FUNDING AGREEMENT
This Funding Agreement ("Agreement") is made as of April 1, 2003 by and
among COGNIGEN NETWORKS, INC., a Colorado corporation, having an address at 0000
Xxxxxxx Xxxxxx, X.X., Xxxxx 000, Xxxxxxx, Xxxxxxxxxx 00000 ("Cognigen"),
INTANDEM COMMUNICATIONS CORP., a Delaware corporation having its principal
address at 00 Xxxxxx Xxx, Xxxxxxx, XX 00000 ("InTandem"), XXXXX X. XXXXXXX, an
individual having an address at 00 Xxxxxx Xxx, Xxxxxxx, XX 00000 ("Xxxxxxx"),
XXXXXXX X. DE HAVEN, an individual having an address at 0000 Xxxxxxxx Xxxx Xxxx,
Xxxxxxxxx, XX 00000 ("De Haven"), and XXXXXXX XXXXX, an individual having an
address at 00 Xx. Xxxxx Xxxxx, Xxxxxxxx, Xxx Xxxx 00000 ("Xxxxx") (Xxxxxxx, De
Haven and Xxxxx are sometimes referred to individually as the "Principal" and
collectively as the "Principals").
RECITALS:
WHEREAS, Cognigen is in the business of marketing telecommunications
products and services; and
WHEREAS, InTandem was formed for the purpose of marketing
telecommunications services; and
WHEREAS, InTandem desires to obtain a series of loans from Cognigen and
Cognigen desires to lend to, or invest in, InTandem;
WHEREAS, the Principals have or will have an ownership interest in InTandem
and desire to be employed and provide for the management and operation of
InTandem;
NOW, THEREFORE, it is agreed as follows:
1. FUNDING BY COGNIGEN
1.1 Funding. Subject to the terms and conditions herein, Cognigen shall provide
up to $448,093 in a series of loans ("Loans" or "Loan") to InTandem in
accordance with Schedule A.
1.2 Discontinuance of the Funding. Notwithstanding any other provision of this
Agreement to the contrary, Cognigen shall provide the first four monthly
Loans in accordance with Schedule A. Thereafter, upon 30 days written
notice, Cognigen may cancel its obligation to provide further Loans should
InTandem fail to attain a performance level of at least seventy-five (75%)
percent of its revenue and profit and loss projections for any month as set
forth on Schedule B ("Financial Model"). If Cognigen, at its sole
discretion, elects to terminate further loans under this condition, it is
understood that Cognigen will continue to perform the responsibilities
specified in Schedule C, with no cost allocations back to InTandem through
September 30, 2004.
1.3 Promissory Notes. Each Loan shall be represented by a separate promissory
note, in the form of Schedule D, bearing an interest rate of 7.5% per annum
("Promissory Note") (all the Promissory Notes are collectively referred to
as the "Promissory Notes"). The principal and interest of each Promissory
Note shall be due from InTandem in 12 equal monthly installments commencing
twelve months after the last Promissory Note is issued. Repayments shall be
applied first to interest and then to principal of each Promissory Note
individually, in the order in which such Promissory Note was issued; and,
subject to the conversion rights of Cognigen set forth in Section 1.4, each
Promissory Note shall be deemed satisfied when the payment of principal
plus accrued interest allocable to such Promissory Note has been received
by Cognigen. Each Promissory Note shall be secured by the pledge of all of
the InTandem common stock owned directly or beneficially by the Principals.
1.4 Conversion of the Promissory Notes. If Cognigen makes all the Loans under
this Agreement, all of the Promissory Notes shall be, at Cognigen's sole
option, convertible into InTandem common stock commencing anytime after the
final Loan is made, but not later than 12 months after the last payment on
all of the Loans has been received by Cognigen. The total principal of
$448,093 plus any interest accrued thereon loaned by Cognigen to InTandem
shall be convertible into 49% of InTandem's outstanding common stock as of
the date of conversion. If Cognigen chooses to convert the Promissory Notes
into InTandem common stock, any payments received by Cognigen from InTandem
for repayment of principal and/or interest on the Promissory Notes shall be
returned in full to InTandem.
1.5 Failure to Convert the Promissory Notes. Should Cognigen choose not to
convert the Promissory Notes into InTandem common stock, InTandem's
obligation to repay the Promissory Notes will be discounted by a value
equal to 25% of the net income realized by Cognigen from the sale of
Cognigen services through the 1+ long distance Cognigen Resale Division
created pursuant to Section 6 hereof (the "CRD") (e.g., CogniPhone, xx.xxx)
through InTandem's efforts after the Closing Date defined in Section 7.1
hereof. This income sharing formula will continue for income generated from
InTandem's efforts for a period of one year after Cognigen's decision to
terminate further funding or Cognigen's decision to not convert the
InTandem Promissory Notes, whichever is later.
1.6 Repayment of Loans. Should Cognigen discontinue further lending due to
InTandem's failure to meet InTandem's revenue and profit and loss
projections, then the principal and interest of each Promissory Note shall
be due from InTandem in 12 equal monthly installments (discounted by the
formula above) commencing one year after the last Promissory Note is
issued. Repayments shall be applied first to interest and then to principal
of each Promissory Note individually, in the order in which such Promissory
Note was issued; and, subject to the conversion rights of Cognigen set
forth in Section 1.4, each Promissory Note shall be deemed satisfied when
the payment of principal plus accrued interest allocable to such Promissory
Note has been received by Cognigen. Each Promissory Note shall be secured
per Section 1.3.
1.7 Restrictions on Issuance of Additional Debt or Equity. Prior to the Closing
Date and during the time Cognigen is: (i) a holder of any unpaid InTandem
Promissory Notes, (ii) an InTandem shareholder or (iii) has a right to
acquire InTandem's common stock, InTandem shall not issue, without the
prior written consent of Cognigen, any debt, equity or other securities
that can be converted into equity securities of InTandem.
1.8 Restrictions on Transfers. Prior to the Closing Date and during the time
Cognigen is (i) a holder of unpaid InTandem promissory notes, (ii) an
InTandem shareholder or (iii) has a right to acquire InTandem's common
stock, the Principals shall not sell or otherwise transfer an interest in
any shares of InTandem common stock or other equity securities of InTandem
owned or controlled by the Principals without the prior written consent of
Cognigen. The above prohibitive terminology shall not prevent the
Principals from an adjustment of their common stock ownership in InTandem
among the Principals.
2. BOARD OF DIRECTORS
During the time Cognigen is: (i) a holder of an unpaid InTandem Promissory
Note, (ii) an InTandem shareholder or (iii) has a right to acquire InTandem's
common stock, Cognigen shall have the right to designate two of the directors on
InTandem's board of directors. In no event, during such period of time, shall
InTandem's board of directors ever exceed five (including the two persons
designated by Cognigen). Notwithstanding any provision of InTandem's Certificate
of Incorporation, By-Laws, or the Delaware General Corporation Law to the
contrary, (a) all decisions made by the InTandem's board of directors shall be
approved by a vote of not less than 80% of InTandem's board of directors; and
(b) a minimum of four directors shall be required to have a quorum at any
InTandem's board of directors' meeting. On or before the Closing Date, InTandem
and the Principals agree and covenant to amend InTandem's By-Laws and/or
Certificate of Incorporation to reflect the terms of this Section.
3. BUSINESS PLAN AND FINANCIAL STATEMENTS
As of the date hereof, InTandem and the Principals represent and warrant
that InTandem's financial condition is, and will be as of the date of Closing
defined in Section 7.1 hereof, as set forth in the business plan and balance
sheet annexed hereto in Schedule E.
4. Employment AND NONCOMPETITION Agreements
Prior to the Closing Date, InTandem will enter into employment and
noncompetition agreements with Xxxxxxx and XxXxxxx, substantially in the form
annexed hereto in Schedule F. On the Closing Date, Cognigen shall enter into an
employment and noncompetition agreement with Xxxxx substantially in the form
annexed hereto in Schedule F.
5. Stock PURCHASE AND non-qualified STOCK Options
5.1 Cognigen Option to Purchase Additional InTandem Common Stock. Provided that
Cognigen has exercised its conversion rights under Section 1.4, on or
before April 1, 2005 or the date Cognigen's conversion rights expire as
provided in Section 1.4, whichever is later, but no earlier than April 1,
2004, Cognigen shall have the right to acquire all the outstanding common
stock of InTandem from the Principals in InTandem. The price that Cognigen
shall pay for such common stock shall be equal to four times the gross
revenue generated by InTandem for the last three months prior to the
acquisition of the InTandem common stock by Cognigen, multiplied by 51%.
Said gross revenue for the said quarter shall exclude revenue derived from
sales of Cognigen products and services generated by (a) Cognigen's
Internet websites (except those created for InTandem and/or the CRD), (b)
affinity programs, or (c) other programs resulting from the efforts or
initiatives of Cognigen management or independent representatives' contacts
and efforts. Cognigen shall have the right to pay the purchase price by:
(i) issuing its common stock based upon the average of the last sale prices
of the preceding fifteen trading days; (ii) in cash or; (iii) in any
combination thereof. If Cognigen elects to convert its debt, as represented
by the Promissory Notes, to equity in accordance with Section 1.4 hereof,
and otherwise elects not to purchase the balance of InTandem's common
stock, then Cognigen and the Principals of InTandem would continue to earn
the percentage of InTandem's net income that corresponds to their
respective equity positions in InTandem.
5.2 Principals' Non-Qualified Stock Options in Cognigen. The Principals shall
also receive options to purchase an aggregate of 180,000 shares (options
for 60,000 shares to each of the Principals) of Cognigen's common stock in
the form of non-qualified stock options grants annexed hereto as Schedule
G. Such stock options will expire valueless if InTandem fails to meet its
revenue and profit and loss projections included in Schedule B of this
Agreement.
6. Cognigen resale Division
Prior to the Closing Date, Cognigen has organized a 1+ long distance
reseller known as Cognigen Resale Division (the "CRD"). The CRD shall either be
a division of Cognigen or a wholly-owned subsidiary of Cognigen.
6.1 CRD's Mission, Authority and Responsibilities. CRD has been created by the
Cognigen Board of Directors, and is vested with all managerial,
administrative, marketing, sales, billing, credit authorization,
collection, customer service, carrier provisioning, rate setting, call
rating, jurisdictional permitting, network creation, and overall
operational authority necessary and proper for the resale of domestic and
international 1+ long distance telephone service for Cognigen. CRD shall
have the authority, subject to the Board of Directors policies, to
contract, in the name of and on behalf of Cognigen, with third party
providers and carriers including CST for services as may be appropriate and
efficient.
6.2 Management. CRD shall be under the managerial authority and guidance of
Xxxxx who shall be designated President of the CRD. Xxxxx shall report
directly to Cognigen's CEO and Board of Directors. Xxxxx shall have full
and specific responsibility for: (i) completing all permitting
(certificates of convenience and necessity) in all target jurisdictions,
(ii) marketing, sales, product and service development and management,
(iii) contracting with carriers, retail rate setting that maximizes net
earnings while being consistent with market competition and development and
implementation of least cost routing for all of its interstate, intrastate
and international traffic, and (iv) coordinating the development and
integration of all systems and applications necessary for the efficient
operation of the CRD. InTandem shall provide consulting services at all
levels to assist the CRD in fulfilling its mission and responsibilities
through the overall transition of a substantial part of Cognigen's sales
production from master agency status to proprietary reseller revenue.
6.3 Bonus Option. In the event a third party introduces a large affiliated
group of subscribers to Cognigen that requires the specialized product and
service management of InTandem, and Cognigen agrees to pay a gross revenue
commission to that third party and sponsoring entity at the level of a
super agency, the InTandem Principals shall receive as a separate and
additional bonus a 15% share of the total commission payable to the super
agency and sponsoring entity by Cognigen. Revenue and net earnings derived
from such a group of affiliated subscribers shall be excluded from all
revenue and net earnings otherwise used to base bonuses, options, repayment
of debt discounts and other compensation payable to InTandem or the
Principals.
7. Closing
7.1 Closing Date. The closing of the transactions contemplated by this
Agreement (the "Closing Date") will take place at the offices of Cognigen
Networks, Inc. at 0000 Xxxxxxx Xxxxxx, X.X., Xxxxx 000, Xxxxxxx, Xxxxxxxxxx
on or before April 1, 2003 at 10:00 a.m., or after all conditions to the
parties' obligations set forth in Section 10 hereof have been satisfied or
waived by the party entitled to the benefit of such condition. The Closing
may take place at such other place and on such other date as is mutually
agreeable to Cognigen, InTandem, and the Principals.
7.2 General Procedure. At the Closing, each party shall deliver to the party
entitled to receipt thereof the documents required to be delivered pursuant
to Section 10 hereof and such other documents, instruments and materials
(or complete and accurate copies thereof, where appropriate) as may be
reasonably required in order to effectuate the intent and provisions of
this Agreement, and all such documents, instruments and materials shall be
satisfactory in form and substance to counsel for the receiving party.
8. Representations and Warranties
8.1 Representations and Warranties of InTandem and the Principals. InTandem and
the Principals hereby represent and warrant to Cognigen that:
(a) Incorporation and Corporate Power. InTandem is a corporation duly
incorporated, validly existing and in good standing under the laws of
the State of Delaware and has all requisite corporate power and
authority to enter into the transactions contemplated herein.
(b) Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by InTandem and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by the Board of Directors of InTandem, and its
stockholders, and no other proceedings on their part are necessary to
authorize the execution, delivery and performance of this Agreement.
This Agreement has been duly executed and delivered by InTandem and
the Principals, and assuming that this Agreement is the valid and
binding agreement of Cognigen, constitutes the valid and binding
obligation of InTandem and the Principals, enforceable in accordance
with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application affecting enforcement of creditors' rights
or by general principles of equity.
(c) Authority; No Breach. InTandem has the requisite corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this
Agreement by InTandem and the Principals and the consummation of the
transactions contemplated hereby do not conflict with or result in any
breach of any of the provisions of, or constitute a default under,
result in a violation of, result in the creation of a right of
termination or acceleration or any lien, security interest, charge or
authorization, consent, approval, exemption or other action by or
notice to any court or other governmental body, under the provisions
of the Certificate of Incorporation or Bylaws of InTandem or any
indenture, mortgage, lease, loan agreement, employment agreement,
noncompetition agreement or other agreement or instrument by which
InTandem or the Principals are bound or affected, or any law, statute,
rule or regulation or order, judgment or decree to which InTandem or
the Principals are subject. No consent, approval or authorization of
any governmental or regulatory authority is required to be obtained by
InTandem in connection with its execution, delivery and performance of
this Agreement.
(d) Brokerage. No third party shall be entitled to receive any brokerage
commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated
by this Agreement based on any arrangement or agreement made by or on
behalf of InTandem or the Principals.
(e) Authorized Capital. The authorized equity securities of InTandem
consist of 1000 shares of common stock, par value $.01 per share, of
which 510 shares are issued and outstanding as of the date of this
Agreement. The Principals are and will be on the Closing Date the
record and beneficial owners and holders of 510 shares of the common
stock of InTandem free and clear of all Encumbrances. With the
exception of the shares of common stock owned by the Principals, no
other shares of common stock of InTandem have been issued or are
outstanding. All of the outstanding equity securities of InTandem have
been duly authorized and validly issued and are fully paid and
nonassessable. There are no contracts relating to the issuance, sale,
or transfer of any equity securities or other securities of InTandem
or options or rights to acquire any common stock or other equity
securities of InTandem. None of the outstanding equity securities or
other securities of InTandem was issued in violation of the Securities
Act of 1933.
