UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission File Number 0-21138
June 30, 2000
BOCA RESEARCH, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2479377
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1601 Clint Moore Road
Boca Raton, Florida
(Address of principal 33487
executive offices) (Zip Code)
(561) 997-6227
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding as of
Class August 11, 2000
----- ---------------
Common stock, par value 11,608,788
$.01 per share
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<PAGE>
BOCA RESEARCH, INC.
Form 10-Q for the Quarter Ended June 30, 2000
INDEX
Page
Part I. FINANCIAL INFORMATION ----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(unaudited) as of June 30, 2000 and
December 31, 1999.......................... 3
Condensed Consolidated Statements of
Operations (unaudited) for the three and six
months ended June 30, 2000 and 1999 ....... 4
Condensed Consolidated Statements of
Cash Flows (unaudited) for the six
months ended June 30, 2000 and 1999........ 5
Notes to Condensed Consolidated
Financial Statements (unaudited)........... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 13
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.............................. 26
Items 2-3. Not applicable................................. 26
Item 4. Submission of Matters to a Vote of
Security Holders.............................. 26
Item 5. Other Information.............................. 27
Item 6. Exhibits and Reports on Form 8-K............... 28
Signatures................................................ 29
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<PAGE>
PART I. Item 1.
BOCA RESEARCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------------- ----------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents................................ $ 9,072 $ 11,819
Accounts receivables, net................................ 2,212 3,623
Inventory, net........................................... 835 3,672
Prepaid expenses and other current assets................ 998 789
---------- ----------
Total current assets................................... 13,117 19,903
Property and equipment, net................................ 1,100 2,039
Goodwill and other intangible assets....................... -- 3,369
Other assets............................................... 1,288 1,177
---------- ----------
Total assets......................................... $ 15,505 $ 26,488
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................... $ 3,907 $ 4,444
Deferred revenue......................................... 240 586
Accrued expenses and other current liabilities........... 5,121 3,619
---------- ----------
Total current liabilities 9,268 8,649
---------- ----------
Deferred revenue........................................... -- 16
---------- -----------
Other non-current liabilities.............................. 500 500
---------- -----------
Stockholders' equity:
Common stock, 25,000,000 $.01 par value shares
authorized, 11,601,438 issued and outstanding
at June 30, 2000, 11,475,793 issued and
outstanding at December 31, 1999........................ 116 115
Additional paid-in capital............................... 39,984 39,516
Deficit.................................................. (34,363) (22,308)
----------- ------------
Total stockholders' equity............................. 5,737 17,323
---------- -----------
Total liabilities and stockholders' equity........... $ 15,505 $ 26,488
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
BOCA RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales........................................ $ 3,437 $ 8,747 $ 8,092 $ 19,448
Cost of goods sold............................... 3,860 8,305 8,119 16,908
----- ------- ----- ------
Gross profit (loss)......................... (423) 442 (27) 2,540
------- -------- -------- ---------
Operating expenses:
Research and development.................... 853 891 1,571 1,974
Selling, general and administrative......... 4,003 4,342 7,229 9,304
Asset impairment and other charges.......... 4,633 -- 4,633 --
------ -------- ------- ---------
Total operating expenses.................... 9,489 5,233 13,433 11,278
----- ------- ------ ------
Loss from operations............................. (9,912) (4,791) (13,460) (8,738)
Non-operating income/(expense), net.............. 254 (38) 1,407 103
------ -------- ------- ---------
Loss before income taxes ........................ (9,658) (4,829) (12,053) (8,635)
Income taxes .................................... 2 6 2 6
--------- --------- ---------- ----------
Net loss......................................... $ (9,660) $ (4,835) $ (12,055) $ (8,641)
---------- ----------- ----------- -----------
Net loss per share (Basic and Diluted)........... $ ( 0.83) $ ( 0.51) $ (1.04) $ (0.95)
--------- ---------- ---------- -----------
Weighted average
shares outstanding............................. 11,601 9,449 11,564 9,115
====== ===== ====== =====
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
BOCA RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------
2000 1999
---- ----
<S> <C> <C>
Cash provided by (used in):
Operating activities:
Net loss.............................................. $(12,055) $ (8,641)
Adjustments for non-cash charges...................... 1,215 1,502
Adjustment for Asset impairment and other charges..... 4,633 --
Gain on sale of shares received under
marketing agreement.................................. (956) --
Gain on sale of fixed assets.......................... (292) --
Changes in assets and liabilities..................... 3,379 6,037
--------- -------
Net cash used in operating activities................ (4,076) (1,102)
---------- --------
Investing activities:
Cash paid for acquisition............................. -- (2,800)
Proceeds from sale of shares received under
marketing agreement.................................. 1,156 --
Proceeds from sale of fixed assets.................... 715 --
Capital expenditures.................................. (1,012) (299)
---------- ---------
Net cash provided by (used in)
investing activities................................ 859 (3,099)
---------- ---------
Financing activities - Issuance of common stock.......... 470 8,029
--------- --------
Net (decrease) increase in cash and cash equivalents..... (2,747) 3,828
Cash and cash equivalents, beginning of period........... 11,819 6,959
--------- --------
Cash and cash equivalents, end of period................. $ 9,072 $ 10,787
======= ========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
BOCA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Basis of Presentation
The condensed consolidated financial statements have been prepared by
Boca Research, Inc. and subsidiaries (the "Company") in accordance with the
rules and regulations of the Securities and Exchange Commission regarding
interim financial reporting and, accordingly, they do not include all of the
information and disclosures required by generally accepted accounting
principles. In the opinion of management, the condensed consolidated financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position of the Company as of June 30,
2000, the results of its operations for the three and six month periods ended
June 30, 2000 and 1999, and its cash flows for the six month periods ended June
30, 2000 and 1999. These results have been determined on the basis of generally
accepted accounting principles and practices applied consistently with those
used in the preparation of the Company's 1999 audited consolidated financial
statements.
The accompanying financial statements should be read in conjunction with
the Company's most recent audited consolidated financial statements and notes
thereto for the year ended December 31, 1999. The results of operations for the
three and six month periods ended June 30, 2000 are not necessarily indicative
of the results to be expected for the full year.
Certain prior year amounts have been reclassified to conform to the
current presentation.
Recent Developments and Subsequent Events
The Company embarked upon a plan in early 2000 to transition from being
primarily a data communications products manufacturer to its new focus on
providing software and systems solutions-based services. The Company's data
communications sales continued to decline in the three months ended June 30,
2000 and the outlook for the following quarter ending September 30, 2000 was for
a further decrease in sales and continued operating losses. Therefore, the
Company has taken several steps to exit the data communications marketplace. The
Company has significantly reduced its purchase orders for new products from
Boundless Manufacturing Services, Inc. ("Boundless"), the manufacturing
subcontractor utilized by the Company. Procurement of new data communications
products will be eliminated by September 30, 2000. The Company recently
announced the sale of certain assets to Zoom Telephonics, Inc. ("Zoom") which
will provide the Company with a smooth and customer oriented transition out of
the analog modem business. These actions resulted in the Company determining
that the goodwill and tradenames related to the data communications business had
been impaired as of June 30, 2000 and in the Company has recording a charge to
operations of $2,683,000. The elimination of new purchase orders to Boundless
will result in the Company falling short of the guarantee purchase commitments
under the Supply Agreement with Boundless. Although purchases by Zoom from
Boundless of the Company's products relating to the analog business may mitigate
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<PAGE>
BOCA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
(Unaudited)
the shortfall, (see "Commitments and Contingencies" and "Agreement between Boca
Research, Inc. and Zoom Telephonics"), the Company has estimated that this
shortfall is $1,950,000 and has taken a charge to operations for this amount.
The charges to operations relating to impairment of goodwill and
tradenames and the shortfall for the guarantee purchase commitment are recorded
under "Asset impairment and other charges" in the Condensed Consolidated
Statements of Operations for the three and six months ended June 30, 2000. The
Company will continue to discharge its warranty obligation on all products sold.
The warranty obligation is included within the caption "Accrued expenses and
other current liabilities" under the "Current liabilities" section of the
balance sheet.
During July 2000, the Company closed on the sale of its 20% interest
in PowerTel Boca Pvt., Ltd. ("PowerTel") and received net proceeds of $314,000,
resulting in a gain of $238,000.
Agreement between Boca Research, Inc. and Zoom Telephonics
On July 28, 2000, the Company concluded a definitive agreement with Zoom
pursuant to which Zoom has acquired certain of the Company's assets, including
selected trademarks such as Global Village(TM), rights to Global Village and
Boca Research branded products, and certain Web domain names. Under the
Agreement, the Company will continue to support all the products it has already
shipped or will be shipping and will remain responsible for warranty, returns
and technical support for these products. The Company will outsource technical
support to Zoom in order to provide customers with a single point of contact.
Zoom, acting as a master distributor, has the right to sell products from the
Company's inventory, utilizing the Global Village and Boca Research brand names.
Zoom has the right to introduce new products within both product lines. In
general, except for minor royalty payments, no payment will be received except
that the Company is entitled to be paid a purchase price based on the sales
performance schedule as follows: $500,000 if sales by Zoom of the Company's
existing product lines over the following 12 months exceed $12 million; $1.0
million if sales by Zoom of the Company's existing product lines over the
following 12 months exceeds $19 million; and $2.0 million if sales by Zoom of
the Company's existing product lines over the following 12 months exceeds $24
million. The determination of the purchase price was arrived at by negotiation
among the parties. Net sales by the Company of its analog modem and other PC
peripheral products for the quarters ended March 31, 2000 and June 30, 2000 were
$4.3 million and $2.7 million, respectively. If Zoom manufactures the Company's
products at Boundless, the Company will receive credit against the Company's
minimum guarantee commitment as explained under "Commitment and Contingencies"
below.
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<PAGE>
BOCA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
(Unaudited)
Supplemental Cash Flow Information
Net cash payments (refunds) for income taxes were $2,000 and
($2,045,000) for the six month period ended June 30, 2000 and 1999,
respectively. Interest payments of $0 and $185,000 were made in the six months
ended June 30, 2000 and 1999, respectively.
Comprehensive Income (Loss)
Comprehensive income includes all changes in equity during a period
except those resulting from investment by owners and distributions to owners.
The Company's comprehensive income (loss) equals its net loss for the three and
six months ended June 30, 2000 and 1999, and net loss is the only component of
comprehensive income (loss) for such periods.
Fair Value of Financial Instruments
The carrying value of cash, accounts receivable, accounts payable, and
accrued expenses and other current liabilities approximates fair value.
Current Assets
Accounts receivable are included in the condensed consolidated balance
sheets net of allowances and consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------------- ------------
<S> <C> <C>
Accounts receivable................................... $ 4,528 $ 7,711
Allowance for sales returns, allowances and
price protection.................................... (826) (2,007)
Allowance for doubtful accounts....................... (1,490) (2,081)
--------- ---------
$ 2,212 $ 3,623
======== ========
</TABLE>
-8-
<PAGE>
BOCA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
(Unaudited)
At June 30, 2000, the Company had a 20% ownership interest in PowerTel,
a joint venture in India. Sales to this related party in the six months ended
June 30, 2000 and 1999 were $0 and $68,000, respectively. During July 2000, the
Company closed on the sale of its 20% interest in PowerTel and received net
proceeds of $314,000, resulting in a gain of $238,000.
Inventories included in the condensed consolidated balance sheets
consist of the following (in thousands):
June 30, December 31,
2000 1999
-------------- --------------
Raw materials................... $ 2,241 $ 4,378
Work in process................. -- 1,053
Finished goods.................. 2,578 3,351
Inventory allowances............ (3,984) (5,110)
-------------- --------------
$ 835 $ 3,672
============== ==============
Property and Equipment
Property and equipment is included in the condensed consolidated balance
sheets, net of accumulated depreciation of $1,955,000 at June 30, 2000 and
$11,664,000 at December 31, 1999.
Deferred Revenue
Revenue from engineering services contracts is recognized as the work is
performed using the percentage of completion method. Revenue from product
licensing or software royalties is recognized as earned in accordance with the
terms of the contracts. Amounts received but unearned are recorded as deferred
revenue.
Line of Credit
The Company had a two-year collateralized revolving line of credit
agreement expiring November 9, 2000, which permits borrowings of the lesser of
$5,000,000 or 60% of qualified accounts receivable and 20% of eligible
inventory. During March 2000, the Company's total credit limit under the loan
agreement was reduced from $5,000,000 to $2,500,000. The interest rate during
the second year of the agreement is 1/2% in excess of the prime rate. The loan
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<PAGE>
BOCA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
(Unaudited)
agreement requires the Company to maintain certain financial ratios, limits the
incurrence of additional debt, and prohibits payment of dividends without the
lender's consent. No borrowings were outstanding as of December 31, 1999 or June
30, 2000.
Commitments and Contingencies
On March 3, 2000, the Company completed the sale of certain of its assets
(the "Purchased Assets") relating to its manufacturing operations at 1377 Clint
Moore Road for the manufacture of products, including modems, to Boundless, a
wholly owned subsidiary of Boundless Corporation, for $1,700,000 in cash and
note (the "Boundless Transaction"). In accordance with the terms of the Asset
Purchase Agreement between the Company and Boundless Technologies, Inc., which
was assigned to Boundless on the closing of the transaction, Boundless paid the
Company $700,000 in cash and Boundless issued to the Company a 6% promissory
note (the "Note") in the principal amount of $1,000,000 to be paid in eight
equal installments of $125,000 plus accrued interest commencing on June 1, 2000,
and on the first business day of every third month thereafter, until paid in
full. The obligations of Boundless under the Note are guaranteed by Boundless
Technologies, Inc. and Boundless Corporation. Additionally, concurrent with the
closing of the Boundless Transaction, the Company entered into a Supply
Agreement with Boundless pursuant to which the Company agreed to outsource the
manufacture of certain products to Boundless for a period of two years.
Under the Supply Agreement, the Company guarantees that it will
purchase products resulting in proceeds to Boundless exclusive of costs of
materials, of at least $3,775,000 during the first year of the term of the
Supply Agreement. To the extent the Company falls short of the cumulative
prorated amount guaranteed in any of the four 90 day periods subsequent to March
3, 2000, the amount of the shortfall would be due within 30 days after the end
of the 90 day period in which the shortfall occurred. During the first 90 day
period, the shortfall amounted to $23,000. As noted under "Recent Developments
and Subsequent Events," the Company will be curtailing its purchase of data
communications products from Boundless and has estimated that there will be a
shortfall in meeting its contractual purchase commitment of $1,950,000. The
calculation of the shortfall in the purchase commitment took into consideration
the Company's purchase requirements for data communications products through
September 30, 2000, the use of Boundless to fulfill the Company's obligations
for warranty repairs, and other opportunities to satisfy the purchase
requirements that are afforded by the contract with Boundless. In the event of
any default under the Note, the Company is entitled to offset any amounts due to
Boundless under the Supply Agreement.
The Company receives communications from time to time alleging that
certain of the Company's products infringe the patent rights of other third
parties. The Company cannot
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<PAGE>
BOCA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
(Unaudited)
predict the outcome of any such claim which may arise in the future, or the
effect of any such claim on the Company's operating results or financial
condition.
The Company has been named a co-defendant in an action brought in the
United States District Court for the District of Massachusetts, by NEC
Technologies, Inc. ("NEC"). The suit alleges that the Company supplied modem
hardware to NEC, which was combined by NEC with software supplied by another
co-defendant, Ring Zero Systems, Inc. NEC was subsequently sued for patent
infringement by PhoneTel Communications, Inc., allegedly as a result of NEC's
combination of modem hardware and software supplied by the vendors in its
personal computer products. NEC alleges that the Company and Ring Zero are
obligated to indemnify NEC for NEC's costs of defense and settlement of the
PhoneTel suit, in the amount of $327,000. This action was dismissed without
prejudice on April 25, 2000; however, the reason for the dismissal was entirely
procedural, and there has been no resolution of the substantive dispute. The
Company anticipates that NEC will refile this action in an appropriate
jurisdiction in the near future. The Company continues to evaluate the claim,
but does not presently believe the claim will have a material adverse effect on
the Company's operating results and financial condition.
The Company and its Boca Global, Inc. subsidiary have been named
co-defendants in an action brought in the District Court of South Dakota, by
Gateway, Inc. ("Gateway"). Global Village, Inc. had contracted to supply its
FaxWorks software to be bundled with Gateway PCs. Gateway's complaint against
the Company and Boca Global, Inc. alleges that either or both of these entities
assumed the liabilities of Global Village, Inc. with respect to the FaxWorks
product. Gateway reportedly will pay between $5,000,000 and $6,000,000 to settle
litigation brought by PhoneTel, Inc., for which Gateway is seeking
indemnification from the Company, Boca Global, Inc., and an unrelated
co-defendant. While the Company believes it will be able to assert numerous
defenses to liability, the Company is unable to estimate what impact, if any,
this claim will have upon the Company's financial statements, given the
preliminary nature of the claim.
Stockholders' Equity
During the six month period ended June 30, 2000, 125,645 shares were
issued in connection with the exercise of options granted under the Company's
stock option plans and with purchases by employees through the Employee Stock
Purchase Plan. The aggregate proceeds received from these exercises were
$470,000.
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<PAGE>
BOCA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
(Unaudited)
Stock Option Plan
During the six month period ended June 30, 2000, the Company granted
options to purchase 428,250 shares at prices ranging from $3.69 to $7.69 to both
new and existing employees. During the six month period ended June 30, 2000,
options to purchase 193,168 shares were canceled.
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<PAGE>
Item 2.
BOCA RESEARCH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
23E of the Securities Act of 1934, as amended. These statements relate to future
events or future financial performance. Any statements contained in this report
that are not statements of historical fact may be deemed to be forward-looking
statements. In some cases, forward-looking statements can be identified by
terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
"intend", "believe," "estimate," "predict," "potential" or "continue," or the
negative of such terms or other comparable terminology. These statements are
only predictions. Actual events or results may differ materially.
