ASSET PURCHASE AND REORGANIZATION AGREEEMENT between COGNIGEN NETWORKS, INC. and COMMISSION RIVER INC. TABLE OF CONTENTS

 

 

 

 

 

1.            Assets to be Contributed to the Purchaser by the Company                                                                                        1

 

1.1.

Sale of Assets

1

1.2

Excluded Assets

1

1.3

Liabilities of the Company to be Assumed by the Purchaser

3

1.4

Retained Liabilities

3

1.5

Purchase Price

3

1.6

Closing; Delivery

4

1.7

Tax-Free Reorganization

4

1.8

Defined Terms Used in this Agreement

4

 

2.            Representations and Warranties of the Company                                                     & #160;                                          6

 

2.1

Organization, Good Standing, Corporate Power and Qualification

6

2.2

Sufficiency of Assets; Title

7

2.3

Material Contracts

7

2.4

Capitalization

9

2.5

Subsidiaries

9

2.6

Authorization

9

2.7

Governmental Consents and Filings

10

2.8

Litigation

10

2.9

Intellectual Property

10

2.10

Compliance with Other Instruments

11

2.11

Agreements; Actions

11

2.12

Conflicts of Interest

12

2.13

Voting Rights

12

2.14

Absence of Liens

12

2.15

Financial Statements

13

2.16

Changes

13

2.17

Employee Matters

14

2.18

Tax Returns and Payments

15

2.19

Insurance

16

2.20

Confidential Information and Invention Assignment Agreements

16

2.21

Permits

16

2.22

Corporate Documents

16

2.23

Environmental and Safety Laws

16

2.24

Restricted Securities

17

2.25

Limited Market

17

2.26

Legends

17

2.27

Adequate Knowledge; No Reliance Upon Representations                                                                               17

2.28

Agent Relations

18

 

3.            Representations and Warranties of the Purchaser                                                      ;                                          19

 

3.1

Organization, Good Standing, Corporate Power and Qualification

19

3.2

Authorization

19

3.3

SEC Filings

19

 

 

3.4

Governmental Consents and Filings

19

3.5

Litigation

20

3.6

Capitalization

20

3.7

Issuance of Shares

21

3.8

Changes

21

3.9

Compliance with Laws

21

3.10

Tax-Deferred Reorganization

21

3.11

Tax Returns and Payments

22

 

4.            Conditions to the Purchaser’ Obligations at Closing                                                                                             22

 

4.1

Representations and Warranties

22

4.2

Performance

22

4.3

Compliance Certificate

22

4.4

Qualifications

22

4.5

RESERVED

22

4.6

Secretary’s Certificate

22

4.7

Employment Agreements

23

4.8

Proceedings and Documents

23

4.9

No Proceedings

23

 

5.            Conditions of the Company’s Obligations at Closing                                                                                             23

 

5.1

Representations and Warranties

23

5.2

Performance

23

5.3

Qualifications

23

5.4

Purchase Price

23

5.5

Compliance Certificate

23

5.6

Secretary’s Certificate

23

5.7

Consents

24

5.8

Transaction Agreements

24

5.9

Proceedings and Documents

24

5.10

Stock Restriction Agreement

24

 

6.            Remedies for Breach of Transaction Documents                                                      ;                                            24

 

6.1

Survival of Representations and Warranties

24

6.2

Indemnification

24

6.3

Matters Involving Third Parties

25

6.4

Limitation on Claims

26

6.5

Sole Remedy

26

 

7.            Termination                                                
60;                                                                             26

 

7.1

Mutual Agreement

26

7.2

Due Diligence Termination

26

7.3

Purchaser Termination for Breach

27

7.4

Company Termination for Breach

27

7.5

Effect of Termination

27

 

8.            Miscellaneous   27

 

8.1

Transfer; Successors and Assigns

27

8.2

Governing Law

27

8.3

Counterparts

28

8.4

Titles and Subtitles

28

8.5

Notices

28

8.6

No Finder’s Fees

28

8.7

Attorney’s Fees

28

8.8

Amendments and Waivers

29

8.9

Severability

29

8.10

Delays or Omissions

29

8.11

Entire Agreement

29

 

 

THIS ASSET PURCHASE AND REORGANIZATION AGREEMENT (this “Agreement”) is made as of the 30th day of November, 2007 by and among COGNIGEN NETWORKS, INC., a Colorado corporation (the “Purchaser”), and COMMISSION RIVER INC., a Utah corporation (the “Company”).

 

WHEREAS, the Company operates an online affiliate marketing business that provides technology, tools, and products to affiliate marketers and creates and manages affiliate programs for select product vendors (the “Business”); and

 

WHEREAS, the Company and the Purchaser desire to effectuate a “type C reorganization” under Section 368(a)(1) of the Code, by selling substantially all of the Company’s assets and property to Purchaser solely in exchange for 16,000,000 shares of voting common stock of the Purchaser (the “Shares”).

 

NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, and intending to be legally bound, the parties hereto agree as follows:

 

1. Assets to be Contributed to the Purchaser by the Company.

 

1.1. Sale of Assets.  On the terms and subject to the conditions set forth in this Agreement, at the Closing and in consideration of the contribution of the Shares to the Company, the Company shall contribute, assign, transfer and convey to the Purchaser, free and clear of all Liens, and the Purchaser shall accept and acquire from the Company, all of the right, title and interest of the Company in, to and under the assets, properties, rights and privileges of every kind and nature of the Company used in connection with the Business, as the same shall exist at the Closing, including the inventory, tangible personal property, personal property leases, real property leases, business contracts, accounts receivable, intellectual property, permits, vehicles, business record, rights under warranties, real property improvements, goodwill and insurance proceeds of the Company, but specifically excluding the Excluded Assets (such assets and properties being contributed, assigned, transferred and conveyed are referred to herein as the “Assets”).

 

1.2. Excluded Assets.  Notwithstanding anything in this Agreement to the contrary, the Assets to be contributed and transferred to the Purchaser by the Company hereunder shall not include any of the following assets and properties of the Company (collectively, the “Excluded Assets”):

 

(a) Except as otherwise subject to this Section 1.2, the rights of the Company pertaining to any property or asset used in or necessary to the Assets, which have accrued or will accrue to the Company, as the case may be, where the consent of another Person would be invalid or constitute a breach of any agreement or commitment to which the Company is a party or by which the Company may be bound, if the consent of such Person to such assignment or attempted assignment shall not have been obtained; provided, however, that in such event, such property or asset or the proceeds thereof shall be held and/or received by the Company, for the benefit of the Purchaser and the Purchaser may act as agent therefor in order to

 

obtain for the Purchaser the benefits that would flow from ownership of such property or asset; and provided further that for so long as any Material Contract for which a consent to assignment is legally required but such consent to assignment or the like has not been obtained, the Purchaser shall be obligated to promptly pay to the Company any payment, royalty, fee, or other form of compensation which would be payable to a third party under such Material Contract by the Company, as the case may be, but for the fact that the Purchaser has acquired the Assets as of the Closing (the “Third Party Payments”), and the Company agrees to defend, indemnify, release and hold harmless the Purchaser for any additional payment, royalty, fee or other form of compensation which would be payable to a third party under such Material Contract, except to the extent any such additional payment, royalty, fee or other form of compensation relates to any action or omission of the Purchaser occurring after the Closing that would not be permitted under the applicable Material Contract.

 

(b) Books and Records.  The Company’s historical financial statements and tax records, minutes of the meetings of the Company’s board of directors and Shareholders, the minute book of the Company, records of the Shareholders, and the share ledger; provided that the Purchaser and its attorneys, accountants and other representatives may, upon reasonable notice, inspect and copy all of the Company’s financial statements, records, minutes and ledgers not being turned over to the Purchaser which relate to the Business prior to the Closing.

 

(c) Other Excluded Assets.  Those assets and properties of the Company set forth on Schedule 1.2(c); and

 

(d) Rights Under this Agreement.  The Company’s rights under or pursuant to this Agreement or the other Transaction Agreements.

 

1.3. Liabilities of the Company to be Assumed by the Purchaser.  Subject to the terms and conditions set forth in this Agreement, immediately prior to the contribution of the Shares from the Purchaser to the Company as provided in Section 1.6, the Purchaser shall assume and agree to pay, perform and discharge only the Liabilities of the Company arising in connection with the operation of the Business as the same shall exist at the Closing as set forth on Schedule 1.3 attached hereto (the “Assumed Liabilities”).

 

1.4. Retained Liabilities.  Except for the Assumed Liabilities, the Purchaser shall not assume pursuant to this Agreement or the transactions contemplated hereby, and shall have no liability for, any Liabilities of the Company (including those related to the Business) of any kind, character or description whatsoever (collectively, the “Retained Liabilities”) or any other Liabilities relating to the Business of any kind, character or description whatsoever.  Without limiting the foregoing, the Retained Liabilities shall be as set forth on Schedule 1.4 attached hereto.

 

1.5.  Purchase Price.  The purchase price of the Assets shall be the Shares, which are valued by the parties at $400,000 (the “Purchase Price”) and shall be deemed paid upon the issuance and delivery of all of the Shares by the Purchaser to the Company at the Closing as contemplated hereby.  The Purchaser agrees that the Company may assign, transfer or convey all or any portion of the Shares to its Shareholders in complete liquidation of the

 

 

 

1.6. Closing; Delivery.

 

(a) Closing.  The purchase and sale of the Assets shall take place at the offices of Parr Waddoups Brown Gee & Loveless, 185 South State Street, Suite 1300, Salt Lake City, Utah, on or before November 30, 2007, or at such other time and place as the Company and Purchaser mutually agree upon, orally or in writing (which time and place are designated as the “Closing”).

 

(b) Company Deliverables.  At Closing, the Company shall deliver, or cause to be delivered, to the Purchaser: (i) a Bill of Sale and Assignment Agreement, substantially in the form attached hereto as Exhibit A; (ii) an Assignment and Assumption Agreement, substantially in the form attached hereto as Exhibit B (the “Assignment Agreement”); (iii) an Intellectual Property Assignment Agreement, substantially in the form attached hereto as Exhibit C (the “IP Assignment Agreement”); (iv) Employment Agreements with Edwards and Oborn substantially in the form attached hereto as Exhibit D (the “Employment Agreement”); and (v) a Stock Restriction Agreement substantially in the form attached hereto as Exhibit E (the “Stock Restriction Agreement”).

 

(c) Purchaser Deliverables.  At Closing, the Purchaser shall deliver to the Company (i) one or more stock certificates representing the Shares as payment in full of the Purchase Price, (ii) the Employment Agreements, and (iii) the Stock Restriction Agreement.

 

1.7. Tax-Free Reorganization.  The transactions contemplated by this Agreement are intended to be a “reorganization” within the meaning of Section 368(a)(1)(C) of the Code, all of the Shares are intended to constitute consideration issued in connection with the reorganization, and this Agreement is intended to constitute a “plan of reorganization” within the meaning of the regulations promulgated under Section 368 of the Code.  The parties hereto agree to prepare and file tax returns that are consistent with the intention of having the transactions contemplated by this Agreement constitute a reorganization within the meaning of Section 368 of the Code.

 

1.8. Defined Terms Used in this Agreement.  In addition to the terms defined above, the following terms used in this Agreement shall be construed to have the meanings set forth or referenced below.

 

“Affiliate” any Person which, directly or indirectly, controls, is controlled by, or is under common control with such Person, including, without limitation, any partner, officer, director, shareholder or member of such Person.

 

 

“Agent” means any consultant, advisor, marketing representative, independent agent or other Person who is not an employee of the Company but is engaged by or on behalf of the Company for the purpose of marketing, distributing, promoting or selling the Company’s products and services, whether or not pursuant to a written agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Contracts” means all written or oral contracts, agreements, leases, license agreements, sublicenses, assignments, purchase agreements, indentures, mortgages, deeds of trust, instruments of Indebtedness, security agreements, guaranties, purchase orders, sales orders, offers to sell, options, rights of first refusal, distribution agreements, rights to discounts, maintenance agreements and rights under any of the foregoing.

 

“Edwards” means Adam Edwards, an individual.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Governmental Authority” means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States or any domestic state, county, city or other political subdivision.

 

“Key Employee” means any of Edwards or Oborn.

 

“Knowledge” or “knowledge” means, with respect to any individual, the actual knowledge of such individual, after reasonable investigation, of a particular fact or other matter.

 

“Laws” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any Governmental Authority.

 

“Liabilities” means all indebtedness, obligations (contractual, legal or otherwise) and other liabilities of a Person, whether absolute, accrued, unaccrued, contingent, fixed or otherwise, whether known or unknown, and whether due or to become due.

 

“Liens” means any mortgage, deed of trust, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge, community or other marital property interest, governmental charge or other encumbrance of any kind, or any conditional sale contract, title retention contract, option to lease or purchase, right of first refusal or other contract to give any of the foregoing

 

“Material Adverse Effect” means, with respect to any Person, any event, change or effect that is materially adverse to the financial condition, properties, assets, liabilities, business, operations, results of operations or prospects of such entity and its subsidiaries, taken as a whole.

 

“Oborn” means Patrick Oborn, an individual.

 

                “Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

 

“Permitted Liens” means statutory Liens for the payment of current taxes that are not yet delinquent and encumbrances and Liens that arise in the Ordinary Course of Business and do not materially impair the Company’s ownership or use of such property or assets.

 

“Person” means any natural person, corporation, general partnership, limited partnership, proprietorship, limited liability company, joint venture, other business organization, trust, union, association or Governmental Authority.

 

“SEC” means the United States Securities and Exchange Commission.

