Exhibit 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement"), made as of the 25th
day of July, 2002, is entered into by Pegasystems Inc., a Massachusetts
corporation with its principal place of business at 000 Xxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000 (the "Company"), and Xxxxx Xxxxxx, residing at 000 Xxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 (the "Executive").
The Company desires to employ the Executive, and the Executive desires to
be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts employment with the Company, upon the terms set
forth in this Agreement, for the period (the "Employment Period") commencing on
July 25, 2002 (the "Commencement Date") and ending when terminated in accordance
with the provisions of Section 4.
2. Title; Capacity. (a) The Executive shall serve as President and Chief
Operating Officer of the Company, subject to the general direction and control
of the Company's Board of Directors (the "Board") and its Chief Executive
Officer (the "CEO"). The Company will use its best efforts to cause the
Executive to be elected to the Board prior to December 31, 2002. The Executive
hereby accepts such employment and agrees to undertake the duties and
responsibilities inherent in such position and such other executive duties and
responsibilities as the Board or the CEO shall from time to time reasonably
assign to him.
(b) All employees of the Company other than the CEO and his
administrative assistant shall report to the Executive.
(c) The Executive agrees to devote his entire business time, attention
and energies to the business and interests of the Company during the Employment
Period provided, however, that Executive shall be allowed, to the extent that
such activities do not materially interfere with the performance of his duties
and responsibilities hereunder, to manage his personal and family financial and
legal affairs and to serve on corporate, civic, not-for-profit, charitable and
industry boards and advisory committees. Notwithstanding the foregoing, the
Executive shall only serve on for-profit corporate boards of directors and
advisory committees if approved in advance by the Board or the CEO.
3. Compensation and Benefits.
3.1 Salary. The Company shall pay the Executive an annual base salary
of $325,000 during the Employment Period. Such base salary shall be subject to
review by the Compensation Committee of the Board and, based on such review, may
be changed by the Compensation Committee in its sole discretion.
3.2 Bonuses. The Company shall pay the Executive an annual cash bonus
targeted at 50% of his annual base salary, with the actual bonus amount being
dependent on the achievement of goals and objectives. Each such bonus shall be
paid within 90 days after the end of the calendar year to which it relates, and,
except as provided in Section 5 shall be conditioned upon the Executive's
employment by the Company through the end of the calendar year to which it
relates.
3.3 Fringe Benefits. The Executive shall be entitled to participate in
all bonus and benefit programs (collectively, "Benefits") that the Company
establishes and makes available to its senior executive employees, to the extent
that the Executive's position, tenure, salary, age, health and other
qualifications make him eligible to participate.
3.4 Vacation. The Executive shall be entitled to four (4) weeks paid
vacation per year.
3.5 Reimbursement of Expenses. The Company shall reimburse the
Executive for all reasonable travel, entertainment and other expenses incurred
or paid by the Executive in connection with, or related to, the performance of
his duties, responsibilities or services under this Agreement, subject to the
Executive's compliance with the Company's standard expense reimbursement
policies.
3.6 Stock Options. (a) On the Commencement Date, the Company will
grant the Executive a nonqualified 10-year option under the Company's 1994
Long-Term, Incentive Plan (the "Plan") to purchase 500,000 shares of the
Company's common stock, $.01 par value per share ("Common Stock"), at a price
equal to the fair market value of the Common Stock on such date as determined in
accordance with the Plan. Such option shall vest in equal quarterly installments
over four (4) years.
(b) In the event of a termination of the Executive's employment by the
Company without Cause, by the Executive for Good Reason or as a result of the
Executive's death (as each term is defined below), all vested stock options then
held by the Executive shall remain exercisable for at least one (1) year after
such termination, but in no event beyond the original term of the stock option.
In the event of a termination of the Executive's employment as a result of
Disability or "retirement" (as defined in the Plan), all vested stock options
then held by the Executive shall remain exercisable for at least two (2) years
after such termination, but in no event beyond the original term of the stock
option. Upon any other termination, all vested stock options held by the
Executive shall remain exercisable for at least 90 days after such termination,
but in no event beyond the original term of the stock option.
