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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DECEMBER 3, 1998
----------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
COMPUTER NETWORK TECHNOLOGY CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 0-13994 41-1356476
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(STATE OF INCORPORATION) (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
605 NORTH HIGHWAY 169, MINNEAPOLIS, MINNESOTA 55441
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
TELEPHONE NUMBER: (612) 797-6000
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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Item 2. Acquisition or Disposition of Assets
On December 3, 1998, Computer Network Technology Corporation (the Company)
acquired all of the outstanding stock of Intelliframe Corporation , a start-up
software and services company which develops technology for legacy systems
integration with client/server and Internet technologies. The Intelliframe
technology manages software development and deployment, network communications,
user security and integration for integrating enterprise applications for large
e-commerce and customer relationship management (CRM) deployments. Products
based on the combined capabilities of Intelliframe and the Company are
anticipated in mid 1999.
The $2.0 million purchase price will be paid in two installments of $1.0 million
each in January 1999 and 2000. The acquisition will be accounted for under the
purchase method of accounting. The Company anticipates that the purchase price
will be paid from existing working capital resources. The registrant is in the
process of evaluating the allocation of the purchase price to the assets
acquired, principally purchased technology and in process research and
development. The Company expects a one-time, unspecified charge against earnings
in the fourth quarter of 1998 for purchased in-process research and development.
Certain Intelliframe employees will be eligible for significant bonus payments
through December 31, 2001 as outlined in Exhibit A to the employment agreements
filed herewith, if future revenues from the Company's Re-engineering Software
products exceed certain defined targets. Most of the Intelliframe employees
will be relocated to the Company's Massachussetts facility.
FORWARD LOOKING STATEMENTS
Certain statements in this Form 8-K constitute "forward looking statements." All
forward looking statements involve risks and uncertainties, and actual results
may be materially different. The amount of any one-time unspecified charge
against earnings in the fourth quarter of 1998 for purchased in-process research
and development is dependent on the Company's review and completion of the
purchase price allocation for the Intelliframe acquisition. The timing and
availability of products based on the combined capabilities of Intelliframe and
the Company may be impacted by the timely completion of necessary engineering
and development activities, unforeseen technological barriers, unanticipated
expense, higher than expected commitments of engineering resource and the level
of customer acceptance. Additional factors that could impact the Company's
future results are described in the Company's most recently filed SEC documents,
including the Company's annual report on Form 10-K and quarterly reports on Form
10-Q. The Company assumes no obligation to publicly release results of any
revision or updates to these forward looking statements to reflect future events
or unanticipated occurrences.
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Exhibits
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2.1 Agreement for Sale of Shares among Computer Network Technology
Corporation and each of Scott Opitz and Alexsandr Elkin dated December
3, 1998. The Registrant hereby agrees to furnish supplementally a copy
of any omitted schedule or exhibit to the Commission upon request.
10.3 Employment Agreement dated December 3, 1998 by and between Scott Opitz
and Intelliframe Corporation.
10.4 Employment Agreement dated December 3, 1998 by and between Aleksandr
Elkin and Intelliframe Corporation.
99.2 Press Release dated December 8, 1998
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Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 10, 1998 Computer Network Technology Corporation
By: /s/ Gregory T. Barnum
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Name: Gregory T. Barnum
Title: Secretary and Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
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Exhibits Page Number
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<S> <C>
2.1 Agreement for Sale of Shares among Computer Network Technology
Corporation and each of Scott Opitz and Alexsandr Elkin dated
December 3, 1998. The Registrant hereby agrees to furnish
supplementally a copy of any omitted schedule or exhibit to
the Commission upon request. .............................................electronically filed
10.3 Employment Agreement dated December 3, 1998 by and between
Scott Opitz and Intelliframe Corporation. ................................electronically filed
10.4 Employment Agreement dated December 3, 1998 by and between
Aleksandr Elkin and Intelliframe Corporation. ............................electronically filed
99.2 Press Release dated December 8, 1998......................................electronically filed
</TABLE>
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Exhibit 2.1
AGREEMENT FOR SALE OF SHARES
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Agreement made as of the 3rd day of December, 1998,
AMONG:
COMPUTER NETWORK TECHNOLOGY CORPORATION
a Minnesota corporation (the "Purchaser")
- AND EACH OF -
SCOTT G. OPITZ,
an individual residing in the Commonwealth of Pennsylvania
- AND -
ALEKSANDR A. ELKIN,
an individual residing in the Commonwealth of Massachusetts
(individually each a "Seller" and collectively, the "Sellers")
WHEREAS the Sellers are now and at the Time of Closing will be the
legal and beneficial owners of all of the issued and outstanding shares of
capital stock of IntelliFrame Corporation, a Pennsylvania corporation (the
"Corporation"); and
WHEREAS the Sellers are desirous of selling and the Purchaser is
desirous of purchasing all of the issued and outstanding shares of capital stock
of the Corporation;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
mutual covenants and agreements hereinafter contained, the parties hereto agree
as follows:
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ARTICLE 1
INTERPRETATION
1.1 Defined Terms
(a) Where used herein or in any amendments hereto, the following terms
shall have the following meanings respectively:
"Annual Financial Statements" means the unaudited financial statements
of the Corporation prepared internally by the Corporation, including
the balance sheet as at the end of the Corporation's fiscal year ended
June 30, 1998, and a statement of profit and loss for the fiscal year
then ended and any notes thereto, a copy of which is attached hereto as
a part of Schedule A;
"Business" means the business of the Corporation including the
development, design, maintenance and provision of consulting services
with respect to re-engineering software products.
"Closing Date" means the 3rd day of December, 1998 or such other date
as may be mutually agreed between the parties hereto;
"CPR" shall have the meaning given to such term in Section 12.1(b)
hereof;
"Code" shall have the meaning given to such term in Section 3.1(u)
hereof;
"Contingent Worker" shall have the meaning given to such term in
Section 3.1(u) hereof;
"Continuation Coverage" shall have the meaning given to such term in
Section 3.1(u) hereof;
"Contracts" means all agreements, whether oral or written, to which the
Corporation is a party which agreements include, but are not
necessarily limited to any and all: OEM agreements, employment
agreements, consulting agreements, loan agreements, leases, agreements
granting or pertaining to mortgages or security interests, guarantees,
agreements with customers or suppliers or distributors, agreements
containing noncompetition or confidentiality provisions, government
grant agreements, insurance policies, derivative contracts and
agreements not terminable by the Corporation on thirty (30) days notice
without permission or penalty;
"Corporation" means IntelliFrame Corporation, a Pennsylvania
corporation;
"Corporation Plans" shall have the meaning given to such term in
Section 3.1(u) hereof;
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"Deliverable Agreement" means that certain Software Development
Agreement dated July 29, 1998, as the same may have been amended from
time to time, between the Corporation and the Purchaser;
"Development Employees and Agents" shall have the meaning given to such
term in Section 3.1(v) hereof;
"Employment Agreement" shall have the meaning given to such term in
Section 4.1(f) hereof;
"ERISA" shall have the meaning given to such term in Section 3.1(u)
hereof;
"Financial Statements" means the Annual Financial Statements and the
Month Financial Statements, copies of which are each attached hereto as
a part of Schedule A;
"Intellectual Property" means all rights with respect to internet
domain names, patents, patent applications, patent licenses,
trademarks, trademark licenses, trade names, trademark applications,
brand names, labels, copyrights, copyright registrations, applications
and licenses, service marks, unpatented inventions, techniques,
discoveries, improvements, designs, patterns, logos, artwork, printing
plates, trade secrets, know-how, industrial designs, formulae,
processes, technical information, proprietary rights, customer lists,
databases and non-public information and data, whether patentable or
not, and the goodwill that may be associated with any trademarks,
trademark licenses, trade names, assumed names, trademark applications,
brand names and labels necessary or used or useful in the conduct or
operation of the Business and any rights under licenses related to the
foregoing, including, but not limited to, the names "IntelliFrame" and
"Mapmaker";
"Invention Assignments" shall have the meaning given to such term in
Section 4.1(e) hereof;
"Inventory" means all inventory, work in progress, raw materials,
returned goods inventory, evaluation systems inventory, Products and/or
Services being tested or evaluated by customers or prospective
customers or other third parties, warranty returns inventory, service
inventory, finished products, supplies, packaging and shipping
containers and materials of the Seller (on-site, off-site and
consigned) used in the Business as of the Closing Date as well as
rights to all billed but unshipped inventory;
"Leases" means those agreements to which the Corporation is a party set
forth and described on Schedule 3.1(p) hereto;
"Month Financial Statements" means the internally prepared financial
statements of the Corporation including the balance sheet as at
September 30, 1998 and a statement of profit and loss for the three (3)
month period then ended and any notes thereto, a copy of which is
attached hereto as a part of Schedule A;
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"Multiemployer Plan" shall have the meaning given to such term in
Section 3.1(u) hereof;
"Products and/or Services" means any and all products or services,
which are prepared, developed, produced or sold or otherwise
transferred or provided by the Corporation to any third party
including, but not limited, versions of any language and all features,
modifications, enhancements, derivative works, optional modules,
add-ons and extensions thereof whether currently being marketed or in
development (including beta test versions), and all obsolete and prior
versions, all related programming technology, in both source and object
code form, regardless of the state of development of any such
technology, any other computer program containing a substantial portion
of such source or object code, any tools and utilities and all
development environments, intellectual property used to develop,
upgrade or maintain the programs, and all documentation, drawings,
specifications and technical data and other related technology.
"Purchase Price" shall have the meaning given to such term in Article 2
hereof;
"Purchased Shares" shall have the meaning given to such term in Article
2 hereof;
"Purchaser" means Computer Network Technology Corporation, a Minnesota
corporation;
"Purchaser's Counsel" means Leonard, Street and Deinard, P.A.;
"Seller(s)" means Scott G. Opitz, a resident of Pennsylvania and
Aleksandr A. Elkin, a resident of Massachusetts;
"Sellers' Counsel" means Mintz, Levin, Cohn, Ferris, Glovsky and Popeo
P.C.;
"Time of Closing" means the time on the Closing Date when the
transactions contemplated hereby are consummated such that the
Purchased Shares are appropriately transferred to Purchaser and that
portion of the Purchase Price described in Section 2.2(a) has been paid
to Seller.
(b) All dollar amounts referred to in this agreement are in United
States Dollars.
(c) In this agreement, any reference to any event, change or effect
being "material" with respect to any entity means any material event,
change or effect related to the condition (financial or otherwise),
properties, prospects or business of such entity.
1.2 Schedules
The following Schedules are attached hereto and form part hereof:
Schedule A- Financial Statements;
Schedule 3.1(a) - Locations; Licenses and Permits
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Schedule 3.1(f) - Title;
Schedule 3.1(n) - Taxes;
Schedule 3.1(p) - Leases;
Schedule 3.1(r) - Insurance;
Schedule 3.1(s) - Contracts;
Schedule 3.1(u) - Employee Benefits;
Schedule 3.1(v) - Employees; Development Employees and Agents;
Schedule 3.1(y) - Dividends;
Schedule 3.1(z) - Liabilities to Employees;
Schedule 3.1(aa) - Legal Proceedings;
Schedule 3.1(bb) - Products Liability;
Schedule 3.1(dd) - Intellectual Property;
Schedule 3.1(ff) - Bank Accounts
Schedule 3.1(gg) - Facilities and Equipment;
Schedule 3.1(hh) - Corporate Policy; and
Schedule 3.1(jj) - Accounts Receivable.
ARTICLE 2
PURCHASE OF SHARES
2.1 Purchased Shares and Purchase Price. On the terms and subject to conditions
hereof, the Sellers covenant and agree to sell, assign and transfer to the
Purchaser and the Purchaser covenants and agrees to purchase from the Sellers
effective the Closing Date all of the issued and outstanding capital stock of
the Corporation, which consists of twenty (20) shares of Common Stock
("Purchased Shares") free and clear of any mortgages, liens, charges, security
interests, adverse claims, pledges, encumbrances and demands or other
restriction whatsoever.
2.2 Purchase Price. The purchase price for the Purchased Shares to be paid by
Purchaser (the "Purchase Price") shall be Two Million Dollars ($2,000,000.00).
Subject to Purchaser's rights of offset herein contained, the Purchase Price
shall be paid and satisfied in cash by wire transfer of certified funds to an
account in the United States of America or by delivery of a certified or
cashier's check as follows:
(a) One Million dollars ($1,000,000.00) payable to Sellers pro rata in
accordance with their present equity interests in the Corporation on
January 4, 1999; and
(b) One Million Dollars ($1,000,000.00) plus interest thereon accruing
from the date hereof at the rate for 90 day Treasury Bills of the
United States of America as published in the Wall Street Journal
payable to the Seller's pro rata in accordance with their present
equity interests in the Corporation on January 3, 2000.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Sellers' Representations and Warranties. The Sellers hereby, jointly and
severally, represent and warrant as follows in this Section 3.1 and further
acknowledge that the Purchaser is relying upon such representations and
warranties in connection with the purchase by the Purchaser of the Purchased
Shares.
(a) Organization. The Corporation has been duly incorporated and
organized and is validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania. The Corporation has the corporate
power to own or lease its property and to carry on its business as such
business is now being conducted. The Corporation is not required to be
duly qualified as a corporation to do business in any jurisdiction
other than the Commonwealth of Pennsylvania and the Commonwealth of
Massachusetts, except to the extent that the failure to be so qualified
would not have a material adverse effect on the Corporation. The
Corporation has all licenses and permits in each jurisdiction in which
the nature of the business conducted by it or the property owned or
leased by it makes such licensing or permitting necessary. None of the
aforementioned licenses or permits contains any burdensome, term,
provision, condition or limitation which has or may have an adverse
effect on the Corporation or the operation of the Business and none of
such licenses or permits will require the consent of or the making of
notice to a third party in order to remain effective following the
Closing. Attached hereto as Schedule 3.1(a) is a list detailing (i) all
locations where the Corporation has offices, carries on business or has
assets, and (ii) all licenses and permits held by the Corporation.
(b) No Violation. Except as disclosed on the Schedules hereto, the
entering into of this agreement and the consummation of the
transactions contemplated hereby will not result in the violation of
any of the terms or provisions of the articles of incorporation or
by-laws of the Corporation, the Contracts, the Leases or of any
indenture or other agreement, written or oral, to which the Corporation
or any Seller may be a party, or by which the any of their respective
assets or properties may be bound. Except as contemplated herein, the
entering into of this agreement and the transactions contemplated
hereby will not result in the violation of any law applicable to any
Seller, the Corporation or any of their respective assets or
properties.
(c) Binding Agreement. This agreement has been duly executed and
delivered by the Sellers and is a valid and binding obligation of each
of the Sellers enforceable against each of the Sellers in accordance
with its terms.
(d) Capitalization. With respect to the capitalization of the
Corporation:
(i) The authorized capital stock of the Corporation consists
of One Thousand (1,000) shares of Common Stock of which only
the Purchased Shares have been duly issued and are
outstanding, and such Purchased Shares have been issued as
fully paid and non-assessable shares, and not in violation of
any pre-emptive
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rights, and are held ten (10) shares by Aleksandr A. Elkin and
ten (10) shares by Scott G. Opitz;
(ii) All of the Purchased Shares are owned by the Sellers as
the legal and beneficial owners of record, with a good and
marketable title thereto, free and clear of all mortgages,
liens, charges, security interests, adverse claims, pledges,
encumbrances and demands or other restrictions whatsoever;
(iii) Other than this agreement, no person, firm or
corporation has any agreement or option or any right or
privilege, whether by law, pre-emptive or contractual, capable
of becoming an agreement or option for the purchase from any
Seller of any of the Purchased Shares; and
(iv) No person, firm or corporation has any agreement or
option or any right or privilege to subscribe for or otherwise
acquire any shares of the capital stock or any other
securities of the Corporation, whether by law, pre-emptive or
contractual right, or any arrangement capable of becoming an
agreement.
(e) Other Assets. No Seller owns or has owned (either legally or
beneficially), leases or has leased, or has or had any interest in or
control of any property or assets used by or relating to the
Corporation excepting only Purchased Shares.
(f) Title. Other than as disclosed on Schedule 3.1(f) hereto, the
Corporation owns its undertakings, assets and properties free and clear
of any and all liens, claims, security interests, mortgages, easements,
restrictions, charges and/or encumbrances whatsoever or howsoever
arising. Except as disclosed on Schedule 3.1(f) hereto, the Corporation
owns all of the assets and properties used or usable in the conduct of
the Business.
(g) Subsidiaries. The Corporation has no subsidiaries or interests in
any other entity or person and there are no agreements of any nature to
acquire any such subsidiary or interest in any other entity or person
or to acquire or lease any other business operations.
(h) Books and Records. The books and records of the Corporation fairly
and correctly set out and disclose in all material respects the
financial position of the Corporation as at the date this
representation is made. Complete and accurate copies of all the books
and records of the Corporation have been made available to the
Purchaser and will be delivered at Closing. All material financial
transactions of the Corporation have been accurately recorded in such
books and records. The corporate records and minute books of the
Corporation contain complete and accurate duly executed minutes of all
meetings of the directors and shareholders of the Corporation held
since the incorporation of the Corporation; provided, however, any
actions of the Corporation either which were approved at meetings for
which minutes are missing or which would normally require director
and/or shareholder approval have been properly ratified and confirmed
by appropriate actions by written consent of the directors and/or
shareholders of the Corporation as are necessary and appropriate and as
are contained in the minute
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books of the Corporation or will be delivered to Purchaser at the
Closing. The share certificate books, register of shareholders, and
register of transfers of the Corporation are complete and accurate. The
Sellers are the only individuals who have ever served as directors of
the Corporation.
(i) Financial Statements. Each of the Financial Statements (i) are
based upon the books and records of the Corporation, (ii) reflect
fairly and accurately the operations and financial condition of the
Corporation for the periods or as of the dates indicated, and were
prepared in accordance with generally accepted accounting principles,
uniformly applied on a basis consistent with that of prior years or
periods, (iii) contain and reflect all necessary adjustments and
reserves for a fair and accurate presentation of the results of
operations for the period covered by such Financial Statements.
Notwithstanding the foregoing, the Monthly Financial Statements do not
contain any reserve for taxes arising from the operation of the
Business. Such Monthly Financial Statements do, however, reflect levels
of cash and the Corporation presently has cash sufficient to pay for
all taxes of the Corporation arising from the operation of the Business
prior to the date hereof.
(j) Liabilities. There are no liabilities of the Corporation of any
kind whatsoever, whether or not accrued, whether or not determined or
determinable, and whether or not contingent in respect of which the
Corporation or the Purchaser may become liable on or after the
consummation of the transactions contemplated by this agreement other
than:
(i) liabilities disclosed on, reflected in or provided for in
the Month Financial Statements;
(ii) liabilities expressly disclosed to in this agreement or
in the Schedules attached hereto; or
(iii) liabilities arising in the ordinary course of business
which will not have a material adverse effect on the
Corporation, its Business, assets, financial condition or
prospects.
(k) Indebtedness. Except as disclosed in the Month Financial
Statements, the Corporation does not have outstanding any bonds,
debentures, mortgages, notes or other indebtedness and the Corporation
is not a party to or bound by any agreement to create or issue any
bonds, debentures, mortgages, notes or other indebtedness.
(l) Certain Third Party Obligations. The Corporation is not a party to
or bound by any agreement or guarantee, indemnification, assumption or
endorsement or any other like commitment of the obligations,
liabilities, contingent or otherwise, or indebtedness of any other
person, firm or corporation.