 

“SEC Filings” means each statement, report, registration statement, definitive proxy statement and other filings required to be filed with the SEC by Purchaser between June 30, 2006 and the date hereof, including without limitation Purchaser’s Annual Report on Form 10-KSB for the Fiscal Year Ended June 30, 2007, as filed with the SEC on October 15, 2007 and amended on Forms 10-KSB/A filed on October 18, 2007 and October 29, 2007; Purchaser’s Quarterly Report on Form 10-QSB for the Quarterly Period Ended September 30, 2007, as filed with the SEC on November 19, 2007 and Form 12b-25 related thereto, as filed with the SEC on November 14, 2007; Purchaser’s Definitive Proxy Statement on Form DEF 14A, as filed with the SEC on November 19, 2007, and Purchaser’s Current Reports on Form 8-K, as filed with the SEC on October 23, 2007, November 1, 2007, and November 8, 2007.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Shareholder” means Edwards, Oborn and Aaron J. Lieberman, who are all of the shareholders of the Company.

 

“Transaction Agreements” means this Agreement, the Assignment Agreement, the IP Assignment Agreement and the Stock Restriction Agreement, and each of the documents, agreements, instruments and transactions contemplated thereby.

 

2. Representations and Warranties of the Company.  The Company hereby represents and warrants to Purchaser that, except as set forth on the Disclosure Schedule delivered by the Company to Purchaser at the Closing, the following representations are true and complete as of the date of Closing.  The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 2. For purposes of these representations and warranties, the phrase “to the Company’s knowledge” shall mean the Knowledge of Edwards or Oborn.

 

2.1. Organization, Good Standing, Corporate Power and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted.  The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect on the Company.

 

2.2. Sufficiency of Assets; Title.

 

(a)            Except for the Excluded Assets, the Assets constitute all of the assets, properties, rights and interests, tangible and intangible, of any nature whatsoever, necessary to conduct the Business as conducted immediately prior to the Closing by the Company. As of the date hereof, the Company has the right to use all of the Assets in the manner that such Assets are presently used in the Business. Assuming no limitations exist to which the Purchaser is subject and for which the Company has no knowledge and except as set forth on Schedule 2.2, upon the consummation of the transactions contemplated by this Agreement, the Purchaser will have the right to use all of the Assets in the manner that such Assets are presently used in the Business by the Company.

(b)            As of the date hereof,except as set forth on Schedule 2.2, the Company owns good and valid title to all of the Assets, free and clear of all Liens (other than Permitted Liens).  Assuming no limitations exist to which the Purchaser is subject and for which the Company has no knowledge, upon the consummation of the transaction contemplated by this Agreement or except as set forth on Schedule 2.2, the Purchaser will own good and valid title to all of the Assets, free and clear of all Liens.  With respect to the Assets it leases, the Company is in compliance with such leases and holds a valid leasehold interest free of any Liens, claims or encumbrances other than Liens, claims or encumbrances of the lessors of such property or assets.

 

2.3. Material Contracts.

 

(a)            Description of Material Contracts.  Schedule 2.3(a) contains a true and complete list of the following Contracts (collectively, the “Material Contracts”), other than Excluded Contracts, to which the Company is a party as of the date hereof or by which any of the Assets is bound:

 

(i)            all Contracts (including Contracts with customers, suppliers, distributors, dealers, manufacturer’s representatives, or sales agencies) that involve the sale or lease of goods or materials or the performance of services (in each case, to or by the Company) of an amount of more than $5,000 annually;

 

(ii)                       all Contracts that were not entered into in the Ordinary Course of Business of the Company;

 

(iii)                       all Contracts of the Company with officers, directors, shareholders or Affiliates of the Company;

 

(iv)                       all Contracts providing for a commitment of employment or personal services to the Company, and all Contracts with any labor union or other employee representative of a group of employees relating to wages, hours or other conditions of employment;

 

(v)            all Contracts with any Person containing any provision or covenant prohibiting or limiting the ability of the Company to engage in any business

 

        activity or compete with any Person, or prohibiting or limiting the ability of any Person to compete with the Company;

 

(vi)                       all partnership, joint venture, shareholders’ or other similar Contracts, including those involving a sharing of profits, losses, costs or liabilities by the Company with any other Person;

 

(vii)                       all Contracts relating to the ownership, the right to use, or the disposition or acquisition of any of the Assets other than dispositions or acquisitions of inventory in the Ordinary Course of Business of the Company;

 

(viii)                     all Contracts relating to an interest in the real property or tangible personal property, including but not limited to lease hold interests;

 

(ix)                       all Contracts under which the Company has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness or under which the Company has granted (or may grant) a Lien on any of the Assets;

 

(x)                  all Contracts providing for payments to or by the Company based on sales, purchases or profits, other than direct payments for goods in an aggregate amount not in excess of $5,000 annually;

 

(xi)                       all Contracts under which the Company is a prime contractor or a subcontractor under or with respect to any Contract with the United States government or any state government or any body, subdivision, department, bureau, agency, commission, board, instrumentality or authority thereof;

 

(xii)                       all Contracts (other than those identified above) that (A) are material to the Business or (B) cannot be terminated by the Company on sixty (60) days’ notice or less without resulting in any cost or penalty to the Company in excess of $5,000; and

 

(xiii)                       each amendment, supplement and modification in respect of any of the foregoing.

 

        (b)            Status of Material Contracts.  As of the date hereof, except as disclosed in Schedule 2.3(b), the Company is not in violation or breach of or default under any Material Contract.  As of the date hereof, except as disclosed in Schedule 2.3(b), to the Company’s knowledge, no other party to any Material Contract is in violation or breach of or default under such Material Contract, except where such violation, breach or default would not have a Material Adverse Effect on the Company.  As of the date hereof, to the Company’s knowledge, no facts or circumstances exist that with notice or lapse of time or both would constitute any violation or breach of, or constitute any event of default or permit termination, modification or acceleration under, any such Material Contract.  As of the date hereof, each Material Contract is in full force and effect and constitutes a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, and, to the Company’s knowledge, enforceable by the Company against the other party or parties to such Material Contract in accordance with its terms, subject, as to enforcement against or by the Company, to (i)

 

 

 

2.4. Capitalization.  The authorized capital of the Company consists, immediately prior to Closing, solely of:

 

(a) 2,000 common shares (the “Common Stock”), 220 shares of which are issued and outstanding immediately prior to Closing.  All of the outstanding shares of Common Stock have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws.  The Company holds no treasury stock and no shares of its capital stock in its treasury.

 

(b) Schedule 2.4(b) sets forth the true and accurate capitalization of the Company immediately prior to Closing including the number of shares of the issued and outstanding shares of capital stock.  There are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire from the Company any shares of capital stock, or any securities convertible into or exchangeable for shares of capital stock.

 

(c) None of the outstanding shares of Common Stock are, or will, following the consummations of the transactions contemplated hereby, be, subject to (i) any right of first refusal in favor of the Company upon any proposed transfer, (ii) any pre-emptive right, or (iii) to the Company’s knowledge, any other right or limitation affecting the transfer of such shares.  None of the Company’s stock purchase agreements contains a provision for acceleration of vesting (or lapse of a repurchase right) upon the occurrence of any event or combination of events.

 

2.5. No Subsidiaries.  The Company does not have any subsidiaries, and does not own, beneficially or otherwise, any shares or other securities of, or any direct or indirect interest of any nature in, any other Person.

 

2.6. Authorization.  All corporate action required to be taken by the Company’s Board of Directors and shareholders in order to authorize the Company to enter into the Transaction Agreements, and to sell the Assets at the Closing, and to consummate the transactions contemplated by this Agreement and the other Transaction Agreements, has been taken or will be taken prior to the Closing.  All action on the part of the officers of the Company necessary for the execution and delivery of the Transaction Agreements, the performance of all obligations of the Company under the Transaction Agreements to be performed as of the Closing, and the delivery of the Assets has been taken or will be taken prior to the Closing.  The Transaction Agreements, when executed and delivered by the Company, constitute valid and

 

 

 

2.7. Governmental Consents and Filings.  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the consummation of the transactions contemplated by this Agreement.

 

2.8. Litigation.  There is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or to the Company’s knowledge, currently threatened (i) against the Company or any officer, director or Key Employee of the Company; (ii) that questions the validity of the Transaction Agreements or the right of the Company to enter into them, or to consummate the transactions contemplated by the Transaction Agreements; or (iii) to the Company’s knowledge that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on the Company.  Neither the Company nor, to the Company’s knowledge, any of its officers or directors, is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality.  There is no action, suit, proceeding or investigation by the Company pending or which the Company intends to initiate.  The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing (or any basis therefor known to the Company) involving the prior employment of any of the Company’s employees, their services provided in connection with the Company’s business, or any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers.

 

2.9. Intellectual Property.  Except as set forth in Schedule 2.9, the Company owns or possesses all legal rights to use (i) all trademarks, service marks, tradenames, domain names, copyrights, trade secrets, licenses, information and proprietary rights and processes and (ii) to the Company’s knowledge, all patents and patent rights, (such rights are collectively referred to herein as the “Company Intellectual Property”) as are necessary to the conduct of the Business as now conducted and as presently proposed to be conducted, without any known conflict with, or infringement of, the rights of others.  To the Company’s knowledge, no product or service marketed or sold (or proposed to be marketed or sold) by the Company violates or will violate any license or infringes any intellectual property rights of any other party.  Other than with respect to commercially available software products under standard end-user object code license agreements, there are no outstanding options, licenses, agreements, claims, encumbrances or shared ownership interests of any kind relating to the foregoing, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other person or entity.  The Company has not received any communications alleging that the Company has violated or, by conducting its business, would violate any of the patents, trademarks, service marks, tradenames, copyrights, trade

 

 

 

2.10. Compliance with Other Instruments.  The Company is not in violation or default (i) of any provisions of its Articles of Incorporation or By-laws, (ii) of any instrument, judgment, order, writ or decree, (iii) under any note, indenture or mortgage, or (iv) under any lease, agreement, Contract or purchase order to which it is a party or by which it is bound that is required to be listed on the Disclosure Schedule, or to its knowledge, of any provision of federal or state statute, rule or regulation applicable to the Company, the violation of which would have a Material Adverse Effect on the Company.  The execution, delivery and performance of the Transaction Agreements and the consummation of the transactions contemplated by the Transaction Agreements will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (i) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement or (ii) an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to the Company.

 

2.11. Agreements; Actions.

 

(a) Except for the Transaction Agreements or as set forth on Schedule 2.11, there are no agreements, understandings, instruments, Contracts or proposed transactions to which the Company is a party or by which it is bound that involve (i) obligations (contingent or otherwise) of, or payments to, the Company in excess of $5,000, (ii) the license of any patent, copyright, trade secret or other proprietary right to or from the Company, (iii) the grant of rights to manufacture, produce, assemble, license, market, or sell its products to any other person or affect the Company’s exclusive right to develop, manufacture, assemble, distribute, market or sell its products, or (iv) indemnification by the Company with respect to infringements of proprietary rights.

 

(b) The Company has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) except as disclosed on Schedule 2.11, incurred any indebtedness for money borrowed or incurred any other liabilities individually in excess of $5,000 or in excess of $25,000 in the aggregate, (iii) made any loans or advances to any person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other

 

 

 

(c) The Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation.

 

2.12. Conflicts of Interest.

 

(a) Except as set forth on Schedule 2.12(a) and other than standard employee benefits generally made available to all employees, there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors, or Key Employees, or any Affiliate thereof.

 

(b) Except as set forth in Schedule 2.12(b), the Company is not indebted, directly or indirectly, to any of its directors, officers or employees or to their respective spouses or members of their immediate family or to any Affiliate of any of the foregoing, other than in connection with expenses or advances of expenses incurred in the Ordinary Course of Business or employee relocation expenses.  Except as set forth in Schedule 2.12(b), none of the Company’s directors, officers or employees, or any members of their immediate families, or any Affiliate of the foregoing (i) are, directly or indirectly, indebted to the Company or, (ii) to the Company’s knowledge, have any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company except that directors, officers or employees or shareholders of the Company may own stock in (but not exceeding two percent of the outstanding capital stock of) publicly traded companies that may compete with the Company.   Except as set forth in Schedule 2.12(b), to the Company’s knowledge: (x) none of the Company’s directors, officers or employees or any members of their immediate families or any Affiliate of any of the foregoing are, directly or indirectly, interested in any material contract with the Company; and (y) none of the directors or officers, or any members of their immediate families, has any material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any of the Company’s major business relationship partners, service providers, joint venture partners, licensees and competitors.

 

2.13. Voting Rights.  To the Company’s knowledge, no shareholder of the Company has entered into any agreements with respect to the voting of capital shares of the Company.

 

2.14. Absence of Liens.  Except as set forth on Schedule 2.14, the Assets are free and clear of all Liens, except for Permitted Liens.  With respect to the Assets it leases, the Company is in compliance with such leases and holds a valid leasehold interest free of any Liens, claims or encumbrances other than those of the lessors of such property or assets.

 

 

 

2.15. Financial Statements. The Company has delivered to Purchaser its un-audited financial statements (including balance sheets and income statements) as of October 31, 2007 and for the ten-month period then ended (collectively, the “Financial Statements”).  Except as set forth in the Financial Statements, the Company has no material Liabilities or obligations, contingent or otherwise, other than (i) Liabilities incurred in the Ordinary Course of Business subsequent to October 31, 2007 and (ii) obligations under contracts and commitments incurred in the Ordinary Course of Business, which, in both cases, individually and in the aggregate would not have a Material Adverse Effect on the Company.

