Exhibit A to Definitive Stock Purchase Agreement ASSIGNMENT AND ROYALTY AGREEMENT October 19, 2007
Exhibit
1.2
Exhibit
A
to
Definitive
Stock Purchase Agreement
October
19, 2007
FOR
GOOD
AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby
acknowledged, Two Dog Net, Inc., a
Utah
corporation (“Transferor”)
does
hereby sell, convey, assign, transfer, vest and deliver to The Childrens
Internet, Inc., a Nevada corporation (the “Company”),
its
successors and assigns, any and all of its rights, title, and interest in
and to
the assets as described in Appendix
I
hereto
(the “Assets”),
(the
“Assignment
and Transfer”).
The
Assignment and Transfer shall be effective as of the closing date (the
“Closing
Date”)
set
forth in that certain Definitive Stock Purchase Agreement of even date herewith
(the “Purchase
Agreement”)
without any further action by either party. This Agreement shall
terminate and be void and of no legal effect in the event of termination
of the
Purchase Agreement in accordance with its terms prior to the Closing Date.
The
Company shall take no action perfecting the Assets transferred hereby until
after the Closing Date.
1. Royalties.
Transferor and the Company hereby agree that the Company shall pay to
Transferor, for the duration of the Royalty Period, and as additional
consideration for the transfer of the Assets, a one time payment, per
subscriber, of One Dollar ($1.00) for each subscriber of The Children’s Internet
secure online service that becomes a subscriber during the Royalty Period
(the
“Royalty
Payment”).
The
“Royalty
Period”
shall
mean the two year period beginning on the Closing Date hereof and
ending on the two year anniversary of the Closing Date hereof. Each
Royalty Payment will accrue upon receipt by the Company of its first monthly
user fee (the “Initial
User Fee”)
from
each such subscriber. Accrued Royalty Payments shall be paid within thirty
(30)
days after the end of the calendar quarter in which it accrues.
Each
Royalty Payment shall be accompanied by a corresponding royalty report setting
forth the number new subscribers received during the calendar quarter in
which
the applicable royalties accrued, and the total Royalty Payment due. The
Company
shall keep records in sufficient detail to permit the determination of Royalty
Payments payable hereunder and at the request and expense of Transferor will
permit Transferor to examine, upon thirty (30) days written notice to the
Company, during ordinary business hours once in each calendar year, such
records
and other materials as may be reasonably necessary to verify or determine
royalties paid or payable under this Agreement. If no request for examination
of
such records and materials for a particular calendar month has been made
by
Transferor within one (1) year after the end of said period, the right to
examine such records and materials for said period, and the obligation to
keep
such records and materials for said period shall terminate. In the event
that
any such examination reveals an underpayment by the Company, Transferor shall
notify the Company in writing of the total amount owing.
In
the
event that the Company agrees with such discrepancy, it shall pay the amount
equal to such underpayment promptly. In the event the Company disagrees with
such discrepancy and the parties are unable, after diligent effort, to resolve
the matter, the parties shall submit the matter to an independent accountant
reasonably agreed to by the parties who shall make a final determination
as to
the correct royalty payment owed. The fees and expenses of such independent
accountant shall be paid by the party who’s position does not prevail and was
determined to be incorrect by such accountant. Such fees shall be paid promptly
and within industry standards for services performed.
2. Cancellation
of Stock Option and Company Stock Purchase Opportunity.
a. Cancellation
of Stock Option. Transferor and the Company agree that on the Closing Date,
the option to purchase up to 18,000,000 shares of the Company’s common stock
dated February 15, 2005 held by Transferor (the “Option”) will be cancelled
without any further action or any payment by
the
parties. Transferor further
agrees not to exercise, transfer or otherwise modify the Option in whole
or in
part on or prior to the Closing Date.
b. Company
Stock Purchase Opportunity. After the Closing Date, the Company shall set
aside from its authorized and unissued shares an aggregate of 12,857,142
shares
of its common stock (the “Shares”) solely for the purpose of offering such
Shares to certain stockholders of Transferor at a price of $0.07 per share,
as
further described below (the “Offering”). The Shares will be made available only
to stockholders of Transferor who receive cash payments from the Securities
and
Exchange Commission (the “SEC”) from an escrow fund of $900,000 set aside for
such stockholders under a final judgment entered into in connection with
the SEC
Litigation (as defined in the Purchase Agreement) and only to the extent
of such
payments. The Offering will be held open for a period of ninety (90) days
following the date of the cash distribution by the SEC. The Shares will
be
offered under SEC Regulation D.
