THE CHILDREN’S INTERNET, INC. EXECUTIVE EMPLOYMENT AGREEMENT
THE
CHILDREN’S INTERNET, INC.
This
Employment Agreement (the “Agreement”) is dated as of April 2, 2007 (the
“Effective Date”), by and between Xxx X. Xxxxxx (“Employee”) and The Children’s
Internet, Inc., a Nevada corporation (the “Company”).
1. Term
of Agreement.
This
Agreement shall commence on the date hereof and shall automatically terminate
on
April 2, 2010, unless earlier terminated pursuant to the terms
herein.
2. Duties.
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(1)
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Position.
Employee
shall be employed as the Director of Finance and Operations. It is
the
Company’s intent to acquire a Directors and Officers insurance policy.
Upon attaining Directors and Officers insurance, the Company will
promote
the Employee to the position of an Officer of the Company. In addition,
at
that time, the Employee will be nominated to serve as a member of
the
Board of Directors of the Company.
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(b)
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Report.
Employee will report to the Company’s Board of Directors and Chief
Executive Officer.
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(c)
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Obligations
to the Company.
Employee agrees to the best of his ability and experience that he
will at
all times loyally and conscientiously perform all of the duties and
obligations required of and from Employee pursuant to the express
and
implicit terms hereof. At such time as the Employee is promoted to
the
position of an Officer of the Company, and subject to the control
and
oversight of the Board of Directors, Employee shall be responsible
for
general supervision, direction, and control of the business and officers
of the Company. Employee shall preside at all meetings of the shareholders
and in the absence of the Chairman of the Board, or if there be none,
at
all meetings of the Board of Directors. Employee shall have the general
powers and duties of management usually vested in the office of an
Officer
of the Company of a Corporation, and shall have such other powers
and
duties as may be prescribed by the Board of Directors or the Bylaws.
During the term of Employee’s employment relationship with the Company,
Employee further agrees that he will devote all of his business time
and
attention (except for vacation periods as set forth herein and reasonable
periods of illness or other incapacities permitted by the Company's
general employment policies) to the affairs of the Company and promotion
of its interests, and will spend at least three (3) days per each
work
week at the Company’s headquarters, unless travel or other meetings on the
Company’s behalf prevent his presence at the headquarters.
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(d)
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Indemnification:
At such time as the Employee is promoted to the position of an Officer
of
the Company, the Company agrees to indemnify and defend the Employee
to
the fullest extent possible under the law for all actions taken by
the
Employee while acting on the Company’s behalf. In addition, the Company
will use its best efforts to obtain, for the benefit of the Employee,
indemnification and hold harmless agreements from related parties
including Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxx, Shadrack Films and Two
Dog
Net, Inc.
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(d)
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Performance
of Services for Others.
The Company will be entitled to all of the benefits and profits arising
from or incident to all such work services and advice described in
Section
2(c) above, Employee will not render commercial or professional services
of any nature to any person or organization, whether or not for
compensation, without the prior written consent of the Company’s Board of
Directors if such service impacts in any way the Employee’s ability to
fully and completely perform his duties to the Company under this
agreement and Employee will not directly or indirectly engage or
participate in any business that is competitive in any manner with
the
business of the Company during the term of this Agreement.
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3. Compensation.
For the
duties and services to be performed by Employee hereunder, the Company shall
pay
Employee, and Employee agrees to accept, the salary, stock options, bonuses
and
other benefits described below in this Section 4.
(a)
Base Salary.
Employee
shall receive a yearly salary of $157,500. Employee shall earn a monthly salary
of $13,125 of which $5,000 will be paid in cash and $8,125 shall be deferred
and
accrued for a maximum period of twelve months from the date of this Agreement.
