CONSULTING AGREEMENT
THIS AGREEMENT is entered into as of the 4th day of October, 1996, among
Boca Research, Inc., a Florida corporation (the "Company"), ARGOQUEST, Inc., a
California corporation (the "Consultant") and Xxxxx Xxxxxxxx, the sole
stockholder of the Consultant (the "Principal").
WHEREAS, the Consultant, through the Principal, has considerable
experience and expertise in the marketing and sale of computer peripheral
products to retail accounts, wholesale distributors and original equipment
manufacturers;
WHEREAS, the Company designs, manufactures, markets and sells data
communications, multimedia and networking products to facilitate the
transmission of information on personal computers and computer networks;
WHEREAS, the Company has agreed to retain the Consultant as a
consultant, and the Consultant has agreed to become a consultant to the Company,
upon the terms and conditions set forth herein; and
WHEREAS, the Principal, as the sole stockholder of the Consultant, will
derive significant benefit from the payments being made to the Consultant
hereunder and wishes to ensure the performance of the duties and obligations of
the Consultant hereunder.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, the Consultant and
the Principal agree as follows:
1. Duties of the Consultant.
1.1 The Company hereby agrees to retain the Consultant, and the
Consultant agrees to provide advisory and consulting services to the Company,
for the Term (as hereinafter defined). During the Term, the Consultant shall be
available to render the following advisory and consulting services to the
Company relating to the generation of "Net Sales" (as defined herein) in the
area of sales to retail accounts, wholesale distributors and original equipment
manufacturers ("OEMs") as may be reasonably requested by the Chief Executive
Officer of the Company from time to time:
(a) the development and implementation of a business strategy with respect
to the Company's retail distribution channel, including, without limitation,
introducing the Company to new retail customers, assisting the Company with
respect to the positioning of
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its products in the retail channel, assisting the Company in the creation of a
retail channel marketing and sales plan and developing new opportunities for the
Company in the retail channel;
(b) the development and implementation of a business strategy with respect
to the Company's OEM distribution channel, including, without limitation,
introducing the Company to new OEM customers, assisting the Company in the
creation of an OEM product strategy, and developing new opportunities for the
Company in the OEM channel;
(c) introducing the Company to possible technology partners, assisting the
Company in the negotiation of technology joint ventures, partnerships, licensing
agreements or other arrangements, and providing general advice and assistance
with respect to formulating ideas for new products and the commercialization of
new technologies; and
(d) the provision of general advisory and consulting services to the
Company in the area of marketing and sales, including, without limitation,
assisting the Company in the development and implementation of a product
marketing strategy and assisting the Company in the development of its
international distribution channels.
1.2 During the Term, the Consultant and the Principal will
present to the Company all opportunities with respect to new technologies or
products that are directly competitive with products designed, manufactured,
marketed and sold by the Company as part of its "Core Business" (as defined in
Section 7.3 hereof) or represent enhancements or improvements to the technology
or functionality of such products in any material respect. If the Company
determines to pursue such opportunities, the Company, the Consultant and the
Principal will negotiate in good faith with the owner of such technologies or
products in an effort to reach an appropriate licensing or other arrangement
with respect to such technologies or products, which license or arrangement with
the owner of such technologies or products must be exclusive to the Company. If
the Company declines to pursue any of such opportunities or if the Company,
Consultant, the Principal and the owner of such products are unable to reach an
appropriate licensing or other arrangement with respect to such technologies or
products within thirty (30) days following commencement of such negotiations,
the Consultant or the Principal, as the case may be, will be permitted to pursue
such opportunities independent of the Company so long as the pursuit of such
opportunity does not result in a breach of the obligations of the Consultant or
the Principal under Section 7 hereof. The Company agrees that the Consultant
and/or the Principal may have an ownership, royalty or other interest in
companies that own or market new products offered to the Company pursuant to
this Section 1.2, and that so long as such product opportunities are presented
to the Company as required by this Section 1.2, such ownership, royalty or other
interest shall not be deemed a breach of Section 7.3 hereof. The Company further
agrees that the negotiation by the Consultant or Principal of a licensing or
other arrangement with respect to such products with a competitor of the
Company, following the
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Company's declining to pursue such opportunity or the parties' inability to
reach an appropriate licensing or other arrangement within thirty (30) days,
shall not be deemed a breach of Section 7.3 hereof.
1.3 The relationship of the Consultant to the Company is that of
an independent contractor and neither this Agreement nor the advisory and
consulting services to be rendered hereunder shall for any purpose whatsoever or
in any manner create an employer-employee relationship between the Company and
the Consultant and any of the Consultant's employees. Accordingly, the
Consultant shall have the sole and exclusive responsibility for the payment of
all federal, state and local income taxes and for all employment and disability
insurance, social security and other similar taxes with respect to any
compensation provided by the Company hereunder. Neither the Consultant nor the
Principal is authorized to bind the Company, except as expressly authorized in
writing by the Company.
1.4 The Principal shall be responsible for the performance of
all of the duties and obligations of the Consultant under this Agreement. The
Principal shall be jointly and severally liable to the Company for any breach or
violation of this Agreement by the Consultant.
2. Term. The Term of the Consultant's engagement hereunder (the
"Term") shall commence on the date hereof and continue until March 31,
2001 (the "Term"), unless sooner terminated pursuant to Section 6 of this
Agreement.
3. Consulting Fee.
3.1 In consideration of the advisory and consulting services
hereunder, the Consultant will be entitled to receive a monthly fee of
$83,333.33 in cash for the Term, payable in arrears, except that no fees will be
paid for the period commencing on April 1, 1997 and ending on March 31, 1998
(the "Deferred Period"), unless the Board of Directors of the Company shall
determine otherwise. If the Company achieves at least $50 million in Net Sales
during the period commencing on the date of this Agreement and ending on March
31, 1998 (the "First Period"), the Consultant will be entitled to receive an
additional consulting fee of $1,000,000, less any consulting fees paid to the
Consultant during the Deferred Period, which additional consulting fees shall be
payable at such time during the First Period as $50 million in Net Sales is
achieved.
3.2 The Company shall reimburse the Consultant for all
reasonable out-of-pocket expenses incurred in connection with advisory and
consulting services to be provided by the Consultant under this Agreement so
long as the incurrence of such expenses was approved by the Company, such
approval not to be unreasonably withheld. Reimbursement shall be made only upon
presentation to the Company by the Consultant of reasonably itemized
documentation therefor. It is anticipated that such reasonable expenses
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will include, without limitation, reasonable expenses for an office and support
staff in Los Angeles as well as reasonable travel and other expenses incurred in
connection with Consultant's activities.
4. Equity Incentives.
4.1 Initial Equity. (a) In consideration of the advisory and
consulting services hereunder, the Consultant will have the right to be granted
options to purchase shares of Common Stock of the Company, the grant of such
options shall be subject to the Company achieving specified Net Sales during
certain periods (the "Initial Options"). In the event that during the First
Period, the Company achieves Net Sales of at least $100 million, then the
Consultant shall be granted options to purchase 500,000 shares of Common Stock,
par value $.01 per share, of the Company (the "Boca Common Stock"), at an
exercise price of $2.95 per share. In the event that during the period
commencing on April 1, 1998 and continuing through March 31, 1999 (the "Second
Period"), the Company achieves Net Sales of at least $125 million, then the
Consultant shall be granted options to purchase 1,000,000 shares of Boca Common
Stock, at an exercise price of $2.95 per share. The Initial Options shall be
granted at such time during the applicable period as the applicable Net Sales
target for such period has been achieved.