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance or achievements. Moreover, neither the
Company, nor any other entity, assumes responsibility for the accuracy and
completeness of the forward-looking statements. The Company is under no
obligation to update any of the forward-looking statements after the filing of
this Form 10-Q to conform such statements to actual results or to changes in the
Company's expectations.
The following discussion should be read in conjunction with the
Company's financial statements, related notes and the other financial
information appearing elsewhere in this Form 10-Q. Readers are also urged to
carefully review and consider the various disclosures made by the Company which
attempt to advise interested parties of the factors which affect the Company's
business, including without limitation, the disclosures made under the caption
"Certain Factors That May Affect Future Performance."
As an aid to reviewing the Company's results of operations for the three
and six months ended June 30, 2000 and 1999, the following table sets forth the
financial information as a percentage of net sales and as a percent of change
when compared to the earlier period:
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<PAGE>
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- Percent --------------- Percent
2000 1999 Change 2000 1999 Change
---- ---- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Net sales................................... 100.0 % 100.0 % (60.7) % 100.0 % 100.0 % (58.4) %
Cost of goods sold.......................... 112.3 95.0 (53.5) 100.3 86.9 (52.0)
----- ---- ------ ----
Gross profit (loss).................. (12.3) 5.0 (195.7) (0.3) 13.1 (101.1)
------ ------ ------- -----
Operating expenses:
Research and development.................. 24.8 10.2 (4.3) 19.4 10.2 (20.4)
Selling, general and administrative....... 116.5 49.6 (7.8) 89.3 47.8 (22.3)
Asset impairment and other charges........ 134.8 -- * 57.3 -- *
----- ------ ------ ------
Total operating expenses............ 276.1 59.8 81.3 166.0 58.0 19.1
----- ------ ------ ------
Loss from operations........................ (288.4) (54.8) * (166.3) (44.9) *
Non-operating income (expense), net......... 7.4 (0.4) * 17.4 0.5 1266.0
----- ------- ------ ------
Loss before income taxes .................. (281.0) (55.2) * (148.9) (44.4) *
Income taxes ............................... 0.1 0.1 (66.7)% 0.0 0.0 (66.7)%
----- ------ ------ ------
Net loss.................................... (281.1) % (55.3) % * (148.9) % (44.4) % *
====== ===== ====== =====
</TABLE>
* Not meaningful
Results of Operations
Net Sales. The Company's net sales decreased by 60.7% to $3,437,000 in
the three months ended June 30, 2000 from $8,747,000 in the three months ended
June 30, 1999. For the six months ended June 30, 2000, net sales decreased by
58.4% to $8,092,000 from $19,448,000 for the comparable period in 1999. Sales in
the three and six month periods ended June 30, 2000 versus the comparable period
in 1999 are shown by product category as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
(In Millions) (In Millions)
<S> <C> <C> <C> <C>
Data Communications........................................... $ 2.1 $ 6.9 $ 5.5 $ 15.3
Custom Manufacturing.......................................... 0.0 0.0 0.1 0.5
Networking.................................................... 0.0 0.3 0.0 0.4
I/O, IDE, & Multiport........................................ 0.6 1.0 1.3 1.9
Video Conferencing............................................ 0.0 0.0 0.0 0.3
Internet Access Device........................................ 0.0 0.2 0.1 0.6
Engineering Services.......................................... 0.7 0.3 1.1 0.4
------- ------- ------- -------
$ 3.4 $ 8.7 $ 8.1 $ 19.4
====== ====== ====== =======
</TABLE>
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<PAGE>
The sales decrease was primarily attributable to data communications
products. Sales of data communication products were adversely affected by
industry-wide pricing pressure.
With respect to the Global Village branded product, net sales decreased
to $1,047,000 and $3,420,000 in the three and six month periods ended June 30,
2000 as compared to net sales of $3,438,000 and $7,521,000 in the comparable
periods of 1999. The inclusion of non-Global Village brand modems with certain
models being sold by Apple Computer, Inc. continued to negatively impact sales
of Global Village modems.
The engineering services revenue consisted primarily of $517,000 for
contract engineering and $210,000 in royalties from licensing the Company's
Internet appliance reference design.
International sales were approximately $0.5 million for the three months
ended June 30, 2000 compared to $1.3 million for the three months ended June 30,
1999. For the six months ended June 30, 2000, international sales decreased by
61.5% to $1.0 million from $2.6 million for the comparable period in 1999.
Gross Profit (Loss). Gross profit (loss) was ($423,000) or (12.3%) of net
sales for the three months ended June 30, 2000 as compared to $442,000 or 5.0%
of net sales for the three months ended June 30, 1999. For the six months ended
June 30, 2000, gross profit (loss) decreased by 101.1% to ($27,000) from
$2,540,000 for the comparable period in 1999. The Company's gross profit was
negatively impacted by deteriorating profit margins on data communications
products.
On March 3, 2000, the Company completed the sale of certain of its assets
(the "Purchased Assets") relating to its manufacturing operations at 1377 Clint
Moore Road for the manufacture of products, including modems, to Boundless, a
wholly owned subsidiary of Boundless Corporation, for $1,700,000 in cash and
notes. The sale is part of the Company's efforts to improve gross margins and
resulted in a gain of $277,000. In accordance with the terms of the Asset
Purchase Agreement between the Company and Boundless Technologies, Inc., which
was assigned to Boundless on the closing of the transaction, Boundless paid the
Company $700,000 in cash and Boundless issued to the Company a 6% promissory
note (the "Note") in the principal amount of $1,000,000 to be paid in eight
equal installments of $125,000 plus accrued interest commencing on June 1, 2000,
and on the first business day of every third month thereafter, until paid in
full. The obligations of Boundless under the Note are guaranteed by Boundless
Technologies, Inc. and Boundless Corporation. Additionally, concurrent with the
closing of the Boundless Transaction, the Company has entered into a Supply
Agreement with Boundless pursuant to which the Company agreed to outsource the
manufacture of certain products to Boundless for a period of two years. Under
the Supply Agreement, the Company guarantees that it will purchase products
resulting in proceeds to Boundless exclusive of costs of materials, of at least
$3,775,000 during the first year of the term of the Supply Agreement. To the
extent the Company falls short of the cumulative prorated amount guaranteed in
any of the four 90 day periods subsequent to March 3, 2000, the amount of the
shortfall would be due within 30 days after the end of the 90 day period in
which the shortfall occurred. In the event of any default under the Note, the
Company is entitled to offset any amounts due to Boundless
-15-
<PAGE>
under the Supply Agreement. The elimination of new purchase orders to Boundless
will result in the Company falling short of the guaranteed purchase commitment.
However, purchases by Zoom from Boundless of the Company's branded products
relating to the analog modem business may mitigate the shortfall (see "Agreement
between Boca Research, Inc. and Zoom Telephonics").
The gross profit margins for the Company have been impacted by poor
general industry conditions such as lower sales and declining prices and the
Company's transition out of the data communications business. The Company has
decided to exit the data communications business, however, the Company has
inventory and purchase commitments with Boundless that will result in data
communications product sales in the third quarter of 2000. The factors that have
affected gross margins in the past for the data communications business, such as
product and channel mix, (wholesale distributors and retailers versus OEM's),
component costs and manufacturing efficiency and capacity utilization will be
different for the software and systems solution-based services business. Also,
industry dynamics are different for a service business versus a products
business.
Research and Development Expenses. Research and development expenses
decreased to $853,000 in the three months ended June 30, 2000 from $891,000 in
the three months ended June 30, 1999. This represents an increase in research
and development expenses as a percentage of net sales to 24.8% for the three
months ended June 30, 2000 from 10.2% for the three months ended June 30, 1999.
Research and development expenses decreased to $1,571,000 for the six months
ended June 30, 2000 from $1,974,000 in the six months ended June 30, 1999. This
represents an increase in research and development expenses as a percentage of
net sales to 19.4% for the six months ended June 30, 2000 from 10.2% for the six
months ended June 30, 1999. Research and development expenses decreased in the
three and six months ended June 30, 2000 versus the comparable periods in 1999
primarily as the result of closing the Sunnyvale, California location and the
reclassification to cost of goods sold of certain costs related to contract
engineering revenue.
In the short term, as the Company makes the transition into an
engineering services organization, a large portion of the total hours worked on
engineering projects will not be billable to third party clients and are
therefore internal research and development related. In the future, the
Company's goal is to bill external clients for an increasing portion of the
engineering hours. While there is no assurance that it will be able to pass
along such costs, the Company intends to continue expending capital towards
research and development projects.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to $4,003,000 in the three months ended June
30, 2000 from $4,342,000 in the three months ended June 30, 1999. Selling,
general and administrative expenses as a percentage of net sales increased to
116.5% in the three months ended June 30, 2000 from 49.6% in the three months
ended June 30, 1999. Selling, general and administrative expenses decreased to
$7,229,000 in the six months ended June 30, 2000 from $9,304,000 in the six
months ended June 30, 1999. Selling, general and administrative expenses as a
percentage of net sales increased to 89.3% in the six months ended June 30, 2000
from 47.8% in the six
-16-
<PAGE>
months ended June 30, 1999. Selling, general and administrative expenses
decreased in the three and six months ended June 30, 2000 versus the comparable
period in 1999 primarily as the result of the Company's efforts to reduce
expenses. The Company's expenses for the six months ended June 30, 2000 compared
to the six months ended June 30, 1999 were $650,000 lower for technical support,
$646,000 lower for rent, $371,000 lower for marketing development funds,
$198,000 lower for trade shows, $126,000 lower for freight and courier costs,
and included a $292,000 gain on the sale of fixed assets.
Selling, general and administrative expenses as a percentage of net
sales will continue to fluctuate and will be influenced by the level of sales.
Selling, general and administrative expenses are likely to be different for a
service business than for a products business. The Company is adjusting this
expense to support the anticipated sales level of the new business. However,
since the Company will continue to have data communications products sales in
the third quarter from existing inventories, there will be selling, general and
administrative expenses associated with this activity. Certain selling, general
and administrative expenses have a fixed nature, thus a reduction in net sales
may result in an increase in selling, general and administrative expenses as a
percentage of net sales.
Asset Impairment and Other Charges. As discussed above, the Company
recently announced the sale of certain assets to Zoom which will provide the
Company with a smooth and customer oriented transition out of the analog modem
business. These actions resulted in the Company determining that the goodwill
and tradenames related to the data communications business had been impaired as
of June 30, 2000, and in the Company recording a charge to operations of
$2,683,000. The elimination of new purchase orders to Boundless will result in
the Company falling short of the guarantee purchase commitments under the Supply
Agreement with Boundless. Although purchases by Zoom from Boundless of the
Company's product relating to the analog business may mitigate the shortfall,
(see "Commitments and Contingencies" and "Agreement between Boca Research, Inc.
and Zoom Telephonics"), the Company has estimated that this shortfall is
$1,950,000 and has taken a charge to operations for this amount.
LIQUIDITY AND CAPITAL RESOURCES
In the six months ended June 30, 2000, the Company's working capital
decreased by $7,405,000. This decrease was represented by decreases in accounts
receivable of $1,411,000 and inventory of $2,837,000 and an increase in accrued
expenses and other current liabilities of $1,502,000, offset by an increase in
prepaid expenses and other current assets of $209,000 and decreases in accounts
payable of $537,000 and deferred revenue of $346,000. Also in the six months
ended June 30, 2000, the Company had a $956,000 gain associated with the sale of
shares previously received in connection with an exclusive marketing agreement
and a $292,000 gain on the sale of fixed assets. The Company's operations used
cash of $4,076,000 for the six months ended June 30, 2000.
The Company had a two year collateralized revolving line of credit
agreement expiring November 9, 2000, which permits borrowings of the lesser of
$5,000,000 or 60% of qualified accounts receivable and 20% of eligible
inventory. During March 2000, the Company's total
-17-
<PAGE>
credit limit under the loan agreement was reduced from $5,000,000 to $2,500,000.
The interest rate during the second year of the agreement is 1/2% in excess of
the prime rate. The loan agreement requires the Company to maintain certain
financial ratios, limits the incurrence of additional debt, and prohibits
payment of dividends without the lender's consent. No borrowings were
outstanding as of December 31, 1999 or June 30, 2000.
The Company incurred substantial operating losses in 1997, 1998, 1999,
and in the first six months of 2000 and it is likely that cash flow from
operations will be negative in 2000. However, management has implemented efforts
to bring the Company's expense structure in line with the reduced revenue levels
being achieved. Further, the Company may have additional cash requirements in
connection with the Boundless Transaction. The elimination of new purchase
orders to Boundless will result in the Company falling short of the guarantee
purchase commitments under the Supply Agreement with Boundless. Although
purchases by Zoom from Boundless of the Company's products relating to the
analog business may mitigate the shortfall, (see "Commitments and Contingencies"
and "Agreement between Boca Research, Inc. and Zoom Telephonics"), the Company
has estimated that this shortfall is $1,950,000 and has taken a charge to
operations for this amount. This will be a cash outflow over the next nine
months. Although there can be no assurances that the Company will return to
profitable operations in 2000, management believes that existing cash balances
and cash generated from operations will be sufficient to meet its liquidity and
capital needs for the next twelve months. However, if certain negative factors
occur as further described below under the heading "Certain Factors That May
Affect Our Performance", the Company's liquidity could become strained.
The Company regularly evaluates acquisitions of businesses, technologies
or products complementary to the Company's business. In the event that the
Company pursues one or more acquisitions, the Company's cash balances may be
utilized to finance such acquisitions and additional sources of liquidity such
as debt or equity financing may be required for such acquisitions or to meet
working capital needs. There can be no assurance that additional capital beyond
the amounts forecasted by the Company will not be required nor that any such
required capital will be available on terms acceptable to the Company, if at
all, at such time or times as required by the Company.
-18-
<PAGE>
Pro Forma Financial Statements
The Company has embarked upon a plan in early 2000 to transition from
being primarily a data communications product manufacturer to its new focus on
providing software and systems solutions-based services, and has recently taken
steps to exit the data communication business. The software and systems
solution-based services business is in a start up mode and the Company has taken
action to reduce its expenses to correspond with the anticipated sales level of
the new business. The Company is winding down its data communication business
and the assets and liabilities associated with the business will be reduced over
a period of time. The Pro Forma Balance Sheets as of December 31, 1999, and June
30, 2000, reflect those items that can be specifically identified with the old
and new businesses and those that are common to both. The Company has identified
sales related to the old and new businesses, which are shown under the section
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Engineering Services product category shown in the table on
page 14 represents the new business. However, the Company cannot specifically
identify expenses related to the old and new businesses because it did not
segment its business during the transition period. In the year ended December
31, 1999, engineering services revenue made up $715,000 of the $32.8 million
total revenues. The Company continues to review the prospects for the new
business in order to size the operation to an appropriate cost structure.
-19-
<PAGE>
BOCA RESEARCH, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999
(Unaudited)
(In thousands except share data)
<TABLE>
<CAPTION>
Specific
--------------------
Data Eng. Non-
ASSETS Comm. Svcs. Specific Total
----- ----- ---------- -----
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........................ $ -- $ -- $ 11,819 $ 11,819
Accounts receivables, net........................ 3,300 323 -- 3,623
Inventory, net................................... 3,672 -- -- 3,672
Prepaid expenses and other current assets........ 789 -- -- 789
-------- -------- -------- --------
Total current assets........................... 7,761 323 11,819 19,903
Property and equipment, net........................ 1,639 400 -- 2,039
Goodwill and other intangible assets............... 3,369 -- -- 3,369
Other assets....................................... -- -- 1,177 1,177
-------- -------- -------- --------
Total assets................................. $ 12,996 $ 723 $ 12,996 $ 26,488
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 4,444 $ -- $ -- $ 4,444
Deferred revenue................................. 101 485 -- 586
Accrued expenses and other current liabilities... 3,619 -- -- 3,619
-------- -------- -------- --------
Total current liabilities 8,164 485 -- 8,649
-------- -------- -------- --------
Deferred revenue................................... 16 -- -- 16
-------- -------- -------- --------
Other non-current liabilities...................... -- 500 -- 500
-------- -------- -------- --------
Stockholders' equity:
Common stock..................................... -- -- 115 115
Additional paid-in capital....................... -- -- 39,516 39,516
Deficit.......................................... -- -- (22,308) (22,308)
-------- -------- --------- ---------
Total stockholders' equity..................... -- -- 17,323 17,323
-------- -------- -------- --------
Total liabilities and stockholders' equity... $ 8,180 $ 985 $ 17,323 $ 26,488
======== ======== ======== ========
</TABLE>
-20-
<PAGE>
BOCA RESEARCH, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2000
(Unaudited)
(In thousands except share data)
<TABLE>
<CAPTION>
Specific
--------------------
Data Eng. Non-
ASSETS Comm. Svcs. Specific Total
----- ----- ---------- -----
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........................ $ -- $ -- $ 9,072 $ 9,072
Accounts receivables, net........................ 1,714 498 -- 2,212
Inventory, net................................... 835 -- -- 835
Prepaid expenses and other current assets........ 998 -- -- 998
-------- -------- -------- --------
Total current assets........................... 3,547 498 9,072 13,117
Property and equipment, net........................ 100 1,000 -- 1,100
Goodwill and other intangible assets............... -- -- -- --
Other assets....................................... -- -- 1,288 1,288
-------- -------- -------- --------
Total assets................................. $ 3,647 $ 1,498 $ 10,360 $ 15,505
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 3,707 $ 200 $ -- $ 3,907
Deferred revenue................................. 67 173 -- 240
Accrued expenses and other current liabilities... 4,621 500 -- 5,121
-------- -------- -------- --------
Total current liabilities 8,395 873 -- 9,268
-------- -------- -------- --------
Deferred revenue................................... -- -- -- --
-------- -------- -------- --------
Other non-current liabilities...................... -- 500 -- 500
-------- -------- -------- --------
Stockholders' equity:
Common stock..................................... -- -- 116 116
Additional paid-in capital....................... -- -- 39,984 39,984
Deficit.......................................... -- -- (34,363) (34,363)
-------- -------- --------- ---------
Total stockholders' equity..................... -- -- 5,737 5,737
-------- -------- -------- --------
Total liabilities and stockholders' equity... $ 8,395 $ 1,373 $ 5,737 $ 15,505
======== ======== ======== ========
</TABLE>
-21-
<PAGE>
Certain Factors That May Affect Future Performance
In addition to the other information contained in this Report, the
following are important factors that should be considered carefully in
evaluating the Company and its business:
Transition of Company. The Company embarked upon a plan in early 2000
to transition from being primarily a data communication products manufacturer to
its new focus on providing software and systems solutions-based services. Such
transition was substantially completed on July 28, 2000 upon the sale of the
Company's analog modem business. Currently, the Company has very limited
experience providing software and systems solutions-based services, and there
can be no assurances that the Company will succeed in implementing its as-yet
unproven business plan. Risks associated with this transition include:
a. the existence of a limited number of network operators and information
appliance manufacturers that have deployed products and services using
the Company's technology;
b. potential delays in deploying high-speed networks and internet-enhanced
services and applications by the Company's customers;
c. an unproven business model, which depends on revenues from engineering
services and royalty fees paid by information appliance manufacturers
and network operators; and
d. a potential inability of the Company to expand its engineering and
design staff, increase its sales or marketing activities, and invest in
its technological infrastructure.