In the event that the Company raises, during this twelve-month period,
additional capital, through loans, equity investment or both, in the aggregate
sum of one million dollars, the Employee’s monthly cash compensation shall be
increased to $6,562.50. The balance of the Employees monthly compensation of
$6,562.50 shall be deferred and accrued. At the end of the twelve month period,
the total amount of the Employee’s deferred compensation shall be payable by the
Company, and the Employee’s cash compensation will be increased to $13,125 per
month. In the event that the Company, acting in good faith, determines that
it
does not have the resources to pay the Employee’s deferred compensation, the
Employee and the Company agree that the total amount of deferred compensation
will be converted into a note payable to the Employee by the Company. The Note
shall have a term of one year and shall accrue interest at the annual rate
of
7.75%, or 2.5 % above the Federal Funds Rate then in effect, whichever amount
is
higher, payable at the end of each calendar month. At the end of the Note term,
the principal amount and any unpaid earned interest shall be due and payable.
The Note will have a Warrant attached to it that will enable the holder to
purchase shares of the Company’s common stock. The number of shares of the
Company’s common stock that will be purchasable under the terms of the Warrant
will be equal to the principal amount of the Note multiplied by four and divided
by the then current market price of the Company’s common stock. The Warrant
Shares will be unregistered and subject to Rule 144. The Warrant Shares shall
have piggyback registration rights. The term of the Warrant will be five years
from the date of issue.
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Employee’s
monthly salary will otherwise be payable pursuant to the Company’s normal
payroll practices. The Note will continue to be due and payable with interest
from the date issued.
(b) Bonus. In
addition to the Base Salary, the Employee shall participate in a bonus program
in which the Employee will earn an annual bonus equal to 50% of the Employees
Base Salary subject to the Employee meeting the performance objectives
established by the Company.
(c) Option
Grant.
In
connection with the commencement of Employee’s employment, the Board of
Directors shall grant to Employee a
combination of qualified Incentive Stock Options (ISOs) and nonqualified stock
options (the Stock Option) to purchase up to Two Million, Six Hundred and Eighty
Seven Thousand, Three Hundred and Seventy Four, (2,687,374) shares of common
stock (the “Option Shares”) at a price per share (the Purchase Price) equal to
fair market value per share. The Employee may exercise the Option at any
time during a period of one hundred and twenty (120) months from the Date of
Grant. The Employee may elect to exchange all or some of the options for shares
of Common stock using the Net Issue Exercise method. If the Employee elects
to
exchange all or some of the options using the Net Issue Exercise method, as
provided herein, the Employee shall tender to the Company written notice of
his
election to exchange all or some of his shares and the number of options he
wished to exchange and the Company shall issue to the Employee the number of
shares of Common Stock computed using the following formula:
X=(Y(A-B))/A
Where:
X=
the
number of share of Common Stock to be issued
Y=
the
number of share of Common Stock purchasable under the options being
exchanged.
A=
the
Fair Market Value of one share of the Common Stock
B=
Purchase Price as defined herein
The
Stock
Option will vest as follows: 300,000 shares of the Option Shares, at fair
market value, shall vest immediately upon the commencement date of employment.
The remainder of the Option Shares shall be qualified Incentive Stock Options
and will vest at the rate of 1/36 each month until fully vested. Subject
to the discretion of the Company’s Board of Directors, Employee may be eligible
to receive additional grants of purchase rights or stock options from time
to
time in the future, at a purchase or exercise price equal to the price of the
Company stock on the date of grant.
The
Company warrants that it has established or will establish a qualified Incentive
Stock Option Plan pursuant to Section 422 of the Internal Revenue Service
code.
(d) Acceleration
of Vesting.
In the
event Employee’s employment is terminated Without Cause or Resignation with Good
Reason, the Option Shares shall become fully vested. In addition, The Option
Shares shall become fully vested at such time as the Company executes an
agreement in which the Company is sold or the Company enters into a business
combination with another entity or person in which the surviving entity is
no
longer controlled by a majority of the Company’s shareholders holding shares
immediately prior to the business combination.
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(e) Additional
Benefits.
Employee
will be eligible to participate in the Company’s employee benefit plans of
general application, if any, including without limitation, those plans covering
medical, disability and life insurance in accordance with the rules established
for individual participation in any such plan and under applicable law. Employee
will receive four weeks of paid vacation per year and shall be accorded sick
leave in accordance with the policies in effect during the term of this
Agreement and will receive such other benefits as the Company generally provides
to its other employees of comparable position and experience.
(f) Reimbursement
of Expenses.
