SBN Softbrands

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant      þ
Filed by a Party other than the Registrant      o
Check the appropriate box:
þ       Preliminary Proxy Statement
o       Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o       Definitive Proxy Statement
o       Definitive Additional Materials
o       Soliciting Material Pursuant to §240.14a-12

SoftBrands, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
o       No fee required.
þ       Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

			1	)		Title of each class of securities to which transaction applies:
						o		Common stock, par value $0.01 per share (“Common Stock”)
						o		Series B Preferred Stock, par value $0.01 per share (“Series B Preferred Stock”)
						o		Series C-1 Preferred Stock, par value $0.01 per share (“Series C-1 Preferred Stock”)
						o		Series D Preferred Stock, par value $0.01 per share (“Series D Preferred Stock”)
			2	)		Aggregate number of securities to which transaction applies:
						o		44,866,535 shares of Common Stock (representing the number of shares of Common Stock outstanding on June 11, 2009, excluding shares of Common Stock held by SoftBrands, Inc. in its treasury and unvested Common Stock);
						o		4,331,540 shares of Series B Preferred Stock (representing the number of shares of Series B Preferred Stock outstanding on June 11, 2009, which were each convertible into 1.024 shares of Common Stock as of June 11, 2009) or 4,435,497 shares of Common Stock;
						o		18,000 shares of Series C-1 Preferred Stock (representing the number of shares of Series C-1 Preferred Stock outstanding on June 11, 2009, which were each convertible into 509.16 shares of Common Stock as of June 11, 2009) or 9,164,970 shares of Common Stock;
						o		6,000 shares of Series D Preferred Stock (representing the number of shares of Series D Preferred Stock outstanding on June 11, 2009, which were each convertible into 612 shares of Common Stock as of June 11, 2009) or 3,671,971 shares of Common Stock;
						o		warrants to purchase 6,299,788 shares of Common Stock (as of June 11, 2009) (“Warrants”);
						o		options to purchase 8,682,390 shares of Common Stock (as of June 11, 2009) (“Options”);
						o		stock appreciation rights with respect to 3,795,500 shares of Common Stock (as of June 11, 2009) (“Stock Appreciation Rights”); and
						o		1,856,119 shares of unvested Common Stock (as of June 11, 2009) representing restricted stock units granted under SoftBrands’ stock and employee plans (“Restricted Stock Units”).

			3	)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
						Calculated solely for the purpose of determining the filing fee . The transaction value was determined based upon the sum of:
						o		$41,277,212 (44,866,535 shares of Common stock multiplied by $0.92 per share);
						o		$4,591,432 (4,331,540 shares of Series B Preferred Stock multiplied by $1.06 per share);
						o		$18,000,000 (18,000 shares of Series C-1 Preferred Stock multiplied by $1,000.00 per share);
						o		$6,000,000 (6,000 shares of Series D Preferred Stock multiplied by $1,000.00 per share);
						o		$0 (0 Warrants with an exercise price of less than $0.92 per share multiplied by the difference between $0.92 and the applicable exercise price of each Warrant);
						o		$180,125 (327,500 Options with an exercise price of less than $0.92 per share multiplied by the difference between $0.92 and the applicable exercise price of each Option);
						o		$479,700 (1,180,000 Stock Appreciation Rights with an exercise price of less than $0.92 per share multiplied by the difference between $0.92 and the applicable grant price of each Stock Appreciation Right); and
						o		$1,707,629 (1,856,119 shares of Common Stock represented by Restricted Stock Units multiplied by $0.92 per share).
						In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was determined by multiplying .0000558 by the proposed maximum aggregate value of the transaction of $72,236,098.
			4	)		Proposed maximum aggregate value of transaction: $72,236,098
			5	)		Total fee paid: $4,031

o		Fee paid previously with preliminary materials:
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	1)		Amount Previously Paid:
	2)		Form, Schedule or Registration Statement No.:
	3)		Filing Party:
	4)		Date Filed:

 

SPECIAL MEETING OF STOCKHOLDERS — MERGER VOTE REQUIRED

 

To the Stockholders of SoftBrands, Inc.:

 

On June 11, 2009, we entered into an Agreement and Plan of Merger with Steel Holdings, Inc. and Steel Merger Sub, Inc., a wholly owned subsidiary of Steel Holdings. If the merger is completed pursuant to the terms of the merger agreement, Steel Merger Sub will be merged with and into SoftBrands, and SoftBrands will become a wholly owned subsidiary of Steel Holdings. Upon completion of the merger, (1) holders of our outstanding common stock will be entitled to receive $0.92 in cash, without interest, and less any applicable withholding taxes, for each share of common stock they own at the effective time of the merger, (2) holders of our outstanding Series B Preferred Stock will be entitled to receive $1.06 in cash, without interest, and less any applicable withholding taxes, for each share of Series B Preferred Stock that they own, (3) holders of our outstanding Series C-1 Preferred Stock will be entitled to receive $1,000.00 in cash, plus an amount equal to any accrued but unpaid dividends, without interest, and less any applicable withholding taxes, for each share of Series C-1 Preferred Stock that they own, and (4) holders of our outstanding Series D Preferred Stock will be entitled to receive $1,000.00 in cash, plus an amount equal to any accrued but unpaid dividends, without interest, and less any applicable withholding taxes, for each share of Series D Preferred Stock that they own.

 

In connection with our merger agreement with Steel Holdings, we will hold a special meeting of SoftBrands stockholders on August • , 2009 at • , local time, at • . Stockholders of SoftBrands will be asked, at the special meeting, to consider and vote upon the adoption of the merger agreement. After careful consideration, the board of directors of SoftBrands has unanimously approved and has declared the proposed merger, the merger agreement and the transactions contemplated by the merger agreement advisable, and has determined that it is in the best interests of SoftBrands stockholders that SoftBrands enter into the merger agreement and consummate the proposed merger on the terms and conditions set forth in the merger agreement. Accordingly, the board of directors of SoftBrands unanimously recommends that SoftBrands stockholders vote “FOR” the adoption of the merger agreement. We are also asking you to vote “FOR” any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement.

 

The merger cannot be completed unless (i) the holders of a majority of the outstanding shares of our capital stock, voting together as a class on an as-converted-to-common stock basis at the close of business on the record date for the special meeting vote “FOR” the adoption of the merger agreement and (ii) subject to our repurchase rights provided in the Certificate of Designations, Preferences and Rights of the Series B Preferred Stock, the holders of a majority of the outstanding shares of our Series B Preferred Stock consent to the transaction. The completion of the merger is also subject to the satisfaction or waiver of other specified closing conditions. The accompanying proxy statement provides you with more detailed information about the proposed merger and the special meeting. We encourage you to read the accompanying proxy statement carefully and in its entirety, because it explains the proposed merger, the documents related to the merger and other related matters.

 

Your vote is very important, regardless of the number of shares you hold. Whether or not you plan to attend the special meeting, please take the time to submit a proxy by following the instructions on your proxy card as soon as possible. If your shares are held in an account at a brokerage firm, bank or other nominee, you should instruct your broker, bank or nominee how to vote in accordance with the voting instruction form furnished by your broker, bank or nominee. If you submit your proxy but do not indicate how you want to vote, your proxy will be voted “FOR” the adoption of the merger agreement and “FOR” any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the merger agreement. If you do not vote or do not instruct your broker, bank or nominee how to vote, it will have the same effect as voting “AGAINST” the proposal to adopt the merger agreement — so please vote.

We are very excited about the merger and I join the other members of our board of directors in recommending that you vote “FOR” the adoption of the merger agreement. After you have reviewed the enclosed materials, please vote by one of the means specified in the proxy statement as soon as you can. Thank you in advance for your continued support.

 

Sincerely,

 

Randal B. Tofteland

President and Chief Executive Officer

 

This transaction has not been approved or disapproved by the Securities and Exchange Commission or any state securities commission. Neither the Securities and Exchange Commission nor any state securities commission has passed upon the merits or fairness of this transaction or upon the adequacy or accuracy of the information contained in this proxy statement. Any representation to the contrary is a criminal offense.

 

This proxy statement is dated July • , 2009 and is first being mailed to stockholders of SoftBrands, Inc. on or about July • , 2009.

 

800 LaSalle Avenue, Suite 2100
Minneapolis, Minnesota 55402
Telephone: (612) 851-1500

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST • , 2009

To the Stockholders of SoftBrands, Inc.:

 

NOTICE IS HEREBY GIVEN THAT a special meeting of stockholders of SoftBrands, Inc., a Delaware corporation, will be held on August • , 2009 at • , local time, at • :

 

1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of June 11, 2009, by and among Steel Holdings, Inc., Steel Merger Sub and SoftBrands, Inc.;

 

2. To consider and vote upon any proposal by SoftBrands’ board of directors to adjourn the special meeting, if necessary, to solicit additional proxies in support of Proposal 1 if there are not sufficient votes at the time of the special meeting in favor of adoption of the merger agreement; and

 

3. To transact such other business as may properly come before the special meeting or any adjournments of the special meeting.

 

The board of directors of SoftBrands has unanimously approved the merger agreement and recommends that SoftBrands stockholders vote “FOR” the adoption of the merger agreement. The board of directors of SoftBrands also recommends that SoftBrands stockholders vote “FOR” any proposal by SoftBrands’ board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement.

 

The board of directors of SoftBrands has fixed the close of business on July • , 2009 as the record date for the determination of stockholders entitled to notice of, and to vote at, the special meeting and any adjournment or postponement of the special meeting. Only holders of record of shares of our capital stock at the close of business on the record date are entitled to notice of, and to vote at, the special meeting or any adjournment or postponement of the special meeting. At the close of business on the record date, SoftBrands had outstanding and entitled to vote • shares of common stock, [4,331,540] shares of Series B Preferred Stock, 18,000 shares of Series C-1 Preferred Stock and 6,000 shares of Series D Preferred Stock. Holders of our common stock and Preferred Stock as of the record date are entitled to cast a total of • votes on an as-converted-to-common stock basis at the special meeting. SoftBrands stockholders who do not wish to accept the merger consideration for their shares and who do not vote in favor of the adoption of the merger agreement may have appraisal rights under Delaware law in connection with the merger if they meet specified conditions. See the section of this proxy statement entitled “The Merger — Appraisal Rights” beginning on page • .

 

Your vote is very important, regardless of the number of shares you hold. The affirmative vote of the holders of a majority of the outstanding shares of our capital stock, voting together as a class on an as-converted-to-common stock basis, at the close of business on the record date is required to adopt the merger agreement. The affirmative vote of the holders of a majority of the outstanding shares of our capital stock, voting together as a class on an as-converted-to-common stock basis, at the close of business on the record date, present in person or represented by proxy at the special meeting and entitled to vote may approve any proposal by our board of directors to adjourn the meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the adoption of the merger agreement. The chairperson of the special meeting may also adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the adoption of the merger agreement.

 

Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return the enclosed proxy card and thus ensure that your shares will be represented at the special meeting if you are unable to attend. You may also vote your shares by using a toll-free number or via the internet. If you submit your proxy but do not indicate how you wish to vote, your proxy will be counted as a vote “FOR” the adoption of the merger

agreement and “FOR” any proposal by SoftBrands’ board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement. If you do not vote, it will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement and make it more difficult for SoftBrands to achieve a quorum at the special meeting — so please vote. If you do not vote, it will not affect the outcome of any proposal to adjourn the special meeting, but will reduce the number of votes required to approve such a proposal. If you do attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

 

This proxy statement contains detailed information about the merger and the other transactions contemplated by the merger agreement. Please read this proxy statement and the merger agreement attached to it as Annex A carefully and in their entirety. For specific instructions on how to vote your shares, please refer to the section of this proxy statement entitled “The Special Meeting” beginning on page • .

 

By Order of the Board of Directors,

 

Gregg A. Waldon

Secretary

 

Minneapolis, Minnesota

July • , 2009

SUMMARY VOTING INSTRUCTIONS

 

YOUR VOTE IS IMPORTANT

 

Ensure that your shares can be voted at the special meeting by submitting your proxy or contacting your broker, bank or other nominee. If you do not vote or do not instruct your broker, bank or other nominee how to vote, it will have the same effect as voting “AGAINST” the adoption of the merger agreement.

 

If your shares are registered in the name of a broker, bank or other nominee:   check the voting instruction card forwarded by your broker, bank or other nominee to see which voting options are available or contact your broker, bank or other nominee in order to obtain directions as to how to ensure that your shares are voted in favor of the proposals at the special meeting.

 

If your shares are registered in your name:   submit your proxy as soon as possible by telephone, via the Internet or by signing, dating and returning the enclosed proxy card in the enclosed postage-paid envelope, so that your shares can be voted in favor of the proposals at the special meeting.

 

Instructions regarding telephone and Internet voting are included on the proxy card.

 

If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact:

 

SoftBrands, Inc.

Attn: Vice President, Corporate Communications

800 LaSalle Avenue, Suite 2100

Minneapolis, Minnesota 55402

Telephone: (612) 851-1500

TABLE OF CONTENTS

 

 

Annexes

 

 

This proxy statement contains information related to our special meeting of stockholders to be held on August • , 2009 at • , local time, at • , and at any adjournments or postponements thereof. We are furnishing this proxy statement to the stockholders of SoftBrands, Inc. as part of the solicitation of proxies by SoftBrands’ board of directors for use at the special meeting.

 

The following are some questions that you, as a stockholder of SoftBrands, may have regarding the proposed merger, the special meeting of SoftBrands stockholders and the transfer of SoftBrands’ trust interest as well as brief answers to such questions. We urge you to read carefully the entirety of this proxy statement because the information in this section does not provide all the information that may be important to you with respect to the adoption of the merger agreement. Additional important information is also contained in the annexes to this proxy statement.

 

Except as otherwise specifically noted in this proxy statement, “we,” “our,” “us” and similar words used in this proxy statement refer to SoftBrands, Inc. Throughout this proxy statement we refer to SoftBrands, Inc. as “SoftBrands.”

 

 

Attn: Vice President, Corporate Communications

800 LaSalle Avenue, Suite 2100

Minneapolis, Minnesota 55402

Telephone: (612) 851-1500

 

This summary term sheet highlights the most material terms of the proposed merger. While this summary describes the principal terms of the merger, this summary may not contain all of the information that is important to you. To understand the merger fully and for a more complete description of the legal terms of the merger, you should carefully read this entire proxy statement and the documents to which we have referred you. In particular, you should read the annexes attached to this proxy statement, including the Agreement and Plan of Merger, dated as of June 11, 2009, by and among SoftBrands, Steel Holdings and Merger Sub, which is attached as Annex A to this proxy statement. We have included page references in parentheses to direct you to a more complete description of the topics presented in this summary. See the section of this proxy statement entitled “Where You Can Find More Information” beginning on page • .

 

SoftBrands, Inc.

800 LaSalle Avenue, Suite 2100

Minneapolis, Minnesota 55402

Telephone: (612) 851-1500

 

We are a provider of enterprise software and related professional services to approximately 5,000 customers in more than 100 countries. We have established a worldwide infrastructure for distribution, development and support of enterprise software. We operate in two principal business segments: manufacturing software and hospitality software. Our integrated software suites provide the tools necessary for businesses in these sectors to enhance customer satisfaction and improve efficiency and profitability. We were incorporated in Delaware in 2001 and are quoted on the NYSE Amex Equities under the symbol “SBN.” Our principal executive offices are located at 800 LaSalle Avenue, Suite 2100, Minneapolis, Minnesota 55402, and our telephone number is (612) 851-1500. Additional information regarding SoftBrands is contained in our filings with the Securities and Exchange Commission, or the SEC. See the section of this proxy statement entitled “Where You Can Find More Information” beginning on page • .