 

2.16. Changes.  Except as set forth on Schedule 2.16, since December 31, 2006 there has not been:

 

(a) any change in the Assets, Liabilities, financial condition or operating results of the Company from that reflected in the Financial Statements, except changes in the Ordinary Course of Business that have not caused, and are not reasonably likely to result in, a Material Adverse Effect on the Company;

 

(b) any damage, destruction or loss, whether or not covered by insurance, that would have a Material Adverse Effect on the Company;

 

(c) any waiver or compromise by the Company of a valuable right or of a material debt owed to it involving more than $5,000;

 

(d) any satisfaction or discharge of any Lien, claim, or encumbrance or payment of any obligation by the Company with respect to any Person, except in the Ordinary Course of Business of the Company and the satisfaction or discharge of which would not have a Material Adverse Effect on the Company;

 

(e) any change to a material contract or agreement by which the Company or any of its assets is bound or subject, except for a change that would not have a Material Adverse Effect on the Company;

 

(f) any material change in any compensation arrangement or agreement with any employee, officer, director or shareholder;

 

(g) any resignation or termination of employment of any officer or Key Employee of the Company;

 

(h) any mortgage, pledge, transfer of a security interest in, or Lien, created by the Company, with respect to any of the Assets, except for Permitted Liens;

 

(i) any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the Ordinary Course of Business of the Company;

 

(j) any declaration, setting aside or payment or other distribution in respect of any of the Company’s shares of capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Company;

 

 

 

(k) any sale, assignment or transfer of any Company Intellectual Property that could reasonably be expected to result in a Material Adverse Effect on the Company;

 

(l) receipt of notice that there has been a loss of, or material order cancellation by, any major customer of the Company;

 

(m) to the Company’s knowledge, any other event or condition of any character, other than events affecting the economy or the Company’s industry generally,  that could reasonably be expected to result in a Material Adverse Effect on the Company; or

 

(n) any arrangement or commitment by the Company to do any of the things described in this Section 2.16.

 

2.17. Employee Matters.

 

(a) As of the date hereof, the Company employs two (2) full-time employees.  Schedule 2.17 sets forth a description of all compensation, including salary, bonus, and deferred compensation paid or payable for each officer or employee of the Company who is anticipated to receive compensation in excess of $25,000 for the fiscal year ending December 31, 2007, or is anticipated to receive compensation in excess of $25,000 for the fiscal year ending December 31, 2008.

 

(b) To the Company’s knowledge, none of its employees is obligated under any Contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with such employee’s ability to promote the interest of the Company or that would conflict with the Business, except as set forth in the Employment Agreements or on Schedule 2.17.  Except as set forth on Schedule 2.17, neither the execution or delivery of the Transaction Agreements, nor the carrying on of the Business by the employees of the Company, nor the conduct of the Business as now conducted will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which any such employee is now obligated.

 

(c) Except as set forth on Schedule 2.17, the Company is not delinquent in payments to any of its employees, consultants or independent contractors for any wages, salaries, commissions, bonuses, or other direct compensation for any service performed for it to the date hereof or amounts required to be reimbursed to such employees, consultants, or independent contractors. To the Company’s knowledge, the Company has complied with all applicable state and federal equal employment opportunity Laws and with other Laws related to employment, including those related to wages, hours, worker classification, collective bargaining, and the payment and withholding of taxes and other sums as required by law except where noncompliance with any applicable law would not result in a Material Adverse Effect.  The Company has withheld and paid to the appropriate governmental entity or is holding for payment not yet due to such Governmental Authority all amounts required to be withheld from

 

 

 

(d) To the Company’s knowledge, no Key Employee intends to terminate employment with the Company, nor does the Company have a present intention to terminate the employment of any of the foregoing; provided, however, that the Company has informed Purchaser of its intention to liquidate and dissolve the Company subsequent to the Closing Date, and the Company makes no representation or warranty regarding the effect of such liquidation and dissolution on the continued employment of any Key Employee of the Company.  The employment of each employee of the Company is terminable at the will of the Company.  Except as set forth in Schedule 2.17 or as required by law, upon termination of the employment of any such employees, no severance or other payments will become due.  Except as set forth in Schedule 2.17, the Company has no policy, practice, plan, or program of paying severance pay or any form of severance compensation in connection with the termination of employment services.

 

(e) The Company has not made any representations regarding equity incentives to any officer, employees, director or consultant that are inconsistent with the share amounts and terms set forth in the minutes of the meetings of the Company’s board of directors.

 

(f) The Company has not terminated any Key Employee’s employment with the Company.

 

(g) Schedule 2.17 sets forth each employee benefit plan maintained, established or sponsored by the Company, or which the Company participates in or contributes to, which is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  The Company has made all required contributions and has no liability to any such employee benefit plan, other than liability for health plan continuation coverage described in Part 6 of Title I(B) of ERISA, and has complied in all material respects with all applicable laws for any such employee benefit plan.

 

(h)            To the Company’s knowledge, none of the officers or directors of the Company during the previous five (5) years has been (a) subject to voluntary or involuntary petition under the federal bankruptcy laws or any state insolvency law or the appointment of a receiver, fiscal agent or similar officer by a court for his business or property; (b) convicted in a criminal proceeding or named as a subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (c) subject to any order, judgment, or decree (not subsequently reversed, suspended, or vacated) of any court of competent jurisdiction permanently or temporarily enjoining him from engaging, or otherwise imposing limits or conditions on his engagement in any securities, investment advisory, banking, insurance, or other type of business or acting as an officer or director of a public company; or (d) found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated any federal or state securities, commodities, or unfair trade practices law, which such judgment or finding has not been subsequently reversed, suspended, or vacated.

 

2.18. Tax Returns and Payments.  There are no federal, state, county, local or foreign taxes dues and payable by the Company which have not been timely paid, except where

 

 

 

2.19. Insurance.  Schedule 2.19 provides a complete list of the Company’s fire and casualty insurance policies currently in effect.

 

2.20. Confidential Information and Invention Assignment Agreements.  Each current and former Key Employee and officer of the Company has executed an agreement with the Company regarding confidentiality and proprietary information substantially in the form or forms delivered to the counsel for the Purchaser (the “Confidential Information Agreements”).  No current or former Key Employee or officer of the Company has excluded works or inventions from his or her assignment of inventions pursuant to such Key Employee’s or officer’s Confidential Information Agreements.  The Company is not aware that any of its Key Employees or officers is in violation thereof.

 

2.21. Permits.  The Company and each of its subsidiaries has all permits, licenses and any similar authority necessary for the conduct of the Business, the lack of which could reasonably be expected to have a Material Adverse Effect on the Company.  To the Company’s knowledge, the Company is not in default in any material respect under any of such permits, licenses or other similar authority.

 

2.22. Corporate Documents.  The Articles of Incorporation and Bylaws of the Company are in the form provided to the Purchaser.

 

2.23. Environmental and Safety Laws. Except as could not reasonably be expected to have a Material Adverse Effect on the Company (a) the Company is and has been in compliance with all Environmental Laws; (b) there has been no release or, to the Company’s knowledge, threatened release of any pollutant, contaminant or toxic or hazardous material, substance or waste, or petroleum or any fraction thereof, (each a “Hazardous Substance”) on, upon, into or from any site currently or heretofore owned, leased or otherwise used by the Company; (c) there have been no Hazardous Substances generated by the Company that have been disposed of or come to rest at any site that has been included in any published U.S. federal, state or local “superfund” site list or any other similar list of hazardous or toxic waste sites published by any governmental authority in the United States; and (d) there are no underground storage tanks located on, no polychlorinated biphenyls (“PCBs”) or PCB-containing equipment used or stored on, and no hazardous waste as defined by the Resource Conservation and Recovery Act, as amended, stored on, any site owned or operated by the Company, except for the storage of hazardous waste in compliance with Environmental Laws.  The Company has made available to the Purchaser true and complete copies of all material environmental records, reports, notifications, certificates of need, permits, pending permit applications, correspondence, engineering studies, and environmental studies or assessments.

 

For purposes of this Section 2.23, “Environmental Laws” means any law, regulation, or other applicable requirement relating to (a) releases or threatened release of

 

 

2.24. Restricted Securities.  The Company understands that the Shares have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Company’s representations as expressed herein.  The Company understands that the Shares are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Company must hold the Shares indefinitely unless they are registered with the SEC and qualified by state authorities, or an exemption from such registration and qualification requirements is available.  The Company acknowledges that the Purchaser has no obligation to register or qualify the Shares for resale. The Company further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Shares, and on requirements relating to the Purchaser which are outside of the Company’s control, and which the Purchaser is under no obligation and may not be able to satisfy.

 

2.25. Limited Market.  The Company understands that the Shares are quoted on the Over-the-Counter Bulletin Board and that a limited public market exists for the Shares.  The Purchaser has made no assurances that an active public market will ever exist for the Shares.

 

2.26. Legends.  The Company understands that the Shares and any securities issued in respect of or exchange for the Shares, may bear one or all of the following legends:

 

(a)            “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(b)            Any legend set forth in, or required by, the other Transaction Agreements.

 

(c)            Any legend required by the securities laws of any state to the extent such laws are applicable to the Shares represented by the certificate with such legend.

 

2.27. Adequate Knowledge; No Reliance Upon Representations.

 

(a)            The Company acknowledges and confirms that it has been given a reasonable

 

 

 

(b)            The Company has received no representations, written or oral, from the Purchaser or its officers, directors, employees, attorneys or agents other than those contained in this Agreement. In making the decision to sell the Assets in exchange for the Shares, the Company has relied solely upon its review of the Purchaser’s books and records, the SEC Filings and this Agreement and independent investigations made by it

 

2.28. Agent Relations.

 

(a)            As of the date hereof, the Company maintains a network of not less than 200 Persons registered as independent agents selling products and services through the Company’s affiliated self-replicating websites.  Schedule 2.28 sets forth a detailed description of all compensation, including bonus, and deferred compensation paid or payable for each Agent, including independent agents, who received remuneration (in any for whatsoever) in excess of $5,000 for the fiscal year ended December 31, 2006 or is anticipated to receive remuneration (in any form whatsoever) in excess of $10,000 for the fiscal year ending December 31, 2007.

 

(b)            To the Company’s knowledge, none of the Agents is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with such Agent’s ability to promote the interests of the Company or that would conflict with the Company’s business.  Neither the execution or delivery of the Transaction Agreements, nor the conduct of the Company’s business as now conducted, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant, arrangement (whether or not in writing) or instrument under which any Agent is now engaged.

 

(c)            Except as described in Schedule 2.28(c), the Company is not delinquent in payments to any of the Agents for any commissions, bonuses, or other compensation or remuneration for any service performed for it to the date hereof or amounts required to be reimbursed to such Agent.  The Company has complied with all applicable state and federal laws and regulations related to the Agents, including the development and operation of the Company’s self-replicating websites, except limited individual circumstances in which noncompliance with a particular law or regulation (individually or in the aggregate) would not result in a Material Adverse Effect on the Company.  The Company has withheld and paid to the appropriate governmental entity or is holding for payment not yet due to such governmental entity all amounts required to be withheld from any Agents, and is not liable for any arrears of taxes, penalties, or other sums for failure to comply with any of the foregoing.

(d)            To the Company’s knowledge, no Agent intends to terminate his, her or its engagement with the Company or is otherwise likely to become unavailable to continue to provide services to or for the benefit of the Company, nor does the Company have a present intention to terminate the engagement of any Agent.  The employment of each employee of the Company is terminable at the will of the Company.  Except as set forth in Schedule 2.28, the

 

 

 

3. Representations and Warranties of the Purchaser.  As of the Closing Date, the Purchaser hereby represents and warrants to the Company that except as set forth on the Purchaser Disclosure Schedule delivered by Purchaser to the Company at the Closing, the following representations and warranties are true and complete.  For purposes of these representations and warranties, the phrase “to the Purchaser’s Knowledge” shall mean the Knowledge of Robert K. Bench, Purchaser’s Chief Executive Officer, or Gary L. Cook, Purchaser’s Chief Financial Officer.

 

3.1. Organization, Good Standing, Corporate Power and Qualification.  The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted.  Purchaser is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect on the Purchaser.

 

3.2. Authorization.  The Purchaser has full power and authority to enter into the Transaction Agreements.  The Transaction Agreements to which the Purchaser is a party, when executed and delivered by the Purchaser, will constitute valid and legally binding obligations of the Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies, or (b) to the extent the indemnification provisions contained in this Agreement may be limited by applicable federal or state securities laws.

 

3.3.  SEC Filings.  Purchaser has filed with the SEC each SEC Filing.  Each SEC Filing, when filed, complied with all applicable requirements of the Securities Act, the Exchange Act and other requirements of law.  Prior to the Closing, Purchaser will file any additional documents required to be filed with the SEC by Purchaser prior to the Closing (collectively with the SEC Filings, the “Purchaser SEC Documents”).  None of the SEC Filings, at the time of filing, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading in light of the circumstances under which they were made.  The Company has taken all necessary actions to ensure its continued inclusion in, and the continued eligibility of the Common Stock for trading on the over-the-counter market (the “OTC”) under all currently effective and currently proposed inclusion requirements.  Purchaser has made available to the Company all exhibits to the SEC Filings filed prior to the date hereof that are (a) requested by the Company, and (b) not available in complete form through EDGAR (“Requested Confidential Exhibits”) and will promptly make available to the Company all Requested Confidential Exhibits to any additional Purchaser SEC Documents filed prior to the Closing.

