Exhibit 10.2

 

EMPLOYMENT AND CHANGE OF CONTROL AGREEMENT

 

This Employment and Change of Control Agreement is made and entered into on this
17 day of February, 2003 by and between NetSolve, Incorporated, a Delaware
corporation (the “Company”), and Ken Kieley (the “Executive”).

 

RECITALS

 

WHEREAS, the Board of Directors of the Company (the “Board”), has determined
that, in the event the Company were to become involved in discussions and
negotiations with a third party concerning a potential transaction which might
result in a Change of Control of the Company, it is desirable and in the best
interest of the Company and its stockholders to have established arrangements to
ensure that Executive remains focused and appropriately incented with respect to
the successful completion of such Change of Control and the transition and
ongoing activities thereafter regarding the continued business of the Company
following such Change of Control; and

 

WHEREAS, in order to accomplish these objectives, the Company and Executive have
entered into this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby expressly acknowledged, the Company and Executive agree as
follows:

 

  1. Effective Date. The effective date of this Agreement shall be the date on
which a Change of Control occurs (the “Effective Date”). However, anything in
this Agreement to the contrary notwithstanding, if a Change of Control occurs
and if, prior to such Change of Control, the Executive’s employment with the
Company or its affiliated companies had been terminated or the Executive was
demoted, and if it is reasonably demonstrated by the Executive that such
termination or diminution arose in connection with, or anticipation of, the
Change of Control, then, for all purposes of this Agreement, the “Effective
Date” shall mean the date immediately prior to the date of such termination or
diminution.

 

  2. Change of Control. For the purposes of this Agreement, a “Change of
Control” shall mean a change of control of the Company of a nature that would be
required to be reported in response to Item 1(a) of the Securities and Exchange
Commission Form 8-K, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) or
would have been required to be so reported but for the fact that such event had
been “previously reported” as that term is defined in Rule 12b-2 of Regulation
12B under the Exchange Act; provided that, without limitation, a Change of
Control shall be deemed to have occurred if:

 

  (i) individuals who constitute the Board of Directors on the date of execution
of this Agreement (the “Incumbent Board”) cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the date hereof

 

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whose election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for director, without
objection to such nomination) shall be, for purposes of this clause, considered
as though such person were a member of the Incumbent Board; or

 

  (ii) the stockholders of the Company approve the sale or other disposition of
all or substantially all of the assets of the Company or a complete liquidation
or dissolution of the Company; or

 

  (iii) the stockholders of the Company approve a merger, consolidation,
reorganization or other business combination transaction pursuant to which the
Company is not the surviving ultimate parent entity.

 

For purposes of this definition, the following terms shall have the meanings set
forth below:

 

“Person” shall mean and include any individual, corporation, partnership, group,
association or other “person,” as such term is used in Section 14(d) of the
Exchange Act, other than the Company, a subsidiary of the Company or any
employee benefit plan(s) sponsored or maintained by the Company or any
subsidiary thereof.

 

“Independent Shareholder” shall mean any shareholder of the Company except any
employee(s) or director(s) of the Company or any employee benefit plan(s)
sponsored or maintained by the Company or any subsidiary thereof.

 

“Sale or disposition by the Company of all or substantially all of the assets of
the Company” shall mean a sale or other disposition transaction or series of
related transactions involving assets of the Company in which the value of the
assets being sold or otherwise disposed of (as measured by the purchase price
being paid therefore or by such other method as the Board determines is
appropriate in a case where there is no readily ascertainable purchase price)
constitutes more than two-thirds of the fair market value of the Company (as
hereinafter defined).

 

“Fair market value of the Company” shall be the aggregate market value of the
then outstanding shares of Common Stock of the Company (on a fully diluted
basis). The aggregate market value of the shares of outstanding Company Common
Stock shall be determined by multiplying the number of shares of outstanding
Company Common Stock (on a fully diluted basis) outstanding on the date of the
execution and delivery of a definitive agreement with respect to the transaction
or series of related transactions (the “Transaction Date”) by the average
closing price of the shares of outstanding Company Common Stock for the ten
trading days immediately preceding the Transaction Date.