 

Steel Holdings, Inc.

c/o Golden Gate Private Equity, Inc.

One Embarcadero Center, 39 ^th Floor

San Francisco, California 94111

Telephone: (415) 983-2700

 

Steel Holdings is a Delaware corporation that is a wholly owned subsidiary of investment funds managed by Golden Gate Private Equity, Inc. and is an affiliate of Infor Global Solutions Holdings Ltd. (which we sometimes refer to in this proxy statement as “Infor”). Steel Holdings exists solely to facilitate the merger and has not engaged in any operations other than in connection with its formation and the negotiation and execution of the merger agreement. Its principal executive offices are located at c/o Golden Gate Private Equity, Inc., One Embarcadero Center, 39th Floor, San Francisco, California 94111, and its telephone number is (415) 983-2700.

 

Steel Merger Sub, Inc.

c/o Golden Gate Private Equity, Inc.

One Embarcadero Center, 39 ^th Floor

San Francisco, California 94111

Telephone: (415) 983-2700

 

Merger Sub is a Delaware corporation and a wholly owned subsidiary of Steel Holdings. Merger Sub exists solely to facilitate the merger and has not engaged in any operations other than in connection with its formation and the negotiation and execution of the merger agreement. Merger Sub’s principal executive offices and telephone number are the same as those of Steel Holdings.

 

Steel Holdings has agreed to acquire SoftBrands under the terms of the merger agreement that is described in this proxy statement and attached as Annex A. We encourage you to read the merger agreement carefully and in its entirety. It is the principal document governing the merger.

 

If the merger is completed and you are a holder of our common stock, you will receive the common stock per share amount of $0.92 in cash, without interest, and less any applicable withholding taxes, for each share of our common stock that you own immediately prior to the effective time of the merger unless you exercise and perfect your appraisal rights under Delaware law.

 

If the merger is completed and you hold shares of our Series B Preferred Stock, you will receive the Series B Preferred Stock per share amount of $1.06 in cash, without interest, and less any applicable withholding taxes, for each share of our Series B Preferred Stock that you own immediately prior to the effective time of the merger unless you exercise and perfect your appraisal rights under Delaware law. If, however, we have not obtained a duly executed written consent from the holders of a majority of our Series B Preferred Stock adopting and approving the merger agreement and the transactions contemplated by the merger agreement prior to the tenth day before the special meeting, each share of our Series B Preferred Stock will be repurchased and canceled prior to the completion of the merger at a price equal to $1.06 in cash without interest, and less any applicable withholding taxes.

 

If the merger is completed and you hold shares of our Series C-1 Preferred Stock, you will receive the Series C-1 Preferred Stock per share amount of $1,000.00 in cash, plus an amount equal to any accrued but unpaid dividends, without interest, and less any applicable withholding taxes, for each share of our Series C-1 Preferred Stock that you own immediately prior to the effective time of the merger unless you exercise and perfect your appraisal rights under Delaware law.

 

If the merger is completed and you hold shares of our Series D Preferred Stock, you will receive the Series D Preferred Stock per share amount of $1,000.00 in cash, plus an amount equal to any accrued but unpaid dividends, without interest, and less any applicable withholding taxes, for each share of our Series D Preferred Stock that you own immediately prior to the effective time of the merger unless you exercise and perfect your appraisal rights under Delaware law.

 

After the merger is completed, your shares of our capital stock will be converted into the right to receive merger consideration, without interest, but you will no longer have any rights as a SoftBrands stockholder. As a SoftBrands stockholder, you will receive the merger consideration, without interest, after exchanging your SoftBrands stock certificates in accordance with the instructions contained in the letter of transmittal to be sent to you shortly after completion of the merger.

 

See the section of this proxy statement entitled “The Merger Agreement — Effect on Capital Stock” beginning on page • .

 

Warrants

 

Immediately prior to the effective time of the merger, each warrant to purchase our capital stock outstanding that has not been canceled or exercised at such time will be canceled, and Steel Holdings will cause the surviving corporation to pay each holder a lump sum payment in cash without interest, and less any applicable withholding taxes, equal to the excess, if any, of:

 

 

Options and Stock Appreciation Rights

 

Immediately prior to the effective time of the merger, each option to purchase our common stock or stock appreciation rights outstanding, whether or not vested or exercisable, will be accelerated and canceled, and Steel Holdings will cause the surviving corporation to pay each holder a lump sum payment in cash without interest, and less any applicable withholding taxes, equal to the excess, if any, of:

 

 

Although our stockholders approved an option and stock appreciation right exchange program at our annual meeting held February 17, 2009, under which options and stock appreciation rights granted prior to September 30, 2008 would be exchanged for new stock appreciation rights that would have lower exercise prices, because discussions relating to transactions that eventually led to the merger proposal commenced shortly after the annual meeting, we never commenced the exchange program. All outstanding stock options and stock appreciation rights granted prior to September 30, 2008 have exercise prices that exceed $0.92 and will expire without value upon consummation of the merger.

 

Stock-Based Awards

 

Immediately prior to the effective time of the merger, each stock-based award will be accelerated and canceled, and Steel Holdings will cause the surviving corporation to pay each holder a lump sum payment in cash without interest, and less any applicable withholding taxes, equal to product of:

 

 

In the course of reaching its decision to approve the merger and enter into the merger agreement, our board of directors consulted with our senior management, outside legal counsel and our financial advisor, and reviewed a significant amount of information and considered a number of factors, including, among others, the following factors:

 

 

 

See the section of this proxy statement entitled “The Merger — Background to the Merger” beginning on page • .

 

After careful consideration of the factors described in the section of this proxy statement entitled “The Merger — Recommendation of our Board of Directors” beginning on page • , our board of directors unanimously:

 

 

Our board of directors also recommends that SoftBrands stockholders vote “FOR” any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement.

 

See the section of this proxy statement entitled “The Merger — Recommendation of our Board of Directors” beginning on page • .

 

Time, Date and Place.   A special meeting of our stockholders will be held on August • , 2009, at • at • , local time, to consider and vote upon a proposal to adopt the merger agreement and consider and vote upon a proposal to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement.

 

Record Date and Voting Power.   You are entitled to vote at the special meeting if you owned shares of our capital stock at the close of business on July • , 2009, the record date set by our board of directors for the special meeting. You will have one vote at the special meeting for each share of our common stock you owned at the close of business on the record date. Each share of Series B Preferred Stock issued and outstanding on the record date will be entitled to 1.024 votes per share of Series B Preferred Stock because each such share votes on an as-converted-to common stock basis. Each share of Series C-1 Preferred Stock issued and outstanding on the record date will be entitled to 509.16 votes per share of Series C-1 Preferred Stock because each such share votes on an as-converted-to common stock basis. Each share of Series D Preferred Stock issued and outstanding on the record date will be entitled to 598.80 votes per share of Series D Preferred Stock because each such share votes on an as-converted-to common stock basis. As of the record date, there were [44,866,535] shares of our common stock, [4,331,540] shares of our Series B Preferred Stock, [18,000] shares of our Series C-1 Preferred Stock and [6,000] shares of our Series D Preferred Stock outstanding and entitled to be voted at the special meeting. Holders of our common stock and Series B Preferred Stock, Series C-1 Preferred Stock and Series D Preferred Stock are entitled to cast a total of • votes on an as-converted-to-common stock basis at the special meeting.

 

Required Vote.   The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of our capital stock, voting together as a class on an as-converted-to-common stock basis, as of the close of business on the record date. The chairperson of the special meeting may adjourn the meeting, if necessary to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement. In addition, the affirmative vote of the holders of a majority of the outstanding shares of our capital

stock, voting together as a class present in person or represented by proxy at the special meeting and entitled to vote may approve any proposal by our board of directors to adjourn the special meeting to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement. Each share of Series B Preferred Stock issued and outstanding on the record date will be entitled to 1.024 votes per share of Series B Preferred Stock because each such share votes on an as-converted-to common stock basis. Each shares of Series C-1 Preferred Stock issued and outstanding on the record date will be entitled to 509.16 votes per share of Series C-1 Preferred Stock because each such share votes on an as-converted-to common stock basis. Each share of Series D Preferred Stock issued and outstanding on the record date will be entitled to 598.80 votes per share of Series D Preferred Stock because each such share votes on an as-converted-to common stock basis. As a condition to Steel Holdings and Merger Sub entering into the merger agreement, ABRY Mezzanine Partners, L.P., one of our significant stockholders, and its affiliate ABRY Partners, LLC (which we sometimes refer to in this proxy statement collectively as “ABRY”) entered into voting agreements with Steel Holdings and Merger Sub, pursuant to which ABRY agreed, among other things, to vote the shares of SoftBrands capital stock over which ABRY exercises voting control in favor of the adoption of the merger agreement. ABRY exercises voting control over an aggregate of 1,958,087 shares of our common stock, 15,000 shares of our Series C-1 Preferred Stock and 5,000 shares of our Series D Preferred Stock, or 12,589,574 shares of our common stock on an as-converted-to-common stock basis, which constitutes approximately [20.29]% of our capital stock entitled to vote at the special meeting on an as-converted-to-common stock basis as of [ • ], 2009, the record date for the special meeting. In addition, on June 25, 2009, Capital Resource Partners, L.P. (which we sometimes refer to in this proxy statement as “CRP”), another one of our significant stockholders, entered into a voting agreement with Steel Holdings and Merger Sub pursuant to which CRP agreed, among other things, to vote its shares of SoftBrands capital stock over which CRP exercises voting control in favor of the adoption of the merger agreement. CRP exercises voting control over an aggregate of [389,419] shares of our common stock, 4,331,540 shares of our Series B Preferred Stock, 3,000 shares of our Series C-1 Preferred Stock and 1,000 shares of our Series D Preferred Stock, or 6,951,213 shares of our common stock on an as-converted-to-common stock basis, which constitutes approximately [11.2]% of our capital stock entitled to vote at the special meeting on an as-converted-to-common stock basis as of [ • ], 2009, the record date for the special meeting. See the section of this proxy statement entitled “The Merger — Voting Agreements” beginning on page • and Annex B hereto. As required by the Series B Preferred Stock certificate of designations. The holders of a majority of the outstanding shares of our Series B Preferred Stock have consented to the merger.

 

Share Ownership of Directors and Management.   As of the record date, our directors and executive officers and their affiliates owned approximately • % of the shares entitled to vote at the special meeting.

 

See the section of this proxy statement entitled “The Special Meeting” beginning on page • .

 

Piper Jaffray & Co. (which we sometimes refer to in this proxy statement as “Piper Jaffray”) rendered an oral opinion to SoftBrands’ board of directors on June 11, 2009, which was subsequently confirmed by delivery of a written opinion dated June 11, 2009, to the effect that, as of the date of the opinion, and based upon and subject to the considerations and limitations set forth in the opinion, Piper Jaffray’s work described below and other factors Piper Jaffray deemed relevant, the $0.92 per common share cash consideration was fair, from a financial point of view, to the holders of SoftBrands’ common stock.

 

The full text of the Piper Jaffray written opinion, dated June 11, 2009, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Piper Jaffray in rendering its opinion, is attached as Annex C and is incorporated in its entirety herein by reference. You are urged to, and should, carefully read the Piper Jaffray opinion in its entirety, and this summary is qualified by reference to the written opinion. The Piper Jaffray opinion addresses only the fairness, from a financial point of view and as of the date of the opinion, to holders of our common stock (other than Steel Holdings or its affiliates) of the $0.92 per common share cash consideration to be paid to the holders of SoftBrands common stock pursuant to the merger agreement. The Piper Jaffray opinion does not address any consideration to be paid to any class or series of our preferred stock, or any of our other classes of securities, creditors or other constituencies. The Piper Jaffray opinion was directed to our board of directors and was not intended to be, and does not constitute, a recommendation as to how any of our stockholders should act or vote with respect to the merger or any other matter.

The Piper Jaffray opinion is not intended to confer rights and remedies upon Steel Holdings, any stockholders of Steel Holdings or any affiliates thereof, any of our common or preferred stockholders, option holders or warrant holders, or any other holder of stock-based compensation of SoftBrands. The Piper Jaffray opinion was approved for issuance by a committee of Piper Jaffray employees in accordance with its customary practice.

 

Piper Jaffray acted as our financial advisor in connection with the merger and will receive an estimated fee of approximately $750,000 from us, approximately $250,000 of which is contingent upon the consummation of the merger. Piper Jaffray will receive a fee of $500,000 from us for providing its opinion, which will be credited against the fee for financial advisory services. The opinion fee was not contingent upon the consummation of the merger or the conclusions reached in Piper Jaffray’s opinion.

 

See the section of this proxy statement entitled “The Merger — Opinion of Piper Jaffray & Co.” beginning on page • .

 

When considering the recommendation by our board of directors to vote in favor of the adoption of the merger agreement, you should be aware that a number of our executive officers and directors have interests in the merger that are different from yours, including, among others:

 

 

See the section of this proxy statement entitled “The Merger — Interests of Our Directors and Executive Officers in the Merger” beginning on page • .

 

As a condition to Steel Holdings and Merger Sub entering into the merger agreement, ABRY Mezzanine Partners, L.P., one of our significant stockholders, and its affiliate ABRY Partners, LLC have entered into voting agreements with Steel Holdings and Merger Sub pursuant to which they have agreed (i) to vote their shares of SoftBrands capital stock in favor of the adoption of the merger agreement and (ii) to certain restrictions on the disposition of such shares of SoftBrands capital stock, subject to the terms and conditions of the voting agreements. These stockholders exercise voting control over an aggregate of 1,958,087 shares of our common stock, 15,000 shares of our Series C-1 Preferred Stock and 5,000 shares of our Series D Preferred Stock, or 12,589,572 shares of our common stock on an as-converted-to-common stock basis, which constitutes approximately [20.29]% of our capital stock entitled to vote at the special meeting on an as-converted-to-common stock basis as of [ • ], 2009, the record date for the special meeting.

 

In addition, on June 25, 2009, Capital Resource Partners, L.P., another one of our significant stockholders, entered into a voting agreement with Steel Holdings and Merger Sub pursuant to which CRP agreed (i) to vote its shares of SoftBrands capital stock in favor of the adoption of the merger agreement and (ii) to certain restrictions on the disposition of such shares of SoftBrands capital stock, subject to the terms and conditions of the voting agreements. CRP exercises voting control over an aggregate of [389,419] shares of our common stock, 4,331,540 shares of our Series B Preferred Stock, 3,000 shares of our Series C-1 Preferred Stock and 1,000 shares of our Series D Preferred Stock, or 6,951,213 shares of our common stock on an as-converted-to-common stock basis, which constitutes approximately [11.2]% of our capital stock entitled to vote at the special meeting on an as-converted-to-common stock basis as of [ • ], 2009, the record date for the special meeting.

See the section of this proxy statement entitled “The Merger — Voting Agreements” beginning on page • and Annex B hereto.

 

Our common stock is listed on the NYSE Amex Equities under the symbol “SBN”. On June 11, 2009, the last full trading day prior to the public announcement of the proposed merger, our common stock closed at a price of $0.47. On June [ • ], 2009 the last practicable trading day prior to the printing of this proxy statement, our common stock closed at a price of $[ • ]. To date, we have not paid any dividends on our common stock. See the section of this proxy statement entitled “The Merger — Market Price and Dividend Data” beginning on page • .

 

If the merger is completed, our common stock will no longer be traded on the NYSE Amex Equities and will be deregistered under the Securities Exchange Act of 1934, as amended, and we will no longer be required to file periodic reports with the SEC with respect to our shares of common stock.

