The Children’s Internet Holding Company, LLC
Exhibit
1
The
Children’s Internet Holding Company,
LLC
| 0000 Xxxx Xxxx Xxxx. | 0000 Xxxx Xxxx Xxxx. |
| Xxxxxxxx X | Xxxxx 000-000 |
| Xxxxxxxxxx, XX 00000 | Xxxxxxxxxx, XX 00000 |
| Tele: (000) 000.0000 | Tele: (000) 000.0000 |
| Fax: (000) 000.0000 | Fax: (000) 000.0000 |
CONFIDENTIAL
The
Children’s Internet, Inc.
The
Children’s Internet, Inc., a Nevada corporation, symbol CITC.OB, with its
principal place of business at 0000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, XX
00000 (the “Company”) and The Children’s Internet Holding Company, LLC, a
Delaware limited liability company (“TCI Holding”) hereby enter into this
Definitive Interim Stock Purchase Agreement (the Interim Agreement) effective
as
of June 15, 2007 (the “Effective Date”).
Interim
Agreement:
Means
this Definitive Interim Stock Purchase Agreement. The terms and conditions
of
the Interim Agreement shall be binding on the parties, unless explicitly stated
to the contrary herein. Unless the parties otherwise agree, the terms and
conditions of the Interim Agreement shall be incorporated into the Final
Agreement.
Securities
Issued:
Means
One Hundred Twenty Million (120,000,000) shares of the Common Stock of the
Company, which shall be issued to the Investors from the Company’s authorized
but un-issued treasury, and Ten Million (10,000,000) shares of the Company’s
Common Stock issued to and held by Shadrack Films, Inc. (“Shadrack”) (as more
fully defined below) shall be transferred to the Investors.
Amended
Articles: Means
to
accommodate the Securities to be issued pursuant to the Stock Issuance
Transaction, the Company agrees that it will hold a special shareholder meeting
at the earliest date possible following the execution of this Interim Agreement
to vote on increasing its authorized shares to Two Hundred Fifty Million. The
Company represents it will do everything within its corporate powers to amend
its Articles of Incorporation thereby increasing its authorized common stock
shares from Seventy-Five Million (75,000,000) to Two Hundred Fifty Million
(250,000,000).
Issue
Price:
Means
$0.05 per share (“Common Stock” or the “Securities”).
Common
Stock:
Means
collectively the Company’s publicly traded common stock held by management of
the Company, Shadrack Films, Inc., Two Dog Net, Inc., and the common stock
to be
issued from the Company treasury, including any stock options.
Issue
Amount:
Means up
to Six Million Dollars ($6,500,000).
Purchase
Consideration:
Means
Eight Million Dollars ($8,000,000) consisting of the Issue Amount and the
payment of One Million Five Hundred Thousand Dollars ($1,500,000) of Company
Debt as directed by the Company, as further adjusted for any deposit which
may
have been received by the Company.
Stock
Issuance Transaction:
Means
the sale and issuance of the Securities Issued in exchange for the Purchase
Consideration, as described herein.
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Escrow
Account: Means
the
Escrow Account that the Parties agree TCI Holding shall set up in order to
secure and facilitate the purchase of the Company’s shares of common stock by
TCI Holding pursuant to the Interim and Final Agreements. The delivery of the
Company’s shares of common stock shall consist of the Company placing into the
Escrow Account stock certificates representing such shares with TW Escrow,
LLC
(the “Escrow Holder”). The Escrow Account shall be subject to escrow
instructions to the Escrow Holder, which allows release of the TCI Holding
and
Company Initial and Second Deposits, as set forth below. TCI Holding shall
pay
all escrow fees.
TCI
Holding Initial Deposit:
Means
Three Hundred Thousand Dollars ($300,000), which TCI Holding will place in
escrow upon the execution of the Interim Agreement. If TCI Holding were to
commit an Event of Default under the Interim Agreement, then the resulting
damages would be impracticable or extremely difficult to determine, and the
parties agree that, in the event of such an Event of Default by TCI Holding,
the
Company shall receive the TCI Holding Initial Deposit as liquidated damages,
which shall be the sum total of the Company’s recovery for said Event of Default
and the Company shall not be entitled to recover any other damages, fees or
penalties of any kind or receive any other payments or compensation from TCI
Holding pertaining to or resulting from said Event of Default.