(m) Adverse Changes. From the date of the Annual Financial Statements
there has not been any material adverse change in the financial
conditions, prospects, assets or liabilities of the Corporation as the
same existed as of the date of the Annual Financial Statements, except
for changes resulting from operations and transactions in the ordinary
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course of business; provided that any such latter changes do not, and
no Seller has any reasonable basis to believe that any such latter
changes will, adversely affect the financial condition or prospects of
the Corporation. Since the dates of the Annual and Month Financial
Statements (i) the Business has been carried on in the ordinary and
normal course, (ii) there has been no transfer of the Corporation's
assets (other than sales of inventory in the ordinary course of
business), no increases or accelerations in payments of salary or
bonuses to any officers, directors or employees (and no approvals of
the same) no distributions of cash or assets of the Corporation to any
shareholders (and no approvals of the same), and (iii) there has been
no change in the business, operations, affairs or condition of the
Corporation, financial or otherwise, arising as a result of any
legislative or regulatory change, the termination or alteration of any
agreement, the revocation of any license or right to do business, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot,
storm, condemnation, act of God or otherwise; except changes occurring
in the ordinary course of business, which changes have not, and no
Seller has any reasonable basis to believe any such changes will,
adversely affect(ed) the organization, business, properties, prospects
and financial condition of the Corporation.
(n) Taxes. Except as disclosed on Schedule 3.1(n), the Corporation has
duly and timely filed all tax returns required to be filed by it and
has paid all taxes (including, without limitation, income, sales, goods
and services, property, import, export, payroll and capital taxes)
which are or were due and payable, and has paid all assessments and
reassessments, and all other amounts payable by the Corporation.
Installments have been made by the Corporation as required by law for
taxes payable for the current period for which tax returns are not yet
required to be filed. There are no agreements, waivers or other
arrangements providing for an extension of time or for audits by the
relevant authorities with respect to the filing of any tax return by,
or payment of any tax, governmental charge or deficiency with respect
to, the Corporation. There are no actions, suits, proceedings,
investigations or claims now threatened or pending against the
Corporation in respect of taxes, governmental charges or assessments,
or any matters under discussion with any governmental authority
relating to taxes, governmental charges or assessments asserted by any
such authority. The Corporation has withheld from each payment made to
any of its officers, directors, former directors, and employees the
amount of all taxes, including but not limited to income tax, and other
deductions required to be withheld therefrom and has paid the same to
the proper tax or other receiving authorities within the time required
under any applicable federal, state or local law or regulation.
(o) Consignment Arrangements. The Corporation is not a party to any
material conditional sales contract, hire-purchase agreement or other
title retention agreement or any consignment agreement, agency
agreement or other relationship whereby assets of the Corporation are
in the possession of a third party.
(p) Leases. The Corporation is not a party to or bound by any lease or
agreement in the nature of a lease in regard to real or personal
property, whether as lessor or lessee, except those Leases listed on
Schedule 3.1(p) hereto, and each of such Leases is in good standing and
in full force and effect without amendment thereto. All such Leases are
in
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writing, copies of which have been provided to Purchaser. The
Corporation is not, and to the knowledge of each Seller and the
Corporation no other party is, in breach of any of the covenants,
conditions or agreements contained in each such Lease and no Seller is
aware of any proposed or ongoing capital expenditures relating to such
leased property for which the Corporation may be liable to pay any part
of the costs of such repair.
(q) Use of Property. The uses to which the leased properties or
equipment and real property referred to in subsection 3.1(p) have been
and are being put have never breached and are not in breach of any
statute, by-law, ordinance, regulation, covenant or restriction.
(r) Insurance. Attached hereto as Schedule 3.1(r) is a true and
complete schedule setting out all insurance policies (specifying the
insurer, the amount of the coverage, the type of insurance, the policy
number and any pending claims thereunder) maintained by the Corporation
on its properties, assets, businesses or personnel at the date this
representation is made. The Corporation is not in default with respect
to any of the provisions contained in any such insurance policy and has
not failed to give any notice or present any claim under any such
insurance policy in due and timely fashion. There have been no
substantial changes in the insurance described in Schedule 3.1(r) since
December 31, 1997 and such insurance coverage will be continued in full
force and effect to and including the Closing Date. Annexed hereto as
part of Schedule 3.1(r) is a description of all personal insurance
policies held by the Corporation in respect of its employees including
named insureds, coverage amounts and beneficiaries.
(s) Agreements. The Corporation does not have any outstanding
Contracts, whether written or oral, of any nature or kind whatsoever
except (i) those Contracts set out and described in Schedule 3.1(s)
hereto; (ii) the Leases described in Schedule 3.1(p) hereto; (iii) the
insurance policies described in Schedule 3.1(r) hereto; and (iv) the
employment and benefit agreements described in Schedule 3.1(u) hereto.
Each of the aforementioned Schedules respectively lists any and all
consents or notices which must be obtained or made in order to avoid a
termination or breach of or default under any such Contracts because of
the transactions contemplated hereby.
(t) Defaults. The Corporation is not, and to the knowledge of each
Seller and the Corporation no other party is, in material default or
material breach of any Contracts to which it is a party including,
without limitation, computer software licenses and there exists to the
knowledge of each Seller no state of facts which after notice or lapse
of time or both would constitute such a default or breach, and all such
contracts, agreements, indentures or other instruments are now in good
standing and the Corporation is entitled to all benefits thereunder.
(u) Benefit Plans. Schedule 3.1(u) hereto sets forth all stock
purchase, stock option, deferred compensation, incentive compensation,
severance or termination pay plans, agreements and arrangements and all
"employee benefit plans", as defined in Section 3(3) of ERISA and all
other employee fringe benefit and employee compensation arrangements,
established, sponsored, maintained or offered by the Corporation or to
which the Corporation contributed or is obligated to contribute
thereunder for current or
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former employees of the Corporation or which are otherwise sponsored or
maintained by third parties in an "affiliated service group" or
"controlled group" in which the Corporation is a member as such terms
are defined or otherwise utilized in ERISA or the Code (the
"Corporation Plans"). Schedule 3.1(u) separately identifies each
Corporation Plan which is a "multiemployer plan", as defined in Section
3(37) of ERISA ("Multiemployer Plan"). True, correct and complete
copies of the following documents, with respect to each of the
Corporation Plans, have been made available or delivered to Purchaser
by the Sellers, (a) any plans and related trust documents, and
amendments thereto; (b) the last three filed Forms 5500; (c) the last
Internal Revenue Service determination letter, if applicable; and (d)
summary plan descriptions. The Corporation is not and has never been a
member of any "affiliated service group" or "controlled group" as such
terms are defined or otherwise utilized in ERISA or the Code. With
respect to the Corporation Plans and other arrangements of the
Corporation pertaining to its employees:
(i) the Corporation Plans intended to qualify under Section
401 of the Code and the trusts maintained pursuant thereto are
exempt form federal income taxation under section 501 of the
Code, and nothing has occurred with respect to the operation
of the Corporation Plans which could cause the loss of such
qualification or exemption or the imposition of any liability,
penalty or tax under ERISA or the Code which may result in a
material adverse effect on the Corporation or the Business;
(ii) the Corporation Plans have been maintained in accordance
with their terms and with all provisions of the Code and ERISA
(including rules and regulations thereunder) and other
applicable federal and state laws and regulations, except
where the failure to so maintain would not result in a
material adverse effect on the Corporation or the Business;
(iii) no plan or employment arrangement exists that could
result in the payment by the Corporation to any current,
former, or future director or employee of the Corporation of
any money or other property rights or accelerate or provide
any other rights or benefits to any such employee or director
as a result of transactions contemplated by this Agreement,
whether or not such payment, acceleration, or provision would
constitute a "parachute payment" (within the meaning of
Section 280G of the Code) or whether or not some other
subsequent action or event would be required to cause such
payment, acceleration or provision to be triggered;
(iv) the Corporation does not have any employee who cannot be
dismissed on not more than the notice required by common law
or statute without further liability;
(v) no Corporation Plan continues any benefit to any employee
or former employee of the Corporation other than continuation
of health coverage to the extent required by Section 4980B of
the Code and Part 6 of Subtitle B of Part I of
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ERISA (and comparable provisions of state law) or continuation
of life insurance benefits to the extent required by state law
("Continuation Coverage"), and the Corporation has complied
with all requirements relating to Continuation Coverage is not
subject to any liability, penalty or tax in connection
therewith;
(vi) no Corporation Plan is a defined benefit pension plan and
neither the Corporation nor any member of any "affiliated
service group" or "controlled group" as such terms are defined
or otherwise utilized in ERISA or the Code has ever maintained
or contributed to any defined benefit plan or Multiemployer
Plan;
(vii) no leased employee, temporary employee, contingent
employee, or independent contractor ("Contingent Worker") has
a claim for benefits under any Corporation Plan, other than a
claim under a Corporation Plan with respect to which the
Corporation has recognized the Contingent Worker as a
participant in said Corporation Plan; and
(viii) there are no actions, suits or claims pending (other
than routine claims for benefits) or threatened against any
Corporation Plan or against the Corporation or any individual
or other entity that may have a claim for indemnification
against the Corporation with respect to any Corporation Plan
or its assets.
As used herein "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time and any and all
regulations or rulings promulgated thereunder or arising therefrom and
"Code" means the Internal Revenue Code of 1986, as amended from time to
time and any and all regulations or rulings promulgated thereunder or
arising therefrom.
(v) Employees. Schedule 3.1(v) sets forth a true and complete list of
the names of each employee of the Corporation, together with such
person's position or function, annual base salary or wages and any
incentive, bonus or other benefit arrangements with respect to such
person. Schedule 3.1(v) also sets forth a true and complete list of any
and all past or present employees and independent contractors who have
ever provided services to the Corporation by assisting in the creation,
development, marketing or maintenance of any items of Intellectual
Property or Products and/or Services (the "Development Employees and
Agents"); such list specifying which individuals were employees vs.
independent contractors as well as the nature of the services provided
by each such individual. The Corporation is not a party to, and there
does not otherwise exist, any union, collective bargaining or similar
agreement with respect to employees of the Corporation There has never
been and there is not any actual or threatened, strike, work stoppage
or work slowdown that has had or may have an adverse effect on the
business, operations, condition (financial or otherwise) or prospects
of the Corporation. No unfair labor practice complaint or sex, age,
race or other discrimination claim has been brought during the last
five (5) years against the Corporation before any governmental or
regulatory authority. No officer or employee of the Corporation is
subject to any agreement with any other person or entity which requires
such officer or employee to assign any interest in inventions or other
intellectual property or keep
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confidential any trade secrets, proprietary data, customer lists or
other business information or which restricts such officer or employee
from engaging in competitive activities or solicitation of customers.
All officers, directors and employees of the Corporation are either
citizens of the United States of America or have work visas permitting
them to work in the United States of America under applicable
immigration law into the foreseeable future; it being more specifically
represented that (i) Aleksandr A. Elkin has a permanent work visa
allowing him to permanently reside and work in the United States of
America, and (ii) each of Aleksey Baykov and Vadim Gaponov have
temporary work visas permitting them to reside and work in the United
States of America until October 31, 2000 and July 12, 2001,
respectively.
(w) Payments. No payments have been made or authorized since December
31, 1997 by the Corporation to its current or former officers,
directors, shareholders or employees or to any person or company not
dealing at arm's length with any of the foregoing, except in the
ordinary course of business and at the regular rates payable to them of
salary, pension, bonuses, rents or other remuneration of any nature.
(x) Related Party Indebtedness. The Corporation has no loans or
indebtedness outstanding which have been made to or from directors,
former directors, officers, shareholders and/or employees of the
Corporation or to any person or corporation not dealing at arm's length
with any of the foregoing.
(y) Dividends. Except as disclosed on Schedule 3.1(y), the Corporation
has not subsequent to December 31, 1997, directly or indirectly,
declared or paid any dividends or declared or made any other
distribution on any of its shares of any class. The Corporation has
not, directly or indirectly, redeemed, purchased or otherwise acquired
any of its shares of any class of its capital stock or agreed to do so.
(z) Liabilities to Employees. All vacation pay, bonuses, commissions
and other emoluments owed employees or agents of the Corporation are
reflected and have been accrued in the books of account and Financial
Statements of the Corporation or are disclosed on Schedule 3.1(z).
(aa) Legal Matters. Except as disclosed in Schedule 3.1(aa), there are
no actions, suits or proceedings (whether or not purportedly on behalf
of the Corporation), pending or threatened against or affecting the
Corporation or any Seller, at law or in equity, or before or by any
federal, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign. No Seller is aware of any existing ground on which any such
action, suit or proceeding might be threatened or commenced. At all
times prior to the date hereof each of the Corporation and its Business
has existed and been operated in full compliance with any and all
applicable rules, laws and regulations, including, but not limited to
the Occupational Health and Safety Act or similar state or local laws,
rules or regulations governing workplace safety, any laws, rules or
regulations pertaining to the protection of the environment or any
laws, rules or regulations regarding employment and employment
practices, terms and conditions of employment and wages and hours with
respect to employees.
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(bb) Products Liability. Schedule 3.1(bb) lists all Products or
Services provided or sold by the Corporation. Schedule 3.1(bb) hereto
lists all product liability claims exceeding $5,000 in any one instance
suffered or incurred by the Corporation in the past five (5) years from
the date hereof. With the exception of warranties implied by applicable
law, Schedule 3.1(bb) further sets forth (or lists any written
contracts containing) any and all warranties or guarantees extended by
the Corporation in connection with the provision or sale by it of any
Products or Services. The amount of any liability incurred by the
Corporation with respect to the provision or sale by it of any Products
or Services, either individually or in the aggregate with other similar
liabilities, does not exceed amounts specifically reserved for such
liabilities on the Month Financial Statements. The Products and
Services meet all specifications and standards set forth in the
Corporation's written descriptions of the Products or Services and its
representations and warranties made to any of its customers or
distributors (express or implied, written or oral). Complete and
accurate copies or written summaries of such descriptions or
representations and warranties have been delivered to Purchaser.
(cc) Exports. The Corporation (whether through the Business or
otherwise) does not and has not ever exported any Products or Services
from the United States to foreign countries.
(dd) Intellectual Property. Schedule 3.1(dd) contains a correct and
complete list of all licenses, contracts, agreements or understandings
pursuant to which the Corporation has authorized any individual or
entity to use any of the Intellectual Property pursuant to which the
Corporation has granted a license with respect to the Intellectual
Property and Schedule 3.1(dd) contains a complete list of all licenses,
contracts, agreements or understandings pursuant to which the
Corporation has licensed, acquired ownership or other rights which are
included in the Intellectual Property. Schedule 3.1(dd) sets forth a
complete list of domain names, patents, patent applications, trade
marks, service marks, trade mark applications and copyright
registrations. The Seller owns, possesses, or licenses and as of the
Closing Date will own, possess, or license, all right, title and
interest in and to the items of Intellectual Property that are required
to conduct its businesses as now conducted without conflict with the
rights of others. Except as set forth in Schedule 3.1(dd): (i) the
Corporation has the right to use and market and to the knowledge of the
Corporation, the sole and exclusive right to use and market, the
Intellectual Property (including applications for any of the foregoing)
used in connection with the Business, and none of the past or present
employees, officers, directors or stockholders of the Corporation, or
anyone else, has any rights with respect thereto; (ii) the consummation
of the transactions contemplated hereby will not alter or impair any
such rights; (iii) the Corporation has not received any notice or claim
of infringement, misuse or misappropriation or any claim challenging or
questioning the validity or effectiveness of any of the claims of
Intellectual Property, and there is no valid basis for any such claim;
and (iv) the Corporation is not liable, nor has it made any contract or
arrangement whereby it may become liable, to any individual or entity
for any royalty or other compensation for use of any of the items of
Intellectual Property. Schedule 3.1(dd) includes the text of the
Corporation's standard licenses for the Intellectual Property and no
material variations have been made to such form. The Corporation has
not
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granted any person, firm or entity any exclusive right to distribute
its products in any territory or the exclusive right to use any of the
products.
(ee) Inventory. The Inventory is, except to the extent of reserves
therefore in the Financial Statements, salable or usable in the normal
course of the Business.
(ff) Bank Accounts. Attached hereto as Schedule 3.1(ff) is a true and
complete list showing the name of each bank, trust company or similar
institution in which the Corporation has accounts or safety deposit
boxes and the names of all persons authorized to draw thereon or to
have access thereto.
(gg) Facilities and Equipment. All facilities, equipment and furniture
owned or used by the Corporation in connection with the Business are in
good operating condition and are in a state of good repair and
maintenance, reasonable wear and tear excepted. A complete and accurate
listing of such facilities, equipment and furniture is set forth on
Schedule 3.1(gg) hereto.
(hh) Corporate Policy. Schedule 3.1(hh) hereto sets out a description
of all corporate policy manuals or similar materials of the
Corporation; copies of which have all been provided to the Purchaser.
(ii) Year 2000 Compliance. None of the Products or Services produced,
developed, prepared, sold, licensed, rendered, or otherwise provided by
the Corporation in the conduct of the business will malfunction, will
cease to function, will generate incorrect data or will produce
incorrect results when processing, providing or receiving (A)
date-related data in connection with any valid date in the twentieth
and twenty-first centuries or (B) date-related data in connection with
any valid date in the twentieth and twenty-first centuries.
(jj) Accounts Receivable, Installment Receivables, and Accounts
Payable. All accounts receivable of the Corporation, whether or not
reflected on the Financial Statements, represent sales actually made or
leases entered into in the ordinary course of business or valid claims
as to which full performance has been rendered and such accounts
receivable are fully collectible. Except to the extent reserved against
on the Financial Statements and as set forth Schedule 3.1(jj), no
counterclaims or offsetting claims with respect to any such accounts
receivable are pending or, to the knowledge of the Sellers, threatened.
Listed on Schedule 3.1(jj) is a true and correct listing of all
accounts receivable of the Corporation (including the consolidated
aging thereon) and no material change has occurred since the date of
preparation, except in the ordinary course of business. The accounts
payable of the Seller reflected on the Financial Statements arose, or
will arise, from bona fide transactions in the ordinary course of
business, and all such accounts payable either have been paid, are not
yet due and payable under the Corporation's payment policies and
procedures or are being contested by the Corporation in good faith.
Listed on Schedule 3.1(jj) is a is true and correct listing of all
accounts payable of the Corporation and no material change has occurred
since that date, except in the ordinary course of business.
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(kk) Continuation of Business. Except as set forth on Schedule 3.1(kk),
assets owned by the Corporation and those leased to the Corporation as
described in the Schedules hereto are sufficient for the continued
operation of the Corporation's business by Purchaser (without further
capital expenditure) following the Closing in the same manner as the
Corporation has operated such business in the past. Neither the Sellers
nor the Corporation have any knowledge that any customer, supplier or
distributor of the Corporation intends to cease doing business with the
Corporation either because of the transactions contemplated hereby or
for any other reason. There are no outstanding disputes with any
customer, supplier or distributor of the Corporation. All of the
Corporation's products perform in accordance with the written
descriptions of such products provided to customers and distributors.
(ll) Status of Contracted Deliverable. The Sellers know of no
circumstances which would delay the Corporation in properly performing
and completing all of its duties and obligations under the Deliverable
Agreement in a timely fashion if such Deliverable Agreement were not
being terminated in connection with the transactions contemplated
hereby.
(mm) Complete Disclosure. All information relating to the Corporation
or the Business of the Corporation which is known, or which on
reasonable inquiry ought to be known, to the Corporation or any Seller
and which would materially affect a purchaser for value of, or
subscriber for shares in the Corporation has been disclosed to the
Purchaser. Neither Seller nor the Corporation has any information or
knowledge of any facts relating to the Business or to the Purchased
Shares, which if known to the Purchaser, might be reasonably expected
to deter the Purchaser from completing the transactions contemplated
herein.
3.2 Purchaser's Representations and Warranties. The Purchaser hereby represents
and warrants as follows in this Section 3.2 and acknowledges that the Sellers
are relying upon such representations and warranties in connection with the sale
by the Sellers of the Purchased Shares.