Employee
shall be authorized to incur on behalf and for the benefit of, and shall be
reimbursed by, the Company for reasonable expenses, provided that such expenses
are substantiated in accordance with Company policies.
4. Termination
of Employment and Severance Benefits.
(a) Termination
of Employment.
This
Agreement may be terminated upon the occurrence of any of the following
events:
(i) The
Company’s determination in good faith that it is terminating Employee for Cause
(as defined in Section 6 below) (“Termination for Cause”);
(ii) The
Company’s determination that it is terminating Employee without Cause, which
determination may be made by the Company at any time at the Company’s sole
discretion, for any or no reason (“Termination Without Cause”);
(iii) The
effective date of a written notice sent to the Company from Employee stating
that Employee is electing to terminate his employment with the Company
(“Voluntary Termination”); or
(v) Following
Employee’s death or Disability (as defined in Section 7 below).
(b) Severance
Benefits.
Employee
shall be entitled to receive severance benefits upon termination of employment
only as set forth in this Section 4(b):
(i) Voluntary
Termination.
If
Employee’s employment terminates by Voluntary Termination, then Employee shall
not be entitled to receive payment of any severance benefits. Employee will
receive payment(s) for all salary (including deferred salary and interest earned
thereon) and unpaid vacation accrued as of the date of Employee’s termination of
employment and Employee’s benefits will be continued under the Company’s then
existing benefit plans and policies in accordance with such plans and policies
in effect on the date of termination and in accordance with applicable
law.
(ii) Termination
without Cause or Resignation for Good Reason.
If
Employee’s employment is terminated under Section 4(a)(ii) above or Section
4(b)(v) below, then Employee will be entitled to receive, in addition to the
payments described in Section 4 (b)(i) above, payment of severance benefits
equal to the monthly salary for the remaining term of the Agreement (i.e.,
up to
April 2, 2010), the pro rata portion of the Employee’s performance bonus for
that calendar year and shall have the Option Shares become fully vested. In
exchange for this severance, Employee agrees to execute a release of the
Company, its officers, directors and agents from any claims related to
Employee’s employment by the Company.
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(iii) Termination
for Cause.
If
Employee’s employment is terminated for Cause, then Employee shall not be
entitled to receive payment of any severance benefits. Employee will receive
payment(s) for all salary (including deferred salary and interest earned
thereon) and unpaid vacation accrued as of the date of Employee’s termination of
employment and Employee’s benefits will be continued under the Company’s then
existing benefit plans and policies in accordance with such plans and policies
in effect on the date of termination and in accordance with applicable
law.
(iv) Termination
by Reason of Death or Disability.
In the
event that Employee’s employment with the Company terminates as a result of
Employee’s death or Disability (as defined in Section 6 below), Employee or
Employee’s estate or representative will receive payment(s) for all salary
(including deferred salary and interest earned thereon), unpaid vacation accrued
as of the date of Employee’s termination of employment, and the pro rata portion
of Employee’s Performance Bonus for that calendar year and Employee’s benefits
will be continued under the Company’s then existing benefit plans and policies
in accordance with such plans and policies in effect on the date of termination
and in accordance with applicable law. In addition, Employee’s estate or
representative will receive the amount of Employee’s performance bonus for the
fiscal year in which the death or Disability occurs to the extent that the
bonus
has been earned as of the date of Employee’s death or Disability, as determined
by the Board of Directors or its Compensation Committee based on the specific
corporate and individual performance targets established for such fiscal
year.
(v) Resignation
for Good Reason.
The
Employee may resign from his employment at any time upon 30 days written notice
to the Company for good reason. For purposes of this Agreement, “Good Reason” is
defined as:
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a.
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The
Company’s material breach of this
Agreement.
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b.
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The
Company’s requirement that the Employee perform acts which are illegal as
a condition of continued
employment.
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c.
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The
Company’s reduction in the Employee’s compensation;
or
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| d. | The Company’s requirement that the Employee relocate out of the San Francisco Bay Area. |
5. Definition
of Cause.