(b) In the event the Company achieves at least $50 million in Net Sales for
the First Period, the Initial Options to be granted under paragraph 4.1(a) with
respect to the First Period shall be pro rated on a linear basis between $0 and
$100 million of the targeted Net Sales for such period. In the event that the
Company achieves at least $70 million in Net Sales for the Second Period, the
Initial Options to be granted with respect to the Second Period shall be pro
rated on a linear basis between $0 and $125 million of the targeted Net Sales
for such period. In addition, in the event that Net Sales for the First Period
are less than $100 million, the Consultant will be entitled to be granted those
Initial Options attributable to the First Period which were not granted in the
First Period if the Company achieves Net Sales for the Second Period of at least
$125 million plus an amount equal to the difference between actual Net Sales for
the First Period and $100 million.
(c) All Initial Options which are granted pursuant to this Section 4.1 and
the shares of Common Stock issuable upon exercise thereof will be subject to the
restrictions on transfer described in Sections 5.4 and 5.5 hereof.
4.2 Performance Options. (a) In consideration of the advisory
and consulting services hereunder, the Consultant will have the right to be
granted additional options to purchase shares of Boca Common Stock at the
exercise prices set forth below, the grant of such options shall be subject to
the Company achieving the Target Net Sales set forth below during the periods
set forth below (the "Performance Options" and together with the Initial
Options, the "Options"):
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Target Monthly Run
Net Sales Rate Pro Rata Number of
Period (Millions) (Millions) Threshold Options Exercise Price
Date of this $150 $8.33 $100 225,000 $14.16
Agreement through 200 11.11 150 225,000 14.16
March 31, 1998
April 1, 1998 175 14.58 150 300,000 17.70
through March 31, 225 18.75 175 300,000 17.70
1999
April 1, 1999 250 20.83 175 300,000 20.65
through 350 29.16 250 300,000 20.65
March 31, 2000
April 1, 2000 325 27.08 250 300,000 23.60
through 400 33.33 325 300,000 23.60
Xxxxx 00, 0000
(x) The Performance Options shall be granted at such time during the
applicable period as the applicable Net Sales Target for such period has been
achieved. In the event that the Company achieves Net Sales equal to at least the
Pro Rata Threshold set forth in the table above but less than the Target Net
Sales for such period, then the Consultant shall be entitled to be granted a
portion of the Performance Options designated for such period determined on a
linear basis from the Pro Rata Threshold through the Target Net Sales for such
period. For example, in the event that the Company achieves Net Sales of $125
million for the First Period, then the Consultant shall be granted Performance
Options with respect to 112,500 shares of Common Stock. If the Company fails to
achieve the Pro Rata Threshold for the respective periods described above, then
the Consultant's right to be granted the Performance Options attributable to
that period shall terminate.
(c) Within sixty days following the end of each period specified in the
table above, the Company shall deliver to the Consultant a detailed report
summarizing the Net
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Sales of the Company for such period and the number of Performance Options, if
any, to be granted to the Consultant based on the Company's actual Net Sales for
such period. The report shall be certified by the Chief Financial Officer of the
Company as being accurate and complete.
(d) All Performance Options which are granted pursuant to this Section 4.2
will vest in three equal annual installments from the date of grant, commencing
on the first anniversary of the date of grant, and the Performance Options and
the shares of Common Stock issuable upon exercise thereof will be subject to the
restrictions on transfer described in Sections 5.4 and 5.5 below. The vesting of
all Performance Options which are granted pursuant to this Section 4.2 will
accelerate upon a Change of Control (as defined in Section 6.4). The Consultant
may only exercise those Performance Options which have vested in accordance with
this Section 4.2(d).
4.3 Change of Control. In the event the Company elects to
terminate this Agreement pursuant to Section 6.4 in connection with a Change of
Control, then any Performance Options which have been previously granted
pursuant to Section 4.2 will vest as provided in Section 4.2(d) and the
Consultant shall be entitled to be granted Options with respect to the Period in
which the Change of Control occurs and, in the case of a Change of Control
occurring during the First Period, Options with respect to the Second Period, on
the following terms and conditions:
(a) If the Change of Control shall occur during the First Period, (i)
subject to the Company achieving Average Monthly Sales equal to at least $5.55
million during the First Period, the Consultant shall be entitled to be granted
a percentage of the Initial Options allocable to the First Period equal to the
amount of Sales to Date divided by $100 million, provided that if the Average
Monthly Sales are less than $5.55 million and the Annualized Sales are at least
$50 million, the Consultant will be entitled to be granted a percentage of the
Initial Options allocable to the First Period equal to the amount obtained by
dividing (1) the Annualized Sales less $50 million, by (2) $50 million, (ii)
subject to the Company achieving Average Monthly Sales of at least $8.33 million
during the First Period, the Consultant shall be entitled to be granted a
percentage of the first tranche of 225,000 Performance Options equal to the
amount of Sales to Date divided by $150 million, and (iii) subject to the
Company achieving Average Monthly Sales of at least $11.11 million during the
First Period, the Consultant shall be entitled to be granted a percentage, of
the second tranche of 225,000 Performance Options equal to the amount of Sales
to Date divided by $200 million. In addition, if the Change of Control shall
occur during the First Period, (i) subject to Sales to Date being at least $125
million, the Consultant shall be entitled to be granted fifty percent (50%) of
the Initial Options allocable to the Second Period, (ii) subject to the Company
achieving Sales to Date of at least $150 million and Average Monthly Sales of at
least $14.58 million during the First Period, the Consultant shall be entitled
to be granted a percentage of the first tranche of 300,000 Performance Options
equal to the amount of Sales to Date divided by $175 million, and (iii) subject
to the Company
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achieving Sales to Date of at least $175 million and Average Monthly Sales
during the First Period of at least $18.75 million, the Consultant shall be
entitled to be granted a percentage of the second tranche of 300,000 Performance
Options equal to the amount of Sales to Date divided by $225 million. Examples
of the calculation of the number of Options which may be granted to the
Consultant in the event of a Change of Control during the First Period are
contained in Exhibit A hereto.
(b) If the Change of Control shall occur during the Second Period, (i)
subject to the Company achieving Average Monthly Sales of at least $10.41
million during the Second Period, the Consultant shall be entitled to be granted
a percentage of the Initial Options allocable to the Second Period equal to the
amount of Sales to Date divided by $125 million, (ii) subject to the Company
achieving Average Monthly Sales of at least $14.58 million during the Second
Period, the Consultant shall be entitled to be granted a percentage of the first
tranche of 300,000 Performance Options equal to the amount of Sales to Date
divided by $175 million, and (iii) subject to the Company achieving Average
Monthly Sales of at least $18.75 million during the Second Period, the
Consultant shall be entitled to be granted a percentage of the second tranche of
300,000 Performance Options equal to the amount of Sales to Date divided by $225
million.
(c) If the Change of Control shall occur during the Third Period or Fourth
Period, then the Consultant shall be entitled to be granted a portion of the
Performance Options for the Period during which the Change of Control occurs,
subject to the Company achieving Average Monthly Sales during such applicable
period equal to at least the Monthly Run Rate for the respective tranche of
Performance Options for the respective period, in which event the Consultant
shall be granted a percentage of the respective tranche of 300,000 Performance
Options equal to the amount of Sales to Date divided by the Target Net Sales for
such tranche for such period.
(d) The Consultant's right to earn any Options which are not required to be
granted under this Section 4.3 shall terminate immediately prior to the
occurrence of the Change of Control.