(a) Organization. The Purchaser has been duly incorporated and
organized and is validly existing and in good standing under the laws
of the State of Minnesota. The Purchaser has the corporate power to own
or lease its property and to carry on its business as now being
conducted by it. The Purchaser is duly qualified as a corporation to do
business and is in good standing in each jurisdiction in which the
nature of its business conducted by it or the property owned or leased
by it makes such qualification necessary.
(b) Binding Agreement. This agreement has been duly executed and
delivered by the Purchaser and is a valid and binding obligation of the
Purchaser enforceable in accordance with its terms.
(c) No Violation. The performance by Purchaser of its obligations under
this agreement will not result in a violation of any law or regulation
applicable to the Purchaser.
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(d) Authority. The Purchaser has all requisite corporate power and
authority to acquire the Purchased Shares and to execute and deliver
this Agreement.
ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 Sellers' Covenants. The Sellers, jointly and severally, hereby covenant and
agree with the Purchaser that, unless otherwise requested in writing by the
Purchaser or the Purchaser's Counsel, at or up to the Time of Closing they will
do or will cause to be done by the Corporation the following things:
(a) Due Diligence. Permit the Purchaser, prior to the Closing Date,
through its representatives, to make such investigation of the
properties and assets of the Corporation and of its financial and legal
condition as the Purchaser deems necessary or advisable to familiarize
itself with such properties, assets and other matters. Such
investigation shall not in any way affect or mitigate each Seller's
covenants, representations and warranties hereunder or the Purchaser's
right to rely thereon, which shall all continue in full force and
effect as provided in Article 6. The Purchaser and its representatives
will be permitted to have, after the date of execution hereof, full
access to the Business premises and the Corporation's employees,
customers and suppliers and the Sellers agree that they shall ensure
that the Corporation shall produce the following documents of the
Corporation for inspection by the Purchaser and/or its representatives:
all leases, licenses, contracts, title documents, insurance
policies, pension plans, guarantees, lists of salaries,
management contracts, documents relating to pending law suits,
if any, deeds and title papers, all minute books, share
certificate books, share registers and other corporate
documents, including the constituting documents of the
Corporation, and all books, records, accounts, financial
statements, tax returns, tax credit results and all other data
which in the opinion of the Purchaser or its representatives
are required to make an examination of the Corporation and the
Business.
(b) Operation of Business. Continue to operate the Business in the
usual and ordinary course; such duty to include, but not necessarily be
limited to, specifically taking and/or causing the Corporation to take
the following actions:
(i) continue to maintain in full force and effect all policies
of insurance now in effect or renewals thereof and to give all
notices and present all claims under all policies of insurance
in due and timely fashion.
(ii) cause the Corporation to duly and timely file all tax
returns required to be filed by it and (subject to any defense
asserted in good faith that the same are not due and owing by
the Corporation which may be made by the Sellers at their sole
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cost and expense) to promptly pay all taxes, assessments and
governmental charges which are due and owing to any
governmental authority; cause the Corporation not to enter
into any agreement, waiver or other arrangement providing for
an extension of time with respect to the filing of any tax
return or the payment or assessment of any tax, governmental
charge or deficiency;
(iii) make no changes affecting the banking and safety deposit
arrangements referred to in Article 3 and open no new bank
accounts or safe deposit boxes or grant any new powers of
attorney except with the prior written consent of the
Purchaser;
(iv) use best efforts to ensure that any and all agreements or
arrangements of the Corporation with its suppliers, customers
and distributors and others having business relations with it
shall remain in full force and effect up to and following the
Time of Closing;
(v) ensure that the Corporation performs its obligations under
its contracts and agreements and not engage in any new line of
business or enter into any agreement, transaction or activity
or make any commitment except those in the ordinary course
which are not otherwise prohibited by the terms and conditions
of this agreement or which would cause any of the
representations and warranties herein to be false;
(vi) make no changes to nor amend the articles of
incorporation or bylaws of the Corporation;
(vii) not enter into, modify or extend in any manner the terms
of any Corporation Plan or any contract with an employee or
either Seller nor grant any increase in the compensation of
officers, directors or employees, whether or not hereafter
payable, including any such increase pursuant to any option,
bonus, stock purchase, pension, profit-sharing, deferred
compensation, retirement or other plan, arrangement, contract
or commitment;
(viii) not terminate the employment of any employee;
(ix) use best efforts to continue to collect accounts
receivable of the Corporation and pay the accounts payable of
the Corporation in the ordinary course of business;
(x) not (a) create, incur or assume any debt, (b) assume,
guarantee, endorse or otherwise become liable or responsible
for the obligations of any other person or entity, (c) make a
loan to any other person or entity, (d) make any capital
contribution to, or investments in, any other person or
entity, or (e) make any capital expenditure without the prior
written consent of the Purchaser;
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(xi) not change in any manner the authorized capital stock of
the Corporation, and, in particular, ensure that no further
securities (or rights to acquire the same) shall be created or
issued or granted;
(xii) not declare or set aside for payment any dividend or
other distribution in respect of its capital stock or any
other securities and not allow the Corporation or any Seller
to redeem, purchase or otherwise acquire any share of the
capital stock or any other securities of any other Seller or
the Corporation or any rights or obligations convertible or
exchangeable for any shares of the capital stock or any other
securities of the Corporation or obligations convertible into
such, or any options, warrants or other rights to purchase or
subscribe for any of the foregoing;
(xiii) not sell, transfer or assign any assets or properties
of the Corporation other than sales of inventory made in the
ordinary course of business and to maintain the Intellectual
Property in tact; and
(xiv) use best efforts to (a) preserve and maintain the
goodwill of the Corporation, (b) preserve intact the corporate
existence and business organization of the Corporation, and
(c) keep the employees of the Corporation available to the
Purchaser following the Closing Date.
(c) take all necessary steps and proceedings as approved by the
Purchaser's Counsel to permit all of the Purchased Shares to be duly
and regularly transferred to the Purchaser.
(d) cause all of the directors and officers of the Corporation to
resign or be removed in favor of nominees of the Purchaser, such
resignations or removals to be effective as at the Time of Closing
(e) cause all Development Employees and Agents of the Corporation to
execute and deliver invention assignments in a form acceptable to
Purchaser in its sole discretion (the "Invention Assignments");
(f) each of the Sellers shall enter into and execute an Employment
Agreement with the Corporation in a form satisfactory to Purchaser (the
"Employment Agreements"), such Employment Agreements to contain
noncompetition and confidentiality provisions without which the Sellers
acknowledge Purchaser would not enter into this agreement or the
transactions contemplated hereby;
(g) [Intentionally Omitted]
(h) execute and deliver an appropriate termination of any shareholders
agreement pertaining to the Corporation in a form reasonably acceptable
to Purchaser.
(i) use best efforts to obtain those consents and make those notices to
third parties which are required in connection with the transactions
contemplated by this agreement; and
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(j) use best efforts to satisfy the conditions to the Purchasers
obligations to close the transactions contemplated by this agreement as
set forth in Article 6 hereof.
4.2 Purchaser's Right of Offset. Any amount for which any Seller is liable
hereunder or pursuant hereto, whether for an indemnification claim or otherwise
(including any costs related thereto for which any Seller is responsible), may
at Purchaser's option be setoff against any payments due from Purchaser or its
affiliates to any Seller pursuant to any agreement, instrument or document,
including but not limited to this agreement. Neither the exercise of nor the
failure to exercise such setoff right shall constitute an election of remedies
nor limit Purchaser or its affiliates in any manner in the enforcement of any
other remedies available to any of them.
4.3 Certain Matters With Respect to Employees. Subject to the terms and
conditions of the Employment Agreements, following the consummation of the
transactions contemplated hereby the Purchaser hereby agrees that all employees
of the Corporation which it retains shall maintain their initial hire date with
the Corporation for the purposes of determining their eligibility of any
benefits programs which the Purchaser may implement for the Corporation. The
Purchaser hereby acknowledges that following the Closing it presently intends to
retain within the Corporation all present employees of the Corporation. Subject
to the provisions of the Employment Agreements, the Purchaser (and the
Corporation) shall be under no obligation, however, to maintain the employment
of any employee of the Corporation following the Closing.
4.4 Termination of Deliverable Agreement. In connection with the Closing, the
Deliverable Agreement shall be terminated so that it is of no further force or
effect.
ARTICLE 5
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
5.1 Survival. The representations and warranties of each of the parties
contained in this agreement and contained in any document or certificate given
pursuant hereto as well as the right of the other party to rely thereon shall
survive until July 1, 2000; provided, however, (i) the representations and
warranties of Sellers contained in Sections 3.1(a), (c), (d-g), (n), (aa), (dd)
and, solely with respect to the provision of a "Star Framework" Product at
Mercedes, (ii), and the right of Purchaser to reply thereon shall survive the
Time of Closing until the expiration of any applicable statutes of limitation
relating to the subject matter of such representations and warranties, and (ii)
the right of a party to obtain indemnification or other relief permitted
hereunder by making a claim with respect to any representation or warranty shall
be extended until such claim has been finally resolved and, if applicable, paid
in full so long as the claim has been appropriately commenced by the provision
of notice to the other party prior to the expiration of the effectiveness of the
applicable representation and warranty.
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ARTICLE 6
CONDITIONS OF CLOSING
6.1 Purchaser's Conditions. The obligation of the Purchaser to purchase the
Purchased Shares is subject to the following terms and conditions for the
exclusive benefit of the Purchaser to be fulfilled and/or performed at or prior
to the Time of Closing:
(a) the covenants, representations and warranties of the Sellers
contained in this agreement or in any Schedule hereto or certificate or
other document delivered to the Purchaser pursuant hereto shall be true
and correct as of and shall have been remade by the Sellers at the Time
of Closing with the same force and effect as when they were made upon
the full execution of this agreement and regardless of the date as of
which the information in this agreement or any such Schedule or
certificate or document is given. The Purchaser shall have received at
the Time of Closing a certificate of each Seller dated the Closing
Date, in form satisfactory to Purchaser's Counsel, to the effect that
such covenants, representations and warranties referred to above are
remade as of the Closing Date with the same force and effect as when
they were made upon the full execution of this agreement and regardless
of the date as of which the information in this agreement or in any
Schedule hereto or certificate or other document delivered to Purchaser
pursuant hereto was given; provided that the acceptance of such
certificate and the closing of the transactions contemplated herein
provided for shall not be a waiver of the covenants, representations
and warranties contained herein or in any Schedule hereto or in any
certificate or document given pursuant to this agreement or in the
certificate under this subsection (a), which covenants, representations
and warranties shall continue in full force and effect as provided in
Article 5;
(b) the Sellers shall have complied with all covenants and agreements
herein agreed to be performed or caused to be performed by it and,
where applicable, shall have supplied the Purchaser with satisfactory
evidence of such compliance;
(c) [Intentionally Omitted];
(d) at the Closing Date, there shall have been no material adverse
change in the affairs, assets, liabilities, financial condition,
prospects or business (financial or otherwise) of the Corporation since
the date of the Month Financial Statements other than with respect to
corporate taxes payable as contemplated herein;
(e) no substantial damage by fire or other hazard to the physical
assets of the Corporation shall have occurred prior to the Time of
Closing (whether or not covered by insurance);
(f) no legislation (whether by statute, by-law, regulation or
otherwise) shall have been enacted or introduced which, in the opinion
of the Purchaser, adversely affects or may adversely affect the
operations and Business of the Corporation;
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(g) [Intentionally Omitted];
(h) the Sellers shall have provided the Purchaser with evidence
satisfactory to the Purchaser of the obtaining of consents from and of
the making of notice to any third parties as may be required in
connection with the transactions contemplated hereby;
(i) at or prior to the Time of Closing the Purchaser shall have
received assurances satisfactory to Purchaser in its sole discretion
that all liens and encumbrances on the assets and properties of the
Corporation, other than items designated as a "permitted encumbrances"
on Schedule 3.1(f) hereto shall have been released;
(j) at the Time of Closing on the Closing Date, upon fulfillment of all
of the other conditions set out in this Article 6 which have not been
waived in writing by the applicable party, the Sellers shall deliver to
the Purchaser:
(i) certificates respecting all the Purchased Shares duly
endorsed for transfer to the Purchaser and will cause
transfers of such shares to be duly and regularly recorded in
the name of the Purchaser on the books and records of the
Corporation;
(ii) good standing certificates and tax goods standing
certificates for the Corporation from the Commonwealth of
Pennsylvania as well as evidence reasonably satisfactory to
Purchaser that the Corporation has submitted or is prepared to
submit the materials necessary to become qualified to do
business in the Commonwealth of Massachusetts;
(iii) certified copies of the articles of incorporation and
by-laws of the Corporation;
(iv) an opinion of Sellers' Counsel reasonably satisfactory to
Purchaser's counsel;
(v) copies of all Leases and Contracts not previously
delivered to Purchaser;
(vi) resignations and releases of all directors and officers
of the Corporation in forms acceptable to Purchaser;
(vii) the corporate seals of the Corporation and all corporate
records and books of account of the Corporation, including
without limiting the generality of the foregoing, the minute
books, share register books, share certificate books and
annual reports; and
(viii) Invention Assignments executed by each of the
Development Employees and Agents of the Corporation;
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(ix) The Employment Agreements executed by each of the Sellers
and Purchaser's standard "work for hire" and confidentiality
agreements executed by each of Aleksey Baykov and Vadim
Gaponov;
(x) an appropriate termination of any shareholders agreement
of the Corporation in a form reasonably acceptable to
Purchaser;
6.2 Failure of Conditions. In case any of the foregoing conditions shall not be
fulfilled and/or performed at or before the Closing Date, the Purchaser may
rescind this agreement by notice to the Sellers in such event the Purchaser
shall be released from all obligations hereunder, provided that any of the said
conditions may be waived in whole or in part by the Purchaser without prejudice
to its rights of rescission in the event of the non-fulfillment of any other
condition or conditions, any such waiver to be binding on the Purchaser only if
the same is in writing.
6.3 Sellers' Conditions. The sale and purchase of the Purchased Shares is
subject to the following terms and conditions for the exclusive benefit of the
Sellers to be fulfilled and/or performed at or prior to the Time of Closing:
(a) the covenants, representations and warranties of the Purchaser
contained in this agreement or in any Schedule hereto or certificate or
other document delivered to the Sellers pursuant hereto shall be true
and correct on and as of the Closing Date with the same force and
effect as though such covenants, representations and warranties had
been made on and as of such date, regardless of the date as of which
the information in this agreement or any such Schedule or certificate
or document is given, and the Sellers shall have received at the Time
of Closing on the Closing Date a certificate of an officer of the
Purchaser dated the Closing Date, in form satisfactory to Sellers'
Counsel, to the effect that such covenants, representations and
warranties referred to above are true and correct on and as of the
Closing Date with the same force and effect as though made on and as of
such date; provided that the acceptance of such certificate and the
closing of the transaction herein provided for shall not be a waiver of
the covenants, representations and warranties contained herein or in
any Schedule hereto or in any certificate or document given pursuant to
this agreement or in the certificate under this subsection (b), which
covenants, representations and warranties shall continue in full force
and effect as provided in Article 5; and
(b) the Purchaser shall have complied with all covenants and agreements
herein agreed to be performed or caused to be performed by it and,
where applicable, shall have supplied the Sellers with reasonably
satisfactory evidence of such compliance.
6.4 Failure of Conditions. In case any of the foregoing conditions shall not be
fulfilled and/or performed at or before the Closing Date, the Sellers may
rescind this agreement by notice to the Purchaser and in such event the Sellers
shall be released from all obligations hereunder; provided that any of the said
conditions may be waived in whole or in part by the Sellers without prejudice to
its rights of rescission in the event of the non-fulfillment of any other
condition or conditions, any such waiver to be binding on the Sellers only if
the same is in writing.
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ARTICLE 7
CLOSING
7.1 Closing. The closing shall take place at 10:00 a.m. Central Standard Time
(or such other time agreed to by the parties) on December 3, 1998 at the offices
of Leonard, Street and Deinard, P.A., 150 South Fifth Street, Suite 2300,
Minneapolis, Minnesota 55402.
ARTICLE 8
BROKERS, FINDERS AND INVESTMENT BANKERS
8.1 Brokers, Finders and Investment Bankers. The Sellers hereby, jointly and
severally, represent and warrant that no Seller nor the Corporation has employed
or retained any broker, finder or investment banker or other intermediary or
incurred any liability for any investment banking fees, financial advisory fees,
brokerage fees, finders' fees or other similar fees in connection with the
transactions contemplated herein.
ARTICLE 9
NOTICES
9.1 Notices. All notices, requests and demands and other communications
hereunder must be in writing and shall be deemed to have been duly given when
(i) personally delivered, (ii) when forwarded by Federal Express, Airborne or
another private carrier which maintains records showing delivery information,
(iii) when sent via facsimile transmission but only if a written or facsimile
acknowledge of receipt is received by the sending party, or (iv) when placed in
the United States mail and forwarded by Registered or Certified mail, return
receipt requested, postage prepaid, addressed to the party to whom such notice
is being given at the following addresses:
IF TO SELLERS: Scott G. Opitz
411 Mews Drive
Sellersville, PA 18960
Aleksandr A. Elkin
8 Ethan Allen Drive
Acton, Massachusetts 01720
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with a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C.
One Financial Center
Boston, MA 02111
Attn: Richard R. Kelly, Esq.
IF TO PURCHASER: Computer Network Technology Corporation
605 North Highway 169, Suite 800
Minneapolis, MN 55441
Attn: Gregory T. Barnum
with a copy to: Leonard, Street and Deinard, P.A.
150 South Fifth Street
Suite 2300
Minneapolis, Minnesota 55402
Attn: Morris M. Sherman, Esq.
ARTICLE 10
INDEMNIFICATION BY SELLERS
10.1 Agreement by the Sellers. The Sellers, jointly and severally, agree that
they will indemnify and hold Purchaser and its affiliates harmless in respect of
the aggregate of all indemnifiable damages of the Purchaser and such affiliates.
For this purpose, "indemnifiable damages" of the Purchaser and its affiliates
means the aggregate of all expenses, losses, costs, deficiencies, liabilities
and damages (including related counsel fees and expenses) incurred or suffered
by the Purchaser and its affiliates (i) resulting from any inaccurate
representation or warranty made by any Seller in or pursuant to this agreement,
(ii) resulting from any default in the performance of any of the covenants or
agreements made by a Seller in this agreement, or (iii) liabilities not fully
disclosed to Purchaser on the Schedules hereto arising out of the existence or
operation of the Business prior to the Time of Closing, (including without
limitation undisclosed liabilities arising out of the Corporation's employment
of its employees or the termination of such employment prior to the Time of
Closing, undisclosed liabilities with respect to Products or Services conducted,
prepared, delivered or sold prior to the Closing regardless of whether such
liabilities arise pursuant to a warranty extended to a customer or otherwise,
and undisclosed liabilities for taxes of the Corporation accruing for periods or
pertaining to income earned prior to the Time of Closing). Without limiting the
generality of the foregoing, with respect to the measurement of "indemnifiable
damages", the Purchaser and its affiliates shall have the right to be put in the
same financial position as they would have been in had each of the
representations and warranties of the Sellers been true and correct and had each
of the covenants of the Sellers been performed in full; provided, however, that
Purchaser and its affiliates shall not be entitled to recover any consequential
or other indirect damages they suffer.
With respect to any claim for indemnification made by Purchaser or its
affiliates hereunder, the Purchaser or its affiliates may thereupon seek to
recover by any legal means either directly from the Sellers or pursuant to
offsets under Section 4.2. Nothing in the preceding
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sentence shall prevent the Purchaser or its affiliates from obtaining equitable
relief in an appropriate case. The Purchaser agrees to use its best efforts to
give prompt written notice to the Sellers of each claim for indemnifiable
damages which it believes it has suffered; provided, however, that no delay in
the giving of such notice shall affect the rights of the Purchaser to recover
indemnifiable damages hereunder.