Company
Initial Deposit:
Means
Four Million Five Hundred Thousand (4,500,000) Shares of Common Stock of the
Company from the Company’s authorized but un-issued treasury, which the Company
will place in escrow within 25 days upon the execution of this Interim
Agreement. If the Company were to commit an Event of Default under the Interim
Agreement, then the resulting damages would be impracticable or extremely
difficult to determine, and the parties agree that, in the event of such an
Event of Default by the Company, TCI Holding shall receive the Company Initial
Deposit as liquidated damages, which shall be the sum total of TCI Holding’s
recovery for said Event of Default and TCI Holding shall not be entitled to
recover any other damages, fees or penalties of any kind or receive any other
payments or compensation from the Company pertaining to or resulting from said
Event of Default..
Due
Diligence: The
Company will have Fifteen (15) days from the later of the Effective Date or
the
date TCI Holding provides the Company with a due diligence request to provide
the documents and information responsive to said request. TCI Holding will
have
thirty (30) days from the date of receipt of the documents and information
to
complete its due diligence review. At the end of the due diligence review period
(the “Due Diligence Period”), TCI Holding shall notify the Company in writing if
it intends to proceed with the Stock Issuance Transaction.
TCI
Holding Second Deposit:
Means an
additional Two Hundred Thousand Dollars ($200,000), which TCI Holding will
place
in escrow at the end of the Due Diligence Period and simultaneous with providing
notice to the Company of its election to proceed with the Stock Issuance
Transaction. If TCI Holding were to commit an Event of Default under the Final
Agreement (defined below), then the resulting damages would be impracticable
or
extremely difficult to determine, and the parties agree that, in the event
of
such an Event of Default by TCI Holding, the Company shall receive the TCI
Holding Initial Deposit and the TCI Holding Second Deposit as liquidated
damages, which shall be the sum total of the Company’s recovery for said Event
of Default and the Company shall not be entitled to recover any other damages,
fees or penalties of any kind or receive any other payments or compensation
from
TCI Holding pertaining to or resulting from said Event of Default..
Company
Second Deposit:
Means an
additional Three Million (3,000,000) Shares of Common Stock of the Company
from
the Company’s authorized but un-issued treasury as of the Effective Date, which
the Company will place in escrow at the end of the Due Diligence Period upon
receiving notice from TCI Holding of its election to proceed with the Stock
Issuance Transaction. If the Company were to commit an Event of Default under
the Final Agreement (defined below), then the resulting damages would be
impracticable or extremely difficult to determine, and the parties agree that,
in the event of such an Event of Default by the Company, TCI Holding shall
receive the Company Initial Deposit and the Company Second Deposit as liquidated
damages, which shall be the sum total of TCI Holding’s recovery for said Event
of Default and TCI Holding shall not be entitled to recover any other damages,
fees or penalties of any kind or receive any other payments or compensation
from
the Company pertaining to or resulting from said Event of Default.
Final
Agreement:
Means
the Final Stock Purchase Agreement. TCI Holding, at its sole expense, shall
be
responsible for the preparation of the Final Agreement, which the parties shall
negotiate in good faith and enter into no
later
than forty five (45) days after the Effective Date, unless extended by consent
of the parties, which consent shall not be unreasonably withheld. The Final
Agreement shall incorporate the terms of the Interim Agreement and shall contain
customary terms, conditions, covenants, representations and warranties,
including a representation and warranty by the Company regarding no material
changes in its condition between the date of signature and the Closing Date.
The
Company shall be responsible for its own costs and legal expense to review
and
make comments to the Final Agreement.
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Closing
Date:
Means
the date that is no later than forty five (45) days after the end of the Due
Diligence Period. The Parties hereto agree the Closing shall be reasonably
extended from time to time for cause.
Representations
and Warranties Of TCI Holding:
TCI
Holding,
hereby
represents and warrants to the Company that:
(a) TCI
Holding is
a
limited liability company duly organized and validly existing and in good
standing under the laws of the State of Delaware and is qualified to transact
business in the state.
