1
EXHIBIT 10.10
Note: This agreement was individually executed by each executive officer of
the Company during fiscal 1998.
EMPLOYEE RETENTION AND MOTIVATION AGREEMENT
This Agreement (the "Agreement") is effective as of _________________,
(the "Agreement Date") by and between ________________ (the "Employee") and
Progress Software Corporation, a Massachusetts corporation (the "Company").
R E C I T A L S
A. The Employee presently serves at the pleasure of the Board of
Directors of the Company (the "Board") in a role that is important to the
continued conduct of the Company's business and operations.
B. The Board has determined that it is in the best interests of
the Company and its stockholders to assure that the Company will have the
continued dedication and objectivity of the Employee, 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
Employee with certain benefits following a Change of Control and certain
severance benefits upon the Employee's termination of employment following a
Change of Control.
D. In order to accomplish the foregoing objectives, the Board has
directed the Company, upon execution of this Agreement by the Employee, to
commit to the terms provided 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 Employee's execution of the Employee Proprietary Information
and Confidentiality Agreement, attached hereto as Exhibit A; and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
1. TERM OF EMPLOYMENT. The Company and the Employee acknowledge
that the Employee's employment is at will, as defined under applicable law,
except as may otherwise be provided under the terms of any written employment
agreement between the Company and Employee, that is signed on behalf of the
Company and now or hereafter in effect. If the Employee's employment terminates
for any reason, the Employee 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) any written employment agreement then in effect between Employee and the
Company, or (iii) the Company's existing severance guidelines and benefits plans
which are in effect at the time of termination, or (iv) applicable statutory
2
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 a termination of employment occurring prior to the
termination of the provisions of this Agreement.
2. BENEFITS IMMEDIATELY FOLLOWING CHANGE OF CONTROL.
(a) ACCELERATED VESTING OF A PORTION OF OUTSTANDING
OPTION. Upon a Change of Control, the vesting of each outstanding stock option
held by the Employee under the Company's stock option plans on the date of the
Change of Control, shall automatically accelerate as to the last six (6) months
of the unvested portion of each such option.
(b) PAYMENT OF MANAGEMENT BONUS. Effective immediately
upon a Change of Control, the Employee's annual management bonus shall be fixed
at the Employee's target bonus level as in effect immediately prior to the
Change of Control and the Employee shall be paid a pro-rated portion of such
bonus, as of the date of the Change of Control. In addition, the Employee shall
be paid the balance of the fixed bonus at the end of the Company's fiscal year
provided that the Employee remains employed as of the applicable date or upon
the Employee's Involuntary Termination (as defined in Section 4(b) below),
whichever event occurs earlier. Any payment to which the Employee 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
Employee's employment terminates after a Change of Control, then, subject to
Section 5 below, the Employee shall be entitled to receive severance benefits as
follows:
(i) INVOLUNTARY TERMINATION. If the Employee's
employment is terminated within six (6) months following a Change of Control as
a result of Involuntary Termination other than for Cause, then the Employee
shall be entitled to receive a lump sum severance payment in an amount equal to
nine (9) months of the Employee's annual Target Compensation; and in addition,
for a period of nine (9) months after such termination, the Company shall be
obligated to provide the Employee with benefits that are substantially
equivalent to the Employee's benefits that were in effect immediately prior to
the Change of Control. If the Employee's employment is terminated after six (6)
months and prior to twelve (12) months following a Change of Control as a result
of Involuntary Termination other than for Cause, then the Employee shall be
entitled to receive a lump sum severance payment in an amount equal to six (6)
months of the
-2-
3
Employee's annual Target Compensation; and in addition, for a period of six (6)
months after such termination, the Company shall be obligated to provide the
Employee with benefits that are substantially equivalent to the Employee's
benefits that were in effect immediately prior to the Change of Control. Any
severance payments to which the Employee is entitled pursuant to this section
shall be paid in a lump sum within thirty (30) days of the effective date of the
Employee'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 Employee from the period of time immediately prior to the Change of Control
through the effective date of the Employee's termination. With respect to any
taxable income that the Employee is deemed to have received for federal income
tax purposes by virtue of the Company providing continued employee benefits to
the Employee, the Company shall make a cash payment to the Employee such that
the net economic result to the Employee will be as if such benefits were
provided on a tax-free basis to the same extent as would have been applicable
had the Employee's employment not been terminated.
If the Employee's employment is terminated
at any time following a Change of Control as a result of Involuntary Termination
other than for Cause, then the vesting of each outstanding stock option which
had been granted prior to the date of the Change of Control, held by the
Employee under the Company's stock option plans, shall accelerate as to the last
twelve (12) months of the unvested portion of each such option on the effective
date of the Involuntary Termination, after taking into account accelerated
vesting in accordance with Section 2(a) above.
(ii) VOLUNTARY RESIGNATION. If the Employee's
employment terminates by reason of the Employee's voluntary resignation (and is
not an Involuntary Termination or a termination for Cause), then the Employee
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 benefits plans at the time of such
termination.