10.2 Limitation on Recovery. Notwithstanding any other provision of this
Agreement, the Sellers shall not be liable to Purchaser or its affiliates for
any breach of the representations and warranties of Sellers contained herein
unless and until the indemnifiable damages of Purchaser and its affiliates total
Twenty Thousand Dollars ($20,000.00) in the aggregate, at which time Sellers
shall be liable in full for all such indemnifiable damages and all further
indemnifiable damages beyond such amount.
ARTICLE 11
MISCELLANEOUS
11.1 Merger Clause. This Agreement contains the final, complete and exclusive
statement of the agreement between the parties with respect to the transactions
contemplated herein and all prior or contemporaneous written or oral agreements
with respect to the subject matter hereof are merged herein.
11.2 Amendments. No change, amendment, qualification or cancellation hereof
shall be effective unless in writing and executed by each of the parties hereto
individually or by its duly authorized officers, as the case may be.
11.3 Benefits and Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns, as the case may be.
11.4 Captions. The captions are for convenience of reference only and shall not
be construed as a part of this Agreement.
11.5 Governing Law. This Agreement shall be construed, interpreted, enforced and
governed by and under the laws of the State of Minnesota without regard for
choice of law rules.
11.6 Schedules. All the Schedules to this Agreement are incorporated herein by
reference and shall be deemed to be a part of this Agreement for all purposes.
11.7 Severability. The invalidity or unenforceability of any one or more
phrases, sentences, clauses or provisions of this Agreement shall not affect the
validity or enforceability of the remaining portions of this Agreement or any
part thereof.
11.8 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall constitute an original but all of which shall constitute one
and the same instrument.
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11.9 Assignment. No party hereto may assign or delegate any of its rights,
interests, duties or obligations hereunder without the prior written consent of
all the other parties hereto; provided that the Purchaser may assign or delegate
any of its rights, interests, duties or obligations hereunder without obtaining
the Sellers' consent to any entity which controls or is controlled by or is
under common control with the Purchaser.
11.10 Fees, Expenses and Taxes. Purchaser hereby agrees to a limit of Twenty
Thousand Dollars ($20,000.00) in the aggregate that Purchaser shall pay (i) any
and all sales or use taxes which are payable on the transfer of the Purchased
Shares from the Sellers to the Purchaser hereunder, and (ii) the legal fees of
the Sellers needed to complete the transactions contemplated hereby. Except as
otherwise specifically contemplated elsewhere herein, each party hereto shall
pay its own costs and expenses which arise from this agreement and the
transactions contemplated herein. To the extent such amounts are not paid by
Purchaser in accordance with this Section 11.10, the Sellers hereby, jointly and
severally, agree that they shall be responsible for and pay any and all sales or
use taxes which are payable on the transfer of the Purchased Shares from the
Sellers to the Purchaser hereunder. Except to the extent of cash presently
available in the Corporation at the Time of Closing, the Sellers hereby further,
jointly and severally, agree that they shall be responsible for and pay any and
all tax liabilities which pertain to the existence and/or operation of the
Corporation for all periods prior to the Time of Closing and shall cooperate
with the Purchaser in the preparation and filing of any tax returns which
pertain to such taxes. Such obligation shall include, but not be limited to, the
preparation and filing of tax returns and payment of all franchise taxes or
similar fees owed to the Commonwealth of Massachusetts in connection with the
qualification of the Corporation to do business in such state. Any failure of
Seller's to satisfy their obligations under this Section 11.10 shall not be
subject to any limitations set forth in Section 10.2 hereof.
11.11 Confidentiality. Except to the extent otherwise required by law the
Sellers hereby agree that they shall keep the terms and conditions of this
agreement and the transactions contemplated hereby fully confidential.
11.12 Exclusivity. The Sellers do hereby covenant and agree that pending the
Closing they shall not enter and shall cause the Corporation to refrain from
entering into any negotiations or agreements pertaining to the sale or transfer
of the Purchased Shares, the sale or transfer of a substantial portion of the
Corporation's assets or any merger or other business combination of the
Corporation with another entity.
11.13 Affiliates. As used in this agreement references to "affiliates" of the
Purchaser shall include any entity (including but not limited to the
Corporation) which controls, is controlled by or is under common control with
the Purchaser and shall also include any officers, directors or employees of
such entities.
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ARTICLE 12
ARBITRATION
12.1 Arbitration of Disputes.
(a) The parties shall attempt in good faith to resolve any dispute
arising out of or relating to this agreement, the breach, termination
or validity hereof (including without limitation with respect to any
claim for indemnification pursuant to Article 10 hereof) promptly by
negotiation between the representatives of Purchaser and the Sellers
who have authority to settle the controversy. Either Purchaser or the
Sellers may give to the other party written notice that a dispute
exists (a "Notice of Dispute"). The Notice of Dispute shall include a
statement of such party's position and the name and title of the
representatives who will represent the parties. Within ten (10)
business days of the delivery of the Notice of Dispute, the
representatives of Purchaser and the Sellers shall meet at a mutually
acceptable time and place, and thereafter as long as they reasonably
deem necessary, to attempt to resolve the dispute. All reasonable
requests for information by one party to the other shall be honored.
(b) If a dispute has not been resolved by negotiation as provided in
paragraph (a) above within fifteen (15) days of the date of the Notice
of Dispute, then either party may initiate mediation under the then
current Center for Public Resources ("CPR") Model Procedure for
Mediation of Business Disputes, and the parties shall endeavor to
settle such dispute by such mediation. The neutral third party mediator
shall be selected by CPR from the CPR panel of neutrals (in accordance
with any criteria upon which the parties have been able to agree).
(c) Any controversy or claim arising out of or relating to this
agreement, the breach, termination or validity hereof, or the
transactions contemplated herein (including without limitation with
respect to any claim for indemnification pursuant to Article 10
hereof), if not settled by negotiation or mediation as provided in
paragraphs (a) and (b) above, shall be settled by arbitration in
Minneapolis, Minnesota in accordance with the CPR Rules for
Non-Administered Arbitration of Business Disputes, by three
arbitrators. Either party may initiate arbitration thirty (30) days
following the delivery of a Notice of Dispute if the dispute has not
then been settled by negotiation or mediation, or sooner if the other
party fails to participate in negotiation or mediation in accordance
with paragraphs (a) and (b) above. The parties shall each use their
best efforts so that any arbitration which is initiated shall be
concluded within thirty (30) days. The three arbitrators shall be
appointed by CPR from the CPR panel of neutrals (in accordance with any
criteria upon which the parties have been able to agree). In any such
arbitration, each of the parties hereto shall pay its own costs and
expenses and the fees, costs and expenses of the arbitrators shall be
paid fifty percent (50%) by Purchaser and fifty percent (50%) by the
Sellers. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. S. 1-16, and the award rendered by the
arbitrators shall be final and binding on the parties and may be
entered by any court having jurisdiction thereof and may include
equitable relief. The parties hereby submit to the jurisdiction of any
court (State or Federal) located
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in the City of Minneapolis, Minnesota for the enforcement of any awards
granted in arbitration.
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IN WITNESS WHEREOF, Sellers and Purchaser have each caused this
agreement to be appropriately executed all as of the day and year first above
written.
SELLERS:
--------
-------------------------------------------
Scott G. Opitz
-------------------------------------------
Aleksandr A. Elkin
PURCHASER:
----------
COMPUTER NETWORK TECHNOLOGY CORPORATION
By:
----------------------------------------
Name/Title:
--------------------------------
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Exhibit 10.3
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 3rd day of December 1998 by and between SCOTT G. OPITZ, a resident of the
Commonwealth of Pennsylvania (the "Employee"), and INTELLIFRAME CORPORATION, a
Pennsylvania corporation (the "Employer").
W I T N E S S E T H:
WHEREAS, as of the date hereof Computer Network Technology Corporation,
a Minnesota corporation ("CNT"), has acquired all of the outstanding capital
stock of Employer (the "Stock Acquisition");
WHEREAS, Employee was, until the date hereof, an officer, director and
shareholder of Employer and pursuant to the Stock Acquisition has sold all of
the stock in Employer which he held to CNT;
WHEREAS, Employer desires to secure the future services of Employee and
to that end desires to enter into this Agreement with Employee, upon the terms
and conditions herein set forth;
WHEREAS, Employee desires to accept employment and enter into this
Agreement with Employer effective as of the date hereof; and
WHEREAS, in consideration the substantial personal benefit Employee has
derived from the Stock Acquisition and other considerations herein described,
Employee shall also agree not to compete with the Employer, CNT or any of their
affiliates on the terms hereinafter set forth; it being acknowledged by Employee
that CNT would not have entered into the Stock Acquisition and that Employer
would not have entered into this Agreement without such agreement by Employee.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Employer and Employee,
intending legally to be bound, hereby agree as follows
Section 1. Agreement of Employment. Employer hereby agrees to employ
Employee and Employee hereby agrees to become and remain employed by Employer
for the Employment Period (as defined below), and upon and subject to the terms
and conditions hereafter set forth. For the purposes of this Agreement, the term
"Employment Period" shall mean the period ending thirty-seven (37) months from
the date hereof, unless Employee's employment under this Agreement is sooner
terminated in accordance with the terms hereof. Notwithstanding the foregoing,
following its expiration, the Employment Period hereunder shall automatically be
renewed for successive terms of twelve (12) months unless either party hereto
provides the other with thirty (30) days prior
<PAGE>
written notice of its intention to terminate this Agreement upon the expiration
of the then current Employment Period.
Section 2. Employee Representations. Employee represents to Employer
that Employee is not subject to an employment agreement with any other employer,
nor to any other agreements under the terms of which he may be prohibited from
accepting employment with Employer, and that Employee may accept employment with
Employer effective as of the date hereof.
Section 3. Duties of Employee.
(a) Subject to the supervision and pursuant to the orders,
advice and directions of Employer given from time to time, Employee
shall perform his assigned duties as Vice President of Marketing;
Internet Solutions Division. Such duties shall generally be consistent
with those of an executive management level employee and Employee's job
title shall at all times be maintained as a vice president or a
reasonably equivalent title. Unless Employee otherwise provides his
written consent to Employer, until January 1, 2002, (i) Employee's
duties shall include, but not necessarily be limited to, job activities
which provide significant involvement in the marketing or development
of any Re-engineering Software Products as such term is defined in
Exhibit A hereto, and (ii) Employee's duties shall not expand generally
beyond providing marketing, development and technical engineering
services.
(b) Employee agrees that he will at all times and on a
full-time basis faithfully, industriously, and to the best of his
ability, experience and talents, perform all of the duties that may be
reasonably required of and from him pursuant to the terms hereof, to
the reasonable satisfaction of the Employer. Such duties shall
initially be rendered primarily at Employee's home located anywhere in
eastern Pennsylvania; provided that, Employee shall undertake such
travel as is reasonably necessary in connection with the performance of
his duties. In addition, the Employer hereby agrees that Employee shall
not be required to transfer from Employee's Pennsylvania office for a
period of three (3) years from the date hereof without the written
consent of Employee.
(c) Employee hereby agrees to refrain from engaging in any
business ventures or business enterprises which might significantly
interfere with the performance of his duties hereunder. Employee shall
at all times conduct himself in a manner that will not substantially
prejudice or injure the reputation of Employer, its other employees or
any of its affiliates.
Section 4. Employers Right to Benefits of Work Performed. Employer
shall be entitled to all of the benefits, emoluments, and profits arising from
or incident to any and all work, services, and advice of Employee performed or
rendered in the course of Employee's employment hereunder.
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Section 5. Compensation, Expenses and Benefits.
(a) Employer shall pay to Employee, and Employee shall accept
from Employer, during the Employment Period, in consideration for all
services to be performed by Employee, a salary at the rate of One
Hundred Forty Thousand Dollars ($140,000.00) per year during the
Employment Period (the "Salary"). The payment of the Salary as well as
of any bonuses Employee may be entitled to receive shall be less
withholding and deductions required by law and Employee authorized
deductions, and the Salary shall be payable semi-monthly in arrears
during the Employment Period.
(b) In addition to the Salary described in Section 5(a) above,
Employee shall be eligible to receive a performance bonus for the 1999,
2000 and 2001 calendar years (and no other calendar years regardless of
the renewal of any Employment Period hereunder) based upon certain
revenues received by Employer as is detailed in Exhibit A attached
hereto and incorporated herein.
(c) In addition to the Salary described in Section 5(a) above,
Employee shall be eligible to participate in the executive bonus plan
of CNT to the same extent comparatively situated executives of CNT so
participate in such plan.
(d) In addition to the Salary described in Section 5(a) above,
Employer agrees to reimburse Employee promptly (in accordance with
policies and procedures adopted by Employer or CNT from time to time)
for all reasonable and necessary expenses incurred by Employee in
connection with Employer's or CNT's business, including without
limitation all reasonable and necessary expenses of travel, lodging,
entertainment, and meals away from home incurred by Employee in the
course of his employment hereunder. Employee agrees to keep and
maintain such records of such expenses as Employer or CNT may require
and to account to Employer therefor prior to any such reimbursement.
Employee shall comply with all reasonable and lawful policies and
procedures applied by Employer or CNT from time to time to its
employees generally and relating to or regulating, the nature and
extent of reimbursable expenses, and the manner of accounting and
reimbursement therefor.
(e) Employer hereby agrees to make available to Employee,
during the Employment Period, all benefits which are generally
available to similarly-situated employees of Employer or CNT, subject
to and on a basis consistent with the terms and conditions of such
benefits. Such benefits shall include benefits provided to similarly
situated employees of CNT, such as: health and dental insurance,
disability insurance, the right to participate in a 401(k) plan,
flexible spending accounts and eligibility to receive stock option
grants for shares of stock in CNT.
(f) In accordance with Employer's stated policy regarding
vacation time for employees, as the same may be amended from time to
time by Employer in its sole discretion, the number of days of
available vacation for each year shall increase over time based upon
the length of time Employee has been employed by Employer. For the
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<PAGE>
purposes of this Agreement Employee shall as of the date hereof be
considered a fifth year employee under such vacation policy, which
level of seniority shall initially entitle Employee to twenty (20) days
of paid vacation each year.
(g) In accordance with the terms and conditions of any
applicable stock option plan of CNT and any related agreements,
Employee shall be granted as of the date hereof options to purchase up
to 50,000 shares of CNT's capital stock. Such options shall vest
beginning on December 3, 1999 and each December 3 thereafter until
December 3, 2002 in increments of 12,500 shares.
(h) Employee shall be eligible to participate in CNT's
Executive Deferred Compensation Plan in accordance with the terms and
conditions of such plan.; it being acknowledged and agreed that any
payments made pursuant to Section 5(b) hereof shall be treated as if
they were non-existent when determining Employee's rights to benefits
under such plans.
Section 6. Noncompetition. Employee recognizes and agrees that the
nature of the CNT's and the Employer's business in which he shall be providing
services extends throughout the planet Earth, the continents of North America,
South America, Africa, Asia, Europe and Antarctica, and the United States of
America and Canada (the "Territory"). Employee further recognizes and
acknowledges that CNT and the Employer currently are engaged in the businesses
of creating, developing, marketing and/or providing consultation, repair,
maintenance and training services for (i) software products and solutions
commonly known within the Employer's and CNT's industry as "legacy extension"
that allow for the continued use and integration of business critical software
applications, including all terminal based applications (3270, 5250, VT100 and
VT220, etc.) which run on IBM S/390 and plug compatible (e.g. Hitachi, Amdahl,
etc.) mainframes, IBM Systems/3X, IBM AS/400, Unisys systems, Burroughs,
Honeywell, ICL, Bull, Siemens, including, but not limited to software programs
that provide such legacy extension capabilities utilizing the techniques known
as "screen scraping", "message based interfacing" and "database interfacing";
(ii) software development tools and solutions that facilitate a developer's
integration of multiple data and/or transactional sources typically found in the
business environments (such applications commonly known in the Employer's and
CNT's industry as Middleware or Enterprise Application Integration solutions
from vendors such as Active Software, Neon, Tibco Vitria and Crossworlds); (iii)
software products and solutions which provide the software development
functionality commonly known within CNT's and Employer's industry as "workflow"
or "process flow"; and (iv) software products and solutions which assist in the
automation of business processes for entities engaged in reinsurance business
(the "Employer Activities"). Specifically excluded from Employer Activities at
all times after the termination of Employee's employment shall be the Employee's
right to work for systems integrators (e.g. Cambridge Technology Partners, CSC,
KPMG, Price Waterhouse, etc.) and value added resellers, those companies who
produce an integrated solution which solves a specific business purpose but
whose product is not generally considered a development tool (e.g. SAP, BAAN,
Peoplesoft, etc.). In consideration of the foregoing, the substantial personal
benefit Employee has derived from the Stock Acquisition and will derive from
being employed by
4
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Employer and the payments described in Section 5(b) above, the Employee
covenants and agrees as follows:
(a) Period of Covenant. The term of the noncompetition
covenant shall be for the period beginning as of the date hereof and
ending the later of either (i) four (4) years from the date hereof, or
(ii) the date Employee's employment with Employer is terminated (the
"Noncompetition Period").
(b) Nature and Scope of Covenant. The Employee covenants and
agrees not to carry on or engage in, directly or indirectly, on its own
behalf or by or through any other person or entity, any business or
other activity in competition with the Employer Activities of the
Employer, CNT or any affiliates of the Employer or CNT during the
Noncompetition Period throughout the Territory. Without limiting the
generality of the foregoing, the Employee covenants and agrees that
during the Noncompetition Period it will not, directly or indirectly,
throughout the Territory.
(A) own any interest in, manage or serve as an
employee of or consultant, business advisor or independent
contractor for any individual, corporation, partnership,
association, joint venture or other entity which is engaged in
a business in competition with the Employer Activities as they
are conducted during the Employment Period.
(B) solicit business similar to the Employer
Activities from any customer that has done business with, or
potential customers that have been in contact with, the
Employer, CNT or any affiliates of the Employer or CNT during
the Employment Period;
(C) make a loan to or guarantee the obligations of,
any individual or entity engaged in the Employer Activities or
make a loan to, or guarantee the obligations of, any owner,
officer, director, partner or shareholder thereof;
(D) request, induce or attempt to influence any
supplier of goods or services to the Employer, CNT or any
affiliates of the Employer or CNT to curtail or cancel any
business it transacts with the Employer, CNT or any such
affiliate with respect to the Employer Activities; or
(E) request, induce or attempt to influence any
employee of the Employer, CNT or any affiliates of the
Employer or CNT to terminate his or her employment with the
Employer, CNT or any such affiliate, or attempt to dissuade
any then current employee of the Employer, CNT or any
affiliates of the Employer or CNT from continuing employment
with the Employer, CNT or any such affiliate.
Notwithstanding the foregoing, the parties hereby recognize that
Employee may (1) upon the approval or instruction of Employer work with
a company affiliated with Employer, (2) hold up to two percent (2%)
shares of stock or other securities in a company in
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competition with the Employer Activities whose securities are traded on
a public exchange and (3) invest through mutual funds, investment
trusts or other diversified investment vehicles which Employee does not
directly or indirectly manage, control or otherwise participate in
investment decisions without violating the terms of this Section 6.
It is further agreed that if any portion of such restrictive covenant
is held to be unreasonable, arbitrary or against public policy, then
such covenant shall be considered divisible both as to time and
geographic area, with each year being deemed a separate period of time
and each geographic area described above being deemed a separate
geographic area, it being the intention of the parties that a lesser
period of time or geographic area shall be enforced so long as the same
is not unreasonable, arbitrary or against public policy. The parties
agree that, in the event any court of competent jurisdiction determines
that a specified time period or a specified geographic area is
unreasonable, arbitrary or against public policy, a lesser time period
or geographic area which is determined to be reasonable, nonarbitrary
and not against public policy may be enforced against the Employee.
Section 7. Nondisclosure of Confidential Information.
