Exhibit 10.10
TRANSITION
AGREEMENT
THIS TRANSITION
AGREEMENT (the
“Transition Agreement”) made and entered into as of the
first day of October, 2005 by and between SoftBrands, Inc. a
Delaware corporation (“SoftBrands”) and George H.
Ellis, an individual resident of the State of Texas
(“Executive”).
WHEREAS, SoftBrands and Executive are parties to that
certain employment agreement dated as of January 1, 2002, as
amended by that certain amendment to employment agreement dated as
of November 26, 2002 (the “Employment Agreement”),
pursuant to which Executive has served, and continues to serve, as
the Chief Executive Officer and Chairman of the Board of
SoftBrands;
WHEREAS, Executive has expressed his desire to transition
his position with SoftBrands, effective January 1, 2006 (the
“Transition Date”), to Executive Chairman of the Board
and to promote Randal Tofteland to the position of Chief Executive
Officer effective such date;
WHEREAS, Executive and SoftBrands wish to confirm the
employment and compensation arrangements that will apply on and
after the Transition Date and consistent with such arrangements to
terminate the Employment Agreement as of the Termination
Date.
NOW, THEREFORE,
in consideration of the forgoing
recitals, and in consideration of the mutual promises and
agreements made herein and for other good and valuable
consideration the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
EMPLOYMENT PRIOR TO TERMINATION DATE
1.1
Employment Until Transition Date . During the period commencing
on the date of this Transition Agreement and ending on the day
before the Transition Date, the employment of Executive by
SoftBrands shall be governed by and pursuant to the provisions of
the Employment Agreement and shall continue at the rate of base pay
($360,000 per annum or $90,000 per quarter) in effect on
September 30, 2005. During such period the Executive
shall remain eligible to receive a bonus based on performance and
Executive’s attainment of objectives established by the
Compensation Committee of the Board of Directors of SoftBrands for
such period.
1.2
Termination of Employment Agreement . Effective on the
Transition Date, the Employment Agreement and all prior employment
or consulting agreements between Executive or its subsidiaries
shall be and the same are hereby terminated and there shall be no
right to severance or other related benefits thereunder; provided,
however, that the foregoing will not apply to any obligation of
SoftBrands or any of its subsidiaries to provide and continue in
full force and effect an officer’s and director’s
liability insurance policy or to indemnify Executive against any
losses, costs, damages or
expenses, including the
obligations under Section 3.5 of the Employment Agreement or
under the Indemnification Agreement dated as of January 1,
2002 with Executive (the “Indemnification
Agreement”).
ARTICLE II
TRANSITION – EMPLOYMENT AS EXECUTIVE CHAIRMAN
AND ELECTION AS CHAIRMAN OF THE BOARD
2.1
Transition Executive Chairman and Term . Effective on the
Transition Date, Executive hereby resigns as Chief Executive
Officer of SoftBrands. Effective such date, Executive is
hereby employed as, and appointed to the position of, Executive
Chairman of the Board of Directors of SoftBrands (“Executive
Chairman”) to serve in such position for a term of one year
ending December 31, 2006 (the “Initial Executive
Term”), unless the Initial Executive Term is terminated
earlier as provided for herein, or unless such term is renewed for
an additional one year period ending December 31, 2007 (the
“Extended Executive Term” and together, if applicable,
with the Initial Executive Term, (the “Executive Term”)
upon written notice delivered to Executive on or before
September 1, 2006. Upon termination of the Executive
Term, Executive’s employment with SoftBrands shall terminate,
but Executive shall remain a director, and Chairman of the Board of
Directors of SoftBrands (“Chairman of the Board”),
until the earlier of (i) December 31, 2008, or
(ii) if he is not reelected to a position as a director of
SoftBrands, until the annual meeting of stockholders of SoftBrands
held in 2008 (the period commencing immediately after the Executive
Term and ending December 31, 2008, being hereafter referred to
as the Chairman Term”). During the Chairman Term,
Executive shall, subject to action of stockholders of the Company,
remain a director of SoftBrands and serve as Chairman of the Board
of Directors of SoftBrands, but he shall not be an employee of
SoftBrands.
2.2
Duties .