(f) Financial Statements. InTandem and the Principals have delivered to
Cognigen an unaudited proforma balance sheet of InTandem as of April
1, 2003, reflecting the first Loan as per Schedule A. Such balance
sheet fairly presents the financial condition of InTandem as of April
1, 2003. Such balance sheet is included for reference in Schedule E.
(g) No Undisclosed Liabilities. Except for the liabilities listed in
Schedule E and Schedule H, InTandem has no liabilities or obligations
of any nature (whether absolute, accrued, contingent, or otherwise) in
excess of $5,000.
(h) Taxes.
(i) Tax Returns. InTandem has filed or caused to be filed (on a timely
basis since its inception) all tax returns ("Tax Returns") that are or
were required to be filed by or with respect to InTandem, either
separately or as a member of a group of corporations, pursuant to
applicable legal requirements. InTandem has paid, or made provision
for the payment of, all taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by InTandem and the Principals, except such Taxes,
if any, that are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been
provided in the balance sheet attached as Schedule E.
(ii) Tax Withholdings. All taxes that InTandem is or was required by legal
requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
governmental body.
(i) No Material Adverse Change. Since the date of the proforma balance
sheet attached as Schedule E, there has not been any material adverse
change in the business, operations, properties, prospects, assets, or
condition of InTandem, and no event has occurred or circumstance
exists that may result in such a material adverse change.
8.2 Representations and Warranties of Cognigen. Cognigen hereby represents and
warrants to InTandem that:
(a) Incorporation and Corporate Power. Cognigen is a corporation duly
incorporated, validly existing and in good standing under the laws of
the State of Colorado, with the requisite corporate power and
authority to enter into this Agreement and perform its obligations
hereunder.
(b) Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by Cognigen and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by all requisite corporate action, and no other
corporate proceedings on its part are necessary to authorize the
execution, delivery or performance of this Agreement. This Agreement
has been duly executed and delivered by Cognigen and constitutes the
valid and binding obligation of Cognigen, enforceable in accordance
with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application affecting enforcement of creditors' rights
or by general principles of equity.
(c) Authority; No Breach. The execution, delivery and performance of this
Agreement by Cognigen and the consummation by Cognigen of the
transactions contemplated hereby do not conflict with or result in any
breach of any of the provisions of, constitute a default under, result
in a violation of, result in the creation of a right of termination or
acceleration or any lien, security interest, charge or encumbrance
upon any assets of Cognigen, or require any authorization, consent,
approval, exemption or other action by or notice to any court or other
governmental body, under the provisions of the Articles of
Incorporation or Bylaws of Cognigen or any indenture, mortgage, lease,
loan agreement or other agreement or instrument by which Cognigen is
bound or affected, or any law, statute, rule or regulation or order,
judgment or decree to which Cognigen is subject. No consent, approval
or authorization of any governmental or regulatory authority is
required to be obtained by Cognigen in connection with its execution,
delivery and performance of this Agreement.
(d) Brokerage. Other than possible fee obligations to Combined
Telecommunications Consultancy, Ltd., no third party shall be entitled
to receive any brokerage commissions, finder's fees, fees for
financial advisory services or similar compensation in connection with
the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Cognigen.
9. Covenants
9.1 Covenants of InTandem and the Principals. InTandem and the Principals
agree to observe each term set forth in this Agreement and agree that,
from the date hereof until the Closing Date, unless otherwise
consented to by Cognigen in writing:
(a) InTandem shall not, directly or indirectly, sell, pledge, dispose
of or encumber any assets, except in the ordinary course of
business.
(b) InTandem and the Principals shall take all commercially
reasonable actions necessary to cause the conditions set forth in
Section 10.1 to be satisfied and to consummate the transactions
contemplated herein as soon as reasonably possible after the
satisfaction thereof (but in any event within three business days
of such date).
9.2 Covenants of Cognigen. Cognigen shall take all commercially reasonable
actions necessary to cause the conditions set forth in Section 10.2 to be
satisfied and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof (but in any event within
three business days of such date).
10. Conditions to Closing
10.1 Conditions to Cognigen's Obligations. The obligation of Cognigen to
consummate the transactions contemplated by this Agreement is subject to
the satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Section 8.1 hereof
shall be true and correct in all material respects at and as of the
Closing Date as though then made, except that any such representation
or warranty made as of a specified date (other than the date hereof)
shall only need to have been true on and as of such date;
(b) InTandem and the Principals shall have performed in all material
respects all of the covenants and agreements required to be performed
and complied with by them under this Agreement prior to the Closing;
(c) InTandem shall have obtained, or caused to be obtained, each consent
and approval required in order to complete the transactions
contemplated hereby.
(d) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency,
domestic or foreign, challenging or seeking to make illegal, or to
delay or otherwise directly or indirectly restrain or prohibit, the
consummation of the transactions contemplated hereby or seeking to
obtain material damages in connection with such transactions.
(e) On the Closing Date, InTandem will have delivered to Xxxxx X. Xxxxxxx
and Xxxxxxx X. De Haven their Employment Agreements referred to in
Section 4 of this Agreement.
10.2 Conditions to InTandem's and the Principal's Obligations. The
obligations of InTandem and the Principals to consummate the
transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions on or before the Closing
Date:
(a) The representations and warranties set forth in Section 8.2
hereof will be true and correct in all material respects at and
as of the Closing as though then made;
(b) Cognigen shall have performed in all material respects all the
covenants and agreements required to be performed by it under
this Agreement prior to the Closing;
(c) There shall not be threatened, instituted or pending any action
or proceeding, before any court or governmental authority or
agency, domestic or foreign, challenging or seeking to make
illegal, or to delay or otherwise directly or indirectly restrain
or prohibit, the consummation of the transactions contemplated
hereby or seeking to obtain material damages in connection with
such transactions; and
(d) On the Closing Date, Cognigen will have delivered to the
Principals:
(i) the Employment Agreement of Xxxxxxx Xxxxx referred to in
Section 4 of this Agreement; and
(ii) the options referred to in Section 5.2 of this Agreement.
11. Termination; Effect of Termination
11.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by the mutual consent of Cognigen, InTandem and the Principals;
(b) by either Cognigen or InTandem and the Principals if there has
been a material misrepresentation, breach of warranty or breach
of covenant on the part of the other in the representations,
warranties and covenants set forth in this Agreement;
(c) by either Cognigen or InTandem and the Principals if the
transactions contemplated hereby have not been consummated by
April 15, 2003; provided that, neither Cognigen nor InTandem and
the Principals will be entitled to terminate this Agreement
pursuant to this Section 11.1(c) if such party's willful breach
of this Agreement has prevented the consummation of the
transactions contemplated hereby; or
(d) by Cognigen if, after the date hereof, there shall have been a
material adverse change in the condition of InTandem or the death
or disability of one of the Principals or if, after the date
hereof, an event shall have occurred which, so far as reasonably
can be foreseen, would result in any such change, except to the
extent such change is directly caused by Cognigen; or
(e) by bankruptcy, receivership or complete liquidation of InTandem.
11.2 Effect of Termination. In the event of termination of this Agreement
by either Cognigen or InTandem and the Principals as provided in
Section 11.1, this Agreement shall become void and there shall be no
liability on the part of Cognigen, InTandem or the Principals, or
their respective stockholders, officers, or directors, except that
Sections 8.1(d), 8.2(d), 12, and 13.6, hereof shall survive
indefinitely, and except with respect to willful breaches of this
Agreement prior to the time of such termination.
12. Survival; Indemnification
12.1 Survival. The covenants, representations and warranties contained in
this Agreement shall survive the closing.
12.2 Indemnification by InTandem. InTandem and the Principals agree to
indemnify Cognigen with respect to, and hold Cognigen harmless from,
any loss, liability or expense (including, but not limited to,
reasonable legal fees) which Cognigen may directly or indirectly incur
or suffer prior to or following the Closing by reason of, or which
results, arises out of or is based upon (a) the inaccuracy of any
representation or warranty made by InTandem or the Principals in this
Agreement, or (b) the failure of InTandem or the Principals to comply
with any covenants or other commitments made by InTandem or the
Principals in this Agreement.
12.3 Indemnification by Cognigen. Cognigen agrees to indemnify InTandem and
the Principals with respect to, and hold InTandem and the Principals
harmless from, any loss, liability or expense (including, but not
limited to, reasonable legal fees) which InTandem or the Principals
may directly or indirectly incur or suffer prior to or following the
Closing by reason of, or which results, arises out of or is based upon
the (a) the inaccuracy of any representation or warranty made by
Cognigen in this Agreement, or (b) the failure of Cognigen to comply
with any covenants made by Cognigen in this Agreement.
12.4 Legal Proceedings. In the event Cognigen, InTandem or the Principals
become involved in any legal, governmental or administrative
proceeding which may result in indemnification claims hereunder, such
party shall promptly notify the other party in writing and in full
detail of the filing, and of the nature of such proceeding. The other
party may, at its option and expense, defend any such proceeding if
the proceeding could give rise to an indemnification obligation
hereunder. If the other party elects to defend any proceeding, it
shall have full control over the conduct of such proceeding, although
the party being indemnified shall have the right to retain legal
counsel at its own expense and shall have the right to approve any
settlement of any dispute giving rise to such proceeding, provided
that such approval may not be withheld unreasonably by the party being
indemnified. The party being indemnified shall reasonably cooperate
with the indemnifying party in such proceeding.
13. Miscellaneous Provisions
13.1 Press Releases and Announcements. Prior to the Closing Date, InTandem
and the Principals shall not issue any press release (or make any
other public announcement) related to this Agreement or the
transactions contemplated hereby or make any announcement to the
employees, customers or suppliers of InTandem without prior written
approval of Cognigen.
13.2 Expenses. Except as otherwise expressly provided for herein, InTandem,
the Principals, and Cognigen will pay all of their own expenses
(including attorneys' and accountants' fees in connection with the
negotiation of this Agreement, the performance of their respective
obligations hereunder and the consummation of the transactions
contemplated by this Agreement (whether consummated or not).
13.3 Further Assurances. Cognigen, InTandem and the Principals agree that,
on and after the Closing Date, they shall take all appropriate action
(without incurring any out-of-pocket expenses) and execute any
documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out any of the provisions
hereof.
13.4 Amendment and Waiver. This Agreement may not be amended or waived
except in a writing executed by the party against which such amendment
or waiver is sought to be enforced. No course of dealing between or
among any persons having any interest in this Agreement will be deemed
effective to modify or amend any part of this Agreement or any rights
or obligations of any person under or by reason of this Agreement.
13.5 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally
delivered or three business days after being mailed by first class
U.S. mail, return receipt requested, or when receipt is acknowledged,
if sent by facsimile, telecopy or other electronic transmission
device. Notices, demands and communications to Cognigen and InTandem
and the Principals will, unless another address is specified in
writing, be sent to the address indicated below:
To Cognigen: 0000 Xxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
To InTandem
and the Principals: Xxxxx X. Xxxxxxx, CEO
00 Xxxxxx Xxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile: 000-000-0000
With a copy to: Xxxxx Xxxxxx, Esq.
00 Xxxx Xxxx
Xxx Xxxxxxxx, XX 00000
Facsimile: 000-000-0000
13.6 Governing Law; Choice of Forum.
(a) Governing Law. This Agreement shall be construed and governed in
accordance with the laws of the State of Washington, without
regard to conflicts of laws principles; and all questions
concerning this Agreement, including, but not limited to, the
execution, interpretation and performance hereof, shall be
subject to such governing law.
(b) Forum For Disputes. The parties to this Agreement hereby submit
now and forever to the jurisdiction of the Courts of King County
of the State of Washington in connection with any action arising
in connection with this Agreement. The parties further agree that
any action with respect to this Agreement shall be brought only
in the Courts of King County of the State of Washington, and no
party shall have any objection to the jurisdiction of such courts
or shall be permitted to raise any defense or argument that any
action has been brought in an inconvenient forum.
13.7 Unenforceable Provisions. If any provision of this Agreement is
determined to be legally invalid, inoperative or unenforceable, only
that particular provision shall be affected, and the determination
shall have no effect whatsoever on any other provision of this
Agreement, and all other provisions shall remain in full force and
effect and fully enforceable. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to
be only as broad as is enforceable.
13.8 No Assignment. Except as expressly provided herein, the rights and
obligations under this Agreement may not be assigned by Cognigen,
InTandem or by any Principal except with the prior written consent of
each of the other parties hereto. This Agreement is made solely for
the benefit of the parties, and no other person shall acquire or have
any right under or by virtue of this Agreement.
13.9 Multiple Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
13.10Headings. The headings in this Agreement have been inserted as a
matter of convenience and shall not affect the construction hereof.
13.11Entire Agreement; Modification In Writing. This Agreement is intended
by the parties as a final expression of their agreement, and is
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter
contained herein. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such subject matter,
including, in particular, the Term Sheet dated March 11, 2003. This
Agreement shall be binding upon Cognigen, its successors and permitted
assigns, InTandem, its successors and permitted assigns, the
Principals, their permitted assigns, heirs, devisees, executors and
administrators, and upon any transferees pursuant to this Agreement.
This Agreement may not be modified except in a written instrument,
duly executed by each of the parties hereto.
[Signatures on following page]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
COGNIGEN NETWORKS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxx
Title: President
XXXXX X. XXXXXXX, Individually
/s/ Xxxxx X. Xxxxxxx
---------------------------------------
XXXXXXX X. XXXXXXX, Individually
/s/ Xxxxxxx X. De Haven
---------------------------------------
XXXXXXX XXXXX, Individually
/s/ Xxxxxxx Xxxxx
---------------------------------------
INTANDEM COMMUNICATIONS CORP.
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Xxxxx Xxxxxxx
Title: Chief Executive Officer
SCHEDULE A
LOAN SCHEDULE
The initial funding of the Corporation shall be by Cognigen as follows:
Monthly Installments
Month 1 $ 84,073.55
Month 2 $ 78,471.80
Month 3 $ 66,393.79
Month 4 $ 60,462.80
Month 5 $ 61,014.49
Month 6 $ 50,165.60
Month 7 $ 40,510.64
Month 8 $ 5,000.00
Month 9 $ 2,000.00
SCHEDULE C
COGNIGEN RESPONSIBILITIES
Cognigen agrees to provide:
(a) the benefits of certain facilities controlled by Cognigen rent-free for a
period of twelve (12) months;
(b) the benefits of any underlying carrier agreements to which Cognigen or any
of its Affiliates may be a party, at cost;
(c) the benefits of any operational agreements with CST or the CRD, at cost;
and
(d) other in-kind services performed by Cognigen. Such in-kind services shall
include, without limitation, billing and call rating, commissions,
certifications, provisioning, customer service and credit/collections
functions, information technology support, and web development of custom
order-entry and associated reporting systems.
SCHEDULE D
PROMISSORY NOTES
THIS SECURITY AND ANY SHARES OF COMMON STOCK ISSUABLE UPON THE CONVERSION OF
THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
PORTION HEREOF MAY BE OFFERED, SOLD OR DELIVERED EXCEPT IN COMPLIANCE WITH THE
REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
SUCH REGISTRATION PROVISIONS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE COMPANY. TRANSFER OF THIS SECURITY IS SUBJECT TO CERTAIN
CONDITIONS SET FORTH IN THE NOTE.
INTANDEM COMMUNICATIONS CORP.
