CHANGE OF CONTROL AGREEMENT
Exhibit
10.24
THIS
CHANGE OF CONTROL AGREEMENT, dated as of July 31. 2008 is between ARI Network
Services, Inc. (the "Company") and Xxxxxx X. Xxxx (the "Employee").
WITNESSETH:
WHEREAS,
the Employee has been employed by the Company since January 26. 2007 and
currently serves as its Chief Technology Officer; and
WHEREAS,
the Board of Directors of the Company has determined that it wishes to assure
the continued availability of the Employee as Chief Technology Officer of the
Company by entering into this Change of Control Agreement (the "Agreement");
and
WHEREAS,
the Board of Directors of the Company wants to assure that, in the event of a
Change of Control (as hereinafter defined), the Employee's service to the
Company will be recognized.
NOW.
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, the Company and the Employee hereby agree as follows:
1. Definitions.
For Purposes of this Agreement:
(a)
Cause. "Cause"
means (i) the willful and continued failure by the Employee to substantially
perform the Employee's duties with the Company (other than any such failure
resulting from the Employee's incapacity due to physical or mental illness) for
a period of at least ten days after a written demand for substantial performance
is delivered to the Employee which specifically identifies the manner in which
the Employee has not substantially performed his duties, or (ii) the willful
engaging by the Employee in misconduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Agreement, no act or failure to act on the Employee's part shall be considered
"willful" unless done or omitted to be done by the Employee not in good faith
and without reasonable belief that such action or omission was in the best
interest of the Company. Notwithstanding the foregoing, the Employee shall not
be deemed to have been terminated tor Cause unless ;and until there shall have
been delivered to the Employee a copy of a resolution, duly adopted by the
affirmative vote of not less than a majority of the Board of Directors of the
Company at a meeting of the Board called and held for such purposes (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board), stating that in the
good faith opinion of the Board the Employee was guilty of conduct constituting
Cause as set forth above and specifying the particulars thereof in
detail.
Page 1 of
8
(b) Change in Control. A
"Change in Control" shall mean the first to occur of the following:
(i) the
acquisition by an individual, entity or group, acting individually or in concert
(a "Person") of beneficial ownership of more than 50% of the then outstanding
shares of common stock of the Company (the "Outstanding Common Stock"); provided. however, that for
purposes of this Subsection l(b)(i). the following acquisitions shall not
constitute a Change in Control: (A) any acquisition directly from the Company.
(B) any acquisition by the Company. (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A). (B) and (C) of
Subsection l(b)(ii) below: or
(ii) consummation
of a reorganization, merger or consolidation, share exchange, or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, immediately following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding Common Stock
immediately prior to such Business Combination beneficially own. directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be. of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Common Stock. (B) no Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, more than 50% of.
respectively, the then outstanding common stock of the corporation resulting
from such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination, and (C) at least a majority
of the members of the Board of the corporation resulting from such Business
Combination were members of the Board of the Company at the time of the
execution of the initial agreement providing for such Business Combination;
or
(iii) approval
by the shareholders of the Company of a complete liquidation or dissolution of
the Company.
(c) Date of Termination.
"Date of Termination" means the date specified in the Notice of Termination
where required (which date shall be on or after the date of the Notice of
Termination) or in any other case during the Term, upon the Employee's ceasing
to perform services lor the Company.
Page 2 of
8
(d)
Effective Date.
"Effective Date" means the date on which the Change of Control
occurs.
(e)
Good Reason. "Good
Reason" means, without the Employee's written consent, the occurrence of one or
more of the following during the Term:
(i) a
material diminution of or interference with the Employee's duties and
responsibilities as Chief Technology Officer of the Company, including, but not
limited to a material demotion of the Employee, a material reduction in the
number or seniority of other Company personnel reporting to the Employee, or a
material reduction in the frequency with which, or in the nature of the matters
with respect to which, such personnel arc to report to the
Employee;
(ii) a
change in the principal workplace of the Employee to a location outside of a
50-mile radius from Cypress. California;
(iii) a
reduction or adverse change in the salary, bonus, perquisites, benefits,
contingent benefits or vacation time which had theretofore been provided to the
Employee; or
(iv) an
unreasonable increase in the workload of the Employee.
For
purposes hereof, any good faith determination made by the Employee that she has
Good Reason to terminate her employment with the Company shall be conclusive.
The Employee's continued employment or failure to give Notice of Termination
will not constitute consent to. or a waiver of rights with respect to. any
circumstance constituting Good Reason hereunder.
(f)
Notice of
Termination. Any termination of the Employee's employment by the Company
without Cause, or termination by the Employee for Good Reason, during the Term
will be communicated by a Notice of Termination to the other party hereto. A
"Notice of Termination" means a written notice which specifies a Date of
Termination (which date shall be on or after the date of the Notice of
Termination), indicates the provision in this Agreement applying to the
termination and. if applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated.
