Exhibit 10.12
EXECUTIVE AGREEMENT
AGREEMENT made as of this 5th day of April, 2007 by and between Virtusa
Corporation (the "Company"), and Xxxxxx X. Xxxxxx (the "Executive").
1. Purpose. The Company considers it essential to the best interests of its
stockholders to promote and preserve the continuous employment of key management
personnel. The Board of Directors of the Company (the "Board") recognizes that,
as is the case with many corporations, the possibility of a Change in Control
(as defined in Section 2 hereof) exists and that such possibility, and the
uncertainty and questions that it may raise among management, may result in the
departure or distraction of key management personnel to the detriment of the
Company and its stockholders. Therefore, the Board has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's key management, including
the Executive, to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from the possibility of a Change in
Control. Nothing in this Agreement shall be construed as creating an express or
implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right to
be retained in the employ of the Company.
2. Change in Control. A "Change in Control" shall be deemed to have
occurred upon the occurrence of any one of the following events:
(a) any "Person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Act") (other than the
Company, any of its subsidiaries, or any trustee, fiduciary or other person or
entity holding securities under any employee benefit plan or trust of the
Company or any of its subsidiaries), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Act) of such
person, shall become the "beneficial owner" (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, of securities of the Company
representing 50 percent or more of the combined voting power of the Company's
then outstanding securities having the right to vote in an election of the
Company's Board of Directors ("Voting Securities") (in such case other than as a
result of an acquisition of securities directly from the Company); or
(b) persons who, as of the date hereof, constitute the Company's Board
of Directors (the "Incumbent Directors") cease for any reason, including,
without limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board, provided
that any person becoming a director of the Company subsequent to the date hereof
shall be considered an Incumbent Director if such person's election was approved
by or such person was nominated for election by either (A) a vote of at least a
majority of the Incumbent Directors or (B) a vote of at least a majority of the
Incumbent Directors who are members of a nominating committee comprised, in the
majority, of Incumbent Directors; but provided further, that any such person
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of members of the Board of Directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other
than the Board, including by reason of agreement intended to avoid or settle any
such actual or threatened contest or solicitation, shall not be considered an
Incumbent Director; or
(c) the consummation of (A) any consolidation or merger of the Company
where the stockholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger, beneficially
own (as such term is defined in Rule 13d-3 under the Act), directly or
indirectly, shares representing in the aggregate more than 50 percent of the
voting shares of the Company issuing cash or securities in the consolidation or
merger (or of its ultimate parent corporation, if any), or (B) any sale, lease,
exchange or other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all or substantially
all of the assets of the Company; or
(d) the approval by the Company's stockholders of any plan or proposal
for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
have occurred for purposes of the foregoing clause (a) solely as the result of
an acquisition of securities by the Company that, by reducing the number of
shares of Voting Securities outstanding, increases the proportionate number of
shares of Voting Securities beneficially owned by any person to 50 percent or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any person referred to in this sentence shall
thereafter become the beneficial owner of any additional shares of Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction or as a result of an acquisition of securities directly from the
Company) and immediately thereafter beneficially owns 50 percent or more of the
combined voting power of all then outstanding Voting Securities, then a "Change
in Control" shall be deemed to have occurred for purposes of the foregoing
clause (a).
3. Terminating Event. A "Terminating Event" shall mean any of the events
provided in this Section 3:
(a) Termination by the Company. Termination by the Company of the
employment of the Executive with the Company for any reason other than for
Cause, death or Disability. For purposes of this Agreement, "Cause" shall mean:
(i) conduct by the Executive constituting a material act of
willful misconduct in connection with the performance of his duties,
including, without limitation, misappropriation of funds or property of the
Company or any of its subsidiaries or affiliates other than the occasional,
customary and de minimis use of Company property for personal purposes; or
(ii) the commission by the Executive of any felony or a
misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any
conduct by the Executive that would reasonably be expected to result in
material injury to the Company or any of its subsidiaries and affiliates if
he were retained in his position; or
(iii) continued, willful and deliberate non-performance by the
Executive of his duties to the Company (other than by reason of the
Executive's physical
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or mental illness, incapacity or disability) which has continued for more
than 30 days following written notice of such non-performance from the
Board; or
(iv) a violation by the Executive of the Company's employment
policies which has continued following written notice of such violation
from the Chief Executive Officer; or
(v) willful failure to cooperate with a bona fide internal
investigation or an investigation by regulatory or law enforcement
authorities, after being instructed by the Company to cooperate, or the
willful destruction or failure to preserve documents or other materials
known to be relevant to such investigation or the willful inducement of
others to fail to cooperate or to produce documents or other materials.