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4. Employment Termination. The employment of the Executive by the Company
pursuant to this Agreement shall terminate upon the occurrence of any of the
following:
4.1 At the election of the Company, for Cause, immediately upon
written notice by the Company to the Executive given within 90 days after the
Cause event becomes known to the Company. For the purposes of this Agreement,
Cause shall mean: (A) a material breach by the Executive of this Agreement or a
material breach by the Executive of the Company's Code of Conduct, in each case
that is not cured within 10 days following receipt by the Executive of written
notice from the Company specifying the details thereof, (B) Executive's willful
failure to attempt in good faith to follow the legal written direction of the
Board or the CEO, which is not cured within 10 days following receipt by the
Executive of written notice from the Board or the CEO specifying the details
thereof, (C) Executive's conviction of a felony (other than a felony involving a
traffic violation or as a result of vicarious liability), (D) Executive's
commission of an act constituting fraud, embezzlement, larceny or theft with
regard to the Company that is of a material nature (other than good faith
expense account reimbursement disputes) or (E) willful misconduct by the
Executive with regard to the Company that has a material adverse effect on the
Company. 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 him not in good faith and without reasonable belief that his action or
omission was in the best interests of the Company. For purposes of clause (A)
above, the Company's "Code of Conduct" shall mean such code as currently in
effect and as it may hereafter be amended from time to time, provided that any
such amendment is communicated to the Executive in writing or electronically.
4.2 Upon the death of the Executive, or upon 30 days' written notice
from the Company after the Executive has incurred a Disability and remains
disabled, unless he returns to the full-time performance of his duties within
such 30-day period. As used in this Agreement, the term Disability shall mean
the failure of the Executive, due to a physical or mental disability, to perform
the services contemplated by this Agreement for a period of 120 days, whether or
not consecutive, during any 360-day period.
4.3 At the election of the Company, without cause, immediately upon
written notice by the Company to the Executive.
4.4 At the election of the Executive for Good Reason, provided that
the Executive shall have given written notice to the Board within 90 days after
he becomes aware of the occurrence of any event of Good Reason specifying such
event, and such event shall be continued for a period of ten (10) days following
such notice. For purposes of this Agreement, Good Reason means any of the
following events (unless consented to by the Executive in writing): (i) a
material diminution in the Executive's duties, responsibilities or authorities
or the assignment to the Executive of duties or responsibilities that are
materially adversely consistent with his then position; (ii) any individual
appointed as the CEO other than the current CEO or the Executive; (iii) any
material breach by the Company of this Agreement; (iv) failure of the Executive
to be elected to the Board by September 1, 2003, or the Executive's removal
from, or failure to be re-elected to the Board once elected thereto; (v) a
reduction in the Executive's base salary or targeted bonus; (vi) a requirement
by the Company that the Executive's principal place
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of work to be moved to a location more than 35 miles away from Cambridge,
Massachusetts; (vii) a requirement by the Company that the Executive report to a
person other than the CEO; or (viii) a change in the Executive's title to a
lesser title.
4.5 At the election of the Executive, without Good Reason, upon at
least 60 days' prior written notice to the Company.
5. Effect of Termination.
5.1 Termination Pursuant to Section 4.2. In the event the Executive's
employment is terminated by reason of the Executive's death or Disability, the
Company shall pay or provide to the Executive (or his estate in the case of a
termination due to the Executive's death) any compensation and Benefits accrued
and otherwise payable to him under Section 3 through the last day of his actual
employment by the Company (including, without limitation, any bonus if declared
or earned but not yet paid for a completed fiscal year), and accrued vacation
pay payable pursuant to the Company's policies, and any unreimbursed business
expenses payable pursuant to Company policy (collectively the "Accrued
Amounts"), which amounts shall promptly be paid in a lump sum. In addition, the
Company shall: (i) continue to provide him and his dependents, for the
twelve-month period commencing on the date of such termination, with the
Benefits to which he would otherwise have been entitled hereunder had his
employment not been terminated and (ii) pay to the Executive (or his estate in
the case of his death) a pro-rata bonus for the year of termination equal to,
the product of (x) the target annual bonus for the fiscal year of Executive's
termination, multiplied by (y) a fraction, the numerator of which is the number
of days of the current fiscal year during which Executive was employed by the
Company, and the denominator of which is 365, which bonus shall be paid when
bonuses for such period are paid to the other executives (the "Pro-Rata Bonus").