7.5% Secured Convertible Note due 200_
No. ______ Principal Amount: $__________
Issue Date: _____________, 2003
INTANDEM COMMUNICATIONS CORP., a Delaware corporation (the "Company"),
promises to pay to COGNIGEN NETWORKS, INC. or registered assigns ("Holder"), the
principal amount of $____________ Thousand Dollars ($________) on __________ __,
200_ (the "Due Date"). This Note is one of the duly authorized issue of Notes of
the Company, limited in aggregate principal amount to $448,093, issued or to be
issued by the Company to the Holder.
1. Interest. The Company promises to pay interest on the principal amount of
this Note at the interest rate of 7.5% per annum. The Company will pay the
principal and interest on this Note in 12 equal monthly installments
commencing 12 months after the last of the Notes is issued by the Company
to the Holder. Interest on this Note will accrue from the Issue Date above.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Notwithstanding this paragraph, the Holder shall forfeit any
accrued interest rate if it exercises its conversion right set forth
herein.
2. Method of Payment. The Company will pay principal and interest in money of
the United States that at the time of payment is legal tender for payment
of public and private debts. However, the Company may pay principal and
interest by its check payable in such money. It may mail an interest check
to the Holder's registered address. If the Company defaults in a payment of
interest on the Notes, it shall pay the defaulted interest to Holder on a
subsequent special record date selected by the Company.
3. Collateral. Xxxxx X. Xxxxxxx, Xxxxxxx X. De Haven and Xxxxxxx Xxxxx (the
"Principals") have entered into a Pledge Agreement dated April 1, 2003 (the
"Pledge Agreement"), pledging all of the issued and outstanding common
stock of the Company to secure the obligations under this Note.
4. Conversion. The aggregate of all the Notes in the principal amount of
$448,093 are convertible into 49% of the issued and outstanding common
stock of the Company. The Holder may convert the Notes into common stock of
the Company at any time before the close of business on a date that is 12
months after the last payment on the Notes.
To convert the Notes the Holder must: (1) have loaned the Company the
amount of no less than $448,093 evidenced by the Notes, (2) complete and sign
the conversion notice on the back of the Notes, (3) surrender the Notes to the
Company, and (3) furnish appropriate endorsements or transfer documents required
by the Company. The Holder may not convert the Notes if the total principal
amount represented by the Notes is less than $448,093.
No adjustment will be made for accrued interest on a converted Note and, as
full payment for the 49% of the issued and outstanding common stock of the
Company, all principal and interest will be forfeited by the Holder in the event
of conversion of the Notes.
The Company shall reserve out of its authorized but unissued common stock
or its common stock held in treasury enough shares of common stock to permit the
conversion of the Notes. All shares of common stock which may be issued upon
conversion of the Notes shall be fully paid and non-assessable.
The Notes will not entitle the Holder to vote on any matter voted on at a
meeting of the Company's shareholders.
5. Transfer. The Notes cannot be transferred by the Holder unless the Notes
are registered under the United States Securities Act of 1933 or an
exemption from registration is available. In order for the Holder to
transfer the Notes pursuant to an exemption, the request for transfer must
be accompanied by evidence satisfactory to the Company that an exemption is
available for the transfer, which may include an opinion of counsel or a
no-action letter from the Securities and Exchange Commission. In addition,
the Company may require the Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any required
taxes and fees.
6. Persons Deemed Owners. The Holder of a Note or the Notes may be treated as
the owner of it for all purposes.
7. Defaults and Remedies. An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any Note when the
same becomes due and payable and the default continues for a period of
30 days after written notice thereof;
(2) the Company defaults in the payment of the principal of any Note when
the same becomes due and payable at maturity, upon redemption or
otherwise;
(3) the Company or the Principals fail to comply with any of its other
agreements in the Note or the Pledge Agreement and the default
continues for the period and after the notice specified below;
(4) the Company pursuant to or within the meaning of any Bankruptcy Law
(a) commences a voluntary case, (b) consents to the entry of an order
for relief against it in an involuntary case, (c) consents to the
appointment of a Custodian of it or for all or substantially all of
its property, or (d) makes a general assignment for the benefit of its
creditors; or
(5) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (a) is for relief against the Company in an
involuntary case, (b) appoints a Custodian of the Company or for all
or substantially all of its property, or (c) orders the liquidation of
the Company, and the order or decree remains unstayed and in effect
for 90 days.
The term "Bankruptcy Law" means title 11, U.S. Code or any similar Federal
or State law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.
A default under clause (3) is not an Event of Default until the holders of
at least 25% in principal amount of the Notes notify the Company of the default
and the Company does not cure the default within 90 days after receipt of the
notice. The notice must specify the default, demand that it be remedied and
state that the notice is a "Notice of Default."
If an Event of Default occurs and is continuing past the expiration of the
notice period, the Holder by further notice to the Company may declare the
principal of and accrued interest on all the Notes to be due and payable
immediately. Upon a declaration such principal and interest shall be due and
payable immediately. The Holder by notice to the Company may rescind an
acceleration and its consequences if all existing Events of Default have been
cured or waived and if the rescission would not conflict with any judgment or
decree.
If an Event of Default occurs and is continuing, the Holder may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal or interest on the Notes or to enforce the performance of any
provision of the Notes.
A delay or omission by the Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
The Holder by notice to the Company may waive an existing Default and its
consequences. When a Default is waived, it is cured and stops continuing.
8. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday, a legal holiday
or a day on which banking institutions are not required to be open. If a
payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
9. Abbreviations. Customary abbreviations may be used in the name of a Holder
or an assignee, such as TEN COM ("tenants in common"), TEN ENT ("tenants by
the entireties"), JT TEN ("joint tenants with right of survivorship and not
as tenants in common"), CUST ("custodian"), and U/G/M/A ("Uniform Gift to
Minors Act").
10. Governing Law. THE LAWS OF THE STATE OF WASHINGTON SHALL GOVERN THE NOTE
AND THE PLEDGE AGREEMENT.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
under its corporate seal.
Dated: ___________, 2003
INTANDEM COMMUNICATIONS CORP.
By: ______________________________
Its: ______________________________
[SEAL]
ASSIGNMENT FORM CONVERSION NOTICE
To assign this Note, fill in the form To convert this Note into common stock
below: of the Company, check the box [ ].
I or we assign and transfer this Note to
-------------------------
_________________________ If you want the stock certificate made
(Insert assignee's soc. sec. or tax ID out in another person's name fill in
no.) the form below:
-------------------------
-------------------------
-------------------------
_________________________ (Insert the other person's soc. sec.
tax ID no.)
-------------------------
(Print or type assignee's name, address __________________________
and zip code)
--------------------------
and irrevocably appoint
-------------------- --------------------------
agent to transfer this Note on the (Print or type other person's name,
books of the Company. The agent may address and zip code)
substitute another to act for him.
Date: __________ Your Signature: _________________________________
---------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement"), dated as of April __, 2003, between
Xxxxx X. Xxxxxxx, Xxxxxxx X. De Haven, and Xxxxxxx Xxxxx, ("Pledgors"), and
Cognigen Networks, Inc., a Colorado corporation (the "Company").
WHEREAS, the Pledgors have requested that the Company provide a series of
loans ("Loans") to InTandem Communications, Corp., a Delaware corporation
("InTandem"), where the Pledgors are or will be the sole shareholders, and as an
inducement Pledgors have offered to guarantee the Loans and pledge, as
collateral, all of the InTandem issued and outstanding shares of common stock
(the "Pledged Shares"); and
WHEREAS, InTandem has or will deliver to the Company convertible notes (the
"Note" or "Notes") in the amount of the Loans; and
WHEREAS, the Company has required that Pledgors grant to the Company, and
Pledgors are willing to grant to the Company, a security interest in the Pledged
Shares as security for the payment by InTandem of its obligations under the
Notes.
NOW, THEREFORE, in consideration of the premises, the mutual agreements set
forth herein and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
1. Pledge of Stock.
(a) Pledge. As security for the prompt payment of any amounts at any time
due to the Company from InTandem pursuant to the Notes, Pledgors
hereby grant a security interest to the Company in the Pledged Shares.
(b) Delivery. Immediately upon execution of this Agreement, Pledgors will
deliver to the Company the certificates representing all of the
Pledged Shares, which certificates shall be endorsed in blank or with
executed stock powers attached.
2. Rights and Benefits of Pledged Shares.
(a) General. Except as provided in Section 2(b), the Company shall receive
and hold (by the Company or by an agent of the Company) the Pledged
Shares and any property (including without limitation monies or
securities) distributed or issued with respect to the Pledged Shares,
whether as a dividend, in partial or complete liquidation, pursuant to
a merger or reorganization plan or otherwise. Pledgors shall cause any
property distributed or issued with respect to the Pledged Shares to
be assigned and transferred to the Company and delivered to the
Company, and such securities shall be subject to the terms and
conditions of this Agreement.
(b) Voting. Unless and until a default is declared by the Company pursuant
to Section 5, Pledgors shall be entitled to vote the Pledged Shares.
(c) Assignment, Etc. Except as provided or specifically permitted herein,
Pledgors shall not pledge, sell, assign, transfer or otherwise dispose
of the Pledged Shares without the prior written approval of the
Company.
(d) Legend. The certificates representing the Pledged Shares shall bear an
endorsement in substantially the following form:
"The shares of stock represented by this certificate are pledged under, and
are subject to the terms and conditions of, a Pledge Agreement, dated as of
April __, 2003, between Cognigen Networks, Inc. and the registered owner of
this certificate as security for the performance of the obligations of
InTandem Communications, Corp. under convertible notes to Cognigen
Networks, Inc. Such shares cannot be pledged, sold, assigned, transferred
or otherwise disposed of except as provided in such Pledge Agreement."
3. Appointment of the Company as Attorney-in-Fact.
Pledgors hereby appoint and constitute the Company as Pledgors' true and
lawful attorney-in-fact and with full power of substitution in the premises to
execute such assignments and/or endorsements of the Pledged Shares as may be
necessary to effect the rights and remedies which the Company has under this
Agreement in the event of a default under this Agreement.
4. Event of Default; Remedies.
The occurrence of an event of default under the Note shall constitute an
event of default under this Agreement.
Upon the occurrence of an event of default, the Company shall have the
option to declare this Agreement in default and thereupon the Company is
authorized to exercise and shall have, in addition to the rights and remedies
provided in this Agreement and all other applicable rights and remedies, the
rights and remedies of a secured party under the Uniform Commercial Code of the
State of Washington and any other applicable laws. In particular, and without
limitation, the Company is authorized at its option and without further notice
or demand to cause the Pledged Shares to be transferred of record to the Company
or its agent or nominee and shall be entitled to exercise all rights of
ownership in respect to the Pledged Shares and all property received with
respect to the Pledged Shares. The Company shall also have the right to hold and
vote the Pledged Shares and, at its option and upon 20 days' notice in writing
to Pledgors of such default, shall have the right to sell and transfer the
Pledged Shares and the property received with respect to the Pledged Shares or
any portion thereof at any public or private sale, including private placement
based upon investment representations, and for cash or such other consideration
as the Company shall, in its sole discretion, determine to be reasonable, and
Pledgors shall have no right or equity of redemption in connection with any such
sale; provided, however, that during such 20-day period Pledgors shall have the
right to cure any default by paying all obligations under the Note, together
with all expenses incurred by the Company including, without limitation,
reasonable attorneys' fees and expenses in obtaining, holding and preparing for
sale the Pledged Shares and the property received with respect to the Pledged
Shares and in arranging for the sale. After deducting the expenses of such sale,
including reasonable attorneys' fees, the proceeds therefrom shall be applied to
the payment of Pledgors' obligations under the Note and the surplus, if any,
shall be paid to Pledgors.
5. Release of Collateral.
At such time as the Notes have been paid or converted in full, the Company
shall deliver the Pledged Shares and any property distributed with respect to
the Pledged Shares to Pledgors in accordance with Pledgors written directions,
and Pledgors shall thereafter be discharged in full from any and all obligations
under this Agreement.
6. Cooperation.
Upon the execution of this Agreement and at any time or from time to time
thereafter, Pledgors and the Company agree to cooperate in carrying out the
terms of this Agreement, including the execution and delivery of such further
instruments and documents as may be reasonably requested in order to more
effectively carry out the terms and conditions of this Agreement.
7. Miscellaneous.
(a) Entire Agreement. This Agreement, the Notes, and the Funding Agreement
of even date, contain the entire understanding between the parties
hereto with respect to the subject matter hereof and supersede any
prior understandings, agreements or representations, written or oral,
relating to the subject matter hereof.
(b) Counterparts. This Agreement may be executed in separate counterparts,
each of which will be an original and all of which taken together
shall constitute one and the same agreement, and any party hereto may
execute this Agreement by signing any such counterpart.
(c) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid
under applicable law but if any provision of this Agreement is held to
be invalid, illegal or unenforceable under any applicable law or rule,
the validity, legality and enforceability of the other provision of
this Agreement will not be affected or impaired thereby.
(d) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns.
(e) Modification, Amendment, Waiver or Termination. No provision of this
Agreement may be modified, amended, waived or terminated except by an
instrument in writing signed by the parties to this Agreement. No
course of dealing between the parties will modify, amend, waive or
terminate any provision of this Agreement or any rights or obligations
of any party under or by reason of this Agreement. No delay on the
part of the Company in the exercise of any right or remedy under this
Agreement shall operate as a waiver thereof, and no single or partial
exercise by the Company of any right or remedy under this Agreement
shall preclude other or further exercise thereof or the exercise of
any other right or remedy. No waiver by the Company of any right or
remedy under this Agreement shall be deemed to be or construed as a
further or continuing waiver of such right or remedy or as a waiver of
any other right or remedy.
(f) Notices. All notices, consents, requests, instructions, approvals or
other communications provided for herein shall be in writing and
delivered by personal delivery, overnight courier, mail, electronic
facsimile or e-mail addressed to the receiving party at the address
set forth herein. All such communications shall be effective when
received.
If to Cognigen:
Cognigen Networks, Inc.
0000 Xxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
If to Pledgors:
Xxxxx X. Xxxxxxx
00 Xxxxxx Xxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxxx X. De Haven
0000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Xxxxxxx Xxxxx
00 Xx. Xxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
With a copy to:
Xxxxx Xxxxxx, Esq.
00 Xxxx Xxxx
Xxx Xxxxxxxx, XX 00000
Any party may change the address set forth above by notice to each
other party given as provided herein.
(g) Headings. The headings and any table of contents contained in this
Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
(h) Governing Law. ALL MATTERS RELATING TO THE INTERPRETATION,
CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF WASHINGTON, WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW PROVISIONS THEREOF.
(i) Third-Party Benefit. Nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights, remedies,
obligations or liabilities of any nature whatsoever.
(j) Remedies Cumulative. All rights and remedies of the Company under this
Agreement are cumulative and are in addition to, but not in limitation
of, any rights or remedies which it may have under applicable law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph.
PLEDGORS
--------------------------------
XXXXX X. XXXXXXX
--------------------------------
XXXXXXX X. DE HAVEN
--------------------------------
XXXXXXX XXXXX
COGNIGEN NETWORKS, INC.
By:
-------------------------------------
Xxxxxxx X. Xxxxxx, President
SCHEDULE F
EMPLOYMENT AGREEMENTS
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of April ___, 2003, is
made by and between COGNIGEN NETWORKS, INC., a Colorado corporation having its
principal office at 0000 Xxxxxxx Xxxxxx, X.X., Xxxxx 000, Xxxxxxx, Xxxxxxxxxx
00000 ("Cognigen"), and Xxxxxxx Xxxxx ("Executive").
