICABLE STATE SECURITIES LAWS IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION, AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD 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 LAWS.
4.1 Registration Procedures and Expenses.
Softbrands:
(a) shall,
subject to receipt of necessary information from the Holders,
prepare and file with the Securities and Exchange Commission
(“ SEC ”) as promptly as possible, and in any
event prior to July 15, 2009 (the “ Filing
Date”) , a Registration Statement on Form S-3 (the
“ Registration Statement ”), to enable the
resale of any Shares, together with any securities issued or
issuable upon any
stock
split, dividend or other distribution, recapitalization or similar
event with respect to the foregoing (collectively, the “
Registrable Securities ”) by the Holders on a
continuous basis pursuant to Rule 415 of the Securities
Act;
(b) shall
use its best efforts, subject to receipt of necessary information
from the Holders, to cause the Registration Statement to become
effective as soon as practicable, such efforts to include, without
limiting the generality of the foregoing, preparing and filing with
the SEC any financial statements that are required to be filed
prior to the effectiveness of such Registration
Statement;
(c) shall
use its best efforts to (i) prepare and file with the SEC such
amendments and supplements to the Registration Statement and the
Prospectus as may be necessary to keep the Registration Statement
current and effective for a period (the “ Effectiveness
Period ”) ending on the earlier of (A) the second
anniversary of the Filing Date, or (B) the date on which the
(x) Holders may sell Registrable Securities pursuant
Rule 144(b)(ii) under the Securities Act or any successor rule
(“ Rule 144 ”) or (y) such time as all
Registrable Securities have been sold pursuant to a registration
statement or Rule 144; (ii) notify each Holder promptly
upon the Registration Statement, and each post-effective amendment
thereto, being declared effective by the SEC; (iii) respond as
promptly as reasonably possible to any comments received from the
SEC with respect to the Registration Statement or any amendment
thereto and as promptly as reasonably possible provide the Holders
true and complete copies of all correspondence from and to the SEC
relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the
Securities Exchange Act of 1934, as amended (the “
Exchange Act ”) with respect to the disposition of all
Registrable Securities covered by the Registration Statement during
the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration
Statement as so amended or in such Prospectus as so
supplemented;
(d) shall
bear all expenses of SoftBrands and the Holders incident to the
performance of or compliance with the registration rights contained
in Section 4 of this Agreement by SoftBrands and the Holders,
including without limitation (a) all registration and filing
fees and expenses, including without limitation those related to
filings with the SEC, any Trading Market and in connection with
applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing
certificates for Registrable Securities and of printing
prospectuses requested by the Holders), (c) messenger,
telephone and delivery expenses, (d) fees and disbursements of
counsel for SoftBrands, (e) fees and expenses of all other
persons retained by SoftBrands in connection with the consummation
of the transactions contemplated by this Agreement, (f) all
listing fees to be paid by SoftBrands to the Trading Market; and
(g) the fees and expenses of one legal counsel retained by the
Holdersin connection the registration and sale of Registrable
Securities pursuant hereto, but excluding any underwriting or
brokerage fees or commissions;
(e) shall
use its commercially reasonable efforts to: (i) make and keep
public information available, as those terms are understood and
defined in Rule 144, until the earlier of (A) such date
as all of the Holder’s Registrable Securities may be resold
pursuant to Rule 144(b)(ii) or any other rule of similar
effect or (B) such date as all of the Holder’s
Registrable Securities shall have been resold; (ii) file with
the SEC in a timely manner all reports and other documents required
of SoftBrands under the Securities Act and under the Exchange Act;
and (iii) furnish to the Holder upon request, as long as the
Holder owns any Registrable Securities, (A) a written
statement by SoftBrands that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, (B) a
copy of SoftBrands’s most recent Annual Report on Form 10-K
or Quarterly Report on Form 10-Q, and (C) such other
information as may be reasonably requested in order to avail the
Holder of any rule or regulation of the SEC that permits the
selling of any such Registrable Securities without
registration;
(f) shall
not, and shall use its best efforts to ensure that no Affiliate of
SoftBrands shall, sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Registrable Securities in a manner that
would require the registration under the Securities Act of the sale
of the Registrable Securities to the Holders or that would be
integrated with the offer or sale of the Securities for purposes of
the rules and regulations of any Trading Market;
(g) shall
notify the Holders of Registrable Securities to be sold as promptly
as reasonably possible, and (if requested by any such person) of
any of the following events: (i) the SEC notifies SoftBrands
whether there will be a “review” of any Registration
Statement; (ii) the SEC comments in writing on any
Registration Statement (in which case SoftBrands shall deliver to
each Holder a copy of such comments and of all written responses
thereto); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the SEC
or any other Federal or state governmental authority requests any
amendment or supplement to any Registration Statement or Prospectus
or requests additional information related thereto; (v) the
SEC issues any stop order suspending the effectiveness of any
Registration Statement or initiates any proceedings for that
purpose; (vi) SoftBrands receives notice of any suspension of
the qualification or exemption from qualification of any
Registrable Securities for sale in any jurisdiction, or the
initiation or threat of any proceeding for such purpose; or
(vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any statement
made in any Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference is
untrue in any material respect or any revision to a Registration
Statement, Prospectus or other document is required so that it 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;
(h) shall
furnish to each Holder, without charge, at least one conformed copy
of each Registration Statement and each amendment thereto,
including financial statements and schedules promptly after the
filing of such documents with the SEC, and to the extent requested
by such person all documents incorporated or deemed to be
incorporated therein by reference and all exhibits (including those
previously furnished or incorporated by reference);
(i) shall
promptly deliver to each Holder, without charge, as many copies of
the Prospectus or Prospectuses (including each form of prospectus)
and each amendment or supplement thereto as such persons may
reasonably request. Subject to the provisions of this Agreement,
including provisions related to any Suspension (as hereafter
defined), SoftBrands hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or
supplement thereto;
(j) shall
(i) in the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares
listing application covering all of the Registrable Securities;
(ii) take all reasonable steps necessary to cause such
Registrable Securities to be approved for listing on each Trading
Market as soon as possible thereafter; (
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