(e) For purposes of this Section 4.3, (i) "Sales to Date" means, with
respect to the applicable Period, the amount of Net Sales achieved by the
Company from the first day of such Period through the date of the Change of
Control, (ii) "Average Monthly Sales" means, with respect to the applicable
Period, the Sales to Date divided by the number of months elapsed during such
Period immediately prior to the Change of Control, and (iii) "Annualized Sales"
means, with respect to the First Period, the Average Monthly Sales multiplied by
18.
(f) In no event shall any of the percentages calculated in Section 4.3(a),
(b) and (c) above exceed 100%.
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4.4 Certain Definitions
(a) Net Sales. For purposes of this Agreement, the term "Net Sales" shall
mean total revenues calculated on a consolidated basis less all discounts,
credits, returns, rebates and promotional expenses, all as determined in
accordance with generally accepted accounting principles ("GAAP"), less the
amount of accounts receivable attributable to such customers which have been
written off as uncollectible, attributable to any of the following:
(i) sales of the Company's products to customers introduced to the
Company by the Consultant other than Existing Customers (as defined below);
(ii) sales of the Company's products to Existing Customers which
result primarily from at least one of the following:
(a) the direct negotiation by the Consultant with such Existing
Customer of an increase in sales to such Existing Customer; or
(b) the introduction by the Consultant of a new Company product
design for such Existing Customer.
(iii) sales of the Company's products in Europe, but not including
direct sales by the Company to telecommunications companies in Europe or
sales to Xxxxxx Xxxxxxx/TeleDenmark, Santa Xxxxxxx Spain, Stebis Holland,
Computerline Holland, Xxxxxx Xxxxxxxxx/Ecoline Scandanavia, Perscom,
Malhous Portugal, Karma Turkey and Altron Switzerland;
(iv) sales of the Company's products to mass merchandisers in the
United States during any consecutive annual period of the Term which are in
excess of $17.6 million;
(v) any sales or licensing of products, technologies or product
designs of the Company that the Consultant introduced to the Company; and
(vi) any other sales or revenues directly attributable to contracts,
arrangements or business opportunities which the Consultant was primarily
responsible for introducing and making available to the Company.
All sales shall be subject to the acceptance of the purchase order
therefor by the Company, including, without limitation, credit, pricing and
payment terms acceptable to the Company, which the Company may accept or reject
in its sole discretion. Discounts, credits, returns, rebates and promotional
expenses shall be calculated in a manner consistent with the Company's customary
business practices to reflect accurately the actual impact of such
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concessions on the Company's revenues. "Net Sales" shall include revenues
attributable to sales by the Company to its non-consolidated affiliates under
clauses (ii), (iii), (v) and (vi) (treating the affiliates as customers of the
Company for such purpose) to the extent that the Company does not need to defer
any of the profit relating to such sales in accordance with GAAP, but such
affiliates shall be treated as "Existing Customers". The Consultant shall have
sixty days following the execution of this Agreement to confirm that the $17.6
million referred to in clause (iv) above represents the annualized run rate of
the Company's sales to mass merchandisers. In the event that the Consultant
objects to such amount, the parties shall negotiate in good faith to agree upon
such annual run rate. The Company will cooperate with the Consultant and provide
information to the Consultant to enable it to confirm the annual run rate.
(b) Existing Customers. The term "Existing Customers" shall mean customers
of the Company on the date of this Agreement or at any time during the
three-month period prior to the date of this Agreement, all of which are listed
on Exhibit B attached hereto.
4.5 Accounting; Audit Rights
(a) Within fifteen (15) days following the end of each calendar month
during the Term, the Company shall deliver to the Consultant a detailed report
summarizing the Net Sales of the Company for such period and the method of
calculation of such Net Sales and the number of Initial Options and/or
Performance Options, if any, to be granted to the Consultant based on the
Company's actual Net Sales for such period. The report shall be certified by the
Chief Financial Officer of the Company as being accurate and complete. The
Company shall furnish such additional information as Consultant may reasonably
request to facilitate Consultant's understanding of how Net Sales were
calculated by the Company. Upon Consultant's request, the Chief Financial
Officer and Chief Executive Officer of the Company shall meet with the Principal
and one or more other designated representatives of the Consultant at the
Company's executive offices to discuss any disagreements regarding the
calculation of Net Sales by the Company.
(b) The Company shall keep complete and accurate books of account relating
to Net Sales. Upon reasonable advance written notice to the Company,
representatives of Consultant may examine and audit the books and records of the
Company not more than once annually to determine the accuracy of Company's
reports of Net Sales. Any such audit shall take place during normal business
hours at Company's location and shall be conducted in a manner that does not
unreasonably disrupt the business operations of Company, Consultant shall bear
the expense of any such audit unless such audit reveals that any Net Sales
Report by Company to Consultant pursuant to this Agreement understated Net Sales
by five percent (5%) or more, in which event the cost of such audit shall be
born by Company. Except in connection with any efforts to obtain payment due
hereunder or with any litigation between the parties, and except as may
reasonably be required to comply with applicable law or disclosure requirements,
the
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Consultant shall hold in confidence and not disclose any of Company's
confidential information acquired by Consultant in any audit conducted pursuant
to this Section 4.5(b).
5. Term of Options; Exercisability.
5.1 Term. Each Option granted under Sections 4.1 and 4.2
shall expire ten (10) years from the date of grant.
5.2 Exercisability. The Consultant shall have no rights in any
Option until it has been granted in accordance with Section 4.1 or 4.2, as the
case may be. Each Initial Option shall be fully vested and exercisable on the
date of grant. Each Performance Option shall be exercisable only to the extent
it has become vested under Section 4.2(d).
5.3 Manner of Exercise of Option.
(a) To the extent that the right to exercise an Option has accrued and is
in effect, the Option may be exercised in full or in part by giving written
notice to the Company stating the number of shares of Common Stock exercised and
accompanied by payment in full for such shares. Payment may be either (a) wholly
in cash or by check payable to the Company, or (b) at the Consultant's election,
by surrendering for cancellation that number of the shares of Boca Common Stock
subject to the Options being exercised with a Fair Market Value (based upon the
closing price of the Common Stock on the Nasdaq National Market on the date of
exercise) equal to the exercise price in order to effectuate an exercise without
making a payment by cash or check. Upon such exercise, delivery of a certificate
for paid-up, non-assessable shares shall be made at the principal office of the
Company to the person exercising the Option, not more than thirty (30) days from
the date of receipt of the notice by the Company.
(b) The Company shall at all times during the term of the Option reserve
and keep available such number of shares of its Common Stock as will be
sufficient to satisfy the requirements of the Option. The Consultant shall not
have any of the rights of a stockholder of the Company in respect of the shares
until one or more certificates for such shares shall be delivered to it upon the
due exercise of the Option.
5.4 Non-Transferability; Limitation on Resale. (a) The right
of the Consultant to exercise any Option shall not be assignable or transferable
by the Consultant, and the Options shall be exercisable only by the Consultant.
The Options shall be null and void and without effect upon the bankruptcy of the
Consultant or upon any attempted assignment or transfer, or levy of execution,
attachment, trustee process or similar process, whether legal or equitable, upon
the Option. Notwithstanding anything to the contrary contained in this Section
5.4(a), the Consultant may transfer Options aggregating not more
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than twenty-five percent (25%) of the Options which have been granted hereunder,
determined on a cumulative basis; provided that all transferees shall agree, as
a condition to such transfer, to be bound by the transfer restrictions contained
in Section 5.4(b).