 

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Notwithstanding any other provision of this Agreement, a transaction or event
shall not be deemed to constitute a Change of Control if it is the result of, or
arises out of, the Company having filed, voluntarily or involuntarily, a
petition in bankruptcy.

 

  3. Acceleration of Stock Option Vesting. Immediately upon the Effective Date,
the vesting of outstanding and unvested stock options previously granted to
Executive will automatically be accelerated in accordance with the provisions of
this Section. A number of shares equal to one-half (1/2) of the unvested shares
underlying each such stock option grant will become immediately vested and fully
exercisable at any time during the remaining term of the applicable option.

 

  4. Employment Period. The Company hereby agrees to continue the Executive in
its employ, and the Executive hereby agrees to remain in the employ of the
Company, for a period commencing on the Effective Date and continuing for a
twelve (12) month period (the “Employment Period”).

 

  5. Position and Duties. During the Employment Period, the Executive’s position
(including status, titles, and reporting relationships), authority, duties, and
responsibilities with the Company or its affiliated companies or both, as the
case may be, shall be comparable to, and, in any event, no less than those in
effect immediately prior to the Effective Date. The Executive’s services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date, although the Executive understands and agrees that
he may be required to travel from time to time for business purposes.

 

       During the Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees to devote
substantially all of his time and attention during normal business hours to the
business and affairs of the Company and its affiliated companies and to use his
reasonable best efforts to faithfully perform the duties and responsibilities
assigned to him hereunder. During the Employment Period it shall not be a
violation of this Agreement for the Executive to serve on corporate, civic or
charitable boards or committees and fulfill these and other reasonable personal
interests, and devote reasonable amounts of time to the management of his and
his family’s personal investments and affairs, so long as such activities do not
significantly interfere with the performance of the Executive’s responsibilities
as an employee of the Company or its affiliated companies in accordance with
this Agreement.

 

  6. Compensation. During the Employment Period, the Executive shall be
compensated as follows:

 

  (a) Annual Base Salary. The Executive shall be paid an annual base salary, in
equal installments under the Company’s usual payroll practice, at least equal to
the annual base salary being paid to the Executive immediately prior to the
Effective Date

 

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  (b) Annual Bonus. Executive shall be eligible for, and entitled to participate
in, annual bonus programs of the Company during the Employment Period on a basis
consistent with, and no less favorable to Executive as, his participation prior
to the Effective Date.

 

  (c) Stock Options and other Long-Term Incentive Compensation. Executive shall
be eligible for, and entitled to participate in, stock option and other
long-term incentive programs of the Company during the Employment Period on a
basis comparable to other peer executives of the Company.

 

  (d) Savings and Retirement Plans. During the Employment Period, the Executive
shall be entitled to participate in all savings and retirement plans, practices,
policies, and programs applicable generally to other peer executives of the
Company and its affiliated companies.

 

  (e) Benefit Plans. During the Employment Period, the Executive and/or the
Executive’s family, as the case may be, shall be eligible for participation in,
and shall receive all benefits under, welfare benefit plans, and other benefit
programs, practices and policies (including, without limitation, medical,
prescription drug, short-term disability, long-term disability, leave of
absence, salary continuance, vacation, group life insurance, accidental death
and dismemberment, and all other applicable plans and programs) provided by the
Company to the extent applicable generally to other peer executives of the
Company, but in no event shall such plans, practices, policies, and programs
provide the Executive with benefits and rights which are less favorable, in the
aggregate, than the most favorable of such plans, practices, policies, and
programs in effect for the Executive at any time prior to the Effective Date or,
if more favorable to the Executive, those provided generally at any time after
the Effective Date.

