Exhibit 10.2


 


SEVERANCE PAY AGREEMENT


 


This Agreement is
made as of the second day of June, 2006, between SoftBrands, Inc., a Delaware
corporation (the “Company”) and Gregg A. Waldon (“Executive”).


 


WITNESSETH
THAT:


 


WHEREAS,
it is the purpose of this Agreement to specify the financial arrangements that
the Company will provide to the Executive upon Executive’s separation from
employment with the Company or with a subsidiary of the Company or one of its
subsidiaries under the circumstances described herein; and


 


WHEREAS,
this Agreement is adopted in the belief that it is in the best interests of the
Company and its stockholders to provide stable conditions of employment for
Executive, thereby minimizing personnel turnover and enhancing the Company’s
and its subsidiaries’ ability to recruit highly qualified people.


 


NOW,
THEREFORE, to assure the Company that it will have the continued dedication of
Executive notwithstanding the possibility, threat or occurrence of a bid to
take over control of the Company, and to induce Executive to remain in the
employ of the Company, and for other good and valuable consideration, the
Company and Executive agree as follows:


 


1.             Term of Agreement.  This Agreement shall be for a two-year term
commencing on the date hereof.  This
Agreement shall be automatically renewed for additional one-year terms
thereafter unless either Executive or the Company provides written notice at
least sixty (60) days prior to its scheduled termination of their intent not to
renew the same; provided that this Agreement shall continue for at least two
years after a Change of Control that occurs during the term of this Agreement.


 


2.             Termination of Employment.


 


(i)                           If a Change in
Control (as defined in Section 3(i) hereof) occurs during the term of this Agreement
and either of the events described in clause (a) or (b) below occurs, the
terminated Executive shall be entitled to receive the cash payment provided in
Section 4 hereof:


 


(a)                                  the Company shall,
within one year after such Change of Control occurs, have exercised its right
to terminate the Executive without cause; or


 


(b)                                 the Executive shall,
prior to March 15 of the calendar year following the year in which the Change
of Control occurs, have voluntarily exercised his option to terminate his
employment for Good Reason (as defined in Section 3(ii) hereof).  Notice of election of this option must set
forth in reasonable detail the facts and circumstances claimed to constitute
Good Reason.


 


(ii)           From and after the date of a Change
in Control, the Company shall have the right to terminate Executive from
employment at any time during the term of this Agreement for


 

















 


Cause (as defined in Section 3(iii) hereof), by
written notice to the Executive, specifying the particulars of the conduct of
Executive forming the basis for such termination, and Executive shall not be
entitled to any payment pursuant to Section 4 for termination for Cause.


 


(iii)          From and after the date of a Change in
Control during the term of this Agreement, Executive shall not be removed from
employment with the Company except as provided in Section 2(i) or (ii) hereof
or as a result of Executive’s Disability (as defined in Section 3(iv) hereof)
or his death.  Executive’s rights upon
termination of employment prior to a Change in Control or after the expiration
of the term of this Agreement shall be governed by the standard employment
termination policy applicable to Executive in effect at the time of
termination.


 


Any notice given by
Executive pursuant to this Section 2 shall be effective five (5) business days
after the date it is given by Executive.


 


3.             Definitions


 


(i)                                     A “Change in
Control” shall mean an event involving one transaction or a series of
related transactions in which:


 


(a)                                  any
person or persons acting in concert acquire more than fifty percent (50%) of
the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended (“the “Exchange Act”), or any
successor provision) of the outstanding voting power of the then outstanding
securities entitled to vote generally in the election of directors (“Voting
Stock”) of the Company,


 


(b)                                 the
Company issues securities representing more than fifty percent (50%) of the
Voting Stock of the Company in connection with a merger, consolidation or other
business combination (other than for purposes of reincorporation),


 


(c)                                  the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than a
reincorporation),


 


(d)                                 more
than fifty percent (50%) of the Company’s consolidated assets or earning power
are sold or transferred, or


 


(e)                                  the
Board of the Company determines, in its sole and absolute discretion, that
there has been a change in control of the Company;


 


Provided, however, that
clauses (b), (c) and (d), above, will constitute a “Change in Control” only if
all or substantially all of the individuals and entities who were the
beneficial owners of Voting Stock of the Company immediately prior to such
merger, consolidation or other business combination or sale or transfer of
earning power or assets (each, a “Business Combination”) beneficially own less
than 50% of the combined voting power of the then


 

















 


outstanding shares of Voting Stock of the entity resulting from such
Business Combination (including, without limitation, an entity which as a
result of such transaction owns the Company or all or substantially all of the
Company’s earning power or assets either directly or through one or more
subsidiaries) and shall specifically not include any change of control that
results from the issuance of securities or property in connection with a
reorganization under the United States Bankruptcy Code, as amended.