(b) The Consultant will not sell or otherwise dispose of any shares of Boca
Common Stock issuable upon exercise of the Options until the first anniversary
of the date of issuance thereof and, after such date, not to sell or otherwise
dispose of greater than 33% of such shares, in the aggregate, on an annual
basis. Upon any date on which the Option is exercised in whole or in part, the
Consultant shall give a written representation to the Company in the form
attached hereto as Exhibit C and the Company shall place an "investment legend,"
so-called, as described in Exhibit C, upon any certificate for the shares issued
by reason of such exercise.
5.5 Representation Letter and Investment Legend.
(a) The shares of Boca Common Stock issuable upon exercise of any Options
granted pursuant to this Agreement will not be registered under the Securities
Act of 1933, as amended, and will be subject to the restriction on resale
imposed by the Securities Act.
(b) Except as provided in Section 5.6, the Company shall be under no
obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purposes of covering the issue of shares.
5.6 Registration Rights.
(a) Rights to Demand Registration. If at any time and from time to time
during the time period described in this Section 5.6(a), consultant shall
request the Company in writing to register under the Securities Act of 1933 (the
"Securities Act"), as amended, any of the Boca Common Stock issuable upon
exercise of any Options granted pursuant to this Agreement, Company shall use
all reasonable efforts to cause such shares specified in such request to be
registered as soon as reasonably practicable so as to permit the sale thereof
and in connection therewith prepare and file a registration statement on Form
S-3 under the Securities Act (or on such other form as may be appropriate if
Company is not then eligible to use Form S-3) to effect such registration and
seek to have such registration statement become effective as promptly as
practicable; provided, however, that such request shall (i) specify the number
of shares intended to be offered and sold, (ii) express the present intention of
the Consultant to offer or cause the offering of such shares for distribution,
(iii) describe the nature or method of the proposed offer and sale thereof and
(iv) contain the undertaking of the Consultant to provide all such information
and materials and take all such action as may be reasonably required in order to
permit the Company to comply with all
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applicable requirements of the Securities and Exchange Commission ("Commission")
and to obtain any desired acceleration of the effective date of such
registration statement. The Company shall not have any obligation to effect a
registration if the current market value of the shares sought to be registered
is less than Two Million Dollars ($2,000,000) as of the date of Consultant's
request for registration. Upon any registration becoming effective pursuant to
this Section 5.6(a), Company shall use reasonable efforts to keep such
registration statement current for a period of 90 days. Notwithstanding the
foregoing, (x) the Company shall not be obligated to cause any special audit to
be undertaken in connection with any such registration, (y) the Company shall be
entitled to postpone for a reasonable period of time, but not in excess of 90
days and not more than once in any 12-month period, the filing of any
registration statement otherwise required to be prepared and filed by it if the
Company, at the time it receives a request for registration, reasonably believes
in good faith, that it would be disadvantageous to the Company for such filing
to be made at the time requested by the Consultant and (z) the Company shall not
be obligated to file a registration statement pursuant to this Section 5.6(a)
during the 180-day period following the effectiveness of any registration
statement filed by the Company in connection with an underwritten primary
offering of its securities (or such longer period as may be required by the
underwriters of such offering). The obligation of Company to register any shares
on demand by Consultant shall continue only until the earlier of (i) the date
that the Consultant is able to sell the shares owned by Consultant in the
quantities desired without registration, by reason of an exemption under Rule
144 under the Securities Act, or (ii) after a registration statement filed by
reason of demand by the Consultant has become effective, and been maintained
effective and current as described above, on one occasion. If any registration
will be underwritten, the managing underwriter shall be reasonably acceptable to
the Company (with the Company specifying in writing the reasons for any
rejection of an underwriter selected by the Consultant), and the Company shall
have the right to select a co-managing underwriter for any such registration,
provided that no additional costs shall thereby be imposed on the Consultant.
Notwithstanding anything to the contrary contained in this Section 5.6, in no
event shall the Company be required to engage in any marketing or sales efforts
in connection with a registration requested under this Section 5.6(a), including
any "road show" or other similar presentations.
(b) Company Obligations. As to the offering of Company Common Stock covered
by a registration statement referred to in Section 5.6(a), Company shall:
1. Use reasonable efforts to have such registration statement declared
effective as promptly as reasonably practicable on or after such time and date
as specified by the Consultant and will promptly notify the Consultant and its
underwriter, if any, and confirm such advice in writing (i) when such
registration statement has become effective, (ii) when any post-effective
amendment to any such registration statement becomes effective and (iii) of any
request by the Commission for any amendment or supplement to such registration
statement or any prospectus relating thereto or for additional information;
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2. Furnish to the Consultant or the underwriters such number of copies of
any prospectus (including any preliminary prospectus). In conformity with the
requirements of the Securities Act, as the Consultant may reasonably request in
order to effect the offering and sale of the shares of Boca Common Stock being
offered and sold by the Consultant, but only while Company is required under the
provisions hereof to cause the registration statement to remain current;
3. Use reasonable efforts to register or qualify, not later than the
effective date of such registration statement, the shares of the Consultant
registered thereunder under the "blue sky" laws of such states as the Consultant
may reasonable request; provided, however, that Company shall not be obligated
to qualify as a foreign corporation or as a dealer in securities or to execute
or file any general consent to service of process under the laws of any such
state where it is not at such time so qualified or subject, and Company shall
not be obligated to make any changes to the offering or incur any material
additional expenses in response to requests of any blue sky authorities; and
4. For a period of at least 90 days after the effective date of the
registration statement or until all shares covered by such registration
statement are sold, whichever is earlier, keep such registration statement in
effect and current and from time to time amend or supplement the registration
statement and the prospectus in connection therewith in compliance with the
Securities Act and the rules and regulations adopted thereunder to permit the
sale or distribution of the shares with respect to which such registration
statement shall have become effective. If at any time the Commission should
institute or threaten to institute any proceedings for the purpose of issuing,
or should issue a stop order suspending the effectiveness of any such
registration statement, Company with promptly notify the Consultant and will use
reasonable efforts to prevent the issuance of any such stop order or to obtain
the withdrawal thereof as soon as possible.
(c) "Piggyback" Registration Rights. The rights contained in this Section
5.6(c) shall be in addition to the rights provided by Section 5.6(a) hereof.
Each time that the Company shall determine to proceed with the actual
preparation and filing of a registration statement under the Securities Act in
connection with the proposed offer and sale for money of any of its securities
by the Company or any of its security holders (except any registration statement
in connection with any acquisition of any entity or business or any employee
benefit plan, including any stock option plan), the Company shall give written
notice of its determination to the Consultant. Upon the written request of
Consultant given within 10 days after receipt of any such notice from the
Company, Company will, except as herein provided, use reasonable efforts to
cause the number of shares of Boca Common Stock held by Consultant and which are
set forth in such request to be included in such registration statement, to the
extent required to permit the sale or other disposition by the Consultant of
such shares to be so registered; provided, however, that nothing herein shall
prevent the
- 13 -
Company from, at any time, abandoning or delaying any such registration
initiated by it. If any registration pursuant to this Section 5.6(c) shall be
underwritten in whole or in part, the Company may require that the shares
requested for inclusion pursuant to this Section 5.6(c) be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the managing
underwriter of such public offering, the inclusion of all or any portion of the
shares held by Consultant originally included in a request for registration
would reduce the number of shares to be offered by the Company (or by another
holder of Boca Common Stock that initiated the offering by exercising rights to
demand such registration) or interfere with the successful marketing of the
securities offered by Company (or by such other holder that initiated the
offering), the number of shares otherwise to be included by the Consultant in
the underwritten public offering may be reduced or excluded altogether;
provided, however, that (i) in any such offering by the Company, the shares to
be included by the Consultant cannot be excluded altogether but must be treated
in the same manner as all other selling security holders, and (ii) in any such
offering initiated by another holder pursuant to demand registration rights
exercised by such holder, the shares otherwise to be included by the Consultant
can be excluded altogether but shall be treated in the same manner as all
selling security holders other than those selling pursuant to the exercise of
demand registration rights.