WHEREAS, Cognigen has entered into a Funding Agreement, (the "Funding
Agreement") with InTandem Communications Corp. ("InTandem; and
WHEREAS, Cognigen desires to retain the services of the Executive
subsequent to the execution of the Funding Agreement, but prior to granting
loans to InTandem, and the Executive desires to be employed by Cognigen, on the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual agreements set
forth herein and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, and as an inducement to Cognigen to complete
the Funding Agreement and lend funds to InTandem, the parties agree as follows:
SECTION 1. Employment and Term.
(a) Cognigen hereby employs Executive commencing as of the date hereof
(the "Commencement Date"). The initial term of Executive's employment
shall continue for as long as Cognigen (i) owns the right to acquire
any, or owns any InTandem common stock or (ii) for four years after
the Commencement Date, whichever is shorter, subject to earlier
termination as specified herein (the "Employment Term"). Cognigen
shall be able to forfeit its right to acquire InTandem common stock at
any time thereby enabling Cognigen to terminate this Agreement. Any
renewal or extension of the Employment Term and this Agreement shall
be determined by the mutual agreement of Executive and Cognigen,
subject to Section 8 hereof.
(b) Executive shall be employed as the President of the Cognigen Resale
Division of Cognigen (the CRD) with powers and duties consistent with
such position, for the duration of the Employment Term. Initially,
Executive shall report to the Chief Executive Officer and Board of
Directors of Cognigen.
SECTION 2. Full-Time Employment.
(a) During Executive's employment by Cognigen, Executive shall devote
Executive's entire business time, energy and skill to the performance of
Executive's duties hereunder and to the business of Cognigen. Executive
shall faithfully and diligently perform such duties, shall adhere to the
instructions of the Chief Executive Officer and Board of Directors of
Cognigen and shall use his best efforts to promote the interests of
Cognigen consistent with the foregoing. Executive shall adhere to all
corporate policies of Cognigen to the extent not inconsistent with the
terms hereof and, to the extent applicable to Executive's duties hereunder,
Cognigen's subsidiaries and affiliates. Executive shall not, directly or
indirectly, alone or as a member of any partnership, or as an officer,
director or executive of any other corporation, partnership or other
organization, be actively engaged in or concerned with any other duties or
pursuits which interfere with the performance of his duties hereunder, or
which may be inimical to or contrary to the best interests of Cognigen.
(b) Executive represents and warrants that he is free to be employed by
Cognigen upon the terms contained in this Agreement and that he is not a
party to any employment contract or restrictive covenant or other
arrangement which could reasonably be expected to prevent, interfere with
or hinder, or be deemed to be breached by, full performance of his duties
hereunder.
SECTION 3. Compensation.
(a) Base Salary. For all services rendered by Executive in any capacity
during Executive's employment under this Agreement, including, without
limitation, service as an executive, officer, director or member of
any committee of Cognigen or any of its subsidiaries or affiliates,
Cognigen agrees to pay or cause to be paid to Executive a base salary
(the "Base Salary") in accordance with the following formula:
First Calendar Year $10,000 per month
Second Calendar Year $12,500 per month
Third Calendar Year $15,000 per month
Fourth Calendar Year $15,000 per month
Executive's Base Salary shall be less any legally required
withholdings and reductions shall be paid in equal installments in
accordance with the prevailing salary payment practices of Cognigen in
effect from time to time. In the event that sickness or accident disability
payments under Cognigen's insurance programs shall become payable to
Executive in respect of any period of Executive's employment hereunder, the
salary installment payable to Executive hereunder in respect of Executive's
Base Salary on the next succeeding salary installment payment date shall be
an amount computed by subtracting (i) the amount of such disability
payments which shall have become payable during the period between such
date, from (ii) the salary installment otherwise payable to Executive
hereunder in respect of Executive's Base Salary on such date.
(b) Bonus. For the initial term of this Agreement, no bonus is expressly
provided for. Any bonus considered to be paid to Executive shall be
paid at the sole discretion of the Board of Directors of Cognigen, and
shall be made to the extent, at such time and in such amount as
determined by the unanimous vote of the Board of Directors of
Cognigen, in its sole discretion.
(c) Incentive Compensation. In addition to the Base Salary, the Executive
shall be eligible to earn, as incentive compensation, a percentage,
that in the aggregate does not exceed 3.0% in the second InTandem
fiscal year, 2.5% in the third InTandem fiscal year and 2.0% in the
fourth InTandem fiscal year, of InTandem's net income.
(d) Benefits. Executive shall be entitled to participate in the medical,
dental, life insurance, disability insurance, 401(k) savings,
Executive stock purchase plan and other benefits (collectively, the
"Benefits") as these or other Benefits may be implemented from time to
time and in accordance with prevailing policies of Cognigen for
executive Executives.
SECTION 4. Vacation. Executive shall be entitled to an annual vacation of
three (3) weeks (without deduction in salary or other compensation or Benefits).
Such vacation shall be taken at such time or times as may be convenient to the
operations of Cognigen and shall be consistent with the prevailing vacation
policies of Cognigen. Within 10 days of the termination or expiration of the
Employment Term, any accrued but unused vacation earned by Executive shall be
paid to Executive at the rate of Executive's base salary at the time of
termination or expiration of the Employment Term.
SECTION 5. Reimbursement for Expenses. Executive is authorized to incur
reasonable and necessary traveling expenses and other reasonable and necessary
expenses and disbursements for or on behalf of Cognigen in the performance of
Executive's duties during Executive's employment under this Agreement, in
accordance with Cognigen's prevailing expense incurrence policies. Cognigen will
reimburse Executive for all such expenses in accordance with Cognigen's
prevailing expense reimbursement policies upon presentation of a properly
itemized account of such expenditures and the business reasons for such
expenditures.
SECTION 6. Termination of Employment By Cognigen.
(a) Termination. Executive shall be subject to dismissal from Executive's
position as an executive of Cognigen at any time and with or without
Cause. The effect of any termination of the employment of Executive
with Cause is set forth in Section 8(a) hereof. The effect of any
termination of the employment of Executive without Cause is set forth
in Section 8(d) hereof.
(b) Definition of Cause. The term "Cause" shall mean: (i) a material
breach of this Agreement by Executive, but only if such breach is not
cured within thirty (30) days following written notice by Cognigen to
Executive of such breach, assuming such breach may be cured; (ii)
Executive is convicted of any act or course of conduct involving moral
turpitude; or (iii) Executive engages in any act or course of conduct
constituting an abuse of office or authority which significantly
adversely affects the business or reputation of Cognigen. Any written
notice by Cognigen to Executive pursuant to this Section 6(b) shall
set forth, in reasonable detail, the facts and circumstances claimed
to constitute the cause.
(c) Termination by Reason of Incapacity. In the event that Executive
suffers a disability which prevents him from substantially performing
Executive's duties under this Agreement for a period of at least sixty
(60) calendar days within any fiscal year period (whether consecutive
or non-consecutive) (a "Disability"), Cognigen shall have the right to
dismiss Executive upon ten (10) calendar days' written notice. In the
event of any dispute between Cognigen and Executive as to whether
Executive has suffered a Disability, the determination of whether
Executive has suffered a Disability shall be made by an independent
physician selected by InTandem, and the decision of such physician
shall be binding upon Cognigen and Executive.
(d) Termination by Death. In the event Executive dies during the
Employment Term, this Agreement shall terminate automatically, such
termination to be effective on the date of Executive's death.
SECTION 7. Termination of Employment By Executive. The employment of
Executive under this Agreement shall be deemed to have been terminated by
Executive for "Good Reason" if Executive voluntarily terminates employment
following the occurrence of (a) a material breach by Cognigen of any of its
obligations under this Agreement; provided, however, that Executive shall
provide written notice of such material breach within thirty (30) days after
Executive's discovery of such material breach and Cognigen shall have the
opportunity to cure such default within thirty (30) days after receipt of such
written notice, and if Cognigen does not cure the default within such time, then
Executive's employment shall be deemed to have been terminated for Good Reason
by Executive, thirty (30) days after receipt of such written notice by Cognigen,
or such shorter period as InTandem may elect; or (b) a diminution of job
responsibilities, reporting assignment or job title for any reason other than
for Cause as defined in Section 6(b) above. No resignation or other voluntary
termination by Executive other than pursuant to this Section 7 shall be deemed
under any circumstances to be a termination with Good Reason, a "constructive
termination" or otherwise not in breach of Executive's obligations under this
Agreement.
SECTION 8. Effect of Termination.
(a) For Cause by InTandem; Without Good Reason by Executive. In the event
of termination of this Agreement (x) by Cognigen for Cause or (y) by
Executive without Good Reason, Cognigen shall pay to Executive within
thirty (30) days of such termination any Base Salary accrued but not
paid to Executive prior to the effective date of such termination, and
Executive shall be entitled to any Benefits which may then be due
under any of the benefit or other plans in which Executive is a
participant. Executive shall forfeit any right to any bonus not
previously paid to Executive by Cognigen and shall not be entitled to
any further compensation or benefits hereunder (including, without
limitation, the Benefits), except as the same are required by
applicable law to be continued or otherwise made available. In
addition, Executive shall forfeit all unvested options held by
Executive in accordance with the terms of any Incentive Stock Option
Agreement then in effect.
(b) By Reason of Executive's Death. In the event of the termination of
this Agreement by reason of the death of the Executive, Cognigen (i)
shall pay, within sixty (60) days of death, Executive's legal
representatives (A) any unpaid salary installment in respect of
Executive's Base Salary through the last day of the calendar month in
which Executive's death occurs, and (B) any bonus previously awarded
but not yet paid to Executive; and (ii) shall continue to provide
(subject to any applicable eligibility criteria) any medical and
dental benefits comprising part of the Benefits (or comparable
benefits) to the spouse and any dependents of Executive at the time of
Executive's death, for a period of twelve (12) months from the last
day of the calendar month in which Executive's death occurs. In
addition, any unvested Cognigen options held by Executive at the time
of Executive's death that are scheduled to vest within one (1) year of
Executive's death shall become immediately vested.
(c) By Reason of the Incapacity of the Executive. In the event of
termination of this Agreement by reason of the Disability of
Executive, Cognigen (i) shall pay to Executive (A) any unpaid Base
Salary through the last day of the calendar month in which such
termination occurs, and (B) any bonus previously awarded but not yet
paid to Executive; and (ii) shall continue to provide (subject to any
applicable eligibility criteria) any medical and dental benefits
comprising part of the Benefits (or comparable benefits) to Executive,
Executive's spouse and any dependents of Executive who enjoyed such
benefits at the time of Executive's Disability, for a period of twelve
(12) months from the last day of the calendar month in which such
termination occurs. In addition, all unvested Cognigen options held by
Executive at the time of Executive's death that are scheduled to vest
within one (1) year of Executive's death shall become immediately
vested.
(d) Without Cause by Cognigen; For Good Reason by Executive. In the event
of termination of this Agreement (x) by Cognigen without Cause or (y)
by Executive for Good Reason, Cognigen (i) shall continue pay to
Executive (A) the full amount of Executive's Base Salary through the
expiration of the initial Term of this Agreement, as if the
Executive's employment had continued without interruption through the
date of termination, and (B) any bonus previously awarded to but not
yet paid to Executive; and (ii) shall continue to provide Executive
with Benefits (or comparable benefits), including (subject to
applicable eligibility criteria) medical and dental benefits
comprising a portion of the Benefits (or comparable benefits) in
respect of Executive's spouse and any dependents of the Executive as
of the date of such termination, until one year following the date of
termination. In addition, upon any such termination in accordance with
this Section 8(d), (xx) any Cognigen stock options granted to
Executive shall become immediately vested and exercisable; and (yy)
notwithstanding anything to the contrary in any shareholders'
agreement to which Executive is a party, Executive shall not be
subject to forfeiture of any shares of Cognigen common stock then
beneficially owned or controlled by Executive.
(e) Sole Remedy. Executive shall not be entitled to any form of severance
benefits, including, without limitation, benefits otherwise payable
under any of Cognigen regular severance policies, other than those set
forth herein. In consideration of the compensation and benefits
available and paid hereunder, Executive, except as otherwise expressly
provided in this Agreement, unconditionally releases Cognigen and its
present and future Affiliates, directors, officers, Executives and
agents, or any of them, from any and all claims, liabilities and
obligations of any nature pertaining to termination of Executive's
employment hereunder. Executive and Cognigen further agree that upon
any termination of Executive's employment in accordance with the terms
hereof, each of Executive and Cognigen shall act in good faith in
connection with any such termination, and neither Executive nor
Cognigen shall disparage or otherwise defame the business reputation
of the other party hereto.
(f) Change in Control.
(i) After a Change in Control (as defined below) of Cognigen has
occurred, all of Executive's stock options, stock appreciation
rights, restricted stock grants or stock bonuses and similar
benefits shall be deemed to vest in full on the effective date of
such Change of Control, notwithstanding any provision to the
contrary in any applicable agreement or plan. If Cognigen (or any
successor thereto) terminates Executive's employment with
Cognigen within six (6) months after the Change in Control,
Executive shall be entitled to receive the sum of (1) Executive's
Base Salary for the remainder of the initial term of this
Agreement (but in no event less than twelve (12) months'
then-current base Salary), (2) bonus compensation, to the extent
that Cognigen's commitment to the same existed as of the date of
the Change in Control, pro-rated to the date of termination, (3)
incentive stock compensation, (4) benefits, (5) perquisites and
awards, including, without limitation, immediate vesting of
benefits and awards under Cognigen's stock option, stock
appreciation, restricted stock, stock bonus or similar plan to
the extent not theretofore vested, and (6) any benefits in
InTandem pension or retirement plan or program, accrued through
the date Executive's employment with Cognigen, that would
otherwise terminate pursuant to the terms thereof (the
"Termination Date") (all of the foregoing six elements,
individually and collectively, the "Termination Compensation").
Notwithstanding the foregoing, if Executive is offered an
employment agreement ("New Agreement") by Cognigen within sixty
(60) days after the Change in Control, having a term of not less
than twelve (12) months on terms substantially similar to those
provided herein, Executive shall not be entitled to the
Termination Compensation unless within three (3) months after
Executive's acceptance of the New Agreement, Executive determines
to sever Executive's employment relationship with Cognigen, in
which event, the Executive shall be entitled to the Termination
Compensation.
(ii) or purposes hereof, a "Change in Control" shall be deemed to have
occurred if, after the date hereof and before the date Cognigen
Networks, Inc. ("Cognigen") owns any InTandem shares of common
stock: (A) any "person" or "group" (as such terms are used in
Sections (3), 3(a), (9) and 13(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), as amended) other than the existing
shareholders of Cognigen as of the date of this Agreement,
including their respective affiliates, becomes a "beneficial
owner" (as such term is used in the Exchange Act), directly or
indirectly, of shares of Cognigen representing fifty percent
(50%) or more of the combined voting power of Cognigen's then
outstanding shares; (B) a change in "control" of Cognigen (as the
term "control" is defined in rule 12b-2 or successor rule
promulgated under the Exchange Act) shall have occurred; (C) the
majority of the Board of Directors, as such entire Board of
Directors is composed as of the date hereof, no longer serve as
directors of Cognigen; (D) the shareholders of Cognigen approve,
and Cognigen actually consummates, a plan of complete liquidation
of Cognigen or an agreement for the sale or disposition by
Cognigen of all or substantially all of Cognigen's assets; or (E)
the shareholders of Cognigen approve, and Cognigen actually
consummates, a merger or consolidation of Cognigen with any other
entity, in which the voting power of Cognigen's interest
represents fifty percent (50%) or less of the total voting power
of the successor entity. Notwithstanding the foregoing, any
transaction involving a leveraged buyout or other acquisition of
Cognigen which would otherwise constitute a Change in Control, in
which Executive participates in the surviving or successor entity
(other than solely as an Executive or consultant), shall not
constitute a Change in Control.
