CHANGE OF CONTROL
AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT, dated as of
July 31. 2008 is between ARI Network Services, Inc. (the "Company")
and Robert J. Hipp (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.
(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.
(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 employme