(d) Expenses. The out-of-pocket costs and expenses incurred by Company in
connection with any registration effected pursuant to this Section 5.6 shall be
borne by Consultant. The costs and expenses of any such registration shall
include, without limitation, the reasonable fees and expenses of the Company's
counsel and its accountants and all other out-of-pocket costs and expenses of
the Company incident to the preparation, printing and filing under the
Securities Act of the registration statement and all amendments and supplements
thereto and the cost of furnishing copies of each preliminary prospectus, each
final prospectus and each amendment or supplement thereto to underwriters,
dealers and other purchasers of the securities so registered, the costs and
expenses incurred in connection with the qualification of such securities so
registered under the "blue sky" laws of various jurisdictions, the fees and
expenses of Company's transfer agent, expenses of all marketing and promotional
efforts requested by the managing underwriter and all other costs and expenses
of complying with the foregoing provisions of this Section 5.6 with respect to
such registration. Consultant shall bear underwriting discounts, selling
commissions and transfer taxes with respect to the shares sold by the Consultant
pursuant to the registration and any costs of Consultant's counsel.
(e) Indemnification.
1. In the case of any offering registered pursuant to Section 5.6(a) or
5.6(c), Company hereby indemnifies and agrees to hold harmless the Consultant,
any underwriter (as defined in the Securities Act) of shares offered by the
Consultant, and each
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person, if any, who controls the Consultant or any such underwriter within the
meaning of Section 15 of the Securities Act against any losses, claims, damages
or liabilities (collectively, "Losses") joint or several, to which any such
persons may be subject, under the Securities Act or otherwise, and to reimburse
any of such persons for any legal or other expenses reasonably incurred by them
in connection with investigating any claims or defending against any actions,
insofar as such Losses arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement under which such shares were registered under the Securities Act
pursuant to this Section 5.6, any prospectus contained therein, if used during
the period appropriate for such prospectus, or any amendment or supplement
thereto, or the omission or alleged omission to state therein (if so used) a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except insofar as such Losses arise out of or are (x) based upon any such untrue
statement or omission or alleged untrue statement or omission made in reliance
upon information furnished in writing to Company by the Consultant or any
underwriter for the Consultant or any controlling person of the Consultant or
any such underwriter specifically for use therein, or (v) made in any
preliminary prospectus, if the prospectus contained in the registration
statement as declared effective or in the form filed by Company with the
Commission pursuant to Rule 424 under the Securities Act shall have corrected
such statement or omission, ample copies of such prospectus (together with a
statement that such corrected prospectus must be used in lieu of all prior
prospectuses) shall have been provided by Company to the Consultant or
underwriter, and a copy of such prospectus shall not have been sent or otherwise
delivered to such person by the Consultant or underwriter at or prior to the
confirmation of such sale to such person.
2. By requesting registration under this Section 5.6 Consultant shall agree
in the same manner and to the same extent as set forth in the preceding
paragraph, to indemnify and to hold harmless Company and its directors and
officers and each person, if any, who controls Company within the meaning of the
Securities Act and any underwriter (as defined in the Securities Act) of any
shares offered by the Consultant, against any Losses, joint or several, to which
any of such persons may be subject under the Securities Act or otherwise, and to
reimburse any of such persons for any legal or other expenses reasonably
incurred by them in connection with investigating or defending against any such
Losses, but only to the extent it arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact in any registration statement under which the Consultant's shares
were registered under the Securities Act pursuant to this Section 5.6, any
prospectus contained therein, or any amendment or supplement thereto, which was
based upon and made in conformity with information furnished in writing to
Company by the Consultant or such underwriter expressly for use therein.
3. Each party indemnified under this section 5.6(e) shall, promptly after
receipt of notice of the commencement of any action against such indemnified
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party in respect of which indemnity may be sought, notify the indemnifying party
in writing of the commencement thereof. The omission of any indemnified party so
to notify an indemnifying party of any such action shall not relieve the
indemnifying party from any liability in respect of such action which it may
have to such indemnified party on account of the indemnity agreement contained
in this Section 5.6(e), except to the extent that the indemnifying party was
prejudiced by such omission, and in no event shall relieve the indemnifying
party from any other liability which it may have to such indemnified party. In
case any such action shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party, and, after
notice from the indemnifying party to such indemnified party under this Section
5.6(e) of its election to assume the defense thereof, the indemnifying party
shall not be liable to the indemnified party pursuant to the provisions of this
Section 5.6(e) for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation; provided, however, that the indemnifying party shall
remain liable for the reasonable costs of separate counsel for the indemnified
party if and to the extent that the indemnified party reasonably determines that
it requires separate counsel in view of a conflict of interest affecting the
counsel designated by the indemnifying party or other demonstrable need.
(f) Proposed Distribution. As to each registration statement
referred to in Sections 5.6(a) and 5.6(c), the Consultant will provide Company
with a description of the proposed method or methods of distribution of
securities from time to time contemplated by the Consultant and Company shall
include such description in the registration statement and file any amendments
and supplements necessary in connection therewith.
(g) Issuances By Company. As to each registration statement
referred to in Section 5.6(a), additional shares of Boca Common Stock to be sold
for the account of Company or other holders may be included therein; provided,
however, that the managing underwriter of such offering (designated by the
Consultant pursuant to Section 5.6(a)) or the securities professional described
below, as applicable, may limit or prevent the inclusion of any such additional
securities in such registration statement if, in the reasonable opinion of such
managing underwriter (or, if there is no managing underwriter, a reputable
securities professional advising the Consultant with respect to such offering),
such inclusion would adversely affect the successful offering of shares to be
sold by the Consultant. The costs and expenses incurred in connection with any
such registration shall be borne by the Consultant and Company in proportion to
the aggregate number of shares being sold by the Consultant, on the one hand,
and by Company and any other holders whose shares are included therein, on the
other.
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(h) Company Right of First Refusal. In the event that
Consultant exercises its registration rights under Section 5.6(a) or 5.6(c)
hereof, Company shall have the option, at its discretion, to instead repurchase
all of the shares as to which Consultant is then demanding registration. In such
event, Company shall exercise such repurchase option, if at all, by providing
written notice to Consultant within 10 business days after receipt of the
written demand for registration under Section 5.6(a) or 5.6(c), as applicable,
that it will purchase all of the shares specified in the registration demand
notice for cash per share equal to the "Average Market Price," with the
applicable date for determining the Average Market Price in such event being the
date of the demand for registration hereunder. As used herein, the "Average
Market Price" means the average of the daily closing market prices at which the
Boca Common Stock is trading as reported in The Wall Street Journal for the
NASDAQ National Market System, or for such national securities exchange as may
be the principal market for the Boca Common Stock, or, if the Boca Common Stock
is not trading on NASDAQ or another national securities exchange, the average
median of the bid and ask price for the Boca Common Stock on whatever the
principal market for such stock may be, during the five consecutive trading days
immediately preceding and the five consecutive days including and immediately
following the applicable date. The closing of such purchase shall take place
within the period ending 30 business days following such written notice, which
period shall be extended to the extent necessary in order to comply with the
Xxxx Xxxxx Xxxxxx Act and all applicable securities laws and regulations.
