Executive Services Agreement

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.12

[Phase—Forward (TM) Logo]

July 20, 2004                                 

Mr. Martin Young
Little Timbers
Riversdale
Bourne End
Bucks SL8 5EA

Dear Martin:

        I am pleased to confirm my offer to you for the position of Vice President, Services North America reporting to me. You will provide services to Phase Forward Incorporated, via a secondment arrangement (the "Secondment") between PFI and your current employer, Phase Forward Europe Limited ("PFEL"). The terms of the Secondment are embodied in this letter agreement, which is countersigned by PFEL. During the Secondment, the terms and conditions of your current Executive Services Agreement dated 28 July 1999 (the "ESA") with PFEL will be suspended, as more fully detailed below.

        The Secondment will be for an initial period of 36 months commencing on May 17, 2004 and ending on May 16, 2007 (the "Initial Secondment Period"), subject to earlier expiration of your visa if it is not renewed. The secondment arrangements envisaged by this letter agreement may be extended beyond the Initial Secondment Period by our mutual written agreement. Notwithstanding the foregoing, you may terminate the Secondment on the first anniversary date ( i.e. , May 17, 2005) and elect to return to the UK; provided that you give PFI written notice of your intent to terminate the Secondment no later than March 18, 2005. If you elect to terminate the Secondment in accordance with the previous sentence, PFI will reimburse you for the reasonable costs of relocating to the UK, subject to the Phase Forward Travel and Expense Policy applicable to U.S. employees. The Initial Secondment Period together with any extension will collectively be known as the Secondment Period.

        The base salary for this position will be comprised of two elements as follows: $11,875.00 and £2,500.00 monthly (without regard to any currency exchange rates). These amounts will be paid from the U.S. and UK operations, respectively, in accordance with the regularly established payroll policies for those operations. You will also be eligible to participate in the Phase Forward Corporate bonus program with the opportunity to earn up to 27.5% of your annual base salary, computed separately for each of the U.S. ($) and UK (£) portions thereof, for delivery on certain financial and personal objectives. Phase Forward reserves the right to modify your compensation in future years.

        In addition, Phase Forward will continue to contribute to your UK pension scheme at 15% of both the U.S. ($) and UK (£) components of your base salary during the initial term of your employment visa. You will also be eligible to participate in the benefits plans available to U.S. employees for the duration of your assignment in the U.S., except for the PFI 401(k) plan, for which you are not eligible. Any benefits computed on the basis of salary will reflect only the U.S. portion of your base salary.

        You will also be eligible, on a one-time basis only, to receive a management override percentage payment, in accordance with the 2004 Sales Management Compensation Plan (the "Comp Plan"), for GSK business that you are actively involved with that is booked (in accordance with the definition of "booking" in the Comp Plan) before December 31, 2004. This amount will be paid in local currency from the UK office. Any disputes concerning the compensation for which you are eligible under this one-time arrangement will be resolved by me.

880 Winter Street
Waltham, MA 02451
P:781.890.7878
F: 781.890.4848
www.phaseforward.com

Martin A. Young
July 20, 2004
Page 2 of 3

    

        You will also be entitled to receive an additional option to purchase shares of Common Stock of the company in the amount of 35,000 (thirty five thousand shares), which has been approved by the Board of Directors subject to your acceptance of the position.

        Acceptance of this position will necessitate a move by you and your family to the greater Waltham, Massachusetts, U.S. area. To assist you with this move, Phase Forward will provide you with the following relocation benefits, subject to the Phase Forward Travel and Expense Policy applicable to U.S. employees:

•

Up to $15,000 to be used for temporary living expenses in the U.S.

•

Payment of the reasonable costs associated with the movement of your personal goods.

•

Flights for you and your family to relocate to the area.

•

A flat payment of $5,000 net, to use as needed to assist with the relocation.

•

Closing costs associated with a home purchase in the U.S. (not to include points).

•

Realtor "finders fee" associated with securing a rental property in the U.S.

•

Reasonable tax preparation costs for your U.S. and any incremental UK tax filing requirements related to your assignment in the U.S.

        The above amounts are guidelines and will be adjusted accordingly based upon your needs upon discussion with Vic Becker, Vice President of Human Resources, subject in each case to the Company's Signature and Approval Authority Policy and the Company's Travel and Expense Policy.

        At the end of the Secondment you may return to the UK and recommence duties pursuant to the ESA with PFEL, as suspended, provided a suitable position exists at such time. For the avoidance of doubt, you have no absolute right to return to any particular position. Nevertheless, PFEL and PFI will make every reasonable effort to find a suitable alternative position for you.