(a) For the Employment Period and all times after the
termination of this Agreement, Employee covenants and agrees to treat
as confidential and not to disclose and to use only for the advancement
of the interests of Employer all information, plans, records, trade
secrets, business secrets, and confidential or other data of Employer
or any affiliate of Employer, submitted to Employee or compiled,
received, or otherwise discovered by Employee from time to time in the
course of his employment by Employer for use in Employer's business or
that of any affiliate of Employer. Information shall not be considered
confidential or proprietary if it generally is available in the public
domain through no direct or indirect action of Employee.
Notwithstanding the foregoing, the existence of a trade secret or the
confidential nature of proprietary information will not be negated
merely because a person has acquired a trade secret or proprietary
information without express or specific notice that it is a trade
secret or proprietary information if, under all the circumstances, such
person knows or has reason to know that the party who owns the
information or has disclosed it intends or expects the secrecy of the
type of information comprising the trade secret or proprietary
information to be maintained.
(b) Employee agrees that upon termination of his employment
with Employer, for any reason, voluntary or involuntary, with or
without cause, he will immediately return to the Employer any property,
customer lists, written information, forms, formulae, plans, documents
or other written or computer material or data, software or firmware, or
copies of the same, belonging to Employer or any of its affiliates, or
any of their customers, within his possession, and will not at any time
thereafter copy, reproduce or otherwise facilitate the future
disclosure of the same. Employee agrees that, following such
termination of employment, he shall not disclose or use any
proprietary, secret or confidential information, relating to the
products, equipment, methods of manufacture, inventions, discoveries or
trade secrets, price lists, computer programs, customer lists, business
plans or other proprietary information related to the business of the
Employer which he acquires,
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develops, designs or produces while employed by Employer and that all
embodiments of such information shall belong to Employer. Employee
further agrees that he will not retain or use for his account at any
time any trade names, trade mark, service mark, or other proprietary
business designation used or owned in connection with the business of
Employer or its affiliates.
Section 8. Enforcement; Remedies; Construction.
(a) Employee covenants, agrees, and recognizes that because
the breach or threatened breach of the covenants, or any of them,
contained in Sections 6 and 7 will result in immediate and irreparable
injury to the Employer and CNT, the Employer and/or CNT shall be
entitled to an injunction restraining the Employee or any of his
affiliates or future employers or entities he serves as a contractor
from any violation of Sections 6 and 7 to the fullest extent allowed by
law. The Employee further covenants and agrees that in the event of a
violation of any of its respective covenants and agreements contained
in Sections 6 and 7 hereof, the Employer and/or CNT shall be entitled
to an accounting of all profits, compensation, commissions,
remunerations or benefits which the Employee directly or indirectly has
realized and/or may realize as a result of, growing out of or in
connection with any such violation. Employer and/or CNT shall further
be entitled to pursue any and all legal or equitable remedies which may
be available to them for any such breach or threatened breach.
(b) Employee agrees that in the event he breaches the
covenants, or any of them, contained in Section 6, then the
Noncompetition Period shall be automatically extended by the length of
time any such breach remains continuing; provided, however, this
provision shall be of no effect if Employer fails to claim a breach by
Employee of any such covenant by the later of four (4) years from the
date hereof or one (1) year following the termination of Employee's
employment.
(c) The Employee hereby expressly acknowledges and agrees as
follows:
(i) that the covenants set forth in Sections 6 and 7
above are reasonable in all respects and are necessary to
protect the legitimate business and competitive interests of
the Employer, CNT and their affiliates; and
(ii) that each of the covenants set forth in Sections
6 and 7 and the subdivisions thereof is separately and
independently given, and each such covenant is intended to be
enforceable separately and independently of the other such
covenants, including, without limitation, enforcement by
injunction;
provided, however, that the invalidity or unenforceability of this
Agreement in any respect shall not affect the validity or
enforceability of this Agreement in any other respect. In the event
that any provision of this Agreement shall be held invalid or
unenforceable by a court of competent jurisdiction by reason of the
geographic or business scope or the duration thereof or for any other
reason, such invalidity or unenforceability shall attach only to the
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particular aspect of such provision found invalid or unenforceable as
applied and shall not affect or render invalid or unenforceable any
other provision of this Agreement or the enforcement of such provision
in other circumstances, and, to the fullest extent permitted by law,
this Agreement shall be construed as if the geographic or business
scope or the duration of such provision or other basis on which such
provision has been challenged had been more narrowly drafted so as not
to be invalid or unenforceable.
Section 9. Termination. If the term of Employee's employment under this
Agreement has not sooner expired by lapse of an applicable notice period or
otherwise under the terms hereof, the term of Employee's employment hereunder
shall terminate upon the occurrence of any of the following:
(a) The death, incapacity or any disability which would
trigger Employee's rights to receive benefits under any then existing
long term disability insurance program maintained by Employer (it being
assumed Employee is a participant in such program) of Employee;
(b) Without cause at the election of Employer upon at least
thirty (30) days prior written notice delivered to Employee;
(c) Without cause at the election of Employee upon at least
thirty (30) days prior written notice delivered to Employer;
(d) For Cause at the election of the Employer by providing
Employee with written notice which outlines the "Cause" reason for the
Employer's action. "Cause" shall mean: (i) dishonesty, alcoholism which
impairs Employee's ability to perform his duties hereunder, addiction
to drugs or convictions of a felony or a misdemeanor (other than
traffic violations), (ii) the material breach of any covenant contained
in this Agreement, including, without limitation, failure to devote
substantially all of his business time to the business of Employer, or
(iii) any (A) acts of material insubordination by Employee or (B) the
repeated or material failure of Employee to perform his duties
hereunder as an employee of Employer after Employee has received notice
of such failure and has been given a reasonable opportunity to cure the
same; or
(e) For Cause at the election of Employee by providing
Employer which outlines the "Cause" reason for the Employee's action.
"Cause" shall mean: (i) the failure to pay when due any amounts owing
to Employee hereunder and (ii) any material breach of any covenant
contained hereunder by Employer, in each case which is not corrected
within a reasonable time after Employee notifies Employer of such
failure or breach.
Upon the termination of Employee's employment pursuant to this Section
9 for any reason, Employee's right to further compensation and benefits under
this Agreement shall cease; provided, however, that Employee shall remain
entitled to (i) any unpaid compensation, bonuses and benefits accrued prior to
such termination, (ii) any expense reimbursements to which he was entitled at
the date of such termination, and (iii) any payments of bonus which Section 5(b)
and Exhibit A
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attached hereto specifically state Employee remains entitled or eligible to
receive. In addition, subject to the terms and conditions of CNT's stock option
plan and any related agreements between Employee and CNT, Employee shall remain
entitled to any stock options in which he is vested at the date of termination.
Subject to the provisions of Section 5(b) and Exhibit A, any unpaid
compensation, bonuses and benefits accrued prior to the termination of
Employee's employment hereunder to which Employee is entitled shall be paid
within thirty (30) days of such termination.
Notwithstanding the foregoing, in the event Employer terminates the
employment of Employee without cause at any time during the Employment Period,
then Employer shall continue to pay Employee an amount equal to the Salary (less
applicable withholdings or deductions required by law) in a manner which
generally mirrors Employer's standard payroll practices for a period of six (6)
months. Regardless of the prior sentence, Employer, in its sole discretion, may
accelerate the payments referenced above at any time and in any amount from time
to time.
Notwithstanding any other provision herein to the contrary, the
obligations of Employee under Sections 6 or 7 hereof shall survive the
termination (for any reason) of Employee's employment under this Agreement.
Section 10. Enforcement of Employee-Restrictions. Employee acknowledges
that he has carefully read and considered the provisions of this Agreement and,
having done so, agrees that the restrictions set forth in this Agreement in
Sections 6 and 7 are fair and reasonable and are necessarily required for the
protection of the interests of Employer, CNT and their affiliates. Employee
covenants and agrees with Employer that if he shall violate any of the covenants
or agreements contained in Sections 6 or 7 of this Agreement, then Employer
shall be entitled to an accounting and repayment of all profits, compensation,
commissions, remunerations or benefits which Employee directly or indirectly has
realized as a result, growing out of or in connection with any such violations;
such remedy to be in addition to and not in limitation of any injunctive relief
or other rights or remedies to which Employer, CNT or their affiliates is or may
be entitled to at law or in equity.
Further, should Employee breach the provisions of Section 6 or 7
hereof, Employee shall forfeit his right to receive any and all bonuses whether
or not accrued and whether payable pursuant to Section 5(b) or otherwise;
provided, however, that if Employee breaches Section 7 hereof other than through
any act of gross negligence, recklessness or malintent, he shall remain entitled
to receive any such bonuses to the extent such bonuses exceed the recoverable
damages of Employer, CNT and their affiliates caused by such breach. The
provisions of this Section 10 shall survive the termination of this Agreement.
Section 11. Assignment of Developments.
(a) Works Made for Hire. Employee understands that as part of
his job duties he may be asked to create, or contribute to the creation
of, computer programs, documentation and other copyrightable works.
Employee agrees that any and all computer programs, documentation and
other copyrightable materials that he is asked to prepare or work on as
part of his employment with Employer shall be "works made for
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hire" and that Employer shall own all the copyright rights in such
works. IF AND TO THE EXTENT ANY SUCH MATERIAL DOES NOT SATISFY THE
LEGAL REQUIREMENTS TO CONSTITUTE A WORK MADE FOR HIRE, EMPLOYEE HEREBY
ASSIGNS ALL HIS COPYRIGHT RIGHTS IN THE WORK TO EMPLOYER.
(b) Disclosure of Developments: While Employee is employed by
Employer, Employee will promptly inform Employer of the full details of
his inventions, discoveries, improvements, innovations and ideas
(collectively called "Developments") whether or not patentable,
copyrightable or otherwise predictable that he conceives, completes or
reduces to practice (whether jointly or with others) and which:
(i) relate to Employer's present or prospective
business, or actual or demonstrably anticipated research and
development; or
(ii) result from any work Employee does using any
equipment, facilities (exclusive of personal activities of
Employee conducted outside the course of his employment in his
home), materials, trade secrets or personnel of Employer in
the course of their service to Employer; or
(iii) results from or are suggested by any work that
Employee may reasonably be expected to do for Employer in the
course of his employment.
(c) Assignment of Developments. Employee hereby assigns to
Employer or Employer's designee, his entire right, title and interest
in all of the following, that Employee conceives or makes (whether
alone or with others) while employed by Employer:
(i) all Developments;
(ii) all copyrights, trade secrets, trademarks and
mask work rights in Developments; and
(iii) all patent applications filed and patents
granted on any Developments, including those in foreign
countries.
(d) Notice Pursuant to State Law. Employee acknowledges and
understands that this Agreement does not apply to any invention that
qualifies fully under the provisions of Minnesota Statutes Annotated
Sections 181.78(1) and (2), the text of which is attached as Exhibit B.
Employee acknowledges this section shall serve as written notice to
Employee as required by Minnesota Statutes Annotated Section 181.78(3).
(e) Further Assurances. Employee hereby agrees that he shall
execute any and all such documents, instruments, agreements or
certificates and take such other
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actions as Employer may reasonably request to further secure Employer's
rights in and title to any Developments.
Section 12. Notices. All notices required or permitted hereunder shall
be deemed to be duly given if in writing and delivered personally or sent by
United States registered or certified mail, return receipt requested, postage
pre-paid, addressed as follows:
Employee: Scott G. Opitz
411 Mews Drive
Sellersville, PA 18960
Facsimile: 215-257-8382
Employer: IntelliFrame Corporation
c/o Computer Network Technology Corporation
605 North Highway 169
Minneapolis, MN 55441
Attn: Greg Barnum
Facsimile: 612-797-6800
or at such changed addresses as the parties may designate in writing.
Section 13. Miscellaneous.
(a) Headings. Headings, titles and captions contained in this
Agreement are inserted only as a matter of convenience and reference
and in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any provisions hereof.
(b) Entire Agreement. This writing constitutes the entire
agreement between the parties hereto and supersedes any prior
understanding or agreements between them respecting the subject matter
herein contained. There are no extraneous representations,
arrangements, understandings, or agreements, oral or written, in
respect of the subject matter of this Agreement, between the parties
hereto, except those fully expressed herein.
(c) Amendments. No amendments, changes, alterations,
modifications, additions and qualifications to the terms of this
Agreement shall be made or binding unless made in writing and signed by
all the parties hereto; provided any such amendment to Section 14 shall
not be made or binding unless made in writing and signed by Employer
and Employee.
(d) Waiver. The failure of either party to enforce at any time
any of the provisions of this Agreement shall not be construed as a
waiver of such provisions or of the right of such party thereafter to
enforce any such provisions.
(e) Invalidity and Severability. The invalidity or
unenforceability of any particular provision of this Agreement shall
not affect the enforceability of other provisions
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hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provisions were omitted.
(f) Governing Law. This Agreement shall be construed and
governed in accordance with the laws of the State of Minnesota.
Employee hereby consents to the jurisdiction of any local, state or
Federal court located in the State of Minnesota, and consents to
service of process by certified or registered mail, return receipt
requested, directed to Employee at Employees address stated in Section
12 of this Agreement. Employee waives the right to trial by jury in
connection with the resolution of any disputes that may arise under
this Agreement.
(g) Burden and Benefit. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their heirs,
successors and permitted assigns. This Agreement is not assignable by
Employee. Employer may assign this Agreement to any successor owner of
the business of Employer or to any company affiliated with Employer, at
any time, provided that prior to making any such assignment Employer
shall give Employee notice thereof.
(h) Affiliates. As used herein the term "affiliates" when used
with respect to the Employer or CNT shall include, but not necessarily
be limited to, any and all legal entities controlled by or under common
control with Employer or CNT.
(i) Life Insurance. Each of the parties hereto stipulates and
agrees that the Employer shall have an insurable interest in the life
of the Employee as a key employee of the Employer. The Employer shall
have the right to apply and pay premiums for policies of insurance on
the life of Employee whenever, in the opinion of Employer, such
insurance may be necessary or desirable. The Employer shall be the sole
owner of such policies and may apply to the payments of any premiums
any dividends declared or paid on such policies. Employee agrees to
cooperate in the application process for any such policies including
submitting to physical examinations or tests and providing all
information required to obtain such policies.
Section 14. EXPECTATIONS REGARDING EMPLOYMENT, SERVICE AS OFFICER OF
EMPLOYER. EMPLOYER AND EMPLOYEE AGREE THAT THIS AGREEMENT EXPRESSES ALL OF THE
EXPECTATIONS BETWEEN EMPLOYEE AND EMPLOYER, WHETHER UNDER SECTION 302A.751 OF
THE MINNESOTA BUSINESS CORPORATION ACT OR OTHERWISE, REGARDING THE TERM OF
EMPLOYEE'S EMPLOYMENT AND EMPLOYEE'S AND EMPLOYER'S RIGHT TO TERMINATE THAT
EMPLOYMENT. THE EMPLOYEE SHALL HAVE NO GREATER RIGHTS AS AN EMPLOYEE OR, ONLY IF
APPLICABLE, AN OFFICER, DIRECTOR AND/OR SHAREHOLDER OF EMPLOYER (OR OF ANY
DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF EMPLOYER) THAN ANY OTHER
PERSON WHO IS NOT RELATED TO EMPLOYER OR SUCH AFFILIATE IN ANY SUCH CAPACITY.
EMPLOYER HEREBY ADVISES EMPLOYEE THAT EMPLOYER WOULD NOT ENTER INTO THIS
AGREEMENT (OR, ONLY IF APPLICABLE, ELECT EMPLOYEE AS AN OFFICER
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<PAGE>
AND/OR DIRECTOR OR ISSUE ANY EQUITY RIGHTS TO EMPLOYEE) IF THE EMPLOYEE HAD ANY
EXPECTATION THAT THE EMPLOYEE'S SERVICE AS AN EMPLOYEE (OR, ONLY IF APPLICABLE,
SERVICE AS AN OFFICER AND/OR DIRECTOR OR POSITION AS A SHAREHOLDER) WOULD
ENTITLE EMPLOYEE TO CONTINUED EMPLOYMENT WITH (OR, ONLY IF APPLICABLE, CONTINUED
STATUS AS AN OFFICER, DIRECTOR OR SHAREHOLDER) OF EMPLOYER OR ANY AFFILIATE OF
EMPLOYER OTHER THAN AS SET FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE
FOREGOING SENTENCES, EMPLOYEE ACKNOWLEDGES THAT EMPLOYER IN ITS SOLE DISCRETION
MAY DECLINE IN THE FUTURE TO RENEW HIS EMPLOYMENT BEYOND THE TERMS OF THIS
AGREEMENT FOR ANY REASON. EMPLOYEE CONFIRMS THAT EMPLOYEE HAS CAREFULLY REVIEWED
THIS AGREEMENT AND UNDERSTANDS IT. EMPLOYEE FURTHER CONFIRMS THAT EMPLOYEE HAS
CONSULTED WITH LEGAL COUNSEL REPRESENTING EMPLOYEE CONCERNING THIS AGREEMENT AND
ANY OTHER AGREEMENTS BETWEEN OR AMONG EMPLOYEE, EMPLOYER AND ANY OF ITS PRESENT
OR PROSPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS AND/OR OTHER AFFILIATES.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
EMPLOYER:
---------
INTELLIFRAME CORPORATION
By: __________________________
Name: ________________________
Title: _______________________
EMPLOYEE:
---------
-------------------------------
Name: Scott G. Opitz
For and in consideration of Employee's agreement to be bound by Section
6 and 7 of this Agreement for the benefit of CNT, CNT hereby unconditionally and
irrevocably guarantees the full and punctual performance of all Employer's
obligations and payment of all amounts due under this Agreement, including but
not limited to all amounts due pursuant to Section 5(b) and Exhibit A. CNT also
agrees to comply with providing such information under Paragraph 1(a)(ii) of
such Exhibit A as is reasonably necessary to allow for any bonus payments owing
under 5(b) and Exhibit A to be appropriately calculated, and will cooperate in
providing to Employee all information reasonably requested in connection with
any audit conducted under Paragraph 6 of such Exhibit A.
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This Guarantee is a guarantee of payment and not collection; guarantor
shall be deemed a primary obligor and Employee may assert a claim directly
against CNT without first seeking recovery against Employer. CNT hereby waives
all surityship defenses and defenses in the nature thereof.
COMPUTER NETWORK TECHNOLOGY
CORPORATION
By: ____________________________
Name/Title: ___________________
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EXHIBIT A
---------
1. Definitions. As used in this Exhibit A the following terms shall have the
following meanings:
(a) (i) "Re-engineering Product Revenues" shall mean all revenue
recognized by Employer, CNT and other subsidiaries of CNT as provided
in clause (ii), from (1) selling, leasing or licensing Re-engineering
Software Products (including primary license charges, annual license
charges and monthly license charges), or (2) the Sale of a Principal
Re-engineering Product. Re-engineering Product Revenue does not include
revenue from (A) providing standard customer support and maintenance of
such Re-engineering Software Products, or (B) providing implementation,
management, industrial or other consulting services of any nature to
customers or clients.
(ii) Employer, CNT and other subsidiaries of CNT shall measure
Re-engineering Product Revenue in the same manner that CNT and its
other subsidiaries recognized revenue for financial statement purposes.
Employer shall maintain procedures to measure Re-engineering Product
Revenue in accordance with such revenue recognition practices.
(b) "Re-engineering Software Products" shall mean (i) the products
developed and/or marketed by Employer, CNT or other subsidiaries of CNT
commonly known as "Enterprise/Access", "Web/Integrator", "MapMaker",
"Process Dynamics", "ReSolution" and "Star Framework" as well as all
Enhancements and Derivative Works of such products, as well as (ii) any
similar additional products acquired, developed and/or marketed by
Employer, CNT or other subsidiaries of CNT which provide software
development and deployment tools that provide applications with an
abstraction from their underlying environment (hardware, operating
systems, networks) and provide interoperability between applications
and/or components of applications as well as all Enhancements and
Derivative works of such additional products. Except as set forth above
no other products of either Employer, CNT or other subsidiaries of CNT
shall constitute or be considered a Re-engineering Software Product.
