NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is made as of May 13, 2004
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by and between YDI WIRELESS, INC., a Delaware corporation ("Parent"), and the
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undersigned shareholder or other stakeholder ("Stakeholder") of KarlNet, Inc., a
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Delaware corporation (the "Company").
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RECITALS
A. Concurrently with the execution of this Agreement, Parent, KFire Merger
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Merger Sub"), the Company, Xxxxxxx X. Xxxx, and Xxxxx Xxxx have entered into
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an Agreement and Plan of Reorganization dated as of May 13, 2004 (the "Merger
Agreement") pursuant to which the Company will merge with and into Merger Sub
(the "Merger") and outstanding shares of the Company's capital stock will be
converted into the right to receive shares of common stock of Parent ("Parent
Common Stock") and cash. The Closing Date (as defined in the Merger Agreement)
shall be the "Effective Date" of this Agreement.
B. As a condition to the Merger, the Merger Agreement contemplates, among
other things, that Stakeholder shall enter into this Agreement.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Parent and
Stakeholder hereby agree as follows:
1. Acknowledgements by Stakeholder. Stakeholder acknowledges that (a)
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Stakeholder has occupied a position of trust and confidence with the Company
prior to the date hereof and has had access to, and will continue to have access
to, and has become familiar with the following, any and all of which constitute
confidential information of the Company (collectively the "Confidential
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Information"): (i) any and all information concerning the business and affairs
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of the Company, product specifications, data, know-how, formulae, compositions,
processes, designs, sketches, photographs, graphs, drawings, samples, inventions
and ideas, past, current and planned research and development, current and
planned manufacturing and distribution methods and processes, customer lists,
current and anticipated customer requirements, price lists, market studies,
business plans, computer software and programs (including object code and source
code), computer software and database technologies, systems, structures and
architectures (and related processes, formulae, compositions, improvements,
devices, know-how, inventions, discoveries, concepts, ideas, designs, methods
and information of the Company and any other information, however documented, of
the Company that is a trade secret within the meaning of applicable trade secret
law; (ii) any and all information concerning the business and affairs of the
Company (which includes historical financial statements, financial projections
and budgets, historical and projected sales, plans, competitive and other
strategies, capital spending budgets and plans, the names and backgrounds of key
personnel, and personnel training and techniques and materials), however
documented; and (iii) any and all notes, analysis, compilations, studies,
summaries, and other material prepared by or for the Company containing or
based, in whole or in part, on any information included in the foregoing; (b)
the business of the Company is international in scope; (c) its products and
services are marketed
throughout the world; (d) the Company competes with other businesses that are or
could be located in any part of the world; (e) the Company and Parent are
engaged in a highly competitive industry; (f) the goodwill associated with the
existing business, customers, and assets of the Company prior to the Merger are
an integral component of the value of the Company to Parent and is reflected in
the consideration payable to Stakeholder pursuant to the Merger Agreement; (g)
Parent has required that Stakeholder make the covenants set forth in this
Agreement as a condition to the Merger; (h) Stakeholder's agreement as set forth
herein is necessary to preserve the value of the Company for Parent following
the Merger; (i) Parent and the Company would be irreparably damaged if
Stakeholder were to breach the covenants set forth in this Agreement; (j)
Stakeholder is receiving significant consideration in connection with the
Merger; and (k) in the event Stakeholder's employment with the Company ended,
Stakeholder would be able to obtain suitable and satisfactory employment without
violation of this Agreement. For the foregoing reasons, among others, the
Stakeholder agrees that the provisions of this Agreement, including without
limitation the provisions in Sections 2 and 3 below, are reasonable and
necessary to protect and preserve Parent's business.