(a)
Executive Term . Executive hereby accepts, during the
Executive Term, employment with SoftBrands in accordance with this
Transition Agreement and agrees to render the services described
below. The Executive shall accept and follow the directions
of the Board in the performance of his duties, and shall comply
with all existing and future regulations applicable to employees of
SoftBrands and to SoftBrands’ business. Executive shall
during such period or extended period serve as the Executive
Chairman in accordance with the policies, procedures and duties as
adopted by the Board of Directors of SoftBrands.
Executive’s duties as Executive Chairman include substantial
ongoing mentoring and support of the Chief Executive Officer and
his team in the areas of board communications, regulatory
relations, capital markets strategy, corporate finance, shareholder
relations, acquisitions and business development. Throughout
the Executive Term, SoftBrands will use its best efforts, subject
to its rights of termination under this Agreement, to cause
Executive to be elected as a member of the Board.
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(b)
Chairman Term . Executive’s major responsibilities as
Chairman of the Board include the management of Board
communications and its governance process, and implementing and
monitoring the direction of the Board as to management
oversight. This requires attendance at substantially all
board and committee meetings and at the annual meeting of
SoftBrands.
2.3
Non-Exclusive Services . Subject to the
provisions of Article V of this Transition Agreement, it is
understood and agreed that Executive’s position as Executive
Chairman is not full-time and accordingly the Executive may engage
in other business activities during the Executive Term and the
Chairman Term, whether or not for profit or other revenue, without
the consent or approval of SoftBrands, except as may be required by
the provisions of Article V or by his fiduciary obligations as
a director.
2.4
Reporting Obligations . In performance of
his duties as Executive Chairman and as Chairman of the Board, the
Executive shall report directly to the Board.;
ARTICLE III
COMPENSATION AND BENEFITS OF EXECUTIVE
3.1
Annual Base Salary . SoftBrands shall pay
the Executive a base salary for the services to be rendered by him
as Executive Chairman during the Executive Term at the rate of two
hundred thousand dollars ($200,000) annually (prorated for any
portion of a year). Such base salary shall be payable in
periodic installments in accordance with the terms of
SoftBrands’ regular payroll practices in effect from time to
time during the term of this Transition Agreement, but in no event
less frequently than once each month. Such base salary cannot
be decreased. During the Executive Term, Executive shall be
eligible for such benefits and expenses as SoftBrands makes
available to its employees generally.
3.2
Director Fees . During the Executive
Term and the Chairman Term, SoftBrands shall pay Executive annual
fees of at least $100,000 for all of Executive’s services as
a director and Chairman of the Board (the “Chairman
Fee”), subject to increases, if any, as SoftBrands’
Compensation Committee may determine. Such Chairman Fee shall
be paid in accordance with the terms in effect from time-to-time
adopted by SoftBrands’ Compensation Committee. During
the Chairman Term, Executive shall be eligible for such benefits
and expenses as SoftBrands make available to its members of the
Board of Directors, including participating in director option
grants.
3.3
Bonuses . Executive is not
eligible to receive bonuses or other incentive compensation in
either of the positions of Executive Chairman or Chairman of the
Board.
3.4
Expenses . SoftBrands shall pay
or reimburse the Executive for all reasonable, ordinary and
necessary business expenses actually incurred or paid by the
Executive in the performance of Executive’s services under
this Transition Agreement in accordance with the expense
reimbursement policies of SoftBrands in effect from time to time
during the Executive Term, upon presentation of proper expense
statements or
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vouchers or such other
written supporting documents as SoftBrands may reasonably
require.
3.5
Vacation . The Executive shall
not be entitled to paid vacation during the Executive
Term.
3.6
Indemnification . Consistent with the
terms of SoftBrands’ certificate of incorporation and bylaws,
SoftBrands shall indemnify Executive against any losses, costs,
damages or expenses incurred as a direct consequence of the
discharge of his duties or by reason of his status as an agent of
SoftBrands and hold Executive harmless for any actions taken or
decisions made by him in good faith while performing services in
his capacity as an officer or director of SoftBrands during the
Executive Term and the Chairman Term. Nothing in this
Transition Agreement shall cause termination, alteration or
amendment of the Indemnification Agreement and Executive shall be
entitled to the benefit of such Agreement throughout the Executive
Term. SoftBrands has in effect and will continue in full
force and effect at all times during the Executive Term and the
Chairman Term, an officer’s and director’s liability
insurance policy covering the Executive on terms no less favorable
than those in effect on the Transition Date in all respects,
including coverage and amounts.
3.7
General Employment Benefits . Except where
expressly provided for herein, the Executive shall be entitled to
participate in, and to receive the benefits under, any pension,
health, life, accident and disability insurance plans or programs
and any other employee benefit or fringe benefit plans that
SoftBrands makes available generally to its employees, as the same
may be in effect from time to time during the Executive Term.
Except that the Executive and his dependents shall be entitled to
participate in health insurance benefits during the Chairman Term
and until termination of this Agreement as if he continued to be an
employee, Executive shall not otherwise be entitled to participate
in such plans or programs during the Chairman Term. After
expiration of the Chairman Term, Executive shall be entitled to
participate in the Company’s executive retirement health
plan, which offers continued health benefit coverage subject to
certain payments or co-payments by executives.
3.8
Office Space . SoftBrands shall
reimburse the Executive for seventy-five percent (75%) of the
actual cost paid by the Executive for maintaining during the
Executive Term an office at 8401 North Central Expressway,
Suite 840, Dallas, Texas, not to exceed $60,000 per
annum. If there is no Extended Executive Term, then for the
calendar year 2007, SoftBrands shall reimburse the Executive for
fifty percent (50%)of the actual cost paid by the Executive for
maintaining during calendar year 2007 an office at 8401 North
Central Expressway, Suite 840, Dallas, Texas, not to exceed
$40,000 per annum. From and after January 1, 2008,
SoftBrands will not reimburse Executive for any expenses for
maintaining any office.
3.9
Personal Secretary . SoftBrands shall
provide at Softbrands’ expense a personal secretary at the
Executive’s choice during the Executive Term. If there
is no Extended Executive Term, then for calendar year 2007,
SoftBrands shall provide at Softbrands’ expense a personal
secretary at the Executive’s choice, not to exceed
$60,000
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per annum. From and
after January 1, 2008, SoftBrands shall not provide any
personal secretary or secretarial services to
Executive.
3.10
Location; Travel . In connection with
his employment during the Executive Term, unless otherwise agreed
by the Executive, the Executive will be based in the Dallas
metropolitan area. Executive will undertake normal business
travel on behalf of SoftBrands, the reasonable expenses of which
will be paid by SoftBrands pursuant to Section 3.4 of this
Transition Agreement.
3.11
Options . Executive is hereby
granted effective as of the Transition Date an option to purchase
50,000 shares of SoftBrands common stock pursuant to the
SoftBrands’ Stock Incentive Plan at the fair market value of
the stock on the Transition Date. One-third of such options
shares shall be fully vested on the Transition Date and one-third
thereof shall be full vested on the first anniversary of the
Transition Date and the balance of such options shares shall be
fully vested on the second anniversary of the Transition Date and
the option shall expire 10 years from the Transition Date. In
addition, during the calendar years 2007 and 2008 the Executive
shall be eligible to participate in SoftBrands option grants to
directors, which pursuant to current policy, would cause the grant
on July 31 st of each year to each director an
option to purchase 20,000 shares of SoftBrands’ common stock,
exercisable over a ten (10) year period. Consistent with
the Employment Agreement, and except as provided in
Section 4.2 below, all stock options granted to Executive
prior to the date of this Transition Agreement to purchase an
aggregate of 1,650,000 shares of common stock shall remain
outstanding after termination of the Executive Term for the balance
of the term of such options and shall vest in accordance with their
terms; provided, however, that Executive acknowledges and agrees
that, to the extent such options are not fully exercised and do not
expire within 90 days after termination of the Executive Term, and
to the extent that any such options continue to vest after
termination of the Executive Term, such options shall not be
incentive stock options and shall not be entitled to the treatment
afforded under Section 422 of the Internal revenue Code, as
amended.
ARTICLE IV
TERMINATION OF EMPLOYMENT AND POSITION AS CHAIRMAN
4.1
Termination . The employment
services during the Executive Term, and the services as Chairman
under this Transition Agreement may be terminated early as provided
for in this Article IV.
4.2
Termination For Cause . SoftBrands reserves
the right to terminate Executive’s employment during the
Executive Term, or to terminate Executive’s services as
Chai
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