(iii)It is intended that the "present value" of the payments and
benefits to Executive, whether under this Agreement or otherwise,
which are included in the computation of "Termination
Compensation" shall not, in the aggregate, exceed 2.99 times the
"base amount" (the terms "present value" and "base amount" being
determined in accordance with Section 280G of the Code). However,
if Executive receives payments or benefits from Cognigen prior to
payment of the Termination Compensation which, when added to the
Termination Compensation, would, in the opinion of the
Accountants, subject any of the payments or benefits to Executive
to the excise tax imposed by Section 4999 of the Code, Cognigen
shall be responsible for payment of such tax and shall gross-up
the payment to Executive, accordingly, so as to make the impact
of such tax neutral with respect to payments made to Executive.
SECTION 9. Non-Competition and Permitted Business Activities.
(a) Non-Compete During Employment Term. Executive agrees that during the
Employment Term of this Agreement, except with the written consent of
InTandem and Cognigen, such Executive shall not, directly or
indirectly, engage in competition with InTandem or Cognigen in any
manner or capacity (e.g., as an advisor, principal, agent, partner,
officer, director, stockholder, Executive, member of any association
or otherwise) in any phase of the business which InTandem or Cognigen
is conducting during the term of this Agreement, including any
business engaged in the provision of telecommunications and internet
provider services other than through the facilities of InTandem or
Cognigen (a "Competing Business") or (ii) hold any beneficial
ownership interest, directly or indirectly, in any Competing Business;
provided however, that none of the foregoing shall prohibit Executive
from owning, for the purpose of passive investment, (x) less than 5%
of any class of securities of another publicly-held corporation, or
(y) such interest(s) in non-public non-Competing Business entities as
Executive owned prior to the effective date of this Agreement.
(b) Executive agrees that, during the term of this Agreement and for a
period of twelve (12) consecutive months after termination of
employment, Executive shall not, except in the course of Executive's
duties hereunder, or except with the prior written permission of
InTandem and Cognigen, (i) hire any person employed by InTandem or
Cognigen as of the date of termination of employment; or (ii) directly
or indirectly induce or attempt to induce or otherwise counsel,
advise, solicit or encourage any person to leave the employ of
InTandem or Cognigen (or any subsidiary or affiliate thereof) to
accept employment with any person or entity other than InTandem or
Cognigen, as the case may be.
(c) Executive agrees that during the term of this Agreement, and for a
period of twelve (12) consecutive months after termination of such
employment, Executive shall not directly or indirectly solicit, induce
or attempt to solicit, induce or otherwise counsel, advise, or
encourage any customer or supplier of InTandem or Cognigen (or any
subsidiary or affiliate thereof) to sever its business relationship
with InTandem or Cognigen and to become a customer or supplier of
another person or entity other than InTandem or Cognigen.
(d) Executive agrees that during the term of this Agreement, and for a
period of twelve (12) consecutive months after termination of such
employment, Executive shall not directly or indirectly solicit, induce
or attempt to solicit, induce or otherwise counsel, advise, or
encourage any agent, dealer, distributor or consultant of InTandem or
Cognigen (or any subsidiary or affiliate thereof) to sever its
business relationship with InTandem and to move its existing business
base to another person or entity other than InTandem or Cognigen.
(e) Executive agrees that during the term of this Agreement, and for a
period of twelve (12) consecutive months after termination of such
employment. The Executive will not, directly or indirectly, assist or
encourage any other person in carrying out, directly or indirectly,
any activity that would be prohibited by the above provisions of this
Section 9 if such activity were carried out by the Executive, either
directly or indirectly. In particular the Executive agrees that he/she
will not, directly or indirectly, induce any executive of InTandem to
carry out, directly or indirectly, any such activity.
(f) The Executive agrees that the restrictions and agreements contained in
this Section 9 are reasonable and necessary to protect the legitimate
interests of InTandem and that any violation of this Section 9 will
cause substantial and irreparable harm to InTandem that would not be
quantifiable and for which no adequate remedy would exist at law and
accordingly injunctive relief shall be available for any violation of
this Section 9.
(g) If the duration or geographical extent of, or business activities
covered by, this Section 9 are in excess of what is valid and
enforceable under applicable law, then such provision shall be
construed to cover only that duration, geographical extent or
activities that are valid and enforceable. The Executive acknowledges
the uncertainty of the law in this respect and expressly stipulates
that this Agreement be given the construction which renders its
provisions valid and enforceable to the maximum extent (not exceeding
its express terms) possible under applicable law.
SECTION 10. Ownership of Work Product.
(a) Executive acknowledges that during the Employment Term, he may
conceive of, discover, invent or create inventions, improvements, new
contributions, literary property, material, ideas and discoveries
related to the business of InTandem and Cognigen, whether or not
patentable or copyrightable (collectively, "Work Product"), and that
various business opportunities may be presented to him by reason of
Executive's employment by Cognigen. Executive acknowledges that,
unless Cognigen otherwise agrees in writing, all such Work Product
related to the business of Cognigen, and all such business
opportunities, shall be owned by and belong exclusively to Cognigen,
and that he shall have no personal interest therein.
(b) Executive shall further, unless Cognigen otherwise agrees in writing,
(i) promptly disclose any such Work Product and business opportunities
to Cognigen, (ii) assign to Cognigen, upon request and without
additional compensation, the entire rights to such Work Product and
business opportunities, (iii) execute all documents necessary to carry
out the foregoing and (iv) give testimony in support of Executive's
inventorship or creation in any appropriate case, upon request of the
senior management of Cognigen. Executive agrees that he will not
assert any rights to any Work Product or business opportunity as
having been made or acquired by him prior to the date of this
Agreement, except for Work Product or business opportunities, if any,
disclosed to and acknowledged by Cognigen in writing prior to the date
hereof.
SECTION 11. Non-Disclosure of Confidential Information.
(a) Executive shall hold in a fiduciary capacity for the benefit of
Cognigen all Confidential Information (as defined below) and shall
not, during the term of Executive's employment hereunder or after the
termination of such employment, communicate or divulge any
Confidential Information to, or use any Confidential Information for
the benefit of, any person (including Executive) other than Cognigen,
affiliates of Cognigen or persons designated in writing by Cognigen.
"Confidential Information" shall mean customer lists, supplier lists,
costs and specifications of Cognigen's products and services,
know-how, trade secrets, financial data, operational methods,
marketing and sales information, marketing plans and strategies,
business plans, personnel information, research projects, development
plans or projects and all other information of a proprietary nature.
Upon termination of Executive's employment with Cognigen for any
reason whatsoever, Executive shall promptly return to Cognigen or, at
the sole option of Cognigen, otherwise destroy any documents or other
written, recorded or graphic matter containing, relating or referring
to any Confidential Information (and all copies and extracts thereof
and any notes relating thereto) in Executive's possession or control,
and deliver to Cognigen a written confirmation that all such
Confidential Material has been so returned or destroyed.
(b) Executive covenants that he will not, during the term of this
Agreement, improperly use or disclose any proprietary information or
trade secrets of any former employer or other person or entity, and
that he will not bring onto the premises of Cognigen any unpublished
document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer,
person or entity.
(c) The provisions of this Section 11 shall survive the expiration,
cancellation or other termination of this Agreement.
SECTION 12. Liability for Actions or Inactions; Indemnification. Executive
shall not be liable, in damages or otherwise, to Cognigen for any act or failure
to act on behalf of Cognigen, performed within the scope of Executive's
authority conferred by the terms of Executive's employment under this Agreement,
unless such act or omission constituted Cause or fraudulent or willful
misconduct, was performed or omitted in bad faith or constituted gross
negligence.
SECTION 13. Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior agreements and understandings, both written and
oral, of the parties with respect to the subject matter hereof.
SECTION 14. Governing Law; Jurisdiction; Service of Process.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Washington (other than its rules of conflicts
of laws to the extent that the application of the laws of another
jurisdiction would be required thereby).
(b) With respect to any suit, action, or proceedings relating to this
Agreement ("Proceedings"), the parties irrevocably:
(i) submit to the non-exclusive jurisdiction of the courts of the
State of Colorado and the United States District Court located in
King County , State of Washington; and
(ii) waive any objection that they may have at any time to the laying
of venue of any Proceedings brought in any such court; waive any
claim that such Proceedings have been brought in an inconvenient
forum; and further waive the right to object, with respect to
such Proceedings, that such court does not have jurisdiction over
such party.
(c) The parties irrevocably consent to service of process given in the
manner provided for notices in Section 20. Nothing in this Agreement
shall affect the right of either party to serve process in any other
manner permitted by law.
SECTION 15. Specific Enforcement. If Executive breaches, or threatens to
commit a breach of, any of the provisions of Sections 9, 10, or 11 hereof,
Cognigen shall have the right and remedy to have such provision specifically
enforced by any court having jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury to Cognigen
and that money damages will not provide an adequate remedy to Cognigen. Nothing
in this Section 14 shall be construed to limit the right of Cognigen to collect
money damages in the event of a breach of any of the provisions of this
Agreement, including, without limitation, Sections 9, 10 and 11 hereof.
SECTION 16. Third Party Beneficiaries. None of the provisions of this
Agreement shall be for the benefit of or enforceable by any third party (other
than Executive's heirs or representatives of Cognigen), including, without
limitation, any creditor of Cognigen or of Executive. No such third party shall
obtain any right under any provision of this Agreement or shall by reason of any
such provision make any claim in respect of any debt, liability, or obligation
(or otherwise) against Cognigen.
SECTION 17. Waiver of Jury Trial. Each party waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in respect
of any litigation arising out of or relating to this Agreement and Executive's
employment by Cognigen. Each party (a) certifies that no representative, agent
or attorney of the other party has represented, expressly or otherwise, that
such other party would not, in the event of litigation, seek to enforce the
foregoing waiver; and (b) acknowledges that it has been induced to enter into
this Agreement by, among other things, the mutual waivers and certifications set
forth in this Section.
SECTION 18. Expenses. Each party hereto shall assume and pay its own
expenses incident to the negotiation and execution of this Agreement, the
preparation for carrying it into effect and the consummation of the transactions
contemplated hereby. Without limiting the generality of the foregoing, each
party shall pay all legal fees and other fees to consultants and advisors
incurred by it relating to this Agreement and such transactions and shall
indemnify and hold the other party harmless from and against any claims for such
expenses and fees.
SECTION 19. Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended and the terms hereof may be waived,
only by a written instrument signed by each party, or, in the case of a waiver,
by the party waiving compliance. Except where a specific period for action or
inaction is provided herein, no delay on the part of a party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof. Neither
any waiver on the part of a party of any such right, power or privilege, nor any
single or partial exercise of any such right, power or privilege shall preclude
any further exercise thereof or the exercise of any other such right, power or
privilege.
SECTION 20. Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent, postage prepaid, by registered, certified or express mail or
reputable overnight courier service and shall be deemed given when so delivered
by hand, or if mailed, three days after mailing (one business day in the case of
express mail or overnight courier service), as follows:
If to Cognigen:
Cognigen Networks, Inc.
0000 Xxxxxxx Xxxxxx, X.X., Xxxxx
000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx,
Chairman and CEO
If to Executive:
at the then-current address for Executive maintained in the
Cognigen Executive files.
SECTION 21. Calculations. All calculations of dollar amounts hereunder
shall be rounded to the nearest whole cent. Equidistant amounts shall be rounded
upwards.
SECTION 22. Severability. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement or the application of such provision to
other persons or circumstances shall not be affected thereby; provided, however,
that the parties shall negotiate in good faith with respect to an equitable
modification of the provision or application thereof held to be invalid. To the
extent that it may effectively do so under applicable law, each party hereto
hereby waives any provision of law, which renders any provision of this
Agreement invalid, illegal or unenforceable in any respect.
SECTION 23. Opportunity to Review; No Drafting Presumptions. Both parties
acknowledge that the terms and conditions of this Agreement reflect the correct
understanding and intent of both parties. The parties acknowledge that they have
carefully reviewed the terms and conditions of this Agreement with legal counsel
of their own choosing. Should any provision of this Agreement require
interpretation or construction, is agreed by the parties that the entity
interpreting or construing this Agreement shall not apply a presumption against
the party who prepared the document.
SECTION 24. Successors and Assigns. Except as otherwise specifically
provided in this Agreement, this Agreement shall be binding upon and inure to
the benefit of the parties and Cognigen, and their legal representatives, and
permitted successors and assigns.
SECTION 25. Captions. All headings, paragraph titles and captions contained
in this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provisions hereof.
SECTION 26. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be on original and all of which, when taken
together, shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COGNIGEN NETWORKS, INC.
By:
----------------------------------------
Title: President
-------------------------------
EXECUTIVE
Xxxxxxx Xxxxx
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of April ___, 2003, is
made by and between INTANDEM COMMUNICATIONS CORP., a Delaware corporation having
its principal office at ------------------------------------------------
("InTandem"), and ___________________ ("Executive").
WHEREAS, InTandem desires to retain the services of the Executive and the
Executive desires to be employed by InTandem, on the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual agreements set
forth herein and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
SECTION 1. Employment and Term.
(a) InTandem hereby employs Executive commencing as of the date hereof
(the "Commencement Date"). The initial term of Executive's employment
shall be four years, subject to earlier termination as specified
herein (the "Employment Term"). Any renewal or extension of this
Agreement shall be determined by the mutual agreement of Executive and
InTandem, subject to Section 8 hereof.
(b) Executive shall be employed as the ____________________________ of
InTandem, with powers and duties consistent with such position, for
the duration of the Employment Term. Initially, Executive shall report
to the _________________________ and Board of Directors of InTandem.
SECTION 2. Full-Time Employment.
(a) During Executive's employment by InTandem, Executive shall devote
Executive's entire business time, energy and skill to the performance
of Executive's duties hereunder and to the business of InTandem.
Executive shall faithfully and diligently perform such duties, shall
adhere to the instructions of the ____________ and Board of Directors
of InTandem and shall use Executive's best efforts to promote the
interests of InTandem consistent with the foregoing. Executive shall
adhere to all corporate policies of InTandem to the extent not
inconsistent with the terms hereof and, to the extent applicable to
Executive's duties hereunder, InTandem's subsidiaries and affiliates.
Executive shall not, directly or indirectly, alone or as a member of
any partnership, or as an officer, director or executive of any other
corporation, partnership or other organization, be actively engaged in
or concerned with any other duties or pursuits which interfere with
the performance of Executive's duties hereunder, or which may be
inimical to or contrary to the best interests of InTandem.
(b) Executive represents and warrants that he is free to be employed by
InTandem upon the terms contained in this Agreement and that he is not
a party to any employment contract or restrictive covenant or other
arrangement which could reasonably be expected to prevent, interfere
with or hinder, or be deemed to be breached by, full performance of
Executive's duties hereunder.
SECTION 3. Compensation.
(a) Base Salary. For all services rendered by Executive in any capacity
during Executive's employment under this Agreement, including, without
limitation, service as an executive, officer, director or member of
any committee of InTandem or any of its subsidiaries or affiliates,
InTandem agrees to pay or cause to be paid to Executive a base salary
(the "Base Salary") in accordance with the following formula:
First Calendar Year $10,000 per month
Second Calendar Year $12,500 per month
Third Calendar Year $15,000 per month
Fourth Calendar Year $15,000 per month
Executive's Base Salary shall be less any legally required withholdings and
reductions shall be paid in equal installments in accordance with the prevailing
salary payment practices of InTandem in effect from time to time. In the event
that sickness or accident disability payments under InTandem's insurance
programs shall become payable to Executive in respect of any period of
Executive's employment hereunder, the salary installment payable to Executive
hereunder in respect of Executive's Base Salary on the next succeeding salary
installment payment date shall be an amount computed by subtracting (i) the
amount of such disability payments which shall have become payable during the
period between such date, from (ii) the salary installment otherwise payable to
Executive hereunder in respect of Executive's Base Salary on such date.