Boca Global, Inc.: Declining Revenue. Sales have declined
substantially and the Company has substantially exited the data communications
business via the sale of certain of the Company's assets to Zoom on July 28,
2000.
Inprimis Technologies, Inc.: Uncertainty in Development of an Evolving
Industry. The market for intelligent computing devices is emerging and the
potential size of this market and the timing of its development are not known.
As a result, the profitability of the Inprimis subsidiary is uncertain and its
revenue may not grow as fast as anticipated, if at all. The Company is dependent
upon the broad acceptance by business and consumers of a wide variety of
intelligent computing devices, which depend on many factors, including:
a. the development of content and applications for intelligent computing
devices;
b. the willingness of large numbers of businesses and consumers to use
devices such as handheld and palm-size PCs and handheld industrial data
collectors to perform functions currently carried out manually or by
traditional PCs, including inputting and sharing data, communicating
among users and connecting to the Internet; and
c. the evolution of industry standards that facilitate the distribution of
content over the Internet to these devices via wired and wireless
telecommunications systems, satellite or cable.
-22-
<PAGE>
There can be no assurances that the Company will succeed in achieving its
goals, and its failure to do so would have a material adverse effect on its
business, prospects, financial condition and operating results.
Software Development and Services Market; Low Barriers to Entry. The
market for software development and services is becoming increasingly
competitive. Increased competition may result in price reductions, lower gross
margins and loss of market share, which would harm the Company's planned
business through its Inprimis subsidiary. The Company faces competition from:
a. current and potential customers' internal research and development
departments that may seek to develop their own proprietary solutions;
b. large professional engineering services firms that may enter the
market;
c. established intelligent computing device software and tools
manufacturers; and
d. small- and medium-sized engineering service companies.
As the Company assists other companies in developing new products,
particularly products focused on specific industries, they may begin competing
with companies in sectors that have not been identified above. It is also
possible that new competitors will enter the market or that existing competitors
will form alliances that may enable them to rapidly increase their market share.
The barriers to entering the market as software developer or hardware design
consultant for intelligent computing devices are low. New market entrants may
have lower overhead than the Company and therefore be able to offer advantageous
pricing. The Company expects that competition will increase as other established
and emerging companies enter the intelligent computing device market and as new
products and technologies are introduced.
New Products and Services, and Technological Changes. The markets for
the Company's products and services are characterized by rapidly changing
technology, evolving industry standards and short product life cycles. The
Company's success depends upon its ability to enhance its existing products and
services and to introduce new products and services with features that meet
changing end-user requirements. The Information Technology ("IT") sector in
which the Company offers outsourcing and other services is characterized by
rapidly changing technology with continuous improvements in both computer
hardware and software and rapid obsolescence of current systems. The Company's
success will depend in part on its ability to develop solutions that keep pace
with continuing changes in information technology, evolving industry standards
and changing client preferences. Additionally, there can be no assurance that
the Company will be successful in identifying new markets, in developing, and
marketing new products and services, or in enhancing its existing products and
services, either internally or through strategic relationships with third
parties. The Company's business would be adversely affected if the Company were
to incur delays in developing new, or enhancing existing, products and services,
due to delays in obtaining any required regulatory approvals for its products or
if any such new products or enhancements did not gain market acceptance. In
addition, there can be no assurance that products or technologies developed by
others will not render the Company's products or technologies noncompetitive or
obsolete.
-23-
<PAGE>
Potential Fluctuations in Quarterly Results. The Company's quarterly
operating results have varied significantly, and continue to vary significantly,
depending on a number of factors, some of which could adversely affect the
Company's operating results and the trading price of the Company's Common Stock.
These factors include the level of demand for the Company's products and
services, competitive pricing pressures, and the timing of engineering contracts
and completion of the contracts per the specified terms. There can be no
assurance that the Company will be able to return to its growth in revenue or
profitability on a quarterly or annual basis. The Company's expense levels are
based, in part, on its expectations as to future revenue. If sales and revenue
levels are below expectations, operating results may be adversely affected,
which would likely have an adverse effect on the trading price of the Company's
Common Stock.
Acquisitions. The Company may from time to time pursue the acquisition
of other companies, assets, technologies or product lines that would complement
or expand its existing business. Certain of these acquisitions may involve
businesses in which the Company lacks experience. Acquisitions involve a number
of risks that could adversely affect the Company's operating results, including
the diversion of management's attention, the assimilation of the operations,
products and personnel of the acquired companies, the amortization of acquired
intangible assets and the potential loss of key employees of the acquired
companies. There can be no assurance that the Company will be able to identify
businesses that would complement or expand its existing business or such
acquisitions, manage one or more acquisitions successfully, or that the Company
will be able to integrate the operations, products, or personnel gained through
such acquisition without a material adverse impact on the Company's business,
financial condition, and results of operations, particularly in the quarters
immediately following such acquisitions.
Competition. The markets for the Company's products and services are
increasingly competitive resulting in increasing pricing pressures. Some of the
Company's competitors have significantly greater financial, technical, product
development, manufacturing or marketing resources than the Company. The Company
believes that its ability to compete depends on a number of factors, including
price, quality and reliability, availability, credit terms, name recognition,
delivery time, and post-sale service and support. There can be no assurance that
the Company will be able to continue to compete successfully with respect to
these factors. A variety of companies currently offer products and services that
compete directly with the Company's products and services. These competitors
could introduce additional products and services that are superior to the
Company's, or that achieve greater market acceptance. The introduction of lower
priced competitive products and services or significant price reductions by the
Company's competitors would result in price reductions in the Company's products
and services that could have a material adverse effect on the Company's
operating results. In addition, as the Company enters into new markets, such as
Internet TV appliances, the Company anticipates that it will encounter
competition from a number of well-established companies, many of which have
greater financial, technical, product development, manufacturing or marketing
resources and experience.
Proprietary Rights; Dependence on Software Licenses. The Company
receives from time to time, and may receive in the future, communications from
third parties asserting intellectual
-24-
<PAGE>
property rights relating to the Company's products and technologies. There can
be no assurance that in the future the Company will be able to obtain licenses
of any intellectual property rights owned by third parties with respect to the
Company's products or that any such licenses can be obtained on terms favorable
to the Company. If the Company is unable to obtain licenses of protected
technology, it could be prohibited from developing and marketing products
incorporating that technology. The Company could also incur substantial costs in
redesigning its products or in defending any legal action taken against it.
Should the Company be found to infringe the proprietary rights of others, the
Company could be required to pay damages to the infringed party, which could
have a material adverse effect on the Company's operating results.
In certain of its products, the Company includes software licensed from
third parties. The Company's operating results could be adversely affected by a
number of factors relating to this third party software, including lack of
market acceptance, failure by the licensors to promote or support the software,
delays in shipment of the Company's products as a result of delays in the
introduction of licensed software or errors in the licensed software, or excess
customer support costs or product returns experienced by the Company due to
errors in the licensed software. Moreover, any impairment or termination of the
Company's relationship with any licensors of third party software could have a
material adverse effect on the Company's operating results.
Volatility of Stock Price. The price of the Company's Common Stock
historically has been volatile due to fluctuations in operating results and
other factors relating to the Company's operations, the market's changing
expectations for the Company's growth, overall equity market conditions relating
to the market for technology stocks generally and other factors unrelated to the
Company's operations, including announcements by or relating to the Company's
competitors. Such fluctuations are expected to continue. In addition, stock
markets have experienced more price volatility in recent years. This volatility
has had a substantial effect on the market prices of securities issued by many
technology companies, often for reasons unrelated to the operating performance
of the specific companies.
Dependence on Key Personnel and Management of Growth. The Company is
highly dependent on its executive officers and other key personnel, many of whom
could be difficult to replace. If certain of these people were to leave the
Company, operating results could be adversely affected. The future growth and
success of the Company also depends in part on its ability to attract and retain
skilled employees and on the ability of its officers and key employees to manage
growth successfully.
-25-
<PAGE>
PART II.
BOCA RESEARCH, INC.
OTHER INFORMATION
Item 1. Legal Proceedings
The information required by this Item is disclosed in the "Commitments
and Contingencies" Note to the Company's Condensed Consolidated Financial
Statements contained in Part I hereof.
Items 2-3.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company held on May 22,
2000, (i) the Company's nominees for directors to serve until the 2001 Annual
Meeting of Stockholders were elected (ii) the stockholders approved an amendment
to the Boca Research, Inc., 1996 Non-Employee Director Stock Option Plan to
increase the number of shares covered thereby from 200,000 shares to 500,000
shares, and (iii) the stockholders approved an amendment to the Boca Research,
Inc. 1996 Non-Employee Director Stock Option Plan to increase the number of
shares subject to options issued annually to each non-employee director from
10,000 shares to 12,000 shares.
With respect to the election of the Directors, the voting was as follows:
Nominee For Against Withheld
------- --- ------- --------
Bernard A. Carballo 8,509,844 0 17,488
Blaine E. Davis 8,509,844 0 17,488
Robert W. Ferguson 8,509,844 0 17,488
Karl Gruns 8,509,428 0 17,904
H. Ric Luhrs 8,509,428 0 17,904
Joseph M. O'Donnell 8,509,428 0 17,904
Michael S. Polacek 8,509,844 0 17,488
Douglas K. Raborn 8,509,428 0 17,904
Philip A. Vachon 8,509,844 0 17,488
Rob van Oostenbrugge 8,509,844 0 17,488
Eduard Will 8,509,844 0 17,488
Arthur R. Wyatt 8,509,844 0 17,488
-26-
<PAGE>
With respect to the amendment to the Company's 1996 Non-Employee Director Stock
Option Plan to increase the number of shares covered thereby from 200,000 shares
to 500,000 shares, the voting was as follows:
For Against Withheld Non-Voted
--- ------- -------- ---------
8,036,328 276,123 214,881 3,074,106
With respect to the amendment to the Company's 1996 Non-Employee Director Stock
Option Plan to increase the number of shares subject to options issued annually
to each non-employee director from 10,000 shares to 12,000 shares the voting was
as follows:
For Against Withheld Non-Voted
--- ------- -------- ---------
8,027,247 284,395 215,690 3,074,106
Item 5. Other information
On July 28, 2000, the Company concluded a definitive agreement with Zoom
Telephonics, Inc. pursuant to which Zoom has acquired certain of the Company's
assets including selected trademarks such as Global Village(TM), rights to
Global Village and Boca Research branded products, and certain Web domain names.
The Company will continue to support all the products it has already shipped or
will be shipping and will remain responsible for warranty, returns and technical
support for these products. Under the Agreement, the Company will outsource
technical support to Zoom in order to provide customers with a single point of
contact. Zoom, acting as a master distributor, has the right to sell products
from the Company's inventory, utilizing the Global Village and Boca Research
brand names. Zoom has the right to introduce new products within both product
lines. In general, except for minor royalty payments, no payment will be
received except that the Company is entitled to be paid a purchase price based
on the sales performance schedule as follows: $500,000 if sales by Zoom of the
Company's existing product lines over the following 12 months exceed $12
million; $1.0 million if sales by Zoom of the Company's existing product lines
over the following 12 months exceeds $19 million; and $2.0 million if sales by
Zoom of the Company's existing product lines over the following 12 months
exceeds $24 million. The determination of the purchase price was arrived at by
negotiation among the parties. Net sales by the Company of its analog modem and
other PC peripheral products for the quarter ended March 31, 2000 and June 30,
2000 were $4.3 million and $2.7 million, respectively. If Zoom manufactures the
Company's products at Boundless, the Company will receive credit against the
Company's minimum guarantee commitment as explained under Commitment and
Contingencies.
See also "Pro Forma Financial Statements" included under "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
-27-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10.1. Asset Purchase Agreement, dated July
28, 2000, between Boca Research, Inc.
and Boca Global, Inc., and Zoom
Telephonics, Inc.
Exhibit 10.2. Employment Agreement, dated May 16,
2000, between Boca Research, Inc. and
Richard M. Brewer
Exhibit 10.3. Amendment, dated May 16, 2000, to
Employment Agreement, dated August 19,
1999, between Boca Research, Inc. and
Robert P. Heinlein
Exhibit 11.1 Calculation of shares used in
determining earnings per share.
(b) Reports on Form 8-K
None.
-28-
<PAGE>
BOCA RESEARCH, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
Dated: August 11, 2000 /S/ Robert W. Ferguson
----------------------
Robert W. Ferguson
Chief Executive Officer and Chairman of the
Board of Directors
(Principal Executive Officer)
Dated: August 11, 2000 /S/ R. Michael Brewer
----------------------
R. Michael Brewer
Vice President of Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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<PAGE>
BOCA RESEARCH, INC.
INDEX TO EXHIBITS
No. Description
------------ -------------------------------------------------------
Exhibit 10.1 Asset Purchase Agreement, dated July 28, 2000, between
Boca Research, Inc. and Boca Global, Inc., and Zoom
Telephonics, Inc.
Exhibit 10.2 Employment Agreement, dated May 16, 2000, between
Boca Research, Inc. and Richard M. Brewer
Exhibit 10.3 Amendment, dated May 16, 2000, to Employment Agreement,
dated August 19, 1999, between Boca Research, Inc. and
Robert P. Heinlein
Exhibit 11.1 Calculation of shares used in determining earnings per
share
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Exhibit 10.1
ASSET PURCHASE AGREEMENT
FOR CERTAIN OF THE ASSETS OF BOCA RESEARCH, INC. and BOCA GLOBAL, INC.
by ZOOM TELEPHONICS, INC.
July 28, 2000
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TABLE OF CONTENTS
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Recitals Page No.
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ARTICLE I DEFINITIONS....................................................................................2
1.1 DEFINITIONS.............................................................................................2
ARTICLE II PURCHASE AND SALE OF ASSETS....................................................................4
2.1 PURCHASE OF ASSETS......................................................................................4
2.2 RETAINED ASSETS.........................................................................................4
2.3 ASSUMED LIABILITIES.....................................................................................4
2.4 RETAINED LIABILITIES....................................................................................4
2.5 MANUFACTURING THROUGH BOUNDLESS.........................................................................4
2.6 SUBLEASE................................................................................................4
2.7 TECH SUPPORT OBLIGATIONS................................................................................5
2.8 PURCHASE PRICE..........................................................................................5
2.9 [INTENTIONALLY OMITTED].................................................................................7
2.10 TIME AND PLACE OF CLOSING...............................................................................7
2.11 EXECUTION AND DELIVERY OF DOCUMENTS OF TITLE BY THE COMPANY; FURTHER ASSURANCES.........................7
2.12 EXECUTION AND DELIVERY OF DOCUMENTS BY BUYER; FURTHER ASSURANCES........................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SUBSIDIARY...................................8
3.1 CONDITION OF ASSETS.....................................................................................8
3.2 EMPLOYEES...............................................................................................8
3.3 BROKERS.................................................................................................8
3.4 COPIES OF DOCUMENTS.....................................................................................8
3.5 ORGANIZATION AND QUALIFICATION OF COMPANY...............................................................8
3.6 AUTHORITY AND BINDING EFFECT............................................................................8
3.7 NO CONFLICTS............................................................................................9
3.8 LITIGATION..............................................................................................9
3.9 INTELLECTUAL PROPERTY RIGHTS...........................................................................10
3.10 TITLE TO TRANSFERRED ASSETS NOT CONSTITUTING INTELLECTUAL PROPERTY.....................................10
3.11 AVAILABLE CAPITAL......................................................................................11
3.12 SOLE REPRESENTATIONS AND WARRANTIES....................................................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................................................11
4.1 BROKERS................................................................................................11
4.2 AVAILABILITY OF CAPITAL................................................................................11
4.3 REGULATORY APPROVALS...................................................................................11
4.4 AUTHORITY AND BINDING EFFECT...........................................................................11
4.5 SOLE REPRESENTATIONS AND WARRANTIES....................................................................11
ARTICLE V COVENANTS.....................................................................................12
5.1 COVENANTS OF THE COMPANY...............................................................................12
5.2 COVENANTS OF THE COMPANY AND BUYER.....................................................................12
5.3 [INTENTIONALLY OMITTED]................................................................................15
5.4 COVENANTS OF BUYER.....................................................................................15
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5.5 COVENANTS OF BUYER AND THE COMPANY.....................................................................15
ARTICLE VI CLOSING CONDITIONS.............................................................................17
6.1 CONDITIONS TO OBLIGATIONS OF BUYER.....................................................................17
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY...............................................................18
ARTICLE VII TERMINATION........................................................................................20
7.1 TERMINATION OF AGREEMENT...............................................................................20
ARTICLE VIII INDEMNIFICATION...................................................................................21
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............................................................21
8.2 INDEMNIFICATION BY THE COMPANY.........................................................................21
8.3 INDEMNIFICATION BY BUYER...............................................................................22
8.4 MINIMUM INDEMNIFICATION; MATERIALITY...................................................................22
8.5 NOTICE AND OPPORTUNITY TO DEFEND.......................................................................23
ARTICLE IX MISCELLANEOUS..................................................................................23
9.1 FEES AND EXPENSES......................................................................................23
9.2 PUBLICITY AND DISCLOSURES..............................................................................23
9.3 NOTICES................................................................................................23
9.4 SUCCESSORS AND ASSIGNS.................................................................................24
9.5 DESCRIPTIVE HEADINGS...................................................................................25
9.6 COUNTERPARTS...........................................................................................25
9.7 SEVERABILITY...........................................................................................25
9.8 ATTORNEYS' FEES........................................................................................25
9.9 COURSE OF DEALING......................................................................................25
9.10 THIRD PARTIES..........................................................................................25
9.11 TAX MATTERS............................................................................................25
9.12 VARIATIONS IN PRONOUNS.................................................................................26
9.13 WAIVER OF JURY TRIAL...................................................................................26
9.14 GOVERNING LAW..........................................................................................27
9.15 ENTIRE AGREEMENT.......................................................................................27
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TABLE OF EXHIBITS
Exhibit A Instrument of Assumption
TABLE OF SCHEDULES
Schedule 2.1 Transferred Assets
Schedule 2.2 Retained Assets
Schedule 2.3 Assumed Liabilities
Schedule 3.2 Employment Agreements
Schedule 3.3 Brokers
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Schedule 3.9(a)... Intellectual Property
Schedule 3.9(b)... Liens on Intellectual Property
Schedule 3.9(c)... Proceedings
Schedule 3.9(d)... Notices of Infringement
Schedule 3.9(f)... Transfers of Source Code
Schedule 4.1...... Brokers
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ASSET PURCHASE AGREEMENT
Asset Purchase Agreement (the "Agreement") dated as of July 28, 2000,
by and among ZOOM TELEPHONICS, INC., a Delaware corporation (together with its
successors and assigns, "ZOOM" or "Buyer"), BOCA RESEARCH, INC. (together with
its successors and assigns, "BRI") and BOCA GLOBAL, INC. (together with its
successors and assigns, "BGI or "Subsidiary"), both Florida corporations
(collectively referred to as the "Company").
