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On-message over lucrative exit from Progress Software…

On Monday, Progress Software Corporation (PRGS) disclosed in an 8-K that Richard D. Reidy, its President and Chief Executive Officer, will leave the company as soon his yet-to-be-identified successor starts work. Since the company has only just started an external search for Reidy’s replacement, we don’t know exactly when his last day will be. But we do know that he will soon have millions more to invest however he wants.

The biggest chunk of what the company will pay Reidy relates to his stock options and restricted stock. A snippet from the 8-K notes that:

“…the Company expects to recognize stock-based compensation expense of between approximately $4.5 million and $5.5 million, with a significant portion of this expense to be recognized in the third quarter of fiscal year 2011 and the remaining portion to be recognized over Mr. Reidy’s remaining employment period. In addition, in connection with the cash severance payments and employee-related benefits to be paid to Mr. Reidy under the Existing Separation Agreement, the Company expects to incur an aggregate pre-tax charge of approximately $2.5 million in the third quarter of fiscal year 2011.”

The terms of the Separation Payment are in this July 31 letter that Progress Software filed along with the 8-K (Exhibit 10.2). In exchange for Reidy staying on while the company hires his successor, he will receive the same salary ($500,000 a year, as of April, 2010, per the 2011 proxy) and benefits he had been earning.

In addition, he may get an “Extended Exercise Period” during which he can exercise unexpired stock options and his currently-unvested equity interests will continue to vest. That provision – good for an extra 15 months – will kick in if the company ends his employment before February 29, 2012, or even after that in some circumstances. And Progress Software also agreed to pay up to $10,000 for the work Reidy’s attorneys did in negotiating the letter agreement.

It’s not unusual that the company is requiring Reidy to sign a Release of Claims (Exhibit A in the letter agreement) before it hands over a fistful of money. But what is uncommon are the contractual constraints upon both parties that restrict what they can say about Reidy’s departure. The letter is quite specific on that topic:

“If contacted by any person or entity about your employment or separation of your employment from the Company, you agree to provide to the maker of the inquiry, a statement materially consistent with the statement set forth in Exhibit B. Additionally, the Company acknowledges that you shall be entitled to, in cooperation with the Board or its designees, elaborate the reasons for your separation from the Company in discussions with the senior management of the Company in a manner materially consistent with any public statements or internal communications prepared by the Company. For the Company’s part, it agrees that any official statement of the Company that it releases to the media or circulates generally to employees, customers or other groups with which the Company has business relationships shall be materially consistent with Exhibit B. The Company further agrees to direct its directors and officers not to make statements concerning your employment or its termination that are materially inconsistent with Exhibit B.”

No one knows what the uncensored remarks might have been, but one or both of the parties apparently thought it best not to find out. Reidy is no short-timer, though: He may have been in the top post only about 29 months, but he has actually served in a number of leadership roles at Progress Software for 27 years.

Regardless of whether the relationship is ending on a positive note or not, Reidy is presumably set financially as he sails off into the sunset.

Image source: tiarescott via flickr

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