(i) Lock-Up Agreement. If requested by the underwriter in any
registered public offering by the Company, the Consultant and the Principal
agree not to sell or otherwise transfer any Options or shares of Common Stock
for such period of time after the date of such offering as may be requested by
the underwriter, but in no event to exceed 180 days from the date of such
registered public offering, provided that all executive officers and directors
of the Company enter into similar agreements.
5.7 Stock Splits, Stock Dividends and the Like. If the shares
of Common Stock shall be subdivided or combined into a greater or smaller number
of shares or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common Stock
deliverable upon the exercise of Options shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or stock
dividend. If the Company is to be consolidated with or acquired by another
entity in a merger, sale of all or substantially all of the Company's assets or
otherwise (an "Acquisition"), the Board of Directors of the Company or the board
of directors of any entity assuming the obligations of the Company hereunder
(the "Successor Board"), shall, as to Options which have been granted hereunder,
either (i) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such options
the consideration payable with respect to the outstanding shares of Common
- 17 -
Stock in connection with the Acquisition; or (ii) upon written notice to the
Consultant, provide that all Options must be exercised, to the extent then
exercisable, within a specified number of days of the date of such notice, at
the end of which period the Options shall terminate; or (iii) terminate all
Options which have been granted hereunder in exchange for a cash payment equal
to the excess of the fair market value of the shares subject to such Options (to
the extent then granted and exercisable) over the exercise price thereof.
5.8 No Special Employment Rights. Nothing contained in this
Agreement shall be construed or deemed by any person under any circumstances to
bind the Company to continue the consultancy or employment of the Consultant for
the period within which any Option may be exercised. However, during the period
of the Consultant's consultancy, the Consultant shall render diligently and
faithfully the services which are assigned to the Consultant from time to time
by the Board of Directors or by the executive officers of the Company, provided
that such services are consistent with the services usually required to be
performed by the Consultant.
5.9 Withholding Taxes. Whenever shares are to be issued upon
exercise of the Option, the Company shall have the right to require the
Consultant to remit to the Company an amount sufficient to satisfy all Federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such shares.
6. Termination. This Agreement terminates at the expiration of the Term,
but may be terminated earlier as follows:
6.1 Upon Bankruptcy or Death. If a voluntary or involuntary
petition for bankruptcy is filed with respect to the Consultant during the Term
or if the Principal dies during the Term, this Agreement shall automatically
terminate as of the close of business on the date of such bankruptcy or death,
as the case may be.
6.2 Upon Disability of the Principal. If during the Term the
Principal shall become physically or mentally disabled, whether totally or
partially, either permanently or so that the Principal is unable to perform
services of the Consultant hereunder for a period of ninety (90) continuous days
or for ninety (90) days during any six (6) month period during the Term, as
determined by an independent qualified physician mutually acceptable to the
Company and the Principal (or his representative), the Company may, upon fifteen
(15) days written notice to the Consultant, terminate this Agreement.
6.3 For Cause. This Agreement may be terminated at any time by the Company,
effective immediately upon written notice to the Consultant, for Cause. The
Company shall have "Cause" for termination of the Consultant if any of the
following has occurred:
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(a) the Consultant's willful and continued failure to perform its duties
hereunder (other than as a result of a Disability) after a demand in writing for
performance hereunder has been delivered to the Consultant by the Company, which
demand shall identify the manner in which the Company believes that the
Consultant has not performed its duties;
(b) the conviction of either the Consultant or the Principal for, or
entering a plea of nolo contendere to, a crime on the part of either the
Consultant or the Principal constituting a felony under the Laws of the United
States, or any other jurisdiction in which the Company is conducting business;
(c) either the Consultant or the Principal has materially breached any
provision or covenant contained in this Agreement, including, without
limitation, the covenants contained in Section 7 hereof, provided written notice
of such breach has been given to the Consultant and the principal and is not
cured within 15 days, if such breach is capable of being cured; or
(d) the failure of the Company to achieve at least $50 million in Net Sales
during the First Period.
6.4 Upon a Change of Control. The Company shall have the right to terminate
this Agreement effective immediately upon the occurrence of a Change of Control.
For purposes of this Agreement, a "Change of Control" shall mean the happening
of any of the following events:
(a) An acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2)) of the Securities Exchange Act of 1934 (the
"Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more the combined voting power of
the then outstanding securities entitled to vote generally in the election of
directors of the Company; excluding, however, the following: (1) any acquisition
directly from the Company, other than an acquisition by virtue of the exercise
of a conversion privilege unless the security being so converted was itself
acquired directly from the Company, (2) any acquisition by the Company, (3) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (4)
any acquisition by any entity pursuant to a transaction which is excluded from
subsection (b) below; or
(b) The approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company ("Corporate Transaction"); excluding, however, any
Corporate Transaction which would result in the voting securities of the Company
immediately prior to
- 19 -
such Corporate Transaction continuing to represent (either by remaining
outstanding or being converted into voting securities or other entity) 50% or
more of the combined voting power of the securities entitled to vote generally
in the election directors of the Company or such other entity outstanding
immediately after such Corporate Transaction.
6.5 Without Cause by the Consultant. The Consultant shall have
the right to terminate this Agreement at any time after March 31, 1997 and prior
to April 1, 1998, provided that the Consultant shall have provided at least 30
days' written notice to the Company.
Upon the termination of this Agreement pursuant to the terms of this
Section 6, each of the Company, the Consultant and the Principal shall be
released and discharged from any further obligations hereunder, including,
without limitation, the obligations of the Company under Sections 3 and 4 of
this Agreement to pay consulting fees and to grant the Options to the
Consultant, except that the Consultant and the Principal shall continue to be
bound by their respective obligations under Section 7 hereof and, if this
Agreement is terminated by the Company under Section 6.4, the Consultant shall
have the rights set forth in Section 4.3.
7. Protection of Confidential Information; Non-Competition; Standstill.
7.1 Acknowledgment. Each of the Consultant and the Principal agrees and
acknowledges that, in the course of rendering services to the Company, the
Consultant and the Principal have had and in the future may have access to and
have become and will become acquainted with confidential information about the
operational, business and financial affairs of the Company and may have
contributed to or may in the future contribute to such information. Each of the
Consultant and the Principal acknowledges that the Company is engaged in a
highly competitive business and the success of the Company in the marketplace
depends upon its goodwill and reputation. Each of the Consultant and the
Principal agrees and acknowledges that reasonable limits on their ability to
engage in activities competitive with the Company are warranted to protect its
substantial investment in developing and maintaining their status in the
marketplace, reputation and goodwill. Each of the Consultant and the Principal
recognizes that in order to guard the legitimate interests of the Company it is
necessary for the Company to protect all confidential information.
7.2 Confidential Information. During and at all times after
the Term, the Consultant and the Principal shall keep secret all confidential
matters and materials of the Company (including any subsidiaries or affiliates),
including, without limitation, know-how, trade secrets, technologies, customers,
pricing policies, operational methods, any information relating to the Company's
(including any subsidiaries or affiliates) products, services, processes,
customers and services and other business and financial affairs of the Company
- 20 -
(collectively, the "Confidential Information"), to which either of them has had
or may have access, whether previously existing, now existing or arising
hereafter, and shall not disclose such Confidential Information to any person
other than the Company or any of its subsidiaries, its and its subsidiaries'
employees, officers, directors and representatives and such other persons to
whom the Consultant has been instructed or is permitted to make disclosure by
the Board of Directors of the Company, in each case only to the extent required
or appropriate in the course of the Consultant's service to the Company,
provided, however, that the Consultant shall be entitled to disclose
Confidential Information to the extent required by law, rule or regulation,
pursuant to any requirement or request of any governmental authority or in
connection with any judicial or administrative proceedings or inquiry.