(b) TCI
Holding, has
the
company power to carry on its business as now being conducted.
(c) Since
formation, TCI Holding,
has had
no change in the nature of the business of TCI Holding, which in part includes
acting as an investment advisor or investment manager of certain investors
(the
“Investors”), who are interested in making the Purchase and owning the stock as
provided for in this Agreement; provided however, that the Investors are
acceptable to the Company and subject to Company and the SEC’s consent, which
consent will not be unreasonably withheld.
(d) This
Agreement has
been
duly executed by TCI Holding, by
its
Managers or Managing Members, and the execution and performance of this
Agreement will not violate, or result in a breach of, or constitute a default
in
its Articles of Organization, Operating Agreement, any agreement, instrument,
judgment, order or decree to which TCI Holding is a party, or to which TCI
Holding, or
any of
its properties are subject, nor will such execution and performance constitute
a
violation of or conflict with any fiduciary duty to which TCI
Holding,
is
subject, to the best of TCI Holding’s knowledge.
(e) TCI
Holding, understands that any shares of the Company, which TCI Holding may
receive pursuant to this Agreement shall be “restricted stock” as such term is
commonly defined in the federal securities laws of the United States of America.
Accordingly, TCI Holding understands that any certificates of the Company which
TCI
Holding receives
pursuant to this Agreement shall bear a restrictive legend similar to the
following:
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER, THE TRANSFER
QUALIFIES FOR AN EXEMPTION FROM OR EXEMPTION TO THE REGISTRATION PROVISIONS
THEREOF.
Representations
And Warranties Of The Company:
The
Company represents
and warrants to TCI Holding, that:
(a) The
Company is a corporation duly organized and validly existing and in good
standing under the laws of the State of Nevada and is qualified to carry on
its
business as now being conducted.
(b) The
Company will
have
immediately prior to the Closing Date authorized
capitalization of Two Hundred Fifty Million (250,000,000) common stock shares,
of which there are issued and outstanding Twenty Six Million Eight Hundred
Seventy Three Thousand Seven Hundred Thirty Eight (26,873,738) shares of common
stock, par value $0.01 per share and that management owns Fourteen Million
Forty
Thousand Nine Hundred Ninety Eight (14,040,998) shares of such stock. In
addition, there are Twenty-two Million Nine Hundred Seventy-three Thousand
Four
Hundred Eighty-six (22,973,486) shares of common stock options that are
outstanding.
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(c) Since
the
Effective Date, there has been no change in the nature of the business of the
Company, nor in its financial condition or property, other than changes in
the
usual and ordinary course of business, none of which has been materially
adverse, and the Company has
incurred no obligations or liabilities or made any commitments other than in
the
usual and ordinary course of business, none of which singularly or collectively
are material, except as disclosed.
(d) This
Agreement has been
duly
executed by the Company ,
by its
Chief Executive Officer, who has been duly authorized to do so by its Board
of
Directors. Furthermore, the execution and performance of this Agreement will
not
violate, or result in a breach of, or constitute a default in the Company’s
Articles of Incorporation, or in any agreement, instrument, judgment, order
or
decree to which the Company is a party, or to which the Company or any of its
properties are subject, nor will such execution and performance constitute
a
violation of or conflict with any fiduciary duty to which the
Company is
subject to.
(e) The
Company
is not in default with respect to any order, writ, injunction, or decree of
any
court of federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality. The Company has
complied in all material respects with all laws, regulations and orders
applicable to its business, except for any ongoing suit or investigation
currently being conducted by the SEC.
(f) The
Company
is not presently being sued and is not involved in any litigation or legal
proceeding whatsoever nor does it anticipate being sued or involved in any
litigation or legal proceeding whatsoever except for the current action being
promulgated by the SEC and the current cross action by the Company titled,
The
Children’s Internet, Inc. x. Xxxxxx & Xxx, Superior Court, County of Orange,
Case No. 04CC11623, (the “Xxxxxx Case”) . TCI Holding hereby agrees to assign to
the Company, any and all right, title and interest in the Xxxxxx Case that
TCI
Holding may have as a result of this Agreement.
(g) The
Company
is presently current in all audit filings with the SEC and the Company is not
about to be delisted by the SEC.
