EMPLOYEE RETENTION AND MOTIVATION AGREEMENT (Amended and Restated as of October 13, 2009)
Exhibit 10.2
(Amended and Restated as of October 13, 2009)
This agreement (the “Agreement”) is effective as of October 13, 2009 (the “Agreement Date”) by
and between Xxxxxxx Xxxxx (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 Company and the Covered Person are parties to an Employee Retention and Motivation
Agreement, dated December 31, 2008 (the “Existing XXXX”), which provides 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. The Company and the Covered Person have agreed to make certain changes to the Existing XXXX
as set forth herein.
E. 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 The Company and the Covered Person are parties to a
Severance Agreement (as amended, the “Severance Agreement”), which provides the Covered Person with
certain benefits following a termination of employment in circumstances other than following a
Change in Control. This Agreement shall be applicable in the event an Involuntary Termination (as
defined below) occurs within twelve (12) months following a Change in Control. 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 Severance
Agreement or any other written employment agreement then in effect between the Covered Person and
the Company, 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) five years after the Agreement Date; provided, however, that
the term of the provisions of this Agreement may be extended by written resolutions adopted by the
Board. 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 stock option 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 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.
(b) Payment of Management Bonus Effective immediately upon a Change of Control, the
Covered Person’s annual management bonus 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. 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, 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 in an amount equal to
fifteen (15) months of the Covered Person’s annual Target Compensation; and in addition, for a
period of fifteen (15) months after the Termination Date, 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 stock option 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 stock
option 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 Termination Date. 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
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employee benefits to the Covered Person, 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 April 1
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 “separation from service” (within
the meaning of Section 409A of the Code), (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 for
such benefits (if any) as may then be established under the Company’s then existing severance
guidelines and benefit plans at the time of such termination.
(iii) Disability; Death If the Company terminates the Covered Person’s employment as
a result of the Covered Person’s Disability, 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 except for 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, then the Covered Person shall not be entitled to receive any severance payments or other
benefits following the date of such termination, 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 required by law.
(b) Termination Other than in Connection with Change of Control If the Covered
Person’s employment is terminated for any reason either prior to the occurrence of a 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 Severance
Agreement.
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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.
For purposes of this Section 4(a), the term “Incumbent Directors” shall mean directors who either
(A) are directors of the Company as of the Agreement Date, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of the directors of the
Company as of the Agreement Date, at the time of such election or nomination (but shall not include
an individual whose election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company).
(b) Involuntary Termination “Involuntary Termination” shall occur on the
31st day after receipt by the Company of Covered Person’s notice pursuant to subsection
(ii) below, if the conditions set forth in all of subsections (i), (ii) and (iii) below occur:
(i) Any of the following “Events” occurs without Covered Person’s prior written consent during
the term of this Agreement:
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| (A) | 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; | ||
| (B) | 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; | ||
| (C) | 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; | ||
| (D) | 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; or | ||
| (E) | A material breach of this Agreement by the Company. |
(ii) Within sixty (60) days after the first occurrence of any such Event, the Covered Person
provides written notice to the Company describing with reasonable specificity the Event and stating
his intention to resign from employment due to such Event; and
(iii) The Company does not cure, or cause to be cured, such Event within thirty (30) days
after receipt of Covered Person’s notice.
(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, and (iv) 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).
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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 a Covered Person based upon one hundred percent (100%) attainment of
performance levels.
(f) Termination Date. “Termination Date” shall mean the date the Covered Person’s
employment with the Company terminates.
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 “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 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, 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 may make reasonable assumptions
and approximations concerning the application 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
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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
(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 the assumption
agreement described in this subsection (a) 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
Termination Date, 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
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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.
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 the Severance Agreement, 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.
(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.
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(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.
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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
By: |
/s/ Xxxxx X. Xxxxxx | By: | /s/ Xxxxxxx X. Xxxxx | |||||
| Xxxxx X. Xxxxxx | Covered Person | |||||||
| Executive Chairman |
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