(g)
Term. The
" Term" means a period beginning on the Effective Date and ending on the date
two years alter the occurrence of a Change of Control.
2.
Termination of
Employment During the Term.
(a)
Termination by the
Company Without Cause or by the Employee for Good Reason. If the
Employee's employment is terminated during the Term by the Company without Cause
or by the Employee for Good Reason, the Employee shall be entitled to the
following:
Page 3 of
8
(i) the
Company shall pay the Employee his full base salary and commissions (if
applicable) through the Date of Termination at the rate in effect at the
time the Notice of Termination is given:
(ii) as
the annual current year bonus for the year in which the Date of Termination
occurs, the Company will pay the Employee an amount (not less than zero) equal
to (A) the product of (i) the average of the Employee's annual current year
bonus for the three fiscal years of the Company ending prior to the Date of
Termination and (ii) a fraction, the numerator of which is the actual number of
days the Employee was employed by the Company during the fiscal year in which
the Date of Termination occurs and the denominator of which is 365. minus (B)
the aggregate payments previously made by the Company, if any. with respect to
the current year annual bonus:
(iii) the
Company shall pay to the Employee as a severance benefit a lump-sum amount equal
to two (2) times the sum of (a) the Employee's annual base salary as in effect
on the Effective Date or Date of Termination, whichever is greater, without
reduction for any mandatory or voluntary deferrals, (b) 100% of the targeted
commissions, if any. for the year in which the Effective Date or Date of
Termination occurs, whichever is greater, and (c) 100% of the targeted
short-term annual bonus and long-term bonus for the year in which the Effective
Date or Date of Termination occurs, whichever is greater, or. where the targeted
short-term annual bonus or long-term bonus amounts have not been set as of the
Effective Date or Date of Termination. 100% of the average of the Employee's
targeted annual short-term and long-term bonus for the three fiscal years of the
Company ending prior to the Date of Termination, without reduction for any
amounts that would otherwise be deferred to future fiscal years, within thirty
days after the Date of Termination;
(iv) for
a 24-month period after the Date of Termination starting with the month
immediately after the month in which the Date of Termination occurs, the Company
will arrange to provide the Employee and the Employee's eligible dependents, at
the Company's expense, with benefits under the medical and dental plans of the
Company, or. if such benefits are not available, benefits substantially similar
to the benefits the Employee was receiving during the 90-day period immediately
prior to the Date of Termination; provided, however, that
benefits otherwise receivable by the Employee
pursuant to this Subsection 2(a)(iv) will be reduced to the extent other
comparable benefits arc actually received by the Employee from subsequent
employment during the 24-month period following the Date of Termination, and any
such benefits actually received by the Employee will be reported to the Company;
and provided,
further that
any access to insurance continuation coverage that the Employee may be entitled
to receive under the Consolidated Omnibus Budget Reconciliation Act of
1986("COBRA") will commence on the Date of Termination.
(b) Termination for Any Other
Reason. If the Employee's employment with the Company is terminated
during the Term for any reason not specified in Subsection 2(a) above, the
Employee will be entitled to the following:
Page 4 of
8
(i) the
Company will pay the Employee his full base salary and commissions (if
applicable) through the Date of Termination at the rate in effect on the Date of
Termination; and
(ii) as
the annual current year bonus for the year in which the Date of Termination
occurs, the Company will pay the Employee an amount (not less than zero) equal
to (A) the product of (i) the average of the Employee's annual current year
bonus for the three fiscal years of the Company ending prior to the Date of
Termination and (ii) a fraction, the numerator of which is the actual number of
days the Employee was employed by the Company during the fiscal year in which
the Date of Termination occurs and the denominator of which is 365, minus (B)
the aggregate payments previously made by the Company, if any. with respect to
the current year annual bonus. Notwithstanding the foregoing, no bonus will be
paid to the Employee under this Subsection 2(b)(ii) if the Employee's employment
is terminated for Cause.
(c)
Timing of
Payments. Where a payment of benefits under any of Subsections 2(a)(ii).
(iii) and (iv) or Subsection 2(b)(ii) is required to be delayed for six months
after the Date of Termination under Internal Revenue Code Section 409A. the
Company shall make payment of such amounts to the Employee on the date that is
six months after the Date of Termination. Where a payment of benefits under
Subsections 2(a)(ii). (iii) and (iv) and Subsection 2(b)(ii) is not required to
be delayed for six months after the Date of Termination
under Internal Revenue Code Section 409A. the Company shall make payment of such
amounts to the Employee within thirty (30) days after the Date of
Termination.
3. Restrictions. As of the Effective Date,
all restrictions limiting the exercise, transferability or other incidents of
ownership of any outstanding award, including but not limited to restricted
stock, options, stock appreciation rights, or other property or rights of the
Company granted to the Employee shall lapse, and such awards shall become fully
vested and be held by the Employee free and clear of all such restrictions.