 

Conditions to the Completion of the Merger (See Page  • )

 

The obligations of each of SoftBrands, Steel Holdings and Merger Sub to complete the merger are subject to the satisfaction or waiver of each of the following conditions:

 

 

Steel Holdings and Merger Sub will not be obligated to effect the merger unless the following conditions are satisfied or waived:

 

 

 

We will not be obligated to effect the merger unless the following conditions are satisfied or waived:

 

 

Termination Rights (See Page  • )

 

SoftBrands and Steel Holdings can terminate the merger agreement under certain circumstances, including:

 

 

 

 

 

 

 

 

 

No Solicitation Covenant (See Page  • )

 

We have agreed to cease all existing activities, discussions or negotiations with any persons concerning any acquisition proposal (as described in the section of this proxy statement headed “The Merger Agreement — No Solicitation Covenant — Acquisition Proposals”).

 

Further, the merger agreement provides that neither SoftBrands nor our subsidiaries nor any of our or our subsidiaries’ directors, officers or other employees, affiliates, or any investment banker, attorney, or other agent or representative will, directly or indirectly,

 

 

However, prior to our stockholders having adopted the merger agreement, our board of directors may, directly or indirectly:

 

 

We may only take such actions if:

 

 

 

Expenses and Termination Fees (See Page  • )

 

The merger agreement requires that we pay Steel Holdings a termination fee of $2,600,000.00 if, among other things:

 

 

 

 

 

The merger agreement requires that Steel Holdings pay us a termination fee of $8,000,000.00 if we terminate the merger agreement because:

 

 

 

If the agreement is terminated because (i) our stockholders have not adopted the merger agreement at the special meeting and within 12 months following the date of such termination we consummate an acquisition transaction or (ii) we have breached or violated any of our representations, warranties, covenants, agreements or other obligations under the merger agreement, or any such representations and warranties have become untrue and have not been cured within the requisite period, we have agreed to reimburse Steel Holdings for the expenses of Steel Holdings, Merger Sub and their affiliates incurred in connection with the merger agreement in an amount not to exceed $1,000,000.00. Any such payment of expenses will be applied toward and reduce the termination fee payable by SoftBrands, if any.

 

All other fees and expenses incurred in connection with the merger agreement and the transactions contemplated thereby shall be paid by the party incurring such expenses.

 

The exchange of shares of our capital stock for the cash merger consideration and the transfer of our 10% interest in the AremisSoft liquidating trust to our stockholders will be a taxable transaction to our stockholders for United States federal income tax purposes.

 

You should read the section of this proxy statement entitled “The Merger — Material United States Federal Income Tax Consequences” beginning on page • for a more complete discussion of the federal income tax consequences of the merger and the transfer to you of our interest in the liquidating trust, including possible alternative characterizations. Tax matters can be complicated, and the tax consequences of the merger and transfer of the trust interest to you will depend on the facts of your own situation. You should consult your own tax advisor to fully understand the tax consequences to you.

 

The Hart Scott Rodino Antitrust Improvements Act of 1976, as amended, or the HSR Act, prohibits us from completing the merger until we have furnished required information and materials to the Antitrust Division of the Department of Justice and the Federal Trade Commission and the required waiting period has ended or been early terminated. On June 23, 2009, Steel Holdings and SoftBrands filed the required notification and report forms, but the waiting period has not yet ended and we may receive requests for additional information. See the section of this proxy statement entitled “The Merger — Regulatory Matters” beginning on page • .

 

Under Delaware law, SoftBrands’ stockholders who do not wish to accept the common stock per share amount, the Series B Preferred Stock per share amount, the Series C-1 Preferred Stock per share amount and/or the Series D Preferred Stock per share amount, as applicable may seek, under Section 262 of the General Corporation Law of the State of Delaware, judicial appraisal of the fair value of their shares by the Delaware Court of Chancery. This value could be more than, less than or equal to the common stock per share amount of $0.92 per share of common stock or the Series B Preferred Stock per share amount, the Series C-1 Preferred Stock per share amount or the Series D Preferred Stock per share amount, as applicable. This right to appraisal is subject to a number of restrictions and technical requirements. Generally, in order to properly demand appraisal, among other things:

 

 

 

Merely voting against the adoption of the merger agreement will not preserve your right to appraisal under Delaware law. Also, because a submitted proxy not marked “against” or “abstain” will be voted “FOR” the proposal to adopt the merger agreement, the submission of a proxy not marked “against” or “abstain” will result in the waiver of appraisal rights. If you hold shares in the name of a broker, bank or other nominee, you must instruct your nominee to take the steps necessary to enable you to demand appraisal for your shares. If you or your nominee fails to follow all of the steps required by Section 262 of the General Corporation Law of the State of Delaware, you will lose your right of appraisal. See the section of this proxy statement entitled “The Merger — Appraisal Rights” beginning on page • for a description of the procedures that you must follow in order to exercise your appraisal rights.

 

Annex D to this proxy statement contains the full text of Section 262 of the General Corporation Law of the State of Delaware, which relates to your right to appraisal. We encourage you to read these provisions carefully and in their entirety.

 

[ • ] will act as the paying agent in connection with the merger.

 

This proxy statement contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,” “project,” “predict,” “intend,” “plan,” “anticipate,” “believe,” “will,” “may,” “should,” “would,” and similar expressions are intended to identify forward-looking statements. These statements are based on the current expectations and beliefs of our management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These statements are not guarantees of future performance, involve risks, uncertainties and assumptions that are difficult to predict, and are based upon assumptions as to future events that may not prove accurate. Therefore, actual outcomes and results may differ materially from what is expressed in the forward-looking statements.

 

In any forward-looking statement in which we express an expectation or belief as to future results, that expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement or expectation or belief will result or be achieved or accomplished. Risks and uncertainties could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties are detailed in various SEC filings made periodically by us, particularly our latest report on Form 10-K and subsequent reports on Form 10-Q, copies of which are available from us without charge or online at http://www.softbrands.com. Please review such filings and do not place undue reliance on these forward-looking statements.

 

You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We do not undertake any obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances that occur after the date of this proxy statement or to reflect the occurrence of unanticipated events.

 

The enclosed proxy is solicited on behalf of the board of directors of SoftBrands for use at the special meeting of stockholders or at any adjournment or postponement thereof.

 

We will hold the special meeting at • , at • , local time, on August • , 2009.

 

At the special meeting, we are asking holders of record of SoftBrands capital stock to consider and vote on the following proposals:

 

 

We do not expect a vote to be taken on any other matters at the special meeting. If any other matters are properly presented at the special meeting for consideration, however, the holders of the proxies, if properly authorized, will have discretion to vote on these matters in accordance with their best judgment.

 

After careful consideration, our board of directors determined that it is advisable, fair to and in the best interests of SoftBrands’ stockholders for SoftBrands to enter into the merger agreement and consummate the merger and the other transactions contemplated by the merger agreement.

 

Our board of directors unanimously recommends that our stockholders vote “FOR” the proposal to adopt the merger agreement. Our board of directors also recommends that SoftBrands stockholders vote “FOR” any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement. Our board of directors will determine whether to make such a proposal to adjourn the special meeting in accordance with its obligations under the merger agreement and its fiduciary duties to our stockholders.

 

In considering such recommendation, you should be aware that some of our directors and officers have interests in the merger that are different from, or in addition to, those of our stockholders generally. See the section of this proxy statement entitled “The Merger — Interests of Our Directors and Executive Officers in the Merger” beginning on page • .

 

If your submitted proxy does not specify how you want to vote your shares, your shares will be voted “FOR” the proposal to adopt the merger agreement and “FOR” any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement.

 

Only holders of record of our capital stock at the close of business on July • , 2009, the record date set by our board of directors, are entitled to notice of and to vote at the special meeting. On the record date,

 

 

 

A quorum is present at the special meeting if a majority of the outstanding shares of our capital stock on the record date, with the Series B Preferred Stock, Series C-1 Preferred Stock and Series D Preferred Stock counted on an as-converted-to-common stock basis is present in person or by proxy. In the event that a quorum is not present at the special meeting, it is expected that the meeting will be postponed to solicit additional proxies. Holders of record of our common stock on the record date are entitled to one vote per share at the special meeting on the proposals to adopt the merger agreement and adjourn the special meeting.

 

Holders of record of our Series B Preferred Stock on the record date are entitled to a number of votes per share of Series B Preferred Stock as such holder would have been entitled to receive in the event each such share of Series B Preferred Stock held as of the record date had been converted into our common stock in accordance with the conversion rights set forth in the Series B Preferred Stock certificate of designations. Therefore, each share of Series B Preferred Stock will be entitled to 1.024 votes per share of Series B Preferred Stock on an as-converted-to-common stock basis.

 

Holders of record of our Series C-1 Preferred Stock on the record date are entitled to a number of votes per share of Series C-1 Preferred Stock as such holder would have been entitled to receive in the event each such share of Series C-1 Preferred Stock held as of the record date had been converted into our common stock in accordance with the conversion rights set forth in Certificate of Designations, Preferences and Rights of the Series C-1 Preferred Stock. Therefore, each share of Series C-1 Preferred Stock will be entitled to 509.16 votes per share of Series C-1 Preferred Stock on an as-converted-to-common stock basis.

 

Holders of record of our Series D Preferred Stock on the record date are entitled to a number of votes per share of Series D Preferred Stock as such holder would have been entitled to receive in the event each such share of Series D Preferred Stock held as of the record date had been converted into our common stock (not taking into account any adjustment to the conversion price) in accordance with the conversion rights set forth in Certificate of Designations, Preferences and Rights of the Series C-1 Preferred Stock. Therefore, each share of Series D Preferred Stock will be entitled to 598.80 votes per share of Series D Preferred Stock on an as-converted-to-common stock basis.

 

Holders of our common stock and Series B Preferred Stock, Series C-1 Preferred Stock and Series D Preferred Stock are entitled to cast a total of [62,059,816] votes on an as-converted-to-common stock basis at the special meeting.

 

The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of our capital stock, voting together as a class. If a SoftBrands stockholder abstains from voting or does not vote, either in person or by proxy, it will count as a vote against the adoption of the merger agreement — so please vote. The affirmative vote of the holders of a majority of the outstanding shares of capital stock of SoftBrands, with the Series B Preferred Stock, Series C-1 Preferred Stock and Series D Preferred Stock voting on an as-converted-to-common stock basis, present in person or represented by proxy at the special meeting and entitled to vote may adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement. If a SoftBrands stockholder does not vote, either in person or by proxy, such failure will not affect the outcome of any proposal to adjourn the special meeting, but will reduce the number of votes required to approve such a proposal. If a SoftBrands stockholder abstains from voting, either in person or by proxy, it will count as a vote against any proposal to adjourn the special meeting. The chairperson of the meeting may also adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in

favor of adoption of the merger agreement. As required by the Series B Preferred Stock certificate of designations. The holders of a majority of the outstanding shares of our Series B Preferred Stock have consented to the merger.

 

At the close of business on the record date, our directors and executive officers and their affiliates owned and were entitled to vote [ • ] shares of our common stock, which represented approximately [ • ]% of the shares of our common stock outstanding on that date. At the close of business on the record date, ABRY Mezzanine Partners, L.P. was entitled to vote 1,958,087 shares of our common stock, 15,000 shares of our Series C-1 Preferred Stock and 5,000 shares of our Series D Preferred Stock.

 

As a condition to Steel Holdings and Merger Sub entering into the merger agreement, ABRY entered into voting agreements with Steel Holdings and Merger Sub, pursuant to which ABRY agreed, among other things, to vote the shares of SoftBrands capital stock over which ABRY exercises voting control in favor of the adoption of the merger agreement. ABRY exercises voting control over an aggregate of 12,589,574 shares of our common stock on an as-converted-to-common stock basis, as of July • , 2009, the record date for the special meeting, which constitutes approximately [20.29]% of the shares of our common stock outstanding on that date, on an as-converted to-common stock basis.

 

In addition, on June 25, 2009, CRP entered into a voting agreement with Steel Holdings and Merger Sub pursuant to which CRP agreed, among other things, to vote the shares of SoftBrands capital stock over which CRP exercises voting control in favor of the adoption of the merger agreement. CRP exercises voting control over an aggregate of 6,951,213 shares of our common stock on an as-converted-to-common stock basis, which constitutes approximately [11.2]% of our capital stock entitled to vote at the special meeting on an as-converted-to-common stock basis as of [ • ], 2009, the record date for the special meeting.

 

See the section of this proxy statement entitled “The Merger — Voting Agreements” beginning on page • and Annex B hereto.

 

All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the holders. Properly executed proxies that do not contain voting instructions will be voted “FOR” the adoption of the merger agreement and “FOR” any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement.

 

Shares of our capital stock represented at the special meeting but not voting, including shares of our capital stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business.

 

Only shares affirmatively voted for the adoption of the merger agreement, including properly executed proxies that do not contain voting instructions, will be counted as favorable votes for that proposal. Only shares affirmatively voted for any proposal by our board of directors to adjourn the special meeting, including properly executed proxies that do not contain voting instructions, will be counted as favorable votes for such a proposal. No proxy that is specifically marked “AGAINST” approval of the merger proposal will be voted in favor of the meeting adjournment proposal, unless it is specifically marked “FOR” the discretionary authority to adjourn the special meeting to a later date. If a SoftBrands stockholder abstains from voting, it will effectively count as a vote “AGAINST” the adoption of the merger agreement and a vote “AGAINST” the adjournment of the special meeting — so please vote. If a SoftBrands stockholder does not vote, either in person or by proxy, it will effectively count as a vote “AGAINST” the adoption of the merger agreement and it will not affect the outcome of any proposal to adjourn the special meeting, but will reduce the number of votes required to approve any such proposal.

 

Brokers who hold shares of our common stock in “street name” for customers who are the beneficial owners of such shares may not give a proxy to vote those customers’ shares in the absence of specific instructions from those

customers. Any “broker non-votes” would be considered present for purposes of determining whether or not a quorum is present, but would not be considered entitled to vote on a particular proposal. Failing to instruct your broker on how to vote your shares on the proposal to adopt the merger agreement will have the same effect as a vote “AGAINST” such proposal — so please vote. Failing to instruct your broker on how to vote your shares on any proposal to adjourn the special meeting will have no effect on the outcome of such a proposal, but will reduce the number of votes required to approve that proposal.

 

The grant of a proxy on the enclosed form of proxy does not preclude you from voting in person at the special meeting. If you are a stockholder of record you may revoke your proxy and change your vote at any time before your vote is counted at the special meeting by submitting a later-dated proxy by telephone, internet or mail, or by voting in person at the meeting. Attending the meeting will not revoke your proxy unless you specifically request to revoke it. To request an additional proxy card, or if you have any questions about the special meeting or how to vote or revoke your proxy, you should write to 800 LaSalle Avenue, Suite 2100, Minneapolis, Minnesota 55402 or call (612) 851-1500. If you hold your shares in street name and have instructed a broker, bank or nominee to vote your shares, you must follow directions received from your broker, bank or nominee to change those instructions.

 

SoftBrands is conducting this proxy solicitation and will bear the cost of soliciting proxies, including the preparation, assembly, printing and mailing of this proxy statement, the proxy card and any additional information furnished to stockholders. We also reimburse brokerage houses and other custodians, nominees and fiduciaries for their costs of forwarding proxy and solicitation materials to beneficial owners.

 

Stockholders should not send stock certificates with their proxies. A letter of transmittal with instructions for the surrender of stock certificates will be mailed to our stockholders as soon as practicable after completion of the merger. The instructions will provide that, at the election of the stockholder, certificates may be surrendered, and the merger consideration in exchange for the certificates may be collected, by hand delivery.