A Terminating Event shall not be deemed to have occurred pursuant to this
Section 3(a) solely as a result of the Executive being an employee of any direct
or indirect successor to the business or assets of the Company, rather than
continuing as an employee of the Company following a Change in Control. For
purposes of clauses (i), (iii) and (v) hereof, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive without reasonable belief that the Executive's act, or failure
to act, was in the best interests of the Company and its subsidiaries and
affiliates. For purposes hereof, the Executive will be considered "Disabled" if,
as a result of the Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from his duties to the Company on a full-time
basis for 180 calendar days in the aggregate in any 12-month period.
(b) Termination by the Executive for Good Reason. Termination by the
Executive of the Executive's employment with the Company for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean the occurrence of any of
the following events:
(i) a substantial diminution or other substantial adverse change,
not consented to by the Executive, in the nature or scope of the
Executive's responsibilities, authorities, powers, functions or duties from
the responsibilities, authorities, powers, functions or duties exercised by
the Executive immediately prior to the Terminating Event; or
(ii) a material reduction in the Executive's annual base salary
or targeted total annual cash compensation (i.e., base salary and targeted
bonus) as in effect on the date hereof or as the same may be increased from
time to time hereafter except for across-the-board reductions similarly
affecting all or substantially all management employees; or
(iii) the relocation of the Company's offices at which the
Executive is principally employed immediately prior to the date of a
Terminating Event (the "Current Offices") to any other location more than
50 miles from the Current Offices, or the requirement by the Company for
the Executive to be based anywhere other than the Current Offices, except
for required travel on the Company's business to an extent substantially
consistent with the Executive's business travel obligations immediately
prior to the Terminating Event; or
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(iv) the failure by the Company to obtain an effective agreement
from any successor to assume and agree to perform this Agreement, as
required by Section 20.
4. Severance and Change in Control Payments.
(a) In the event a Terminating Event occurs within 12 months after a
Change in Control, the following shall occur:
(i) the Company shall pay to the Executive an amount equal to
the sum of (x) one-half of the Executive's annual base salary in effect
immediately prior to the Terminating Event (or the Executive's annual base
salary in effect immediately prior to the Change in Control, if higher) and
(y) provided that the Company achieves its corporate performance targets
for the period, a pro rated portion of the Executive's targeted annual
bonus for the period in which the Change in Control occurred, payable in
one lump-sum payment no later than three days following the Date of
Termination (provided that any pro rated bonus amount shall be payable no
later then three days following the date on which such bonus is payable to
other management employees);
(ii) subject to the Executive's copayment of premium amounts at
the active employees' rate, the Executive shall continue to participate in
the Company's group health, dental and vision program for six months;
provided, however, that the continuation of health benefits under this
Section shall reduce and count against the Executive's rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"); and
(iii) all stock options and other stock-based awards granted to
the Executive by the Company shall immediately accelerate and become
exercisable or non-forfeitable as of the effective date of such Change in
Control.
(b) In the event a Terminating Event occurs prior to a Change in
Control, the following shall occur:
(i) the Company shall pay to the Executive an amount equal to
the sum of (x) one-half of the Executive's annual base salary in effect
immediately prior to the Terminating Event and (y) provided that the
Company achieves its corporate performance targets for the period, a pro
rated portion of the Executive's targeted annual bonus for the period in
which the Terminating Event occurred, payable in one lump-sum payment no
later than three days following the Date of Termination (provided that any
pro rated bonus amount shall be payable no later then three days following
the date on which such bonus is payable to other management employees); and
(ii) subject to the Executive's copayment of premium amounts at
the active employees' rate, the Executive shall continue to participate in
the Company's group health, dental and vision program for six months;
provided, however, that the continuation of health benefits under this
Section shall reduce and count against the Executive's rights under COBRA.
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(c) Notwithstanding anything to the contrary in any applicable option
agreement or stock-based award agreement, upon a Change in Control, all stock
options and other stock-based awards granted to the Executive after the date of
this Agreement by the Company shall immediately accelerate twelve (12) months so
that the shares that would have vested in the one-year period following such
Change in Control would become immediately vested and the remaining unvested
shares would continue to vest in accordance with their terms but on a schedule
that would be twelve (12) months earlier than had the Change in Control not
transpired. The Executive shall also be entitled to any other rights and
benefits with respect to stock-related awards, to the extent and upon the terms
provided in the employee stock option or incentive plan or any agreement or
other instrument attendant thereto pursuant to which such options or awards were
granted.