For
purposes of this Agreement, “Cause”
for
Employee’s termination will exist at any time after the happening of one or more
of the following events:
(a) Employee’s
willful misconduct or gross negligence in performance of his or her duties
hereunder, including Employee’s refusal to comply in any material respect with
the legal directives of the Company’s Board of Directors so long as such
directives are not inconsistent with the Employee’s position and duties, and
such refusal to comply is not remedied within 30 working days after written
notice from the Board of Directors, which written notice shall define a
commercially reasonable remedy that is acceptable to the Board of Directors
and
state that failure to remedy such conduct may result in Termination for
Cause;
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(b) Dishonest
or fraudulent conduct, a deliberate attempt to do a material injury to the
Company, or conduct that materially discredits the Company or is materially
detrimental to the reputation of the Company, including conviction of a felony;
or
(c) Employee’s
incurable material breach of any element of the Company’s Confidential
Information and Invention Assignment Agreement, including without limitation,
Employee’s theft or other misappropriation of the Company’s proprietary
information.
6. Definition
of Disability.
For
purposes of this Agreement, “Disability”
shall
mean that Employee has been unable to perform his duties hereunder as the result
of his incapacity due to physical or mental illness, and such inability, which
continues for at least 120 consecutive calendar days or 150 calendar days during
any consecutive twelve-month period, is determined to be total and permanent
by
a physician selected by the Company and its insurers and acceptable to Employee
or to Employee’s legal representative (with such agreement on acceptability not
to be unreasonably withheld).
7. Confidentiality
Agreement.
Employee
shall sign, or has signed, a Proprietary Information and Inventions Agreement
(the “Confidentiality
Agreement”)
substantially in the form attached hereto as Exhibit B.
Employee hereby represents and warrants to the Company that he has complied
with
all obligations under the Confidentiality Agreement and agrees to continue
to
abide by the terms of the Confidentiality Agreement and further agrees that
the
provisions of the Confidentiality Agreement shall survive any termination of
this Agreement or of Employee’s employment relationship with the
Company.
8. Non-competition
Covenant.
Employee
hereby agrees that he shall not, during the term of his employment pursuant
to
this Agreement and during the time period that he is receiving severance
benefits from the Company, if any, do any of the following without the prior
written consent of the Company’s Board of Directors:
(a) Compete.
Carry on
any business or activity (whether directly or indirectly, as a partner,
stockholder, principal, agent, director, affiliate, employee or consultant)
which is competitive with the business conducted by the Company (as conducted
now or during the term of Employee’s employment), nor engage in any other
activities that conflict with Employee’s obligations to the
Company.
(b) Solicit
Business.
Solicit
or influence or attempt to influence any client, customer or other person either
directly or indirectly, to direct his or its purchase of the Company’s products
and/or services to any person, firm, corporation, institution or other entity
in
competition with the business of the Company.
(c) Solicit
Personnel.
During
the term of this Agreement and for a period of one (1) year thereafter, solicit
or influence or attempt to influence any person then employed by the Company
to
terminate or otherwise cease his employment with the Company or become an
employee of any competitor of the Company, although this provision shall not
prohibit Employee from conducting general solicitations for employment through
newspaper advertisements, job postings on website(s) and other such general,
non-targeted means of solicitation. This Section 9(c) is to be read in
conjunction with Section 6 of the Confidential Information and Invention
Assignment Agreement executed by Employee.
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9. Limitation
on Stock Option/Ownership Acceleration Benefits.
In the
event that any stock option or stock ownership acceleration benefits provided
for in this Agreement to Employee (i) constitute “parachute payments” within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
“Code”)
and
(ii) but for this Section 11, would be subject to the excise tax imposed by
Section 4999 of the Code, then Employee’s acceleration benefits under this
Agreement shall be payable either:
(a) In
full,
or
(b) as
to
such lesser amount which would result in no portion of such benefits being
subject to excise tax under Section 4999 of the Code,
whichever
of the foregoing amounts, taking into account the applicable federal, state
and
local income taxes and the excise tax imposed by Section 4999, results in the
receipt by Employee on an after-tax basis, of the greatest amount of benefits
under this Agreement, notwithstanding that all or some portion of such benefits
may be taxable under Section 4999 of the Code. Unless the Company or Employee
otherwise agree in writing, any determination required under this Section 11
shall be made in writing by independent public accountants appointed by Employee
and reasonably acceptable to the Company (the “Accountants”),
whose
determination shall be conclusive and binding upon Employee and the Company
for
all purposes. For purposes of making the calculations required by this
Section10, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and Employee shall furnish to the Accountants such information
and documents as the Accountants may reasonably request in order to make a
determination under this Section10. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section10.