        At the end of the Secondment Period if no suitable position exists for you with either PFEL and/or PFI and your employment has to be terminated, then you will be entitled to the separation benefits provided for in the Executive Agreement ("EA") annexed hereto as Appendix 1, subject to your execution of the EA. By signing this letter agreement, you accept that the separation benefits provided for in the EA will be deemed to be in full and final settlement of all rights and remedies, whatsoever and howsoever, arising out of your employment with PFEL and PFI pursuant to the ESA, this letter agreement and the EA, and their terminations.

        During the Secondment Period, the terms and conditions of the ESA will be suspended (including but not limited to the accrual of continuity of service with PFEL) in their entirety and will have no effect save as expressly provided for in this letter agreement. Accordingly, by entering into this letter agreement, you expressly waive any contractual rights and remedies arising pursuant to the ESA. Notwithstanding the foregoing, for purposes of determining your service with PFI under PFI's employee benefit plans or programs, you will be given full service credit for the term of your employment with PFEL prior to the Secondment Period. Likewise, if you return to be employed by PFEL in the UK under the ESA, for purposes of determining your service with PFEL under PFEL's employee benefit plans or programs, you will be given full service credit for the term of your employment with PFI during the Secondment Period.

        During the Secondment Period, your employment is "at will" and, accordingly, either you or we may terminate your employment. Termination of your employment by either party will also operate as a

Martin A. Young
July 20, 2004
Page 3 of 3

    

termination of this letter agreement and the ESA. Any such termination will be subject to the terms of the EA, to the extent the provisions of the EA are triggered by the circumstances of termination. Without limiting any rights you may have under the EA, should you choose to relocate to the UK if PFI terminates your employment without Cause (as defined in the EA), or should you terminate your employment as a result of a "Resignation for Good Reason Upon a Change in Control" (as defined in the EA), PFI will reimburse you for the reasonable costs of relocating to the UK, subject to the Phase Forward Travel and Expense Policy applicable to U.S. employees.

        This offer is contingent upon the successful attainment of your L1 visa authorizing you to work in the United States, and your continued eligibility therefor. Phase Forward will pay for all costs, legal and administrative, associated with obtaining this authorization. The laws of the Commonwealth of Massachusetts and the United States of America and -company policies applicable to U.S-domiciled employees will govern all matters relating to our arising out your service during the Secondment. All parties submit to the jurisdiction of the courts of the Commonwealth of Massachusetts and the U.S. situated in Boston, Massachusetts for all purposes relating to this letter agreement.

        This letter agreement, together with any Appendices, constitutes the entire Agreement between the parties and supersedes all prior agreements, understandings and arrangements between them, and representations by them, whether oral or written, which relate to the subject matter of this letter agreement unless the contrary is expressly stated herein. Any variation of the terms and conditions of this letter agreement will be in writing in a form agreed and signed by the Parties. This letter agreement will be subject to any tax totalization agreement in force from time to time between the U.S. and the UK.

        We have agreed that you will begin work upon receipt of your employment authorization. I am extremely pleased to extend this offer and am looking forward to working with you. If the terms described in this letter agreement accurately reflect your understanding regarding the Secondment please indicate your agreement by signing in the space below on both copies and returning one copy of this letter agreement in the envelope provided no later than July 25, 2004. Please retain the other copy for your records.

Sincerely,

PHASE FORWARD INCORPORATED

Attachment to Assignment Letter Dated July 20, 2004

        Martin, as per your assignment letter dated July 20, 2004 you are eligible for a on a one-time basis only, to receive a management override percentage payment, in accordance with the 2004 Sales Management Compensation Plan (the "Comp Plan"), for GSK business that you are actively involved with that is booked (in accordance with the definition of "booking" in the Comp Plan) before December 31, 2004. This amount will be paid in local currency from the UK office. The following comp plan definitions apply to this override.

Definitions

(a)    Commissionable Orders

These are Orders that are accepted by the company, net of pass-through items and net of royalty/license payments made to any 3 ^rd party, in the following categories:

•

Software licenses : software fees or usage fees relating to any Phase Forward products.

•

Services :

•

ASP Services: study preparation, eCRF design, server hosting, CDD formatting, provisioning, site assessment, custom reports.

•

Consulting Services: project management, training, integration services, custom reports.

•

Customer Support :

•

Maintenance and customer support agreements for software transactions.

•

Server hosting, help desk.

(b)    Commission Accrued

For Orders that are fixed in nature, a commission is accrued upon acceptance of an Order by the company, which is evidenced by signing of the Order by the designated authority in the company. For Orders that are variable in nature, such as estimated usage fees or future service commitments, commission is accrued at the time the Order becomes fixed (as usage occurs or committed amount is determinable).

(c)    Pass-Through Items

Products or services provided at cost. Pass-through items are not commissionable.