 

3.4. Governmental Consents and Filings.  Assuming the accuracy of the representations made by the Company in Section 2 of this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with,

 

 

 

3.5. Litigation.  There is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or to the Purchaser’s Knowledge, currently threatened (i) against the Purchaser or any officer, director or Key Employee of the Purchaser; (ii) that questions the validity of the Transaction Agreements or the right of the Purchaser to enter into them, or to consummate the transactions contemplated by the Transaction Agreements; or (iii) to the Purchaser’s Knowledge that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on the Purchaser.  Neither the Purchaser nor, to the Purchaser’s Knowledge, any of its officers or directors, is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality.  There is no action, suit, proceeding or investigation by the Purchaser pending or which the Purchaser intends to initiate.  The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing (or any basis therefor known to the Purchaser) involving the prior employment of any of the Purchaser’s employees, their services provided in connection with the Purchaser’s business, or any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers.

 

3.6. Capitalization.  The authorized capital of the Purchaser consists, immediately prior to Closing, solely of:

 

(a) (i) 300,000,000 shares of common stock, par value $0.001 (“Purchaser Common Stock”), 22,265,726 shares of which are issued and outstanding immediately prior to Closing, and (ii) 20,000,000 shares of preferred stock, no par value (“Purchaser Preferred Stock,” and together with Purchaser Common Stock, the “Purchaser Stock”), of which no shares are issued and outstanding immediately prior to Closing.  There are no other shares of capital stock or voting securities of Purchaser other than shares of Purchaser Common Stock issued after that same date upon the exercise of options issued under the 2001 Incentive and Nonstatutory Stock Option Plan (“Purchaser Option Plan”).  All of the outstanding shares of Purchaser Stock have been duly authorized, are fully paid and nonassessable and, except as set forth on Schedule 3.6 of the Purchaser Disclosure Schedule, to the Purchaser’s knowledge all such shares of Purchaser Stock issued by the Company since July 1, 2003 were issued in compliance with all applicable federal and state securities laws.  The Company holds no treasury stock and no shares of its capital stock in its treasury.

 

(b) As of immediately prior to Closing, there were outstanding options to purchase 902,000 shares of Purchaser Common Stock at prices ranging from $0.09 to $0.71 per share and warrants to purchase 275,000 shares of Purchaser Common Stock at prices ranging from $0.12 to $0.3015 per share, all with terms that expire no later than June 27, 2013.

 

(c) As of immediately prior to Closing, Purchaser has reserved 625,000 shares of Purchaser Common Stock for issuance to employees, directors and independent contractors pursuant to the Purchaser Option Plan, of which 467,000 shares are subject to outstanding, unexercised options.  Other than as described in this Agreement (including this Section 3.6) and the Purchaser Option Plan, there are there are no outstanding

 

 

 

3.7. Issuance of Shares.  The issuance and delivery of the Shares, as the Purchaser Price in accordance with this Agreement, shall be, at or prior to the Closing, duly authorized by all necessary corporate action on the part of Purchaser, and, when issued at the Closing as contemplated by this Agreement, such Shares will be duly and validly issued, fully paid and nonassessable.  Such Shares, when so issued and delivered in accordance with the provisions of this Agreement, shall be free and clear of all Liens (other than restrictions created by the Stock Restriction Agreement or by applicable securities laws) and will not have been issued in violation of any preemptive rights or rights of first refusal or similar rights.  The Shares shall be issued in compliance with all applicable state and federal securities laws.

 

3.8. Changes.  Except as disclosed on Schedule 3.8, since September 30, 2007, there has not been:

 

(a) any change in the assets, liabilities, financial condition or operating results of the Purchaser from that reflected in the SEC Filings, except changes in the Ordinary Course of Business that have not caused, and are not reasonably likely to result in, a Material Adverse Effect on the Purchaser;

 

(b) any damage, destruction or loss, whether or not covered by insurance, that would have a Material Adverse Effect on the Purchaser;

 

(c) any change to a material contract or agreement (or amendments) by which the Purchaser or any of its assets is bound or subject, except for a change that would not have a Material Adverse Effect on the Purchaser;

 

(d) any material change in any compensation arrangement or agreement with any employee, officer, director or shareholder, other than in the Ordinary Course of Business consistent with past practice;

 

(d) any amendment or change to the Articles of Incorporation or the Bylaws of the Purchaser; or

 

(e) to the Purchaser’s Knowledge, any other event or condition of any character, other than events affecting the economy or the Purchaser’s industry generally, that could reasonably be expected to result in a Material Adverse Effect on the Purchaser.

 

3.9. Compliance with Laws.  Except as disclosed on Schedule 3.9, the Purchaser has operated its business in compliance with all applicable Laws having jurisdiction over its assets, its facilities or its operations, in all material respects, and the Purchaser has not been notified in writing of any noncompliance therewith, except circumstances in which noncompliance would not result in a Material Adverse Effect on the Purchaser.

 

3.10. Tax-Deferred Reorganization.

 

 

 

 

(a) The Purchaser has no plan or intention to reacquire any Shares pursuant to Section 1.5 hereof.

 

(b) It is the present intention of the Purchaser to continue at least one significant historic business line of the Company, or to use at least a significant portion of the Company’s historic business assets in a business, in each case within the meaning of Treasury Regulations Section 1.368-1(d).

 

3.11. Tax Returns and Payments.  Except as set forth on Schedule 3.11, there are no federal, state, county, local or foreign taxes dues and payable by the Purchaser which have not been timely paid.  Except as set forth on Schedule 3.11, to the Purchaser’s Knowledge, there are no accrued and unpaid federal, state, country, local or foreign taxes of the Purchaser which are due, whether or not assessed or disputed.  There have been no examinations or audits of any tax returns or reports by any applicable federal, state, local or foreign governmental agency.  Except as set forth on Schedule 3.11, the Purchaser has duly and timely filed all federal, state, county, local and foreign tax returns required to have been filed by it and there are in effect no waivers of applicable statutes of limitations with respect to taxes for any year.

 

4. Conditions to the Purchaser’ Obligations at Closing.  The obligations of the Purchaser to purchase the Assets at Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

 

4.1. Representations and Warranties.  The representations and warranties of the Company contained in Section 2 shall be true and correct in all material respects as of such Closing, except that any such representations and warranties shall be true and correct in all respects where such representation and warranty is qualified with respect to materiality in Section 2, as the case may be.

 

4.2. Performance.  All actions to be taken by the Company in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby shall be satisfactory in form and substance to the Purchaser.

 

4.3. Compliance Certificate.  The President of the Company shall deliver to the Purchaser at the Closing a certificate certifying that the conditions specified in Sections 4.1 and 4.2 have been fulfilled.

 

4.4. Qualifications.  All authorizations, approvals or permits, if any, of any Governmental Authority or regulatory body of the United States or of any state that are required in connection with the lawful sale of the Assets pursuant to this Agreement shall be obtained and effective as of the Closing.

 

4.5. [RESERVED].

 

4.6. Secretary’s Certificate.  The Secretary of the Company shall have delivered to the Purchaser at the Closing a certificate certifying (i) the Bylaws of the Company, and (ii) resolutions of the Board of Directors of the Company approving the Transaction Agreements and the transactions contemplated under the Transaction Agreements.

 

 

 

4.7. Employment Agreements.  The Purchaser shall have received executed the Employment Agreements, in form satisfactory to the Purchaser, dated as of the date of Closing, from Edwards and Oborn.

 

4.8. Proceedings and Documents.  All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Purchaser, and the Purchaser (or its counsel) shall have received all such counterpart original and certified or other copies of such documents as reasonably requested.  Such documents may include good standing certificates.

 

4.9. No Proceedings.  No action, suit, or proceeding shall be pending or threatened before (or that could come before) any Governmental Authority or before (or that could come before) any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or any other Transaction Document, (B) cause any of the transactions contemplated by this Agreement or any other Transaction Document to be rescinded following consummation, or (C) adversely affect the right of the Purchaser to own the Assets and to operate the Business (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect).

 

5. Conditions of the Company’s Obligations at Closing.  The obligations of the Company to sell the Assets to the Purchaser at Closing or any subsequent Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

 

5.1. Representations and Warranties.  The representations and warranties of the Purchaser contained in Section 3 shall be true and correct in all material respects as of such Closing.

 

5.2. Performance.  The Purchaser shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by them on or before such Closing.

 

5.3. Qualifications.  All authorizations, approvals or permits, if any, of any Governmental Authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and contribution of the Shares pursuant to this Agreement shall be obtained and effective as of the Closing.

 

5.4. Purchase Price.  The Purchaser shall have paid the full amount of the Purchase Price as set forth in Section 1.5 herein.

 

5.5. Compliance Certificate.  The Chief Executive Officer of the Purchaser shall deliver to the Purchaser at the Closing a certificate certifying that the conditions specified in Sections 5.1 and 5.2 have been fulfilled.

 

5.6. Secretary’s Certificate.  The Secretary of the Purchaser shall have delivered to the Company at the Closing a certificate certifying (i) the Bylaws of the Purchaser, and (ii) resolutions of the Board of Directors of the Purchaser approving the Transaction

 

 

 

5.7. Consents.  All government filings, licenses, consents, authorizations, waivers and approvals that are required to be made or obtained for the consummation of the transactions contemplated by this Agreement will have been duly made and obtained.

 

5.8. Transaction Agreements.  The Purchaser shall have executed and delivered a counterpart signature to (a) each of the Employment Agreements, (b) the Assignment Agreement, and (c) the Stock Restriction Agreement.

 

5.9. Proceedings and Documents.  All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Company, and the Company (or its counsel) shall have received all such counterpart original and certified or other copies of such documents as reasonably requested.  Such documents may include good standing certificates for Purchaser.

 

5.10. Stock Restriction Agreement.  The Company shall have received from each of BayHill Capital, LC, BayHill Group, LC and Robert K. Bench a counterpart to the Stock Restriction Agreement.

 

6. Remedies for Breach of Transaction Documents.

 

6.1 Survival of Representations and Warranties..  All of the representations and warranties of the Company contained in Section 2 of this Agreement shall survive the Closing and continue in full force and effect for a period of one year thereafter; except that (i) the representations and warranties of the Company contained in Sections 2.1 of this Agreement shall survive the Closing and continue in full force and effect indefinitely, and (ii) and the representations and warranties of the Company contained in Section 2.18 of this Agreement shall survive the Closing and continue in full force and effect until all applicable statute of limitations has run.  All of the representations and warranties of the Purchaser contained in Section 3 of this Agreement shall survive the Closing and continue in full force and effect for a period of one year thereafter, except that the representations and warranties of the Purchaser contained in Section 3.11 of this Agreement shall survive the Closing and continue in full force and effect until all applicable statute of limitations has run.

 

6.2 Indemnification.

 

(a) Indemnification of Purchaser.  The Company shall indemnify, defend and hold harmless the Purchaser, and each of its officers, directors, employees, agents, successors and assigns (collectively the “Purchaser Group”) from and against any and all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and attorneys’ fees and expenses (together, “Adverse Consequences”) incurred in connection with, arising out of, resulting from or incident to any breach or alleged breach of any covenant, representation, warranty or agreement or the inaccuracy or alleged inaccuracy of any

 

 

 

(b) Indemnification of the Company.  The Purchaser shall indemnify, defend and hold harmless the Company, and each of its officers, directors, employees, agents, successors and assigns (collectively the “Company Group”) from and against any and all Adverse Consequences incurred in connection with, arising out of, resulting from or incident to any breach or alleged breach of any covenant, representation, warranty or agreement or the inaccuracy or alleged inaccuracy of any representation made by the Purchaser pursuant to this Agreement.

 

6.3 Matters Involving Third Parties.

 

(a)            If any third party shall notify a party to be indemnified under Section 6.2 (the “Indemnified Party”) with respect to any matter (a “Third Party Claim”) which may give rise to a claim for indemnification against the other party under this Section 6 (the “Indemnifying Party”), then the Indemnified Party shall promptly notify the Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced.

 

(b)            The Indemnifying Party shall have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified Party in writing within 15 days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against the entirety of any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, or caused by the Third Party Claim, (B) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Company will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder (including the payment in cash of all fees and costs associated with such defense), (C) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice materially adverse to the continuing business interests of the Indemnified Party, and (E) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently.

 

(c)            So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 6(b) above, (A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably), unless the following shall apply (in which

 

 

 

(d)            In the event any of the conditions in Section 6.2(b) above is or becomes unsatisfied, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner they reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith), (B) theIndemnifying Party will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses), and (C) the Indemnifying Party will remain responsible for any Adverse Consequences the Purchaser may suffer resulting from, arising out of, relating to, or caused by the Third Party Claim to the fullest extent provided in this Section 6.  The parties agree that the Company, as a Indemnifying Party, may reimburse the Purchaser, as the Indemnified Party, by delivery of a portion of the Shares to Purchaser, which Shares, for such purpose, shall be valued in accordance with Section 6.2(a) hereof.

 

6.4 Limitation on Claims.  In case any event shall occur which would otherwise entitle either party to assert a claim for indemnification under Section 6.2, no Adverse Consequences shall be deemed to have been sustained by such party to the extent of (a) any tax savings realized by such party with respect thereto, or (b) any proceeds received by such party from any insurance policies with respect thereto.  No Person shall be entitled to recover under Section 6.2 or Section 6.3 until the total amount which such Person would recover under Section 6.2 or Section 6.3, but for this Section 6.4, equals Twenty Thousand and No/100 Dollars ($20,000.00) (the “Deductible”), and then such Person shall be entitled to recover only for the excess over the Deductible.  No Person shall be entitled to recover under Section 6.2 or Section 6.3 to the extent (but only to the extent that) the aggregate Adverse Consequences actually paid to such Person would exceed Two Hundred Thousand Dollars ($200,000.00).

 

6.5 Sole Remedy.  The sole remedy of Purchaser for any and all claims of the nature described in Section 6.2 shall be the indemnity set forth in Section 6.2, as limited by the provisions of this Section 6.