 

Under Delaware law, holders of our capital stock who do not vote in favor of adoption of the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the merger is completed, but only if they submit a written demand for appraisal prior to the vote on the adoption of the merger agreement, and they comply with the provisions of Section 262 of the General Corporation Law of the State of Delaware set forth in full at Annex D to this proxy statement. See the section of this proxy statement entitled “The Merger — Appraisal Rights” beginning on page • .

 

If you need assistance submitting your proxy or have questions regarding the SoftBrands special meeting, please contact:

 

SoftBrands, Inc.

Attn: Vice President, Corporate Communications

800 LaSalle Avenue, Suite 2100

Minneapolis, Minnesota 55402

Telephone: (612) 851-1500

 

The following discussion summarizes the material terms of the proposed merger. Stockholders should read the merger agreement, which is a attached as Annex A to this proxy statement, carefully and in its entirety.

 

Pursuant to the merger agreement, Merger Sub will merge with and into SoftBrands, with SoftBrands surviving as a wholly owned subsidiary of Steel Holdings (which we sometimes refer to in this proxy statement as the “surviving corporation”). At the effective time of the merger,

 

 

Immediately prior to the effective time of the merger,

 

 

Over the past several years, our board of directors has periodically reviewed, with our senior management, the strategic direction for SoftBrands in light of our financial performance and market, economic, competitive and other

conditions and developments. These discussions have included the possibility of, among other things, business combinations involving SoftBrands and other software companies, particularly in view of the increasing competition and ongoing consolidation in our industry. In an effort to maximize stockholder value, our management and board of directors have also regularly considered a variety of business strategies, including the continued pursuit of organic growth, strategic alliances and acquisitions, as well as regularly reviewing our prospects as an independent company.

 

To assist with the periodic review of SoftBrands’ strategic direction and in connection with potential strategic transactions, our board of directors sought the assistance and advice of a financial advisor. After conducting a selection process, we retained Piper Jaffray & Co. (which we sometimes refer to in this proxy statement as “Piper Jaffray”) as a financial advisor and entered into an engagement letter with Piper Jaffray in September 2007 (which was subsequently updated in March 2009). Thereafter, in reviewing our strategic direction and our prospects as an independent company, our board of directors and senior management conferred with, and obtained advice from, representatives of Piper Jaffray from time to time.

 

In connection with our board of directors’ periodic review of our strategic direction, our board of directors, senior management and financial advisor had periodic contacts and discussions with other software companies regarding their respective companies, industry trends and developments, and potential business combinations or other strategic initiatives.

 

In late 2008, we received an inquiry from Party A, who expressed an interest in buying our manufacturing business. Following the completion of preliminary due diligence, Party A submitted a verbal offer to acquire our manufacturing business at a price of $40 to $50 million.

 

Following the receipt of Party A’s verbal offer, our board of directors held a special meeting, at which our board of directors reviewed the financial aspects of Party A’s offer, as well as other potential alternatives, including SoftBrands continuing as an independent company, and the considerations associated with each.

 

In early January 2009, Randal B. Tofteland, SoftBrands’ President, Chief Executive Officer and a member of the board of directors, received a telephone call from the chief executive officer of Party B, indicating that Party B was interested in acquiring our manufacturing business. Following the execution of a nondisclosure agreement with us, Party B began a high-level due diligence review.

 

In late January 2009, we received another inquiry from Party C, who expressed an interest in buying our manufacturing business. Following the completion of preliminary due diligence, Party C submitted a verbal offer to acquire our manufacturing business at a price of $40 to $50 million.

 

On February 17, 2009, we received a verbal offer from Party B to acquire our manufacturing business at a price of $53 million.

 

On February 18, 2009, our board of directors held a regular meeting, at which our board of directors reviewed the financial aspects of the offers received from Party A, Party B and Party C. In discussing the offers, our board of directors discussed the risk of continuing to operate as an independent company, including the costs and expenses related to being a public company, and the associated compliance and reporting obligations, which were impairing our earnings growth and ability to be more competitive, thereby negatively affecting stockholder value. For efficiency purposes and to facilitate the development of strategic alternatives, on February 18, 2009, our board of directors formed a special committee, which we refer to as the “Special Committee,” consisting of Mr. Tofteland, Elaine Wetmore and George H. Ellis, to further explore with Piper Jaffray the alternatives available to SoftBrands.

 

As discussed above, we retained Piper Jaffray to continue formally serving as our exclusive financial advisor to advise us on strategic and financial alternatives, including in connection with a possible sale of our manufacturing business or SoftBrands on an entire company basis. The Special Committee directed Piper Jaffray to conduct a market check and directed our management team to prepare three-year forecasts based on various scenarios discussed by our board of directors.

 

From February 23, 2009 through March 11, 2009, Piper Jaffray placed calls to various financial and strategic parties that had been identified as potentially being interested in entering into a strategic transaction with us. On February 26, 2009, Piper Jaffray sent Infor a nondisclosure agreement, which Infor executed on March 6, 2009.

On March 10, 2009, we received a written indication of interest from Party B to acquire our manufacturing business for $53 million.

 

From March 11, 2009 through March 23, 2009, members of our management team, including Mr. Tofteland and Gregg Waldon, our Chief Financial Officer, participated in multiple discussions and telephone conferences with the interested parties contacted by Piper Jaffray to provide them with information regarding our present business and financial condition.

 

On March 17, 2009, our board of directors held a special meeting to further consider Party B’s proposal and various other strategic alternatives. Piper Jaffray updated our board of directors on the discussions with Party B and other parties that had taken place since the board’s previous meeting. Our board of directors directed management and Piper Jaffray to continue to engage with Party B and the other parties.

 

During the course of March 2009, Party B increased their offer to acquire our manufacturing business to $58 million, but subsequent conversations with Party B further clarified that the $58 million offer included $3 million of SoftBrands’ cash held within the manufacturing business, thereby reducing the offer to $55 million on an enterprise value basis.

 

On March 24, 2009, the Special Committee held a special meeting, at which representatives of Piper Jaffray reviewed the results of their market check and members of management reviewed their three-year forecasts. At that meeting, the Special Committee determined to convene a full board meeting to provide an update on their findings.

 

On March 30, 2009, our board of directors and the Special Committee held a special meeting, at which representatives of Piper Jaffray reviewed the results of their market check, which resulted in indications of interest for our manufacturing business in the range of $40 to $55 million on an enterprise value basis, as well as indications of interest for the entire company in the range of $63 to $85 million on an enterprise value basis. Piper Jaffray also presented preliminary valuation analyses of both our manufacturing and hospitality businesses, and our entire company as a whole. Following discussion of the indications received for our manufacturing business, taking into account the uncertainty of operating our hospitality business on a stand-alone basis, and the indications of interest received for the entire company, our board of directors determined that a sale of the entire company was likely to create more value for common stockholders. Representatives of our outside legal counsel, Dorsey & Whitney LLP (which we sometimes refer to in this proxy statement as “Dorsey & Whitney”) reviewed with our board of directors their responsibilities in connection with a sale of the entire company. The board of directors directed management and Piper Jaffray to reach out to all of the first round bidders to solicit revised offers for the entire company. Piper Jaffray subsequently contacted the bidders to request revised indications of interest.

 

Following the meeting of our board of directors, Mr. Tofteland contacted the chief executive officer of Party B to advise him that our board of directors had determined to pursue offers for the entire company. Piper Jaffray contacted Party A and Party C to offer them an opportunity to make a bid on an acquisition of the entire company, which they both declined.

 

From March 30, 2009 through April 8, 2009, Piper Jaffray placed calls to the initial parties that had submitted indications of interest for our manufacturing business and had conversations with several other potential acquirers to solicit bids for the entire company.

 

On April 8, 2009, the Special Committee held a meeting, at which representatives of Piper Jaffray reviewed five indications of interest it received for the entire company, which ranged in value from $75 to $90 million on an enterprise value basis. At that meeting, the Special Committee determined to convene a full board meeting to discuss the five indications of interest.

 

On April 10, 2009, our board of directors and the Special Committee held a special meeting to review the five indications of interest Piper Jaffray had received. Based on these indications of interest, our board of directors decided that it would be advisable to permit four of the parties, Party D, Party E, Party F and Golden Gate Capital/Infor, to conduct more detailed due diligence with respect to us, with a view toward making more firm offers.

 

Beginning on April 13, 2009, Piper Jaffray sent information packages relating to us and our business to Party D, Party E, Party F and Golden Gate Capital/Infor. On April 13, 2009, we activated an electronic data room that could be accessed by these four parties and their representatives.

On April 15, 2009, we had discussions with Golden Gate Capital/Infor regarding SoftBrands’ business, operating plans and strategy.

 

On April 24, 2009, Piper Jaffray distributed a draft merger agreement to Party D, Party E, Party F and Golden Gate Capital/Infor.

 

On April 27, 2009, Party B contacted Piper Jaffray to indicate that it was interested in pursuing a strategic transaction involving our entire business. Access to the electronic data room was established for Party B on May 2, 2009.

 

Also on April 27, 2009, we received an unsolicited offer from Party G to acquire SoftBrands for $70 million. Piper Jaffray responded to Party G on behalf of SoftBrands and advised them that their offer was below the range of other offers that SoftBrands had recently received. Party G declined to further pursue a transaction with us.

 

Between April 29 and May 8, 2009, members of our senior management and representatives of Piper Jaffray participated in due diligence calls and in-person meetings with representatives of Party B, Party D, Party E and Golden Gate Capital/Infor in Minneapolis, Minnesota. During these meetings, members of our senior management gave presentations about the Company, and potential purchasers were provided the opportunity to ask members of our senior management questions about our business, operating results and financial condition.

 

On the evening of May 11, 2009, we received a letter of interest from Infor and Golden Gate Capital proposing an acquisition of SoftBrands at an enterprise value of approximately $84.9 million, representing a price per common share of approximately $1.00 in cash after payment of the preferred stockholders’ liquidation amounts, which we refer to as the “Initial Letter of Interest.” The Initial Letter of Interest, which was accompanied by a mark-up of the draft merger agreement, was subject to completion of due diligence, and advised that the offer was not contingent on financing. The Initial Indication of Interest was also accompanied by an indication of intent from Wells Fargo Foothill, LLC, SoftBrands’ senior lender, to provide senior financing to Golden Gate Capital to support the consummation of a transaction. In addition, Infor and Golden Gate Capital requested a period of exclusivity as a condition to moving forward with their proposal. The Initial Letter of Interest was distributed to our board of directors that same day.

 

On May 13, 2009, Dorsey & Whitney contacted Kirkland & Ellis LLP, counsel to Infor and Golden Gate Capital (which we sometimes refer to in this proxy statement as “Kirkland & Ellis”), to discuss their initial comments on the merger agreement. During the telephone conference, Dorsey & Whitney indicated that Infor and Golden Gate Capital would be required to improve a number of the non-financial terms and conditions of the draft merger agreement prior to SoftBrands agreeing to enter into exclusivity.

 

On the evening of May 13, 2009, Party B submitted a letter of interest proposing an acquisition of SoftBrands at an enterprise value of $80 million to $90 million, which we refer to as the “Party B Letter of Interest.” The Party B Letter of Interest was distributed to our board of directors that same day.

 

On May 14, 2009, our board of directors held a special telephonic meeting to review the Initial Letter of Interest, the Party B Letter of Interest, as well as to discuss further the strategic alternatives available to SoftBrands. Representatives of Piper Jaffray reviewed the financial aspects of the Initial Letter of Interest, the Party B Letter of Interest, as well as other potential alternatives, including SoftBrands continuing as an independent company, and the considerations associated with each. At the meeting, Dorsey & Whitney again reviewed with our board of directors their responsibilities in connection with a possible sale of all of SoftBrands and discussed its concerns with the merger agreement mark-up submitted by Infor and Golden Gate Capital, particularly relating to deal certainty. At the board’s request, Dorsey & Whitney reviewed the terms and legal implications of each item. The board of directors and its advisors then discussed each item. Our board of directors determined that the deal certainty concerns raised by the mark-up of the merger agreement did not warrant granting exclusivity to Infor and Golden Gate Capital prior to signing a definitive agreement. Our board of directors instructed Piper Jaffray to advise Infor and Golden Gate Capital of its determination and to request Party B to submit a mark-up of the merger agreement. Our board of directors also instructed Dorsey & Whitney to communicate to Kirkland & Ellis its concerns on the merger agreement. Representatives of Piper Jaffray subsequently advised Infor and Golden Gate Capital of our board’s position and Dorsey & Whitney similarly advised Kirkland & Ellis.

On May 15, 2009, Dorsey & Whitney sent Kirkland & Ellis a list of issues that our board of directors had on the merger agreement, highlighting concerns surrounding the conditionality of the merger, the size of the reverse termination fee and the absence of SoftBrands’ right to specific performance.

 

On the morning of May 16, 2009, representatives of Dorsey & Whitney, Kirkland & Ellis, Piper Jaffray, Infor and Golden Gate Capital held a telephone conference to discuss the list of issues previously circulated by Dorsey & Whitney.

 

On the morning of May 19, 2009, Mr. Tofteland telephoned C. James Schaper, chief executive officer of Infor, to investigate the ability of Infor and Golden Gate Capital to improve upon the concerns that our board of directors had with their merger agreement mark-up and that were previously discussed among their respective advisors. Mr. Tofteland also expressed SoftBrands desire to better understand the financing arrangements that Infor and Golden Gate Capital were contemplating. Mr. Schaper indicated that he would discuss these issues further with Golden Gate Capital.

 

On the afternoon of May 19, 2009, the chief executive officer of Party B telephoned Mr. Tofteland to advise Mr. Tofteland that, based on its due diligence review, Party B was unable to achieve the synergies it had initially anticipated. As a result, Party B was withdrawing its proposal.

 

On the evening of May 20, 2009, Party H submitted a letter of interest proposing an acquisition of SoftBrands at an enterprise value of $50 million to $85 million, which we refer to as the “Party H Letter of Interest.” The Party H Letter of Interest was distributed to our board of directors that same day. Piper Jaffray subsequently contacted Party H and advised them that the valuation range and other terms of the Party H Letter of Interest they proposed were highly contingent and too uncertain to warrant allowing them to conduct further due diligence on us.

 

Also on the evening of May 20, 2009, Infor and Golden Gate Capital distributed a draft equity commitment letter that provided a commitment on the part of Golden Gate Capital to finance the entire transaction and made SoftBrands an intended beneficiary with respect to Golden Gate Capital’s commitment to fund the payment of the reverse termination fee. Infor and Golden Gate Capital also distributed a revised draft of the merger agreement, which, among other revisions, increased the reverse termination fee to 10% of the enterprise value of the transaction.

 

On the morning of May 21, 2009, our board of directors and the Special Committee held a special meeting, with representatives of Piper Jaffray and Dorsey & Whitney present, to discuss the revised terms of the offer from Infor and Golden Gate Capital. After a lengthy discussion of its fiduciary duties, our board of directors and the Special Committee determined that the revised terms of such offer were sufficient to grant Infor and Golden Gate Capital a limited period of exclusivity for due diligence review of SoftBrands and to commence exclusive negotiations of a definitive merger agreement.

 

That evening, we entered into an agreement granting Infor and Golden Gate Capital a period of exclusivity through June 10, 2009.

 

Between May 22, 2009 and June 11, 2008, Dorsey & Whitney and Kirkland & Ellis held numerous telephone conferences and exchanged numerous e-mail messages regarding the merger agreement and related due diligence issues and exchanged numerous drafts of the merger agreement and the disclosure letter referenced in the merger agreement. During this time period, SoftBrands’ management team presented various information regarding our technology, business, operations and financial condition to Infor and Golden Gate Capital.