This Agreement sets forth the terms and conditions upon which the Buyer
will purchase from the Company, and the Company will sell to the Buyer, certain
Transferred Assets of the Company (as hereinafter defined) for the consideration
provided herein. This Agreement also provides for the assumption and performance
by the Buyer of certain Assumed Liabilities (as hereinafter defined).
In consideration of the foregoing, the mutual representations,
warranties and covenants set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For the purposes of this Agreement, all
capitalized words or expressions used in this Agreement (including the Schedules
and Exhibits annexed hereto) shall have the meanings specified in this Article
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Agreement" means this Asset Purchase Agreement (together with all
Exhibits and Schedules hereto) as from time to time assigned, supplemented,
modified, amended, or restated or as the terms hereof may be waived.
"Boca Products" means those products listed as Boca Products in
Schedule 2.1.
"Business Day" means any day, excluding Saturday, Sunday and any other
day on which commercial banks in New York, New York are authorized or required
by law to close.
"Buyer" shall have the meaning ascribed to such term in the first
paragraph of this Agreement.
"Charter" means the Certificate of Incorporation, Articles of
Incorporation or Organization or other organizational document of a corporation,
as amended and restated through the date hereof.
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"Claim" means an action, suit, proceeding, hearing, investigation,
litigation, charge, complaint, claim or demand.
"Code" means the Internal Revenue Code of 1986, and the regulations
thereunder, published Internal Revenue Service rulings, and court decisions in
respect thereof, all as the same shall be in effect at the time.
"Commission" means the Securities and Exchange Commission and any other
similar or successor agency of the federal government administering the
Securities Act or the Exchange Act.
"Company" shall have the meaning ascribed to such term in the first
paragraph of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, and any
similar or successor federal statute, and the rules and regulations and
interpretations of the Commission thereunder, all as the same shall be in effect
at the time.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Incident" means the report of a specific problem with a specific
product by a specific customer. An incident may involve one or more calls or
other communications between the customer and the Company.
"Indebtedness" means all obligations, contingent or otherwise, whether
current or long term, which in accordance with GAAP would be classified upon the
obligor's balance sheet as liabilities (other than deferred taxes) and shall
also include capitalized leases, guaranties, endorsements (other than for
collection in the ordinary course of business) or other arrangements whereby
responsibility is assumed for the obligations of others, including any agreement
to purchase or otherwise acquire the obligations of others or any agreement,
contingent or otherwise, to furnish funds for the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
"IRS" means the Internal Revenue Service and any similar or successor
agency of the federal government administering the Code.
"Lien" means, with respect to any asset, any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien, charge, restriction,
adverse claim by a third party, title defect or encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any assignment or other conveyance of any right to receive
income and any
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assignment of receivables with recourse against assignor), any filing of any
financing statement as debtor under the Uniform Commercial Code or comparable
law of any jurisdiction and any agreement to give or make any of the foregoing.
"Officer's Certificate" means a certificate signed in the name of a
corporation by its President, Chief Executive Officer, Treasurer, Chief
Financial Officer, or, if so specified, the Clerk or Secretary, acting in his or
her official capacity.
"Person" means any individual, firm, partnership, association, trust,
corporation, limited liability company, governmental body or other entity.
"Purchase Documents" means this Agreement and any other certificate,
document, instrument, stock power, or agreement executed in connection
therewith.
"Securities Act" means the Securities Act of 1933, and any similar or
successor federal statute, and the rules, regulations and interpretations of the
Commission thereunder, all as the same shall be in effect at the time.
"Subsidiary" shall have the meaning ascribed to such term in the first
paragraph of this Agreement.
"Tax" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or addon minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
The following terms are defined in the following Sections of this
Agreement:
Term Section
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Assumed Liabilities 2.3
Closing 2.10
Closing Date 2.10
Government Authority 3.7
Indemnifying Party 8.5
Losses 8.2
Purchase Price 2.8
Retained Assets 2.2
Retained Liabilities 2.4
Transferred Assets 2.1
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ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase of Assets. Upon the terms and subject to the
conditions contained in this Agreement, at the Closing (as defined in Section
2.10 below), (and in the case of the "Boca Research" name and the intellectual
property and associated html code that is transferable by the Company relative
to the website "www.bocaresearch.com", promptly following the name change
contemplated by Section 5.1(a)), the Company shall sell, assign, transfer and
convey to Buyer, and Buyer shall purchase, acquire and accept from the Company,
in their "as is" condition, without warranty of any kind other than as
specifically set forth in Article III, those certain assets set forth in
Schedule 2.1 (the "Transferred Assets").
2.2 Retained Assets. The Company will retain ownership of all
assets of the Company not listed on Schedule 2.1 attached hereto (collectively,
the "Retained Assets").
2.3 Assumed Liabilities. The Buyer shall assume and agree to pay,
perform and discharge only the Assumed Liabilities, and will pay, perform and
discharge the Assumed Liabilities as they become due. The Assumed Liabilities
shall consist of only those liabilities of the Company listed on Schedule 2.3
attached hereto or otherwise specifically provided for in this Agreement.
2.4 Retained Liabilities. The liabilities and obligations which
shall be retained by the Company (the "Retained Liabilities") shall consist of
all liabilities of the Company other than Assumed Liabilities, and the Company
agrees to pay and perform and discharge the Retained Liabilities as they become
due.
2.5 Manufacturing Through Boundless. The Buyer hereby agrees that
until March 3, 2001, Buyer shall utilize Boundless Manufacturing as its
exclusive manufacturer for the Boca Products.
2.6 Sublease. Subject to the landlord's approval, Buyer agrees to
sublease from the Company the technical support space of approximately 4,500
square feet for $2,343.75 base rent per month on a triple net lease basis,
together with a pro-rata share of all additional, non-rent charges required to
be paid by the Company to the landlord under the Company's lease with the
landlord (the "Master Lease") for a period ending on January 31, 2001 all under
the same terms and conditions as the Master Lease. Before January 31, 2001,
Buyer may elect to continue to sublease such space at a base rent equal to the
rent payable by the Company to the landlord under the Master Lease until the
Master Lease expires on July 12, 2002. In the event the monthly rent under the
Master Lease increases, the Buyer's rent under the sublease shall increase
proportionately. Additionally, Buyer may, prior to Closing, elect to sublease an
additional approximately 1,800 square feet from the Company at a 50% discount on
the base rent paid by the Company to the landlord for such space,
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for the first six months such 1,800 square feet are subleased. Before this
6-month period expires, Buyer may elect to continue to sublease such space at no
discount from the Company's rent under the Master Lease until the Master Lease
expires on July 12, 2002.
2.7 Tech Support Obligations. Buyer shall assume all obligations
for and provide full technical support for the Boca Products, provided that such
technical support provided by the Buyer shall, with respect to Boca Products
sold in the past, present or future by the Company or by the Buyer from the
Company's existing inventory, be provided on a contractor basis. All other
technical support obligations for Boca Products are assumed by the Buyer
outright. Buyer will be paid by the Company for technical support of the current
Boca Products. Buyer will be paid $6.00 for each Incident personally handled by
Buyer's employed technical support representative. Company agrees that the
minimum payments for providing technical support will be at least $45,000 in
August 2000, $40,000 in September, $35,000 in October, $30,000 in November, and
$25,000 in December, and zero thereafter. If Buyer covers technical support
during a portion of July, the minimum for July will be $45,000 pro rated by the
percentage of July that Buyer covers. Buyer will invoice the company at the end
of each of each month following the Closing and the Company shall pay to the
Buyer such invoiced amounts within thirty (30) days of the invoice date. The
Company's "900" telephone number will remain an expense of the Company and all
revenues originating from such telephone number will be paid to the Company.
2.8 Purchase Price. Upon the terms and subject to the conditions
contained in this Agreement and in consideration of the sale, assignment,
transfer and delivery of the Transferred Assets, Buyer will assume the Assumed
Liabilities and will pay an earn-out purchase price (the "Purchase Price") in
the following manner:
(a) Sale of Boca Products: Buyer may sell Boca Products
out of the Company's existing inventory as a master distributor. The Company
shall charge the Buyer its most favorable price for such products. Company will
remain responsible for, and shall pay, perform and discharge, all warranty
obligations for any products shipped prior to Closing and for all products sold
after Closing from the Company's existing inventory. Buyer may manufacture and
sell Boca hardware products provided that Buyer marks such products with unique
identification to distinguish them from prior inventory manufactured by or on
behalf of the Company. Buyer will be responsible for technical support and
warranty for those products. For the sale of all Boca Products (either by Buyer
manufacture or out of Company's existing inventory) Buyer will pay Company a
royalty based on sales by Buyer during the twelve (12) months following the
start of this agreement as follows:
$0 if sales are under $12 million,
$500,000 if sales are $12 million to $19 million,
$1 million if sales are $19 million to $24 million,
$2 million if sales are over $24 million.
It is understood that Buyer will not pay a royalty for any shipments after the
twelve (12) month
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anniversary of Closing, and will not pay for hardware product types that are not
already shipping. For purposes of determining royalties under this Section 2.8,
sales amounts will not include taxes, shipping, returns, etc.
(b) Global Fax Software: As part and by operation of
this Agreement, effective as of the Closing, Buyer shall have acquired all
ownership rights the Company possesses of the
product rights and source code for Global Fax software, subject to the rights of
Thought Communications, Inc. Such acquisition shall be at no cost to the Buyer
other than payment of royalties provided for below. Company will use its
commercially reasonable efforts to assist Buyer in obtaining license rights to
the products and software owned by Thought Communications, Inc. Buyer agrees to
pay $7.50 per standalone unit, less amounts due to Thought under the license,
and $1.00 per unit bundled with Buyer's modem (but not with Company's modem),
less amounts due to Thought under the license, through December 31, 2000, with
at least $4,500.00, less amounts due to Thought under license, per month in
royalties from the start of the Agreement through December 31, 2000. No
royalties will be payable to the Company following December 31, 2000. Buyer
agrees to pay $27,000.00, at Closing, as a prepaid royalty that can be applied
to any royalty-related expenses including the per-unit charges and the monthly
minimums.
Prior to Closing, the Company will use its commercially
reasonable efforts to assist Buyer in obtaining license rights for the Global
Fax products and software for the period commencing January 1, 2001 through the
term of the Agreement, such that the Buyer shall continue to have ownership
rights of the products and software for the Global Fax software that are at
least equivalent to those the Company currently possesses. Buyer shall pay
royalties with respect to the Global Fax software to Thought Communications,
Inc. in an amount equal to or less than currently paid by the Company.
Commencing on the Closing Date through December 31, 2000, the
Buyer will make direct payments to Thought Communications, Inc. on account of
royalties due to Thought Communications, Inc and any remaining amounts owed to
the Company in accordance with the first paragraph of this Section 2.8(b) shall
be paid directly to the Company by the Buyer. Commencing January 1, 2001, all
royalty payments shall be made by Buyer to Thought Communications, Inc. in
accordance with the terms of the Thought Communications License Agreement.
Buyer is responsible for supporting its Global Fax software
customers. It is understood that no more than 500 copies of Global Fax software
will be in the distributor channels as of the date of this Agreement. If the
Company has finished goods stock on the date of this agreement, Buyer will pay
the cost of goods for like-new stock on an as-needed basis, and the Company will
only supply Buyer.
(c) The Buyer will provide monthly sales reports of Boca
Products and distribution of Global Fax software to the Company and the Company
shall have the reasonable right to inspect and audit the records of the Buyer to
confirm such sales upon twenty (20) days' prior
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written notice. Sales and Use Records shall be kept at Buyer's principal place
of business or the principal place of business of the appropriate division of
Buyer to which this Agreement relates. Any adjustments due to overpayment or
underpayment of the portion of the purchase price due shall be made at the next
date when payments to the Company are due. If the undisputed upward adjustment
of the payment due to the Company is greater than ten percent (10%), the Buyer
agrees to reimburse the Company for its reasonable review and audit expenses.
Payment of royalties pursuant to section 2.8(a) shall be made within thirty (30)
days of the end of the twelve (12) month period referenced therein. Payment of
royalties pursuant to Section 2.8(b) shall be made quarterly no later than the
date on which payments to Thought Communications Inc. are due under the Thought
Communications License Agreement.
2.9 [Intentionally Omitted]
2.10 Time and Place of Closing. The closing of the transactions
described in Sections 2.1 through 2.6 above (the "Closing") shall take place at
the offices of Spinner, Dittman, Federspiel & Dowling, 151 N.W. 1st Avenue,
Delray Beach, Florida, at 9:00 a.m. (local time) on the third business day
following the satisfaction of the conditions to closing as provided in this
Agreement or at such other time and place as the parties may mutually agree. The
date and time at which the Closing actually occurs is hereinafter referred to as
the "Closing Date." The parties hereby agree that the Closing may occur through
an exchange by the parties of signatures by mail, overnight courier service or
facsimile transmission.
2.11 Execution and Delivery of Documents of Title by the Company;
Further Assurances. At the Closing, the Company shall execute and deliver to
Buyer, without warranties, except as otherwise described in Article III, such
deeds, conveyances, bills of sale, certificates of title, assignments,
assurances and other instruments and documents as Buyer may reasonably request
in order to effect the sale, conveyance, and transfer of the Transferred Assets
from the Company to the Buyer. Company will, from time to time after the Closing
Date, take such additional action and deliver such further documents as the
Buyer may reasonably request in order to effect the sale and conveyance of the
Transferred Assets from the Company to the Buyer.
2.12 Execution and Delivery of Documents by Buyer; Further
Assurances. At the Closing, Buyer shall execute and deliver to the Company an
Instrument of Assumption in the form attached hereto as Exhibit A and such other
documents as the Company may reasonably request in order to evidence Buyer's
assumption of the Assumed Liabilities. Buyer will, from time to time after the
Closing Date, take such additional action and deliver such further documents as
the Company may reasonably request in order to effectively assume the Assumed
Liabilities.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SUBSIDIARY
3.1 Condition of Assets. All of the Transferred Assets are
conveyed without warranty as to merchantability of fitness for a particular
purpose or, except as otherwise set forth in this Article III, title and are in
their "as is" condition and are conveyed without warranty of any kind except as
set forth in this Article III.
3.2 Employees. Prior to the date hereof, the Company has set forth
a true and complete list of all employees of the Company with respect to the
Business who are contemplated to be hired, by the Buyer on an at-will basis
including each such employee's job title, remuneration and duration of
employment with the Company. Except as disclosed in Schedule 3.2, the Company is
not a party to any written or oral employment, consulting, service, severance or
pension agreement to which the Buyer will become subject. The Company is not a
party to, and none of its employees are subject to, any collective bargaining
agreement or other union contract.
3.3 Brokers. Except as disclosed in Schedule 3.3 attached hereto,
none of the Company, its Subsidiaries, or anyone acting on their behalf, has
engaged, retained, or incurred any liability to any broker, investment banker,
finder or agent or has agreed to pay any brokerage fees, commissions, finder's
fees or other fees with respect to the sale of the Business or the transactions
contemplated by this Agreement.
3.4 Copies of Documents. The Company has made available for
inspection and copying by Buyer and its counsel true and correct copies of all
documents referred to in this Article III or in the Schedules delivered to Buyer
pursuant to this Agreement.
3.5 Organization and Qualification of Company. Each Company is
duly organized and validly subsisting as a corporation under the laws of the
State of Florida with full power and authority to own, operate or lease its
properties and to conduct its business.
3.6 Authority and Binding Effect. Each Company has full power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby, and this Agreement has been duly authorized, executed and
delivered by each Company and constitutes the legal, valid and binding
obligation of each Company, enforceable against each Company in accordance with
its terms.