 

7. Termination.  Certain of the parties to this Agreement may terminate this Agreement as provided below.

 

7.1. Mutual Agreement.  The Company and the Purchaser may terminate this Agreement by mutual written consent at any time prior to the Closing.

 

7.2. Due Diligence and Termination.  Prior to the Closing, the Company and its directors, managers, officers, employees, attorneys, accountants, consultants, advisors and other agents (collectively, “Representatives”) will have reasonable access during normal

 

 

 

7.3            Purchaser Termination for Breach.  The Purchaser may terminate this Agreement by giving written notice to the Company at any time prior to the Closing (a) in the event the Company has breached any representation, warranty, or covenant contained in this Agreement in any material respect, the Purchaser has notified the Company of the breach, and the breach has continued without cure for a period of ten (10) days after the notice of breach or (b) if the Closing shall not have occurred on or before November 30, 2007, by reason of the failure of any condition precedent under Section 4 hereof (unless the failure results primarily from the Purchaser breaching any representation, warranty, or covenant contained in this Agreement).

 

7.4            Company Termination for Breach.  The Company may terminate this Agreement by giving written notice to the Purchaser at any time prior to the Closing (a) in the event the Purchaser has breached any representation, warranty, or covenant contained in this Agreement in any material respect, the Company has notified the Company of the breach, and the breach has continued without cure for a period of ten (10) days after the notice of breach or (b) if the Closing shall not have occurred on or before November 30, 2007, by reason of the failure of any condition precedent under Section 5 hereof (unless the failure results primarily from the Company breaching any representation, warranty, or covenant contained in this Agreement).

 

7.5            Effect of Termination.  If any party terminates this Agreement pursuant to Sections 7.1, 7.2, 7.3 or 7.4 above, all rights and obligations of the parties hereunder shall terminate without any liability of any party to any other party (except for any liability of any party then in breach).

 

8. Miscellaneous.

 

8.1. Transfer; Successors and Assigns.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.  The parties agree that the Company may be liquidated following the Closing at the direction of the Shareholders.

 

8.2. Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Utah, without regard to its principles of conflicts of laws.   EACH OF THE PARTIES HERETO HEREBY UNCONDITIONALLY AND IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF SALT LAKE COUNTY, UTAH, IN CONNECTION WITH

 

 

 

8.3. Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

8.4. Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

8.5. Notices.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given:  (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the respective parties at their address as set forth on the signature page, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 7.6.  If notice is given to the Company, a copy shall also be sent to John G. Weston, Snell & Wilmer L.L.P., 15 West South Temple, Suite 1200, Salt Lake City, Utah 84101 and if notice is given to the Purchaser, a copy shall also be given to Brian G. Lloyd, Parr Waddoups Brown Gee & Loveless, 185 South State Street, Suite 1300, Salt Lake City, Utah 84111.

 

8.6. No Finder’s Fees.  Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction.  Each party agrees to indemnify and hold harmless the other party from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which such party or any of its officers, employees or representatives is responsible.

 

8.7. Attorney’s Fees.  If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any of the Transaction Agreements, the prevailing party shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

 

 

 

8.8. Amendments and Waivers.  Any term of this Agreement may be amended, terminated or waived only with the written consent of the Company and the Purchaser.  Any amendment or waiver effected in accordance with this Section 8.8 shall be binding upon the Purchaser, the Company and their respective successors and assigns.

 

8.9. Severability.  The invalidity of unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

 

8.10. Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

8.11. Entire Agreement.  This Agreement (including the Exhibits hereto, if any), and the other Transaction Agreements (as defined in this Agreement) constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly cancelled.

 

8.12. Other Agreements of the Purchaser. The Purchaser hereby covenants and agrees that from the date of Closing and at all times thereafter:

 

(a)  Continuity of Business Enterprise.  The Purchaser will continue at least one significant historic business line of the Company, or use at least a significant portion of the Company’s historic business assets in a business, in each case within the meaning of Treasury Regulations Section 1.368-1(d); and

 

(b) Acquisition of Common Stock.  There will be no plan or intention by the Purchaser or any person “related” to the Purchaser (as defined in Treasury Regulations Section 1.368-1(e)(3) to acquire or redeem any of the Purchaser Common Stock issued in the transaction contemplated by this Agreement either directly or through any transaction, agreement, or other arrangement with any other person.

 

IN WITNESS WHEREOF, the parties have executed this Asset Purchase and Reorganization Agreement as of the date first written above.

 

a Colorado corporation:

 

By:   _______________________________                                                              

                                                

Name:  _____________________________                                                              

(print)

Title: ______________________________                                                               

 

Address: 10757 South Riverfront Parkway

 Suite 125

 South Jordan, Utah 84095

 

a Utah corporation

 

By: ______________________________                                                               

 

Name: ____________________________                                                               

(print)

Title: _____________________________                                                               

 

Address: 12401 South 450 East

Suite D-1

Draper, Utah 84062

 

Exhibit A -                            Form of Bill of Sale

 

Exhibit B -                            Form of Assignment Agreement

 

Exhibit C -                            Form of Intellectual Property Assignment Agreement

 

Exhibit D-                            Form of Employment Agreement

 

Exhibit E -                            Form of Stock Restriction Agreement

 

 

THIS BILL OF SALE AND ASSIGNMENT AGREEMENT (this “Agreement”) is dated as of November 30, 2007 by and between Commission River Inc., a Utah corporation (“Transferor”), and Cognigen Networks, Inc., a Colorado corporation (“Transferee”).

RECITALS:

WHEREAS, in connection with the transactions contemplated by that certain Asset Purchase and Reorganization Agreement by and among Transferor and Transferee, dated as of November 30, 2007 (the “Purchase Agreement”), Transferor has agreed to sell, transfer, convey, assign and deliver to Transferee certain assets, and Transferee is willing to purchase such assets of Transferor, all in accordance with the terms, conditions and agreements therein contained; and

WHEREAS, pursuant to Section 1.6(b) of the Purchase Agreement, Transferor is obligated to execute and deliver this Agreement.

NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged:

1.            Transferor hereby irrevocably contributes, sells, transfers, conveys, assigns and delivers to Transferee, and Transferee hereby purchases and acquires all right, title, interest, assumed duties and obligations of Transferor in and to the Assets. The assets and properties being sold, transferred, conveyed, assigned and delivered hereby do not include any of the Excluded Assets.

2.            This Agreement is subject to and includes by reference all of the representations, warranties, covenants and indemnities set forth in the Purchase Agreement.

3.            Capitalized terms used but not defined herein shall have the meanings assigned to them in the Purchase Agreement.

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one instrument.

[Signature page follows]

IN WITNESS WHEREOF, the undersigned have caused a duly authorized officer to execute this Bill of Sale and Assignment Agreement as of the date first above written.

TRANSFEROR:

By: _____________________________                                                               

Name: ___________________________                                                                         

Title: ____________________________                                                                          

TRANSFEREE:

By: ____________________________                                                               

Name: __________________________                                                                          

Title: ___________________________                                                                          

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is dated as of November 30, 2007 by and between Commission River Inc., a Utah corporation (“Assignor”), and Cognigen Networks, Inc., a Colorado corporation (“Assignee”).

RECITALS:

WHEREAS, in connection with the transactions contemplated by that certain Asset Purchase and Reorganization Agreement by and among Assignor and Assignee, dated as of November 30, 2007 (the “Purchase Agreement”), Assignor has agreed to sell, transfer, convey, assign and deliver to Assignee certain assets, and Assignee is willing to purchase such assets of Assignor, all in accordance with the terms, conditions and agreements therein contained; and

WHEREAS, pursuant to Section 1.6(b) of the Purchase Agreement, Assignor is obligated to execute and deliver this Agreement.

NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged:

1.            Assignor hereby assigns and transfers to Assignee, and Assignee hereby assumes and agrees to pay, perform and discharge the Assumed Liabilities when such Assumed Liabilities become due. The Assumed Liabilities being assigned and transferred hereby do not include any of the Retained Liabilities.

2.            This Agreement is subject to and includes by reference all of the representations, warranties, covenants and indemnities set forth in the Purchase Agreement.

3.            Capitalized terms used but not defined herein shall have the meanings assigned to them in the Purchase Agreement.

4.            This Agreement shall be governed by, and construed and interpreted with, the laws of the State of Utah.

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one instrument.

[Signature page follows]

IN WITNESS WHEREOF, the undersigned have caused a duly authorized officer to execute this Assignment and Assumption Agreement as of the date first above written.

ASSIGNOR:

By: _______________________                                                               

Name:  _____________________                                                                         

Title:  ______________________                                                                         

ASSIGNEE:

By:  _______________________                                                              

Name: ______________________                                                                          

Title:  ______________________                                                                         

 

 

THIS INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT (this “Agreement”) is dated as of November 30, 2007 by and between Commission River Inc., a Utah corporation (“Assignor”), and Cognigen Networks, Inc., a Colorado corporation (“Assignee”).

RECITALS:

WHEREAS, in connection with the transactions contemplated by that certain Asset Purchase and Reorganization Agreement by and among Assignor and Assignee, dated as of November 30, 2007 (the “Purchase Agreement”), Assignor has agreed to sell, transfer, convey, assign and deliver to Assignee certain assets, and Assignee is willing to purchase such assets of Assignor, all in accordance with the terms, conditions and agreements therein contained; and

WHEREAS, pursuant to Section 1.6(b) of the Purchase Agreement, Assignor is obligated to execute and deliver this Agreement.

NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged:

1.            Assignor hereby contributes, assigns, transfers, conveys and delivers unto Assignee, its successors and assigns, and Assignee hereby accepts and acquires from Assignor, all of Assignors’ right, title, and interest in, to, and under any patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights, processes, computer software and internet domain names, together with the goodwill of the business relating to the goods and services in respect upon which the trademarks are used,  rights under and remedies against infringement of any of the foregoing, all income, royalties, and damages hereafter due or payable to Assignor with respect to the foregoing, all rights to sue for past, present, and future infringements or misappropriations of the foregoing, and rights to protection of interests in any of the foregoing under any applicable Laws used or held for use by the Assignor in connection with the Business, including without limitation, the intellectual property identified on Exhibit A attached hereto, the same to be held and enjoyed by Assignee for its own use and for the use of its successors and assigns.

 

Assignor further covenants that it will execute all documents, papers, forms and authorizations and take all other actions that may be necessary for securing, completing, vesting, or enforcing in Assignee full right, title, and interest in any patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights, processes, computer software and internet domain names owned by Assignor.

 

2.            This Agreement is subject to and includes by reference all of the representations, warranties, covenants and indemnities set forth in the Purchase Agreement.

 

 

 

3.            Capitalized terms used but not defined herein shall have the meanings assigned to them in the Purchase Agreement.

 

4.            This Agreement shall be governed by, and construed and interpreted with, the laws of the State of Utah.

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one instrument.

[Signature page follows]

 

 

IN WITNESS WHEREOF, the undersigned have caused a duly authorized officer to execute this Intellectual Property Assignment Agreement as of the date first above written.

ASSIGNOR:

By: ___________________________                                                               

Name: _________________________                                                                         

Title: __________________________                                                                          

 

STATE OF UTAH                                )

)

COUNTY OF SALT LAKE                 )

On this the 30th day of November, 2007, before me, the undersigned Notary Public, personally appeared _______________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the above and foregoing Assignment, and acknowledged to me that he executed it.

 

WITNESS my hand and official seal.

 

___________________________________

Notary Public in and for the State of Utah

 

 

 

ASSIGNEE:

By: _____________________________                                                               

Name: ___________________________                                                                          

Title: ____________________________                                                                          

 

 

STATE OF UTAH                                                       )

)

COUNTY OF SALT LAKE                                                                 )

On this the 30th day of November, 2007, before me, the undersigned Notary Public, personally appeared _______________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the above and foregoing Assignment, and acknowledged to me that he executed it.

 

WITNESS my hand and official seal.

 

___________________________________

Notary Public in and for the State of Utah

 

 

[See Attached]

 

 

STATE OF UTAH                                )

)

COUNTY OF SALT LAKE                 )

On this the ____ day of November, 2007, before me, the undersigned Notary Public, personally appeared _______________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the above and foregoing Assignment, and acknowledged to me that he executed it.

 

WITNESS my hand and official seal.

 

___________________________________

Notary Public in and for the State of Utah

 

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into effective as of November __, 2007 (the “Effective Date”), by and between Cognigen Networks, Inc., a Colorado corporation (the “Company”) and [Adam Edwards] [Patrick Oborn], an individual (the “Employee”).

 

 

WHEREAS, pursuant to the terms of that certain Asset Purchase and Reorganization Agreement (the “Purchase Agreement“) dated November __, 2007 by and among the Company and Commission River Inc. (“Commission River”), the Company proposes to acquire substantially all of the assets of Commission River in exchange for shares of voting common stock of the Company (the “Transaction”);

 

WHEREAS, an essential condition to the Transaction is the execution of an Employment Agreement to be entered into between the Employee and the Company; and

 

WHEREAS, the Company desires to employ Employee and the Employee desires to be employed by the Company, upon the terms and subject to the conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the mutual premises and agreements hereinafter set forth, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Company and Employee, intending to be legally bound, agree as follows:

 

 

1. Employment.  Commencing on the Effective Date and continuing throughout the term of this Agreement, the Company hereby agrees to employ the Employee as the [Vice President of the Company and President and General Manager of Commission River Operations] [Vice President of Marketing of the Company and Vice President of Marketing of Commission River Operations] or a similar position with a subsidiary of the Company, and the Employee hereby accepts employment with the Company or subsidiary of the Company, upon the terms and subject to the conditions set forth herein.

 

2. Term.  The Employee shall be employed by the Company for a period of three (3) years from the Effective Date or until the Employee’s employment with the Company is terminated in accordance with Section 6.

