THE CHILDREN'S INTERNET, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is dated as of December 30,
2005 (the "Effective Date"), by and between Xxxxxxx 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 December 30, 2008, unless earlier
terminated pursuant to the terms herein.
2. DUTIES.
(1) POSITION. Employee shall be employed as the Company's
President. In addition, the Employee shall serve as a member
of the Board of Directors of the Company.
(b) REPORT. Employee will report to the Company's Chief
Executive Officer.
(c) 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. 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 President 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.
(d) 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, 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. Notwithstanding the foregoing,
the Company acknowledges that Employee's company,
Crosslink Financial Communications, Inc., has a current
engagement with Secured Services that will terminate at
the end of February, 2006, which will not be terminated
at this time. Employee represents and warrants that said
engagement will not interfere with Employee's
performance of services on behalf of the Company and if
in the reasonable judgment of the Board of Directors
said engagement is interfering with Employee's
performance of services, Employee shall terminate said
engagement. Nothing in this Agreement will prevent
Employee from accepting speaking or presentation
engagements in exchange for honoraria or from serving on
boards of charitable organizations, or from owning no
more than 1% of the outstanding equity securities of a
corporation whose stock is listed on a national stock
exchange or the Nasdaq National Market. Employee will
comply with and be bound by the Company's operating
policies, procedures and practices from time to time in
effect during the term of Employee's employment.
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3. AT-WILL EMPLOYMENT. The Company and Employee acknowledge that
Employee's employment is and shall continue to be at-will, as defined under
applicable law, and that Employee's employment with the Company may be
terminated by either party at any time for any or no reason. If Employee's
employment terminates for any reason, Employee shall not be entitled to any
payments, benefits, damages, award or compensation other than as provided in
this Agreement. The rights and duties created by this Section 3 may not be
modified in any way except by a written agreement executed by Employee and a
duly authorized representative of the Company (other than Employee).
4. 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) SALARY. Employee shall receive a monthly salary of $10,000,
$2,500 of which shall be deferred and not paid to Employee until January, 2007.
The deferred salary shall accrue interest at the annual rate of nine percent
(9%). In January, 2007, Employee shall receive the cumulative deferred salary,
plus accrued interest, and from that month on, shall receive the full montly
salary with no portion deferred. Employee's monthly salary will otherwise be
payable pursuant to the Company's normal payroll practices.
(b) OPTION GRANT. In connection with the commencement of
Employee's employment, the Board of Directors shall grant to Employee a
combination of nonqualified stock options and qualified stock options (the Stock
Option) to purchase up to One Million shares of common stock (the "Option
Shares") at a price per share of $0.55 per share.
The Stock Option will vest as follows: one half of the Option Shares
shall vest immediately upon the commencement date of employment and according to
the table below. The remainder of the Option Shares shall 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.
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INITIAL OPTIONS
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DATE TO ISSUE TYPE OF OPTION NUMBER OF OPTIONS PRICE VALUE
------------- -------------- ----------------- ----- -----
Effective Date Qualified 180,000 $.55 $ 99,000
January 2006 Qualified 180,000 $.55 $ 99,000
Effective Date Non-qualified 240,000 $.55 $132,000
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TOTAL 500,000
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VESTING OPTIONS
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VESTING PERIOD TYPE OF OPTION NUMBER OF OPTIONS PRICE VALUE
-------------- -------------- ----------------- ----- -----
Monthly for 36 months Non-qualified 500,000 .55 $132,000
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TOTAL 500,000
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(c) ACCELERATION OF VESTING. In the event Employee's employment is
terminated without cause, the Option Shares shall become fully vested.
(d) PERFORMANCE BONUS. On or before the sixtieth (60th ) day
following the close of the Company's fiscal year, Employee shall receive a bonus
of up to fifty percent (50%) of the Employee's annual salary (including deferred
salary), provided that Employee meets the performance standards established by
the Board of Directors and attached hereto as EXHIBIT A (the "Performance
Standards"). Those Performance Standards are to be defined no later than March
31, 2006. In the absence of stipulated Performance Standards, the bonus will be
50% of annual salary.
(e) CROSSLINK FINANCIAL COMMUNICATIONS. Company will terminate its
agreement with Employee's prior company, Crosslink Financial Communications,
Inc. ("Crosslink"). In connection with said termination, Crosslink has assigned
and the Company hereby accepts the assignment to Employee of all shares of stock
of the Company due and owing to Crosslink under its agreement with the Company.
(f) 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 three 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.
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(g) 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.
5. 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 5(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) INVOLUNTARY TERMINATION. If Employee's employment is
terminated under Section 5(a)(ii) above, then Employee will be entitled to
receive, in addition to the payments described in Section 5 (b)(i) above,
payment of severance benefits equal to the monthly salary for the remaining term
of the Agreement (i.e., up to December __ , 2008), 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.
(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.
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(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 7 below), Employee or
Employee's estate or representative 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. 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.
6. 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;
(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.
7. 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).
8. ASSUMPTION OF AGREEMENT BY TWO DOG NET. In the event the Company
ceases to conduct business, either as a result of formal dissolution or
abandonment, the parties agree that the Company shall assign all of its rights
and obligations hereunder to Two Dog Net, Inc., and that Employee shall continue
to perform the services hereunder for benefit of Two Dog Net, Inc. for the
consideration set forth herein.
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9. 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.
10. NONCOMPETITION 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 10(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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11. 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 Section
11, 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 Section 11. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 11.
12. 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.
13. 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.
14. 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.
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(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. 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.
THE CHILDREN'S INTERNET, INC.
By: Xxxxxx Xxxxxxxx
Title: Chief Executive Officer, Chairman of the Board
Signature: /s/ Xxxxxx Xxxxxxxx
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Address: 000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
XXXXXXX X. XXXXXX
Signature: /s/ Xxxxxxx X. Xxxxxx
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Address: 00 Xxxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
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EXHIBIT A
BONUS PERFORMANCE STANDARDS
To Be Finalized Prior to March 31, 2006
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EXHIBIT B
PROPRIETARY INFORMATION AND
INVENTIONS AGREEMENT
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