(b) Bonus. For the initial term of this Agreement, no bonus is expressly
provided for. Any bonus considered to be paid to Executive shall be
paid at the sole discretion of the Board of Directors of InTandem, and
shall be made to the extent, at such time and in such amount as
determined by the unanimous vote of the Board of Directors of
InTandem, in its sole discretion.
(c) Incentive Compensation. In addition to the Base Salary, the Executive
shall be eligible to earn, as incentive compensation, a percentage
equal to, 3% in the second InTandem fiscal year, 2.5% in the third
InTandem fiscal year and 2% in the fourth InTandem fiscal year, of
InTandem's net income.
(d) Benefits. Executive shall be entitled to participate in the medical,
dental, life insurance, disability insurance, 401(k) savings,
Executive stock purchase plan and other benefits (collectively, the
"Benefits") as these or other Benefits may be implemented from time to
time and in accordance with prevailing policies of InTandem for
executive Executives.
SECTION 4. Vacation. Executive shall be entitled to an annual vacation of
three (3) weeks (without deduction in salary or other compensation or Benefits).
Such vacation shall be taken at such time or times as may be convenient to the
operations of InTandem and shall be consistent with the prevailing vacation
policies of InTandem. Within 10 days of the termination or expiration of the
Employment Term, any accrued but unused vacation earned by Executive shall be
paid to Executive at the rate of Executive's base salary at the time of
termination or expiration of the Employment Term.
SECTION 5. Reimbursement for Expenses. Executive is authorized to incur
reasonable and necessary traveling expenses and other reasonable and necessary
expenses and disbursements for or on behalf of InTandem in the performance of
Executive's duties during Executive's employment under this Agreement, in
accordance with InTandem's prevailing expense incurrence policies. InTandem will
reimburse Executive for all such expenses in accordance with InTandem's
prevailing expense reimbursement policies upon presentation of a properly
itemized account of such expenditures and the business reasons for such
expenditures.
SECTION 6. Termination of Employment By InTandem.
(a) Termination. Executive shall be subject to dismissal from Executive's
position as an executive of InTandem at any time and with or without
Cause. The effect of any termination of the employment of Executive
with Cause is set forth in Section 8(a) hereof. The effect of any
termination of the employment of Executive without Cause is set forth
in Section 8(d) hereof.
(b) Definition of Cause. The term "Cause" shall mean: (i) a material
breach of this Agreement by Executive, but only if such breach is not
cured within thirty (30) days following written notice by InTandem to
Executive of such breach, assuming such breach may be cured; (ii)
Executive is convicted of any act or course of conduct involving moral
turpitude; or (iii) Executive engages in any act or course of conduct
constituting an abuse of office or authority which significantly
adversely affects the business or reputation of InTandem. Any written
notice by InTandem to Executive pursuant to this Section 6(b) shall
set forth, in reasonable detail, the facts and circumstances claimed
to constitute the cause.
(c) Termination by Reason of Incapacity. In the event that Executive
suffers a disability which prevents him from substantially performing
Executive's duties under this Agreement for a period of at least sixty
(60) calendar days within any fiscal year period (whether consecutive
or non-consecutive) (a "Disability"), InTandem shall have the right to
dismiss Executive upon ten (10) calendar days' written notice. In the
event of any dispute between InTandem and Executive as to whether
Executive has suffered a Disability, the determination of whether
Executive has suffered a Disability shall be made by an independent
physician selected by InTandem, and the decision of such physician
shall be binding upon InTandem and Executive.
(d) Termination by Death. In the event Executive dies during the
Employment Term, this Agreement shall terminate automatically, such
termination to be effective on the date of Executive's death.
SECTION 7. Termination of Employment By Executive. The employment of
Executive under this Agreement shall be deemed to have been terminated by
Executive for "Good Reason" if Executive voluntarily terminates employment
following the occurrence of (a) a material breach by InTandem of any of its
obligations under this Agreement; provided, however, that Executive shall
provide written notice of such material breach within thirty (30) days after
Executive's discovery of such material breach and InTandem shall have the
opportunity to cure such default within thirty (30) days after receipt of such
written notice, and if InTandem does not cure the default within such time, then
Executive's employment shall be deemed to have been terminated for Good Reason
by Executive, thirty (30) days after receipt of such written notice by InTandem,
or such shorter period as InTandem may elect; or (b) a diminution of job
responsibilities, reporting assignment or job title for any reason other than
for Cause as defined in Section 6(b) above. No resignation or other voluntary
termination by Executive other than pursuant to this Section 7 shall be deemed
under any circumstances to be a termination with Good Reason, a "constructive
termination" or otherwise not in breach of Executive's obligations under this
Agreement.
SECTION 8. Effect of Termination.
(a) For Cause by InTandem; Without Good Reason by Executive. In the event
of termination of this Agreement (x) by InTandem for Cause or (y) by
Executive without Good Reason, InTandem shall pay to Executive within
thirty (30) days of such termination any Base Salary accrued but not
paid to Executive prior to the effective date of such termination, and
Executive shall be entitled to any Benefits which may then be due
under any of the benefit or other plans in which Executive is a
participant. Executive shall forfeit any right to any bonus not
previously paid to Executive by InTandem and shall not be entitled to
any further compensation or benefits hereunder (including, without
limitation, the Benefits), except as the same are required by
applicable law to be continued or otherwise made available. In
addition, Executive shall forfeit all unvested options held by
Executive in accordance with the terms of any Incentive Stock Option
Agreement then in effect.
(b) By Reason of Executive's Death. In the event of the termination of
this Agreement by reason of the death of the Executive, InTandem (i)
shall pay, within sixty (60) days of death, Executive's legal
representatives (A) any unpaid salary installment in respect of
Executive's Base Salary through the last day of the calendar month in
which Executive's death occurs, and (B) any bonus previously awarded
but not yet paid to Executive; and (ii) shall continue to provide
(subject to any applicable eligibility criteria) any medical and
dental benefits comprising part of the Benefits (or comparable
benefits) to the spouse and any dependents of Executive at the time of
Executive's death, for a period of twelve (12) months from the last
day of the calendar month in which Executive's death occurs. In
addition, any unvested InTandem options held by Executive at the time
of Executive's death that are scheduled to vest within one (1) year of
Executive's death shall become immediately vested.
(c) By Reason of the Incapacity of the Executive. In the event of
termination of this Agreement by reason of the Disability of
Executive, InTandem (i) shall pay to Executive (A) any unpaid Base
Salary through the last day of the calendar month in which such
termination occurs, and (B) any bonus previously awarded but not yet
paid to Executive; and (ii) shall continue to provide (subject to any
applicable eligibility criteria) any medical and dental benefits
comprising part of the Benefits (or comparable benefits) to Executive,
Executive's spouse and any dependents of Executive who enjoyed such
benefits at the time of Executive's Disability, for a period of twelve
(12) months from the last day of the calendar month in which such
termination occurs. In addition, all unvested InTandem options held by
Executive at the time of Executive's death that are scheduled to vest
within one (1) year of Executive's death shall become immediately
vested.
(d) Without Cause by InTandem; For Good Reason by Executive. In the event
of termination of this Agreement (x) by InTandem without Cause or (y)
by Executive for Good Reason, InTandem (i) shall continue pay to
Executive (A) the full amount of Executive's Base Salary through the
expiration of the initial Term of this Agreement, as if the
Executive's employment had continued without interruption through the
date of termination, and (B) any bonus previously awarded to but not
yet paid to Executive; and (ii) shall continue to provide Executive
with Benefits (or comparable benefits), including (subject to
applicable eligibility criteria) medical and dental benefits
comprising a portion of the Benefits (or comparable benefits) in
respect of Executive's spouse and any dependents of the Executive as
of the date of such termination, until one year following the date of
termination. In addition, upon any such termination in accordance with
this Section 8(d), (xx) any InTandem stock options granted to
Executive shall become immediately vested and exercisable; and (yy)
notwithstanding anything to the contrary in any shareholders'
agreement to which Executive is a party, Executive shall not be
subject to forfeiture of any shares of InTandem common stock then
beneficially owned or controlled by Executive.
(e) Sole Remedy. Executive shall not be entitled to any form of severance
benefits, including, without limitation, benefits otherwise payable
under any of InTandem's regular severance policies, other than those
set forth herein. In consideration of the compensation and benefits
available and paid hereunder, Executive, except as otherwise expressly
provided in this Agreement, unconditionally releases InTandem and its
present and future Affiliates, directors, officers, Executives and
agents, or any of them, from any and all claims, liabilities and
obligations of any nature pertaining to termination of Executive's
employment hereunder. Executive and InTandem further agree that upon
any termination of Executive's employment in accordance with the terms
hereof, each of Executive and InTandem shall act in good faith in
connection with any such termination, and neither Executive nor
InTandem shall disparage or otherwise defame the business reputation
of the other party hereto.
(f) Change in Control.
(i) After a Change in Control (as defined below) of InTandem has
occurred, all of Executive's stock options, stock appreciation
rights, restricted stock grants or stock bonuses and similar
benefits shall be deemed to vest in full on the effective date of
such Change of Control, notwithstanding any provision to the
contrary in any applicable agreement or plan. If InTandem (or any
successor thereto) terminates Executive's employment with
InTandem within six (6) months after the Change in Control,
Executive shall be entitled to receive the sum of (1) Executive's
Base Salary for the remainder of the initial term of this
Agreement (but in no event less than twelve (12) months'
then-current base Salary), (2) bonus compensation, to the extent
that InTandem's commitment to the same existed as of the date of
the Change in Control, pro-rated to the date of termination, (3)
incentive stock compensation, (4) benefits, (5) perquisites and
awards, including, without limitation, immediate vesting of
benefits and awards under InTandem's stock option, stock
appreciation, restricted stock, stock bonus or similar plan to
the extent not theretofore vested, and (6) any benefits in
InTandem pension or retirement plan or program, accrued through
the date Executive's employment with InTandem, that would
otherwise terminate pursuant to the terms thereof (the
"Termination Date") (all of the foregoing six elements,
individually and collectively, the "Termination Compensation").
Notwithstanding the foregoing, if Executive is offered an
employment agreement ("New Agreement") by InTandem within sixty
(60) days after the Change in Control, having a term of not less
than twelve (12) months on terms substantially similar to those
provided herein, Executive shall not be entitled to the
Termination Compensation unless within three (3) months after
Executive's acceptance of the New Agreement, Executive determines
to sever Executive's employment relationship with InTandem, in
which event, the Executive shall be entitled to the Termination
Compensation.
(ii) For purposes hereof, a "Change in Control" shall be deemed to
have occurred if, after the date hereof and before the date
Cognigen Networks, Inc. ("Cognigen") owns any InTandem shares of
common stock: (A) any "person" or "group" (as such terms are used
in Sections (3), 3(a), (9) and 13(d) of the Securities Exchange
Act of 1934 (the "Exchange Act"), as amended) other than the
existing shareholders of InTandem as of the date of this
Agreement, including their respective affiliates, becomes a
"beneficial owner" (as such term is used in the Exchange Act),
directly or indirectly, of shares of InTandem representing fifty
percent (50%) or more of the combined voting power of InTandem's
then outstanding shares; (B) a change in "control" of InTandem
(as the term "control" is defined in rule 12b-2 or successor rule
promulgated under the Exchange Act) shall have occurred; (C) the
majority of the Board of Directors, as such entire Board of
Directors is composed as of the date hereof, no longer serve as
directors of InTandem; (D) the shareholders of InTandem approve,
and InTandem actually consummates, a plan of complete liquidation
of InTandem or an agreement for the sale or disposition by
InTandem of all or substantially all of InTandem's assets; or (E)
the shareholders of InTandem approve, and InTandem actually
consummates, a merger or consolidation of InTandem with any other
InTandem, in which the voting power of InTandem's interest
represents fifty percent (50%) or less of the total voting power
of the successor entity. Notwithstanding the foregoing, any
transaction involving a leveraged buyout or other acquisition of
InTandem which would otherwise constitute a Change in Control, in
which Executive participates in the surviving or successor entity
(other than solely as an Executive or consultant), shall not
constitute a Change in Control.
(iii)It is intended that the "present value" of the payments and
benefits to Executive, whether under this Agreement or otherwise,
which are included in the computation of "Termination
Compensation" shall not, in the aggregate, exceed 2.99 times the
"base amount" (the terms "present value", and "base amount" being
determined in accordance with Section 280G of the Code). However,
if Executive receives payments or benefits from InTandem prior to
payment of the Termination Compensation which, when added to the
Termination Compensation, would, in the opinion of the
Accountants, subject any of the payments or benefits to Executive
to the excise tax imposed by Section 4999 of the Code, InTandem
shall be responsible for payment of such tax and shall gross-up
the payment to Executive, accordingly, so as to make the impact
of such tax neutral with respect to payments made to Executive.
SECTION 9. Non-Competition and Permitted Business Activities.
(a) Non-Compete During Employment Term. Executive agrees that during
the Employment Term of this agreement, except with the written
consent of InTandem and Cognigen, such Executive shall not,
directly or indirectly, engage in competition with InTandem or
Cognigen in any manner or capacity (e.g., as an advisor,
principal, agent, partner, officer, director, stockholder,
Executive, member of any association or otherwise) in any phase
of the business which InTandem or Cognigen is conducting during
the term of this Agreement, including any business engaged in the
provision of telecommunications and internet provider services
other than through the facilities of InTandem or Cognigen (a
"Competing Business") or (ii) hold any beneficial ownership
interest, directly or indirectly, in any Competing Business;
provided however, that none of the foregoing shall prohibit
Executive from owning, for the purpose of passive investment, (x)
less than 5% of any class of securities of another publicly-held
corporation, or (y) such interest(s) in non-public non-Competing
Business entities as Executive owned prior to the effective date
of this Agreement.
(b) Executive agrees that, during the term of this Agreement and for
a period of twelve (12) consecutive months after termination of
employment, Executive shall not, except in the course of
Executive's duties hereunder, or except with the prior written
permission of InTandem and Cognigen, (i) hire any person employed
by InTandem or Cognigen as of the date of termination of
employment; or (ii) directly or indirectly induce or attempt to
induce or otherwise counsel, advise, solicit or encourage any
person to leave the employ of InTandem or Cognigen (or any
subsidiary or affiliate thereof) to accept employment with any
person or entity other than InTandem or Cognigen, as the case may
be.
(c) Executive agrees that during the term of this Agreement, and for
a period of twelve (12) consecutive months after termination of
such employment, Executive shall not directly or indirectly
solicit, induce or attempt to solicit, induce or otherwise
counsel, advise, or encourage any customer or supplier of
InTandem or Cognigen (or any subsidiary or affiliate thereof) to
sever its business relationship with InTandem or Cognigen and to
become a customer or supplier of another person or entity other
than InTandem or Cognigen.
(d) Executive agrees that during the term of this Agreement, and for
a period of twelve (12) consecutive months after termination of
such employment, Executive shall not directly or indirectly
solicit, induce or attempt to solicit, induce or otherwise
counsel, advise, or encourage any agent, dealer, distributor or
consultant of InTandem or Cognigen (or any subsidiary or
affiliate thereof) to sever its business relationship with
InTandem and to move its existing business base to another person
or entity other than InTandem or Cognigen.