3.7 No Conflicts.
(a) Except as set forth on Schedule 3.7, neither the
execution, delivery and performance of this Agreement nor the performance of the
transactions contemplated hereby in
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accordance with the terms hereof (i) contravene, conflict with or constitute a
breach or violation of any provision of the Charter or Bylaws of either Company
or any resolutions of either Company's Board of Directors; (ii) require consent,
approval or authorization of or declaration, filing or registration with any
person other than a governmental agency as described in paragraph (b) below
including consents of parties to loans, contracts, leases, licenses and other
agreements; (iii) conflict with or constitute a material breach of, or default
(with or without the passage of time of giving the notice) under, any debt
instrument to which either Company is a party, or give any person the right to
accelerate any indebtedness or terminate, modify or cancel any right; (iv)
constitute (with or without the passage of time or giving of notice) a default
under or material breach of any other agreement, instrument or obligation to
which either Company is a party or by which it or its assets are bound; or (v)
contravene, conflict with or result in a material violation of court order or
law, or give any governmental authority, whether foreign federal, state, local
or other political subdivision or agency of any of the foregoing (each a
"Government Authority"), or any other person, the right to exercise any remedy
or obtain any relief under any court order or law, to which either Company is
subject.
(b) The execution, delivery and performance of this Agreement
and the transactions contemplated hereby by either Company do not require the
consent, waiver, approval, authorization, exemption of or giving notice to any
Governmental Authority other than certificates of occupancy required to be
obtained by the Buyer from the city or county relating to the subleased space.
3.8 Litigation. Except as disclosed in the Company's most recent
annual report on Form 10-K (and more recent quarterly reports on Form 10-Q)
filed with The Securities and Exchange Commission and except as otherwise
disclosed in this Agreement or the Schedules attached hereto, there is no
action, suit, claim, proceeding, investigation or arbitration proceeding,
pending or to the knowledge of either Company currently threatened (a
"Proceeding") against or otherwise involving either Company or any of the
Transferred Assets, which would have a material adverse effect on the
Transferred Assets or the ability of the Company to perform its obligations
under this Agreement. To the best of the Company's knowledge, there are no
outstanding Court Orders to which either Company or by which the Transferred
Assets are bound, any of which questions the validity of this Agreement or the
right of the Company to enter into this Agreement, or to consummate the
transactions contemplated hereby, or that might result, either individually or
in the aggregate, in any material adverse changes in the Transferred Assets or
in the Business, nor is the Company aware of any basis for the foregoing.
Neither Company is a party or subject to the provisions of any Court Order or
the order of any Governmental Authority that would prevent such Company from
complying with the obligations under this Agreement.
3.9 Intellectual Property Rights.
(a) For purposes of this Section 3.9, "Intellectual Property"
means all patents,
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patent applications, trade marks (whether registered or unregistered) or service
marks, trade mark or service mark applications, trade names, copyrights,
licenses and computer software, owned and listed on Schedule 3.9(a).
(b) To the best of the Company's knowledge, all Intellectual
Property is owned exclusively by the Company, and, except as set forth on
Schedule 3.9(b), is free and clear of any attachments, licenses, sub-licenses or
Liens or encumbrances, such that no other person has any right or interest in or
license to use or right to license others to use any of the Intellectual
Property and is freely transferable (except as otherwise required by law); and
(c) Except as disclosed on Schedule 3.9(c), to the best of the
Company's knowledge, no proceedings to which the Company is a party have been
commenced which (i) challenge the rights of the Company in respect of the
Intellectual Property or (ii) charge the Company with infringement of any other
person's rights in the Intellectual Property and, to the knowledge of the
Company, no such proceeding has been instituted nor are any such proceedings
threatened to be filed which challenge the Company's rights to the Intellectual
Property or charge the Company with infringing on another person's rights in the
Intellectual Property.
(d) Except as disclosed on Schedule 3.9(d), the Company has
not received notice that it is infringing upon any the rights of any other
person in or to the Intellectual Property and, to the best knowledge of the
Company, none of the rights in Intellectual Property is being infringed by any
other person.
(e) To the best of the Company's knowledge, no director,
officer or employee of the Company owns, directly or indirectly, in whole or in
part, any rights in any of the Intellectual Property which the Company has used,
is presently using, or the use of which is reasonably necessary to its business
as now conducted or presently contemplated to be conducted.
(f) Except as set forth in Schedule 3.9(f), the Company has
not licensed or transferred source code to any of its Intellectual Property.
3.10 Title to Transferred Assets Not Constituting Intellectual
Property. The Company has good, valid and marketable title to the Transferred
Assets not constituting Intellectual Property and none of such Transferred
Assets is subject to any Lien.
3.11 Available Capital. The Company has adequate means to perform
their respective obligations under this Agreement.
3.12 Sole Representations and Warranties. The representations and
warranties contained in this Article are the only representations and warranties
made by the Company in connection with
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the transactions contemplated by this Agreement and supersede any and all
previous written or oral statements made by the Company to the Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company as follows:
4.1 Brokers. Except as disclosed in Schedule 4.1 attached hereto,
the Buyer, or anyone acting on their behalf, has neither engaged, retained, or
incurred any liability to any broker, investment banker, finder or agent nor has
agreed to pay any brokerage fees, commissions, finder's fees or other fees with
respect to the transactions contemplated by this Agreement.
4.2 Availability of Capital. Buyer has adequate means to
perform its obligations under this Agreement.
4.3 Regulatory Approvals. All regulatory approvals necessary to
complete this transaction have been obtained or will be obtained as of the
Closing Date.
4.4 Authority and Binding Effect. The Buyer has full power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby, and this Agreement has been duly authorized, executed and
delivered by the Buyer and constitutes the legal, valid and binding obligation
of the Buyer, enforceable against the Buyer in accordance with its terms.
4.5 Sole Representations and Warranties. The representations and
warranties contained in this Article IV are the only representations and
warranties made by Buyer in connection with the transactions contemplated by
this Agreement and supersede any and all previous written or oral statements
made by Buyer to the Company.
ARTICLE V
COVENANTS
5.1 Covenants of the Company. The Company shall keep, perform and
fully discharge the following covenants and agreements:
(a) Change of Name; Use of Name. Following the Closing, the
Company will take all action necessary or appropriate to change the corporate
name of Boca Global, Inc., effective upon the Closing, to a name that does not
include the word "Global." The name "Boca Research" will only be transferred if
and when its shareholders shall have approved a change of name for the Company
to a name other than "Boca Research." The Board of Directors of the Company
shall
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recommend the approval of the name change to its shareholders and shall notice a
meeting of the shareholders to vote on the name change to the extent required by
law, such meeting to be noticed as soon as practicable following the Closing but
in no event later than 90 days following Closing. Following such shareholder
approval, the Company shall take such steps as are reasonably required to
effectuate such name change and transfer, including the execution of a Trademark
Assignment, website/domain name transfer documents and such other documents as
are reasonably requested by Buyer in connection therewith.
(b) Satisfaction of Conditions. The Company shall use its
reasonable best efforts to accomplish the satisfaction of the conditions
precedent to Closing contained in Section 6.1 herein on or prior to the Closing
Date.
(c) Existing Inventories Notwithstanding any provision of this
Agreement to the contrary, the Company shall be entitled to use the Global
Village and Boca Research trademarks for the sole purpose of selling off its
existing inventory for a period of six (6) months from Closing. The Company
shall remain responsible for and shall pay, perform and discharge all warranty
obligations for any products shipped by it prior to the Closing and for any
products sold by it from existing inventory after Closing and Buyer does not
assume any responsibility therefor. In discharging such warranty obligations,
the Company shall continue to accept returns of products claimed to be defective
consistent with its past practices, whether or not such products are actually
defective.
(d) Conduct of Business. Between the date of this Agreement
and the Closing, the Company shall conduct its business in the ordinary course
and shall refrain from changing or introducing any method of management or
operations with regard to the Transferred Assets except in the ordinary course
of business and consistent with prior practices.
5.2 Covenants of the Company and Buyer. The Company shall keep,
perform and fully discharge the following covenants and agreements:
(a) Confidentiality. The Buyer and the Company (individually,
a "Party", and collectively, the "Parties") have and will request certain
written and verbal information that is material and confidential in nature (the
"Information") relating to a possible purchase of the Business (such purchase to
be referred to herein as the "Transaction"). For purposes of this Asset Purchase
Agreement, the term Information shall include all information relating to the
Transaction that has been received as of the date of this Asset Purchase
Agreement and any additional information that may be received in the future from
or between the Parties in conjunction with their evaluation of the Transaction.
In consideration of the Parties being furnished with the Information:
(i) The Parties agree that the Information will be
kept confidential and will not, without the other's prior
written consent, be disclosed by the Parties or the Parties'
representatives (which term shall mean, for all purposes
herein, Parties' directors, officers, employees, agents or
representatives, including, without limita-
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tion, attorneys, accountants, consultants, lenders and
financial advisors), in any manner whatsoever, in whole or in
part, and will not be used by the Parties or the Parties'
representatives directly or indirectly for any purpose other
than for the sole purpose of evaluating the Transaction. The
Parties agree to transmit the Information only to those
representatives who need to know the Information for the
purpose of evaluating the Transaction, who are informed by the
Parties of the confidential nature of the Information and who
agree to be bound by the terms of this Agreement. The Parties
will be responsible for any breach of this Agreement by the
Parties representatives.
(ii) Without the other Party's prior written consent,
the Parties and its representatives will not disclose to any
other person the fact that the Information has been made
available, or any of the terms, conditions or other facts with
respect to the Transaction, including the status thereof,
except as permitted by subparagraphs 5.2(a)(iv), (v) and (x)
hereof.
(iii) The Information and all copies thereof will be
returned promptly to the other Party's attention in the event
that the such other Party makes such a request or if the
contemplated Transaction shall not be consummated, and neither
Party nor any representative will make or retain any copies,
extracts or other reproductions, in whole or in part, of the
Information.
(iv) This Section shall be inoperative as to such
portions of the Information which (i) are or become generally
available to the public other than as a result of a disclosure
by a Party or its representatives; (ii) become available to a
Party on a non-confidential basis from a source other than the
other Party; or (iii) was known to a Party on a
non-confidential basis prior to its disclosure to such Party
by the other Party.
(v) In the event that a Party or anyone to whom a
Party transmits the Information pursuant to this Agreement is
requested or becomes legally compelled (by oral questions,
interrogatories, request for information or documents,
subpoena, civil investigative demand or similar process,
including regulatory inquiries) to disclose any of the
Information, such Party will provide the other Party with
prompt prior written notice so that such other Party may seek
a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. In the event
that such protective order or other remedy is not obtained, or
such other Party waives compliance with Paragraph 5.2(e)(ii)
of this Agreement, the Party will furnish only that portion of
the Information that is legally required (which determination
may be based upon advice of outside legal counsel) and will
exercise all reasonable means to obtain reliable assurance
that confidential treatment will be accorded the Information.
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(vi) It is agreed and understood that in the event of
any breach or threatened breach thereof by a Party, such other
Party shall, in addition to any other remedies which may be
available, be entitled to injunctive and other equitable
relief in any court of competent jurisdiction.
(vii) It is understood and agreed that no failure or
delay by the a Party in exercising any right, power or
privilege under this Agreement shall operate as a waiver
thereof nor shall any single or partial exercise thereof
preclude any other further exercise of any right, power or
privilege hereunder.
(viii) If any provision of this Section shall be
determined to be void or unenforceable, the remaining
provisions of this Section shall nonetheless constitute valid
and enforceable obligations of the parties hereto.
(ix) Any consent or waiver of compliance with any
provision hereof shall be effective only if in writing, and no
such consent or waiver shall be deemed to extend beyond the
particular subject thereof.
(x) Insofar as the Buyer is acquiring Information as
a part of the Transferred Assets, the Company hereby,
contemporaneously with Closing, releases such Information from
the restrictions of this Section 5.2(a).
(b) Disclosure Supplements. From time to time prior to the
Closing, the Company will supplement or amend the Schedule(s) hereto with
respect to any matter hereafter arising which, if existing or occurring at or
prior to the date of this Agreement, would have been required to be set forth or
described in any such Schedule or which is necessary to complete or correct any
information in any such Schedule or in any representation or warranty of the
Company which has been rendered inaccurate thereby. Buyer shall be entitled to
terminate this Agreement in the event that any such supplemental disclosure
discloses a change to any of the representations and warranties made by the
Company as of the date of this Agreement which changes have a material adverse
effect on the value of the Transferred Assets.
5.3 [Intentionally Omitted]
5.4 Covenants of Buyer. Buyer shall use its reasonable best
efforts to accomplish the satisfaction of the conditions precedent to Closing
contained in Section 6.2 herein on or prior to the Closing Date.
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5.5 Covenants of Buyer and the Company. The parties hereto hereby
agree to keep, perform and fully discharge the following covenants and
agreements:
(a) Waiver of Compliance with the Bulk Sales Act. In
connection with the transactions contemplated hereby and to the extent the same
is applicable, the parties shall waive compliance with the provisions of Article
6 of the Uniform Commercial Code Bulk Transfers and the Bulk Sales Act and any
other applicable United States, state or provincial bulk sales act or statute
("Bulk Sales Acts").
(b) Employees.
(i) Buyer will, prior to Closing, offer to
hire, on the Closing Date, the Company's technical support personnel and
webmaster set forth on Schedule 5.5(b). The costs of hiring and retaining such
employees shall be borne by the Buyer and Buyer shall pay all salaries and
benefits accruing after the Closing to such employees who agree to become
employees of Buyer (in accordance with Buyer's standard payroll and benefits
practices). It is understood that the Company will have discontinued 800 service
for all products prior to the date of this Agreement, but that the Company will
provide a recording that provides customers with a forwarding phone number. The
Company will provide its customers with not less than three months free
technical support after the date a Boca Product is delivered from Company's
existing Inventory.
(ii) The Company agrees that, following the
execution of this Agreement and prior to the Closing Date, Buyer shall be
allowed to discuss with the Company's employees listed by the Company the
possibility of employment with Buyer and shall be allowed to employ such persons
effective as of the Closing Date on such terms and conditions as may be
negotiated between Buyer and such persons. Buyer shall identify ten (10) days
prior to the Closing Date those Business Employees that it intends to hire. The
Company covenants not to interfere with any such efforts by Buyer and to use all
reasonable efforts to assist Buyer in employing such individuals effective as of
the Closing Date.
(iii) As to any such Business Employee who is
employed by Buyer pursuant to this Section 5.5(b), the Company agrees to cause
the release of such employee from any contractual provision with the Company, or
any affiliate of the Company which would impair the utility of such employee's
services to Buyer, or that would impose upon such employee any monetary or other
obligation to the Company that otherwise would be occasioned by the termination
of such employee's employment or any agreement of noncompetition or
confidentiality. Notwithstanding the foregoing, nothing contained herein shall
prevent the Company from seeking redress from such employees for violations of
such employees' duties as an employee of the Company.
(c) WARN Act. The Company shall be responsible for any notice
required under or liability associated with the Worker Adjustment and Retraining
Notification Act (29 U.S.C.
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ss.ss.2101-2109) and any applicable State or local plant closing, mass layoff,
relocation, or severance laws (hereinafter collectively referred to as "WARN")
associated with the Business Employees which takes place or arises on or before
the Closing Date, and Buyer shall be responsible for any such notice or
liability associated with the persons hired by Buyer on or after the Closing
Date ("Buyer's Employees") which takes place or arises after the Closing Date.
(d) COBRA. The Company shall be responsible for any group
health plan continuation or conversion coverage required under section 4980B of
the Code, Part 6 of Title I or ERISA, or applicable State or local laws
("Required COBRA Coverage") with respect to the Business Employees due to a
qualifying event occurring on or before the Closing Date. The Buyer shall be
responsible for any Required COBRA Coverage with respect to Buyer's Employees
due to a qualifying event occurring after the Closing Date.
(e) Distributions from Plans. Except where prohibited by
applicable law (including but not limited to section 401(k)(2)(B)(i) of the
Code), the Company shall distribute to the Business Employees their accrued
benefits under the Plans (subject, however, to any vesting schedule not
otherwise accelerated by applicable law or any term of the Plan), including but
not limited to accrued vacation and bonus pay. Such distributions shall be made
in the manner and at the time as prescribed by the terms of the Plan and
applicable law.
(f) Buyer's Employee Plans. Effective as of the Closing
Date, Buyer shall make available for the benefit of Buyer's Employees such
employee benefit plans as Buyer currently generally makes available to its
existing employees.
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to Obligations of Buyer. The obligations of Buyer
to consummate this Agreement and the transactions contemplated hereby are
subject to the fulfillment, prior to or at the Closing, of the following
conditions precedent:
(a) Representations, Warranties and Covenants. Each of the
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects at the Closing Date. The Company
shall have performed, on or before the Closing Date, all of its respective
obligations under this Agreement and the other Purchase Documents which by the
terms thereof are to be performed on or before the Closing Date; and the Company
shall have delivered to Buyer an Officer's Certificate dated the Closing Date of
the Company to such effect.
(b) Purchase Permitted by Applicable Laws; Legal Investment.
Buyer's purchase of and payment for the Transferred Assets (a) shall not be
prohibited by any applicable law or governmental order, rule, ruling,
regulation, release or interpretation, including the Hart-Scott-
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Rodino Act of 1976, as amended (the "HSR Act") (b) shall not constitute a
fraudulent or voidable conveyance under any applicable law and (c) shall be
permitted by all applicable laws, statutes, ordinances, regulations and rules of
the jurisdictions to which Buyer is subject.
(c) Proceedings Satisfactory. All proceedings taken in
connection with the purchase and sale of the Transferred Assets, the
transactions contemplated by Section 6.1(o) hereof, all of the other Purchase
Documents and all documents and papers relating thereto, shall be in form and
substance reasonably satisfactory to Buyer. Buyer and its counsel shall have
received copies of such documents and papers as Buyer or its counsel may
reasonably request in connection therewith, all in form and substance reasonably
satisfactory to Buyer. Buyer acknowledges that it has completed its due
diligence with respect to all items. Any Purchase Document, any Schedule or
Exhibit to this Agreement and any other document, agreement or certificate
contemplated by this Agreement, not approved by Buyer in writing as to form and
substance on the date this Agreement is executed, shall be reasonably
satisfactory in form and substance to Buyer.