(d) Anything in this Agreement to the contrary notwithstanding, if at
the time of the Executive's termination of employment, the Executive is
considered a "specified employee" within the meaning of Section 409A(a)(2)(B)(i)
of the Internal Revenue Code of 1986, as amended (the "Code"), and if any
payment that the Executive 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 (i) six months after the Executive's
Date of Termination, (ii) the Executive's death, or (iii) such other date as
will cause such payment not to be subject to such interest and additional tax,
and the initial payment shall include a catch-up amount covering amounts that
would otherwise have been paid during the first six-month period but for the
application of this Section 4(e).
5. ADDITIONAL LIMITATION.
(a) Additional Limitation. Anything in this Agreement to the contrary
notwithstanding, in the event that any compensation, payment or distribution by
the Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Severance Payments"), would be subject to the excise tax imposed
by Section 4999 of the Code, then the benefits payable under this Agreement
shall be reduced (but not below zero) to the extent necessary so that the
maximum Severance Payments shall not exceed the Threshold Amount. To the extent
that there is more than one method of reducing the payments to bring them within
the Threshold Amount, the Executive shall determine which method shall be
followed; provided that if the Executive fails to make such determination within
15 business days after the Company has sent the Executive written notice of the
need for such reduction, the Company may determine the amount of such reduction
in its sole discretion.
For the purposes of this Section 5(a), "Threshold Amount" shall mean three
times the Executive's "base amount" within the meaning of Section 280G(b)(3) of
the Code and the regulations promulgated thereunder less one dollar ($1.00); and
"Excise Tax" shall mean the excise tax imposed by Section 4999 of the Code, and
any interest or penalties incurred by the Executive with respect to such excise
tax.
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6. Term. This Agreement shall take effect on the date first set forth above
and shall terminate upon the earlier of (a) the termination of the Executive's
employment with the Company for any reason other than the occurrence of a
Terminating Event, or (b) the date which is 12 months after a Change in Control
if the Executive is still employed by the Company.
7. Withholding. All payments made by the Company under this Agreement shall
be net of any tax or other amounts required to be withheld by the Company under
applicable law.
8. Notice and Date of Termination.
(a) Notice of Termination. During the term of this Agreement, any
purported termination of the Executive's employment (other than by reason of
death) shall be communicated by written Notice of Termination from one party
hereto to the other party hereto in accordance with this Section 8. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
the Date of Termination.
(b) Date of Termination. "Date of Termination," with respect to any
purported termination of the Executive's employment during the term of this
Agreement, shall mean the date specified in the Notice of Termination. In the
case of a termination by the Company following a Change in Control other than a
termination for Cause (which may be effective immediately), the Date of
Termination shall not be less than 30 days after the Notice of Termination is
given. In the case of a termination by the Executive, the Date of Termination
shall not be less than 30 days from the date such Notice of Termination is
given. Notwithstanding the foregoing, in the event that the Executive gives a
Notice of Termination to the Company, the Company may unilaterally accelerate
the Date of Termination and such acceleration shall not result in a termination
by the Company for purposes of this Agreement.
9. No Mitigation. The Company agrees that, if the Executive's employment by
the Company is terminated during the term of this Agreement, the Executive is
not required to seek other employment or to attempt in any way to reduce any
amounts payable to the Executive by the Company pursuant to Section 4 hereof.
Further, the amount of any payment provided for in this Agreement shall not be
reduced by any compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company or otherwise.
10. Arbitration of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof or otherwise arising out of the
Executive's employment or the termination of that employment (including, without
limitation, any claims of unlawful employment discrimination whether based on
age or otherwise) shall, to the fullest extent permitted by law, be settled by
arbitration in any forum and form agreed upon by the parties or, in the absence
of such an agreement, under the auspices of the American Arbitration Association
("AAA") in Boston, Massachusetts in accordance with the Employment Dispute
Resolution Rules of the AAA, including, but not limited to, the rules and
procedures applicable to the selection of arbitrators. In the event that any
person or entity other than the Executive or the Company may be a party with
regard to any such controversy or claim, such controversy or claim shall be
submitted to arbitration subject to such other person or entity's agreement.
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Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. This Section 10 shall be specifically enforceable.
Notwithstanding the foregoing, this Section 10 shall not preclude either party
from pursuing a court action for the sole purpose of obtaining a temporary
restraining order or a preliminary injunction in circumstances in which such
relief is appropriate; provided that any other relief shall be pursued through
an arbitration proceeding pursuant to this Section 10.
11. Consent to Jurisdiction. To the extent that any court action is
permitted consistent with or to enforce Section 10 of this Agreement, the
parties hereby consent to the jurisdiction of the Superior Court of the
Commonwealth of Massachusetts and the United States District Court for the
District of Massachusetts. Accordingly, with respect to any such court action,
the Executive (a) submits to the personal jurisdiction of such courts; (b)
consents to service of process; and (c) waives any other requirement (whether
imposed by statute, rule of court, or otherwise) with respect to personal
jurisdiction or service of process.