5.2 Termination Pursuant to Sections 4.3 or 4.4. In the event the
Executive's employment is terminated by the Company without cause or, by the
Executive for Good Reason, the Company shall pay or provide the Executive with
the following:
(A) within thirty (30) days after the date of such termination, pay him a
lump sum amount equal to his then current annual base salary;
(B) continue to provide him, for the twelve-month period commencing on the
date of such termination, with the Benefits to which he would otherwise have
been entitled hereunder had his employment not been terminated; and
(C) If the termination occurs at least twelve (12) months after the
Commencement Date, then the Company will accelerate in full the vesting of the
Executive's options to purchase shares of the Company's Common Stock so that
such options are immediately exercisable; and
(D) the Executive shall receive the Pro-Rata Bonus.
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5.3 Termination Pursuant to Sections 4.1 or 4.5. If the Executive's
employment is terminated by the Company for Cause or by the Executive without
Good Reason, the Company shall pay to the Executive the Accrued Amounts.
6. Standards Letter. Concurrently with the execution and delivery of this
Agreement, the Executive agrees to execute and deliver the Company's "standards
letter" in the form most recently signed by an executive officer of the Company
except that such letter shall be modified to provide that if the Executive's
employment hereunder is terminated prior to the first anniversary of the
Commencement Date by the Company without Cause or by the Executive for Good
Reason then the non-competition covenants contained in such letter shall have no
force or effect. The provisions of the standards letter executed by the
Executive (the "Standards Letter") shall survive the termination of this
Agreement.
7. Release. It will be a condition for receipt of the benefits described in
Section 5 above (other than the Accrued Amounts) that the Executive: (i) return
Company property, (ii) execute a general release (in the form attached hereto)
regarding his employment and (iii) materially comply with the provisions of the
Standards Letter.
8. Other Agreements. The Executive hereby represents and warrants that he
is not bound by the terms of any agreement to refrain from competing, directly
or indirectly, with the business of such previous employer or any other party.
The Executive further represents and warrants that his performance of all the
terms of this Agreement does not and will not breach any other agreement to
which the Executive is a party or otherwise bound; provided that there are
certain limitations with regard to confidentiality from prior employers.
9. No Mitigation; No Set-Off. In the event of any termination of employment
hereunder, Executive shall be under no obligation to seek other employment and
there shall be no offset against any amounts due Executive under this Agreement
on account of any remuneration attributable to any subsequent employment that
Executive may obtain. The Company's obligation to pay Executive the amounts
provided and to make the arrangement provided hereunder shall not be subject to
set-off, counterclaim or recoupment except for any amounts the Executive owes to
the Company under any promissory note.
10. Indemnification. The Company shall indemnify and hold harmless
Executive to the fullest extent permitted by law (including the advancement of
legal fees) for any action or inaction of Executive while serving as an officer
or director of the Company or, at the Company's request, as an officer or
director of any other entity or as a fiduciary of any benefit plan, except for
any activity by the Executive that constitutes gross negligence or is
self-enriching. The Company shall cover the Executive under directors and
officers liability insurance both during and, while potential liability exists,
after the Employment Period in the same amount and to the same extent as the
Company covers its other officers and directors.
11. Arbitration. All disputes and controversies arising under or in
connection with this Agreement, other than the seeking of injunctive or other
equitable relief pursuant to the Standards Letter, shall be settled by
arbitration conducted before one arbitrator sitting in Boston, Massachusetts, or
such other location agreed by the parties hereto, in accordance with the
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National Rules for the Resolution of Employment Disputes of the American
Arbitration Association then in effect. The determination of the arbitrator
shall be final and binding on the parties. Judgment may be entered on the award
of the arbitrator in any court having proper jurisdiction.
12. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 12.
13. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
14. Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Executive.
15. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of The Commonwealth of Massachusetts.
16. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of both parties and their respective successors and assigns,
provided that the Company may assign the Agreement only to an acquiror of all or
substantially all of its assets and business, and further provided, however,
that the obligations of the Executive are personal and shall not be assigned by
him. Any successor to the Company shall assume the obligations under this
Agreement in a writing delivered to the Executive upon the assignee becoming
such.
17. Miscellaneous.
17.1 No delay or omission by the Company in exercising any right under
this Agreement shall operate as a waiver of that or any other right. A waiver or
consent given by the Company on any one occasion shall be effective only in that
instance and shall not be construed as a bar or waiver of any right on any other
occasion.