(d) Consents; Permits. The Company shall have received (and
there shall be in full force and effect) all material consents, approvals,
licenses, permits, orders and other authorizations of, and shall have made (and
there shall be in full force and effect) all such filings, registrations,
qualifications and declarations, including without limitation, the consent
required by Thought Communications, Inc., the landlord's consent to the Sublease
referred to in Section 2.6, and other consents referred to in this Agreement,
and any filings required under the HSR Act, with any Person pursuant to any
applicable law, statute, ordinance regulation or rule or pursuant to any
agreement, order or decree to which the Company is a party or to which it is
subject, in connection with the transactions contemplated by this Agreement and
the sale of the Transferred Assets.
(e) Corporate Documents. The Company shall have delivered to
Buyer an Officer's Certificate of the Secretary of the Company certifying (A)
the incumbency and genuineness of signatures of all officers of the Company
executing this Agreement, any document delivered by the Company at the Closing
and any other document, instrument or agreement executed in connection herewith,
(B) the truth and correctness of resolutions of the Company authorizing the
entry by the Company into this Agreement and the transactions contemplated
hereby;
(f) Transfer of Transferred Assets. All of the Transferred
Assets shall have been effectively sold, transferred, conveyed and assigned to
Buyer and all of the deeds, conveyances, bills of sale, certificates of title,
assignments, assurances and other instruments and documents referenced in
Section 2.12 shall have been executed, delivered and, if appropriate, filed or
recorded.
6.2 Conditions to Obligations of the Company. The obligations of
the Company to consummate this Agreement and the transactions contemplated
hereby are subject to the fulfillment, prior to or at the Closing, of the
following conditions precedent:
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(a) Representations and Warranties. Each of the
representations and warranties of Buyer in this Agreement shall remain true and
correct in all material respects at the Closing Date, and Buyer shall, on or
before the Closing Date, have performed all of its obligations under this
Agreement and the Other Purchase Documents which by the terms thereof are to be
performed by it on or before the Closing Date; and Buyer shall have delivered an
Officer's Certificate to the Company dated the Closing Date to such effect.
(b) Letter of the Financial Advisor. The Company shall have
received a letter from Robinson Humphrey to the effect that the transactions
contemplated by this Agreement are in the best interests of the Company.
(c) No Pending Action. No legislation, order, rule, ruling or
regulation shall have been proposed, enacted or made by or on behalf of any
governmental body, department or agency, and no legislation shall have been
introduced in either House of Congress or in the legislature of any state, and
no investigation by any governmental authority shall have been commenced or
threatened, and no action, suit, investigation or proceeding shall have been
commenced before, and no decision shall have been rendered by, any court or
other governmental authority or arbitrator, which, in any such case, was not
known by the Company on the date hereof or which could adversely affect,
restrain, prevent or rescind the transactions contemplated by this Agreement
(including, without limitation, the purchase and sale of the Transferred
Assets).
(d) Corporate Documents. Buyer shall have delivered
respectively to the Company:
(i) an Officer's Certificate of the Secretary
of such party certifying (A) the incumbency and genuineness of signatures of all
officers of Buyer executing this Agreement, any document delivered by Buyer at
the Closing and any other document, instrument or agreement executed in
connection herewith, and (B) the truth, correctness and completeness of the
ByLaws of Buyer;
(ii) the Charter of Buyer certified as of a
recent date by the Secretary of State of the State of Delaware; and
(iii) certificates of corporate good standing and
legal existence of Buyer as of a recent date from the Secretary of State of
Delaware and Commonwealth of Massachusetts.
(e) Purchase Permitted by Applicable Laws; Legal Investment.
The Buyer's purchase of and payment for the Transferred Assets (a) shall not be
prohibited by any applicable law or governmental order, rule, ruling,
regulation, release or interpretation, (b) shall not constitute a fraudulent or
voidable conveyance under any applicable law and (c) shall be permitted by all
applicable laws, statutes, ordinances, regulations and rules of the
jurisdictions to which the Buyer is subject.
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(f) Proceedings Satisfactory. All proceedings taken in
connection with the purchase and sale of the Transferred Assets, all of the
other Purchase Documents and all documents and papers relating thereto, shall be
in form and substance reasonably satisfactory to the Company. The Company and
its counsel shall have received copies of such documents and papers as the
Company or its counsel may reasonably request in connection therewith, all in
form and substance reasonably satisfactory to the Company. Any Purchase
Document, any Schedule or Exhibit to this Agreement and any other document,
agreement or certificate contemplated by this Agreement, not approved by the
Company in writing as to form and substance on the date this Agreement is
executed, shall be reasonably satisfactory in form and substance to the Company.
(g) Sublease, Approval and Consent of Landlord. Buyer shall
have entered into the sublease referred to in Section 2.6 and the Company shall
have obtained for the Buyer the approval and consent of the Landlord to the
Buyer's sublease of the space referenced in Section 2.6. The parties hereby
agree that they will cooperate in good faith to secure a mutually acceptable
Landlord consent.
(h) Finova Line of Credit. Company shall have obtained the
release of UCC's as to the Transferred Assets from Finova.
(i) "No Shop". Until the earlier of Closing or termination of
this Agreement, the Company shall not solicit, encourage or participate in any
negotiations or discussions with third parties with respect to any offer or
proposal to purchase or acquire the Transferred Assets.
ARTICLE VII
TERMINATION
7.1 Termination of Agreement. This Agreement and the transactions
contemplated hereby may (at the option of the party having the right to do so)
be terminated at any time on or prior to the Closing Date:
(a) Mutual Consent. By mutual written consent of Buyer and
the Company;
(b) Court Order. By Buyer, or the Company if any court of
competent jurisdiction shall have issued an order pursuant to the request of a
third party restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated by this Agreement;
(c) Failure to Close By August 15, 2000. By Buyer or the
Company if the transactions contemplated hereby shall not have been consummated
on or before August 15, 2000, provided, however, that such right to terminate
this Agreement shall not be available to any party
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whose failure to fulfill any obligation of this Agreement has been the cause of,
or resulted in, the failure of the transactions contemplated hereby to be
consummated on or before such date;
(d) Termination by Company. By the Company upon notice to
Buyer at any time prior to August 15, 2000, if (i) a condition to the
performance of the Company set forth in Section 6.2 hereof shall not be
fulfilled at the time specified for the fulfillment thereof, (ii) a material
default under or a material breach of this Agreement shall be made by Buyer and
such default or breach shall not be curable prior to August 15, 2000; or
(e) Termination by Buyer. By Buyer by notice to the Company at
any time prior to August 15, 2000, if (i) a condition to the performance of
Buyer set forth in Section 6.1 hereof shall not be fulfilled at the time
specified for the fulfillment thereof; (ii) a material default under or a
material breach of this Agreement shall be made by the Company, and such default
or breach shall not be curable prior to August 15, 2000;
ARTICLE VIII
INDEMNIFICATION
8.1 Survival of Representations and Warranties. The parties hereby
shorten the applicable period of limitation of claims made under representations
and warranties, and for that purpose each and every such representation and
warranty set forth in this Agreement (including the Officer's Certificates
required by Sections 6.1 and 6.2 above), shall survive until one year from the
date of Closing, except with respect to intentional breaches of representations
and warranties which shall survive the Closing without limitation. From and
after the applicable period of survival with respect to such respective
representations and warranties of the Company and Buyer, none of the Company, or
Buyer or any Affiliate of the Company or Buyer shall have any liability
whatsoever with respect to any such representation or warranty, except for
breaches as to which any party shall have notified the other party prior to such
date. This Section 8.1 shall have no effect upon any other obligation of the
parties hereto, whether to be performed before or after the Closing Date.
8.2 Indemnification by the Company. The Company shall indemnify,
defend and hold the Buyer, its respective officers, directors, employees,
consultants, owners, agents and Affiliates, harmless from and in respect of any
and all Losses which may be sustained or suffered by any of them arising out of
or resulting from (i) any breach or inaccuracy of any representation or
warranty, (ii) the breach of or failure to perform any warranty, covenant,
undertaking or other agreement of the Company contained in this Agreement or any
other Purchase Document, (iii) obligations pursuant to the Retained Liabilities
and (iv) any and all actions, suits, claims and administrative or other
proceedings of every kind and nature instituted or pending against the Company
or Buyer or any of their Affiliates at any time before or after the Closing Date
to the extent that such Losses (a) relate to or arise out of or in connection
with the assets, businesses, operations, conduct, products and/or employees
(including former employees) of the Company, whether relating to or arising out
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of or in connection with occurrences before the Closing Date and (b) do not
arise out of a breach or inaccuracy of the Buyer's representations and
warranties in, or a breach or default by Buyer in the performance of any
warranty, covenant under, undertaking or other agreement contained in this
Agreement or any other Purchase Document (the "Losses").
For purposes of this Section 8 "Losses" means all losses,
damages, liabilities, payments and obligations, and all expenses related
thereto. Losses shall include any reasonable attorneys' fees and legal costs
incurred by any of the indemnified persons subsequent to the Closing in defense
of or in connection with any alleged or asserted liability, payment or
obligation, whether or not any liability or payment, obligation or judgment is
ultimately imposed against the indemnified persons and whether or not the
indemnified persons are made or become parties to any such action; provided that
Losses shall include punitive and consequential damages only with respect to
third party actions.
8.3 Indemnification by Buyer. Buyer shall indemnify, defend and
hold the Company, its respective officers, directors, employees, consultants,
owners, agents and Affiliates, harmless from and in respect of any and all
Losses which may be sustained or suffered by any of them arising out of or
resulting from (i) any breach or inaccuracy of any representation or warranty,
(ii) the breach of or failure to perform any warranty, covenant, undertaking or
other agreement of Buyer contained in this Agreement or any other Purchase
Document to the extent that such Losses do not arise out of a breach or
inaccuracy of the Company's representations and warranties in, or a breach or
default in the performance of any warranty, covenant under, undertaking or other
agreement contained in this Agreement or any other Purchase Document, and (iii)
all obligations pursuant to the Assumed Liabilities; provided, however, that
Buyer shall have no liability to the Company pursuant to this Section 8.3 as a
result of the breach of any representation or warranty to the extent that the
Company knew or had reason to know that such representation or warranty was
untrue, inaccurate or incorrect prior to the Closing Date.
8.4 Minimum Indemnification; Materiality. Notwithstanding anything
to the contrary contained herein, no party hereto shall be entitled to recover
Losses relating to any breach or inaccuracy of any representation or warranty
from any other party unless and until the total of all claims for indemnity or
damages with respect to any inaccuracy or breach of any such representations or
warranties, whether such claims are brought under this Article VIII or
otherwise, exceeds $25,000.00 and then only for the amount by which such claims
for indemnity or damages exceed $25,000.00. Other than for any intentional
breach of representation or warranty, under no circumstances shall an
indemnified party be entitled to indemnification from the indemnifying party for
amounts in excess of the Purchase Price, plus any costs of enforcing the
indemnification provisions (including reasonable attorney's fees).
Notwithstanding the foregoing, each party (the "Breaching Party") agrees to
indemnify the other party for Losses arising from the Breaching Party's failure
to observe or perform its covenants hereunder and such indemnification
obligation shall be unrestricted as to time and amount and shall not be subject
to any minimums. Notwithstanding the
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limitations set forth above, each of the indemnification obligations referenced
in subsections 8.2(iii) and 8.3(iii) shall be unrestricted as to time and amount
and shall not be subject to any minimums.
8.5 Notice and Opportunity to Defend. If there occurs an event
that a party asserts is an indemnifiable event pursuant to Section 8.2 or 8.3,
the parties seeking indemnification shall promptly notify the other parties
obligated to provide indemnification (collectively, the "Indemnifying Party").
If such event involves (a) any Claim or (b) the commencement of any action, suit
or proceeding by a third person, the party seeking indemnification will give
such Indemnifying Party prompt written notice of such Claim or the commencement
of such action, suit or proceeding, provided, however, that the failure to
provide prompt notice as provided herein will relieve the Indemnifying Party of
its obligations hereunder only to the extent that such failure prejudices the
Indemnifying Party hereunder. In case any such action, suit or proceeding shall
be brought against any party seeking indemnification and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to participate therein and, to the extent that it desires to do so, to
assume the defense thereof, with counsel reasonably satisfactory to such party
seeking indemnification and, after notice from the Indemnifying Party to such
party seeking indemnification of such election so to assume the defense thereof,
the Indemnifying Party shall not be liable to the party seeking indemnification
hereunder for any attorneys' fees or any other expenses, in each case
subsequently incurred by such party, in connection with the defense of such
action, suit or proceeding. The party seeking indemnification agrees to
cooperate fully with the Indemnifying Party and its counsel in the defense
against any such action, suit or proceeding. In any event, the party seeking
indemnification shall have the right to participate at its own expense in the
defense of such action, suit or proceeding. In no event shall an Indemnifying
Party be liable for any settlement or compromise effected without its prior
consent.
ARTICLE IX
MISCELLANEOUS
9.1 Fees and Expenses. Each of the parties hereto will pay and
discharge its own expenses and fees in connection of with the negotiation of and
entering into of this Agreement and the consummation of the transactions
contemplated hereby. Buyer shall pay all fees and expenses incurred in
connection with the transfer and registration of the Intellectual Property.
9.2 Publicity and Disclosures. Prior to the Closing, no press
release or any public disclosure, either written or oral, of the transactions
contemplated by this Agreement shall be made by any party without the prior
knowledge and written consent of the Company and Buyer other than compliance
with the Securities Act disclosures and other regulatory bodies.
9.3 Notices. All notices, requests, demands, consents and
communications necessary or required under this Agreement or any other Purchase
Document shall be made in the manner
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<PAGE>
specified, or, if not specified, shall be delivered by hand or sent by
registered or certified mail, return receipt requested, or by telecopy (receipt
confirmed) to:
if to Buyer:
Zoom Telephonics, Inc.
207 South Street
Boston, MA 02111
Attention: Frank B. Manning, President
Facsimile Transmission Number: (617) 338-5015
with a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02111
Attention: Philip J. Flink, Esquire
Facsimile Transmission Number: (617) 856-8201
if to the Company:
Boca Research, Inc.
1601 Clint Moore Road
Boca Raton, FL 33487
Attention: R. Michael Brewer
Facsimile Transmission Number: (561)241-1051
with a copy to:
Spinner, Dittman, Federspiel & Dowling
151 N.W. 1st Avenue
Delray Beach, FL 33444
Attention: Robert W. Federspiel, Esq.
Facsimile Transmission Number: (561) 276-5489
All such notices, requests, demands, consents and communications shall
be deemed to have been duly given only when such notice, request, demand,
consent or communication is delivered or, if sent by telecopier, when received.
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<PAGE>
9.4 Successors and Assigns. All covenants and agreements set forth
in this Agreement and made by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the successors and assigns of such party,
whether or not so expressed.
9.5 Descriptive Headings. The headings of the sections and
paragraphs of this Agreement have been inserted for convenience of reference
only and shall not be deemed to be part of this Agreement.
9.6 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
9.7 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason in any
jurisdiction, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions hereof shall not be in any
way impaired or affected, it being intended that each of parties' rights and
privileges shall be enforceable to the fullest extent permitted by law, and any
such invalidity, illegality and unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the fullest extent permitted by law, the parties hereby waive any provision of
any law, statute, ordinance, rule or regulation which might render any provision
hereof invalid, illegal or unenforceable.
9.8 Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement or the other Purchase Documents, or
where any provision hereof or thereof is validly asserted as a defense, the
successful party shall be entitled to recover reasonable attorneys' fees in
addition to any other available remedy.
9.9 Course of Dealing. No course of dealing and no delay on the
part of any party hereto in exercising any right, power, or remedy conferred by
this Agreement shall operate as a waiver thereof or otherwise prejudice such
party's rights, powers and remedies. The failure of any of the parties to this
Agreement to require the performance of a term or obligation under this
Agreement or the waiver by any of the parties to this Agreement of any breach
hereunder shall not prevent subsequent enforcement of such term or obligation or
be deemed a waiver of any subsequent breach hereunder. No single or partial
exercise of any rights, powers or remedies conferred by this Agreement shall
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
9.10 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any Person, other
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<PAGE>
than the parties hereto and their permitted successors or assigns, any rights or
remedies under or by reason of this Agreement or any other Purchase Document.
9.11 Tax Matters.
(a) The Buyer shall pay all real property transfer Taxes,
sales Taxes, stock transfer Taxes, documentary stamp Taxes, recording charges
and other similar Taxes resulting from, arising under or in connection with the
transfer of the Transferred Assets or any other related transaction under the
Agreement.
(b) The Company shall be responsible for and shall timely pay
or cause to be paid any and all Taxes (other than Buyer's Taxes, as defined
below) with respect to or relating to the Business or the Transferred Assets,
whatsoever arising, that are attributable to any taxable period ending on or
prior to the Closing Date and, in the case of a taxable period that includes,
but does not end on the Closing Date, the portion of such taxable period that
ends on the Closing Date ("the Company's Taxes"). Notwithstanding anything in
this Agreement to the contrary, the Company's Taxes shall constitute a Retained
Liability.
(c) Buyer shall be responsible for and shall timely pay or
cause to be paid any and all Taxes (other than the Company's Taxes) with respect
to the Business or the Transferred Assets, whatsoever arising, that are
attributable to any taxable period commencing after the Closing Date and, in the
case of a taxable period that includes, but does not end on, the Closing Date,
the portion of such taxable period that begins on the day after the Closing Date
("Buyer's Taxes"). Notwithstanding anything in this Agreement to the contrary,
Buyer's Taxes shall constitute an Assumed Liability.
