Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT
(“Agreement”) is executed as of this 28th day of July,
2008, by and between Kenneth S. Folberg (“Executive”)
and ARI Network Services, Inc. (the
“Company”).
RECITALS
The Company desires to employ Executive,
and Executive desires to be employed by the Company, on the terms
and conditions set forth herein.
As a result of Executive’s
employment with the Company, Executive will have access to and be
entrusted with valuable information about the Company’s
business and customers, including trade secrets and confidential
information.
The Parties believe it is in their best
interests to make provision for certain aspects of their
relationship during and after the period in which Executive is
employed by the Company.
NOW, THEREFORE, in consideration of the
promises and the mutual agreements and covenants contained herein,
and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the Company and
Executive (collectively, “Parties” and individually,
“Party”), the Parties agree as follows:
ARTICLE I
EMPLOYMENT
1.1
Position and Duties
. Executive shall be employed
in the position of Vice President of Finance and Chief
Financial Officer, and shall be subject to
the authority of, and shall report to, the Company’s
President and Chief Executive Officer. Executive’s
duties and responsibilities shall include all those customarily
attendant to the position of Vice President of Finance and Chief
Financial Officer and as may be assigned from time to time by the
President and Chief Executive Officer. At all times,
Executive shall devote Executive’s entire business time,
attention and energies exclusively to the business interests of the
Company while employed by the Company.
1.2
At-Will Employment
. The term of Executive’s
employment under this Agreement shall be for an indefinite period
and may be terminated by either party at any time and for any
reason or no reason upon written notice to the other
party.
ARTICLE II
COMPENSATION AND OTHER
BENEFITS
2.1
Base Salary . While employed by the Company, the Company
shall pay Executive an annual salary of One Hundred Ninety Thousand
and no/100 Dollars ($190,000) (“Base
Salary”), payable in accordance
with the normal payroll practices and schedule of the Company.
Notwithstanding the foregoing, the Base Salary shall be
subject to annual review by the Compensation Committee (the
“Compensation Committee”) of the Company’s Board
of Directors (the “Board”) and, beginning on the first
anniversary of the commencement of Executive’s employment by
the Company, shall be subject to annual adjustment based on the
recommendation of the Compensation Committee if approved by the
full Board.
2.2
Bonuses . While employed by the Company, Executive will
be eligible to participate in the Company’s Management
Incentive Bonus Plan or any successor plans for senior executives
(“Bonus Plan”), the specifics of which are determined
from time to time by, and at the sole discretion of, the
Compensation Committee and approved by the full Board. For
purposes of clarification, the Parties acknowledge and agree that
under the current Bonus Plan, the annualized bonus amount which
Executive would initially be eligible to receive if one hundred
percent (100%) of such Bonus Plan targets were met would be Seventy
Thousand and no/100 Dollars ($70,000). In the event
that the Board terminates or modifies in any material way the
long-term incentive compensation component or any other component
of the Bonus Plan, Executive shall receive the same treatment as
other similarly situated executive employees.
2.3
Equity – Grant of
Options . Upon
commencement of Executive’s employment with the Company,
Executive will be granted options to purchase up to fifty thousand
(50,000) shares of the Company’s common stock pursuant to the
terms and conditions of an Award Agreement between the Company and
Executive in the form of the Company’s standard Award
Agreement. Such options shall be subject to the terms
and conditions of such Award Agreement, including, without
limitation, with respect to vesting and forfeiture.
2.4
Perquisites, Benefits and Other
Compensation . While
employed by the Company and subject to the express provisions of
this Article II, Executive will be entitled to receive perquisites
and benefits provided by the Company to its senior executive
employees, subject to the eligibility criteria related to such
perquisites and benefits, and to such changes, additions, or
deletions to such perquisites and benefits as the Company may make
from time to time, as well as such other perquisites or benefits as
may be specified from time to time at the sole discretion of the
Board.
2.5
Vacation . Employee shall be entitled to a maximum
of twenty (20) days of paid vacation and three (3) personal
holidays in any calendar year, pro-rated for any partial calendar
year, in accordance with the Company’s general vacation and
personal holidays policies for similarly situated
employees.
ARTICLE III
TERMINATION
3.1
Termination By The Company For
Cause . If
Executive’s employment is terminated by the Company at any
time for Cause (defined below), Executive shall have no further
rights against the Company, except for the right to receive (a) any
unpaid Base Salary with respect to the period prior
to the effective date of termination and (b) any vacation (but
not
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personal holidays) that Executive has
accrued, but not used, prior to the effective date of
termination.
3.2
Termination By The Company Without
Cause . If
Executive’s employment is terminated by the Company at any
time without Cause (defined below), in addition to the compensation
outlined in Paragraph 3.1, above, Executive shall have the right to
receive (a) any earned but unpaid bonus due to Executive for any
fiscal year of the Company that has been completed as of the
effective date of termination and (b) a Severance Payment (defined
below), the payment of which is contingent upon Executive’s
execution of a written severance agreement (in a form satisfactory
to the Company) containing, among other things, a general release
of all claims, statutory or otherwise, against the Company.
Executive acknowledges and agrees that the Company reserves
the right to update and modify the businesses listed in Paragraph
5.4(d), below, in such severance agreement.