 

On June 1, 2009, Dorsey & Whitney and Kirkland & Ellis held additional telephone conferences to discuss the outstanding issues in the draft merger agreement. Kirkland & Ellis also advised Dorsey & Whitney that it would like to better understand the AremisSoft trust before agreeing to a distribution of SoftBrands’ interest in the trust to SoftBrands’ stockholders. Dorsey & Whitney advised Kirkland & Ellis that it would provide Kirkland & Ellis with whatever information it desired regarding the AremisSoft trust, but that the trust was not included in the transaction.

 

Also on June 2, 2009, Kirkland & Ellis distributed a draft form of voting agreement and communicated the desire of Infor and Golden Gate Capital for SoftBrands’ preferred stockholders, ABRY Mezzanine Partners, L.P. and Capital Resource Partners, L.P., to sign such voting agreement and provide any consent that was required of them in connection with the proposed acquisition.

On June 4, 2009, representatives of Dorsey & Whitney, Kirkland & Ellis, Piper Jaffray, SoftBrands management, Infor and Golden Gate Capital held a telephone conference to discuss the material open items in the merger agreement.

 

On June 8, 2009, Mr. Schaper telephoned Mr. Tofteland and indicated that, in their due diligence review of SoftBrands, Infor and Golden Gate Capital identified expenses and other diligence items that they believed negatively impacted their valuation of SoftBrands. Later that day, representatives from Golden Gate Capital and Infor contacted Piper Jaffray to convey the same message and that they were reviewing how they wanted to proceed.

 

During the morning of June 9, 2009, our board of directors and the Special Committee held a regular meeting, with representatives of Piper Jaffray and Dorsey & Whitney present, to discuss the significant open items in the merger agreement as well as the conversations that occurred the previous day.

 

During the afternoon of June 9, 2009, representatives of Golden Gate Capital and Infor verbally communicated to Piper Jaffray that they would be distributing a comprehensive response to open items on the merger agreement and communicated that the revised price per common share would be $0.88.

 

Later in the afternoon of June 9, 2009, the Special Committee held a meeting, with representatives of Piper Jaffray present, to discuss the revised price communicated by Golden Gate Capital and Infor. After a lengthy discussion, our board of directors directed Piper Jaffray to negotiate with Infor and Golden Gate Capital in an effort to improve upon the price communicated and to pursue a reduction in the expense reimbursement obligation to $1 million.

 

On the evening of June 9, 2009, we received a revised letter of interest from Infor and Golden Gate Capital, proposing an acquisition of SoftBrands at a price per common share of $0.88 in cash, which we refer to as the “Second Letter of Interest.” The Second Letter of Interest also proposed removing certain terms surrounding the conditionality of the merger and permitting the AremisSoft trust proceeds to be distributed to SoftBrands’ existing stockholders.

 

During the morning of June 10, 2009, Piper Jaffray, on behalf of SoftBrands, responded that $0.88 per common share was inadequate and insisted that Infor and Golden Gate Capital provide its “best price” offer and that the expense reimbursement obligation needed to be capped at $1 million. In response, Infor and Golden Gate Capital verbally indicated to Piper Jaffray their interest in doing the deal at $0.92 per common share and their agreement to the reduction in the expense reimbursement obligation.

 

During the afternoon of June 10, 2009, our board of directors and the Special Committee held a special meeting, with representatives of Piper Jaffray and Dorsey & Whitney present, to discuss the Second Letter of Interest and the subsequent verbal revisions communicated to Piper Jaffray. At the board’s request, Dorsey & Whitney reviewed the legal implications of the Second Letter of Interest. After a lengthy discussion, our board of directors directed Dorsey & Whitney to attempt to resolve all open items in the merger agreement with Kirkland & Ellis.

 

That evening, Dorsey & Whitney distributed a revised draft of the merger agreement that reflected the terms of the further revised offer of Infor and Golden Gate Capital and Kirkland & Ellis distributed a draft debt commitment letter from Wells Fargo Foothill and a revised draft equity commitment letter from Golden Gate Capital.

 

On the afternoon of June 11, 2009, our board of directors and the Special Committee each met, reviewed with representatives of Dorsey & Whitney the terms and conditions of the merger agreement and discussed how certain open issues in the merger agreement had been resolved, and reviewed its fiduciary duties in that context. Piper Jaffray then reviewed with our board of directors certain financial analyses and rendered its oral opinion to our board of directors (which was subsequently confirmed in writing) that, as of June 11, 2009 and based upon and subject to the factors and assumptions set forth in the opinion, the $0.92 per share in cash to be received by the holders of our common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders. Our board of directors and the Special Committee, after further deliberation, then unanimously (i) approved the merger agreement and the merger; (ii) determined that the terms of the merger and the merger agreement were fair to and in the best interests of the holders of the common stock of SoftBrands; and (iii) recommended that such holders vote any shares held by them in favor of the merger.

After the close of the NYSE Amex Equities trading day on June 11, 2009, SoftBrands, Steel Holdings and Merger Sub executed the merger agreement, and Steel Holdings and ABRY Mezzanine Partners, L.P. and its affiliate ABRY Partners, LLC executed the voting agreements. On June 12, 2009, prior to the open of the NYSE Amex Equities trading day, SoftBrands, Infor and Golden Gate Capital issued a joint press release announcing the transaction.

 

On June 25, 2009, Capital Resource Partners, L.P. executed a voting agreement.

 

Reasons for the Merger.   In the course of reaching its decision to approve the merger and enter into the merger agreement, our board of directors consulted with our senior management, outside legal counsel and our financial advisor, and reviewed a significant amount of information and considered a number of factors, including, among others, the following factors:

 

 

Our board of directors also identified and considered a number of positive factors supporting its decision to approve the merger and enter into the merger agreement, including, but not limited to:

 

 

 

 

In the course of its deliberations, our board of directors also identified and considered a variety of risks and other countervailing factors, including:

 

 

The preceding discussion is not meant to be an exhaustive description of the information and factors considered by our board of directors, but is believed to address the material information and factors considered. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, our board of directors did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weights to the various factors considered in reaching its determination. In considering the factors described above, individual members of the board may have given different weight to different factors.

 

Board of Directors Recommendation. After careful consideration, and taking into account all of the factors outlined below, our board of directors unanimously determined that it is advisable, fair to and in the best interests of SoftBrands and its stockholders for SoftBrands to enter into the merger agreement and consummate the merger and the other transactions contemplated by the merger agreement, and our board of directors unanimously recommends that our stockholders vote “FOR” the adoption of the merger agreement. Our board of directors also recommends that SoftBrands stockholders vote “FOR” any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement.

 

We retained Piper Jaffray & Co. (which we sometimes refer to in this proxy statement as “Piper Jaffray”) to act as financial advisor to our board of directors, and, if requested, to render to our board of directors an opinion as to the fairness, from a financial point of view, to the holders of our common stock of the $0.92 per common share cash consideration to be received by the holders of our common stock pursuant to the merger agreement.

 

The full text of the Piper Jaffray written opinion, dated June 11, 2009, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Piper Jaffray in rendering its opinion, is attached as Annex C and is incorporated in its entirety herein by reference. You are urged to, and should, carefully read the Piper Jaffray opinion in its entirety, and this summary is qualified by reference to the written opinion. The Piper Jaffray opinion addresses only the fairness, from a financial point of view and as of the date of the opinion, to holders of our

common stock (other than Steel Holdings or its affiliates) of the $0.92 per common share cash consideration to be paid to the holders of SoftBrands common stock pursuant to the merger agreement. The Piper Jaffray opinion does not address any consideration to be paid to any class or series of our preferred stock, or any of our other classes of securities, creditors or other constituencies. The Piper Jaffray opinion was directed to our board of directors and was not intended to be, and does not constitute, a recommendation as to how any of our stockholders should act or vote with respect to the merger or any other matter. The Piper Jaffray opinion is not intended to confer rights and remedies upon Steel Holdings, any stockholders of Steel Holdings or any affiliates thereof, any of our common or preferred stockholders, option holders or warrant holders, or any other holder of stock-based compensation of SoftBrands. The Piper Jaffray opinion was approved for issuance by a committee of Piper Jaffray employees in accordance with its customary practice.

 

In connection with rendering the opinion described above and performing its related financial analyses, Piper Jaffray:

 

 

The following is a summary of the material financial analyses performed by Piper Jaffray in connection with the preparation of its fairness opinion, which was reviewed with, and was orally delivered to, our board of directors at a meeting held on June 11, 2009, and was subsequently confirmed in writing by a written opinion dated June 11, 2009. The preparation of analyses and a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, this summary does not purport to be a complete description of the analyses performed by Piper Jaffray or of its presentation to our board of directors on June 11, 2009.

 

This summary includes information presented in tabular format, which must be read together with the text of each analysis summary and considered as a whole in order to fully understand the financial analyses presented by Piper Jaffray. The tables alone do not constitute a complete summary of the financial analyses. The order in which these analyses are presented below, and the results of those analyses, should not be taken as any indication of the relative importance or weight given to these analyses by Piper Jaffray or our board of directors. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before June 10, 2009, and is not necessarily indicative of current market conditions.

 

Implied Consideration.   Based on the cash consideration in the proposed transaction of $0.92 per share of SoftBrands common stock and the number of diluted common shares outstanding as provided by our management based on the treasury stock method, Piper Jaffray calculated the aggregate implied equity value of the total consideration payable in the merger of SoftBrands common stock to be approximately $43.6 million. Piper Jaffray also calculated the implied enterprise value (defined as implied equity value plus SoftBrands’ consolidated debt and the aggregate liquidation preference of its preferred stock less SoftBrands’ consolidated cash) of SoftBrands to be approximately $80.3 million.

Selected Public Companies Analysis

 

Piper Jaffray reviewed selected historical SoftBrands financial data for the last 12 months ended March 31, 2009 and estimated SoftBrands financial data that was prepared by our management for the 9 months beginning April 1, 2009 and calendar year 2010 and compared them to corresponding historical financial data and consensus Wall Street forecasts, where applicable, for publicly traded companies in the software industry with market values below $3.0 billion and with aspects Piper Jaffray deemed similar to aspects of SoftBrands business. Based on these criteria, Piper Jaffray identified and analyzed the following 12 selected companies:

 

 

Piper Jaffray compared valuation multiples for SoftBrands derived from the $0.92 per common share cash consideration and historical and projected revenue and earnings before interest, taxes, depreciation and amortization (which we refer to in this proxy statement as “EBITDA”) data for SoftBrands, on the one hand, to valuation multiples for the selected companies derived from their market valuation and historical and projected revenue and EBITDA data, on the other hand. Piper Jaffray also compared the price to earnings per share (which we refer to in this proxy statement as “P/E”) ratio based on historical and projected earnings:

 

 

 

 

The analysis indicated that, based on the estimates and assumptions used in the analysis, the enterprise value implied by the $0.92 per common share cash consideration as a multiple of projected revenue for the calendar years 2009 and 2010 and as a multiple of revenue for the last 12 months was within the range of similar multiples for the selected public companies. Based on the estimates and assumptions used in the analysis, the enterprise value implied by the $0.92 per common share cash consideration as a multiple of projected EBITDA for the calendar

years 2009 and 2010 and as a multiple of EBITDA for the last 12 months was also within the range of similar multiples for the selected public companies. Based on the estimates and assumptions used in the analysis, the P/E ratio for the last 12 months implied by the $0.92 per common share cash consideration was above the range of similar multiples for the selected public companies. Based on the estimates and assumptions used in the analysis, the P/E ratio for the projected calendar year 2009 implied by the $0.92 per common share cash consideration was within the range of similar multiples for the selected public companies. Based on the estimates and assumptions used in the analysis, the P/E ratio for the projected calendar year 2010 implied by the $0.92 per common share cash consideration was below the range of similar multiples for the selected public companies.

 

Selected Mergers and Acquisitions (“M&A”) Transaction Analysis

 

Piper Jaffray reviewed transactions involving target companies that it deemed comparable to us operating in similar businesses and having SIC code classifications deemed similar to aspects of SoftBrands’ business. Piper Jaffray selected these transactions by searching SEC filings, public company disclosures, press releases, industry reports and press articles, databases and other sources and by applying the following criteria:

 

 

Based on these criteria, the following 33 M&A transactions were deemed similar to the merger (acquiror/target):

 

Historical M&A Transactions:

 

 

 

¹  Based on 6/8/2009 press release. On 6/11/2009, LLR Partners matched this offer.

 

 

Piper Jaffray calculated the multiples of enterprise value implied by the consideration paid in the applicable transaction to revenue and EBITDA for the last 12 months preceding each M&A transaction and the multiples of the implied enterprise value to projected revenue and EBITDA for the 12 consecutive months following each M&A transaction. Piper Jaffray then compared the results of these calculations with similar calculations based on the enterprise value for SoftBrands implied by the $0.92 per common share cash consideration, as described above. The SoftBrands calculations were based on historical SoftBrands financial data for the last 12 months ended March 31, 2009 and estimated SoftBrands financial data that was prepared by our management for the 12 months beginning April 1, 2009. The selected M&A transactions calculations were based on historical financial data and projected 12 months revenue and EBITDA. These projections were based on estimates from Wall Street forecasts and other publicly available information. This analysis indicated the following multiples:

 

 

The analysis of the selected historical M&A transactions indicated that, based on the estimates and assumptions used in the analysis, the enterprise value for SoftBrands implied by the $0.92 per common share cash consideration as a multiple of revenue for the last 12 months and as a multiple of projected revenue for the forward 12-month period was within the range of similar multiples for the selected historical M&A transactions. Based on the estimates and assumptions used in the analysis, the enterprise value for SoftBrands implied by the $0.92 per common share cash consideration as a multiple of EBITDA for the last 12 months was within the range of

similar multiples for the selected historical M&A transactions and as a multiple of projected EBITDA for the forward 12-month period was below the range of similar multiples for the selected historical M&A transactions.

 

Piper Jaffray conducted a separate analysis of historical M&A transactions using only transactions from the historical M&A transaction analysis summarized above which were announced between January 1, 2008 and June 10, 2009, which included the following 8 M&A transactions:

 

Recent M&A Transactions :

 

 

Piper Jaffray calculated the multiples of enterprise value implied by the consideration paid in the applicable transaction to revenue and EBITDA for the last 12 months preceding each recent M&A transaction and the multiples of the implied enterprise value to projected revenue and EBITDA for the 12 consecutive months following each recent M&A transaction. Piper Jaffray then compared the results of these calculations with similar calculations based on the enterprise value for SoftBrands implied by the $0.92 per common share cash consideration, as described above. The SoftBrands calculations were based on historical SoftBrands financial data for the last 12 months ended March 31, 2009 and estimated SoftBrands financial data that was prepared by our management for the 12 months beginning April 1, 2009. The selected M&A transactions calculations were based on historical financial data and projected 12 months revenue and EBITDA. These projections were based on estimates from Wall Street forecasts and other publicly available information. This analysis indicated the following multiples:

 

 

The analysis of the selected recent M&A transactions indicated that, based on the estimates and assumptions used in the analysis, the enterprise value for SoftBrands implied by the $0.92 per common share cash consideration as a multiple of revenue for the last 12 months and as a multiple of projected revenue for the forward 12 month period were within the range of similar multiples for the selected recent M&A transactions. Based on the estimates and assumptions used in the analysis, the enterprise value for SoftBrands implied by the $0.92 per common share cash consideration as a multiple of projected EBITDA for the forward 12 month period and as a multiple of EBITDA for the last 12 months were below the range of similar multiples for the selected recent M&A transactions.