2. Treatment of Confidential Information. Stakeholder acknowledges and
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agrees that all Confidential Information known or obtained by Stakeholder,
whether before or after the date hereof, is the property of Parent and the
Company. Therefore, Stakeholder agrees that Stakeholder will not, at any time,
disclose to any unauthorized persons or entities or use for his own account or
for the benefit of any third party any Confidential Information, whether
Stakeholder has such information in Stakeholder's memory or embodied in writing
or other physical form, without Parent's written consent, unless and to the
extent that the Confidential Information is or becomes generally known to and
available for use by the public other than as a result of Stakeholder's fault or
the fault of any other person or entity bound by a duty of confidentiality to
Parent or the Company. Stakeholder agrees to deliver to Parent, at any time
Parent may request, all documents, memoranda, notes, plans, records, reports,
and other documentation, models, components, devices, or computer software,
whether embodied in a disk or in other form (and all copies of all of the
foregoing), relating to the businesses, operations, or affairs of the Company
and any other Confidential Information that Stakeholder may then possess or have
under Stakeholder's custody, possession, or control.
3. Covenant Not to Compete or Solicit
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(a) For purposes of this Section 3, the term "Parent" shall include
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Parent and all of its affiliated entities, including without limitation Merger
Sub, the Company, and any other direct and indirect subsidiaries of Parent.
(b) For a period of three years after the Effective Date (the
"Restricted Period"), Stakeholder shall not, directly or indirectly, any place
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in the world engage in, invest or own an interest in (except as specifically
permitted below), manage, operate, join, control, lend money or financial or
other assistance to, or participate or in any manner be connected with, as an
officer, partner, equity holder, creditor, consultant, agent, manager, employee,
co-venturer or otherwise, lend Stakeholder's name or any similar name to, lend
Stakeholder's credit to, or render any services or advice to, any business or
other enterprise engaged in or about to engage in designing, developing,
producing, licensing, marketing, distributing, selling, or leasing a Competing
Product or otherwise engage in any practice the purpose of which is to evade the
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provisions of this Agreement; provided, however, that Stakeholder may hold less
than one percent of the outstanding capital stock of any public company (e.g., a
corporation required to file periodic reports with the Securities and Exchange
Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, whose securities are listed on any securities exchange, quoted on the
Nasdaq National or SmallCap Market, or traded in the over-the-counter market) as
a passive investment but without otherwise participating in the activities of
such enterprise. For purposes of this Agreement, "Competing Product" means any
product or service that competes with or will compete with any product, product
line, or service related to such product or product line of the wireless voice
and data communications (and related wireless networking and telecommunications
software and equipment) business of Parent as they presently exist or as may be
in existence or in development on the date of termination of Stakeholder's
employment.
(c) During the Restricted Period, Stakeholder shall not, directly or
indirectly, either for himself or any other person or entity, (A) solicit,
induce, or encourage, or take any action which is intended to solicit, induce,
or encourage or has the effect of soliciting, inducing, or encouraging, any
employee of Parent to terminate or otherwise leave the employ of Parent, (B) in
any other way interfere with the relationship between Parent and any employee of
Parent, (C) employ, or otherwise engage as an employee, independent contractor,
or otherwise, any employee of Parent, or (D) solicit, induce, or encourage, or
take any action which is intended to solicit, induce, or encourage or has the
effect of soliciting, inducing, or encouraging, any customer, supplier,
licensee, or business relation of Parent to cease or reduce doing business with
Parent or in any way interfere with Parent's relationship with any customer,
supplier, licensee, or business relation.
(d) During the Restricted Period, Stakeholder shall not, directly or
indirectly, either for himself or any other person or entity, solicit the
business of any person or entity known to Stakeholder to be a customer of
Parent, whether or not Stakeholder had personal contact with such person or
entity.
(e) Stakeholder shall not directly or indirectly, at any time during or
after the Restricted Period, disparage Parent or any of its shareholders,
directors, officers, employees, or agents.
(f) During the Restricted Period, Stakeholder shall, within two days
after accepting any employment, advise Parent of the identity of any employer of
Stakeholder. Parent may serve notice upon each such employer that Stakeholder is
bound by this Agreement and furnish each such employer with a copy of this
Agreement or relevant portions thereof.
(g) In the event of a breach by Stakeholder of any covenant set forth
in this Section 3, the term of the Restricted Period will be extended by the
period of the duration of such breach.
(h) Stakeholder's obligations under this Agreement shall remain in
effect if Stakeholder's employment with the Company is terminated for any
reason.