3.3
Termination By Executive With Good
Reason . If Executive
resigns his employment with the Company for Good Reason (defined
below), in addition to the compensation outlined in Paragraph 3.1,
above, Executive shall have the right to receive (a) any earned but
unpaid bonus due to Executive for any fiscal year of the Company
that has been completed as of the effective date of resignation and
(b) a Severance Payment (defined below), the payment of which is
contingent upon Executive’s execution of a written severance
agreement (in a form satisfactory to the Company) containing, among
other things, a general release of all claims, statutory or
otherwise, against the Company. Executive acknowledges and
agrees that the Company reserves the right to update and modify the
businesses listed in Paragraph 5.4(d), below, in such severance
agreement. A resignation shall only be for “Good
Reason” if: (1) within thirty (30) calendar days of the
initial existence of Good Reason, Executive provides written notice
of Good Reason to the Board; (2) the Company does not remedy
said Good Reason within thirty (30) calendar days of its receipt of
such notice; and (3) Executive terminates his employment effective
any time after the expiration of such 30-day remedy period prior to
the date that is ninety (90) days after the initial existence of
Good Reason.
3.4
Resignation . If Executive resigns his employment with the
Company at any time without Good Reason (defined below), Executive
shall have no further rights against the Company, except for the
right to receive (a) any unpaid Base Salary with respect
to the period prior to the effective date of resignation
and (b) any vacation (but not personal holidays) that Executive has
accrued, but not used, prior to the effective date of resignation.
Executive agrees that, following his provision of notice of
resignation without Good Reason, the Company may, at its sole
discretion, accept the resignation effective immediately or at such
other time as the Company may designate and that, in such case,
such Company-designated date shall be the effective date of
resignation.
3.5
Death or Disability
. If Executive’s
employment with the Company is terminated due to his death or
Disability (defined below), Executive shall have no further rights
against the Company, except for the right to receive (a) any unpaid
Base Salary with respect to the period prior to the
effective date of termination, (b) any vacation (but not personal
holidays) that Executive has accrued, but not used, prior to the
effective date of termination and (c) any earned
3
but unpaid bonus due to Executive for any
fiscal year of the Company that has been completed as of the
effective date of termination.
3.6
Definitions .
(a)
Severance Payment
. For purposes of Paragraphs 3.2
and 3.3, above, “Severance Payment” means nine (9)
months of Base Salary, payable following termination pursuant to
the terms of the written severance agreement specified in Paragraph
3.2 or 3.3, above. Such Severance Payments shall be made in
equal installments in accordance with the Company’s normal
payroll practices and schedule beginning no later than the second
regular Company pay date following expiration of any revocation
period specified in such severance agreement; provided, however,
that all installments that have yet to be paid by the Final Payment
Date (defined below) shall be paid to the Executive in a lump sum
on the Final Payment Date. For the purposes of this Section
3.6(a), the Final Payment Date is the 15 th day of the
third month following the later of (i) the last day of the calendar
year in which the termination occurs, or (ii) the last day of the
Company’s fiscal year in which the termination
occurs.
(b)
Cause . For purposes of Paragraphs 3.1 and 3.2,
above, “Cause” shall mean any of the following:
(1) Executive has breached this Agreement in a material way or
has breached in a material way the fiduciary duty he owes to the
Company or any other obligation or duty he owes to the Company
under this Agreement, which breach remains uncured, if subject to
cure, to the reasonable satisfaction of the Board for thirty (30)
calendar days after Executive receives written notice thereof from
the Board; (2) Executive has committed gross negligence or
willful misconduct in the performance of Executive’s
duties for the Company; (3) Executive has failed in a material
way to follow reasonable instructions from the Board, consistent
with this Agreement, concerning the operations or business of the
Company, which failure remains uncured, if subject to cure, to the
reasonable satisfaction of the Board for thirty (30) calendar days
after Executive receives written notice thereof from the Board;
(4) Executive has committed a crime the circumstances of
which substantially relate to Executive’s employment duties
with the Company; (5) Executive has misappropriated or
embezzled funds or property of the Company or engaged in any
material act of dishonesty; or (6) Executive has attempted to
obtain a personal profit from any transaction in which the
Executive knows or reasonably should know the Company has an
interest, and which constitutes a corporate opportunity of the
Company, or which is adverse to the interests of the Company,
unless the transaction was approved in writing by the Board
after full disclosure of all details relating
to such transaction.
(c)
For purposes of Paragraphs 3.3 and 3.4,
above, “Good Reason” shall mean the occurrence of any
of the following without the written consent of Executive: (1) the
Company has breached this Agreement in a material way, which breach
remains uncured, if subject to cure, for thirty (30) calendar days
after the Board receives written notice thereof from Executive;
(2) a material diminution in Executive’s Base Salary;
(3) a material diminution in Executive’s authority,
duties, or responsibilities; or (4) a material change in the
geographic location at which Executive must perform his
services,
4
provided such new location is more than
fifty (50) miles from the location where Executive is required to
perform services prior to the change.
(d)
For purposes of Paragraph 3.5, above,
“Disability” means the inability of Executive, due to a
physical or mental impairment, to perform the essential functions
of Executive’s job with the Company, with or without a
reasonable accommodation, for ninety (90) consecutive business days
or one hundred twenty (120) business days in the aggregate during
any 365-day period. A determination of Disability shall
be made by the Board, which may, at its sole discretion,
consult with a physician or physicians satisfactory to the Board,
and Executive shall cooperate with any efforts to make such
determination. Any such determination shall be conclusive and
binding on the Parties. Any determination of Disability under
this Paragraph 3.6(d) is not intended to alter any benefits
any Party may be entitled to receive under any long-term
disability insurance policy carried by either the Company or
Executive with respect to Executive, which benefits shall be
governed solely by the terms of any such insurance
policy.
3.7
Termination In Connection With A
Change In Control .
Notwithstanding any other provision of this Agreement, should
Executive’s employment be terminated upon the occurrence of
or within two (2) years of a “Change in Control,”
as defined in any Change of Control Agreement (“COC
Agreement”) that may be presented by the Company to Executive
(i