(c ) "Derivative Works" shall mean a work which is based upon one or
more preexisting works, such as a revision, Enhancement, modification,
translation, abridgment, condensation, expansion or any other form in
which such preexisting works may be recast, transformed or adapted and
which, if prepared without authorization of the owner of the copyright
in such preexisting work, would constitute a copyright infringement.
(d) "Enhancement" shall mean any Derivative Work that improves
functions, adds new functions, features, text or other materials,
improves performance, adds new value or utility, supports new
input/output devices or provides other updates.
<PAGE>
(e) "Base Revenue" for Re-engineering Product Revenue, in millions of
dollars, are as follows:
1999 calendar year $9.1;
2000 calendar year $11.4; and
2001 calendar year $14.2.
(f) "Sale of a Principal Re-engineering Product" shall mean the sale to
any third party in a transaction which does not constitute a Change of
Control, of all or substantially all of Employer's, CNT's, and CNT's
other subsidiaries' interests in any of their products commonly known
as "Process Dynamics", "ReSolution" or "Star Framework" as well as any
Derivative Works or Enhancements of such products.
(g) "Change of Control" shall mean any transaction pursuant to which
(i) voting control of more than fifty percent (50%) of the outstanding
capital stock of Employer or CNT shall be transferred to a third party
which is not controlled by or under common control with CNT (an
"Unaffiliated Third Party"), (ii) a transfer of substantially all of
the assets of Employer or CNT to an Unaffiliated Third Party, or (iii)
any merger or consolidation of Employer or CNT with any Unaffiliated
Third Party pursuant to which Employer or CNT is not the surviving
entity and in which shareholders of CNT or Employer do not own more
than fifty percent (50%) of the outstanding voting securities of the
surviving entity.
2. Calculation of Bonus Payments. Subject to the adjustments and limitations set
forth in Paragraphs 3 and 4 below, for each of the 1999, 2000 and 2001 calendar
years the Employer shall pay to the Employee ten percent (10%) of the amount, if
any, by which the Re-engineering Product Revenues exceed the Base Revenue for
such year. Any such payment shall be made by wire transfer to an account in the
United States of America of certified funds or by delivery of a cashiers or
certified check to the address set forth in the "Notice" section of the
Agreement. Any such payment shall be made within sixty (60) days of the end of
the calendar year to which the payment pertains. When payment is made, Employer
shall provide Employee with a reasonably detailed summary of how the amount of
the payment was calculated.
3. Certain Adjustments to Bonus Payments.
(a) In the event that Employee terminates his employment with Employer
prior to January 1, 2000, then no bonus payments whatsoever shall be
owing to Employee pursuant to Section 5(b) and this Exhibit A of the
Agreement for any calendar year.
(b) In the event that Employee terminates his employment with Employer
after January 1, 2000 and prior to July 1, 2000, then the bonus payment
calculated pursuant to Section 5(b) and this Exhibit A of the
Agreement:
(i) for the calendar year 2000, shall be calculated by (A)
dividing the Base Revenue which pertains to such year by
twelve (12) (the "Monthly Base Revenue"), then (B) multiplying
the Monthly Base Revenue by the number of
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complete calendar months the Employee was employed by Employer
during the year 2000 (the "Termination Year Employment Time")
to arrive at an adjusted base revenue amount (the "Adjusted
Base Revenue"), and then (C) subtracting the Adjusted Base
Revenue from the Re-engineering Product Revenues recognized
during the Termination Year Employment Time and multiplying
such sum amount (if it greater than zero) by a fraction the
numerator of which is one and the denominator of which is ten;
and
(ii) for all periods of time from and after July 1, 2000,
shall not be due and payable to Employee.
(c) In the event that Employee terminates his employment with the
Employer on or after July 1, 2000, then Employee shall remain entitled
to the bonus payments as calculated in Section 5(b) of the Agreement
and this Exhibit A.
(d) Notwithstanding the provisions of Sections 3 (a-c) above, in the
event that Employee's employment with Employer is terminated because of
(i) a material breach by Employer under the Agreement which is not
cured within a reasonable period of time, (ii) Employee's death,
incapacity or disability (as described in Section 9 of the Agreement),
or (iii) a without cause termination by Employer; then the bonus
payments owing pursuant to Section 5(b) and this Exhibit A of the
Agreement shall still be due and payable to Employee.
(e) In the event that the employment of Aleksandr A. Elkin is
terminated with the Employer prior to July 1, 2000 other than because
of (i) a material breach of Employer under his employment agreement
with Employer which is not cured within a reasonable period of time,
(ii) his death, incapacity or disability (as set forth in Section 9 of
his employment agreement with Employer) or (iii) a without cause
termination by Employer; then the Employee shall be entitled to twenty
percent (20%) of the amount, if any, by which the Re-engineering
Product Revenues exceed the then applicable Base Revenue (1) for each
calendar month following such termination in the calendar year in which
such termination occurs, and (2) for each calendar year following such
termination. For further clarification, the bonus payable to the
Employee with respect to the calendar year in which such a termination
occurs shall be in an amount equal to: (i) the bonus which would have
otherwise been payable to Employee had the termination of Aleksandr A.
Elkin's employment not occurred (the "Standard Bonus"), plus (ii) the
Standard Bonus multiplied by a fraction, the numerator of which is the
number of calendar months in such calendar year which follow the month
in which the termination occurred and the denominator of which is
twelve (12). Notwithstanding any of the foregoing, in order for
Employee to be eligible to receive the additional amounts of bonus
above the Standard Bonus payable under this subparagraph (c) he must be
employed by Employer on December 31st of the year in which the
employment of Aleksandr A. Elkin terminates with Employer.
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<PAGE>
4. Limitations on Amount of Bonus Payable. Notwithstanding anything herein to
the contrary, the aggregate amount of bonus payable to Employee pursuant to
Section 5(b) of the Agreement and this Exhibit A shall be limited as follows:
(a) if the amount of bonus payments due and payable to Employee with
respect to calendar year 1999 reaches Six Million Dollars
($6,000,000.00), then no further bonus payments beyond such amount
whatsoever shall become due and payable to Employee hereunder;
provided, however, that if there shall be a Sale of a Principal
Re-engineering Product in such 1999 calendar year, then such limitation
shall be increased to Eight Million Dollars ($8,000,000.00);
(b) if the applicable threshold of subparagraph (a) has not been
obtained and the aggregate amount of bonus payments due and payable to
Employee with respect to calendar years 1999 and 2000 reaches Five
Million Dollars ($5,000,000.00), then no further bonus payments beyond
such amount whatsoever shall become due and payable to Employee
hereunder; provided, however, that if there shall be a Sale of a
Principal Re-Engineering Product in either such 1999 or 2000 calendar
year; then such limitation shall be increased to Six Million Dollars
($6,000,000.00); and
(c) if none of the applicable thresholds set forth in subparagraphs (a)
or (b) have been obtained, then the aggregate bonus payments payable to
Employee hereunder shall not exceed Four Million Dollars
($4,000,000.00).
5. Agreement to Market/ Discontinuance of Re-Engineering Software Product by
Employer / Change of Control. Subject to the other provisions of this Exhibit A,
should Employer or CNT (i) exclusive of any failure caused by a Change of
Control, completely fail to market the product line of Re-Engineering Software
Products for a continuous period of three (3) months prior to December 31, 2001,
(ii) undergo any Change of Control which later results in a complete failure to
market the product line of Re-engineering Software Products for a continuous
period of three (3) months both prior to December 31, 2001 and subsequent to the
final consummation of the Change of Control, or (iii) otherwise materially fail
during any continuous period of three (3) months prior to December 31, 2001
(taking into account all of the circumstances of CNT's and Employer's business
as well as the totality of all their actions during such three (3) month period)
to use commercially reasonable efforts, consistent with reasonable business
judgment, to market the product line of Re-engineering Software Products (in
each instance such failure occurring for reasons other than such Re-Engineering
Software Products becoming obsolete due to the development of superior
technologies by third parties), then Employee shall be entitled to receive
within sixty (60) days of January 1, 2002 an amount (if a positive number) equal
to Four Million Dollars ($4,000,000.00) less the aggregate of all payments of
bonus previously made to Employee pursuant to Section 5(b) and this Exhibit A of
the Agreement. Upon the occurrence of such an event causing Employee to become
entitled to receive such a payment, the obligations to make any other payments
of bonus to Employee hereunder shall cease.
In the event a Change of Control is finally consummated the parties
hereby agree that notwithstanding any other provision herein to the contrary:
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<PAGE>
(a) the references to the date "July 1, 2000" contained in Paragraphs
3(b), 3(c) and 3(e) shall be read to read the earlier of July 1, 2000
or the date which is the one (1) year anniversary of the final
consummation of the Change of Control;
(b) the definition of Re-Engineering Software Products shall only be
inclusive of those Re-Engineering Software Products in existence
immediately prior to the consummation of the Change of Control and any
Derivative Works and Enhancements thereof which are subsequently
developed; and
(c) the aggregate amount of bonuses payable to Employee hereunder shall
be limited to Four Million Dollars ($4,000,000.00); provided, however,
that notwithstanding such limitation, but still subject to the
limitations of Section 4 hereof, the parties hereby agree that Employee
shall remain entitled to any and all payments of bonus which have
accrued through the date of the consummation of the Change of Control.
For the calendar year in which such Change of Control is consummated,
such accrued bonus shall be calculated by (A) multiplying the Monthly
Base Revenue for such calendar year by the number of complete calendar
months in such calendar year prior to the date the Change of Control is
finally consummated (the "Pre-Change of Control Period") to arrive at
an Adjusted Base Revenue for such calendar year, and then (B)
subtracting such Adjusted Base Revenue from the Re-engineering Product
Revenues recognized during the Pre-Change of Control Period and
multiplying such sum amount (if it greater than zero) by a fraction the
numerator of which is one and the denominator of which is ten.
6. Right of Audit. Employer hereby agrees that no more than once with respect to
each of the calendar years 1999, 2000 and 2001 the Employee shall be entitled to
conduct an audit of the data used to calculate any bonus payments due and
payable to Employee for such calendar year. Such audit shall be conducted by an
independent certified public accountant selected by Employee and reasonably
acceptable to Employer and CNT. Such audit shall be completed at the sole cost
and expense of Employee; provided that should such audit reveal a discrepancy
favorable to Employee of more than three (3%) percent between the bonus payment
as calculated by Employer vis a vis that determined by the audit, then the costs
and expense of such audit shall be borne solely by Employer.
7. Arbitration. Any dispute over the right of Employee to receive any payment of
bonus pursuant to Section 5(b) of the Agreement and this Exhibit A shall be
resolved by arbitration in accordance with the same procedures and terms as are
set forth in Section 12.1 of the Purchase Agreement.
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EXHIBIT B
Minnesota Statutes Annotated Section 181.78 provides as follows:
Subdivision 1. Any provision in an employment agreement that provides
that an employee shall assign or offer to assign any of the employee's rights in
an invention to the employer shall not apply to an invention for which no
equipment, supplies, facility or trade secret information of the employer was
used and that was developed entirely on the employee's own time, and
(1) that does not relate (a) directly to the business of the employer
or (b) to the actual or demonstrably anticipated research or development, or
(2) that does not result from any work performed by the employee for
the employer. Any provision that purports to apply to such an invention is to
that extent against the public policy of this state and is to that extent
unenforceable.
Subdivision 2. No employer shall require a provision made void and
unenforceable by subdivision 1 as a condition of employment or continuing
employment.
<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 3rd day of December 1998 by and between ALEKSANDR A. ELKIN, a resident of
the Commonwealth of Massachusetts (the "Employee"), and INTELLIFRAME
CORPORATION, a Pennsylvania corporation (the "Employer").
W I T N E S S E T H:
WHEREAS, as of the date hereof Computer Network Technology Corporation,
a Minnesota corporation ("CNT"), has acquired all of the outstanding capital
stock of Employer (the "Stock Acquisition");
WHEREAS, Employee was, until the date hereof, an officer, director and
shareholder of Employer and pursuant to the Stock Acquisition has sold all of
the stock in Employer which he held to CNT;
WHEREAS, Employer desires to secure the future services of Employee and
to that end desires to enter into this Agreement with Employee, upon the terms
and conditions herein set forth;
WHEREAS, Employee desires to accept employment and enter into this
Agreement with Employer effective as of the date hereof; and
WHEREAS, in consideration the substantial personal benefit Employee has
derived from the Stock Acquisition and other considerations herein described,
Employee shall also agree not to compete with the Employer, CNT or any of their
affiliates on the terms hereinafter set forth; it being acknowledged by Employee
that CNT would not have entered into the Stock Acquisition and that Employer
would not have entered into this Agreement without such agreement by Employee.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Employer and Employee,
intending legally to be bound, hereby agree as follows
Section 1. Agreement of Employment. Employer hereby agrees to employ
Employee and Employee hereby agrees to become and remain employed by Employer
for the Employment Period (as defined below), and upon and subject to the terms
and conditions hereafter set forth. For the purposes of this Agreement, the term
"Employment Period" shall mean the period ending thirty-seven (37) months from
the date hereof, unless Employee's employment under this Agreement is sooner
terminated in accordance with the terms hereof. Notwithstanding the foregoing,
following its expiration, the Employment Period hereunder shall be automatically
renewed for successive terms of twelve (12) months unless either party hereto
provides the other with thirty (30) days prior
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written notice of its intention to termination this Agreement upon the
expiration of the then current Employment Period.
Section 2. Employee Representations. Employee represents to Employer
that Employee is not subject to an employment agreement with any other employer,
nor to any other agreements under the terms of which he may be prohibited from
accepting employment with Employer, and that Employee may accept employment with
Employer effective as of the date hereof. Employee further represents that he
has a permanent visa permitting him to work and live in the United States of
America.
Section 3. Duties of Employee.
(a) Subject to the supervision and pursuant to the orders,
advice and directions of Employer given from time to time, Employee
shall perform his assigned duties as Director of Advanced Technology,
Internet Solutions Division. Such duties shall generally be consistent
with those of a development engineer and Employee's job title shall at
all times be maintained as a director or a reasonably equivalent title.
Unless Employee otherwise provides his written consent to Employer,
until January 1, 2002 (i) Employee's duties shall include, but not
necessarily be limited to, job activities which provide significant
involvement in the marketing or development of any Re-engineering
Software Products as such term is defined in Exhibit A hereto and (ii)
Employee's duties shall not generally expand beyond primarily providing
technical engineering services.
(b) Employee agrees that he will at all times and on a
full-time basis faithfully, industriously, and to the best of his
ability, experience and talents, perform all of the duties that may be
reasonably required of and from him pursuant to the terms hereof, to
the reasonable satisfaction of the Employer. Such duties shall
initially be rendered primarily at Employer's offices in Westborough,
Massachusetts; provided that, Employee shall undertake such travel as
is reasonably necessary in connection with the performance of his
duties. In addition, the Employer hereby agrees that Employee shall not
be required to transfer from Employer's Westborough office for a period
of three (3) years from the date hereof without the written consent of
Employee.
(c) Employee hereby agrees to refrain from engaging in any
business ventures or business enterprises which might significantly
interfere with the performance of his duties hereunder. Employee shall
at all times conduct himself in a manner that will not substantially
prejudice or injure the reputation of Employer, its other employees or
any of its affiliates.
Section 4. Employers Right to Benefits of Work Performed. Employer
shall be entitled to all of the benefits, emoluments, and profits arising from
or incident to any and all work, services, and advice of Employee performed or
rendered in the course of Employee's employment hereunder.
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Section 5. Compensation, Expenses and Benefits.
(a) Employer shall pay to Employee, and Employee shall accept
from Employer, during the Employment Period, in consideration for all
services to be performed by Employee, a salary at the rate of One
Hundred Fifteen Thousand Dollars ($115,000.00) per year during the
Employment Period (the "Salary"). The payment of the Salary as well as
any bonuses Employee may be entitled to receive shall be less
withholding and deductions required by law and Employee authorized
deductions, and the Salary shall be payable semi-monthly in arrears
during the Employment Period.
(b) In addition to the Salary described in Section 5(a) above,
Employee shall be eligible to receive a performance bonus for the 1999,
2000 and 2001 calendar years (and no other calendar years regardless of
the renewal of any Employment Period hereunder) based upon certain
revenues received by Employer as is detailed in Exhibit A attached
hereto and incorporated herein.
(c) In addition to the Salary described in Section 5(a) above,
Employee shall be eligible to participate in the executive bonus plan
of CNT to the same extent comparatively situated executives of CNT so
participate in such plan.
(d) In addition to the Salary described in Section 5(a) above,
Employer agrees to reimburse Employee promptly (in accordance with
policies and procedures adopted by Employer or CNT from time to time)
for all reasonable and necessary expenses incurred by Employee in
connection with Employer's or CNT's business, including without
limitation all reasonable and necessary expenses of travel, lodging,
entertainment, and meals away from home incurred by Employee in the
course of his employment hereunder. Employee agrees to keep and
maintain such records of such expenses as Employer or CNT may require
and to account to Employer therefor prior to any such reimbursement.
Employee shall comply with all reasonable and lawful policies and
procedures applied by Employer or CNT from time to time to its
employees generally and relating to or regulating, the nature and
extent of reimbursable expenses, and the manner of accounting and
reimbursement therefor.
(e) Employer hereby agrees to make available to Employee,
during the Employment Period, all benefits which are generally
available to similarly-situated employees of Employer or CNT, subject
to and on a basis consistent with the terms and conditions of such
benefits. Such benefits shall include benefits provided to similarly
situated employees of CNT, such as: health and dental insurance,
disability insurance, the right to participate in a 401(k) plan,
flexible spending accounts and eligibility to receive stock option
grants for shares of stock in CNT.
(f) In accordance with Employer's stated policy regarding
vacation time for employees, as the same may be amended from time to
time by Employer in its sole discretion, the number of days of
available vacation for each year shall increase over time based upon
the length of time Employee has been employed by Employer. For the
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purposes of this Agreement Employee shall as of the date hereof be
considered a fifth year employee under such vacation policy, which
level of seniority shall initially entitle Employee to twenty (20) days
of paid vacation each year.
(g) In accordance with the terms and conditions of any
applicable stock option plan of CNT and any related agreements,
Employee shall be granted as of the date hereof options to purchase up
to 25,000 shares of CNT's capital stock. Such options shall vest
beginning on December 3, 1999 and each December 3 thereafter until
December 3, 2002 in increments of 6,250 shares.
Section 6. Noncompetition. Employee recognizes and agrees that the
nature of the CNT's and the Employer's business in which he shall be providing
services extends throughout the planet Earth, the continents of North America,
South America, Africa, Asia, Europe and Antarctica and the United States of
America and Canada (the "Territory"). Employee further recognizes and
acknowledges that CNT and the Employer currently are engaged in the businesses
of creating, developing, marketing and/or providing consultation, repair,
maintenance and training services for (i) software products and solutions
commonly known within the Employer's and CNT's industry as "legacy extension"
that allow for the continued use and integration of business critical software
applications, including all terminal based applications (3270, 5250, VT100 and
VT220, etc.) which run on IBM S/390 and plug compatible (e.g. Hitachi, Amdahl,
etc.) mainframes, IBM Systems/3X, IBM AS/400, Unisys systems, Burroughs,
Honeywell, ICL, Bull, Siemens, including, but not limited to software programs
that provide such legacy extension capabilities utilizing the techniques known
as "screen scraping", "message based interfacing" and "database interfacing";
(ii) software development tools and solutions that facilitate a developers
integration of multiple data and/or transactional sources typically found in the
business environments (such applications commonly known in the Employer's and
CNT's industry as Middleware or Enterprise Application Integration solutions
from vendors such as Active Software, Neon, Tibco Vitria and Crossworlds; (iii)
software products and solutions which provide the software development
functionality commonly known within CNT's and Employer's industry as "workflow"
or "process flow"; and (iv) software products and solutions which assist in the
automation of business processes for entities engaged in reinsurance business
(the "Employer Activities"). Specifically excluded from Employer Activities at
all times after the termination of Employee's employment shall be the Employee's
right to work for systems integrators (e.g. Cambridge Technology Partners, CSC,
KPMG, Price Waterhouse, etc.) and value added resellers, those companies who
produce an integrated solution which solves a specific business purpose but
whose product is not generally considered a development tool (e.g. SAP, BAAN,
Peoplesoft, etc.). In consideration of the foregoing, the substantial personal
benefit Employee has derived from the Stock Acquisition and will derive from
being employed by Employer and the payments described in Section 5(b) above, the
Employee covenants and agrees as follows:
(a) Period of Covenant. The term of the noncompetition
covenant shall be for the period beginning as of the date hereof and
ending the later of either (i) four (4) years from the date hereof, or
(ii) the date Employee's employment with Employer is terminated (the
"Noncompetition Period").