 

  7. Termination of Employment.

 

  (a) Disability. If the Company determines in good faith that the Disability of
the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give the Executive written
notice of its intent to terminate the Executive’s employment. In such event, the
Executive’s employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive, provided that, within the 30
days after receipt of the Company’s notice, the Executive shall not have
received a release to return to work and be willing to return to perform his
duties hereunder. For purposes of this Agreement, “Disability” shall mean the
absence of the Executive from the Executive’s duties with the Company for 180
consecutive business days as a result of incapacity due to mental or physical
illness or injury which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive’s

 

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legal representative (such agreement as to acceptability not to be unreasonably
withheld).

 

  (b) Cause. The Company may terminate the Executive’s employment during the
Employment Period for Cause. For purposes of this Agreement, “Cause” shall mean
(i) repeated willful or intentional violations by the Executive of the
Executive’s obligations under Section 4 of this Agreement (other than as a
result of incapacity due to physical or mental illness or injury) which are
committed in bad faith or without reasonable belief that such violations are in
the best interests of the Company and which are not remedied within a reasonable
period of time after receipt of written notice from the Company specifying such
violations; or (ii) the conviction of the Executive of a felony involving an act
of dishonesty intended to result in substantial personal enrichment at the
expense of the Company. A termination for Cause under clause (i) above may only
be effected pursuant to a formal resolution of the Board at a special meeting
called for the purpose of considering such termination pursuant to which at
least ¾ of the members of the Board affirmatively determine that the violations
of Executive constituted Cause in accordance with the provisions of clause (i)
above and that such violations have not been remedied within a reasonable time
following Executive’s receipt of written notice specifying the conduct and
violations at issue.

 

  (c) Good Reason. The Executive’s employment may be terminated during the
Employment Period by the Executive for Good Reason. For purposes of this
Agreement, “Good Reason” shall mean any one or more of the following
occurrences:

 

  (i) Executive’s base salary as in effective immediately prior to the Effective
Date, or as it may be increased subsequent to the Effective Date, is reduced;

 

  (ii) Executive’s status, position, title or responsibilities with the Company
immediately prior to the Effective Date are materially reduced, or Executive is
assigned duties which are inconsistent with such status, position, title or
responsibilities, or Executive’s business location is materially changed;

 

  (iii) The Company fails to continue in effect any pension, stock option,
health care, or other incentive plan or arrangement, or fringe benefit
arrangement, in which Executive was participating immediately prior to the
Effective Date, or the Company takes some action which materially reduces
Executive’s benefits under any such plan or program (including, without
limitation, providing benefits thereunder which are less than Executive’s
reasonably expected benefit levels based on benefits received prior to the

 

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Effective Date), without (in either such case) providing Executive with
substantially similar benefits; or

 

  (iv) Any successor to the Company in connection with a Change of Control does
not, prior to the closing of the Change of Control transaction, expressly assume
this Agreement.

 

 

For purposes of this Section 6(c), any good faith determination of “Good Reason”
made by the Executive shall be final and conclusive on all parties.

 

  8. Obligations of the Company upon Termination.

 

  (a) Good Reason; Other Than for Cause or Disability. If, during the Employment
Period, the Company terminates Executive’s employment other than for Cause or
Disability, or Executive terminates his employment for Good Reason:

 

  (i) The Company shall promptly pay Executive his unpaid base salary through
the date of such termination and any unused vacation, and shall pay and honor
any benefits or commitments to which Executive is entitled upon such termination
under plans, policies, agreements and arrangements of, or with, the Company
(collectively, the “Accrued Obligations”).

 

  (ii) The Company shall promptly pay Executive a lump sum cash payment equal to
the sum of Executive’s annualized base salary (i.e., 1 year’s base salary) at
the highest level in effect during the Employment Period, and Executive’s annual
bonus actually received for the year prior to the year of the termination.