(e) Executive agrees that during the term of this Agreement, and for
a period of twelve (12) consecutive months after termination of
such employment. The Executive will not, directly or indirectly,
assist or encourage any other person in carrying out, directly or
indirectly, any activity that would be prohibited by the above
provisions of this Section 9 if such activity were carried out by
the Executive, either directly or indirectly. In particular the
Executive agrees that he/she will not, directly or indirectly,
induce any executive of InTandem to carry out, directly or
indirectly, any such activity.
(f) The Executive agrees that the restrictions and agreements
contained in this Section 9 are reasonable and necessary to
protect the legitimate interests of InTandem and that any
violation of this Section 9 will cause substantial and
irreparable harm to InTandem that would not be quantifiable and
for which no adequate remedy would exist at law and accordingly
injunctive relief shall be available for any violation of this
Section 9.
(g) If the duration or geographical extent of, or business activities
covered by, this Section 9 are in excess of what is valid and
enforceable under applicable law, then such provision shall be
construed to cover only that duration, geographical extent or
activities that are valid and enforceable. The Executive
acknowledges the uncertainty of the law in this respect and
expressly stipulates that this Agreement be given the
construction which renders its provisions valid and enforceable
to the maximum extent (not exceeding its express terms) possible
under applicable law.
SECTION 10. Ownership of Work Product.
(a) Executive acknowledges that during the Employment Term, he may
conceive of, discover, invent or create inventions, improvements, new
contributions, literary property, material, ideas and discoveries
related to the business of InTandem, whether or not patentable or
copyrightable (collectively, "Work Product"), and that various
business opportunities may be presented to him by reason of
Executive's employment by InTandem. Executive acknowledges that,
unless InTandem otherwise agrees in writing, all such Work Product
related to the business of InTandem, and all such business
opportunities, shall be owned by and belong exclusively to InTandem,
and that he shall have no personal interest therein.
(b) Executive shall further, unless InTandem otherwise agrees in writing,
(i) promptly disclose any such Work Product and business opportunities
to InTandem, (ii) assign to InTandem, upon request and without
additional compensation, the entire rights to such Work Product and
business opportunities, (iii) execute all documents necessary to carry
out the foregoing and (iv) give testimony in support of Executive's
inventorship or creation in any appropriate case, upon request of the
senior management of InTandem. Executive agrees that he will not
assert any rights to any Work Product or business opportunity as
having been made or acquired by him prior to the date of this
Agreement, except for Work Product or business opportunities, if any,
disclosed to and acknowledged by InTandem in writing prior to the date
hereof.
SECTION 11. Non-Disclosure of Confidential Information.
(a) Executive shall hold in a fiduciary capacity for the benefit of
InTandem all Confidential Information (as defined below) and shall
not, during the term of Executive's employment hereunder or after the
termination of such employment, communicate or divulge any
Confidential Information to, or use any Confidential Information for
the benefit of, any person (including Executive) other than InTandem
or Cognigen, affiliates of InTandem or Cognigen or persons designated
in writing by InTandem or Cognigen. "Confidential Information" shall
mean customer lists, suppliers lists, costs and specifications of
InTandem's or Cognigen's products and services, know-how, trade
secrets, financial data, operational methods, marketing and sales
information, marketing plans and strategies, business plans, personnel
information, research projects, development plans or projects and all
other information of a proprietary nature. Upon termination of
Executive's employment with InTandem for any reason whatsoever,
Executive shall promptly return to InTandem or, at the sole option of
InTandem, otherwise destroy any documents or other written, recorded
or graphic matter containing, relating or referring to any
Confidential Information (and all copies and extracts thereof and any
notes relating thereto) in Executive's possession or control, and
deliver to InTandem a written confirmation that all such Confidential
Material has been so returned or destroyed.
(b) Executive covenants that he will not, during the term of this
Agreement, improperly use or disclose any proprietary information or
trade secrets of any former employer or other person or entity, and
that he will not bring onto the premises of InTandem any unpublished
document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer,
person or entity.
(c) The provisions of this Section 11 shall survive the expiration,
cancellation or other termination of this Agreement.
(d) Liability for Actions or Inactions; Indemnification. Executive shall
not be liable, in damages or otherwise, to InTandem for any act or
failure to act on behalf of InTandem, performed within the scope of
Executive's authority conferred by the terms of Executive's employment
under this Agreement, unless such act or omission constituted Cause or
fraudulent or willful misconduct, was performed or omitted in bad
faith or constituted gross negligence.
SECTION 12. Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior agreements and understandings, both written and
oral, of the parties with respect to the subject matter hereof.
SECTION 13. Governing Law; Jurisdiction; Service of Process.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Washington (other than its rules of
conflicts of laws to the extent that the application of the laws
of another jurisdiction would be required thereby).
(b) With respect to any suit, action, or proceedings relating to this
Agreement ("Proceedings"), the parties irrevocably:
(i) submit to the non-exclusive jurisdiction of the courts of
the State of Washington and the United States District Court
located in King County, State of Washington; and
(ii) waive any objection that they may have at any time to the
laying of venue of any Proceedings brought in any such
court; waive any claim that such Proceedings have been
brought in an inconvenient forum; and further waive the
right to object, with respect to such Proceedings, that such
court does not have jurisdiction over such party.
(c) The parties irrevocably consent to service of process given in
the manner provided for notices in Section 20. Nothing in this
Agreement shall affect the right of either party to serve process
in any other manner permitted by law.
SECTION 14. Specific Enforcement. If Executive breaches, or threatens to
commit a breach of, any of the provisions of Sections 9, 10, or 11 hereof,
InTandem or Cognigen, as the case may be, shall have the right and remedy to
have such provision specifically enforced by any court having jurisdiction, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to InTandem or Cognigen and that money damages will not
provide an adequate remedy to InTandem or Cognigen. Nothing in this Section 14
shall be construed to limit the right of InTandem to collect money damages in
the event of a breach of any of the provisions of this Agreement, including,
without limitation, Sections 9, 10 and 11 hereof.
SECTION 15. Third Party Beneficiaries. None of the provisions of this
Agreement shall be for the benefit of or enforceable by any third party (other
than Executive's heirs or representatives or Cognigen), including, without
limitation, any creditor of InTandem, Cognigen or of Executive. No such third
party shall obtain any right under any provision of this Agreement or shall by
reason of any such provision make any claim in respect of any debt, liability,
or obligation (or otherwise) against InTandem or Cognigen.
SECTION 16. Waiver of Jury Trial. Each party waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in respect
of any litigation arising out of or relating to this Agreement and Executive's
employment by InTandem. Each party (a) certifies that no representative, agent
or attorney of the other party has represented, expressly or otherwise, that
such other party would not, in the event of litigation, seek to enforce the
foregoing waiver; and (b) acknowledges that it has been induced to enter into
this Agreement by, among other things, the mutual waivers and certifications set
forth in this Section.
SECTION 17. Expenses. Each party hereto shall assume and pay its own
expenses incident to the negotiation and execution of this Agreement, the
preparation for carrying it into effect and the consummation of the transactions
contemplated hereby. Without limiting the generality of the foregoing, each
party shall pay all legal fees and other fees to consultants and advisors
incurred by it relating to this Agreement and such transactions and shall
indemnify and hold the other party harmless from and against any claims for such
expenses and fees.
SECTION 18. Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended and the terms hereof may be waived,
only by a written instrument signed by each party, or, in the case of a waiver,
by the party waiving compliance. Except where a specific period for action or
inaction is provided herein, no delay on the part of a party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof. Neither
any waiver on the part of a party of any such right, power or privilege, nor any
single or partial exercise of any such right, power or privilege shall preclude
any further exercise thereof or the exercise of any other such right, power or
privilege.
SECTION 19. Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent, postage prepaid, by registered, certified or express mail or
reputable overnight courier service and shall be deemed given when so delivered
by hand, or if mailed, three days after mailing (one business day in the case of
express mail or overnight courier service), as follows:
if to InTandem:
InTandem Communications Corp.
[ ]
[ ]
Attention: ________________
With a copy to:
[ ]
[ ]
Attention: ________________
if to Executive:
--------------------
[ ]
[ ]
at the then-current address for Executive maintained in the
InTandem Executive files.
SECTION 20. Calculations. All calculations of dollar amounts hereunder
shall be rounded to the nearest whole cent. Equidistant amounts shall be rounded
upwards.
SECTION 21. Severability. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement or the application of such provision to
other persons or circumstances shall not be affected thereby; provided, however,
that the parties shall negotiate in good faith with respect to an equitable
modification of the provision or application thereof held to be invalid. To the
extent that it may effectively do so under applicable law, each party hereto
hereby waives any provision of law, which renders any provision of this
Agreement invalid, illegal or unenforceable in any respect.
SECTION 22. Opportunity to Review; No Drafting Presumptions. Both parties
acknowledge that the terms and conditions of this Agreement reflect the correct
understanding and intent of both parties. The parties acknowledge that they have
carefully reviewed the terms and conditions of this Agreement with legal counsel
of their own choosing. Should any provision of this Agreement require
interpretation or construction, is agreed by the parties that the entity
interpreting or construing this Agreement shall not apply a presumption against
the party who prepared the document.
SECTION 23. Successors and Assigns. Except as otherwise specifically
provided in this Agreement, this Agreement shall be binding upon and inure to
the benefit of the parties and Cognigen, and their legal representatives, and
permitted successors and assigns.
SECTION 24. Captions. All headings, paragraph titles and captions contained
in this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provisions hereof.
SECTION 25. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be on original and all of which, when taken
together, shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INTANDEM COMMUNICATIONS CORP.
By:
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Title:
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EXECUTIVE
SCHEDULE G
PRINCIPALS' STOCK OPTION
COGNIGEN NETWORKS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
This NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made this
_____ day of _____, _____, by and between COGNIGEN NETWORKS, INC., a Colorado
corporation (the "Company") and _____, an individual resident of _____, _____
("Optionee").
1. Grant of Option. The Company hereby grants Optionee the option (the
"Option") to purchase all or any part of one-third of an aggregate number
of shares of the Company's common stock (up to a maximum of 90,000 shares)
(the "Shares") that is determined (i) by deducting from the total amount of
the Company's revenue derived for the period between the Closing Date and
April 1, 2004, from the sales of its 1 + resale products the revenue that
the Company received from the sales thereof as of the Closing Date; (ii)
multiplying that amount by 6% (for sales of 1 + resale products
attributable to the Company) and 12% (for sales of 1 + resale products,
attributable to InTandem); and (iii) dividing the total of the percentage
result by the last sale price of a share of the Company's common stock as
of April 1, 2004. The exercise price shall be equal to the last sale price
of the Company's common stock as of April 1, 2004.
The Option shall terminate March 31, 2009.
2. Vesting of Option Rights. Except as otherwise provided in this Agreement,
the Option may be exercised by Optionee quarterly over a three-year period
commencing one year after the date hereof.
During the lifetime of Optionee, the Option shall be exercisable only by
Optionee and shall not be assignable or transferable by Optionee, other than by
will or the laws of descent and distribution.
3. Method of Exercise of Option. Subject to the foregoing, the Option may be
exercised in whole or in part from time to time by serving written notice
of exercise on the Company at its principal office within the Option
period. The notice shall state the number of Shares as to which the Option
is being exercised and shall be accompanied by payment of the exercise
price. Payment of the exercise price shall be made in cash (including bank
check, personal check or money order payable to the Company).
4. Acceleration of Exercisability Upon Change in Control. Notwithstanding any
other provision in the Agreement, the Option may be exercised as to 100% of
the Shares on the date of a "Change in Control." A "Change in Control"
shall mean any of the following: (i) the consummation of a merger or
consolidation of the Company with or into another entity or any other
corporate reorganization, if more than 50% of the combined voting power of
the continuing or surviving entity's securities outstanding immediately
after such merger, consolidation or other corporate reorganization are
owned by persons who were not stockholders of the Company immediately prior
to such merger, consolidation or other corporate reorganization, (ii) a
public announcement that any person has acquired beneficial ownership of
51% or more of the then outstanding shares of Common Stock and, for this
purpose, the terms "person" and "beneficial ownership" shall have the
meanings provided in Section 13(d) of the Securities Exchange Act of 1934,
as amended or related rules promulgated by the Securities and Exchange
Commission; (iii) the commencement of or public announcement of an
intention to make a tender or exchange offer for 51% or more of the then
outstanding shares of the Common Stock; (iv) a sale of all or substantially
all of the assets of the Company or (v) the Board of Directors of the
Company, in its sole and absolute discretion, determines that there is a
change in control of the Company.
5. Dilution or Other Adjustment.
(a) Adjustment of Exercise Price for Stock Splits, Reverse Stock Splits
and Stock Dividends. If the outstanding shares of Common Stock shall
be subdivided (split), combined (reverse split), by reclassification
or otherwise, or if any dividend payable on the Common Stock in shares
of Common Stock shall occur at the time that any portion of this
Option remains unexercised in whole or in part, the exercise price and
the number of shares of Common Stock available for purchase pursuant
to the exercise of this Option immediately prior to such subdivision,
combination or dividend shall be proportionately adjusted as follows:
(i) If a net increase shall have been effected in the number of
outstanding shares of the Company's Common Stock, the number of
shares of Common Stock underlying this Option shall be
proportionately increased, and the cash consideration payable per
share of Stock shall be proportionately reduced; and
(ii) If a net reduction shall have been effected in the number of
outstanding shares of the Company's Common Stock, the shares of
Common Stock underlying this Option shall be proportionately
reduced and the cash consideration payable per share of Common
Stock shall be proportionately increased.
(b) Adjustment for Capital Reorganizations. If at any time there shall be
a capital reorganization or reclassification of the Company's Common
Stock or a merger or consolidation of the Company with or into another
corporation (other than a merger after which the Company is the
continuing corporation and which does not result in any change of
outstanding shares of Common Stock), or the sale or lease of all or
substantially all of the Company's properties and assets to any other
entity or person, then, as part of such reorganization,
reclassification, merger, consolidation, sale or lease, the Company,
as a condition precedent to such transaction, shall provide, or cause
effective provision to be made so, that the Optionee shall thereafter
be entitled to receive on exercise of this Option during the exercise
period specified in this Option and upon payment of the exercise price
of this Option, as adjusted to the extent required under (a) above,
the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Shares deliverable on exercise
of this Option would have been entitled on such capital
reorganization, reclassification, merger, consolidation or sale if
this Option had been exercised immediately before such capital
reorganization, reclassification, merger, consolidation, sale or
lease. In any such case, appropriate adjustment, as determined in good
faith by the Company's Board of Directors, shall be made in the
application of the provisions of this Option with respect to the
rights and interests of the Optionee after the reorganization,
reclassification, merger. consolidation, sale or lease to assure that
the provisions of this Option, including all adjustments to the
exercise price of this Option then in effect and the number of shares
which may be purchased upon exercise of this Option, but without any
change in the aggregate exercise price, shall be applicable after any
such transaction, as near as reasonably they may be, in relation to
any shares or other securities or property deliverable after such
event upon exercise of this Option. If, as a result of an adjustment
made pursuant to this subsection (b), the Optionee of the Option that
is thereafter exercised shall become entitled to receive shares of two
or more classes of capital stock of the Company or any other
corporation or entity, the board of directors (or other governing body
if there be no board of directors) thereof (whose determination shall
be conclusive and shall be described in a statement filed with the
Company) shall determine the allocation of the adjusted exercise price
between or among shares of such classes of capital stock. If any
subsequent adjustments to the exercise price are made pursuant to this
Section 5, such adjustments shall be made separately to the portion of
the exercise price so allocated to each of such classes of capital
stock. The foregoing provisions of this subsection (b) similarly apply
to successive reclassifications, consolidations, mergers, sales or
leases.