 

3. Duties.

 

General Duties.  The Employee will initially be employed as the [Vice President of the Company and President and General Manager of Commission River Operations] [Vice President of Marketing of the Company and Vice President of Marketing of Commission

 

 

 

River Operations], and will have and perform those duties and responsibilities which are appropriate and customary to the position held by the Employee and assigned or delegated to the Employee from time to time by the Company’s Board of Directors (the “Board”), President or Chief Executive Officer.  The Board or the Company’s President or Chief Executive Officer may, in their sole discretion, alter, modify, or change the Employee’s duties, offices, positions, responsibilities and obligations set forth in this Agreement at any time (including employing the Employee with a subsidiary of the Company), consistent with the Employee’s status as [Vice President of the Company and President and General Manager of Commission River Operations] [Vice President of Marketing of the Company and Vice President of Marketing of Commission River Operations].

 

(a) Performance.  To the best of the Employee’s ability and experience, the Employee will at all times loyally and conscientiously perform all duties, and discharge all responsibilities and obligations, required of and from the Employee pursuant to the terms hereof, and to the satisfaction of the Company.  Notwithstanding the foregoing, the Employee shall be free to engage in the business management and ownership of, or employment by, Telarus, Inc. (“Telarus”), as long as such engagement does not materially interfere with his employment with the Company.  For purposes of this Agreement, the scope of Telarus’ business in which Employee may be engaged shall be limited to (i) ownership of common shares of Telarus, and (ii) sales, marketing and consulting services in the area of commercial information technology, including without limitation telecommunications services and devices, networking services and devices, residential broadband sales and services through www.shop4DSL.com, software and software as a service (collectively, the “Telarus Business”).  Additional products, services and business pursuits may be added to the Telarus Business by written consent of the Company which consent will not be unreasonably withheld.

 

(b) Place of Performance.  In connection with the Employee’s employment by the Company and unless the parties hereto mutually agree otherwise, the Employee will be based at the Company’s offices in Draper, Utah, except for required travel on Company business.

 

4. Compensation and Related Matters.

 

(a) Salary and Bonus.  In consideration for services rendered to the Company as provided herein, the Company will pay to the Employee a base salary (the “Base Salary”) at a rate of: (x) $72,000 per annum for the first thirteen (13) months following the Effective Date; and (y) $100,000 per annum thereafter during the term of this Agreement.  The Base Salary shall be paid as follows:

 

(i)  For the first thirteen (13) months following the Effective Date and calculated on a per annum basis: (x) $24,000 of the Base Salary will be paid in cash according to the Company’s standard payroll policy as in effect from time to time, which currently provides for payments to be made twice a month, in arrears; and (y) $48,000 of the Base Salary will be paid within thirty (30) days of the Company’s fiscal year end, and shall be paid in shares of common stock of the Company (the “Shares”).  The Company shall issue such Shares to Employee based on the stock price of $.03 per share of common

 

 

 

stock of the Company.  The Company shall issue the Shares in compliance with all applicable state and federal securities laws.

 

(ii)  Subsequent to the first thirteen (13) months following the Effective Date and calculated on a per annum basis, the Base Salary will be paid in cash according to the Company’s standard payroll policy as in effect from time to time, which currently provides for payments to be made twice a month, in arrears.

 

(iii)  The Employee shall also be eligible to receive bonuses (each a “Bonus”), payable in cash within forty-five (45) days after the Company’s fiscal year end.  Each Bonus will be based upon the Employee achieving certain performance objectives established and provided to the Employee by the Board or the Company’s President or Chief Executive Officer.

 

Subject to Section 6(a)(iv) hereof, the Base Salary may be increased from time to time in accordance with normal business practices of the Company.

 

(b) Expenses.  The Employee will be entitled to receive reimbursement for reasonable expenses incurred by the Employee in performing services hereunder, including expenses for travel and living expense while away from home on business in the service of the Company; provided that all expenses are incurred, documented, and accounted for in accordance with the policies and procedures as are from time to time established by the Company and expenses in excess of $5,000 are approved in advance by the President, Chief Executive Officer or Chief Financial Officer of the Company.

 

(c) Employee Benefit Plans.  During the term of this Agreement, the Employee is entitled to participate in any employee benefit plans which may be made available by the Company to its employees generally, including, but not limited to, cafeteria plans and health, life, hospitalization, stock purchase plans, option plans, dental, disability or other insurance plans as may be in effect from time to time and in accordance with rules established from time to time for individual participation in such plans.

 

(d) Paid Leave.  The Employee will be entitled to the number of paid leave days in each calendar year as is determined in accordance with the Company’s paid leave policy as in effect from time to time.  The Employee will also be entitled to all paid holidays given by the Company to its employees.  Use of paid leave (and, if applicable, accrual of and compensation for unused paid leave) will be subject to the Company’s policies.

 

5. Facilities and Services Furnished.  The Company will furnish the Employee with office space, and such other facilities, furniture, equipment, and services as it may determine to be reasonably necessary for the performance of the Employee’s duties as set forth herein.

 

6. Termination.

 

(a) Termination Events.  The Employee’s employment hereunder may be terminated under any of the following circumstances:

 

(i) Death.  The Employee’s employment hereunder shall terminate upon the Employee’s death.

 

(ii) Disability.  If the Employee is determined to be “disabled” in accordance with this Section 6(a)(ii), the Company may terminate the Employee’s employment hereunder.  For purposes of this Agreement, the Employee shall be considered “disabled” if in the reasonable, good faith judgment of a licensed physician selected jointly by the Company and the Employee (or the Employee’s personal representative), the Employee is unable, after any accommodation required by applicable law, to perform the Employee’s customary duties as an employee of the Company because of a physical or mental impairment for a period of three (3) consecutive months.  The determination by the physician selected by the Company and the Employee (or the Employee’s personal representative) shall be binding and conclusive for all purposes.  If the Company and the Employee (or the Employee’s personal representative) cannot agree on a single physician, the Company and the Employee (or the Employee’s personal representative) may each designate a physician.  If the two (2) physicians do not agree on whether the Employee is “disabled” as defined in this Section 6(a)(ii), they shall jointly appoint a third (3rd) physician, whose judgment concerning whether the Employee is disabled shall be binding and conclusive on all parties.  The Employee agrees to submit to such physical examinations as may be ordered by any physician selected pursuant to this Section 6(a)(ii).

 

(iii) Cause.  The Company may terminate the Employee’s employment hereunder for Cause (as defined below) at any time upon delivery of written Notice of Termination (as defined below) to the Employee.  For purposes of this Agreement, “Cause” shall mean (1) the conviction of (or the plea of guilty or no contest to) a felony, as evidenced by a judgment, order or decree of, or acceptance of a plea of nolo contendere (or similar plea) by, a court of competent jurisdiction, which the Board reasonably determines is likely to have a material adverse effect on the ability of the Employee to effectively perform the Employee’s duties, (2) unreasonable neglect or refusal by the Employee to perform the Employee’s duties or responsibilities that remains uncured for at least ten (10) days following the Employee’s receipt of written notice of such neglect or refusal from the Board, (3) the Employee’s performance of an act or failure to perform an act which, if the Employee were prosecuted and convicted, would constitute a felony, (4) a material violation by the Employee of the Company’s established policies and procedures that remains uncured for at least ten (10) days following the Employee’s receipt of written notice of such violation from the Board, (5) the breach by the Employee of any of the Employee’s material obligations under this Agreement that remains uncured for at least ten (10) days following the Employee’s receipt of written notice of such breach from the Board; provided that the Employee shall not have any opportunity to cure any material breach of Section 8 or Section 9 hereof, or (6) the Employee’s commission of an act of fraud, misappropriation or embezzlement against the Company.  A determination of whether the Employee’s actions justify termination for Cause and the date on which such termination is effective shall in each case be made in good faith by the Board; provided that the mere allegation of any act described in clause (3) or (6)

 

 

 

above shall not constitute a sufficient basis for “Cause” under such clause (3) or (6), as applicable, and the Employee shall be given in advance of such determination a full and detailed written statement of the basis of such claim and shall be given the opportunity to provide contrary proof before the Board, except that such opportunity will not be required to be given in the event of actual conviction of the type of felony referred to above.

 

(iv) Other Events of Termination.  The Employee’s employment hereunder may be terminated (1) by the Company at any time for any other reason or no reason by providing written Notice of Termination to the Employee; (2) by the Employee, upon the Company’s breach of any material provision of this Agreement that is not cured by the Company within ten (10) days of the Company’s written receipt of written notice of such breach from Employee; or (3) by the Employee for “Good Reason” at any time, which shall mean (i) a change in the Employee’s position that materially reduces his level of authority or responsibility; (ii) a change in Employee’s reporting authority to the Company’s Chief Executive Officer or the Board; (iii) the Company’s failure to pay any amount due or owing to the Employee under the terms of this Agreement; (iv) the Company’s reduction of the Base Salary to an amount less than the amount provided for in Section 4(a) above; or (v) the Company’s breach of any material provisions of this Agreement not involving the payment of money and the expiration of ten (10) business days after the Company’s receipt of written notice of such breach from the Employee unless cured within twenty (20) business days following the notice period.

 

(b) Notice of Termination.  “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated.

 

(c) Effect of Termination.  In the event the Employee’s employment is terminated, all obligations of the Company and the Employee under this Agreement shall cease, except that if the Employee is terminated pursuant to Section 6(a)(i), 6(a)(ii) or 6(a)(iii) hereof, the terms of Section 7 through Section 11 shall survive such termination.  Upon termination for any reason, the Employee or the Employee’s representative or estate shall be entitled to receive any applicable compensation, benefits, and reimbursements set forth in Section 7.  The Employee acknowledges that, upon termination of the Employee’s employment, the Employee is entitled to no other compensation, severance or other benefits other than those specifically set forth under Section 7(b) or any other provision of this Agreement.

 

7. Compensation and Severance Upon Termination.

 

In the event the Employee’s employment hereunder is terminated pursuant to Section 6(a)(i), 6(a)(ii) or 6(a)(iii) above, the Employee or his estate shall only be entitled to receive the amount of the Base Salary payable through the date of termination, and shall not be entitled to any salary, compensation or benefits from the Company thereafter,

 

 

 

except as otherwise specifically provided for under the Company’s employee benefit plans or as otherwise expressly required by applicable law.

 

(a)  In the event the Employee’s employment hereunder is terminated pursuant to Section 6(a)(iv) above, Employee shall be entitled receive the following payments (all such payments will be made according to the Company’s standard payroll policy as in effect from time to time):

 

(i)  If Employee’s employment is terminated within the twelve (12) month period from the Effective Date, the Company shall pay to the Employee an amount that is equal to the sum of: (1) twelve (12) months of the Base Salary payable pursuant to Section 4(a)(x), and (2) any Bonus earned by the Employee in accordance with Section 4(a) hereof, all paid in cash pro rata over the twelve (12) month period commencing on the date of termination, plus the full medical, dental and vision premiums for continuation coverage under COBRA for the Employee and his dependents who qualify for continuation coverage under COBRA for one (1) year following the date of termination.

 

(ii)  If Employee’s employment is terminated at any time on or after the first anniversary of the Effective Date, the Company shall pay to the Employee an amount that is equal to the sum of three (3) months of the Base Salary for the year in which the termination occurred, plus the full medical, dental and vision premiums for continuation coverage under COBRA for the Employee and his dependents who qualify for continuation coverage under COBRA for three (3) months following the date of termination.

 

8. Confidentiality and Inventions Assignment.

 

(a) Confidential Information and Work for Hire.  The Employee and the Company hereby acknowledge and agree that in connection with the employment of the Employee, the Employee has been and will be provided with or shall otherwise be exposed to or receive certain confidential and/or proprietary information of the Company or of third parties and may develop certain products, services, methods, know-how, procedures, formulae, processes, specifications, and information of a similar nature that relate to the services provided by the Employee to the Company.  The Employee shall abide by the terms of this Section 8.

 

(b) Definitions.  As used herein:

 

(i)            “Confidential Information” shall mean any and all tangible and intangible information, whether oral or in writing or in any other medium, relating to the management, business, strategy, plans, intellectual property, operations, products, inventions, financial condition, financial results, and financial projections of Commission River or the Company, including without limitation, any and all trade secrets, know-how, designs, drawings, schematics, formulations, ingredients, samples, processes, machines, prototypes, mock-ups, processing and control information, product performance data, manuals, supplier lists, customer lists, purchase and sales records, marketing information and computer programs, whether developed by Commission River or the Company or furnished to Commission River or the Company by other third parties; and all information

 

 

 

(ii)            “Excluded Information” shall refer to information, if any, that would otherwise constitute Confidential Information and that (1) is generally available to or known by the public other than as a result of a disclosure made by Employee in breach of this Agreement; (2) was available to Employee on a nonconfidential basis prior to disclosure to Employee by the Company; (3) is disclosed to Employee on a nonconfidential basis from a source other than the Company; provided that Employee is not, in good faith after reasonable inquiry, aware that such source is or was bound by a confidentiality agreement with the Company or otherwise prohibited from transmitting the information to Employee by any contractual, legal, or fiduciary obligation or by any other obligation enforceable by law or in equity; (4) is hereafter independently developed or compiled by Employee without the aid, application, or use of the Confidential Information; or (5) was available to the Employee or is hereinafter independently developed, compiled or obtained by the Employee while the Employee was engaged in the Telarus Business.  Excluded Information does not include information that would otherwise constitute Confidential Information during the period from the date the information was disclosed by the Company to Employee and the date that such information became Excluded Information.