 

  (iii) With respect to Executive’s outstanding stock options and similar
incentive awards, either subparagraph (a) or (b) below shall apply, as
appropriate under the particular circumstances:

 

(a) Notwithstanding the provisions of any outstanding awards, Executive shall be
entitled to exercise all vested options and other awards (including those vested
as a result of the accelerated vesting provided for in Section 3 hereof) at any
time prior to the expiration of the longer of six (6) months from the date of
such termination, or January 31 of the year following such termination. The
terms of all outstanding awards shall be automatically amended to incorporate
the provisions of this paragraph in the event such provisions become applicable;
or

 

(b) In the event that, the shares underlying the then outstanding stock options
or similar awards of Executive are not publicly traded as of the date of such
termination, Executive shall be entitled to receive (as soon as reasonably
practical following such

 

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termination, but in any event within 10 days thereof) a lump sum cash payment in
an amount equal to the difference between the aggregate exercise price of the
vested shares underlying each such option (giving credit for the accelerated
vesting provided for in Section 3 above) and the aggregate value of such number
of vested shares calculated on the basis of the closing price of the Company’s
common stock (as reported on the NASDAQ national market) as of the date of the
closing of the transaction or the consummation of the event constituting the
Change of Control.

 

  (iv) The Company shall maintain for a period of one (1) year following such
termination, all medical, prescription drug, group life insurance, disability
and other welfare arrangements in which Executive and Executive’s dependants
were participating, and under the same terms of such participation (including
the required contributions for such coverage and the income tax effect of such
coverage to Executive and Executive’s dependants) as were in effect immediately
prior to such termination. In the event that such continued coverage under any
such arrangement is not possible under the terms of such arrangement, the
Company shall provide such coverage, on the same basis, outside of the terms of
such arrangement. Such continued coverage shall be in addition to the rights of
Executive and his dependants under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA), and such COBRA rights will be provided in
full following the expiration of the continued coverage provided for under this
clause (iv). The coverage and benefits provided for in this clause (iv) shall be
referred to herein as the “Continued Coverage.”

 

  (v) The Company shall, at its cost, provide Executive with professional
outplacement services for up to 12 months following such termination.

 

  (b) Death; Disability. In the event Executive’s employment is terminated
during the Employment Period as a result of Executive’s Disability or death,
this Agreement shall terminate and:

 

  (i) The Company shall provide Executive (or his beneficiaries in the event of
his death) the Accrued Obligations.

 

  (ii) The Company shall provide Executive and his dependants with the Continued
Coverage.

 

  (c) Cause; Other than Good Reason. In the event Executive’s employment is
terminated during the Employment Period by the Company for Cause or by the
Executive without Good Reason, this Agreement shall terminate

 

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and the Company shall provide Executive the Accrued Obligations, and neither
party shall have any further obligations to the other.

 

  9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
the Executive’s continuing or future participation in any plan, program, policy
or practice provided by the Company and for which Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as Executive may
have under any contract or agreement with the Company. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of or any contract or agreement with the Company at
or subsequent to the Date of Termination shall be payable in accordance with
such plan, policy, practice, program, contract, or agreement except as otherwise
expressly modified by this Agreement.

 

  10. Full Settlement. The Company’s obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and, except as otherwise
expressly provided for in this Agreement, such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to
pay, to the fullest extent permitted by law, all legal fees and expenses which
the Executive may reasonably incur at all stages of proceedings, including,
without limitation, preparation, trial and appellate review, as a result of any
contest (regardless of whether formal legal proceedings are ever commenced and
regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement (including as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement), plus in each case interest on
any delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code.

 

  11. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company all confidential information, knowledge or data
relating to the Company which shall have been obtained by the Executive during
the Executive’s employment by the Company and which shall not be or become
public knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive’s
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event, however, shall an
asserted violation of the provisions of this section constitute a basis upon
which the Company may withhold or defer any amount or benefit otherwise payable
to the Executive under this Agreement. The terms of this confidential
information provision shall survive the termination or expiration of this
Agreement.