 

 

²  Based on 6/8/2009 press release. On 6/11/2009, LLR Partners matched this offer.

Technology Premiums Paid Analysis

 

Piper Jaffray reviewed publicly available information for selected technology merger or buyout transactions to determine the premiums (or discounts) paid in the transactions over recent trading prices of the target companies prior to announcement of the transaction. Piper Jaffray selected these transactions by searching SEC filings, public company disclosures, press releases, industry and popular press reports, databases and other sources and by applying the following criteria:

 

 

Piper Jaffray performed its analysis on 132 transactions that satisfied the criteria, and the table below shows a comparison of premiums paid in these transactions to the premium that would be paid to our stockholders based on the $0.92 per common share cash consideration.

 

 

 

 

This analysis indicated that, based on the estimates and assumptions used in the analysis, the premium over the market price on June 10, 2009 for our common stock implied by the $0.92 per common share cash consideration was within the range of premiums paid in the selected transactions as calculated one trading day before announcement, the premium over the market price on June 4, 2009 for our common stock implied by the $0.92 per common share cash consideration was within the range of premiums paid in the selected transactions as calculated five trading days before announcement and the premium over the market price on May 13, 2009 for our common stock implied by the $0.92 per common share cash consideration was within the range of premiums paid in the selected transactions as calculated twenty trading days before announcement.

 

Discounted Cash Flow Analysis

 

Piper Jaffray performed a discounted cash flow analysis to calculate a range of theoretical values for SoftBrands, based on (i) the present value of implied future cash flows of SoftBrands’ business and (ii) a terminal value which is an estimate of the future value of SoftBrands’ business. SoftBrands’ management prepared projected financial data for the period beginning March 31, 2009 and ending September 30, 2012, and Piper Jaffray used these projections in its analysis. For purposes of this analysis, Piper Jaffray used a range of discount rates of 15.0% to 20.0% (based in part on a calculation of SoftBrands’ weighted average cost of capital) and a range of terminal EBITDA multiples of 4.0x-7.0x applied to projected 2012 EBITDA. This analysis resulted in implied equity values per common share of SoftBrands ranging from a low of $0.69 per share to a high of $1.53 per share.

 

 

Trading History of SoftBrands Common Stock.

 

Piper Jaffray reviewed general trading information concerning SoftBrands, including the price of SoftBrands common stock over selected periods measured from June 10, 2009. Piper Jaffray presented the recent common stock trading information for SoftBrands in the following table:

 

Trading History

 

 

Miscellaneous

 

The summary set forth above does not contain a complete description of the analyses performed by Piper Jaffray, but does summarize the material analyses performed by Piper Jaffray in rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Piper Jaffray believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses or of the summary, without considering the analyses as a whole or all of the factors included in its analyses, would create an incomplete view of the processes underlying the analyses set forth in the Piper Jaffray opinion. In arriving at its opinion, Piper Jaffray considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Instead, Piper Jaffray made its determination as to fairness on the basis of its experience and financial judgment after considering the results of all of its analyses. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that this analysis was given greater weight than any other analysis. In addition, the ranges of valuations resulting from any particular analysis described above should not be taken to be Piper Jaffray’s view of the actual value of SoftBrands.

 

Piper Jaffray’s opinion was one of many factors taken into consideration by our board of directors in making the determination to approve the merger agreement. While Piper Jaffray provided advice to our board of directors during their negotiations with Steel Holdings, Piper Jaffray did not recommend any specific merger consideration.

 

Piper Jaffray relied upon and assumed, without assuming liability or responsibility for independent verification, the accuracy and completeness of all information that was publicly available or was furnished, or otherwise made available, to Piper Jaffray or discussed with or reviewed by Piper Jaffray. Piper Jaffray further relied upon the assurances of our management that the financial information provided was prepared on a reasonable basis in accordance with industry practice, and that our management was not aware of any information or facts that would make the information provided to Piper Jaffray incomplete or misleading. Without limiting the generality of the foregoing, for the purpose of the opinion, Piper Jaffray assumed that with respect to financial forecasts, estimates and other forward-looking information relating to us reviewed by it, such information reflected the best then-available estimates and judgments of our management as to our expected future results of operations and financial condition. Piper Jaffray expressed no opinion as to any financial forecasts, estimates or other forward looking

information or the assumptions on which they were based. Piper Jaffray did not act as an advisor to us, and did not express an opinion on, any legal, tax, accounting or regulatory matters in any jurisdiction. Piper Jaffray relied, with the consent of our board of directors, on advice of our outside counsel and our independent accountants, and on the assumptions of our management, as to all accounting, legal, tax and financial reporting matters with respect to us and the merger agreement.

 

Piper Jaffray relied upon and assumed, without independent verification, that (i) the representations and warranties of all parties to the merger agreement and all other related documents and instruments that are referred to therein are true and correct, (ii) each party to such agreements will fully and timely perform all of the covenants and agreements required to be performed by such party, (iii) the merger will be consummated pursuant to the terms of the merger agreement without amendments thereto, and (iv) all conditions to the consummation of the merger will be satisfied without waiver by any party of any conditions or obligations thereunder. In arriving at its opinion, Piper Jaffray assumed that the merger agreement would be in all material respects identical to the draft of the merger agreement reviewed by it. Piper Jaffray also assumed that all the necessary regulatory approvals and consents required for the merger will be obtained in a manner that will not adversely affect SoftBrands or the contemplated benefits of the merger.

 

In arriving at its opinion, Piper Jaffray did not perform any appraisals or valuations of any specific assets or liabilities (fixed, contingent or other) of SoftBrands, and was not furnished or provided with any such appraisals or valuations, nor did Piper Jaffray evaluate the solvency of SoftBrands under any state or federal law relating to bankruptcy, insolvency or similar matters. The analyses performed by Piper Jaffray in connection with its opinion were going concern analyses. Piper Jaffray did not express any opinion regarding the liquidation value of SoftBrands or any other entity. Without limiting the generality of the foregoing, Piper Jaffray has not undertaken any independent analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which SoftBrands or any of its affiliates is a party or may be subject, and at our direction and with the consent of our board of directors, Piper Jaffray’s opinion makes no assumption concerning, and therefore does not consider, the possible assertion of claims, outcomes or damages arising out of any such matters. Piper Jaffray also assumed that neither SoftBrands nor Steel Holdings is party to any material pending transaction, including without limitation any financing, recapitalization, acquisition or merger, divestiture or spin-off, other than the merger.

 

Piper Jaffray’s opinion was necessarily based upon the information available to Piper Jaffray and facts and circumstances as they existed and were subject to evaluation on the date of the opinion; events occurring after the date of the opinion could materially affect the assumptions used in preparing the opinion. Piper Jaffray did not express any opinion as to the price at which shares of common stock of SoftBrands have traded or such stock may trade at any future time. Piper Jaffray has not undertaken to reaffirm or revise the opinion or otherwise comment upon any events occurring after the date of the opinion and does not have any obligation to update, revise or reaffirm the opinion.

 

The opinion addressed solely the fairness, from a financial point of view, to holders of common stock of SoftBrands (other than Steel Holdings or its affiliates) of the $0.92 per common share cash consideration set forth in the merger agreement and did not address any other terms or agreement relating to the merger agreement or any other related agreement. Piper Jaffray was not requested to opine to, and the opinion did not address, the transactions contemplated in Section 7.8 of the merger agreement or the value of the liquidating trust referred to therein. In addition, Piper Jaffray was not requested to opine as to, and the opinion did not address, the basic business decision to proceed with or effect the merger, the merits of the merger relative to any alternative transaction or business strategy that may be available to SoftBrands, Steel Holding’s ability to fund the merger consideration, any other terms contemplated by the merger or the fairness of the merger or the consideration to be paid to any class or series of preferred stock of SoftBrands, or any other class of securities, creditor or other constituency of SoftBrands. Piper Jaffray expressed no opinion with respect to the amount or nature of compensation to any officer, director or employee of any party to the merger, or any class of such persons, relative to the compensation to be received by holders of our common stock in the merger or with respect to the fairness of any such compensation.

 

Piper Jaffray is a nationally recognized investment banking firm and is regularly engaged as a financial advisor in connection with mergers and acquisitions, underwritings and secondary distributions of securities and private placements. Our board of directors selected Piper Jaffray to render its fairness opinion in connection with the

transactions contemplated by the merger agreement on the basis of its experience and reputation in acting as a financial advisor in connection with mergers and acquisitions.

 

Piper Jaffray acted as our financial advisor in connection with the merger and will receive an estimated fee of approximately $750,000 from us, approximately $250,000 of which is contingent upon the consummation of the merger. Piper Jaffray will receive a fee of $500,000 from us for providing its opinion, which will be credited against the fee for financial advisory services. The opinion fee was not contingent upon the consummation of the merger or the conclusions reached in Piper Jaffray’s opinion. We also agreed to indemnify Piper Jaffray against certain liabilities in connection with its services and to reimburse Piper Jaffray for certain of its expenses. In the ordinary course of its business, Piper Jaffray and its affiliates may actively trade securities of SoftBrands for their own account or the account of their customers and, accordingly, Piper Jaffray or its affiliates may at any time hold a long or short position in such securities. Piper Jaffray does not currently own any securities of SoftBrands for its own account. Piper Jaffray has, in the past, provided financial advisory and financing services to SoftBrands and may continue to do so and Piper Jaffray has received, and may receive, fees for the rendering of such services. Piper Jaffray may also, in the future, provide investment banking and financial advisory services to SoftBrands, Steel Holdings or entities that are affiliated with SoftBrands or Steel Holdings, for which Piper Jaffray would expect to receive compensation. Piper Jaffray is not currently engaged by Steel Holdings to provide any such services.

 

Concurrently with the execution and delivery of the merger agreement, Steel Holdings and Merger Sub entered into voting agreements with ABRY Mezzanine Partners, L.P., one of our significant stockholders, and its affiliate ABRY Partners, LLC. In addition, on June 25, 2009, Capital Resource Partners, L.P., another one of our significant stockholders, entered into a voting agreement with Steel Holdings and Merger Sub. As of the record date for the special meeting, an aggregate of 19,540,787 shares of our capital stock on an as-converted-to-common stock basis, representing approximately [31.47]% of our capital stock entitled to vote at the special meeting on the record date, on an as-converted to common stock basis, were subject to the voting agreements. The voting agreements are attached as Annex B hereto.

 

Pursuant to the voting agreements, ABRY and CRP agreed, among other things, to vote all of their shares of our capital stock:

 

 

ABRY and CRP have each agreed to use best efforts to cause it to be present, in person or by proxy, at all meetings of stockholders of SoftBrands at which any of the above will be voted upon. In addition, in the event either ABRY or CRP fails to vote its shares of our capital stock in accordance with their obligations under the voting agreements, ABRY and CRP have agreed to give representatives of Steel Holdings or Merger Sub an irrevocable proxy to vote their shares of SoftBrands capital stock in this manner.

 

The voting agreements prohibit ABRY and CRP from:

 

 

 

ABRY and CRP have also agreed not to:

 

 

The voting agreements terminate upon the earlier of the effective time of the merger of the termination of the merger agreement.

 

In considering the recommendation of our board of directors in favor of the adoption of the merger agreement, you should be aware that members of our board of directors and our executive officers have interests in the merger that are different from, or in addition to, yours.

 

All such additional interests are described below, to the extent material, and except as described below, such persons have, to our knowledge, no material interest in the merger apart from those of stockholders generally. Our board of directors was aware of, and considered the interests of, our directors and executive officers in approving the merger agreement and the merger.

 

Individual Arrangements with Certain Executive Officers

 

Employment Agreement with Randal B. Tofteland

 

On January 1, 2004, we entered into an amended and restated employment agreement with Randal B. Tofteland. The agreement provides that if (i) a Change of Control (as defined in the amended and restated employment agreement) occurs, which includes the merger; and (ii) within 12 months after the date of such Change of Control, either (A) Mr. Tofteland is terminated by the surviving corporation without cause, (B) Mr. Tofteland terminates his employment for Good Reason (as defined in the amended and restated employment agreement) or (C) the surviving corporation fails to renew the amended and restated employment agreement,

 

 

 

 

Severance Pay Agreements with Gregg A. Waldon and Jo Masters

 

We have entered into severance pay agreements with each of Gregg A. Waldon and Jo Masters (each, an “executive”). The severance pay agreement provides that if (i) a Change of Control (as defined in the severance pay agreement) occurs, which includes the merger; and (ii) either (A) within one year after the date of such Change of Control, the surviving corporation has exercised its right to terminate the executive without cause or (B) the executive, prior to March 15 of the calendar year following the year in which the Change of Control occurs, has terminated such executive’s employment for Good Reason (as defined in the Severance Pay Agreement),

 

 

 

Options and Stock Appreciation Rights

 

As of June 11, 2009, none of the individuals who currently serve, or served between October 1, 2008 and the date of this proxy statement, as executive officers or directors of SoftBrands held any options with an exercise price less than the common stock per share amount. Therefore, such individuals will not receive any cash payments for their option holdings in connection with the merger.

 

Of the individuals who currently serve, or served between October 1, 2008 and the date of this proxy statement, as executive officers or directors of SoftBrands, only Ms. Masters, Mr. Tofteland and Mr. Waldon held stock appreciation rights with an exercise price less than the common stock per share amount as of June 11, 2009. In accordance with the merger agreement, immediately prior to the effective time of the merger, these stock appreciation rights, together with all other outstanding stock appreciation rights, will be accelerated and canceled in exchange for the right to receive a cash payment equal to the common stock per share amount of $0.92 less the per share exercise price associated with such stock appreciation rights. As a result, Ms. Masters, Mr. Tofteland and Mr. Waldon may have a financial interest that is different from, or in addition to, the interest of holders of our common stock. As of June, 11, 2009, Ms. Masters, Mr. Tofteland and Mr. Waldon held stock appreciation rights with an exercise price of $0.52 per share for 200,000, 600,000 and 250,000 shares, respectively. In accordance with the merger agreement, Ms. Masters, Mr. Tofteland and Mr. Waldon will receive cash payments in the amount of $80,000, $240,000 and $100,000, respectively, for such outstanding stock appreciation rights.

 

Stock-Based Awards

 

Certain of our directors and executive officers hold restricted stock units. In accordance with the merger agreement, immediately prior to the effective time of the merger, these stock-based awards, together with all other outstanding stock-based awards, will be accelerated and canceled in exchange for the right to receive the common stock per share amount of $0.92 in cash for each share of our common stock subject to issuance upon settlement of such stock-based award. Any restrictions pertaining to stock-based awards will no longer apply as a result of the acceleration and cancellation of stock-based awards in connection with the merger. As a result, directors or executive officers holding such stock-based awards may have a financial interest that is different from, or in addition to, the interest of holders of our common stock.

The following table summarizes the restricted stock units held as of June 11, 2009 by individuals who currently serve, or served between October 1, 2008 and the date of this proxy statement, as executive officers or directors of SoftBrands, and the consideration that each of them will receive pursuant to the merger agreement in connection with the ownership of their restricted stock units.

 

 

 

 

Indemnification; Insurance

 

The merger agreement provides that for a period of six years after the effective time of the merger, the surviving corporation in the merger will fulfill and honor in all respects the indemnification and advancement of expenses obligations of SoftBrands pursuant to our organizational documents or any indemnification agreements between SoftBrands and our directors, officers, employees or agents as of the date of execution of the merger agreement against all losses or claims arising out of such person having served as a director, officer, employee or agent of SoftBrands or any of our subsidiaries or having served at the request of SoftBrands or any of our subsidiaries as a director, officer, employee or agent of any other person pertaining to any matter existing or occurring or any acts or omissions occurring prior to the effective time of the merger, whether or not such losses or claims are asserted prior to the effective time of the merger.