(d)    Negative Booking

A Negative Booking is a change to an Order, which results in the reduction of the net amount of a commissionable Order, the reversal of previously recognized revenue, the uncollectability of an account receivable related to previously recognized revenue, or an indication of hold status or suspension for a period greater than 6 months.

(e)    Split Orders

Sales Management Personnel will designate Global accounts as either Support Accounts or Split Accounts.

        The Commission Rate on the GSK override is .4% of bookings as defined above and commissions will be earned and paid by the end of the month following the quarter in which the order was booked. Commissions paid that subsequently have events which result in a negative booking will have a reversal in payment in the month or months following the quarter they become a negative booking until full repayment is achieved. Negative bookings will be reversed at the commission rate that was applied at the time of the transaction.

        In addition the company reserves the right to make adjustments to the terms in its sole discretion in specific instances based on unusual or special circumstances.

Appendix 1

[PHASE—FORWARD (TM) LOGO]

880 Winter Street
Waltham, MA 02451, U.S.A.
Tel. (781) 890-7878
Fax. (781) 890-4848

        This Executive Agreement (the "Agreement"), by and among Phase Forward Incorporated, a Delaware corporation (the "Company"), and the executive name below ("Executive"), sets forth the terms and conditions by which the Company will provide certain benefits for Executive under certain circumstances in the event of a termination of Executive's employment with the Company. The effective date of this Agreement shall be the date of last execution as set forth below (the "Execution Date").

        WHEREAS, Executive currently is an employee of the Company and an Officer (as hereinafter defined), and has made and is expected to continue to make significant contributions to the business, growth and financial strength of the Company;

        WHEREAS, the Company recognizes that the uncertainty regarding the consequences of a termination in Executive's employment as an Officer of the Company adversely affects the Company's ability to retain Executive;

        WHEREAS, the Company further recognizes that, as is the case for most publicly held companies, the possibility of a Change in Control (as hereinafter defined) exists, which may alter the nature and structure of the Company, and recognizes that the uncertainty regarding the consequences of such an event adversely affects the Company's ability to retain Executive as an Officer;

        WHEREAS, the Company desires to more closely align Executive's interests with those of the shareholders of the Company with respect to any Change in Control that may benefit the shareholders;

        WHEREAS, the Company desires to assure itself of both present and future continuity of management in the event of a Change in Control, and desires to induce Executive to remain employed with the Company by establishing certain benefits for Executive applicable under certain circumstances in the event of a Change in Control, and Executive desires to be so induced; and

        WHEREAS, the parties desire to set forth in writing the terms and conditions of their agreement with respect to the provision of benefits for Executive applicable under certain circumstances in the event of a Change in Control;

1

        NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations herein contained, it is agreed among the parties hereto as follows:

        1.     Term.     This Agreement shall continue for a term commencing on the Execution Date and ending on the date two years thereafter ("Initial Term"), and shall be automatically renewed from year to year thereafter for successive one-year terms (each a "Renewal Term") unless ninety (90) days prior to the expiration of the initial term or any renewal term, a party gives written notice of non-renewal to the other party; provided that any such notice provided by the Company any time during the period beginning on the date that is forty-five (45) days prior to the date upon which a definitive agreement for a Change in Control is publicly announced as having been executed by the Company (the "Announcement Date") and ending on the first anniversary of the effective date of a Change in Control, shall have no effect whatsoever, and the Agreement shall continue in force until such time as otherwise terminated in accordance with the terms hereof. If an effective notice of non-renewal is given as permitted hereunder, this Agreement will expire at the conclusion of either the initial term or the renewal term, whichever is applicable, unless terminated earlier in accordance with Section 2 hereof. The "Term" of this Agreement shall include the Initial Term, as well as any Renewal Term, if applicable, subject to termination at any time prior to the expiration of the Term as provided in Section 2 hereof; provided, however, that in the event of the first Change in Control to occur during the Term (including after any notice of non-renewal is given), the Term shall automatically continue through the first anniversary of the effective date of such Change in Control.

        2.     At-Will Status.     Notwithstanding any provision of this Agreement, Executive will remain employed at-will, so that Executive or the Company may terminate Executive's employment at any time, with or without notice, for any or no reason, and this Agreement shall not create or imply any right or duty of Executive or the Company to have Executive remain in the employ thereof for any period of time. This Agreement shall automatically terminate on the earliest date of (a) Executive's Termination Date (as hereinafter defined) if Executive's employment ceases for any reason other than due to an Involuntary Termination Upon a Change in Control or a Resignation for Good Reason Upon a Change in Control (as such terms are hereinafter defined); or (b) the date immediately following the one-year anniversary of the effective date of the firs