Covenants
of TCI Holding:
TCI
Holding, hereby covenants to the Company that:
(a) TCI
Holding will
not
directly or indirectly modify, change, or otherwise use the Company’s products,
trademarks, trade names or other assets without the express written consent
of
the Company.
(b) TCI
Holding will not use, disclose, transfer or make available any confidential
information of the Company except to its agents, attorneys, advisors and
investors, as required and necessary to consummate the Stock Issuance
Transaction. This covenant shall survive the termination of this Interim
Agreement.
(c) TCI
Holding will not represent to any person, including the public, third parties,
or governmental agencies, that it has any authority to act on behalf of the
Company prior to Closing and shall not take any action or make any decision
on
behalf of the Company prior to the Closing.
(d) TCI
Holding has been granted the right to use the term "The Children's Internet”®, a
registered trademark licensed to the Company under an agreement with Two Dog
Net, for the sole purposes of establishing an entity to consummate the Stock
Purchase Transaction. If the Stock Purchase Transaction is not consummated
for
any reason, TCI Holding will immediately change its name so that the name does
not include the Company’s trademark. TCI Holding further agrees that TCI Holding
will not have acquired and will not claim any right or interest in the trademark
or trade name resulting from TCI Holding’s use of the trademark during the
term or this Agreement.
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Covenants
Of the Company:
The
Company, hereby covenants to TCI Holding that:
(a) From
the
Effective Date until the Closing or earlier termination of the Interim Agreement
or Final Agreement, neither the Company, nor any of its officers, directors,
employees or agents shall solicit, discuss, negotiate or enter into any
agreement or understanding with any third party relating to a sale, merger
or
acquisition of the Company, or the sale of a material portion of the Company’s
assets, without the prior written consent of TCI Holding.
Warrants:
There
will be no warrants attached to this transaction.
Events
of Default under the Interim Agreement:
Means in
the case of TCI Holding, (i) the material breach by TCI Holding of any covenant
made by TCI Holding hereunder, (ii) a
material inaccuracy in or a material breach of any representation or warranty
made by
TCI
Holding hereunder, (iii) the Company is ready to proceed with the Stock Issuance
Transaction at the end of the Due Diligence Period, and TCI Holding unreasonably
elects to not proceed with said Transaction. Means in the case of the Company,
(i) the material breach by the Company of any covenant made by the Company
hereunder, (ii) a
material inaccuracy in or a material breach of any representation or warranty
made by
the
Company hereunder, (iii) TCI Holding is ready to proceed with the Stock Issuance
Transaction at the end of the Due Diligence Period, and the Company unreasonably
elects to not proceed with said Transaction.
Events
of Default under the Final Agreement:
Means in
the case of TCI Holding, (i) the material breach by TCI Holding of any covenant
made by TCI Holding under the Final Agreement, (ii) a
material inaccuracy in or a material breach of any representation or warranty
made by
TCI
Holding under the Final Agreement, (iii) the Company is ready to proceed with
the Stock Issuance Transaction at Closing, and TCI Holding unreasonably elects
to not proceed with said Transaction. Means in the case of the Company, (i)
the
material breach by the Company of any covenant made by the Company under the
Final Agreement, (ii) a
material inaccuracy in or a material breach of any representation or warranty
made by
the
Company under the Final Agreement, (iii) TCI Holding is ready to proceed with
the Stock Issuance Transaction at Closing, and the Company unreasonably elects
to not proceed with said Transaction.
Two
Dog Net, Inc.: Means
the
owner of that certain product
and secure online service known as “The Children’s Internet®”
(the
Product) and certain
software technology known
as
“Safe Zone Technology®”
as
certain components of it is used to secure the Product. As part of this
Agreement, the Company will be responsible for obtaining from Two Dog Net,
Inc.
and transferring the ownership of The
Children’s Internet®
and the
Safe Zone Technology® software and any other related trademarks or registrations
or software applications to TCI Holding as part of the purchase price hereunder;
provided however, the transfer of ownership of such technology and software
and
intellectual property shall relate only to The Children’s Internet business and
shall not pertain to any other unrelated business of Two Dog Net,
Inc.