 

In addition, the merger agreement provides that we will cause the surviving corporation to maintain in effect directors’ and officers’ liability insurance in an amount and on terms no less advantageous to those applicable to current directors and officers of SoftBrands. We may fulfill these obligations by purchasing a policy of directors’ and officers’ insurance or a “tail” policy under our existing directors’ and officers’ insurance policy, in either case which has an effective term of six years from the effective time of the merger.

 

See the section of this proxy statement entitled “The Merger Agreement — Indemnification; Insurance” beginning on page • .

Market Price and Dividend Data

 

Our common stock is listed on the NYSE Amex Equities under the symbol “SBN.” This table shows, for the periods indicated, the range of intraday high and low per share sales prices for our common stock as reported on the NYSE Amex Equities.

 

 

Subject to restrictions under Delaware law and the rights and preferences of our outstanding preferred stock, dividends on our common stock must be determined and declared by our board of directors. We have never declared or paid a dividend on our common stock. We are obligated to pay dividends, in semi-annual installments (payable on June 30 and December 31 of each year), at a rate of 8% to holders of our Series C-1 Preferred Stock and Series D Preferred Stock.

 

The following table sets forth the closing per share sales price of our common stock, as reported on the NYSE Amex Equities on June 11, 2009, the last full trading day before the public announcement of the merger, and on July • , 2009, the latest practicable trading day prior to the printing of this proxy statement:

 

 

Following the merger, there will be no further market for our common stock and our stock will be delisted from the NYSE Amex Equities and deregistered under the Exchange Act.

 

Under the HSR Act and the rules thereunder, certain transactions, including the merger, may not be completed unless certain waiting period requirements have been satisfied. On June 23, 2009, Steel Holdings and SoftBrands have each filed a notification and report form pursuant to the HSR Act with the Antitrust Division of the Department of Justice and the Federal Trade Commission, but the waiting period has not yet ended and we may each receive additional requests for information. The requirements of the HSR Act will be satisfied if the merger is completed within one year from the termination of the waiting period. Even if the waiting period is terminated, the Antitrust Division, the Federal Trade Commission or others could take action under the antitrust laws with respect to the merger, including seeking to enjoin the completion of the merger, to rescind the merger or to conditionally approve the merger. There can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

 

The discussion of the provisions set forth below is not a complete summary regarding your appraisal rights under Delaware law and is qualified in its entirety by reference to the text of the relevant provisions of Delaware law, which are attached to this proxy statement as Annex D. Stockholders intending to exercise appraisal rights should carefully review Annex D. Failure to follow precisely any of the statutory procedures set forth in Annex D may result in a termination or waiver of these rights.

If the merger is consummated, dissenting holders of our capital stock who follow the procedures specified in Section 262 of the General Corporation Law of the State of Delaware (Section 262) within the appropriate time periods will be entitled to have their shares of our common stock appraised by a court and to receive the “fair value” of such shares in cash as determined by the Delaware Court of Chancery in lieu of the consideration that such stockholder would otherwise be entitled to receive pursuant to the merger agreement.

 

The following is a brief summary of Section 262, which sets forth the procedures for dissenting from the merger and demanding statutory appraisal rights. Failure to follow the procedures set forth in Section 262 precisely could result in the loss of appraisal rights. This proxy statement constitutes notice to holders of our capital stock concerning the availability of appraisal rights under Section 262. A stockholder of record wishing to assert appraisal rights must hold the shares of stock on the date of making a demand for appraisal rights with respect to such shares and must continuously hold such shares through the effective time of the merger.

 

Stockholders who desire to exercise their appraisal rights must satisfy all of the conditions of Section 262. A written demand for appraisal of shares must be filed with us before the special meeting on August • , 2009. This written demand for appraisal of shares must be in addition to and separate from a vote against the merger. Stockholders electing to exercise their appraisal rights must not vote “FOR” adoption of the merger agreement. Any proxy or vote against adoption of the merger agreement will not in and of itself constitute a demand for appraisal within the meaning of Section 262.

 

A demand for appraisal must be executed by or for the stockholder of record, fully and correctly, as such stockholder’s name appears on the share certificate. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, this demand must be executed by or for the fiduciary. If the shares are owned by or for more than one person, as in a joint tenancy or tenancy in common, such demand must be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner and expressly disclose the fact that, in exercising the demand, he is acting as agent for the record owner. A person having a beneficial interest in our capital stock held of record in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below and in a timely manner to perfect whatever appraisal rights the beneficial owners may have.

 

Any of our stockholders who elects to exercise appraisal rights should mail or deliver his, her or its written demand to us at our address at 800 LaSalle Avenue, Suite 2100, Minneapolis, Minnesota 55402, Attention: Secretary. The written demand for appraisal should specify the stockholder’s name and mailing address, and that the stockholder is thereby demanding appraisal of his, her or its SoftBrands capital stock. Within ten days after the effective time of the merger, we must provide notice of the effective time of the merger to all of our stockholders who have complied with Section 262 and have not voted for adoption of the merger agreement.

 

Within 120 days after the effective time of the merger, but not thereafter, any stockholder who has satisfied the requirements of Section 262 may deliver to us a written demand for a statement listing the aggregate number of shares not voted in favor of adoption of the merger agreement and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. We, as the surviving corporation in the merger, must mail such written statement to the stockholder no later than the later of ten days after the stockholders’ request is received by us or ten days after the latest date for delivery of a demand for appraisal under Section 262.

 

Within 120 days after the effective time of the merger, but not thereafter, either we or any stockholder who has complied with the required conditions of Section 262 and who is otherwise entitled to appraisal rights may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the SoftBrands shares of stockholders entitled to appraisal rights. We have no obligation or present intention to file such a petition if demand for appraisal is made.

 

Upon the filing of any petition by a stockholder in accordance with Section 262, service of a copy must be made upon us, which we must, within 20 days after service, file in the office of the Register in Chancery in which the petition was filed, a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by us. If we file a petition, the petition must be accompanied by the verified list. The Register in Chancery, if so ordered by the

court, will give notice of the time and place fixed for the hearing of such petition by registered or certified mail to us and to the stockholders shown on the list at the addresses therein stated, and notice will also be given by publishing a notice at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or such publication as the court deems advisable. The forms of the notices by mail and by publication must be approved by the court, and we will bear the costs thereof. The Delaware Court of Chancery may require the stockholders who have demanded an appraisal for their shares, and who hold stock represented by certificates, to submit their stock certificates to the Register in Chancery for notation of the pendency of the appraisal proceedings and the Delaware Court of Chancery may dismiss the proceedings as to any stockholder that fails to comply with such direction.

 

If a petition for an appraisal is filed in a timely fashion, after a hearing on the petition, the court will determine which stockholders are entitled to appraisal rights and will appraise the shares owned by these stockholders, determining the fair value of such shares, exclusive of any element of value arising from the accomplishment or expectation of the merger. Unless the court in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) between the effective date of the merger and the date of payment of the judgment will be paid upon the amount determined to be the fair value.

 

SoftBrands stockholders considering seeking appraisal of their shares should note that the fair value of their shares determined under Section 262 could be more, the same or less than the consideration they would receive pursuant to the merger agreement if they did not seek appraisal of their shares. The costs of the appraisal proceeding may be determined by the court and taxed against the parties as the court deems equitable under the circumstances. Upon application of a dissenting stockholder, the court may order that all or a portion of the expenses incurred by any dissenting stockholder in connection with the appraisal proceeding, including reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all shares entitled to appraisal. In the absence of a determination or assessment, each party bears his, her or its own expenses. The exchange of shares for cash pursuant to the exercise of appraisal rights will be a taxable transaction for United States federal income tax purposes and possibly state, local and foreign income tax purposes as well. See the section of this proxy statement entitled “The Merger — Material United States Federal Income Tax Consequences” beginning on page • .

 

Any stockholder who has duly demanded appraisal in compliance with Section 262 will not, after the effective time of the merger, be entitled to vote for any purpose the shares subject to demand or to receive payment of dividends or other distributions on such shares, except for dividends or distributions payable to stockholders of record at a date prior to the effective time of the merger.

 

At any time within 60 days after the effective time of the merger, any stockholder will have the right to withdraw his demand for appraisal and to accept the terms offered in the merger agreement. After this period, a stockholder may withdraw his demand for appraisal and receive payment for his shares as provided in the merger agreement only with our consent. If no petition for appraisal is filed with the court within 120 days after the effective time of the merger, stockholders’ rights to appraisal (if available) will cease. Inasmuch as we have no obligation to file such a petition, any stockholder who desires a petition to be filed is advised to file it on a timely basis. No petition timely filed in the court demanding appraisal may be dismissed as to any stockholder without the approval of the court, which approval may be conditioned upon such terms as the court deems just.

 

Failure by any SoftBrands stockholder to comply fully with the procedures described above and set forth in Annex D to this proxy statement may result in termination of such stockholder’s appraisal rights.

 

The merger will be accounted for as a “purchase transaction” for financial accounting purposes.

 

This section discusses the material United States federal income tax consequences of the merger and the transfer of our 10% interest in the AremisSoft liquidating trust to U.S. holders and non-U.S. holders (each, as defined below) of our capital stock who will surrender their shares of our stock in the merger in exchange for cash.

This discussion is included for general information purposes only and does not constitute, and is not, a tax opinion or tax advice to any particular holder of our stock. This summary is based on the provisions of the Internal Revenue Code of 1986, as amended (which we sometimes refer to in this proxy statement as the Code), the Treasury Regulations promulgated thereunder, judicial decisions, administrative rulings and other legal authorities, all in effect as of the date hereof and all of which are subject to change, possibly with retroactive effect. No ruling from the Internal Revenue Service, or the IRS, or opinion of counsel will be requested concerning the United States federal income tax consequences of the merger or the transfer of our interest in the liquidating trust. The tax consequences set forth in the following discussion are not binding on the IRS or the courts, and no assurance can be given that contrary positions will not be successfully asserted by the IRS or adopted by a court.

 

The following discussion is not intended to constitute a complete description of all U.S. federal income tax consequences relating to the merger or the transfer of our interest in the liquidating trust, and does not address potential foreign, state, local and other tax consequences of the merger. In addition, the discussion does not address all of the United States federal income tax consequences that may be relevant to a particular holder of our stock, including holders who, in light of their particular circumstances, may be subject to special rules, including, without limitation:

 

 

The discussion below applies only to stockholders that hold our stock as a capital asset at the time of the completion of the merger. The discussion does not include any description of the tax laws of any state, local or foreign government that may be applicable to holders of our stock.

 

If shares of our stock are held by a partnership, the U.S. federal income tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships that hold shares of our stock and partners in such partnerships should consult their own tax advisors regarding the tax consequences to them of the merger.

 

For purposes of this summary, a “U.S. holder” is a beneficial owner of shares of our stock, who is, for U.S. federal income tax purposes:

 

 

A “non-U.S. holder” is a person that is not a U.S. holder, subject to the limitations set forth above for holders to whom special rules apply.

 

U.S. Holders

 

General

 

The exchange of shares of our stock for cash in the merger will be a taxable transaction for United States federal income tax purposes. In addition, the transfer to you of your pro rata share of our 10% interest in the AremisSoft liquidating trust will be taxable to you at the time of the merger and, although the matter is not free from doubt, we expect that it will be characterized as additional consideration for your shares. Accordingly, a U.S. holder generally will recognize capital gain or capital loss equal to the difference, if any, between the sum of the amount of cash received in the merger plus the fair market value of the pro rata interest in the trust received and the U.S. holder’s adjusted tax basis in the shares surrendered. We intend to obtain a valuation from an independent appraisal firm of the fair market value of our 10% interest in the liquidating trust as of the effective time of the merger and we will use this valuation amount consistently for purposes of information and other tax reporting, as applicable.

 

Gain or loss will be calculated separately for each block of shares (or shares acquired at the same cost in a single transaction) exchanged in the merger. If, at the time of the merger, a non-corporate U.S. holder’s holding period for the shares of our stock is more than twelve months, any gain recognized generally will be subject to a reduced tax rate. If a non-corporate U.S. holder’s holding period for the shares of our stock is twelve months or less at the time of the merger, any gain will be subject to United States federal income tax at the same graduated rates as ordinary income. For corporations, capital gain is taxed at the same rates as ordinary income. The deductibility of capital losses is subject to limitations.

 

The IRS could challenge the fair market value of our 10% interest in the trust as established by the appraisal, in which case the amount of gain or loss that you are required to recognize on the exchange of your shares in the merger could be adjusted. In addition, although the matter is not entirely clear under current law, the IRS could take the position that the transfer to you of your pro rata share of the interest in the trust should be characterized as a dividend for federal income tax purposes, rather than as additional consideration for your shares. If the IRS were successful in asserting such a characterization, the fair market value of the interest would be taxed as ordinary dividend income to the extent of our current and accumulated earnings and profits. Any excess would be treated as additional consideration for your shares taxable as described in the preceding paragraphs. Under current law, dividends paid to non-corporate taxpayers are eligible for a 15% reduced rate provided certain holding period and other requirements are satisfied. Dividends received by a corporation may be eligible for a dividends received deduction, subject to applicable limitations.

 

Backup Withholding

 

To prevent federal backup income tax withholding with respect to cash received pursuant to the merger and the transfer of the interest in the liquidating trust, each U.S. holder must either (1) provide a correct taxpayer identification number and certify under penalties of perjury that such U.S. holder is not subject to backup withholding of federal income tax by completing the substitute Form W-9 included in the letter of transmittal or (2) establish a basis for exemption from backup withholding. U.S. holders who fail to provide their correct taxpayer identification numbers and the appropriate certifications or to establish an exemption will be subject to backup withholding on the cash received in exchange for their shares at a tax withholding rate of 28% and may be subject to penalties imposed by the IRS. If the amount withheld on a payment to a U.S. holder results in an overpayment of taxes, a refund generally may be obtained from the IRS, provided that the required information is timely furnished to the IRS. Certain taxpayers, such as corporations and financial institutions, are exempt from backup withholding.

 

Subsequent Distributions of Net Proceeds of the Trust

 

We expect that distributions, if any, of net proceeds of the trust at a later date will be taxable to you at the time of distribution at ordinary income rates. It is unclear whether the amount of taxable income would be offset by any tax basis you may have in your share of the trust interest. You should consult your own tax advisor about the

possibility of any such offset for tax basis. Any such distributions may be subject to information reporting and, unless you supply the required certifications to the paying agent, could be subject to backup withholding. You should consult your own tax adviser regarding the tax consequences of subsequent distributions from the trust to you.

 

Non-U.S. Holders

 

General

 

Any gain realized on the receipt of cash in the merger and the transfer of a pro rata share of our 10% interest in the AremisSoft liquidating trust by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:

 

 

Unless a tax treaty provides otherwise, non-U.S. holder whose gain is described in the first bullet point above will be subject to tax on its net gain in the same manner as if it were a U.S. holder. A non-U.S. holder that is a corporation and whose gain is described under the first bullet point above may be subject to an additional branch profits tax equal to 30% of its effectively connected earnings and profits (including such gain) or at such lower rate as may be specified by an applicable income tax treaty.

 

An individual non-U.S. holder described in the second bullet point above will be subject to tax at a 30% rate on the gain realized, equal to the difference, if any, between the amount of cash received in exchange for shares of our stock and the non-U.S. holder’s adjusted tax basis in such shares, which may be offset by certain U.S.-source capital losses incurred in the same taxable year, even though the individual is not considered a resident of the United States.