 

(iii)            “Person,” whether or not the term is capitalized, will be interpreted very broadly and will include, without limitation, any individual, corporation (including a business trust), partnership, joint stock company, limited liability company, trust, estate, unincorporated association, joint venture, or other entity, or a government or any political subdivision or agency thereof, whether or not any such person is an officer, director, employee, or agent of the Company.

 

(c) Use of Confidential Information.  The Confidential Information will be used by the Employee solely for the purposes of performing services for the Company.  The Confidential Information will not, without the prior written consent of the Company, be used by the Employee, directly or indirectly, for any other purpose.  Such use shall cease at any time when this Agreement has terminated in accordance with its terms.

 

(d) Nondisclosure.  The Employee agrees to safeguard the confidentiality of the Confidential Information and not to disclose any part of it to any Person except to those employees of the Company who need to know such information for the purposes of performing services for the Company.

 

(e) Return of Confidential Information.  Promptly upon the request of the Company, the Employee will return to the Company all copies of Confidential Information furnished to the Employee by the Company, together with all copies of any of the same (whether in hard-copy form or on intangible media, such as electronic mail or computer files), or any part thereof, made by the Employee.  All notes, studies, reports,

 

 

memoranda, and other documents prepared by the Employee that contain or reflect the Confidential Information shall also be returned to the Company.

 

(f) Dispute as to Confidential Nature of Information.  In the event of a dispute or litigation between the Employee and the Company, the Employee shall have the burden of proving that any information disclosed to the Employee by the Company or used by the Employee, and which information the Employee claims does not constitute Confidential Information, is not in fact Confidential Information or a derivative thereof.

 

(g) Subpoena; Court Order; Other Legal Requirement.  If the Employee is requested, under the terms of a subpoena or order or other compulsory instrument issued by or under the authority of a court of competent jurisdiction or by a governmental agency, or is advised in writing by counsel for any such party that there is otherwise a legal obligation to disclose (i) all or any part of the Confidential Information, (ii) the fact that the Confidential Information has been made available to the Employee, or (iii) any of the terms, conditions, or other facts with respect to the Employee’s employment with the Company or the services provided by the Employee to the Company, the Employee agrees to, at the Company’s expense: (1) provide the Company with prompt written notice of the existence, terms, and circumstances surrounding such request or requirement; (2) consult with the Company on the advisability of taking steps to resist or narrow that request; (3) if disclosure of Confidential Information is required, furnish only such portion of the Confidential Information as the Employee is advised in writing by the Employee’s counsel is legally required to be disclosed; and (4) cooperate with the Company, at the request of the Company and at the Company’s expense, in its efforts to obtain an order excusing the Confidential Information from disclosure, or an order or other reliable assurance that confidential treatment will be accorded to that portion of the Confidential Information that is required to be disclosed.

 

(h) Inventions and Other Intellectual Property

 

Attached hereto as Schedule A is a list describing all inventions, original works of authorship, developments, improvements, and trade secrets which were owned or developed by the Employee prior to the Employee’s relationship with Commission River or the Company, which relate to the Company’s proposed businesses and products, and which are not assigned to the Company pursuant to this Section 8(h).  If no such list is attached, the Employee represents that there are no such inventions. The Employee agrees to promptly make full written disclosure to the Company, to hold in trust for the sole right and benefit of the Company, and to assign to the Company all of the Employee’s right, title, and interest in and to any and all inventions, original works of authorship, developments, improvements, discoveries, ideas, know-how, processes, methods, formulae, techniques or trade secrets, whether or not patentable or copyrightable, which the Employee has solely or jointly conceived or developed or reduced to practice, may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the Employee’s relationship with the Company, whether as an officer, employee or other service provider.  The Employee acknowledges and understands that this Section 8(h) will not apply to an invention as to which the Employee can prove the following:

 

 

 

(1)            It was created by the Employee entirely on the Employee’s own time;

 

(2)            It was not conceived, developed, reduced to practice or created by the Employee:

 

(A)          within the scope of the Employee’s engagement or employment;

 

(B)          on the Company’s time; or

 

(C)          with the aid, assistance or use of any of the Company’s property, equipment, facilities, supplies, resources or intellectual property;

 

(3)            It does not result from any work, services or duties performed by the Employee for the Company;

 

(4)            It does not relate to the industry or trade of the Company; and

 

(5)            It does not relate to the current or demonstrably anticipated business, research or development of the Company.

 

The Employee acknowledges that all original works of authorship which are made by the Employee (solely or jointly with others) within the scope of the Employee’s work related to the Company and which are protectable by copyright are “works made by hire,” as that term is defined in the United States Copyright Act (17 U.S.C.A. § 101).  The Employee further agrees that, with respect to any “works made by hire” by the Employee (solely or jointly with others), the Employee will receive no royalty or other consideration therefor.

 

(ii)            Maintenance of Records.  The Employee agrees to keep and maintain adequate and current written records of all inventions and original works of authorship made by the Employee (solely or jointly with others) during the term of the Employee’s relationship with the Company, whether as an officer, employee or other service provider, which will be in the form of notes, sketches, drawings, and any other format that may be specified by the Company; provided that the Employee shall not be required to maintain such records for any invention or original work of authorship made by the Employee in connection with the Employee’s services to Telarus related to the Telarus Business, as permitted hereunder.  Except as limited by the foregoing sentence, the records will be available to and remain the sole property of the Company at all times.  The records will include, but will not be limited to information as to all inventions, as well as information as to any studies or research projects undertaken on the Company’s behalf or with the aid, assistance or use of any of the Company’s property, equipment, facilities, supplies, resources or intellectual property, describing in detail the procedures employed and the results achieved, and any other information the Company requires.

 

 

 

(iii)            Inventions Assigned to the United States.  The Employee agrees to assign to the United States government or any state or local government all of the Employee’s right, title, and interest in and to any and all inventions, original works of authorship, developments, improvements or trade secrets whenever such full title is required to be in the United States or any state or local government by contract between the Company and the United States government or any state or local government if applicable, except for inventions, original works of authorship, developments, improvements or trade secrets that are expressly excluded in this Agreement.

 

(iv)            Obtaining Letters Patent and Copyright Registrations.  The Employee agrees that the Employee will apply, at the Company’s expense and request, for United States and foreign letters patent or copyrights, either in the Employee’s name or otherwise as the Company desires, covering inventions and original works of authorship assigned hereunder to the Company.  The Employee further agrees that the Employee’s obligation to assist the Company to obtain such United States or foreign letters patent and copyright registrations will continue beyond the termination of the Employee’s relationship with the Company, whether as an officer, employee or other service provider, but the Company shall compensate the Employee for such assistance at a reasonable rate for time actually spent by the Employee beyond termination of the Employee’s relationship with the Company at the Company’s request.  If the Company is unable because of the Employee’s mental or physical incapacity or for any other reason to secure the Employee’s signature to apply for or to pursue any application for any United States or foreign letters patent or copyright registrations covering inventions or original works of authorship assigned to the Company pursuant to this Agreement, then the Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as the Employee’s agent and attorney in fact, to act for and in the Employee’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by the Employee.  The Employee hereby waives and quitclaims to the Company any and all claims, of any nature whatsoever, which the Employee now or may hereafter have for infringement of any patents or copyright resulting from any application for letters patent or copyright registrations assigned hereunder to the Company.

 

9. Non-Competition

 

Non-Competition Provision is Integral Part of Agreement.  The Company and the Employee have negotiated the non-competition provisions as an integral part of this Agreement.  The Company and the Employee agree to the non-competition and other provisions contained herein and agree that such provisions are reasonable and are necessary to induce the Company and the Employee to enter into this Agreement.  If, at the time of enforcement of any provision of this Agreement, a court or other tribunal shall hold that the restrictions herein are unreasonable or unenforceable under circumstances then existing, the Employee agrees that the maximum period, scope or geographical area

 

 

 

reasonable under such circumstances shall be substituted for the period, scope or area stated herein.

 

(a) Non-Competition.  The Employee agrees that during the term of the Employee’s employment with the Company and for a period of two (2) years thereafter (the “Restrictive Period”), the Employee will not, unless otherwise agreed by the Company in writing, directly or indirectly, as promoter, shareholder, agent, representative, manager, director, officers, owner, independent contractor or otherwise or in connection with any consultant, employee, agent, partner, relative, or affiliate of the Employee:

 

(i)  Anywhere in the world (the “Restricted Area”) own, manage, operate or control any business of the type and character engaged in and competitive with the Company or any affiliate thereof (for purposes of this paragraph, ownership of securities of not in excess of two percent (2%) of any class of securities of a public company shall not be considered to be competition with the Company or any affiliate thereof);

 

(ii)  Anywhere in the Restricted Area, act as an employee, officer, director, manager, member, advisor, representative, partner, consultant or agent for any business of the type and character engaged in and competitive with the Company, or any of its affiliates; or

 

(iii)  Solicit the employment of any employee or independent contractor of the Company or any of its affiliates.

 

The Company hereby acknowledges and agrees that any of the Employee’s ownership interest in, or services to, Telarus during the Restricted Period shall not be deemed a breach of this Section 9 or any other provision of this agreement, provided that Telarus does not engage, directly or indirectly, in business other than the Telarus Business.

 

(b) Definitions.  For purposes of this Agreement, the term “competitive with the Company” shall mean any business (other than the Telarus Business) located anywhere in the Restricted Area that (i) conducts business similar to the Company during the Employee’s employment with the Company or (ii) is engaged in the business of providing services and/or products similar to those of the Company during Employees employment with the Company related to providing technology, tools, and products to affiliate marketers and creating and managing affiliate programs for product vendors, but shall expressly exclude the Employee’s ownership of, providing services to, or employment by, Telarus.  As used in this Agreement, the term “affiliate” shall mean any individual, joint venture, partnership, corporation, limited liability company, or shareholder which controls, is controlled by, or is under common control with, the Company, or in which the Company owns any interest, as required by the context of this Agreement.

 

10. Availability of Equitable Remedies.  The Employee hereby acknowledges and agrees that a breach of any of the agreements contained in this Agreement will cause irreparable harm and damage to the Company, that the remedy at law for the breach or threatened breach of the agreements set forth in this Agreement will be inadequate, and that, in addition to all other

 

 

 

remedies available to the Company for such breach or threatened breach (including, without limitation, the right to recover damages), the Company will be entitled to injunctive relief for any breach or threatened breach of the agreements contained in this Agreement.

 

11. Representations and Warranties.

 

(a) Restricted Securities.  The Employee understands that any Shares that may be issued to Employee hereunder have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Employee’s representations as expressed herein.  The Company understands that the Shares are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Employee must hold the Shares indefinitely unless they are registered with the SEC and qualified by state authorities, or an exemption from such registration and qualification requirements is available.  The Employee acknowledges that the Company has no obligation to register or qualify the Shares for resale.  The Employee further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Shares, and on requirements relating to the Company which are outside of the Employee’s control, and which the Company is under no obligation and may not be able to satisfy.

 

(b) Limited Market.  The Employee understands that the Shares are quoted on the Over-the-Counter Bulletin Board and that a limited public market exists for the Shares.  The Company has made no assurances that an active public market will ever exist for the Shares.

 

(c) Legends.  The Employee understands that the Shares and any securities issued in respect of or exchange for the Shares, may bear one or all of the following legends:

 

(i)            “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii)            Any legend required by the securities laws of any state to the extent such laws are applicable to the Shares represented by the certificate with such legend.

 

(d) Adequate Knowledge; No Reliance Upon Representations.

 

 

 

(i)            The Employee acknowledges and confirms that he has been given a reasonable opportunity to review all documents, books, records and materials of the Company pertaining to the Shares, has been supplied with all additional information concerning the Company and the Shares that has been requested, has had a reasonable opportunity to ask questions of and receive answers from the Company or its authorized representatives concerning the Shares and that all questions have been answered to the full satisfaction of Employee.

 

(ii)            The Employee has received no representations, written or oral, from the Company or its officers, directors, employees, attorneys or agents other than those contained in this Agreement. In making the decision to receive the Shares as a portion of the Base Salary, the Employee has relied solely upon his review of the Company’s books and records, this Agreement, the Purchase Agreement and independent investigations made by him.

 

12. Miscellaneous.

 

(a) Severability. In the event that a court of competent jurisdiction determines that any portion of this Agreement is in violation of any statute or public policy, then only the portions of this Agreement which violate such statute or public policy shall be stricken.  All portions of this Agreement which do not violate any statute or public policy shall continue in full force and effect.  Further, any court order striking any portion of this Agreement shall modify the stricken terms to give as much effect as possible to the intentions of the parties under this Agreement.

 

(b) Notices.  All notices, demands, and other communications provided for hereunder shall be in writing (including facsimile or similar transmission) and mailed (by U.S. certified mail, return receipt requested, postage prepaid), sent, or delivered (including by way of overnight courier service), (i) if to the Company, to Cognigen Networks, Inc., 1559 North Technology Way, Orem, Utah, Attn: Bob Bench, and in the case of facsimile transmission, to facsimile number ###-###-####; (ii) if to the Employee, to the address set forth opposite the Employee’s name on the signature page, and in the case of facsimile transmission, to the facsimile number set forth opposite the Employee’s name on the signature page or, as to each party, to such other person and/or at such other address or number as shall be designated by such party in a written notice to the other party.  All such notices, demands, and communications, if mailed, shall be effective upon the earlier of (1) actual receipt by the addressee, (2) the date shown on the return receipt of such mailing, or (3) three (3) days after deposit in the mail.  All such notices, demands, and communications, if not mailed, shall be effective upon the earlier of (A) actual receipt by the addressee, (B) with respect to facsimile and similar electronic transmission, the earlier of (x) the time that electronic confirmation of a successful transmission is received, or (y) the date of transmission, if a confirming copy of the transmission is also mailed as described above on the date of transmission, and (C) with respect to delivery by overnight courier service, the day after deposit with the courier service, if delivery on such day by such courier is confirmed with the courier or the recipient orally or in writing.