17.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
17.3 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year set forth above.
PEGASYSTEMS INC.
By: /s/ Xxxx Xxxxxxx
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Title: Chief Executive Officer
/s/ Xxxxx Xxxxxx
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CONFIDENTIAL RELEASE OF CLAIMS
I, Xxxxx Xxxxxx, in consideration of certain separation payments that
Pegasystems Inc. (the "Company") is agreeing to make to me upon the
effectiveness of this Release, agree with the Company as follows:
1. General Release. On behalf of myself and my spouse, heirs, executors,
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administrators, trustees, legal representatives, and assigns, I hereby forever
release and discharge the Company, its predecessors and successors, and each of
its past and present parent corporations, divisions, subsidiaries, affiliates,
assigns, officers, directors, employees, consultants, shareholders, partners,
attorneys, and agents (any or all of which are referred to as the "Releasees")
from any and all claims, demands, liabilities, actions, and causes of action of
every name and nature, whether known or unknown, with regard to my employment
with the Company and termination therefrom which could have been asserted from
the beginning of the world to the date on which I sign this Release. This
release includes, but is not limited to, (a) any claims for breach of contract,
whether express or implied; (b) any claims for wrongful termination; (c) any
claims for reemployment, salary, wages, bonuses, vacation pay, benefits, or
other compensation of any kind; (d) any claims for harassment, discrimination,
or retaliation in employment, including but not limited to any claims under
Title VII of the Civil Rights of 1964, the Age Discrimination in Employment Act,
Massachusetts General Laws Chapter 151B, the Employee Retirement Income Security
Act, the Americans with Disabilities Act, the Family and Medical Leave Act, and
any other federal, state, or local statute, ordinance, regulation, or common law
relating to harassment, discrimination, or retaliation in employment; (e) any
claims under any other federal, state, or local statutes, ordinances, or
regulations; (f) any claims based in tort; (g) any other common-law claims; and
(h) any claims for costs or attorneys' fees. Nothing herein shall release the
Releasees from any claims based on: (i) my right to enforce this Release or the
provisions of my employment agreement with the Company, (ii) any right I may
have to vested or accrued benefits, (iii) any right to indemnification or
(iv) any rights as a shareholder.
2. Company Property. I agree and acknowledge that I have returned to the
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Company all originals and copies of Company documents and all other Company
property that was in my possession at the time of my termination of employment,
including without limitation, all keys, corporate credit cards, computer files,
diskettes, database information, client information, sales documents, financial
statements, budgets and forecasts, and any similar information. Notwithstanding
the foregoing, I am permitted to retain my rolodex and similar address and
telephone directories.
3. Non-Disparagement. I agree not to intentionally make any public
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statement, written or oral, which disparages the Company, its services, or any
of its directors, officers, employees, or agents. The Company shall cause its
senior executive officers not to intentionally make any public statement,
written or oral, which disparages me.
4. Confidentiality. I agree to keep the terms of this Release and the
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amount of separation payments paid to me in exchange for signing this Release
completely confidential, and not to disclose any such matters to anyone, in
words or in substance, except as set forth in
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this section. Notwithstanding the foregoing, I may disclose such information
(a) to my immediate family, attorney, and/or accountant, provided that I shall
first obtain any such person's agreement to keep any such matters completely
confidential and not to disclose any such matters to anyone; and (b) to the
extent required by law or if compelled pursuant to the order of a court or
governmental body or agency.
5. Notice and Right to Consider. I have been advised to consult with an
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attorney before signing this Release. I acknowledge that I have been given the
opportunity to consider this Release for 21 days before signing it. In the event
that I have signed this Release within less than 21 days, I acknowledge that my
decision was entirely voluntary and that I had the opportunity to consider this
Release for the entire 21-day period. The Company acknowledges that for a period
of seven days from the date on which I sign this Release, I will retain the
right to revoke this Release by written notice that the Company receives before
the end of that seven-day period, and that this Release will not become
effective or enforceable until the expiration of such revocation period.
6. Miscellaneous. This Release is binding upon me and upon my heirs,
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administrators, representatives, executors, successors, and assigns. I agree
that I have carefully read and understand all of the provisions of this Release
and that I am voluntarily signing this Release.
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Xxxxx Xxxxxx Date
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