CHANGE OF CONTROL AGREEMENT

 

THIS CHANGE OF CONTROL AGREEMENT, dated as of August 14,2012 is between

ARI Network Services, Inc. (the "Company") and Marvin A. Berg, III (the
"Employee").

 

WITNESSETH:

 

WHEREAS, the Employee has been employed by the Company since March 22, 2010

currently serves as its Vice President of Operations; and

 

WHEREAS, the President and Chief Executive Officer ("CEO") of the Company has

determined that he wishes to assure the continued availability of the Employee
as Vice President

of Operations of the Company by entering into this Change of Control Agreement
(the

"Agreement"); and

 

WHEREAS, the President and CEO 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 for Cause unless and until
there shall

have been delivered to the Employee a copy of a resolution, duly adopted by the
President and

CEO of the Company (after reasonable notice to the Employee and an opportunity
for the

Employee, together with the Employee's counsel, to be heard before the President
and CEO),

stating that in the good faith opinion of the President and CEO the Employee was
guilty of

conduct constituting Cause as set forth above and specifying the particulars
thereof in detail.

 

(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

conceit (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 1 (b)(i), the following
acquisitions shall not

constitute a Change in Control: (A) any acquisition directly from the Company,
(B) any

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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 I (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 for the Company. In either case, the Date of Termination shall be the
date on which

Employee has a "separation from service" from the Company, as determined in
accordance with

Treasury Regulation 1.409A-l(h)(l).

 

(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 Vice President of Operations 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 are to report to the Employee;

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(ii) a change in the principal workplace of the Employee to a location outside

of a 50-mile radius from Milwaukee, WI;

(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 he
has

Good Reason to terminate his 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 patty 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 after the occurrence of a Change of Control. Term also
includes the three

month period immediately preceding the closing of a Change of Control with
respect to any

Company initiated involuntary termination of Employee's employment without Cause
that is

made in anticipation of the 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:

(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 (l!) 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, (12) 100% of the targeted

commissions, if any, for the year in which the Effective Date or Date of
Termination

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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) any unpaid annual installments of long-term bonuses from prior fiscal

years, which installments shall become immediately vested as if the targeted
performance

levels for future years were met if applicable;

(v) 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 are 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; and

(vi) 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.

 

(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:

(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

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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. Limitation on Payments. Subsections 2(a)(iii), (iv), (v) and (vi), 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 3 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 3 shall be of no further
force or effect.

 

4. 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

after the Date of Termination, or otherwise.

 

5. 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

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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.

 

6. 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
President and CEO 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.

 

7. Prior Agreements. This Agreement shall replace and supersede all prior
agreements

between the Company and the Employee relating to the subject matter hereof.

 

8. Amendments. No amendments or additions to this Agreement shall be binding

unless in writing and signed by both patties hereto.

 

9. 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.

 

10. 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.

 

11. 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 patties 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.

 

 

IN WITNESS WHEREOF, the patties have executed this Agreement as of the day and

year first above written.

 

 

 

 

 

 

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ARI NETWORK SERVICES, INC.

10850 W. Park Place, Ste. 1200

Milwaukee, Wisconsin 53224

 

 

By: \s\ Roy W. Olivier

Roy W. Olivier, President &  CEO

 

 

EMPLOYEE

N76 Wl7085 Kolbrook Ct.

Menomonee Falls, WI 5305

                                                                        By: \s\
Marvin A. Berg, III

Marvin A. Berg, III ~

 

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