(iii) DISABILITY; DEATH. If the Company terminates
the Employee's employment as a result of the Employee's Disability, or such
Employee's employment is terminated due to the death of the Employee, then the
Employee 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 benefits plans at the time of
such Disability of death.
(iv) TERMINATION FOR CAUSE. If the Employee is
terminated for Cause, then the Employee 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.
-3-
4
(b) TERMINATION OTHER THAN FROM CHANGE OF CONTROL. If the
Employee'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 Employee shall be entitled to receive
severance and any other benefits only as may then be established under the
Company's existing severance guidelines and benefit plans at the time of such
termination.
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 change in the composition of the Board, as
a result of which fewer than a majority of the directors are Incumbent
Directors. "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); 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 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; but the Company is clearly the acquiror 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
-4-
5
determined immediately prior to the consummation of the merger or consolidation
by the Incumbent Directors.
(iv) The liquidation of the Company; or 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 Employee's express written consent, the assignment to
the Employee of any duties or the significant reduction of the Employee's
duties, either of which is materially inconsistent with the Employee's position
with the Company and responsibilities in effect immediately prior to such
assignment, or the removal of the Employee from such position and
responsibilities, which is not effected for Disability or for Cause; (ii) a
material reduction by the Company in the base salary and/or bonus of the
Employee 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
Employee is entitled immediately prior to such reduction with the result that
the Employee's overall benefits package is significantly reduced; (iv) the
relocation of the Employee to a facility or a location more than 50 miles from
the Employee's then present location, without the Employee's express written
consent; (v) any purported termination of the Employee 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 (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.
An Involuntary Termination shall be effective upon written notice by the
Employee.
(c) CAUSE. "Cause" shall mean (i) any act of personal
dishonesty taken by the Employee in connection with his or her responsibilities
as an employee and intended to result in substantial personal enrichment of the
Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee
which constitutes gross misconduct and which is injurious to the Company, and
(iv) continued violations by the Employee of the Employee's obligations as an
employee of the Company which are demonstrably willful and deliberate on the
Employee's part after there has been delivered to the Employee a written demand
for performance from the Company which describes the basis for the Company's
belief that the Employee has not substantially performed his or her duties.
(d) DISABILITY. "Disability" shall mean that the Employee
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 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 Employee or the Employee's legal representative (such agreement as to
acceptability not to be unreasonably withheld). Termination resulting from
Disability may only be effected after at least 30 day's written notice by the
Company of its intention to terminate the Employee's employment. In the event
that the Employee resumes the performance of substantially all of his or her
duties
-5-
6
as an employee of the Company before the 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 compensation due an Employee based upon 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
Employee (i) constitute "parachute payments" within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (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 Employee'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
Employee 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 Employee 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
Employee. In the event of a reduction in benefits hereunder, the Employee shall
be given the choice of which benefits to reduce. 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 Employee shall furnish to the
Accountants such information and documents as the Accountants may reasonably
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 Employee's benefits are reduced to avoid the Excise
Tax pursuant to Section 5 hereof and notwithstanding such reduction, the IRS
determines that Employee is liable for the Excise Tax as a result of the receipt
of severance benefits from the Company, then Employee 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 Employee'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
-6-
7
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, Employee shall pay the Excise Tax. The Repayment
Obligation shall be discharged within 30 days of either (i) Employee 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 Employee
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) EMPLOYEE'S SUCCESSORS. The terms of this Agreement
and all rights of the Employees hereunder shall inure to the benefit of, and be
enforceable by, the Employee'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
Employee, 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 Employee's employment with the Company at any time
following a Change of Control shall be communicated by notice of termination to
the Employee 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
-7-
8
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 EMPLOYEE OF INVOLUNTARY TERMINATION BY THE
COMPANY. In the event the Employee determines that an Involuntary Termination
has occurred at any time following a Change of Control, the Employee 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 Employee to the Company
in accordance with Section 8(a) of this Agreement within ninety (90) days
following the date on which such Involuntary Termination occurred (or, if such
Involuntary Termination occurred as a result of more than one event set forth in
Section 4(b), within ninety (90) days following the earliest of such events),
shall indicate the specific provision or provisions in this Agreement upon which
the Employee 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 Employee to include in the notice any fact or
circumstance which contributes to a showing of Involuntary Termination shall not
waive any right of the Employee hereunder or preclude the Employee from
asserting such fact or circumstance in enforcing his or her rights hereunder.
9. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. The Employee 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 Employee 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 Employee and by an authorized officer of the
Company (other than the Employee). 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
Employee 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.
-8-
9
(e) SEVERABILITY. The invalidity or unenforceability 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 Employee
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, Employee 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.
(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
Employee.
(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 Agreement
Date.
Progress Software Corporation
By:
-----------------------------------
Authorized Officer
By:
-----------------------------------
Employee
-9-