Notwithstanding the foregoing, the term during which any vested option held by
an Employee is permitted to be exercised shall not be extended. This provision
shall apply to all such property or rights notwithstanding the provisions of any
other plan or agreement to the contrary.
4. Limitation
on Payments.
Subsections 2(a)(iii). (iv) and (v) and Section 3. above, provide for
certain payments to be made or benefits to be given to the Employee if the
Employee's employment with the Company terminates during the Term (the "Change
of Control Payments"). Notwithstanding such subsections, the Change of Control
Payments will be reduced such that the present value of the payments to the
Employee or for the Employee's benefit,
receipt of which is deemed to be contingent on a change of control under Section
280G(b)(2) of the Internal Revenue Code of 1986. as amended (the "Code"), shall
not exceed an amount equal to the maximum which the Company may pay without loss
of deduction under Section 280G(a) of the Code (the "Golden Parachute
Threshold"). If the Golden Parachute Threshold is exceeded, the payments made
pursuant to Subsections 2(a)(iii) and (iv) will be reduced, but not below zero,
so that the total amount paid to the Employee or for the Employee's benefit is
not in excess of the Golden Parachute Threshold. Notwithstanding the foregoing,
if not reducing the Change of Control
Payments would result in a greater after-tax amount to the Employee, such
payments shall not be reduced. All calculations required pursuant to this
Section 4 shall be made in accordance with proposed, temporary or final
regulations promulgated under Section 280G of the Code or other applicable
authority by the Company's public accountants, the Company's lawyers or such
other third party as is mutually agreed between the Employee and the Company. In
the event that the provisions of Sections 280G and 4999 of the Code or any
successor provision are repealed without succession this Section 4 shall be of
no further force or effect.
Page 5 of
8
5. No
Mitigation. The
Employee shall not be required to mitigate the amount of any salary or other
payment or benefit provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Agreement be reduced by any compensation earned by the Employee as a result of
employment by another employer other than as provided in subsection 2(a)(v).
above, by retirement benefits distributed alter the Date of Termination, or
otherwise.
6.
No
Assignments.
(a)
Successors and
Assigns. This Agreement is personal to the Employee, and the Employee may
not assign or delegate any of the Employee's rights or obligations hereunder
without first obtaining the written consent of Company. The Company will require
any successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, by an assumption agreement in form and substance
satisfactory to the Employee, 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 it if no such succession or assignment had taken place. If
such succession or assignment does not take place, and if this Agreement is not
otherwise binding on the Company's successors or assigns by operation of law.
the Employee is entitled to compensation from the Company in the same amount and
on the same terms as the compensation pursuant to Subsection 2(a)
hereof.
(b)
Inurement. This
Agreement and all rights of the Employee hereunder shall inure to the benefit of
and be enforceable by the Employee's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Employee should die while any amount would still be payable to
the Employee hereunder if the Employee had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Employee's devisee. legatee or other designee or if there
is no such designee, to the Employee's estate.
7. Notice. For the purposes of this Agreement,
notices and all other communication provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when
personally delivered or sent by fax with confirmation printed on the sending fax
machine, or five days after mailing certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth opposite the
parties' signatures to this Agreement (provided that all notices to the Company
shall be directed to the attention of the Board of Directors of the Company with
a copy to the Secretary of the Company), or to such other address as either
party may have furnished to the other in writing in accordance
herewith.
Page 6 of
8
8. Prior
Agreements. This
Agreement shall replace and supersede all prior agreements between the Company
and the Employee relating to the subject matter hereof.
9. Amendments. No amendments or additions
to this Agreement shall be binding unless in writing and signed by both parties
hereto.
10. Severability. The provisions of this
Agreement shall be deemed severable and the invalidity or unenforceability of
any provision shall not affect the validity or enforceability of the other
provisions hereof.
11. Governing
Law. This
Agreement shall be governed by the laws of the State of Wisconsin, without
giving effect to its principles of conflicts of laws.
12. Arbitration.
Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration by a single arbitrator mutually
agreed to by the disputing parties in accordance with the rules of the American
Arbitration Association then in effect. Such arbitration shall be held in
Milwaukee. Wisconsin, or such other place as is mutually agreeable to the
parties hereto. Judgment may be entered on the Arbitrator's award in any court
having jurisdiction.
Page 7 of
8
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and year
first above written.
|
ARI
NETWORK SERVICES, INC.
|
||
|
00000
Xxxx Xxxx Xxxx Xxxxx, Xxxxx 000
|
||
|
Xxxxxxxxx,
Xxxxxxxxx 00000
|
||
|
By:
|
/s/
Xxx X. Xxxxxxx
|
|
|
Xxx
X. Xxxxxxx
|
||
|
President
& CEO
|
||
|
EMPLOYEE
|
||
| /s/ Xxxxxx Xxxx | ||
| XXXXXX XXXX | ||
|
(Print
Name)
|
||
Page 8 of 8