Shadrack
Films, Inc.: Means
the
parent company of The Children’s Internet, Inc.
Confidentiality:
Means
the Company and TCI Holding agree to keep the details of this Agreement
confidential unless expressly permitted by TCI Holding or the Company or as
required by law.
Royalty:
Means
the
one time payment by TCI Holding of $1 to Two Dog Net, Inc. or to whoever is
designated in writing by Two Dog Net, Inc., for each subscriber of The
Children's Internet® secure online service. The one time Royalty of $1 will be
paid 30 days after receipt by the Company of its first monthly user fee from
each subscriber. The Royalty is limited by a two year term commencing on the
Closing Date and ending two years later.
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Company
Debt:
Means
as of the Dated Date the Company has One Million Twenty-two Thousand Dollars
($1,022,000) of outstanding corporate long-term debt. TCI Holding shall pay,
as
directed by the Company and agreed to by TCI Holding, from the One Million
Five
Hundred Thousand Dollars ($1,500,000) as part of the Purchase Price the
long-term debt of the Company. The Four Hundred Seventy-Eight Thousand Dollar
balance ($478,000) shall be applied to pay off the Company’s short-term debt as
directed to by the Company. Further, the Company hereby agrees and represents
that there will be no other short-term debt on its books after the $478,000
balance is applied and paid toward its short-term debt.
Anti-Dilution:
The
signing of the definitive closing documents on the Closing Date will include
standard anti-dilution stock provisions for a two year term that provide that
the Company is prohibited from raising additional capital or offering excessive
stock options, rights offerings, cram downs and any other action designed to
artificially limit or reduce minority shareholder rights and interests. Provided
however, during the two-year anti dilution stock term, the Company is not
prohibited from raising additional capital or issuing stock options or
promulgating an employee stock option plan as long as the proposed capital
raise
or stock option is reasonable and customary to the industry.
SEC
Approval: Means
the
Company and TCI Holding shall seek approval to enter into the Stock Issuance
Transaction with the Securities and Exchange Commission (SEC) and the Company
and TCI Holding agree that they will not enter into the Stock Issuance
Transaction unless and until SEC approval has been obtained.
Attorneys
Fees: Means
in
the event the parties hereto litigate this Agreement for any reason whatsoever,
the prevailing party shall be entitled to reasonable attorney’s fees, court
costs and related expenses.
Expenses:
Each
party shall bear its own expenses incurred in connection with the Stock Issuance
Transaction.
No
Interests Conveyed Under Interim Agreement: No
ownership interest in the Company or Two Dog Net or its assets are being
conveyed or transferred hereunder. The issuance and conveyance of the Securities
Issued and the secure online service known as The Children’s Internet® and the
software known as the Safe Zone Technology® shall occur upon the Closing of the
Stock Issuance Transaction.
Governing
Law: Means
this Agreement shall be governed by and construed and enforced in accordance
and
subject to the laws of the State of California.
Counterparts:
Means
any
number of counterparts to this Agreement may be executed and each such
counterpart shall be deemed an original but all counterparts shall constitute
but one agreement.
Waiver:
Means
no
consent to or waiver or breach or default in the enforcement of this Agreement
or consent to or waiver or breach or default of any other consent to or waiver
or default to this Agreement.
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NOW,
THEREFORE,
in
consideration of the promises and covenants set forth herein, the parties hereto
have executed and made effective this Agreement as of the Dated Date.
|
TCI
HOLDING COMPANY, LLC.
|
THE
CHILDREN’S INTERNET, INC.
|
||
| /s/ Xxxxxxx Xxxxx | /s/ Xxxxxx Xxxxxxxx | ||
|
By: Xxxxxxx X. Xxxxx III, |
By: Xxxxxx Xxxxxxxx, CEO |
||
|
Managing
Member
|
ACKNOWLEDGED AND CONSENTED TO BY:
|
TWO DOG NET, INC.
|
SHADRACK
FILMS,
INC.
|
||
| /s/ Xxxxxx Xxxxxxxx | /s/ Xxxxxx Xxxxxxxx | ||
|
By: Xxxxxx Xxxxxxxx, CEO |
By: Xxxxxx Xxxxxxxx, CEO |
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