"Confidential Information" shall not include any information which (i) is or
becomes generally available to the public during the period of service of the
Consultant or thereafter, provided such information is not, or has not become,
available to the public as a consequence of disclosure by the Consultant in
violation of this Agreement, or (ii) is or becomes available to the Consultant
or the Principal on a non-confidential basis from a source other than the
Company, any of its subsidiaries or any of their respective representatives,
which source the Consultant or the Principal reasonably believes is not
prohibited from disclosing such information to the Consultant by any legal,
contractual or fiduciary obligation to the Company or any of its subsidiaries;
or (iii) is independently developed by the Consultant or the Principal.
7.3 Non-Competition and Non-Solicitation.
(a) In consideration of the Company's obligations hereunder, (i)
during the Term and for a period of one (1) thereafter, neither the Consultant
nor the Principal shall, in any capacity, whether for its or his own account or
for any other person or organization, directly or indirectly, within the United
States (a) own, operate, manage, control, or participate in the ownership,
operation, management or control of, (b) serve as an officer, director, partner,
employee, agent, consultant, advisor or developer or in any similar capacity to
or (c) have any financial interest in, or aid or assist anyone else in the
conduct of, any person or enterprise which is a Direct Competitor (as defined
below) of the Company; and (ii) during the Term and for a period of one (1) year
thereafter, neither the Consultant nor the Principal shall, in any capacity,
whether for its or his own account or for any other person or organization,
directly or indirectly, (a) solicit, hire, offer to hire, entice away or in any
manner persuade or attempt to persuade any officer, employee or agent of the
Company (including any subsidiaries or affiliates thereof) to discontinue his
relationship with the Company or such subsidiaries or affiliates, or (b)
solicit, take away or attempt to solicit any of the customers or suppliers or
any other business contacts of the Company in furtherance of activities of a
Direct Competitor of the Company that are directly competitive with the Company.
- 21 -
(b) For purposes hereof, a "Direct Competitor" of the Company
shall mean a competitor actively engaged in designing, manufacturing, marketing
and selling products which are directly competitive with products designed,
manufactured, marketed and sold by the Company as part of its "Core Business."
For purposes hereof, the Company's "Core Business" shall mean those products
which comprise a substantial and material part of the Company's business and
which substantially and materially contribute to the Company's revenues. The
Company's Core Business shall not include ancillary products such as bundled
products which are marketed or sold to enhance or promote the sale of products
constituting part of the Company's Core Business (such as, by way of example,
software bundled with the Company's modems), nor shall the Company's Core
Business include software products marketed or sold on a stand-alone basis.
(c) Nothing contained herein shall be deemed to prohibit Consultant
and/or Principal from owning, directly or indirectly, up to five percent (5%) of
the issued and outstanding stock or securities of a publicly traded corporation
or entity, even if such corporation or entity is a Direct Competitor of the
Company.
(d) The Company understands and acknowledges that Consultant
and/or Principal currently owns, operates, manages, controls, or participates in
the ownership, operation, management or control of, and/or serves as an officer,
director, partner, employee, agent, consultant, advisor or developer or in a
similar capacity to and/or has a financial interest in, or aids or assists in
the conduct of, various businesses, including without limitation those
identified in Schedule 7.3(c), and the Company agrees that such activities do
not constitute a breach of Section 7.3(a) hereof. In the event of a convergence
of the business of Company and that of any other business in which Consultant
and/or Principal now or hereafter has such an interest or for which Consultant
and/or Principal now or hereafter performs any such services which renders such
a business a Direct Competitor of the Company, the parties agree that Consultant
and Principal shall not, by virtue of such convergence, be deemed in breach of
this Agreement, and Company, Consultant and Principal shall negotiate in good
faith a mutually acceptable resolution of such potential conflict of interest.
7.4 Modification. The parties agree and acknowledge that the
duration, scope and geographic area of the covenants described in this Section 7
are fair, reasonable and necessary in order to protect the good will and other
legitimate interests of the Company, that adequate consideration has been
received by the Consultant and the Principal for such obligations, and that
these obligations do not prevent the Consultant or the Principal from earning a
livelihood. If, however, for any reason any court determines that the
restrictions in this Section 7 are not reasonable, that consideration is
inadequate or that the Consultant or the Principal has been prevented unlawfully
from earning a livelihood, such restrictions shall be interpreted, modified or
rewritten to include as much of the duration, scope and geographic area
identified in this Section 7 as will render such restrictions valid and
enforceable.
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7.5 Standstill. Each of the Consultant and the Principal
agrees that during the Term and for a period of two (2) years from the
expiration of the Term, neither the Consultant nor the Principal, nor any of
their respective Affiliates or Associates (as such terms are interpreted under
the Exchange Act) shall, directly or indirectly, (a) solicit proxies or become a
"participant" in a "solicitation" (as such terms are defined in Regulation 14A
under the Exchange Act), or induce or attempt to induce any other person to
solicit proxies or become a "participant" in a "solicitation," in opposition to
the recommendation of the majority of the directors of the Company with respect
to any matter or advise as to or seek to influence the voting of any voting
securities of the Company, (b) become a member of any "group" (as such term is
interpreted under the Exchange Act) for the purpose of acquiring, holding,
voting or disposing of shares of Common Stock of the Company, (c) except for the
purchase of shares of Common Stock upon exercise of the Options, directly or
indirectly acquire beneficial ownership of voting securities of the Company or
options exercisable therefor if the effect of such acquisition would be to
increase the aggregate voting securities then owned by the Consultant, the
Principal and their respective Affiliates and Associates to greater than ten
percent (10%) of the total combined voting securities then outstanding,
excluding from such percentage of any shares issued upon exercise of the
Options, or (d) commence any tender or exchange offer under the Exchange Act for
any equity securities of the Company.
7.6 Remedies for Breach. The Company, the Consultant and the
Principal agree that the restrictive covenants contained in this Agreement are
severable and separate, and the unenforceability of any specific covenant herein
shall not affect the validity of any other covenant set forth herein. In the
event that a court of competent jurisdiction should determine that the time or
territorial restrictions are unreasonable in their scope, then, and in that
event, the court shall insert reasonable limitations and enforce the restriction
in accordance therewith. Each of the Consultant and the Principal acknowledges
that the Company may suffer irreparable harm as a result of a breach of such
restrictive covenants by the Consultant or the Principal for which an adequate
monetary remedy does not exist and a remedy at law may prove to be inadequate.
Accordingly, in the event of any actual or threatened breach by the Consultant
or the Principal of any provision of this Agreement, the Company shall, in
addition to any other legal remedies permitted by law, be entitled to obtain
equitable remedies, including, without limitation, specific performance,
injunctive relief, a temporary restraining order, and/or a permanent injunction
in any court of competent jurisdiction, to prevent or otherwise restrain a
breach of Sections 7.2, 7.3 and 7.5, without the necessity of proving damages,
and to recover any and all costs and expenses incurred in enforcing this
Agreement against the Consultant and the Principal. Such relief shall be in
addition to and not in substitution of any other remedies available to the
Company.
8. Representations and Warranties of the Parties.
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8.1 Representations and Warranties of the Company. The Company
represents and warrants to the Consultant and the Principal that:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida and has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization, execution and
delivery of this Agreement and the performance of all obligations of the Company
hereunder have been taken, and this Agreement constitutes the valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights generally.