(d) The obligations of the Company set forth in the Agreement
relating to Taxes shall, except as otherwise agreed in writing, be unconditional
and absolute and shall remain in effect without limitation as to time or amount
of recovery by Buyer until thirty (30) days after the expiration of the
applicable statute of limitations governing the Taxes to which such obligations
relate (after giving effect to any agreement extending or tolling such statute
of limitations).
9.12 Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
identity of the Person or Persons may require.
9.13 WAIVER OF JURY TRIAL. EACH OF BUYER AND THE COMPANY HEREBY
EXPRESSLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OTHER PURCHASE DOCUMENT
OR THE TRANSFERRED ASSETS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT
MATTER OF THIS AGREEMENT. THE COMPANY AND BUYER ALSO WAIVE ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND
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<PAGE>
WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY PARTY. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE COMPANY AND BUYER
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAVIER IS IRREVOCABLE AND MAY ONLY BE
MODIFIED EITHER ORALLY OR IN AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT, ANY OTHER PURCHASE DOCUMENT OR THE SHARES. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT
A JURY) BY THE COURT.
9.14 GOVERNING LAW. THIS AGREEMENT, INCLUDING THE VALIDITY HEREOF
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE (WITHOUT GIVING EFFECT
TO THE CONFLICTS OF LAWS PROVISIONS THEREOF). EACH OF THE PARTIES HERETO FURTHER
AGREES THAT PROCESS MAY BE SERVED UPON IT BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, ADDRESSED AS MORE GENERALLY PROVIDED IN SECTION 9.3 HEREOF, AND
CONSENTS TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTIES WITH RESPECT
TO ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ENFORCEMENT OF ANY
RIGHTS UNDER THIS AGREEMENT.
9.15 Entire Agreement. This Agreement, including the Schedules and
Exhibits referred to herein, is complete, and all promises, representations,
understandings, warranties and agreements with reference to the subject matter
hereof, and all inducements to the making of this Agreement relied upon by all
the parties hereto, have been expressed herein or in said Schedules or Exhibits.
This Agreement may not be amended except by an instrument in writing signed on
behalf of the Company and Buyer.
IN WITNESS WHEREOF the parties hereto have executed this Agreement
under seal as of the date first set forth above.
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<PAGE>
ATTEST: ZOOM TELEPHONICS, INC.
______________________________ By:__________________________________
Secretary President
ATTEST: BOCA RESEARCH, INC.
______________________________ By:__________________________________
Secretary President
ATTEST: BOCA GLOBAL, INC.
______________________________ By:__________________________________
Secretary President
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<PAGE>
TABLE OF SCHEDULES
Schedule 2.1
Transferred Assets
(a) all of the Company's interest in the Boca Products,
proprietary designs, copyrights, tradenames, servicemarks, trademarks and
trademark applications listed in Exhibit 2.1-A attached hereto, all federal,
state, local and foreign registrations thereof, if applicable, all common law
rights thereto, and all goodwill associated therewith, and all claims or causes
of action for infringement thereof; provided, however, that the Company retains
the rights to the use of its corporate name, Boca Research, Inc., until such
time as its shareholders approve an amendment to its charter changing its name,
and no assurance is given that this will occur.
(b) all rights of the Company to causes of action, lawsuits,
judgments, claims and demands of any nature which would relate to the
Transferred Assets or constitute counterclaims, rights of setoff, and
affirmative defenses to any claims brought against Buyer by third parties
relating to the Transferred Assets;
(c) Intellectual property and associated html code that is
transferable by the Company relative to the websites, including
"www.globalvillage.com", "www.bocaglobal.com", "www.bocavision.com", and,
subject to the shareholder approval contemplated by Section 5.1(a) of this
Agreement, "www.bocaresearch.com" and domain registrations relating to these
sites.
(d) the product lines listed on the attached Exhibit 2.1-B
(the "Boca Products") together with all of the Company's rights to use its
existing tooling to manufacture the Boca Products.
(e) the furniture, fixtures and equipment listed on the
attached Exhibit 2.1-C.
(f) All of the Company's interest in the software license
from Right Now Technologies, Inc. to the Company pursuant to Software License
Agreement between the Company and Right Now Technologies, Inc. dated as of
August 26, 1998.
1
<PAGE>
Exhibit 2.1-A
2
<PAGE>
Exhibit 2.1-B Product Lines
SKU Description
--- -----------------------------------------------------------------
Boca Research
I/O Product Line
BB1008 8 Port ISA Serial Expansion Board
IOP654 4 Port Serial PCI Card
IOP658 8 Port Serial PCI Card
IO650M 2 Port Serial PCI ISA Card (50 Pack)
IO652 Turbo 650 - 2 Port Serial ISA Card
IOAT55 1 Port Parallel + 2 Port Serial ISA Card
IOAT55M 1 Port Parallel + 2 Port Serial ISA Card (50Pack)
IOAT55MHP 1 Port Parallel + 2 Port Serial ISA Card (50Pack) HP
IOAT55X 1 Port Parallel + 2 Port Serial ISA Card (White Box)
IOPAR Turbo Parallel - 1 Port Parallel ISA PCI Card
IOPCI55 Turb Combo 1X2 - 1 Port Parallel + 2 Port Serial PCI Card
IOPCI255M Turb Combo 1X2 - 1 Port Parallel + 2 Port Serial PCI Card
(40 Pack)
IOP652 Turbo Serial 650 - 2 Port Serial PCI Card
IOP652M Turbo Serial 650 - 2 Port Serial PCI Card (50 Pack)
IOPPAR Turbo Parallel - 1 Port Parallel PCI Card
IOP2USB Turbo USB - 2 Port USB PCI Card
Modem Product Line
M024ED 2400 Modem - 2400 bps external, Data
MD56HI 56K WinStorm - PCI internal, V.90, Fax/Data
M56INTLE 56K Multimedia Modem - external, speaker, V.90, Fax/Data,
International
MA56WWE 56K Multimedia Modem - external, voice, V.90, Fax/Data,
International
M56INTLI 56K Multimedia Modem - internal, speaker, V.90, Fax/Data,
ISA, International
M56IQ 56K Multimedia Modem - internal, speaker, V.90, Fax/Data,
ISA, (Compaq)
M56IQG 56K Multimedia Modem - internal, speaker, V.90, Fax/Data,
ISA, (Compaq 40 Pack)
MD56AE 56K TidalWave Modem - external, speaker, V.90, Fax/Data
MD56EUSB 56K TidalWave USB Modem - USB, external, speaker, V.90, Fax/Data
MV.34ED 33.6 Home/Office Modem - external, 33.6Kbps, Fax/Data
MV.34EMSP 33.6 Home/Office Modem - external, 33.6Kbps, Fax/Data (Sprint,
white box)
MV.34FEMS 33.6 Home/Office Modem - external, 33.6Kbps, Fax/Data (White box)
Global Village
Modem Product Line
GV30-6400 TelePort 56K - external, V.90, Fax/Data
GV30-6405 TelePort 56K - external, V.90, Fax/Data, European
GV30-6406 TelePort 56K - external, V.90, Fax/Data, British
GV30-6500 56K PC Card Modem - PC Card, V.90, Fax/Data
GV30-6505 56K PC Card Modem - PC Card, V.90, Fax/Data, International
GV30-6600 TelePort 56K Fax Modem - internal, V.90, Fax/Data, Mac G3
GV30-6605 TelePort 56K Fax Modem - internal, V.90, Fax/Data, International
GV30-6700 TelePort USB 56K - USB, external, V.90, Fax/Data
GV30-6706 TelePort USB 56K - USB, external, V.90, Fax/Data, International
I/O Product Line
GV30-7000 Turbo USB - 2 Port USB PCI Card for Macs
Software Product Line
GV30-0975 GlobaFax(TM) - Fax software for iMac, G3 and G4 internal modems
Multimedia Solutions Line
GV30-0980 VideoFX(TM) - video capture device and software suite
3
<PAGE>
Exhibit 2.1-C
4
<PAGE>
Schedule 2.3
Assumed Liabilities
1. All warranty and upgrade liability for all Boca Products manufactured and
sold by Buyer other than out of Company's existing inventory. All warranty
and upgrade liability for all Boca Products shipped prior to closing or
sold from Company's existing inventory shall be paid, performed and
discharged by the Company as a Retained Liability.
2. All technical support for all Boca Products as expressly provided by this
Agreement (but not including, the Company's warranty obligation set forth
in paragraph 1 of this Schedule 2.3 and the Company's obligation to pay
Buyer for the technical support as provided in Section 2.7 of the
Agreement).
3. All liability for future customer and end-user product returns, claims for
stock rotation, claims for marketing creditors, claims for price
protection, claims for COOP or MDF credits, claims for meet-quota rebates
or any other revenue offset (collectively, the "Return and Off-set
Liability") resulting from product manufactured and sold by Buyer other
than from Company's existing inventory. All Return and Off-Set Liability
for all Boca Products shipped prior to closing or sold or shipped from
Company's existing inventory shall be paid, performed and discharged by the
Company as a Retained Liability.
4. Any liability arising out of the use by Buyer of the Transferred Assets
after Closing or the sale of Boca Products manufactured and sold by Buyer
other than out of Company's existing inventory, including any liability
associated with intellectual property rights infringement (other than
liability for those claims identified in Schedule 3.9(c) or not disclosed
to Buyer as required herein). Any liability arising out of the use by the
Company of the Transferred Assets at any time or the sale of Boca Products
shipped prior to closing or sold from the Company's existing inventory
after Closing, including liability for those claims identified in Schedule
3.9(c) or not disclosed to Buyer as required herein, shall be paid,
performed and discharged by the Company as a Retained Liability.
5. All liabilities associated with the Sublease, once entered, as provided in
said Sublease. All liabilities associated with the Master Lease between
Equitable Pacific Partners Limited Partnership and Boca Research, Inc.
shall be paid, performed and discharged by the Company as a Retained
Liability.
6. All liability associated with the Buyer performing or not performing its
obligations under any Assumed Liability. All liability associated with the
Company performing or not performing its obligation under the Agreement
shall be paid, performed and discharged by the Company as a Retained
Liability.
5
<PAGE>
Schedule 3.2
Employment Agreements
None
6
<PAGE>
Schedule 3.3
Brokers
None
7
<PAGE>
Schedule 3.9(a)
Intellectual Property
All intellectual property referenced in subsections (a) and (c) of
Schedule 2.1.
8
<PAGE>
Schedule 3.9(b)
Liens on Intellectual Property
1. License from Thought Communications, Inc. relating to the GlobalFax
software.
9
<PAGE>
Schedule 3.9(c)
Proceedings
The Company has been named a co-defendant in an action brought in the United
States District court for the District of Massachusetts, by NEC Technologies,
Inc. The suit alleges that the Company supplied modem hardware to NEC, which was
combined by NEC with software supplied by another co-defendant, Ring Zero
Systems, Inc. NEC was subsequently sued for patent infringement by PhoneTel
Communications, Inc. allegedly as a result of NEC's combination of modem
hardware and software supplied by the vendors in its personal computer products.
NEC alleges that the Company and Ring Zero are obligated to indemnify NEC for
NEC's costs of defense and settlement of the PhoneTel suit, in the amount of
$327,000. This action was dismissed, without prejudice on April 25, 2000;
however, the reason for the dismissal was entirely procedural, and there has
been no resolution of the substantive dispute. The Company anticipates that NEC
will refile this action in an appropriate jurisdiction in the near future.
The Company has been named a defendant in an action brought in the District
Court of South Dakota, by Gateway, Inc. Global Village, Inc. had contracted to
supply its FaxWorks software to be bundled with Gateway PCs. Gateway's complaint
against the Company alleges that the Company assumed the liabilities of Global
Village, Inc. with respect to the FaxWorks product. Gateway reportedly will pay
between $5,000,000 and $6,000,000 to settle litigation brought by PhoneTel,
Inc., for which Gateway is seeking indemnification from the Company and an
unrelated co-defendant.
A new case by General Patent Corporation International has been filed against
the Company in state court in New York attempting to set aside a paid up license
purchased by the Company in settlement of a previous case. The license deals
with PCMCIA modems.
10
<PAGE>
Schedule 3.9(d)
Notices of Infringement
None
11
<PAGE>
Schedule 3.9(f)
Transfers of Source Code
None
12
<PAGE>
Schedule 4.1
Brokers
No exceptions.
13
<PAGE>
Schedule 5.5(b)
Personnel to be Hired by Zoom
1. Don Campbell, Director
2. Garrett Mowry, Supervisor
3. Kernes Conze, Supervisor
4. Tom Powers, Webmaster
5. Nancy Crowell, Admin. Asst.
6. Brian Weber
7. Kristin Boyette
8. Gary Kampel
9. Mathew Mathew
10. Brett Bojanoski
11. Teresa Kessler
12. Sam Trapani
13. Jonas Elouidor
14. Harry Burton
15. Jennifer Katz
Optionally, Zoom May Make Job Offers To:
1. Jeff Mikoleit, Sr. Product Marketing Manager
2. Todd Winninger, Sr. Product Marketing Manager
3. Michael Stebel, President
14
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
This Agreement is made as of the 16th day of May, 2000, between Boca
Research, Inc., a Florida corporation (the "Company"), and Richard M. Brewer
(the "Employee").
RECITALS
WHEREAS, the Company desires to employ the Employee as Sr. Vice
President and Chief Financial Officer of the Company, and the Employee desires
to serve as Sr. Vice President and Chief Financial Officer of the Company, on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The company hereby employs the Employee as Sr. Vice
President and Chief Financial Officer of the Company, and the Employee accepts
such employment for the term of employment specified in Section 3 below (the
"Employment Term"). During the Employment Term, the Employee shall, subject to
the direction of the Chief Executive Officer of the Company, oversee and direct
the financial operations of the Company and perform such other duties as may
from time to time be assigned to him by the Chief Executive Officer.
2. Performance. The Employee agrees to devote his best efforts and
all of his business time to the performance of his duties hereunder during the
Employment Term.
3. Employment Term. The Employment Term shall begin on June 6, 2000,
and shall continue until terminated in accordance with the terms of this
Agreement (the "Employment Term").
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay
the Employee a base salary, payable in equal bi-weekly installments, subject to
withholding and other applicable taxes, at a monthly rate of Twelve Thousand
Five Hundred and no/100 Dollars ($12,500.00).
(b) Insurance; Other Benefits. The Employee shall be entitled
to participate in all employee benefit plans now existing or hereinafter
established by the Company, including, but not limited to, medical/dental
insurance plans, group life and disability insurance plans, 401(k) Plan,
pension, profit sharing or bonus plans, Employee Stock Purchase Plan, and any
other employee benefit plan or arrangement made available to executive officers
of the Company. Medical, dental, life, accidental
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<PAGE>
death and disability, and long term disability insurance shall begin on the
first month after Employee shall have completed three full months of full-time
employment. For the purpose of determining Long Term Disability and Life
Insurance benefits the Employee's base compensation shall be equal to his base
salary.
(c) Vacation. The Employee shall be entitled to take paid
vacation during each calendar year of the Employment Term as provided for in the
Company's personnel policy as it exists from time to time, to be taken at such
time or times as shall be mutually convenient and consistent with his duties and
obligations to the Company.
(d) Stock Options.
The Company hereby grants to the Employee the option to
purchase all or any part of an aggregate of 50,000 shares of common stock of
Boca Research, Inc., at a purchase price as of May 15, 2000, subject to the
following vesting schedule:
Cumulative Number of
Shares for Which Option
Will be Exercisable Date of Vesting
------------------- ---------------
10,000 On the first anniversary of the date of grant
20,000 On the second anniversary of the date of grant
50,000 On the third anniversary of the date of grant,
and further subject to the terms, conditions and provisions of the 1992 Employee
Stock Option Plan and subject to such conditions as are established in the Stock
Option Agreement to be approved by the Compensation Committee.
The vesting of all of the Employee's options will
automatically accelerate and become fully vested immediately upon a "Change of
Control." "Change of Control," for purposes of this Agreement, shall mean the
occurrence of any of the following events:
i) any merger or consolidation of the Company
with any other persons in which the Company is not the
surviving company,
ii) any sale of all or of substantially all of
the assets of the Company to any other person resulting in the
Company leaving the telecommunications industry,
iii) the acquisition by any person of 40% or more
of the outstanding voting stock of the Company, or
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<PAGE>
iv) the election of any directors of the Company if
such directors were not nominated for election as directors by
the Board of Directors of the Company and if such directors
constitute a majority of all of the members of the Board of
Directors of the Company.
Notwithstanding the foregoing, in the event the Employee shall
have been employed by the Company or any of its subsidiaries for less than three
(3) years, and in the event a Change of Control occurs as above defined, only
those options which would otherwise have vested during such year in which the
event of Change of Control occurs shall accelerate and vest as a result of such
Change of Control.
5. Expenses. The Employee shall be reimbursed by the Company for all
reasonable expenses incurred by him in connection with the performance of his
duties hereunder in accordance with the policies established by the Board of
Directors from time to time and upon receipt of appropriate documentation.
6. Agreement Not to Compete. The Employee agrees that during the
Employment Term and any Subsequent Employment Term and during the
Non-Competition Period (defined below) he will not in any capacity, either
separately, jointly, or in association with others, directly or indirectly, as
an officer, director, consultant, agent, employee, owner, partner, stockholder
or otherwise, engage or have a financial interest in any business which competes
with the Company in the United States (excepting only the ownership of not more
than 5% of the outstanding securities of any class listed on an exchange or
regularly traded in the over-the-counter market). The "Non-Competition Period"
shall mean the period ending one year after either (a)the termination of his
employment hereunder by the Company , provided that the Company continues to
comply with its obligations under Section 8(b) hereof during such one year
period, or (b)the termination of his employment hereunder by virtue of the
Employee's resignation, unless such resignation is for Good Reason (as defined
below). The Employee further agrees that during the Non-Competition Period,
except in connection with the performance of services hereunder, he will not in
any capacity, either separately, jointly or in association with others, directly
or indirection, solicit or contact with regard to a business competitor of the
Company any of the Company's employees, consultants, agents or suppliers,
customers or prospects, as shown by the Company's records, that were employees,
consultants, agents, suppliers, customers or prospects of the Company at any
time during the year immediately preceding the termination of employment
hereunder. For purposes of this Agreement, "Good Reason" shall mean the
resignation of the Employee due to (a)a material change in the Employee's duties
and responsibilities which interfere with his ability to manage the affairs of
the Company, (b)a material modification of the Employee's duties hereunder such
that such duties are not consistent with the duties of an officer of a company
of similar size and in a similar business as the Company, or (c)a Change of
Control arising out of any merger or consolidation of the Company with any other
person in which the Company is
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<PAGE>
not the surviving company or any sale of all or substantially all of the assets
of the Company to any other person.