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4. Remedies. If Stakeholder breaches any of the covenants set forth in this
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Agreement, Parent will be entitled to the following remedies:
(a) Damages from Stakeholder;
(b) To offset against any and all amounts owing to Stakeholder under
the Merger Agreement any and all amounts which Parent claims under Subsection
4(a) of this Agreement;
(c) In addition to its right to damages and any other rights it may
have, to obtain injunctive or other equitable relief to restrain any breach or
threatened breach or otherwise to specifically enforce the provisions of this
Agreement, it being agreed that money damages alone would be inadequate to
compensate Parent and would be an inadequate remedy for such breach.
The rights and remedies of the parties to this Agreement are cumulative and not
alternative.
5. Miscellaneous.
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(a) Governing Law; Consent to Personal Jurisdiction. This Agreement
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shall be governed by, and construed and enforced in accordance with, the
substantive laws of the State of Delaware, without regard to its principles of
conflicts of laws. Stakeholder hereby consents to the personal jurisdiction of
the state and federal courts located in Delaware for any action or proceeding
arising from or relating to this Agreement and waives any objection to venue
laid therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
(b) Severability. To the maximum extent possible, each provision and
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term of this Agreement will be interpreted in a manner to be effective and valid
to the full extent written. In the event that any provision of this Agreement
shall be determined to be unenforceable, prohibited, or invalid, then any such
provision will be ineffective only to the extent of such unenforceability,
prohibition, or invalidity without invalidating or affecting in any manner
whatsoever the remainder of such provision or the remaining provisions of this
Agreement. Without limiting the generality of the foregoing, in the event a
court of competent jurisdiction determines that the provisions of Section 3 of
this Agreement are excessively broad as to duration, geographic scope, or
activity, it is expressly agreed that Section 3 shall be construed so that the
remaining provisions shall not be affected but shall remain in full force and
effect and any such over-broad provisions shall be deemed, without further
action on the part of any person, to be modified, amended and/or limited, but
only to the extent necessary to render the same valid and enforceable in such
jurisdiction.
(c) No Assignment. Because the nature of the Agreement is specific to the
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actions of Stakeholder, Stakeholder may not assign or delegate this Agreement.
This Agreement shall inure to the benefit of Parent and its successors and
assigns.
(d) Notices. All notices and other communications hereunder shall be in
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writing and shall be deemed given if delivered personally or by commercial
delivery service or
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mailed by registered or certified mail (return receipt requested) or sent via
telecopy (receipt confirmed) to the parties at the following addresses or
telecopy numbers (or at such other address or telecopy numbers for a party as
the party shall specify by like notice). If so mailed, they shall be deemed
given upon the earlier of actual receipt or three business days after mailing.
(i) if to Parent, to:
0000 Xxx Xxxxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxx
00 Xxxxxxxxxx Xxxxx Xxxx
Xxxxx Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
(ii) if to Stakeholder, at the address set forth on the
signature page hereto.
(e) Entire Agreement. This Agreement and the Merger Agreement
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constitute the entire agreement and understanding between the parties with
respect to the subject matter of this Agreement and supersede all prior written
and oral discussions, agreements, and understandings relating to the subject
matter hereof. This Agreement may not be amended, changed, or modified, except
by an agreement in writing executed by the party to be charged with the
amendment.
(f) Waivers. Neither the failure nor any delay by any party in
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exercising any right, power, or privilege under this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
(g) Headings. All captions and section headings used in this Agreement
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are for convenience only and do not form a part of this Agreement.
(h) Counterparts. This Agreement may be executed in one or more
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counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. A facsimile or copy of a signature
is valid as an original.
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(i) Expenses. If any legal proceeding is necessary to enforce or
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interpret the terms of this Agreement, or to recover damages for breach hereof,
the prevailing party shall be entitled to receive from the other party
reasonable attorneys' fees and necessary costs and disbursements incurred in
such litigation, in addition to any other relief to which such prevailing party
may be entitled.
(j) Timing. Time is of the essence as to the performance of the
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parties' obligations set forth hereunder.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date above written.
YDI WIRELESS, INC.
By:
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Name: Xxxxxx X. Xxxxxxxxxx
Title: Chief Executive Officer
STAKEHOLDER:
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Name:
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Address:
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Facsimile:
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[SIGNATURE PAGE TO NONCOMPETITION AGREEMENT]
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