 


(ii)           “Good Reason” shall mean the
occurrence of any of the following events:


 


(a)                                  the assignment to
Executive of employment responsibilities which are not of comparable
responsibility and status as the employment responsibilities held by Executive
immediately prior to a Change in Control;


 


(b)                                 a reduction by the
Company in Executive’s compensation (including a change in the form of the
bonus compensation plan that makes less likely the achievement of a targeted
bonus) as in effect immediately prior to a Change in Control;


 


(c)                                  except to the extent
otherwise required by applicable law, the failure by the Company, or the entity
that acquires the Company, to continue in effect a material benefit or
compensation plan, stock ownership plan, stock purchase plan, bonus plan, life
insurance plan, health-and-accident plan or disability plan in which Executive
is participating immediately prior to a Change in Control (or plans providing
Executive with substantially similar benefits), the taking of any action by the
Company which would adversely affect Executive’s participation in, or
materially reduce Executive’s benefits under, any of such plans or deprive
Executive of any material fringe benefit enjoyed by Executive immediately prior
to such Change in Control, or the failure by the Company to provide Executive
with the number of paid vacation days to which Executive is entitled
immediately prior to such Change in Control in accordance with the Company’s
vacation policy as then in effect;


 


(d)                                 the Company’s
requiring Executive to be based anywhere other than within fifty (50) miles of
Executive’s office location immediately prior to a Change in Control, except
for requirements of temporary travel on the Company’s business to an extent
substantially consistent with Executive’s business travel obligations
immediately prior to a Change in Control; or


 


(e)                                  the failure by the
Company to obtain, as specified in Section 6(i) hereof an assumption of the
obligations of the Company to perform this Agreement by any successor to the
Company.


 


For purposes of
the foregoing, Executive shall not be considered to have been assigned
employment of lesser responsibility if Executive manages, has control over, or
serves in a similar position with a subsidiary, division or operating unit of
an acquiring entity that generates


 

















 


revenues of comparable amounts to the revenues
generated by the Company before such Change in Control.  Notwithstanding the foregoing, none of the
forgoing events shall be considered “Good Reason” if it occurs in connection
with the Executive’s death or disability.


 


(iii)          “Cause” shall mean termination by the
Company of Executive’s employment based upon (a) the willful and continued
failure by Executive substantially to perform his duties and obligations (other
than any such failure resulting from his incapacity due to physical or mental
illness) or (b) the willful engaging by Executive in misconduct which is
materially injurious to the Company or any of its subsidiaries, monetarily or
otherwise.  For purposes of this
paragraph, no act, or failure to act, on Executive’s part shall be considered “willful”
unless done, or omitted to be done, by Executive in bad faith and without
reasonable belief that his action or omission was in the best interests of the
Company and its subsidiaries.


 


(iv)          “Disability” shall mean any physical
or mental condition which would qualify Executive for a disability benefit
under the long-term disability plan of the Company or the Subsidiary.


 


4.             Benefits Upon Termination Under Section 2(i).  Upon the termination of the employment of
Executive pursuant to Section 2(i) hereof, Executive shall be entitled to
receive the benefits specified in this Section 4.  The amounts due to Executive under
subparagraphs (a) and (b) of this Section 4 shall be paid to Executive not
later than one business day prior to the date that the termination of Executive’s
employment becomes effective.


 


(a)           The Company shall pay to Executive
(i) the full base salary earned by him and unpaid through the date that the
termination of Executive’s employment becomes effective, at the rate in effect
at the time written notice of termination (voluntary or involuntary) was given,
(ii) any amount earned by Executive as a bonus with respect to the fiscal year
of the Company preceding the termination of his employment if such bonus has
not theretofore been paid to Executive, (iii) an amount equal to a pro rata
portion, based on number of days elapsed, of the bonus Executive would have
earned for the year in which termination is effective, assuming for purposes or
calculating such bonus against any bonus or incentive plan, that the Company’s
financial and business performance for the current compensation year through
the date of such termination is annualized, and (iii) an amount representing
credit for any vacation earned or accrued by him but not taken;


 


(b)           In lieu of any further base salary
payments to Executive for periods subsequent to the date that the termination
of Executive’s employment becomes effective, the Company shall pay as severance
pay to Executive a lump-sum cash amount equal to six months Executive’s salary
as of the date of such termination (subject to withholding for applicable
taxes); subject, however, to the restriction that the Executive shall not be
entitled to receive any amount pursuant to this Agreement which constitutes an “excess
parachute payment” within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended, or any successor provision or regulations promulgated
thereunder.  In case of uncertainty as to
whether some portion of a payment might constitute an excess parachute payment,
the Company shall initially make the payment to the Executive and Executive
agrees to refund to the Company any amounts ultimately determined to be excess
parachute payments;


 

















 


(c)           The Company shall pay to Executive
all legal fees and expenses incurred by Executive in seeking to obtain or
enforce any right or benefit provided to Executive by this Agreement, including
any and all expenses of arbitration in accordance with Section 12 below; and


 


(d)           The exercisability or vesting, or
both, of all stock options and other stock based benefits held by the Executive
shall become and be accelerated and fully vested as of the date of such
termination, and, to the extent action is required to exercise or otherwise
obtain the benefits thereof, shall remain exercisable for the period set forth
in such option or stock based benefit.