(c) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment pursuant to this Section 5, the Company, at its
expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each Optionee a
certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is
based. The Company shall, upon the written request, at any time, of
the Optionee, furnish or cause to be furnished to the Optionee a like
certificate setting forth:
(i) Such adjustments or readjustments;
(ii) The exercise price of this Option at the time in effect; and
(iii)The number of Shares and the amount, if any, of other property
that at the time would be received upon the exercise of this
Option.
(d) Notices of Record Date. If (i) the Company establishes a record date
to determine the holders of any class of securities for the purpose of
determining who is entitled to receive any dividend or other
distribution, (ii) the Company shall offer to the holders of Common
Stock for subscription or purchase by them of any shares of stock of
any class or any other rights, or (iii) any capital reorganization of
the Company, reclassification of the capital stock of the Company,
consolidation or merger of the Company with or into another
corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company or dissolution, liquidation or
winding up of the Company ("Certain Events") shall be effected, the
Company shall mail to the Optionee at least ten (10) days prior to the
date specified for the taking of (A) a record or (B) the proposed
action, a notice specifying the proposed action to be taken and
stating the date (1) of record for any such dividend or distribution
or (2) when any such Certain Events are to be consummated and the
date, if any, to be fixed as to when the holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon the completion of any
such Certain Events.
6. Miscellaneous.
(a) No Rights of Stockholders. Neither Optionee, Optionee's legal
representative nor a permissible assignee of this Option shall have
any of the rights and privileges of a stockholder of the Company with
respect to the Shares, unless and until such Shares have been issued
in the name of Optionee, Optionee's legal representative or
permissible assignee, as applicable.
(b) No Right to Employment. The grant of the Option shall not be construed
as giving Optionee the right to be retained in the employ of the
Company or of an affiliate or give the Optionee the right to be a
director of the Company or an affiliate of the Company, nor will it
affect in any way the right of the Company or an affiliate to
terminate such employment or position at any time, with or without
cause. In addition, the Company or an affiliate may at any time
dismiss Optionee from employment, or terminate the term of a director
of the Company or an affiliate, free from any liability or any claim
under this Agreement. Nothing in this Agreement shall confer on any
person any legal or equitable right against the Company or any
affiliate, directly or indirectly, or give rise to any cause of action
at law or in equity against the Company or an affiliate. The Option
granted hereunder shall not form any part of the wages or salary of
Optionee for purposes of severance pay or termination indemnities,
irrespective of the reason for termination of employment. Under no
circumstances shall any person ceasing to be an Optionee of the
Company or any affiliate be entitled to any compensation for any loss
of any right or benefit under this Agreement which such Optionee might
otherwise have enjoyed but for termination of employment, whether such
compensation is claimed by way of damages for wrongful or unfair
dismissal, breach of contract or otherwise.
(c) Governing Law. The validity, construction and effect of this
Agreement, and any rules and regulations relating to this Agreement,
shall be determined in accordance with the internal laws, and not the
law of conflicts, of the State of Washington.
(d) Severability. If any provision of this Agreement is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify this Agreement under any law deemed applicable by the
Company, such provision shall be construed or deemed amended to
conform to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Company, materially
altering the purpose or intent of this Agreement, such provision shall
be stricken as to such jurisdiction of this Agreement, and the
remainder of this Agreement shall remain in full force and effect.
(e) No Trust or Fund Created. This Agreement shall not create or be
construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any affiliate and
Optionee or any other person.
(f) Headings. Headings are given to the Sections and subsections of the
Agreement solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Agreement or any provision
thereof.
(g) Conditions Precedent to Issuance of Shares. Shares shall not be issued
pursuant to the exercise of the Option unless such exercise and the
issuance and delivery of the applicable Shares pursuant thereto shall
comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Securities and
Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, the requirements of any applicable Stock
Exchange or the Nasdaq National Market and the Washington General
Corporation Law. As a condition to the exercise of the purchase price
relating to the Option, the Company may require that the person
exercising or paying the purchase price represent and warrant that the
Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation and warranty is
required by law.
(h) Withholding. In order to comply with all applicable federal or state
income tax laws or regulations, the Company may take such action as it
deems appropriate to assure (i) notice to the Company of any
disposition of the shares of the Company within the time periods
described above, and (ii) that, if necessary, all applicable federal
or state payroll, withholding, income or other taxes are withheld or
collected from Optionee.
IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement
on the date set forth in the first paragraph.
COGNIGEN NETWORKS, INC.
By:
Name:
Title:
[OPTIONEE]
Name:
COGNIGEN NETWORKS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
1. This NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made this
_____ day of _____, _____, by and between COGNIGEN NETWORKS, INC., a
Colorado corporation (the "Company") and _____, an individual resident of
_____, _____ ("Optionee").Grant of Option. -
The Company hereby grants Optionee the option (the "Option") to purchase
all or any part of 60,000 shares of the Company's common stock (the "Shares"),
at the option exercise price equal to the last sale price as of the closing date
of the Funding Agreement.
The Option shall terminate at the close of business five years from the
date hereof.
2. Vesting of Option Rights.
(a) Except as otherwise provided in this Agreement, the Option may be
exercised by Optionee in accordance with the following schedule:
Number of Shares
with respect to which
On or after each of the Option is
the following dates exercisable
------------------------- --------------------------
April 1, 2004 20,000
July 1, 2004 5,000
Oct 1, 2004 5,000
Jan 1, 2005 5,000
April 1, 2005 5,000
July 1, 2005 5,000
Oct 1, 2005 5,000
Jan 1, 2006 5,000
April 1, 2006 5,000
(b) During the lifetime of Optionee, the Option shall be exercisable only
by Optionee and shall not be assignable or transferable by Optionee,
other than by will or the laws of descent and distribution.
3. Termination of Option.
(a) Exercise of Option After Termination of Employment. The Option shall
terminate and may no longer be exercised after 12 months after
Optionee ceases to be employed by the Company.
4. InTandem's Failure to Meet Performance Objective. This Option shall expire
valueless in the event that InTandem Communications Corp. fails to meet its
revenue and profit and loss performance objectives established in Schedule
B of the Funding Agreement. Method of Exercise of Option. Subject to the
foregoing, the Option may be exercised in whole or in part from time to
time by serving written notice of exercise on the Company at its principal
office within the Option period. The notice shall state the number of
Shares as to which the Option is being exercised and shall be accompanied
by payment of the exercise price. Payment of the exercise price shall be
made in cash (including bank check, personal check or money order payable
to the Company).
5. Acceleration of Exercisability Upon Change in Control. Notwithstanding any
other provision in the Agreement, the Option may be exercised as to 100% of
the Shares on the date of a "Change in Control." A "Change in Control"
shall mean any of the following: (i) the consummation of a merger or
consolidation of the Company with or into another entity or any other
corporate reorganization, if more than 50% of the combined voting power of
the continuing or surviving entity's securities outstanding immediately
after such merger, consolidation or other corporate reorganization are
owned by persons who were not stockholders of the Company immediately prior
to such merger, consolidation or other corporate reorganization, (ii) a
public announcement that any person has acquired beneficial ownership of
51% or more of the then outstanding shares of Common Stock and, for this
purpose, the terms "person" and "beneficial ownership" shall have the
meanings provided in Section 13(d) of the Securities Exchange Act of 1934,
as amended or related rules promulgated by the Securities and Exchange
Commission; (iii) the commencement of or public announcement of an
intention to make a tender or exchange offer for 51% or more of the then
outstanding shares of the Common Stock; (iv) a sale of all or substantially
all of the assets of the Company or (v) the Board of Directors of the
Company, in its sole and absolute discretion, determines that there is a
change in control of the Company.
6. Dilution or Other Adjustment.
(a) Adjustment of Exercise Price for Stock Splits, Reverse Stock Splits
and Stock Dividends. If the outstanding shares of Common Stock shall
be subdivided (split), combined (reverse split), by reclassification
or otherwise, or if any dividend payable on the Common Stock in shares
of Common Stock shall occur at the time that any portion of this
Option remains unexercised in whole or in part, the exercise price and
the number of shares of Common Stock available for purchase pursuant
to the exercise of this Option immediately prior to such subdivision,
combination or dividend shall be proportionately adjusted as follows:
(i) If a net increase shall have been effected in the number of
outstanding shares of the Company's Common Stock, the number of
shares of Common Stock underlying this Option shall be
proportionately increased, and the cash consideration payable per
share of Stock shall be proportionately reduced; and
(ii) If a net reduction shall have been effected in the number of
outstanding shares of the Company's Common Stock, the shares of
Common Stock underlying this Option shall be proportionately
reduced and the cash consideration payable per share of Common
Stock shall be proportionately increased.
(b) Adjustment for Capital Reorganizations. If at any time there shall be
a capital reorganization or reclassification of the Company's Common
Stock or a merger or consolidation of the Company with or into another
corporation (other than a merger after which the Company is the
continuing corporation and which does not result in any change of
outstanding shares of Common Stock), or the sale or lease of all or
substantially all of the Company's properties and assets to any other
entity or person, then, as part of such reorganization,
reclassification, merger, consolidation, sale or lease, the Company,
as a condition precedent to such transaction, shall provide, or cause
effective provision to be made so, that the Optionee shall thereafter
be entitled to receive on exercise of this Option during the exercise
period specified in this Option and upon payment of the exercise price
of this Option, as adjusted to the extent required under (a) above,
the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Shares deliverable on exercise
of this Option would have been entitled on such capital
reorganization, reclassification, merger, consolidation or sale if
this Option had been exercised immediately before such capital
reorganization, reclassification, merger, consolidation, sale or
lease. In any such case, appropriate adjustment, as determined in good
faith by the Company's Board of Directors, shall be made in the
application of the provisions of this Option with respect to the
rights and interests of the Optionee after the reorganization,
reclassification, merger, consolidation, sale or lease to assure that
the provisions of this Option, including all adjustments to the
exercise price of this Option then in effect and the number of shares
which may be purchased upon exercise of this Option, but without any
change in the aggregate exercise price, shall be applicable after any
such transaction, as near as reasonably they may be, in relation to
any shares or other securities or property deliverable after such
event upon exercise of this Option. If, as a result of an adjustment
made pursuant to this subsection (b), the Optionee of the Option that
is thereafter exercised shall become entitled to receive shares of two
or more classes of capital stock of the Company or any other
corporation or entity, the board of directors (or other governing body
if there be no board of directors) thereof (whose determination shall
be conclusive and shall be described in a statement filed with the
Company) shall determine the allocation of the adjusted exercise price
between or among shares of such classes of capital stock. If any
subsequent adjustments to the exercise price are made pursuant to this
Section 6, such adjustments shall be made separately to the portion of
the exercise price so allocated to each of such classes of capital
stock. The foregoing provisions of this subsection (b) similarly apply
to successive reclassifications, consolidations, mergers, sales or
leases.
(c) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment pursuant to this Section 6, the Company, at its
expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each Optionee a
certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is
based. The Company shall, upon the written request, at any time, of
the Optionee, furnish or cause to be furnished to the Optionee a like
certificate setting forth:
(i) Such adjustments or readjustments;
(ii) The exercise price of this Option at the time in effect; and
(iii)The number of Shares and the amount, if any, of other property
that at the time would be received upon the exercise of this
Option.
(d) Notices of Record Date. If (i) the Company establishes a record date
to determine the holders of any class of securities for the purpose of
determining who is entitled to receive any dividend or other
distribution, (ii) the Company shall offer to the holders of Common
Stock for subscription or purchase by them of any shares of stock of
any class or any other rights, or (iii) any capital reorganization of
the Company, reclassification of the capital stock of the Company,
consolidation or merger of the Company with or into another
corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company or dissolution, liquidation or
winding up of the Company ("Certain Events") shall be effected, the
Company shall mail to the Optionee at least ten (10) days prior to the
date specified for the taking of (A) a record or (B) the proposed
action, a notice specifying the proposed action to be taken and
stating the date (1) of record for any such dividend or distribution
or (2) when any such Certain Events are to be consummated and the
date, if any, to be fixed as to when the holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon the completion of any
such Certain Events.
7. Miscellaneous.
(a) No Rights of Stockholders. Neither Optionee, Optionee's legal
representative nor a permissible assignee of this Option shall have
any of the rights and privileges of a stockholder of the Company with
respect to the Shares, unless and until such Shares have been issued
in the name of Optionee, Optionee's legal representative or
permissible assignee, as applicable.
(b) No Right to Employment. The grant of the Option shall not be construed
as giving Optionee the right to be retained in the employ of the
Company or of an affiliate or give the Optionee the right to be a
director of the Company or an affiliate of the Company, nor will it
affect in any way the right of the Company or an affiliate to
terminate such employment or position at any time, with or without
cause. In addition, the Company or an affiliate may at any time
dismiss Optionee from employment, or terminate the term of a director
of the Company or an affiliate, free from any liability or any claim
under this Agreement. Nothing in this Agreement shall confer on any
person any legal or equitable right against the Company or any
affiliate, directly or indirectly, or give rise to any cause of action
at law or in equity against the Company or an affiliate. The Option
granted hereunder shall not form any part of the wages or salary of
Optionee for purposes of severance pay or termination indemnities,
irrespective of the reason for termination of employment. Under no
circumstances shall any person ceasing to be an Optionee of the
Company or any affiliate be entitled to any compensation for any loss
of any right or benefit under this Agreement which such Optionee might
otherwise have enjoyed but for termination of employment, whether such
compensation is claimed by way of damages for wrongful or unfair
dismissal, breach of contract or otherwise.
(c) Governing Law. The validity, construction and effect of this
Agreement, and any rules and regulations relating to this Agreement,
shall be determined in accordance with the internal laws, and not the
law of conflicts, of the State of Washington.
(d) Severability. If any provision of this Agreement is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify this Agreement under any law deemed applicable by the
Company, such provision shall be construed or deemed amended to
conform to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Company, materially
altering the purpose or intent of this Agreement, such provision shall
be stricken as to such jurisdiction of this Agreement, and the
remainder of this Agreement shall remain in full force and effect.
(e) No Trust or Fund Created. This Agreement shall not create or be
construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any affiliate and
Optionee or any other person.
(f) Headings. Headings are given to the Sections and subsections of the
Agreement solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Agreement or any provision
thereof.
(g) Conditions Precedent to Issuance of Shares. Shares shall not be issued
pursuant to the exercise of the Option unless such exercise and the
issuance and delivery of the applicable Shares pursuant thereto shall
comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Securities and
Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, the requirements of any applicable Stock
Exchange or the Nasdaq National Market and the Washington General
Corporation Law. As a condition to the exercise of the purchase price
relating to the Option, the Company may require that the person
exercising or paying the purchase price represent and warrant that the
Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation and warranty is
required by law.
(h) Withholding. In order to comply with all applicable federal or state
income tax laws or regulations, the Company may take such action as it
deems appropriate to assure (i) notice to the Company of any
disposition of the shares of the Company within the time periods
described above, and (ii) that, if necessary, all applicable federal
or state payroll, withholding, income or other taxes are withheld or
collected from Optionee.
IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement
on the date set forth in the first paragraph.
COGNIGEN NETWORKS, INC.
By:
Name:
Title:
[OPTIONEE]
Name:
SCHEDULE H
LIABILITIES