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(b) Nature and Scope of Covenant. The Employee covenants and
agrees not to carry on or engage in, directly or indirectly, on its own
behalf or by or through any other person or entity, any business or
other activity in competition with the Employer Activities of the
Employer, CNT or any affiliates of the Employer or CNT during the
Noncompetition Period throughout the Territory. Without limiting the
generality of the foregoing, the Employee covenants and agrees that
during the Noncompetition Period it will not, directly or indirectly,
throughout the Territory.
(A) own any interest in, manage or serve as an
employee of or consultant, business advisor or independent
contractor for any individual, corporation, partnership,
association, joint venture or other entity which is engaged in
a business in competition with the Employer Activities as they
are conducted during the Employment Period.
(B) solicit business similar to the Employer
Activities from any customer that has done business with, or
potential customers that have been in contact with, the
Employer, CNT or any affiliates of the Employer or CNT during
the Employment Period;
(C) make a loan to or guarantee the obligations of,
any individual or entity engaged in the Employer Activities or
make a loan to, or guarantee the obligations of, any owner,
officer, director, partner or shareholder thereof;
(D) request, induce or attempt to influence any
supplier of goods or services to the Employer, CNT or any
affiliates of the Employer or CNT to curtail or cancel any
business it transacts with the Employer, CNT or any such
affiliate with respect to the Employer Activities; or
(E) request, induce or attempt to influence any
employee of the Employer, CNT or any affiliates of the
Employer or CNT to terminate his or her employment with the
Employer, CNT or any such affiliate, or attempt to dissuade
any then current employee of the Employer, CNT or any
affiliates of the Employer or CNT from continuing employment
with the Employer, CNT or any such affiliate.
Notwithstanding the foregoing, the parties hereby recognize that
Employee may (1) upon the approval or instruction of Employer work with
a company affiliated with Employer, (2) hold up to two percent (2%)
shares of stock or other securities in a company in competition with
the Employer Activities whose securities are traded on a public
exchange and (3) invest through mutual funds, investment trusts or
other diversified investment vehicles which Employee does not directly
or indirectly manage, control or otherwise participate in investment
decisions without violating the terms of this Section 6.
It is further agreed that if any portion of such restrictive covenant
is held to be unreasonable, arbitrary or against public policy, then
such covenant shall be considered divisible both as to time and
geographic area, with each year being deemed a separate period of time
and
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each geographic area described above being deemed a separate geographic
area, it being the intention of the parties that a lesser period of
time or geographic area shall be enforced so long as the same is not
unreasonable, arbitrary or against public policy. The parties agree
that, in the event any court of competent jurisdiction determines that
a specified time period or a specified geographic area is unreasonable,
arbitrary or against public policy, a lesser time period or geographic
area which is determined to be reasonable, nonarbitrary and not against
public policy may be enforced against the Employee.
Section 7. Nondisclosure of Confidential Information.
(a) For the Employment Period and all times after the
termination of this Agreement, Employee covenants and agrees to treat
as confidential and not to disclose and to use only for the advancement
of the interests of Employer all information, plans, records, trade
secrets, business secrets, and confidential or other data of Employer
or any affiliate of Employer, submitted to Employee or compiled,
received, or otherwise discovered by Employee from time to time in the
course of his employment by Employer for use in Employer's business or
that of any affiliate of Employer. Information shall not be considered
confidential or proprietary if it generally is available in the public
domain through no direct or indirect action of Employee.
Notwithstanding the foregoing, the existence of a trade secret or the
confidential nature of proprietary information will not be negated
merely because a person has acquired a trade secret or proprietary
information without express or specific notice that it is a trade
secret or proprietary information if, under all the circumstances, such
person knows or has reason to know that the party who owns the
information or has disclosed it intends or expects the secrecy of the
type of information comprising the trade secret or proprietary
information to be maintained.
(b) Employee agrees that upon termination of his employment
with Employer, for any reason, voluntary or involuntary, with or
without cause, he will immediately return to the Employer any property,
customer lists, written information, forms, formulae, plans, documents
or other written or computer material or data, software or firmware, or
copies of the same, belonging to Employer or any of its affiliates, or
any of their customers, within his possession, and will not at any time
thereafter copy, reproduce or otherwise facilitate the future
disclosure of the same. Employee agrees that, following such
termination of employment, he shall not disclose or use any
proprietary, secret or confidential information, relating to the
products, equipment, methods of manufacture, inventions, discoveries or
trade secrets, price lists, computer programs, customer lists, business
plans or other proprietary information related to the business of the
Employer which he acquires, develops, designs or produces while
employed by Employer and that all embodiments of such information shall
belong to Employer. Employee further agrees that he will not retain or
use for his account at any time any trade names, trade mark, service
mark, or other proprietary business designation used or owned in
connection with the business of Employer or its affiliates.
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Section 8. Enforcement; Remedies; Construction.
(a) Employee covenants, agrees, and recognizes that because
the breach or threatened breach of the covenants, or any of them,
contained in Sections 6 and 7 will result in immediate and irreparable
injury to the Employer and CNT, the Employer and/or CNT shall be
entitled to an injunction restraining the Employee or any of his
affiliates or future employers or entities he serves as a contractor
from any violation of Sections 6 and 7 to the fullest extent allowed by
law. The Employee further covenants and agrees that in the event of a
violation of any of its respective covenants and agreements contained
in Sections 6 and 7 hereof, the Employer and/or CNT shall be entitled
to an accounting of all profits, compensation, commissions,
remunerations or benefits which the Employee directly or indirectly has
realized and/or may realize as a result of, growing out of or in
connection with any such violation. Employer and/or CNT shall further
be entitled to pursue any and all legal or equitable remedies which may
be available to them for any such breach or threatened breach.
(b) Employee agrees that in the event he breaches the
covenants, or any of them, contained in Section 6, then the
Noncompetition Period shall be automatically extended by the length of
time any such breach remains continuing; provided, however, this
provision shall be of no effect if Employer fails to claim a breach by
Employee of any such covenant by the later of four (4) years from the
date hereof or one (1) year following the termination of Employee's
employment.
(c) The Employee hereby expressly acknowledges and agrees as
follows:
(i) that the covenants set forth in Sections 6 and 7
above are reasonable in all respects and are necessary to
protect the legitimate business and competitive interests of
the Employer, CNT and their affiliates; and
(ii) that each of the covenants set forth in Sections
6 and 7 and the subdivisions thereof is separately and
independently given, and each such covenant is intended to be
enforceable separately and independently of the other such
covenants, including, without limitation, enforcement by
injunction;
provided, however, that the invalidity or unenforceability of this
Agreement in any respect shall not affect the validity or
enforceability of this Agreement in any other respect. In the event
that any provision of this Agreement shall be held invalid or
unenforceable by a court of competent jurisdiction by reason of the
geographic or business scope or the duration thereof or for any other
reason, such invalidity or unenforceability shall attach only to the
particular aspect of such provision found invalid or unenforceable as
applied and shall not affect or render invalid or unenforceable any
other provision of this Agreement or the enforcement of such provision
in other circumstances, and, to the fullest extent permitted by law,
this Agreement shall be construed as if the geographic or business
scope or the duration of such provision or other basis on which such
provision has been challenged had been more narrowly drafted so as not
to be invalid or unenforceable.
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Section 9. Termination. If the term of Employee's employment under this
Agreement has not sooner expired by lapse of an applicable notice period or
otherwise under the terms hereof, the term of Employee's employment hereunder
shall terminate upon the occurrence of any of the following:
(a) The death, incapacity or any disability which would
trigger Employee's rights to receive benefits under any then existing
long term disability insurance program maintained by Employer (it being
assumed Employee is a participant in such program) of Employee;
(b) Without cause at the election of Employer upon at least
thirty (30) days prior written notice delivered to Employee;
(c) Without cause at the election of Employee upon at least
thirty (30) days prior written notice delivered to Employer;
(d) For Cause at the election of the Employer by providing
Employee with written notice which outlines the "Cause" reason for the
Employer's action. "Cause" shall mean: (i) dishonesty, alcoholism which
impairs Employee's ability to perform his duties hereunder, addiction
to drugs or convictions of a felony or a misdemeanor (other than
traffic violations), (ii) the material breach of any covenant contained
in this Agreement, including, without limitation, failure to devote
substantially all of his business time to the business of Employer,
(iii) the failure of Employee to maintain an effective visa permitting
him to live and work in the United States of America under applicable
immigration law, or (iv) any (A) acts of material insubordination by
Employee or (B) the repeated or material failure of Employee to perform
his duties hereunder as an employee of Employer after Employee has
received notice of such failure and has been given a reasonable
opportunity to cure the same; or
(e) For Cause at the election of Employee by providing
Employer which outlines the "Cause" reason for the Employee's action.
"Cause" shall mean: (i) the failure to pay when due any amounts owing
to Employee hereunder and (ii) any material breach of any covenant
contained hereunder by Employer, in each case which is not corrected
within a reasonable time after Employee notifies Employer of such
failure or breach.
Upon the termination of Employee's employment pursuant to this Section
9 for any reason, Employee's right to further compensation and benefits under
this Agreement shall cease; provided, however, that Employee shall remain
entitled to (i) any unpaid compensation, bonuses and benefits accrued prior to
such termination, (ii) any expense reimbursements to which he was entitled at
the date of such termination, and (iii) any payments of bonus which Section 5(b)
and Exhibit A attached hereto specifically state Employee remains entitled or
eligible to receive. In addition, subject to the terms and conditions of CNT's
stock option plan and any related agreements between Employee and CNT, Employee
shall remain entitled to any stock options in which he is vested at the date of
termination. Subject to the provisions of Section 5(b) and Exhibit A, any unpaid
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compensation, bonuses and benefits accrued prior to the termination of
Employee's employment hereunder to which Employee is entitled shall be paid
within thirty (30) days of such termination.
Notwithstanding the foregoing, in the event Employer terminates the
employment of Employee without cause at any time during the Employment Period,
then Employer shall continue to pay Employee an amount equal to the Salary (less
applicable withholdings or deductions required by law) in a manner which
generally mirrors Employer's standard payroll practices for a period of six (6)
months. Regardless of the prior sentence, Employer, in its sole discretion, may
accelerate the payments referenced above at any time and in any amount from time
to time.
Notwithstanding any other provision herein to the contrary, the
obligations of Employee under Sections 6 or 7 hereof shall survive the
termination (for any reason) of Employee's employment under this Agreement.
Section 10. Enforcement of Employee-Restrictions. Employee acknowledges
that he has carefully read and considered the provisions of this Agreement and,
having done so, agrees that the restrictions set forth in this Agreement in
Sections 6 and 7 are fair and reasonable and are necessarily required for the
protection of the interests of Employer, CNT and their affiliates. Employee
covenants and agrees with Employer that if he shall violate any of the covenants
or agreements contained in this Agreement, then Employer shall be entitled to an
accounting and repayment of all profits, compensation, commissions,
remunerations or benefits which Employee directly or indirectly has realized as
a result, growing out of or in connection with any such violations; such remedy
to be in addition to and not in limitation of any injunctive relief or other
rights or remedies to which Employer, CNT or their affiliates is or may be
entitled to at law or in equity.
Further, should Employee breach the provisions of Section 6 or 7
hereof, Employee shall forfeit his right to receive any and all bonuses whether
or not accrued and whether payable pursuant to Section 5(b) or otherwise;
provided, however, that if Employee breaches Section 7 hereof other than through
any act of gross negligence, recklessness or malintent, he shall remain entitled
to receive any such bonuses to the extent such bonuses exceed the recoverable
damages of Employer, CNT and their affiliates caused by such breach. The
provisions of this Section 10 shall survive the termination of this Agreement.
Section 11. Assignment of Developments.
(a) Works Made for Hire. Employee understands that as part of
his job duties he may be asked to create, or contribute to the creation
of, computer programs, documentation and other copyrightable works.
Employee agrees that any and all computer programs, documentation and
other copyrightable materials that he is asked to prepare or work on as
part of his employment with Employer shall be "works made for hire" and
that Employer shall own all the copyright rights in such works. IF AND
TO THE EXTENT ANY SUCH MATERIAL DOES NOT SATISFY THE LEGAL REQUIREMENTS
TO CONSTITUTE A WORK MADE FOR HIRE, EMPLOYEE
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HEREBY ASSIGNS ALL HIS COPYRIGHT RIGHTS IN THE WORK TO EMPLOYER.
(b) Disclosure of Developments: While Employee is employed by
Employer, Employee will promptly inform Employer of the full details of
his inventions, discoveries, improvements, innovations and ideas
(collectively called "Developments") whether or not patentable,
copyrightable or otherwise predictable that he conceives, completes or
reduces to practice (whether jointly or with others) and which:
(i) relate to Employer's present or prospective
business, or actual or demonstrably anticipated research and
development; or
(ii) result from any work Employee does using any
equipment, facilities (exclusive of personal activities of
Employee conducted outside the course of his employment in his
home), materials, trade secrets or personnel of Employer in
the course of their service to Employer; or
(iii) results from or are suggested by any work that
Employee may reasonably be expected to do for Employer in the
course of his employment.
(c) Assignment of Developments. Employee hereby assigns to
Employer or Employer's designee, his entire right, title and interest
in all of the following, that Employee conceives or makes (whether
alone or with others) while employed by Employer:
(i) all Developments;
(ii) all copyrights, trade secrets, trademarks and
mask work rights in Developments; and
(iii) all patent applications filed and patents
granted on any Developments, including those in foreign
countries.
(d) Notice Pursuant to State Law. Employee acknowledges and
understands that this Agreement does not apply to any invention that
qualifies fully under the provisions of Minnesota Statutes Annotated
Sections 181.78(1) and (2), the text of which is attached as Exhibit B.
Employee acknowledges this section shall serve as written notice to
Employee as required by Minnesota Statutes Annotated Section 181.78(3).
(e) Further Assurances. Employee hereby agrees that he shall
execute any and all such documents, instruments, agreements or
certificates and take such other actions as Employer may reasonably
request to further secure Employer's rights in and title to any
Developments.
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Section 12. Notices. All notices required or permitted hereunder shall
be deemed to be duly given if in writing and delivered personally or sent by
United States registered or certified mail, return receipt requested, postage
pre-paid, addressed as follows:
Employee: Aleksandr A. Elkin
8 Ethan Allen Drive
Acton, Massachusetts 01720
Employer: IntelliFrame Corporation
c/o Computer Network Technology Corporation
605 North Highway 169
Minneapolis, Minnesota 55441
Attn: Greg Barnum
Facsimile: 612-797-6800
or at such changed addresses as the parties may designate in writing.
Section 13. Miscellaneous.
(a) Headings. Headings, titles and captions contained in this
Agreement are inserted only as a matter of convenience and reference
and in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any provisions hereof.
(b) Entire Agreement. This writing constitutes the entire
agreement between the parties hereto and supersedes any prior
understanding or agreements between them respecting the subject matter
herein contained. There are no extraneous representations,
arrangements, understandings, or agreements, oral or written, in
respect of the subject matter of this Agreement, between the parties
hereto, except those fully expressed herein.
(c) Amendments. No amendments, changes, alterations,
modifications, additions and qualifications to the terms of this
Agreement shall be made or binding unless made in writing and signed by
all the parties hereto; provided any such amendment to Section 14 shall
not be made or binding unless made in writing and signed by Employer
and Employee.
(d) Waiver. The failure of either party to enforce at any time
any of the provisions of this Agreement shall not be construed as a
waiver of such provisions or of the right of such party thereafter to
enforce any such provisions.
(e) Invalidity and Severability. The invalidity or
unenforceability of any particular provision of this Agreement shall
not affect the enforceability of other provisions hereof, and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
11
<PAGE>
(f) Governing Law. This Agreement shall be construed and
governed in accordance with the laws of the State of Minnesota.
Employee hereby consents to the jurisdiction of any local, state or
Federal court located in the State of Minnesota, and consents to
service of process by certified or registered mail, return receipt
requested, directed to Employee at Employees address stated in Section
12 of this Agreement. Employee waives the right to trial by jury in
connection with the resolution of any disputes that may arise under
this Agreement.
(g) Burden and Benefit. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their heirs,
successors and permitted assigns. This Agreement is not assignable by
Employee. Employer may assign this Agreement to any successor owner of
the business of Employer or to any company affiliated with Employer, at
any time, provided that prior to making any such assignment Employer
shall give Employee notice thereof.
(h) Affiliates. As used herein the term "affiliates" when used
with respect to the Employer or CNT shall include, but not necessarily
be limited to, any and all legal entities controlled by or under common
control with Employer or CNT.
(i) Life Insurance. Each of the parties hereto stipulates and
agrees that the Employer shall have an insurable interest in the life
of the Employee as a key employee of the Employer. The Employer shall
have the right to apply and pay premiums for policies of insurance on
the life of Employee whenever, in the opinion of Employer, such
insurance may be necessary or desirable. The Employer shall be the sole
owner of such policies and may apply to the payments of any premiums
any dividends declared or paid on such policies. Employee agrees to
cooperate in the application process for any such policies including
submitting to physical examinations or tests and providing all
information required to obtain such policies.
Section 14. EXPECTATIONS REGARDING EMPLOYMENT, SERVICE AS OFFICER OF
EMPLOYER. EMPLOYER AND EMPLOYEE AGREE THAT THIS AGREEMENT EXPRESSES ALL OF THE
EXPECTATIONS BETWEEN EMPLOYEE AND EMPLOYER, WHETHER UNDER SECTION 302A.751 OF
THE MINNESOTA BUSINESS CORPORATION ACT OR OTHERWISE, REGARDING THE TERM OF
EMPLOYEE'S EMPLOYMENT AND EMPLOYEE'S AND EMPLOYER'S RIGHT TO TERMINATE THAT
EMPLOYMENT. THE EMPLOYEE SHALL HAVE NO GREATER RIGHTS AS AN EMPLOYEE OR, ONLY IF
APPLICABLE, AN OFFICER, DIRECTOR AND/OR SHAREHOLDER OF EMPLOYER (OR OF ANY
DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF EMPLOYER) THAN ANY OTHER
PERSON WHO IS NOT RELATED TO EMPLOYER OR SUCH AFFILIATE IN ANY SUCH CAPACITY.