(c) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not result in any
violation or default of any provision of any instrument, judgment, order, writ,
decree or contract to which the Company is a party or by which it is bound, or
require any consent under or be in conflict with or constitute, with or without
the passage of time and giving of notice, either a violation or default under
any such provision.
(d) The Company understands and acknowledges that the ability of
the Consultant and the Principal to fulfill their obligations and to meet the
targets specified herein is dependent in part on the Company's good faith
cooperation and assistance. Accordingly, the Company agrees that it will in good
faith cooperate with and provide reasonable assistance to the Consultant and the
Principal, and devote reasonable Company resources, to assist the Consultant and
the Principal to fulfill their obligations and to meet the targets specified
herein, provided that nothing in this paragraph (d) shall be construed as
requiring the Company to accept any purchase orders or to otherwise take action
which the Company reasonably determines to not be in its best interest.
8.2 Representations and Warranties of the Consultant and the Principal. The
Consultant and the Principal represent and warrant to the Company that:
(a) The Consultant is a corporation duly organized, validly existing
and in good standing under the laws of the State of California. The Consultant
has all requisite power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and performance by
the Consultant and the Principal of this Agreement and the consummation by the
Consultant and the Principal of the transactions contemplated hereby have been
duly authorized by the Consultant and no other action on the part of the
Consultant or the Principal is necessary to authorize the execution, delivery or
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performance by the Consultant and the Principal of this Agreement and the
consummation by the Consultant and the Principal of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Consultant and the Principal and is a valid and binding Agreement of the
Consultant and the Principal, enforceable against each of them in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
violation or default of any provision of any instrument, judgment, order, writ,
decree or contract to which either the Consultant or the Principal is a party or
by which either of them is bound, or require any consent under or be in conflict
with or constitute, with or without the passage of time and giving of notice,
either a violation or default under any such provision.
(c) Each of the Consultant and the Principal understands that the shares of
Common Stock of the Company to be issued to the Consultant upon exercise of the
options have not been registered under the Securities Act of 1933, as amended
(the "Act"), and accordingly, must be held indefinitely unless such shares are
subsequently registered under the Act, or an exemption from such registration is
available and that the Company is under no obligation to register the shares or
to comply with any such exemptions under the Act.
(d) Any shares of Common Stock to be acquired by the Consultant upon
exercise of the Options will be acquired for its own account for investment, and
the Consultant will not sell, pledge or transfer such shares in the absence of
an effective registration statement covering the same, except as permitted by
the provisions of Rule 144, if applicable, or some other applicable exemption
under the Act. In view of this representation and warranty, the Consultant
agrees that there may be affixed to the certificates for the shares to be issued
to it, and to all certificates issued hereafter representing such shares (until
in the opinion of counsel, which opinion must be reasonably satisfactory in form
and substance to counsel for the Company, it is no longer necessary or required)
a legend as follows:
"The shares of common stock represented by this certificate
have not been registered under the Securities Act of 1933,
as amended, and were acquired by the registered holder,
pursuant to a representation and warranty that such holder
was acquiring such shares for his own account and for
investment, with no intention to transfer or dispose of the
same, in violation of the registration requirements of that
Act. These shares may not be sold, pledged, or transferred
in the absence of an effective registration statement under
the Securities Act of 1933, as amended, or an opinion of
counsel, which opinion is reasonably satisfactory to
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counsel to the Company, to the effect that registration is
not required under said Act."
(e) The Principal owns of record and beneficially all of the outstanding
capital stock of the Consultant. The Principal agrees that he will not sell,
assign, pledge or otherwise transfer any shares of capital stock of the
Consultant without the prior written consent of the Company.
(f) The Principal has advised all of the members of the Board of Directors
of each company which the Principal serves as a Director of the principal terms
of this Agreement and none of such Boards raised an objection to the execution
and delivery of this Agreement by the Principal.
9. Notices. All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given (a) when delivered
personally, (b) upon confirmation of receipt when such notice or other
communication is sent by facsimile or telex, (c) one business day after delivery
to an overnight delivery courier, or (d) on the third business day following the
date of deposit in the United States mail if sent first class, postage prepaid,
by registered or certified mail. The addresses for such notices shall be as
follows:
(a) For notices and communications to the Company:
Boca Research, Inc.
0000 Xxxxx Xxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Xx., Esq.
(b) For notices and communications to the Consultant and
the Principal, to the address set forth below their
respective signatures hereto.
Any party hereto may, by notice to the other, change its address for receipt of
notices hereunder.
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10. General.
10.1 Governing Law. This Agreement shall be governed by, and
enforced in accordance with, the laws of the State of Florida applicable to
agreements made and to be performed entirely within such state. Any action or
proceeding brought by the Consultant or Principal against the Company arising
out of or related to this Agreement shall be brought only in a state or federal
court of competent jurisdiction located in the County of Palm Beach, Florida and
the parties hereby submit to the in personam jurisdiction of such courts for
purposes of any such action or proceeding. Any action or proceeding brought by
Company against Consultant or Principal arising out of or related to this
Agreement shall be brought only in a state or federal court of competent
jurisdiction located in the County of Los Angeles, California, and the parties
hereby submit to the in personam jurisdiction of such courts for purposes of any
such action or proceeding.
10.2 Amendment; Waiver. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms hereof may be
waived, only by a written instrument executed by both of the parties hereto or,
in the case of a waiver, by the party waiving compliance. The failure of either
party at any time or times to require performance of any provision hereof shall
in no manner affect the right at a later time to enforce the same. No waiver by
either party of the breach of any term or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be, or construed as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in this Agreement.
10.3 Successors and Assigns. This Agreement shall be binding
upon the Consultant and inure to the benefit of its administrators, executors,
heirs and assigns, although the obligations of the Consultant and the Principal
are personal and may be performed only by them. This Agreement also shall be
binding upon and inure to the benefit of the Company and its subsidiaries,
successors and assigns, including any corporation with which or into which the
Company or its successors may be merged or which may succeed to its assets or
business.
10.4 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be considered to have the force and
effect of an original.
10.5 Attorneys' Fees. In the event that any action is brought
to enforce any of the provisions of this Agreement, or to obtain money damages
for the breach thereof, and such action results in the award of a judgment for
money damages or in the granting of any injunction in favor of one of the
parties to this Agreement, all expenses, including reasonable attorneys' fees,
shall be paid by the non-prevailing party.
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10.6 Expenses. Each of the parties shall pay its or his
own expenses in connection with the negotiation, execution and delivery of this
Agreement and the transactions contemplated hereby.
10.7 Public Announcements. Any publicity relating to this
Agreement and the method of its release shall be approved by the Company and the
Principal, except as otherwise permitted by paragraph 10.8 below.
10.8 Confidentiality. The Company, the Consultant and the
Principal agree that public disclosure of the existence of this Agreement, the
subject matter hereof and the contents of the information disclosed in
connection with the transaction will be made only upon mutual consent of the
parties, unless the Company is compelled by the Securities and Exchange
Commission or other regulatory agency, rules or requirements to make such
disclosure.
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IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under seal as of the date first above written.
CONSULTANT:
ARGOQUEST, INC. BOCA RESEARCH, INC.
By:
Name: Xxxxx Xxxxxxxx Name: Xxxxxxxx X. Xxxxxxxx
Title: President Title: Chief Operating Officer
Address:
PRINCIPAL:
Xxxxx Xxxxxxxx
Address:
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