10. Conflicts.
Employee
represents that his or her performance of all the terms of this Agreement will
not breach any other agreement to which Employee is a party. Employee has not,
and will not during the term of this Agreement, enter into any oral or written
agreement in conflict with any of the provisions of this Agreement. Employee
further represents that he is entering into or has entered into an employment
relationship with the Company of his own free will and that he has not been
solicited as an employee in any way by the Company.
11. Successors.
The
terms of this Agreement and all of Employee’s rights hereunder shall inure to
the benefit of, and be enforceable by, Employee’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
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12. Miscellaneous
Provisions.
(a) No
Duty to Mitigate.
Employee
shall not be required to mitigate the amount of any payment contemplated by
this
Agreement (whether by seeking new employment or in any other manner), nor,
except as otherwise provided in this Agreement, shall any such payment be
reduced by any earnings that Employee may receive from any other
source.
(b) Amendments
and Waivers.
Any term
of this Agreement may be amended or waived only with the written consent of
the
parties.
(c) Sole
Agreement.
This
Agreement, including any Exhibits hereto, constitutes the sole agreement of
the
parties and supersedes all oral negotiations and prior writings with respect
to
the subject matter hereof.
(d) Notices.
Any
notice required or permitted by this Agreement shall be in writing and shall
be
deemed sufficient upon receipt, when delivered personally or by a
nationally-recognized delivery service (such as Federal Express or UPS), or
48
hours after being deposited in the U.S. mail as certified or registered mail
with postage prepaid, if such notice is addressed to the party to be notified
at
such party’s address as set forth below or as subsequently modified by written
notice.
(e) Choice
of Law.
The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of California, without giving effect to
the
principles of conflict of laws.
(f) Severability.
If one
or more provisions of this Agreement are held to be unenforceable under
applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (i) such provision shall be excluded
from this Agreement, (ii) the balance of the Agreement shall be interpreted
as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
(g) Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together will constitute one and the same
instrument.
(h) Arbitration.
Any dispute
or claim arising out of or in connection with this Agreement will be finally
settled by binding arbitration in Alameda County, California in accordance
with
the rules of the American Arbitration Association by one arbitrator appointed
in accordance with said rules. The arbitrator shall apply California law,
without reference to rules of conflicts of law or rules of statutory
arbitration, to the resolution of any dispute, which shall be rendered within
thirty (30) days after the submission of the claim to arbitration. Judgment
on
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The prevailing party will be able to recover attorney’s
fees. Notwithstanding the foregoing, the parties may apply to any court of
competent jurisdiction for preliminary or interim equitable relief, or to compel
arbitration in accordance with this paragraph, without breach of this
arbitration provision. This Section 13(h) shall not apply to the Confidentiality
Agreement.
(i) Advice
of Counsel.
EACH
PARTY TO THIS AGREEMENT ACKNOWLEDGES THAT, IN EXECUTING THIS AGREEMENT, SUCH
PARTY HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL,
AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT.
THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE
DRAFTING OR PREPARATION HEREOF.
[Signature
Page Follows]
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The
parties have executed this Agreement the date first written above.
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THE
CHILDREN’S INTERNET, INC.
By: Xxxxxx Xxxxxxxx
Title: Chief Executive Officer, Chairman of the
Board
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| Signature: /s/ Xxxxxx Xxxxxxxx | ||
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Address:
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0000
Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx,
Xxxxxxxxxx 00000
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By:
Xxx
X. Xxxxxx
Title: Director of Finance & Operations
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| Signature: /t/ Xxx X. Xxxxxx | ||
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| Address: | 000 Xxxxxxx Xxx. | |
| Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 | ||
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