EMPLOYER HEREBY ADVISES EMPLOYEE THAT EMPLOYER WOULD NOT ENTER INTO THIS
AGREEMENT (OR, ONLY IF APPLICABLE, ELECT EMPLOYEE AS AN OFFICER AND/OR DIRECTOR
OR ISSUE ANY EQUITY RIGHTS TO EMPLOYEE) IF THE EMPLOYEE HAD ANY EXPECTATION THAT
THE EMPLOYEE'S SERVICE AS AN EMPLOYEE (OR, ONLY IF APPLICABLE, SERVICE AS AN
OFFICER AND/OR DIRECTOR
12
<PAGE>
OR POSITION AS A SHAREHOLDER) WOULD ENTITLE EMPLOYEE TO CONTINUED EMPLOYMENT
WITH (OR, ONLY IF APPLICABLE, CONTINUED STATUS AS AN OFFICER, DIRECTOR OR
SHAREHOLDER) OF EMPLOYER OR ANY AFFILIATE OF EMPLOYER OTHER THAN AS SET FORTH IN
THIS AGREEMENT. WITHOUT LIMITING THE FOREGOING SENTENCES, EMPLOYEE ACKNOWLEDGES
THAT EMPLOYER IN ITS SOLE DISCRETION MAY DECLINE IN THE FUTURE TO RENEW HIS
EMPLOYMENT BEYOND THE TERMS OF THIS AGREEMENT FOR ANY REASON. EMPLOYEE CONFIRMS
THAT EMPLOYEE HAS CAREFULLY REVIEWED THIS AGREEMENT AND UNDERSTANDS IT. EMPLOYEE
FURTHER CONFIRMS THAT EMPLOYEE HAS CONSULTED WITH LEGAL COUNSEL REPRESENTING
EMPLOYEE CONCERNING THIS AGREEMENT AND ANY OTHER AGREEMENTS BETWEEN OR AMONG
EMPLOYEE, EMPLOYER AND ANY OF ITS PRESENT OR PROSPECTIVE SHAREHOLDERS, OFFICERS,
DIRECTORS AND/OR OTHER AFFILIATES.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
EMPLOYER:
---------
INTELLIFRAME CORPORATION
By: _____________________________
Name: ___________________________
Title: __________________________
EMPLOYEE:
---------
-----------------------------------
Name: Aleksandr A. Elkin
For and in consideration of Employee's agreement to be bound by Section
6 and 7 of this Agreement for the benefit of CNT, CNT hereby unconditionally and
irrevocably guarantees the full and punctual performance of all of Employer's,
obligations and payment of all amounts due under this Agreement, including but
not limited to all amounts due pursuant to Section 5(b) and Exhibit A. CNT also
agrees to comply with providing such information under Paragraph 1(a)(ii) of
such Exhibit A as is reasonably necessary to allow for any bonus payments owing
under 5(b) and Exhibit A to be appropriately calculated, and will cooperate in
providing to Employee all information reasonably requested in connection with
any audit conducted under Paragraph 6 of such Exhibit A.
14
<PAGE>
This Guarantee is a guarantee of payment and not collection; guarantor
shall be deemed a primary obligor and Employee may assert a claim directly
against CNT without first seeking recovery against Employer. CNT hereby waives
all surityship defenses and defenses in the nature thereof.
COMPUTER NETWORK TECHNOLOGY
CORPORATION
By: _____________________________
Name/Title: _____________________
15
<PAGE>
EXHIBIT A
---------
1. Definitions. As used in this Exhibit A the following terms shall have the
following meanings:
(a) (i) "Re-engineering Product Revenues" shall mean all revenue
recognized by Employer, CNT and other subsidiaries of CNT as provided
in clause (ii), from (1) selling, leasing or licensing Re-engineering
Software Products (including primary license charges, annual license
charges and monthly license charges), or (2) the Sale of a Principal
Re-engineering Product. Re-engineering Product Revenue does not include
revenue from (A) providing standard customer support and maintenance of
such Re-engineering Software Products, or (B) providing implementation,
management, industrial or other consulting services of any nature to
customers or clients.
(ii) Employer, CNT and other subsidiaries of CNT shall measure
Re-engineering Product Revenue in the same manner that CNT and its
other subsidiaries recognized revenue for financial statement purposes.
Employer shall maintain procedures to measure Re-engineering Product
Revenue in accordance with such revenue recognition practices.
(b) "Re-engineering Software Products" shall mean (i) the products
developed and/or marketed by Employer, CNT or other subsidiaries of CNT
commonly known as "Enterprise/Access", "Web/Integrator", "MapMaker",
"Process Dynamics", "ReSolution" and "Star Framework" as well as all
Enhancements and Derivative Works of such products, as well as (ii) any
similar additional products acquired, developed and/or marketed by
Employer, CNT or other subsidiaries of CNT which provide software
development and deployment tools that provide applications with an
abstraction from their underlying environment (hardware, operating
systems, networks) and provide interoperability between applications
and/or components of applications as well as all Enhancements and
Derivative works of such additional products. Except as set forth above
no other products of either Employer, CNT or other subsidiaries of CNT
shall constitute or be considered a Re-engineering Software Product.
(c ) "Derivative Works" shall mean a work which is based upon one or
more preexisting works, such as a revision, Enhancement, modification,
translation, abridgment, condensation, expansion or any other form in
which such preexisting works may be recast, transformed or adapted and
which, if prepared without authorization of the owner of the copyright
in such preexisting work, would constitute a copyright infringement.
(d) "Enhancement" shall mean any Derivative Work that improves
functions, adds new functions, features, text or other materials,
improves performance, adds new value or utility, supports new
input/output devices or provides other updates.
<PAGE>
(e) "Base Revenue" for Re-engineering Product Revenue, in millions of
dollars, are as follows:
1999 calendar year $9.1;
2000 calendar year $11.4; and
2001 calendar year $14.2.
(f) "Sale of a Principal Re-engineering Product" shall mean the sale to
any third party in a transaction which does not constitute a Change of
Control, of all or substantially all of Employer's, CNT's, and CNT's
other subsidiaries' interests in any of their products commonly known
as "Process Dynamics", "ReSolution" or "Star Framework" as well as any
Derivative Works or Enhancements of such products.
(g) "Change of Control" shall mean any transaction pursuant to which
(i) voting control of more than fifty percent (50%) of the outstanding
capital stock of Employer or CNT shall be transferred to a third party
which is not controlled by or under common control with CNT (an
"Unaffiliated Third Party"), (ii) a transfer of substantially all of
the assets of Employer or CNT to an Unaffiliated Third Party, or (iii)
any merger or consolidation of Employer or CNT with any Unaffiliated
Third Party pursuant to which Employer or CNT is not the surviving
entity and in which shareholders of CNT or Employer do not own more
than fifty percent (50%) of the outstanding voting securities of the
surviving entity.
2. Calculation of Bonus Payments. Subject to the adjustments and limitations set
forth in Paragraphs 3 and 4 below, for each of the 1999, 2000 and 2001 calendar
years the Employer shall pay to the Employee ten percent (10%) of the amount, if
any, by which the Re-engineering Product Revenues exceed the Base Revenue for
such year. Any such payment shall be made by wire transfer to an account in the
United States of America of certified funds or by delivery of a cashiers or
certified check to the address set forth in the "Notice" section of the
Agreement. Any such payment shall be made within sixty (60) days of the end of
the calendar year to which the payment pertains. When payment is made, Employer
shall provide Employee with a reasonably detailed summary of how the amount of
the payment was calculated.
3. Certain Adjustments to Bonus Payments.
(a) In the event that Employee terminates his employment with Employer
prior to January 1, 2000, then no bonus payments whatsoever shall be
owing to Employee pursuant to Section 5(b) and this Exhibit A of the
Agreement for any calendar year.
(b) In the event that Employee terminates his employment with Employer
after January 1, 2000 and prior to July 1, 2000, then the bonus payment
calculated pursuant to Section 5(b) and this Exhibit A of the
Agreement:
(i) for the calendar year 2000, shall be calculated by (A)
dividing the Base Revenue which pertains to such year by
twelve (12) (the "Monthly Base Revenue"), then (B) multiplying
the Monthly Base Revenue by the number of
2
<PAGE>
complete calendar months the Employee was employed by Employer
during the year 2000 (the "Termination Year Employment Time")
to arrive at an adjusted base revenue amount (the "Adjusted
Base Revenue"), and then (C) subtracting the Adjusted Base
Revenue from the Re-engineering Product Revenues recognized
during the Termination Year Employment Time and multiplying
such sum amount (if it greater than zero) by a fraction the
numerator of which is one and the denominator of which is ten;
and
(ii) for all periods of time from and after July 1, 2000,
shall not be due and payable to Employee.
(c) In the event that Employee terminates his employment with the
Employer on or after July 1, 2000, then Employee shall remain entitled
to the bonus payments as calculated in Section 5(b) of the Agreement
and this Exhibit A.
(d) Notwithstanding the provisions of Sections 3 (a-c) above, in the
event that Employee's employment with Employer is terminated because of
(i) a material breach by Employer under the Agreement which is not
cured within a reasonable period of time, (ii) Employee's death,
incapacity or disability (as described in Section 9 of the Agreement),
or (iii) a without cause termination by Employer; then the bonus
payments owing pursuant to Section 5(b) and this Exhibit A of the
Agreement shall still be due and payable to Employee.
(e) In the event that the employment of Scott G. Opitz is terminated
with the Employer prior to July 1, 2000 other than because of (i) a
material breach of Employer under his employment agreement with
Employer which is not cured within a reasonable period of time, (ii)
his death, incapacity or disability (as set forth in Section 9 of his
employment agreement with Employer) or (iii) a without cause
termination by Employer; then the Employee shall be entitled to twenty
percent (20%) of the amount, if any, by which the Re-engineering
Product Revenues exceed the then applicable Base Revenue (1) for each
calendar month following such termination in the calendar year in which
such termination occurs, and (2) for each calendar year following such
termination. For further clarification, the bonus payable to the
Employee with respect to the calendar year in which such a termination
occurs shall be in an amount equal to: (i) the bonus which would have
otherwise been payable to Employee had the termination of Scott G.
Opitz's employment not occurred (the "Standard Bonus"), plus (ii) the
Standard Bonus multiplied by a fraction, the numerator of which is the
number of calendar months in such calendar year which follow the month
in which the termination occurred and the denominator of which is
twelve (12). Notwithstanding any of the foregoing, in order for
Employee to be eligible to receive the additional amounts of bonus
above the Standard Bonus payable under this subparagraph (c) he must be
employed by Employer on December 31st of the year in which the
employment of Scott G. Opitz terminates with Employer.
4. Limitations on Amount of Bonus Payable. Notwithstanding anything herein to
the contrary, the aggregate amount of bonus payable to Employee pursuant to
Section 5(b) of the Agreement and this Exhibit A shall be limited as follows:
3
<PAGE>
(a) if the amount of bonus payments due and payable to Employee with
respect to calendar year 1999 reaches Six Million Dollars
($6,000,000.00), then no further bonus payments beyond such amount
whatsoever shall become due and payable to Employee hereunder;
provided, however, that if there shall be a Sale of a Principal
Re-engineering Product in such 1999 calendar year, then such limitation
shall be increased to Eight Million Dollars ($8,000,000.00);
(b) if the applicable threshold of subparagraph (a) has not been
obtained and the aggregate amount of bonus payments due and payable to
Employee with respect to calendar years 1999 and 2000 reaches Five
Million Dollars ($5,000,000.00), then no further bonus payments beyond
such amount whatsoever shall become due and payable to Employee
hereunder; provided, however, that if there shall be a Sale of a
Principal Re-Engineering Product in either such 1999 or 2000 calendar
year; then such limitation shall be increased to Six Million Dollars
($6,000,000.00); and
(c) if none of the applicable thresholds set forth in subparagraphs (a)
or (b) have been obtained, then the aggregate bonus payments payable to
Employee hereunder shall not exceed Four Million Dollars
($4,000,000.00).
5. Agreement to Market/ Discontinuance of Re-Engineering Software Product by
Employer / Change of Control. Subject to the other provisions of this Exhibit A,
should Employer or CNT (i) exclusive of any failure caused by a Change of
Control, completely fail to market the product line of Re-Engineering Software
Products for a continuous period of three (3) months prior to December 31, 2001,
(ii) undergo any Change of Control which later results in a complete failure to
market the product line of Re-engineering Software Products for a continuous
period of three (3) months both prior to December 31, 2001 and subsequent to the
final consummation of the Change of Control, or (iii) otherwise materially fail
during any continuous period of three (3) months prior to December 31, 2001
(taking into account all of the circumstances of CNT's and Employer's business
as well as the totality of all their actions during such three (3) month period)
to use commercially reasonable efforts, consistent with reasonable business
judgment, to market the product line of Re-engineering Software Products (in
each instance such failure occurring for reasons other than such Re-Engineering
Software Products becoming obsolete due to the development of superior
technologies by third parties), then Employee shall be entitled to receive
within sixty (60) days of January 1, 2002 an amount (if a positive number) equal
to Four Million Dollars ($4,000,000.00) less the aggregate of all payments of
bonus previously made to Employee pursuant to Section 5(b) and this Exhibit A of
the Agreement. Upon the occurrence of such an event causing Employee to become
entitled to receive such a payment, the obligations to make any other payments
of bonus to Employee hereunder shall cease.
In the event a Change of Control is finally consummated the parties
hereby agree that notwithstanding any other provision herein to the contrary:
4
<PAGE>
(a) the references to the date "July 1, 2000" contained in Paragraphs
3(b), 3(c) and 3(e) shall be read to read the earlier of July 1, 2000
or the date which is the one (1) year anniversary of the final
consummation of the Change of Control;
(b) the definition of Re-Engineering Software Products shall only be
inclusive of those Re-Engineering Software Products in existence
immediately prior to the consummation of the Change of Control and any
Derivative Works and Enhancements thereof which are subsequently
developed; and
(c) the aggregate amount of bonuses payable to Employee hereunder shall
be limited to Four Million Dollars ($4,000,000.00); provided, however,
that notwithstanding such limitation, but still subject to the
limitations of Section 4 hereof, the parties hereby agree that Employee
shall remain entitled to any and all payments of bonus which have
accrued through the date of the consummation of the Change of Control.
For the calendar year in which such Change of Control is consummated,
such accrued bonus shall be calculated by (A) multiplying the Monthly
Base Revenue for such calendar year by the number of complete calendar
months in such calendar year prior to the date the Change of Control is
finally consummated (the "Pre-Change of Control Period") to arrive at
an Adjusted Base Revenue for such calendar year, and then (B)
subtracting such Adjusted Base Revenue from the Re-engineering Product
Revenues recognized during the Pre-Change of Control Period and
multiplying such sum amount (if it greater than zero) by a fraction the
numerator of which is one and the denominator of which is ten.
6. Right of Audit. Employer hereby agrees that no more than once with respect to
each of the calendar years 1999, 2000 and 2001 the Employee shall be entitled to
conduct an audit of the data used to calculate any bonus payments due and
payable to Employee for such calendar year. Such audit shall be conducted by an
independent certified public accountant selected by Employee and reasonably
acceptable to Employer and CNT. Such audit shall be completed at the sole cost
and expense of Employee; provided that should such audit reveal a discrepancy
favorable to Employee of more than three (3%) percent between the bonus payment
as calculated by Employer vis a vis that determined by the audit, then the costs
and expense of such audit shall be borne solely by Employer.
7. Arbitration. Any dispute over the right of Employee to receive any payment of
bonus pursuant to Section 5(b) of the Agreement and this Exhibit A shall be
resolved by arbitration in accordance with the same procedures and terms as are
set forth in Section 12.1 of the Purchase Agreement.
5
<PAGE>
EXHIBIT B
---------
Minnesota Statutes Annotated Section 181.78 provides as follows:
Subdivision 1. Any provision in an employment agreement that provides
that an employee shall assign or offer to assign any of the employee's rights in
an invention to the employer shall not apply to an invention for which no
equipment, supplies, facility or trade secret information of the employer was
used and that was developed entirely on the employee's own time, and
(1) that does not relate (a) directly to the business of the employer
or (b) to the actual or demonstrably anticipated research or development, or
(2) that does not result from any work performed by the employee for
the employer. Any provision that purports to apply to such an invention is to
that extent against the public policy of this state and is to that extent
unenforceable.
Subdivision 2. No employer shall require a provision made void and
unenforceable by subdivision 1 as a condition of employment or continuing
employment.
<PAGE>
Exhibit 99.2
[LETTERHEAD OF COMPUTER NETWORK TECHNOLOGY]
NEWS RELEASE
FOR IMMEDIATE RELEASE CONTACT: Greg Barnum, VP of Finance
612-797-6110
[email protected]
or
LeAnn Castillo, Dir. Of Comm.
612-797-6771
[email protected]
COMPUTER NETWORK TECHNOLOGY ACQUIRES INTELLIFRAME
ACQUISITION STRENGTHENS CNT'S POSITION IN GROWING MIDDLEWARE MARKET
MINNEAPOLIS, DECEMBER 8, 1998 -- Computer Network Technology Corp. (CNT(R))
announced today that it has acquired IntelliFrame Corporation, Philadelphia,
Pa.. IntelliFrame, a start-up software and services company, develops technology
for legacy systems integration with client/server and internet technologies. CNT
is purchasing IntelliFrame for $2.0 million in cash. The purchase price will be
paid in two installments of $1.0 million each in January 1999 and 2000. The
acquisition will be accounted for under the purchase method of accounting.
In connection with the acquisition, CNT expects a one-time, unspecified charge
against earnings in the fourth quarter of l998 for purchased in-process research
and development.
"This purchase of IntelliFrame provides CNT with exciting new technology that
complements our existing Internet products and strengthens our position in the
$1.7 billion Middleware market," said Thomas G. Hudson, CNT's president and
chief executive officer. "With IntelliFrame technology to manage software
development and deployment, network communications, business logic, and process
workflow, our customers will benefit from improved development and deployment
for large e-commerce and customer relationship management (CRM) applications."
-more-
<PAGE>
CNT Acquires IntelliFrame - page 2
Products based on the combined capabilities of IntelliFrame and CNT are
anticipated in mid-1999. Certain IntelliFrame employees will be eligible for
significant bonus payments through December 31, 2001, if future revenues from
CNT's Re-engineering Software products exceed certain defined targets.
IntelliFrame employees will be relocated to CNT's Massachusetts facility.
ABOUT INTELLIFRAME
IntelliFrame Corporation provides software development and consulting services
which are offered directly to end-users and indirectly through reseller
partners. The areas of technology focus for IntelliFrame are legacy systems
integration with client/server and Internet technologies, as well as the
development of highly portable deployment frameworks based on Java.
ABOUT COMPUTER NETWORK TECHNOLOGY (CNT)
Computer Network Technology (NASDAQ:CMNT), based in Minneapolis, Minn., is a
leading provider of enterprise integration and high-performance networking
solutions. The company's Enterprise/Connect, Enterprise/Access and
Web/Integrator products integrate legacy applications with frameworks, packaged
applications, or new environments, while also providing mainframe connectivity.
In addition, its Channelink(R), FileSpeed(TM), and UltraNet(R) product lines
offer high-speed open systems connectivity, access to legacy data and guaranteed
data integrity for applications such as remote storage, disk mirroring and
disaster recovery. The company's products are sold worldwide through a direct
sales force and a network of authorized distributors. For more information,
visit www.cnt.com, or call 1-800-638-8324 or 612-797-6000.
- -------------
All brand names and product names are trademarks or registered trademarks of
their respective companies.
Certain statements in this press release constitute "forward looking
statements." All forward looking statements involve risks and uncertainties, and
actual results may be materially different. The amount of any one-time
unspecified charge against earnings in the fourth quarter of 1998 for purchased
in-process research and development is dependent on the Company's review and
completion of the purchase price allocation for the IntelliFrame acquisition.
The timing and availability of products based on the combined capabilities of
IntelliFrame and CNT may be impacted by the timely completion of necessary
engineering and development activities, unforeseen technological barriers,
unanticipated expense, higher than expected commitments of engineering resource
and the level of customer acceptance. Additional factors that could impact the
Company's future results are described in the Company's most recently filed SEC
documents, including the Company's annual report on Form 10-K and quarterly
reports on Form 10-Q. The Company assumes no obligation to publicly release
results of any revision or updates to these forward looking statements to
reflect future events or unanticipated occurrences.
###