 

 

 

(c) Governing Law.  This Agreement shall be governed by the laws of the State of Utah without regard to its conflict of law provisions, and all claims or disputes arising hereunder shall be subject to the jurisdiction of the state and federal courts in the State of Utah.

 

(d) Successors and Assigns.  The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company.  This Agreement is for the unique personal services of the Employee, and the Employee shall not be entitled to assign any of Employee’s rights or obligations hereunder.

 

(e) Entire Agreement; Amendment.  This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof, and supersedes all prior agreements and understandings with respect thereto.  This Agreement can be amended or modified only in a writing signed by the Employee and the Company.

 

(f) No Waiver.  No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time.

 

(g) Headings.  The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement.

 

(h) Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

 

(i) Attorneys’ Fees.  In the event of any action at law, equity, or under this Agreement to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees and court costs in addition to any other relief to which such party may be entitled.

 

(j) Section 409A of the Internal Revenue Code.  To the extent any payments under this Agreement are subject to the provisions of Section 409A of the Internal Revenue Code (the “Code”), it is intended that the Agreement will comply fully with and meet all the requirements of Code Section 409A. 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

 

THE COMPANY:

 

COGNIGEN NETWORKS, INC.

 

 

_______________________________

By: _________________________________                                                               

Its: _________________________________                                                               

 

THE EMPLOYEE:

 

 

____________________________________

        [Adam Edwards][Patrick Oborn]

 

Address:  ____________________________                    

             

 

 

Facsimile Number:  ___________________________                                                                         

 

 

LIST OF PRIOR INVENTIONS

 

AND ORIGINAL WORKS OF AUTHORSHIP

 

Title                                                       Brief Description  Identifying Number

 

This Stock Restriction Agreement (this “Agreement”) is entered into effective as of November 30, 2007 (the “Effective Date”), by and among Cognigen Networks, Inc., a Colorado corporation (“Cognigen”), Commission River Inc., a Utah corporation (“Commission River”), BayHill Group, LC (“Group”), BayHill Capital, LC (“Capital” and together with Group, collectively, the “BayHill Entities”), Robert K. Bench, an individual, and Adam Edwards, an individual, Patrick Oborn, an individual, and Aaron J. Lieberman, an individual, (Messrs. Edwards, Oborn and Lieberman collectively, the “Shareholders”).  Cognigen, Commission River, the BayHill Entities, Mr. Bench and the Shareholders are referred to in this Agreement collectively as the “Parties.”

WHEREAS, in connection with the transactions contemplated by that certain Asset Purchase and Reorganization Agreement by and among Cognigen and Commission River, dated as of November 30, 2007 (the “Purchase Agreement”), Commission River has agreed to sell, transfer, convey, assign and deliver to Cognigen certain assets (the “Assets”), and Cognigen is willing to purchase such Assets in exchange for Cognigen’s issuance to Commission River of 16,000,000 shares of common stock of Cognigen (the “Shares”), all in accordance with the terms, conditions and agreements therein contained;

WHEREAS, in partial consideration for Cognigen’s agreement to issue and deliver the Shares to Commission River, and in accordance with Section 1.6(b) of the Purchase Agreement, Commission River and the Shareholders are obligated to execute and deliver this Agreement;

WHEREAS, in consideration for Commission River’s agreement to sell, transfer, convey assign and deliver the Assets to Cognigen, and in accordance with Section 1.6(c) of the Purchase Agreement, Cognigen, the BayHill Entities and Mr. Bench are obligated to execute and deliver this Agreement;

WHEREAS, the BayHill Entites are shareholders of Cognigen, and as such, own shares of common stock of Cognigen (such shares, the “BayHill Shares”); and

WHEREAS, the Shareholders, the Bayhill Entities and Mr. Bench will benefit from the transactions contemplated by the Purchase Agreement, and desire to enter into this Agreement as an inducement to Commission River to sell, transfer, convey, assign and deliver the Assets and Cognigen to issue and deliver the Shares.

NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the Parties agree as follows:

1.  Restrictions on Transfers of Stock.

 

(a)  In addition to the restrictions set forth below, each of Commission River, the Shareholders and Mr. Bench covenants and agrees that during the six (6) month period immediately following the Effective Date, they will not assign, sell, pledge, encumber, give or otherwise transfer, alienate or dispose of, whether voluntarily or by operation of law (any such action, a “Transfer”) any shares of common stock of Cognigen held by such Party.  Notwithstanding the foregoing, the Parties agree that Commission River may distribute all, but not less than all, of the Shares to the Shareholders in connection with the liquidation of Commission River as contemplated by Section 1.5 of the Purchase Agreement, provided that such distribution results in all of the Shares being owned solely by the Shareholders, each of whom will hold such Shares pursuant to, and will comply in all respects with, Section 1(c) of this Agreement.

 

(b) Commission River.  Subject to the provisions set forth in Section 1(a) above, Commission River covenants and agrees that it will not, during any three (3) month period commencing on or after the Effective Date, Transfer any Shares in an amount that exceeds the greater of: (i) one percent (1%) of the then outstanding shares of common stock of Cognigen; or (ii) the previous three (3) week period’s average weekly reported trading volume of shares of common stock of Cognigen.  Notwithstanding Section 1(a) hereof or the foregoing, the Parties agree that Commission River may distribute all, but not less than all, of the Shares to the Shareholders in connection with the liquidation of Commission River as contemplated by Section 1.5 of the Purchase Agreement, provided that such distribution results in all of the Shares being owned solely by the Shareholders, each of whom will hold such Shares pursuant to, and will comply in all respects with, Section 1(c) of this Agreement.

 

(c) Shareholders.  Subject to the provisions set forth in Section 1(a) above, each of the Shareholders covenants and agrees that he will not, during any three (3) month period commencing on or after the Effective Date, Transfer any Shares in an amount that exceeds the greater of: (i) one percent (1%) of the then outstanding shares of common stock of Cognigen; or (ii) the previous three (3) week period’s average weekly reported trading volume of shares of common stock of Cognigen.

 

(d) BayHill Entities.  Each of the BayHill Entities covenants and agrees that it will not, during any three (3) month period commencing on or after the Effective Date, Transfer any of the BayHill Shares in an amount that exceeds the greater of: (i) one percent (1%) of the then outstanding shares of common stock of Cognigen; or (ii) the previous three (3) week period’s average weekly reported trading volume of shares of common stock of Cognigen.  Notwithstanding the provisions of Section 1(a) above or the foregoing, the Parties agree that the BayHill Entities may distribute some or all of the BayHill Shares to individual members of Group or Capital and that such members will not be bound by the terms of this Agreement.

 

(e) Robert K. Bench.  Subject to the provisions set forth in Section 1(a) above, Mr. Bench covenants and agrees that he will not, during any three (3) month period commencing on or after the Effective Date, Transfer any of the shares of common stock of Cognigen acquired

 

 

 

by him (the “Bench Shares”) in an amount that exceeds the greater of: (i) one percent (1%) of the then outstanding shares of common stock of Cognigen; or (ii) the previous three (3) week period’s average weekly reported trading volume of shares of common stock of Cognigen.

 

(f) Null and Void.  Any Transfer of Shares, BayHill Shares or Bench Shares made other than in conformity with the provisions of this Agreement shall be null and void, and neither Cognigen nor its transfer agent shall recognize or give effect to such Transfer on its books and records.

 

(g) Restrictive Legend.  Cognigen shall cause the certificates evidencing the Shares and the BayHill Shares to bear the following legend:

 

THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF A STOCK RESTRICTION AGREEMENT DATED NOVEMBER 30, 2007 AMONG COGNIGEN NETWORKS, INC., COMMISSION RIVER INC., BAYHILL GROUP, LC, BAYHILL CAPITAL, LC, ROBERT K. BENCH, ADAM EDWARDS, PATRICK OBORN AND AARON J. LIEBERMAN.  A COPY OF THE STOCK RESTRICTION AGREEMENT IS MAINTAINED AT THE PRINCIPAL OFFICE OF COGNIGEN NETWORKS, INC. AND IS AVAILABLE FOR INSPECTION UPON REASONABLE NOTICE AND EVIDENCE OF A PROPER PURPOSE FOR THE INSPECTION.

2. Miscellaneous Provisions.

 

(a) Termination.  This Agreement shall terminate upon the first to occur of either of the following events:

 

(i)  Cognigen's completion of an underwritten public offering of the Cognigen common stock pursuant to an effective registration statement under the Securities Act of 1933, as amended, with a sales price per share (prior to underwriter commissions and expenses) of common stock (as adjusted for combinations, stock dividends, subdivisions or split-ups and the like) of at least $5.00 and with total net offering proceeds to Cognigen, at the public offering price, in excess of $30,000,000; or

 

(ii)  the unanimous agreement of the Parties.

 

(b) Notice.  All offers and notices provided for or permitted herein shall be in writing and shall be delivered either (i) personally or (ii) by recognized overnight courier with proof of delivery directed to the Parties at the addresses set forth below, or to such other address as either Party designates by notice delivered or sent in the above manner.  An offer or notice shall be deemed received and be deemed effective when received by the party or the party’s agents.

 

If to Cognigen:

Cognigen Networks, Inc.

10757 South Riverfront Parkway

Suite 125

South Jordan, Utah 84095

Attn: Robert K. Bench, Chief Executive Officer

 

 

 

Copy to:

Parr Waddoups Brown Gee & Loveless

185 South State Street, Suite 1300

Salt Lake City, Utah 84111

Attn: Brian G. Lloyd

If to BayHill Capital, LC:

BayHill Capital, LC

1559 N. Technology Way

Orem, Utah 84097

Attention: Robert K. Bench

Telephone: (801) 437-9679

Facsimile: (801) 705-9372

Copy to:

Parr Waddoups Brown Gee & Loveless

185 South State Street, Suite 1300

Salt Lake City, Utah 84111

Attn: Brian G. Lloyd

If to BayHill Group, LC:

BayHill Group, LC

1559 N. Technology Way

Orem, Utah 84097

Attention: Robert K. Bench

Telephone: (801) 437-9679

Facsimile: (801) 705-9372

Copy to:

Parr Waddoups Brown Gee & Loveless

185 South State Street, Suite 1300

Salt Lake City, Utah 84111

Attn: Brian G. Lloyd

If to Commission River:

12401 South 450 East

Suite D-1

Draper, Utah 84062

Copy to:

Snell & Wilmer L.L.P.

15 West South Temple, Suite 1200

Salt Lake City, Utah 84101

Fax:  (801) 257-1800

Attn: John G. Weston, Esq.

 

 

 

If to Robert K. Bench:

Robert K. Bench

1559 N. Technology Way

Orem, Utah 84097

If to Adam Edwards:

Adam Edwards

12401 South 450 East

Suite D-1

Draper, Utah 84062

If to Patrick Oborn:

Patrick Oborn

12401 South 450 East

Suite D-1

Draper, Utah 84062

If to Aaron J. Lieberman:

Aaron J. Lieberman

12401 South 450 East

Suite D-1

Draper, Utah 84062

(c) Specific Performance.  The Parties hereby agree that damages are an inadequate remedy in the event the terms of this Agreement are breached and that any Party to this Agreement may institute and maintain a proceeding to compel specific performance of this Agreement.

 

(d) Successors and Assigns.  Notwithstanding anything to the contrary herein, this Agreement may not be assigned by any of the Parties without the written consent of the other Parties.  This Agreement and all rights hereunder shall be binding upon the Parties, their heirs, executors, administrators, successors and permitted assigns, and they agree for themselves, their heirs, executors, administrators, successors and permitted assigns to execute any instrument and to perform any acts necessary to effectuate this Agreement and its purposes.

 

(e) Governing Law; Jurisdiction.  This Agreement shall be governed and construed in accordance with the internal laws of the state of Utah, without giving effect to conflicts of laws rules.  Each of the Parties hereto expressly and irrevocably consents and submits to the jurisdiction of the state and federal courts located in Salt Lake County, Utah in connection with any legal proceeding in connection with this Agreement.

 

(f) Entire Agreement; Waiver; Severability.  This Agreement reflects the entire understanding of the Parties with respect to restrictions and obligations relating to the Shares except as may be set forth in a contemporaneous or subsequent writing and signed by the party against whom enforcement is sought.  The provisions of this Agreement may not be waived or changed except by a writing signed by the Parties.  No waiver of breach shall constitute a

 

 

 

subsequent waiver of any subsequent breach, and if any provision of this Agreement is found to be invalid, the remaining provisions shall remain enforceable.

 

(g) Counterparts; Facsimile.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument.  A facsimile copy or other accurate copy of this Agreement or any counterpart of this Agreement is binding as an original.

 

(h) Attorneys Fees; Costs.  In any action brought because of a breach or to enforce or interpret any of the provisions of this Agreement, the party which prevails in that action by enforcing the provisions of this Agreement shall be entitled to recover from the other party reasonable attorneys’ fees and court costs incurred in connection with that action, the amount of which shall be fixed by the court and made a part of any judgment rendered.

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above.

COGNIGEN NETWORKS, INC.

By: ______________________________________

Name:

Title:

COMMISSION RIVER INC.

By: ______________________________________

Name:

Title:

BAYHILL CAPITAL, LC

By: ______________________________________

Name:

Title:

BAYHILL GROUP LC

By: ______________________________________

Name:

Title:

_____________________________________

    Robert K. Bench, an individual

SHAREHOLDERS:

_____________________________________

    Adam Edwards, an individual

_____________________________________

                                            Patrick Oborn, an individual

_____________________________________

Aaron J. Lieberman, an individual