 


Executive shall not be
required to mitigate the amount of any payment provided for in this Section 4
by seeking other employment or otherwise. 
The amount of any payment or benefit provided in this Section 4 shall
not be reduced by any compensation earned by Executive as a result of any
employment by another employer.


 


5.             Successors; Binding Agreement; Assignment.


 


(i)            The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise), to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to Executive, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place.  Failure of
the Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as
Executive would be entitled hereunder if Executive terminated his employment
after a Change in Control for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Termination Date. 
As used in this Agreement, “Company” shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
Section 5(i) or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.


 


(ii)           This Agreement is personal to
Executive and Executive may not assign or transfer any part of his rights or
duties hereunder, or any compensation due to him hereunder, to any other
person.  Notwithstanding the foregoing,
this Agreement shall inure to the benefit of and be enforceable by Executive’s
personal or legal representatives, executors, administrators, heirs,
distributees, devisees and legatees.


 


6.             Modification; Waiver.  No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and such officer as may be
specifically designated by the Board of Directors of the Company.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition or
provision shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.


 

















 


8.             Notice. 
All notices, requests, demands and all other communications required or
permitted by either party to the other party by this Agreement (including,
without limitation, any notice of termination of employment) shall be in
writing and shall be deemed to have been duly given when delivered personally
or mailed by regular, certified or registered mail, return receipt requested,
at the address of the other party, as follows:


 


	
   

  	
  If to the Company, to:

  
	
   

  	
   

  
	
   

  	
  SoftBrands, Inc.

  
	
   

  	
  Two Meridian Crossings

  
	
   

  	
  Suite 800

  
	
   

  	
  Minneapolis, MN 55423

  
	
   

  	
   

  
	
   

  	
  If to Executive, to:

  
	
   

  	
   

  
	
   

  	
  Gregg A. Waldon

  
	
   

  	
  13799 Candice Lane

  
	
   

  	
  Eden Prairie, MN 55346

  



 


Either party hereto may
change its address for purposes of this Section 8 by giving fifteen (15) days’
prior notice to the other party hereto.


 


9.             Severability. 
If any term or provision of this Agreement or the application hereof to
any person or circumstances shall to any extent be invalid or unenforceable,
the remainder of this Agreement or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby, and each term and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted
by law.


 


10.           Headings.  The headings in this Agreement are inserted
for convenience or reference only and shall not be a part of or control or
affect the meaning of this Agreement.


 


11.           Counterparts.  This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


 


12.           Governing Law/Arbitration.  This Agreement has been executed and
delivered in the State of Minnesota and shall in all respects be governed by,
and construed and enforced in accordance with, the laws of the State of
Minnesota, including all matters of construction, validity and
performance.  Notwithstanding the
foregoing, any dispute as to the occurrence of a “Change of Control,” or as to “Good
Reason,” shall be settled by final and binding arbitration in accordance with
the Center for Public Resources Rules for Non-Administered Arbitration of
Business Disputes in effect as of the date of this Agreement by a sole
arbitrator.   The arbitration shall be
governed by the United States Arbitration Act, 9 U.S.C. § 1-16, and judgment
upon the award rendered by the arbitrator may be entered by any court having
jurisdiction thereof.  The


 

















 


place of arbitration
shall be Minneapolis, Minnesota.  The
arbitrator is empowered to award damages in excess of compensatory damages.


 


13.           Entire Agreement.  This Agreement supersedes any and all other
oral or written agreements or policies made relating to the subject matter
hereof; provided  that, this Agreement shall not supersede or
limit in any way Executive’s rights under any benefit plan, program or
arrangements in accordance with their terms.


 

















 


IN WITNESS WHEREOF, the
Company has caused this Agreement to be executed in its name by a duly
authorized officer, and Executive has hereunto set his hand, all as of the date
first written above.


 


 


	
   

  	
  SoftBrands, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
    /s/ RANDAL
  B. TOFTELAND

  	
   

  
	
   

  	
     Its

  	
  Chief Executive Officer and President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Gregg A. Waldon

  	
   

  
	
   

  	
  Executive