12. Integration. This Agreement shall constitute the sole and entire
agreement among the parties with respect to the subject matter hereof, and
supersedes and cancels all prior, concurrent and/or contemporaneous
arrangements, understandings, promises, programs, policies, plans, practices,
offers, agreements and/or discussions, whether written or oral, by or among the
parties regarding the subject matter hereof, including, but not limited to, that
certain Offer Letter by and between the Company and the Executive, dated April
20, 2001 (and any amendments thereto) and those constituting or concerning
employment agreements, change in control benefits and/or severance benefits;
provided, however, that this Agreement is not intended to, and shall not,
supersede, affect, limit, modify or terminate any of the following, all of which
shall remain in full force and effect in accordance with their respective terms:
(i) any written agreements, programs, policies, plans, arrangements or practices
of the Company that do not relate to the subject matter hereof; (ii) any written
stock or stock option agreements between the Executive and the Company (except
as expressly modified hereby); and (iii) any written agreements between
Executive and the Company concerning noncompetition, nonsolicitation, inventions
and/or nondisclosure obligations.
13. Successor to the Executive. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal representatives, executors,
administrators, heirs, distributees, devisees and legatees. In the event of the
Executive's death after a Terminating Event but prior to the completion by the
Company of all payments due him under Section 4 of this Agreement, the Company
shall continue such payments to the Executive's beneficiary designated in
writing to the Company prior to his death (or to his estate, if the Executive
fails to make such designation).
14. Enforceability. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
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15. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
16. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Company, or to the Company at its main office, attention of the Board of
Directors.
17. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Company.
18. Effect on Other Plans. An election by the Executive to resign for Good
Reason under the provisions of this Agreement shall not be deemed a voluntary
termination of employment by the Executive for the purpose of interpreting the
provisions of any of the Company's benefit plans, programs or policies. Nothing
in this Agreement shall be construed to limit the rights of the Executive under
the Company's benefit plans, programs or policies except as otherwise provided
in Section 5 hereof, and except that the Executive shall have no rights to any
severance benefits under any Company severance pay plan.
19. Governing Law. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts, without giving effect to the conflict of laws principles of such
Commonwealth. With respect to any disputes concerning federal law, such disputes
shall be determined in accordance with the law as it would be interpreted and
applied by the United States Court of Appeals for the First Circuit.
20. Successors to Company. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company 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 if no such succession had taken
place. Failure of the Company to obtain an assumption of this Agreement at or
prior to the effectiveness of any succession shall be a breach of this Agreement
and shall constitute Good Reason if the Executive elects to terminate
employment.
21. Gender Neutral. Wherever used herein, a pronoun in the masculine gender
shall be considered as including the feminine gender unless the context clearly
indicates otherwise.
22. Confidential Information. The Executive shall never use, publish or
disclose in a manner adverse to the Company's interests, any proprietary or
confidential information relating to (a) the business, operations or properties
of the Company or any subsidiary or other affiliate of the Company, or (b) any
materials, processes, business practices, technology, know-how, research,
programs, customer lists, customer requirements or other information used in the
manufacture, sale or marketing of any of the respective products or services of
the Company or any subsidiary or other affiliate of the Company; provided,
however, that no breach or alleged
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breach of this Section 22 shall entitle the Company to fail to comply fully and
in a timely manner with any other provision hereof. Nothing in this Agreement
shall preclude the Company from seeking money damages, or equitable relief by
injunction or otherwise without the necessity of proving actual damage to the
Company, for any breach by the Executive hereunder.
23. Conditions of Benefits. The amounts payable to the Executive by the
Company pursuant to Section 4 hereof shall be condition upon, and payable only
if, the Executive: (a) executes a general release in a form and of a scope
reasonably acceptable to the Company; (b) returns all property, equipment,
confidential information and documentation of the Company; (c) has complied and
continues to comply in all material respects with any noncompetition, inventions
and/or nondisclosure obligations that the Executive may owe to the Company,
whether pursuant to an agreement or applicable law; and (d) provides a signed,
written resignation of Executive's status as an officer and director (if
applicable) of the Company and, if applicable, its subsidiaries.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company by its duly authorized officer, and by the Executive, as of the
date first above written.
VIRTUSA CORPORATION
By: /s/ Xxxx Xxxxxxxxxxx
---------------------------------------------
Name: Xxxx Xxxxxxxxxxx
Title: Chief Executive Officer
/s/ Xxxxxx X. Xxxxxx
---------------------------------------------
XXXXXX X. XXXXXX
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
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