 

We believe that we are not currently and have not previously been a USRPHC for U.S. federal income tax purposes.

 

Information Reporting and Backup Withholding

 

Cash received by non-U.S. holders in the merger and the pro rata interest in the liquidating trust transferred will be subject to information reporting, unless an exemption applies. Moreover, backup withholding of tax (at a rate of 28%) may apply to cash and the pro rata interest in the trust received by a non-U.S. holder, unless the holder or other payee establishes an exemption in a manner satisfactory to the paying agent (generally, by providing the paying agent with a signed statement on the appropriate series of Form W-8 attesting to such non-U.S. holder’s exempt status) and otherwise complies with the backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability provided that the required information is timely furnished to the IRS.

 

Subsequent Distributions of Net Proceeds of the Trust

 

Distributions, if any, of net proceeds of the trust at a later date to a non-U.S. holder will generally be subject to a 30% withholding tax (or lower applicable treaty rate, provided the holder has supplied the paying agent with a signed statement on form W8-BEN that the holder is entitled to the reduced treaty rate). This withholding tax will not apply if the income is effectively connected with a trade or business of the non-U.S. holder in the United States and, if required by an applicable income tax treaty, attributable to a United States permanent establishment of the non-U.S. holder, provided that the non-U.S. holder has certified on form W8-ECI that withholding is not required because the income is effectively connected to a trade or business in the United States. In that case, the distributions will be subject to U.S. income tax on a net income basis in the same manner as if the non-U.S. holder were a

U.S. holder. Any such distributions may be subject to information reporting and, unless the non-U.S. holder supplies the required certifications to the paying agent, could be subject to backup withholding depending on the circumstances. You should consult your own tax adviser regarding the tax consequences of subsequent distributions from the trust to you.

 

EACH HOLDER OF OUR CAPITAL STOCK SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISORS TO DETERMINE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES APPLICABLE TO SUCH HOLDER AS A RESULT OF THE MERGER AND THE TRANSFER OF THE INTEREST IN THE LIQUIDATING TRUST (INCLUDING THE RECEIPT OF ANY SUBSEQUENT DISTRIBUTIONS OF NET PROCEEDS OF THE TRUST) AND ANY STATE, LOCAL OR FOREIGN TAX CONSEQUENCES RELEVANT TO SUCH HOLDER AS A RESULT OF THE MERGER OR THE TRANSFER OF THE INTEREST IN THE LIQUIDATING TRUST (INCLUDING THE RECEIPT OF ANY SUBSEQUENT DISTRIBUTIONS OF NET PROCEEDS OF THE TRUST).

 

If the merger is completed, our common stock will no longer be traded on the NYSE Amex Equities and will be deregistered under the Securities Exchange Act of 1934, as amended, as soon as practicable following the completion of the merger. The delisting and deregistration will be accomplished by filing a Form 25 and a Form 15 with the SEC.

PROPOSAL NO. 1: THE MERGER AGREEMENT

 

The following is a description of the material aspects of the merger agreement but does not purport to describe all of the terms of the merger agreement. While we believe that the following description covers the material terms of the merger agreement, the description may not contain all of the information that is important to you. We encourage you to read carefully this entire document, including the merger agreement attached to this proxy statement as Annex A, for a more complete understanding of the merger. The following description is subject to, and is qualified in its entirety by reference to, the merger agreement.

 

The merger agreement has been included to provide you with information regarding its terms. It is not intended to provide any other factual information about SoftBrands or its business. Such information can be found elsewhere in this proxy statement and in the other public filings we make with the SEC, which are available without charge at www.sec.gov .

 

The merger agreement contains representations and warranties that SoftBrands, Steel Holdings and Merger Sub have made to each other. The assertions embodied in those representations and warranties are qualified by information in a confidential disclosure letter that we have exchanged in connection with signing the merger agreement. While we do not believe that the letter contains information securities laws require us to publicly disclose other than information that has already been so disclosed, the disclosure letter does contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the attached merger agreement. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts, since they are modified in important part by the underlying disclosure letter. The disclosure letter contains information that has been included in our general prior public disclosures, as well as potential additional non-public information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the agreement, which subsequent information may or may not be fully reflected in SoftBrands’ or Steel Holdings’ public disclosures.

 

At the effective time, the representations and warranties contained in the merger agreement are only required to be true and correct subject to the materiality standards contained in the merger agreement, which may differ from what may be viewed as material by stockholders. The representations and warranties will not survive consummation of the merger and cannot be the basis for any claim under the merger agreement by any party thereto after consummation of the merger. The merger agreement should not be read alone, but should instead be read in conjunction with the other information regarding SoftBrands and the merger that is contained in this proxy statement as well as in the filings that SoftBrands makes and has made with the SEC.

The representations and warranties contained in the merger agreement may or may not have been accurate as of the date they were made and we make no assertion herein that they are accurate as of the date of this proxy statement.

 

Pursuant to the merger agreement, Merger Sub will merge with and into SoftBrands, with SoftBrands surviving as a wholly owned subsidiary of Steel Holdings, sometimes referred to in this proxy statement as the “surviving corporation”. At the effective time of the merger, all of SoftBrands’ property, rights, privileges, powers and franchises before the merger will vest in the surviving corporation and all of SoftBrands’ debt, liabilities and duties before the merger will become the debts, liabilities and duties of the surviving corporation.

 

The consummation of the merger will take place no later than the second business day after the satisfaction or waiver of the conditions to the closing of the merger set forth in the merger agreement and described in this proxy statement, or at such time as is agreed upon in writing by Steel Holdings and SoftBrands. The merger will become effective upon the filing of the certificate of merger with the Secretary of State of the State of Delaware or at such later time as is agreed in writing by Steel Holdings and SoftBrands and specified in the certificate of merger.

 

Our certificate of incorporation as in effect immediately prior to the effective time of the merger will be amended and restated as of the effective time of the merger to be identical to the certificate of incorporation of Merger Sub, except that the name of the surviving corporation will be SoftBrands, Inc. At the effective time of the merger, the bylaws of Merger Sub will become the bylaws of the surviving corporation.

 

The initial directors of the surviving corporation will be the directors of Merger Sub immediately prior to the effective time of the merger. The initial officers of the surviving corporation will be the officers of SoftBrands immediately prior to the effective time of the merger.

 

Common Stock

 

At the effective time of the merger, each share of our common stock issued and outstanding immediately prior to the effective time of the merger will be canceled and extinguished and automatically converted into the right to receive an amount equal to $0.92 in cash, without interest, and less any applicable withholding taxes (which amount we sometimes refer to in this proxy statement as the “common stock per share amount”), other than the following shares:

 

 

Series B Preferred Stock

 

At the effective time of the merger, each share of our Series B Preferred Stock issued and outstanding immediately prior to the effective time of the merger will be canceled and extinguished and automatically converted into the right to receive an amount equal to $1.06 in cash without interest, and less any applicable withholding taxes

(which amount we sometimes refer to in this proxy statement as the “Series B Preferred Stock per share amount”), other than the following shares:

 

 

Series C-1 Preferred Stock

 

At the effective time of the merger, each share of our Series C-1 Preferred Stock issued and outstanding immediately prior to the effective time of the merger will be canceled and extinguished and automatically converted into the right to receive $1,000.00 in cash, plus an amount equal to any accrued but unpaid dividends, without interest, and less any applicable withholding taxes (which amount we sometimes refer to in this proxy statement as the “Series C-1 Preferred Stock per share amount”), other than the following shares:

 

 

Series D Preferred Stock

 

At the effective time of the merger, each share of our Series D Preferred Stock issued and outstanding immediately prior to the effective time of the merger will be canceled and extinguished and automatically converted into the right to receive $1,000.00 in cash, plus an amount equal to any accrued but unpaid dividends, without interest, and less any applicable withholding taxes (which amount we sometimes refer to in this proxy statement as the “Series D Preferred Stock per share amount”), other than the following shares:

 

 

If prior to the effective time of the merger, any change in the outstanding shares of our capital stock occurs, including by reason of any stock split, reverse stock split, stock dividend or distribution (including any dividend or distribution of securities convertible into our common stock or our preferred stock, as the case may be), cash dividend, reorganization, recapitalization, reclassification, combination or other like change with respect to our capital stock, but excluding a change that results from the exercise of any options or warrants to purchase our capital stock, the common stock per share amount, the Series B Preferred Stock per share amount, the Series C-1 Preferred Stock per share amount, the Series D Preferred Stock per share amount and any other amounts payable under the merger agreement will be appropriately adjusted.

Dissenting Shares

 

Shares of our capital stock issued and outstanding prior to the effective time of the merger and held by a holder who is entitled to demand, and who properly demands, appraisal of such shares pursuant to, and also complies in all material respects with, Section 262 of the General Corporation Law of the State of Delaware will not be converted into or represent the right to receive the common stock per share amount, the Series B Preferred Stock per share amount, the Series C-1 Preferred Stock per share amount or the Series D Preferred Stock per share amount, as applicable, but rather, such dissenting stockholder will only be entitled to payment of the fair value of such shares in accordance with Section 262 of the General Corporation Law of the State of Delaware (and, at the effective time of the merger, such shares will no longer be outstanding and will automatically be canceled and will cease to exist). If any dissenting stockholder effectively withdraws or loses such holder’s appraisal rights under Section 262 of the General Corporation Law of the State of Delaware, then such shares will automatically be converted into and will represent only the right to receive the common stock per share amount, the Series B Preferred Stock per share amount, the Series C-1 Preferred Stock per share amount, or the Series D Preferred Stock per share amount, as applicable, without interest thereon and less any applicable withholding taxes.

 

Capital Stock of Merger Sub

 

Each share of common stock of Merger Sub issued and outstanding immediately prior to the effective time of the merger will be converted into and become one share of common stock of the surviving corporation.

 

Warrants

 

Immediately prior to the effective time of the merger, each warrant to purchase our capital stock outstanding that has not been canceled or exercised at such time will be canceled, and Steel Holdings will cause the surviving corporation to pay each holder a lump sum payment in cash without interest, and less any applicable withholding taxes, equal to the excess, if any, of:

 

 

Options and Stock Appreciation Rights

 

Immediately prior to the effective time of the merger, each option to purchase our common stock or stock appreciation rights outstanding, whether or not vested or exercisable, will be accelerated and canceled, and Steel Holdings will cause the surviving corporation to pay each holder a lump sum payment in cash without interest, and less any applicable withholding taxes, equal to the excess, if any, of:

 

 

Stock-Based Awards

 

Immediately prior to the effective time of the merger, each right to receive shares of our common stock or benefits measured in whole or in part by the value of a number of shares of our common stock granted under one of our stock plans or employee plans including performance shares, restricted stock, restricted stock units, phantom units, deferred stock units and dividend equivalents, but not including any of our 401(k) plans (all such rights we sometimes refer to in this proxy statement as “stock-based awards”), will be accelerated and canceled, and Steel

Holdings will cause the surviving corporation to pay each holder a lump sum payment in cash without interest, and less any applicable withholding taxes, equal to product of:

 

 

[ • ] will act as paying agent for the payment of the common stock per share amount, the Series B Preferred Stock per share amount, the Series C-1 Preferred Stock per share amount and the Series D Preferred Stock per share amount. No later than one business day following the effective time of the merger, Steel Holdings will deposit with the paying agent, for payment to the holders of shares of our capital stock, an amount of cash equal to the aggregate consideration payable to holders of our capital stock under the merger agreement.

 

No later than one business day following the effective time of the merger, Steel Holdings will deposit with the surviving corporation, for payment to holders of warrants to purchase our capital stock, options to purchase our common stock and stock-based awards, an amount of cash equal to the aggregate consideration payable to holders of warrants to purchase our capital stock, options to purchase our common stock and stock-based awards under the merger agreement.

 

Reasonably promptly following the effective time of the merger, Steel Holdings will instruct the paying agent to mail to each holder of certificates or instruments evidencing our capital stock outstanding immediately prior to the effective time:

 

 

Upon receipt of a letter of transmittal from the paying agent, you should complete and sign the letter of transmittal and return it to the paying agent together with the your share certificates and any other necessary documentation in accordance with the instructions.

 

No interest will be paid or accrued on any cash payable to holders of certificates pursuant to the merger agreement. In addition, Steel Holdings and the surviving corporation are entitled to deduct and withhold from the consideration otherwise payable such amounts as are required by applicable law.

 

You should not send your certificates or instruments representing our capital stock to the paying agent until you have received the letter of transmittal from the paying agent. Do not return your stock certificates with the enclosed proxy, and do not forward your stock certificates to the paying agent without a letter of transmittal.

 

If you own shares of our capital stock that are held in “street name” by your broker, nominee, fiduciary or other custodian, you will receive instructions from your broker, nominee, fiduciary or other custodian as to how to surrender your “street name” shares and receive cash for those shares.

 

From and after the effective time of the merger, there will be no further registration or transfers of SoftBrands share certificates or any other instruments evidencing our capital stock, other than transfers that reflect, in accordance with customary procedures, trades effected prior to the effective time. If a transfer of ownership of shares of our capital stock is not registered in our stock transfer book or ledger, or if the per share amount is to be paid in a name other than that in which the certificate surrendered in exchange for such per share amount is registered in our stock transfer book or ledger, the applicable per share amount may be paid to a person other than the person in whose name the surrendered certificate is registered only if properly endorsed.

From and after the effective time of the merger, all shares of our capital stock will cease to be outstanding and will automatically be canceled, retired and cease to exist, and each holder of a certificate formerly evidencing share(s) of our capital stock will have no further rights with respect to such certificate, except the right to receive the applicable per share amount payable upon surrender of the certificate in accordance with the terms of the merger agreement. If, after the effective time, any certificates or any other instruments evidencing our capital stock are presented to the surviving corporation, they will be canceled and exchanged for the applicable per share amount.

 

If any certificate or other instrument evidencing our capital stock has been lost, stolen or destroyed, upon making an affidavit of that fact by the person claiming that such certificate or other instrument evidencing our capital stock is lost, stolen or destroyed and, if required by Steel Holdings or the paying agent, the posting by such person of a bond in such amount as Steel Holdings or the paying agent may reasonably direct as indemnity against any claim that may be made against Steel Holdings, the surviving corporation or the paying agent with respect to such certificate or other instrument evidencing our capital stock, the paying agent will issue, in exchange for such lost, stolen or destroyed certificate or other instrument evidencing our capital stock, the applicable per share amount payable under the merger agreement.

 

Any portion of the funds deposited with the paying agent for payment to our stockholders that remains undistributed to our stockholders nine months after the effective time of the merger will be delivered to Steel Holdings by the paying agent, and thereafter any of our stockholders who have not previously exchanged certificates or instruments evidencing our capital stock for the applicable per share amount, if any, will only be entitled to request payment of such per share amount from Steel Holdings.

 

Subject to certain exceptions, we made a number of representations and warranties to Steel Holdings and Merger Sub relating to, among other things:

 

 

 

 

Steel Holdings and Merger Sub made a number of representations and warranties to us in the merger agreement relating to, among other things:

 

 

 

Several of the representations and warranties in the merger agreement are qualified by reference to whether the failure of such representation or warranty to be true, individually or in the aggregate, has had or would reasonably be expected to have a “material adverse effect.” As used in the merger agreement and this proxy statement, “material adverse effect” means, with respect to an entity, any change, effect, event, circumstance, or development which, individually or in the aggregate is or is reasonably likely to be materially adverse to the business, operations, condition (financial or otherwise), assets, liabilities or results of operations of SoftBrands and our subsidiaries, taken as a whole, except in each case to the extent that any such effect results from any of the following: