EMPLOYEE RETENTION AND MOTIVATION AGREEMENT
Exhibit 10.2
This agreement (the “Agreement”) is effective as of December 5, 2011 (the “Agreement Date”) by
and between (the “Covered Person”) and Progress Software Corporation, a Massachusetts corporation
(the “Company”).
R E C I T A L S
A. The Covered Person presently serves as an employee or officer of the Company in a role that
is important to the continued conduct of the Company’s business and operations.
B. The Board of Directors of the Company (the “Board”) has determined that it is in the best
interest of the Company and its stockholders to assure that the Company will have the continued
dedication and objectivity of the Covered Person, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company.
C. The Board believes that it is imperative to provide the Covered Person with certain
benefits following a Change of Control and certain severance benefits upon the Covered Person’s
termination of employment following a Change in Control.
D. In order to accomplish the foregoing objectives, the Board has directed the Company, upon
execution of the Agreement by the Covered Person, to commit to the terms provided herein.
E. The Covered Party accepts the terms of the Agreement.
F. Certain capitalized terms used in this Agreement are defined in Section 4 below. In
consideration of the mutual covenants herein contained and in consideration of the continuing
employment of the Covered Person by the Company, the parties agree as follows:
1. Scope; Term of Agreement. Simultaneously with the execution of this Agreement, the
Company and the Covered Person are also entering into an Executive Employment Agreement (as
amended, the “Employment Agreement”), which provides the Covered Person, in addition to other
benefits set forth therein, with certain benefits in circumstances following a termination of
employment other than following a Change of Control. This Agreement shall be applicable in the
event an Involuntary Termination (as defined below) occurs upon or within twelve (12) months
following a Change of Control. The parties acknowledge that the Covered Person’s employment is at
will, as defined under applicable law, except as may otherwise be provided under the terms of the
Employment Agreement. If the Covered Person’s employment terminates for any reason, the Covered
Person shall not be entitled to any payments, benefits, damages, awards or compensation
(collectively, “recompense”) other than the maximum recompense as provided by one of the following:
(i) this Agreement, or (ii) the Employment Agreement, or (iii) the Company’s existing severance
guidelines and benefit plans which are in effect at the time of termination, or (iv) applicable
statutory provisions. The provisions of this Agreement shall terminate upon the earlier of (i) the
date that all obligations of the parties hereunder have been satisfied, or (ii) the date on which
the Covered Person is no longer employed pursuant to the Employment Agreement. A termination of
the provisions of this Agreement pursuant to the preceding sentence shall be effective for all
purposes, except that such termination shall not affect the payment or provision of
compensation or benefits on account of termination of employment occurring prior to the termination
of the provisions of this Agreement.
2. Benefits Immediately Following Change of Control.
(a) Treatment of Outstanding Options and Restricted Equity. Effective immediately
upon a Change of Control, unless the outstanding stock options and shares of restricted equity held
by the Covered Person under the Company’s equity incentive plans on the date of the Change of
Control are continued by the Company or assumed by its successor entity, all outstanding stock
options held by the Covered Person shall accelerate and become fully exercisable, and all shares of
restricted equity held by the Covered Person shall become nonforfeitable and all restrictions shall
lapse. If such outstanding stock options and shares of restricted equity held by the Covered
Person are continued by the Company or assumed by its successor entity, then vesting shall continue
in its usual course. Furthermore, in the event the shares of stock receivable upon the exercise of
the assumed stock options or the vesting of the assumed shares of restricted equity (as the case
may be) are for stock of a company whose shares are not regularly traded on an established national
securities exchange, the Covered Person shall upon subsequent exercise of the assumed options or
the vesting of the assumed shares of restricted equity (as the case may be) be entitled to receive
at his election either (1) cash in an amount equal to the difference between the aggregate fair
market value of the shares of common stock on the date of exercise and the aggregate exercise price
of the stock options or the aggregate fair market value of the restricted equity (as the case may
be) or (2) shares of common stock. Notwithstanding anything in this Section 2(a), at or following
the Change of Control, the successor entity will have the option in its sole discretion to
accelerate, or to cause the Company to accelerate, all stock options or shares of restricted equity
held by the Covered Person that are assumed in the Change of Control in accordance with this
Section 2(a).
(b) Payment of Annual Bonus. Effective immediately upon a Change of Control, the
Covered Person’s annual cash bonus for the year in which the Change of Control occurs shall be
fixed at the Covered Person’s target bonus level as in effect immediately prior to the Change of
Control and the Covered Person shall be paid a pro-rated portion of such bonus, as of the date of
the Change of Control, based on the number of calendar days in the fiscal year to which the bonus
relates which have elapsed prior to the date of the Change of Control. Any payment to which the
Covered Person is entitled pursuant to this section shall be paid in a lump sum within thirty (30)
days of the event requiring such payment.
3. Severance Benefits.
(a) Termination Following a Change of Control. If the Covered Person’s employment
terminates after a Change of Control, then Covered Person shall be entitled to receive the
Mandatory Payments described in Section 3(a)(ii) below and, subject to Section 5 below, the
Covered Person shall be entitled to receive severance benefits as follows:
(i) Involuntary Termination. If the Covered Person’s employment is terminated within
twelve (12) months following a Change of Control as a result of Involuntary Termination, then the
Covered Person shall be entitled to receive a lump sum severance payment
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in an amount equal to eighteen (18) months of the Covered Person’s annual Target Compensation;
and in addition, for a period of eighteen (18) months after such termination, the Company shall be
obligated to provide the Covered Person with benefits that are substantially equivalent to the
Covered Person’s benefits (medical, dental, vision and life insurance) that were in effect
immediately prior to the Change of Control. In addition, each outstanding stock option held by the
Covered Person which had been granted prior to the date of the Change of Control under the
Company’s equity incentive plans shall accelerate and become fully exercisable and all shares of
restricted equity held by the Covered Person which had been granted prior to the date of the Change
of Control under the Company’s equity incentive plans shall become nonforfeitable and all
restrictions shall lapse. Any severance payments to which the Covered Person is entitled pursuant
to this section shall be paid in a lump sum within thirty (30) days of the effective date of the
Covered Person’s termination. For purposes of this Paragraph 3(a)(i), the term “Target
Compensation” shall mean the highest level of Target Compensation applicable to the Covered Person
from the period of time immediately prior to the Change of Control through the effective date of
the Covered Person’s termination. With respect to any taxable income that the Covered Person is
deemed to have received for federal income tax purposes by virtue of the Company providing
continued employee benefits to the Covered Person (i.e medical, dental, vision and life insurance),
the Company shall make a cash payment to the Covered Person such that the net economic result to
the Covered Person will be as if such benefits were provided on a tax-free basis to the same extent
as would have been applicable had the Covered Person’s employment not been terminated. Such cash
payment shall be made no later than March 15 of the following each calendar year in which such
benefits are taxable to the Covered Person.
Anything in this Agreement to the contrary notwithstanding, if at the time of the Covered
Person’s separation from service (within the meaning of Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”), the Covered Person is considered a “specified employee” within
the meaning of Section 409A(a)(2)(B)(i) of the Code, and if any payment that the Covered Person
becomes entitled to under this Agreement is considered deferred compensation subject to interest
and additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application
of Section 409A(a)(2)(B)(i) of the Code, then no such payment shall be payable prior to the date
that is the earliest of (A) six months after the Covered Person’s date of termination, (B) the
Covered Person’s death, or (C) such other date as will cause such payment not to be subject to such
interest and additional tax. The parties agree that this Agreement may be amended, as reasonably
requested by either party and as may be necessary to comply fully with Section 409A of the Code and
all related rules and regulations in order to preserve the payments and benefits provided hereunder
without additional cost to either party.
(ii) Voluntary Resignation. If the Covered Person’s employment terminates by reason
of the Covered Person’s voluntary resignation (and is not an Involuntary Termination), then the
Covered Person shall not be entitled to receive any severance payments or other benefits except
that Covered Person shall be entitled to the following (the “Mandatory Payments”):
| (A) | All accrued but unpaid base salary through the date the Covered Person’s employment is terminated, to be paid in a |
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| lump sum cash payment within thirty (30) days following the termination date or sooner if required by law; | |||
| (B) | Pay for any vacation time earned but not used through the termination date, to be paid in a lump sum cash payment within thirty (30) days following the termination date or sooner if required by law; | ||
| (C) | Except to the extent that the Covered Person’s employment is terminated for Cause, any bonus compensation awarded for the fiscal year preceding that in which the termination occurs, but unpaid on the termination date, to be paid and provided in accordance with the Board’s standard policies for paying executive incentive compensation, but in no event later than sixty (60) days after the end of such fiscal year to which the bonus relates; | ||
| (D) | Any unpaid or unreimbursed business expenses incurred and documented in accordance with the Company’s expense reimbursement policy then in effect by the Covered Person, to the extent incurred during the term of the Covered Person’s employment, to be paid in a lump sum cash payment within thirty (30) days following the termination date; and | ||
| (D) | Any accrued but unpaid benefits provided under the Company’s employee benefit plans, to be paid and provided in accordance with the terms of the applicable plan. |
(iii) Disability; Death. If the Company terminates the Covered Person’s employment as
a result of the Covered Person’s Disability (as defined below), or such Covered Person’s employment
is terminated due to the death of the Covered Person, then the Covered Person shall not be entitled
to receive any severance payments or other benefits, other than the Mandatory Payments or those (if
any) as may then be established under the Company’s then existing severance guidelines and benefit
plans at the time of such Disability or death.
(iv) Termination for Cause. If the Company terminates the Covered Person’ employment
for Cause (as defined below), then the Covered Person shall not be entitled to receive any
severance payments, bonus payments or other benefits following the date of such termination, other
than the Mandatory Payments (excluding amounts under (ii)(c) above), and the Company shall have no
obligation to provide for the continuation of any health and medical benefit or life insurance
plans existing on the date of such termination, other than as specifically required by applicable
law.
(b) Termination Other than in Connection with a Change of Control. If the Covered
Person’s employment is terminated for any reason either prior to the occurrence of a
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Change of Control or after the twelve (12) month period following a Change of Control, then
the Covered Person shall be entitled to receive severance and any other benefits provided under the
Employment Agreement.
4. Definition of Terms. The following terms referred to in this Agreement shall have
the following meanings:
(a) Change of Control. “Change of Control” shall mean the occurrence of any of the
following events:
(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more
of the total voting power represented by the Company’s then outstanding voting securities, whether
by tender offer, or otherwise; or
(ii) A majority of the members of the Board are replaced during any twelve (12) month period
by directors whose appointment or election is not endorsed by a majority of the members of the
Board before the date of such appointment or election; or
(iii) The consummation of a merger or consolidation of the Company with any other entity,
other than (A) a merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (B) a merger or consolidation which
would result in the voting securities of the Company outstanding immediately prior thereto
representing less than 50% of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such merger or consolidation; but
the Company is clearly the acquirer considering the totality of the circumstances, including such
factors as whether the president of the Company will continue as president of the Company or the
surviving entity, the majority of the directors of the Company or the surviving entity will be
incumbent directors, substantially all of the executive officers of the Company will be retained,
etc., all as determined immediately prior to the consummation of the merger or consolidation by the
incumbent directors.
(iv) The sale or disposition by the Company of all or substantially all of the Company’s
assets.
(b) Involuntary Termination. “Involuntary Termination” shall mean (i) without the
Covered Person’s express written consent, the assignment to the Covered Person of any duties or the
significant reduction of the Covered Person’s duties, either of which is materially inconsistent
with the Covered Person’s position with the Company and responsibilities in effect immediately
prior to such assignment, or the removal of the Covered Person from such position and
responsibilities, which is not effected for Disability or for Cause (for the avoidance of doubt, a
material diminution in responsibilities will be deemed to have occurred if either (A) the Covered
Person ceases to hold the position and title of Chief Executive
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Officer of the Company (or any successor entity) and its ultimate parent or (B) the failure of
the Covered Person to be nominated or elected as a member of the Board (or the Board of Directors
of any successor entity) and the Board of Directors of the Company’s (or its successor’s) ultimate
parent); (ii) a material reduction by the Company in the base salary and/or bonus of the Covered
Person as in effect immediately prior to such reduction; (iii) a material reduction by the Company
in the kind or level of employee benefits to which the Covered Person is entitled immediately prior
to such reduction with the result that the Covered Person’s overall benefit package is
significantly reduced; (iv) the relocation of the Covered Person to a facility or a location more
than fifty (50) miles from the Covered Person’s then present location, without the Covered Person’s
express written consent; (v) any purported termination of the Covered Person by the Company which
is not effected for death or Disability or for Cause, or any purported termination for Cause for
which the grounds relied upon are not valid; (vi) the failure of the Company to obtain, on or
before the Change of Control, the assumption of the terms of this Agreement by any successors
contemplated in Section 7 below; or (vii) a material breach of this Agreement by the Company. An
Involuntary Termination shall be effective upon written notice by the Covered Person.
(c) Cause. “Cause” shall mean (i) any act of personal dishonesty taken by the Covered
Person in connection with his or her responsibilities as an employee and intended to result in
substantial personal enrichment of the Covered Person, (ii) the conviction of a felony, (iii) a
willful act by the Covered Person which constitutes gross misconduct and which is injurious to the
Company, (iv) material breach of a material provision of this Agreement or of the Proprietary
Information Agreement (which is not cured within 30 days following notice) or (v) continued
violations by the Covered Person of the Covered Person’s obligations as an employee of the Company
which are demonstrably willful and deliberate on the Covered Person’s part after there has been
delivered to the Covered Person a written demand for performance from the Company which describes
the basis for the Company’s belief that the Covered Person has not substantially performed his or
her duties.
(d) Disability. “Disability” shall mean that the Covered Person has been unable to
perform his or her duties as an employee of the Company as the result of incapacity due to physical
or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is
determined to be total and permanent by a physician selected by the Company or its insurers and
acceptable to the Covered Person or the Covered Person’s legal representative (such agreement as to
acceptability not to be unreasonably withheld). Termination resulting from Disability may only be
effected after at least thirty (30) days’ written notice by the Company of its intention to
terminate the Covered Person’s employment. In the event that the Covered Person resumes the
performance of substantially all of his or her duties as an employee of the Company before
termination of his or her employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.
(e) Target Compensation. “Target Compensation” shall mean the total of all fixed and
variable cash compensation due to a Covered Person based upon one hundred percent (100%) attainment
of performance levels.
5. Limitation on Payments. In the event that the severance and other benefits
provided for in this Agreement or otherwise payable to the Covered Person (i) constitute
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“parachute payments” within the meaning of Section 280G of the Code and (ii) but for this
Section 5, would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise
Tax”), then the Covered Person’s severance benefits under Section 3(a)(i) shall be either
(i) delivered in full, or
(ii) delivered as to such lesser extent which would result in no portion of such severance
benefits subject to the Excise Tax, whichever of the foregoing amounts, taking into account the
applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the
Covered Person on an after tax basis, of the greatest amount of severance payments and benefits,
notwithstanding that all or some portion of such severance payments and benefits may be taxable
under Section 4999 of the Code. Unless the Company and the Covered Person otherwise agree in
writing, any determination required under this Section 5 shall be made in writing in good faith by
the accounting firm serving as the Company’s independent public accountants immediately prior to
the Change of Control (the “Accountants”) in good faith consultation with the Covered Person. In
the event of a reduction in benefits hereunder, unless the Covered Person provides direction
otherwise (which alternative direction shall be subject to the Company’s consent, which shall not
be unreasonably withheld), such benefits shall be reduced in the following order: (a) cash payments
not subject to Section 409A of the Code; (b) cash payments subject to Section 409A of the Code; (c)
equity compensation; and (d) non-cash forms of benefit. To the extent any payment is to be made
over time, then the payment shall be reduced in reverse chronological order. For purposes of
making the calculations required by this Section 5, the Accountants, in consultation with the
Covered Person, may make reasonable assumptions and approximations concerning the applicable taxes
and may rely on reasonable good faith interpretations concerning the application of Sections 280G
and 4999 of the Code. The Company and the Covered Person shall furnish to the Accountants such
information and documents as the Accountants may reasonable request in order to make a
determination under this Section. The Company shall bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this Section 5.
6. Remedy. If Covered Person’s benefits are reduced to avoid the Excise Tax pursuant
to Section 5 hereof and notwithstanding such reduction, the IRS determines that the Covered Person
is liable for the Excise Tax as a result of the receipt of severance benefits from the Company,
then Covered Person shall be obligated to pay to the Company (the “Repayment Obligation”) an amount
of money equal to the “Repayment Amount.” The Repayment Amount shall be the smallest such amount,
if any, as shall be required to be paid to the Company so that the Covered Person’s net proceeds
with respect to his or her severance benefits hereunder (after taking into account the payment of
the Excise Tax imposed on such benefits) shall be maximized. Notwithstanding the foregoing, the
Repayment Amount shall be zero if a Repayment Amount of more than zero would not eliminate the
Excise Tax. If the Excise Tax is not eliminated through the performance of the Repayment
Obligation, the Covered Person shall pay the Excise Tax. The Repayment Obligation shall be
discharged within thirty (30) days of either (i) the Covered Person entering into a binding
agreement with the IRS as to the amount of Excise Tax liability, or (ii) a final determination by
the IRS or a court decision requiring the Covered Person to pay the Excise Tax from which no appeal
is available or is timely taken.
7. Successors.
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(a) Company’s Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or otherwise) or to all or
substantially all of the Company’s business and/or assets shall assume the obligations under this
Agreement and agree expressly to perform the obligations under this Agreement in the same manner
and to the same extent as the Company would be required to perform such obligations in the absence
of a succession. For all purposes under this Agreement, the term “Company” shall include any
successor to the Company’s business and/or assets which executes and delivers an assumption
agreement described in this subsection (a) or which becomes bound by the terms of this Agreement by
operation of law.
(b) Covered Person’s Successors. The terms of this Agreement and all rights of the
Covered Person’s hereunder shall inure to the benefit of, and be enforceable by, the Covered
Person’s personal or legal representatives, executors, administrators, successors, heirs,
distributes, devisees and legatees.
8. Notice.
(a) General. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally delivered or when
mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the
case of the Covered Person, mailed notices shall be addressed to him or her at the home address
which he or she most recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed
to the attention of its General Counsel.
(b) Notice of Termination by the Company. Any termination by the Company of the
Covered Person’s employment with the Company at any time following a Change of Control shall be
communicated by notice of termination to the Covered Person at least five (5) days prior to the
date of such termination, given in accordance with Section 8(a) of this Agreement. Such notice
shall specify the termination date and whether the termination is considered by the Company to be
for Cause as defined in Section 4(c) in which case the Company shall identify the specific
subsection(s) of Section 4(c) asserted by the Company as the basis for the termination and shall
set forth in reasonable detail the facts and circumstances relied upon by the Company in
categorizing the termination as for Cause.
(c) Notice by Covered Person of Involuntary Termination by the Company. In the event
the Covered Person determines that an Involuntary Termination has occurred at any time following a
Change of Control, the Covered Person shall give written notice that such Involuntary Termination
has occurred as set forth in this Section 8(c). Such notice shall be delivered by the Covered
Person to the Company in accordance with Section 8(a) of this Agreement within sixty (60) days
following the date on which such Involuntary Termination if such Involuntary Termination occurred
as a result of an event set forth in Section 4(b)(i)(A) or (B), (ii)-(vi) or within 120 days of an
event set forth in Section 4(b)(i) other than the parenthetical containing (A) or (B) or (vii),
shall indicate the specific provision or provisions in this Agreement upon which the Covered Person
relied to make such determination and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such determination. The failure by the Covered Person
to include in the notice any fact or
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circumstance which contributes to a showing of Involuntary Termination shall not waive any
right of the Covered Person hereunder or preclude the Covered Person from asserting such fact or
circumstance in enforcing his or her rights hereunder.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Covered Person shall not be required to mitigate the
amount of any payment contemplated by this Agreement (whether by seeking new employment or in any
other manner), nor shall any such payment be reduced by any earnings that the Covered Person may
receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified, waived or discharged
unless the modification, waiver or discharge is agreed in writing and signed by the Covered Person
and by an authorized officer of the Company (other than the Covered Person). No waiver by either
party of any breach of, or compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision of the same condition
or provision at another time.
(c) Entire Agreement. Except with respect to the terms of any written employment
agreement, if any, by and between the Company and the Covered Person that is signed on behalf of
the Company, no agreements, representations or understandings (whether oral or written and whether
express or implied) which are not expressly set forth in this Agreement have been made or entered
into by either party with respect to the subject matter hereof.
(d) Choice of Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Massachusetts.
(e) Severability. The invalidity or enforceability of any provisions or provisions of
this Agreement shall not affect the validity or enforceability of any other provision hereof, which
shall remain in full force and effect.
(f) Arbitration. Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by final and binding arbitration in Massachusetts, in
accordance with the rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator’s award in any court having jurisdiction. In the event the Covered
Person prevails in an action or proceeding brought to enforce the terms of this Agreement or to
enforce and collect on any non-de minimis judgment entered pursuant to this Agreement, the Covered
Person shall be entitled to recover all costs and reasonable attorney’s fees.
(g) No Assignment of Benefits. The rights of any person to payments or benefits under
this Agreement shall not be made subject to option or assignment, either by voluntary or
involuntary assignment or by operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor’s process, and any action in violation of this subsection
(g) shall be void.
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(h) Employment Taxes. Subject to Section 5, all payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment taxes.
(i) Assignment by Company. The Company may assign its rights under this Agreement to
an affiliate and an affiliate may assign its rights under this Agreement to another affiliate of
the Company or to the Company; provided, however, that no assignment shall be made if the net worth
of the assignee is less than the net worth of the Company at the time of the assignment. In the
case of any such assignment, the term “Company” when used in a section of the Agreement shall mean
the corporation that actually employs the Covered Person.
(j) Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the date first above written.
| Progress Software Corporation | Covered Person | |||||||
By:
|
/s/ Xxxxx Xxxxxxxx | By: | /s/ Xxx X. Xxxxx | |||||
| Xxxxx Xxxxxxxx, S.V.P. & General Counsel | Xxx X. Xxxxx | |||||||
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