If a court determines that the foregoing restrictions are too broad or
otherwise unreasonable under applicable law, including with respect to time or
space, the court is hereby requested and authorized by the parties hereto to
revise the foregoing restrictions to include the maximum restrictions allowed
under the applicable law. The Employee expressly agrees that breach of the
foregoing would result in irreparable injuries to the Company, that the remedy
at law for any such breach will be inadequate and that upon breach of this
provision, the Company, in addition to all other available remedies, shall be
entitled as a matter of right to seek injunctive relief in any court of
competent jurisdiction.
7. Secret Processes and Confidential Information. For the Employment
Term and thereafter, the Employee agrees to be bound by the terms and conditions
of the Company's Business Code of Conduct and the Confidentiality Agreement
executed by the Employee in favor of the Company.
8. Termination.
(a) Termination. The employment of the Employee hereunder may
be terminated by either party by written notice to the other party, unless
otherwise terminated in the manner provided in this Section 8.
(b) Termination by the Company With Cause. The Company shall
have the right at any time to terminate the Employee's employment hereunder upon
the occurrence of any of the following (any such termination being referred to
as a termination for "Cause"):
(i) the commission by the Employee of any proven
embezzlement of a material amount of funds or other proven
deliberate and premeditated act of dishonesty against the
financial or business interests of the Company which adversely
affects the Company;
(ii) the breach by the Employee of any material term
of the Business Code of Conduct, which beach is not cured
within 30 days subsequent to notice from the Company to the
Employee specifying such breach;
(iii) the conviction by the Employee of or the
pleading by the Employee of nolo contendere to, a felony;
(iv) the willful failure or refusal of the Employee
to materially perform the duties specified in and pursuant to
Section 1 hereof or to follow the lawful directives of the
Board of Directors (provided that the
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<PAGE>
lawfulness of such directives is confirmed by general counsel
to the Company), which failure or refusal is not cured within
15 days subsequent to notice from the Company to the Employee
specifying the nature of such failure or refusal; or
(v) the breach by the Employee of any material terms
of this Agreement, which beach is not cured within 30 days
subsequent to notice from the Company to the Employee
specifying such breach.
(c) Termination Upon Death or Disability. The Employee's
employment hereunder shall automatically terminate upon the Employee's death or
upon his inability to perform his duties hereunder by reason of any mental,
physical or other disability for a period of at least six consecutive months, as
determined by a qualified physician selected by the Employee from a list of five
physicians selected by the Company.
(d) Termination by the Company Without Cause. The Company
shall have the right to terminate the Employee's employment at any time for any
reason without Cause.
(e) Resignation by Employee. The Employee shall have the right
to resign his employment with the Company, in good standing, provided a 60 day
notice is given, at any time for any reason.
9. Effect of Termination of Employment.
(a) With Cause; Resignation; Death or Disability. If the
Employee's employment is terminated with Cause pursuant to Section 8(b), if the
Employee's employment is terminated by the death or disability of the Employee
pursuant to Section 8(c), or if the Employee elects to terminate his employment,
the Employee's salary and other benefits specified in Section 4 shall cease at
the time of such termination; provided, however, that the Employee shall be paid
for all accrued and unused vacation and be entitled to continue to participate
in the Company's medical benefit plans to the extent required by law. Further,
the Employee shall be entitled to such life insurance and/or disability benefits
in the event of a death or disability as the Company provides pursuant to
Section 4(b) above, which for information purposes only, amounts to life
insurance coverage equal to two times the Employee's base salary, subject to
certain caps and limitations under the coverage. This provision shall not be
construed as requiring the Company to carry any certain amounts of insurance and
the same may change from time to time.
(b) Without Cause by the Company. If the Employee's employment is
terminated by the Company without Cause pursuant to Section 8(d), the Employee's
salary and other benefits specified in Section 4 shall cease at the time of such
termination, provided, however, that the Employee shall be entitled to be paid
for all
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<PAGE>
accrued unused vacation. The Employee shall be entitled to receive one year's
annual base salary which exists as of the time of termination, payable in twelve
(12) equal monthly installments commencing on the 1st day of the month following
termination, as "Severance Pay." The Employee shall not be required to mitigate
the amount of any payment provided for in this Section 9(b) by seeking other
employment or otherwise; provided, however, that if the Employee accepts any
other employment for compensation of any kind, deferred or otherwise, during
such period during which the said Severance Pay is being made, such Severance
Pay shall terminate and the Company shall be under no further obligations to
Employee therefor except that he shall be entitled to participate in the
Company's group insurance plans to the extent required by law. Further, all
existing stock options possessed by the Employee shall be deemed immediately
vested, subject to the terms of the 1992 Employee Stock Option Plan. In the
event of such termination whereby the Severance Pay is being made as provided
above, Employee's employment shall be deemed to continue during such period that
the severance payments are being made, exclusively for the purpose of exercising
options pursuant to the 1992 Employee Stock Option Plan and for the purpose of
Employee's continuing on the Company's group medical, dental, and life insurance
plans.
Notwithstanding the foregoing, in the event the Employee shall
have been employed by the Company or any of its subsidiaries for less than three
(3) years, and in the event a Change of Control occurs as above defined, only
those options which would otherwise have vested during such year in which the
event of Change of Control occurs shall accelerate and vest as a result of such
Change of Control.
10. Insurance. The Company may purchase insurance on the life of the
Employee, and if it does so, the Employee shall cooperate fully by performing
all the requirements of the life insurer which are necessary conditions
precedent to the issuance of the life insurance policy issued by it.
11. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses or such other address as to which notice is given in the manner
provided herein:
If to the Employee:
Richard M. Brewer
1180 SW 19th Street
Boca Raton, FL 33486
If to the Company:
Boca Research, Inc.
1601 Clint Moore Road
Boca Raton, Florida 33487
Attn: Chairman
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<PAGE>
12. General.
(a) Governing Law. The terms of this Agreement shall be
governed by and construed under the laws of the State of Florida without regard
to its principles of conflicts of laws.
(b) Assignability. The Employee may not assign his interest
in or delegate his duties under this Agreement. The Company may not assign the
Agreement or the rights and obligations hereunder without consent of Employee.
(c) Enforcement Costs. In the event that either the Company or
the Employee initiates an action or claim to enforce any provision or term of
this Agreement, the costs and expenses (including attorneys' fees) of the
prevailing party shall be paid by the other party, such party to be deemed to
have prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect; Successors. This Agreement shall be
binding upon and inure to the benefit of the Company, its permitted successors
and assigns and the Employee, his representatives and heirs. The Company will
require that any successor (whether direct or indirect, by purchase of stock or
assets, by merger, by consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, together with such successor's
ultimate parent corporation (if any), will be jointly and severally liable for
the obligations owed to the Employee hereunder and will perform this Agreement
in the same manner and to the same extent that the Company is obligated to
perform it. Any succession shall not, however, relieve or alter the Company's
continuing liability for all obligations owing to the Employee hereunder. The
Employee acknowledges and understands, however, that the Employee's employment
by a successor to the Company, if consistent with the terms and provisions of
this Agreement, will not be deemed a termination of the Employee's employment
with the Company.
(e) Entire Agreement; Modification. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and may not be modified or amended in any way except in
writing by the parties hereto.
(f) Duration. Notwithstanding the term of employment
hereunder, this Agreement shall continue for so long as any obligations remain
under this Agreement.
(g) Indemnification. The Employee shall be entitled to rights
of indemnification as an officer of the Company to the extent that the Company
provides indemnification to its officers and directors, including the benefit of
any directors' and officers' insurance coverage maintained from time to time.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first above written.
BOCA RESEARCH, INC.
By: ___/S/ Robert W. Ferguson_________
----------------------
Name: Robert W. Ferguson
Title: C.E.O.
EMPLOYEE
/S/ R. Michael Brewer
---------------------
RICHARD M. BREWER
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<PAGE>
Exhibit 10.3
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is made and entered into this
16th day of May, 2000, by and between BOCA RESEARCH, INC., a Florida corporation
(the "Company") and ROBERT HEINLEIN (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company and the Employee have heretofore entered into that
certain Employment Agreement dated August 19, 1999 (the "Employment Agreement"),
a copy of which is hereby incorporated by reference; and
WHEREAS, the parties desire to amend the said Employment Agreement in
its entirety to read in the manner hereinafter set forth and to have the terms
set forth herein represent the entire understanding of the agreements between
the parties with respect to such employment.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained and other good and valuable consideration between the parties,
the receipt and adequacy of which is hereby acknowledged, the parties hereby
agree that the Employment Agreement is amended, replaced and restated in its
entirety as follows:
1. Employment. The Employee shall continue in the employment of the
Company in the role of a part-time senior staff accountant on an hourly, at-will
basis, providing the following services and hours as requested by the Company:
a. General accounting advice and services;
b. Assistance in SEC and financial reportings;
c. Assistance in strategic efforts;
d. Such other accounting and finance related duties and
functions as the Company shall request.
2. Employment Term. The parties acknowledge that the Employee's
services will be rendered on a fulltime basis until August 15, 2000, at the same
salary and benefits as currently paid and thereafter, on an as-needed, hourly
basis until terminated in accordance with the terms of this Agreement. From
August 15, 2000, until the termination of this Agreement, the Employee agrees to
be available to provide the Company employment services on the basis of up to
twenty (20) hours per week and to be available upon 48 hours' advance notice.
The Employee will provide the Company one week's advance notice of his being
unavailable due to out-of-town travel. The Employee acknowledges that the number
of hours for which the Company shall utilize his services shall be in the
Company's sole discretion and no guarantee or assurance is given Employee as to
the minimum amount of such services as shall be requested.
3. Compensation. The Employee shall be compensated for services
after August 15, 2000, at the rate of $100.00 per hour, payable in bi-weekly
payments, subject to withholding and other applicable taxes.
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<PAGE>
4. Insurance, Vacation and Other Benefits. Until August 15, 2000, the
Employee shall only be entitled to any Employee benefit Plans now existing or
hereinafter established by the Company, including but not limited to
medical/dental insurance plans, group life and disability insurance plans,
401(k) Plan, pension, profit sharing or bonus plans, Employee Stock Purchase
Plan, and any other employee benefit plan or arrangement made available to
employees of the Company to the extent Employee meets the requirements for
participation in such Plans. The Employee shall be paid for all accrued vacation
on the payday occurring next after August 15, 2000. Effective on the later of
August 15, 2000, or such date as the Employee shall not be considered fulltime,
the Employee shall no longer be entitled to any employee benefit Plans, fringe
benefits, insurance benefits (other than COBRA as provided by law), or vacation
pay accrual; however, the Employee shall be considered active in the 401(k) Plan
during the term of this Agreement to the extent permitted by the Plan for
purposes other than participation and contributions.
5. Stock Options. The Employee currently possesses certain stock
options heretofore granted by the Company, including but not limited to those
options granted under the Employment Agreement. All of the stock options
heretofore granted to the Employee shall remain in effect, in accordance with
the terms of their respective grants, including but not limited to provisions
relating to "Change of Control" and "vesting," during the term of the Employee's
employment. Upon the termination of the Employee's employment, the Employee
shall have thirty (30) days to exercise said options. The term of the options
shall not extend beyond ten (10) years from the date of initial grant in
accordance with the terms of the 1992 Employee Stock Option Plan.
6. Resignation. Employee shall voluntarily resign his position as an
officer in the Company and as an officer and Director in all subsidiaries,
effective June 5, 2000. The Employee shall have the right to review and comment
upon the press release relative to his resignation, and the Company shall in
good faith consider his requested edits.
7. Agreement Not to Compete. The Employee agrees that during the
continuing employment term pursuant to this Amendment, the Employee will not in
any capacity, either separately, jointly, or in association with others,
directly or indirectly, as an officer, director, consultant, agent, employee,
owner, partner, stockholder or otherwise, engage or have a financial interest in
any business which competes with the Company in the United States (excepting
only the ownership of not more than 5% of the outstanding securities of any
class listed on an exchange or regularly traded in the over-the-counter market).
8. Secret Processes and Confidential Information. For the Employment
Term and thereafter, the Employee agrees to be bound by the terms and conditions
of the Company's Business Code of Conduct and the Confidentiality Agreement
executed by the Employee in favor of the Company.
9. Termination.
a. The Company shall have the right to terminate the Employee's
employment hereunder at any time upon the occurrence of any
of the following:
i. the commission by the Employee of any proven
embezzlement of a material amount of funds or other
proven deliberate and premeditated act of dishonesty
against the financial or business interests of the
Company which adversely affects the Company;
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<PAGE>
ii. the breach by the Employee of any material term of the
Business Code of Conduct, which breach is not cured
within 10 days subsequent to notice from the Company to
the Employee specifying such breach;
iii. the conviction by the Employee of or the pleading by
the Employee of nolo contendere to, a felony;
iv. the failure or refusal of the Employee to materially
perform the duties specified in and pursuant to Section
1 hereof, which failure or refusal is not cured within
15 days subsequent to notice from the Company to the
Employee specifying the nature of such failure or
refusal; or
v. the breach by the Employee of any material terms of this
Agreement, which breach is not cured within 15 days
subsequent to notice from the Company to the Employee
specifying such breach; provided, however, that the
Employee's failure to be available to provide the
services requested by the Company during the employment
term on more than three (3) separate occasions shall be
deemed cause for termination.
b. At any time after August 15, 2001, either party may terminate
this Agreement upon ten (10) days' written notice to the
other party.
10. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses or such other address as to which notice is given in the manner
provided herein:
If to the Employee:
Robert Heinlein
3398 NW 24th Terrace
Boca Raton, Florida 33431
If to the Company:
Boca Research, Inc.
1601 Clint Moore Road
Boca Raton, Florida 33487
Attn: CEO
With a copy to:
Robert W. Federspiel, Esq.
151 N.W. 1st Avenue
Delray Beach, FL 33444
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<PAGE>
11. General.
a. Governing Law. The terms of this Agreement shall be governed
by and construed under the laws of the State of Florida
without regard to its principles of conflicts of laws.
b. Assignability. The Employee may not assign his interest in
or delegate his duties under this Agreement. The Company may
not assign the Agreement or the rights and obligations
hereunder without consent of Employee.
c. Enforcement Costs. In the event that either the Company or
the Employee initiates an action or claim to enforce any
provision or term of this Agreement, the costs and expenses
(including attorneys' fees) of the prevailing party shall be
paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a
court order or final judgment which is not subject to appeal,
a settlement agreement or dismissal of the principle claims.
d. Binding Effect; Successors. This Agreement shall be binding
upon and inure to the benefit of the Company, its permitted
successors and assigns and the Employee, his representatives
and heirs. The Company will require that any successor
(whether direct or indirect, by purchase of stock or assets,
by merger, by consolidation or otherwise) to all or
substantially all of the business and/or assets of the
Company, together with such successor's ultimate parent
corporation (if any), will be jointly and severally liable
for the obligations owed to the Employee hereunder and will
perform this Agreement in the same manner and to the same
extent that the Company is obligated to perform it. Any
succession shall not, however, relieve or alter the Company's
continuing liability for all obligations owing to the
Employee hereunder. The Employee acknowledges and
understands, however, that the Employee's employment by a
successor to the Company, if consistent with the terms and
provisions of this Agreement, will not be deemed a
termination of the Employee's employment with the Company.
e. Entire Agreement; Modification. This Agreement constitutes
the entire agreement of the parties hereto with respect to
the subject matter hereof and may not be modified or amended
in any way except in writing by the parties hereto.
f. Duration. Notwithstanding the term of employment hereunder,
this Agreement shall continue for so long as any obligations
remain under this Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first above written.
BOCA RESEARCH, INC.
By:/S/ Robert W. Ferguson__________
----------------------
Name: Robert W. Ferguson
Title: CEO
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<PAGE>
EMPLOYEE
/S/ Robert Heinlein_____________
-------------------
Robert Heinlein
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<PAGE>
Exhibit 11.1
BOCA RESEARCH, INC.
EXHIBIT 11.1 - CALCULATION OF SHARES USED IN
DETERMINING NET INCOME PER SHARE
(Unaudited)
June 30, 2000
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 2000 June 30, 2000
------------- -------------
<S> <C> <C>
Shares outstanding at January 1, 2000......................... 11,475,793 11,475,793
Shares issued January 1, 2000 in
connection with the 1992 Employee
Stock Purchase Plan......................................... 13,813 13,813
Shares issued in connection with a
non-qualified stock option plan............................. 111,832 74,174
------------- ------------
Weighted average shares
outstanding................................................. 11,601,438 11,563,780
========== ==========
</TABLE>
June 30, 1999
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999
------------- -------------
<S> <C> <C>
Shares outstanding at January 1, 1999......................... 8,756,487 8,756,487
Shares issued January 1, 1999 in
connection with the 1992 Employee
Stock Purchase Plan......................................... 20,643 20,643
Shares issued in connection with a
non-qualified stock option plan............................. 18,443 9,805
Shares issued May 28, 1999 to
Infomatec Integrated Information
Systems AG.................................................. 653,086 328,347
----------- ------------
Weighted average shares
outstanding................................................. 9,448,659 9,115,282
========= =========
</TABLE>
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