 

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  12. Indemnification. The Company will, to the fullest extent permitted by law,
indemnify and hold the Executive harmless from any and all liability arising
from the Executive’s service as an employee, officer or director of the Company
and its affiliated companies. To the fullest extent permitted by law, the
Company will advance legal fees and expenses to the Executive for counsel
selected by the Executive in connection with any litigation or proceeding
related to the Executive’s service as an employee, officer or director of the
Company and its affiliates. The terms of this indemnification provision shall
survive the termination or expiration of this Agreement, and shall in not limit
the obligations of the Company or the rights of Employee under any other
agreement or charter or bylaw provision.

 

  13. Deductions and Nonalienation of Benefits. Executive shall be required to
pay promptly on demand, by payroll deduction or otherwise, the amount required
to be withheld by the Company for income and employment taxes in respect of
amounts paid under this Agreement. No right, benefit or payment hereunder shall
be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or
charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber
or charge the same shall be null and void. No right, benefit or payment
hereunder shall in any manner be subject to, voluntarily or involuntarily, the
debts, contracts, liabilities or torts of Executive or be otherwise subject to
any execution, garnishment, attachment, insolvency, bankruptcy or legal
proceedings of any character or legal sequestration, levy or sale. If Executive
or any other beneficiary hereunder shall become bankrupt or attempt to
anticipate, alienate, sell, assign, pledge, encumber or charge any right,
benefit or payment hereunder, such right, benefit or payment may be terminated
at any time by the Company without liability or further obligation.

 

  14. Entire Agreement. This Agreement contains the complete understanding and
agreement between the parties and supersedes any and all other agreements,
understandings, or communications of any kind, either oral or in writing,
between the parties hereto with respect to the subject matter hereof. The
parties to this Agreement acknowledge that no representations, inducements,
promises, or agreements, orally or otherwise, have been made by any party, or
anyone acting on behalf of any party, which are not embodied herein, and that no
other agreement, statement, or promise with respect to the subject matter of
this Agreement shall be valid or binding. Any modification of this Agreement
will be effective only if it is in writing and signed by both of the parties
hereto.

 

  15. Severability. If any provision in this Agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force without being impaired or
invalidated in any way, and such invalid, void or unenforceable provisions shall
be reformed and replaced with valid and enforceable provisions which are as
close as possible to such invalid, void or unenforceable provisions.

 

  16. Survival. The parties hereby acknowledge and agree that certain provisions
of this Agreement are, by their nature, intended to survive this Agreement and
the parties

 

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agree that all of such provisions shall survive Executive’s termination of
employment, regardless of the reason for such termination.

 

  17. Successors. This Agreement shall be binding upon and inure to the benefit
of Executive, his heirs, beneficiaries and personal representatives, and the
Company and any successor or assignee of the Company, but neither this
Agreement, nor any of the rights or obligations of either party hereunder may be
assigned, in whole or in part, except the Company may assign this Agreement to
any affiliate of the Company. The Company will seek to obtain the written
acknowledgment and assumption of this Agreement by any successor of the Company
in connection with a Change of Control of the Company prior to the consummation
of such Change of Control transaction. Whether or not such written
acknowledgment and assumption is given, this Agreement shall be binding on such
successor and its assignees, and “Company,” as used in this Agreement, shall be
deemed to mean the Company as hereinbefore defined, and any successors to the
Company, including without limitation, any successor to the Company in the event
of a Change of Control.

 

  18. Notices. Any notices to be given hereunder by either party to the other
may be effected by personal delivery in writing, by facsimile or by mail,
registered or certified, postage prepaid to the current address of the other
party with return receipt requested. Notices delivered personally or by
facsimile shall be deemed communicated as of actual receipt; mailed notices
shall be deemed communicated as of three (3) days after mailing.

 

  19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.

 

Executed effective as of the 17 day of February, 2003.

 

NETSOLVE, INCORPORATED By:  

/s/    J. Michael Gullard

    J. Michael Gullard  

EXECUTIVE

 

  By:  

/s/    David D. Hood

    David D. Hood  

 

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