3. Representations
and Warranties.
a. Transferor
is a corporation duly organized, validly existing and in good standing under
the
laws of the state of Utah and has all requisite corporate power and authority
to
carry on their business as now conducted and proposed to be
conducted.
b. Transferor
has all necessary power and authority to execute and deliver this Agreement
and
to carry out its provisions. All action on Transferor’s part required for the
lawful execution and delivery of this Agreement (including approval of its
board
of directors and stockholders, if necessary) has been taken. Upon its execution
and delivery, this Agreement will be a valid and binding obligation of
Transferor, enforceable in accordance with its terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
laws
of general application affecting enforcement of creditors’ rights and
(b) as limited by general principles of equity that restrict the
availability of equitable remedies.
c. Transferor
is not be a party to, or bound by, any unexpired, undischarged or unsatisfied
written or oral contract, agreement, indenture, mortgage, debenture, note
or
other instruments under the terms of which the execution, delivery and
performance by Transferor of this Agreement and the consummation of the
transactions contemplated hereby will require a consent, approval, or notice
or
result in a lien on any of the Assets.
d. Attached
hereto on Schedule A is a complete and accurate listing of all Transferor’s
Indebtedness (as defined in the Purchase Agreement) as of the date
thereof.
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e. Transferor
warrants that it is the sole owner of the entirety of the Assets, “The
Children’s Internet” product and the “Safe-Zone Technology,” including all
intellectual property related thereto, free and clear of any and all liens,
encumbrances, pledges, security interests, claims (including but not limited
to
creditor claims), agreements, promises or third party rights of any nature
whatsoever. Use of the Assets does not infringe, misappropriate or make any
unlawful use of or has at any time infringed, misappropriated or made any
unlawful use of, any Proprietary Asset ( as defined in the Purchase Agreement)
owned or used by any other person or entity. No claims or notices (in writing
or
otherwise) with respect to the Assets have been communicated to Transferor
(A) to the effect that the manufacture, sale, license or use of any Assets
infringes or potentially infringes, or constitutes a misappropriation or
unlawful use of, any copyright, patent, trade secret or other intellectual
property right of a third party, or (B) challenging the ownership or
validity of any of the rights of Transferor to or interest in the Assets.
Transferor has not received notice to the effect that any Assets are invalid
or
not subsisting. No other person or entity is infringing, misappropriating
or
making any unlawful use of, and no Proprietary Asset owned or used by any
other
person or entity infringes or conflicts with, any Asset.
f. Transferor
warrants that it has the right to enter into and perform each of the acts
and
obligations described in this Agreement without violating any rights of any
third party. Transferor represents and warrants that the Assets and the proposed
use thereof by the Company consistent with its past practices do not and
will
not violate the rights of any other party, and that the Assets are being
delivered in good working order without defects and fit for the use to which
the
Company is currently putting such Assets.
g.
All
current and former employees of Transferor all current and former consultants
and independent contractors to Transferor who provided or are providing
technical services relating to the Assets have executed and delivered to
Transferor an agreement, the material provisions of which are in substance
as
protective to Transferor as the terms of the form of the Mutual Non-Disclosure
Agreement attached to the Purchase Agreement as Exhibit E. To Transferor’s
knowledge, no employee, officer or consultant of Transferor is in violation
of
any such agreement and all such agreements are currently in effect.
4. Use
of
Non-transferred Names and Trademarks.
Prior
to the Closing, Transferor shall cause the Company to remove from its software,
websites, printed materials and any other documents, programs or materials,
the
terms “Two Dog Net” and “Safe Zone Technology.”
5. General.
a. This
Assignment and Royalty Agreement shall be governed by and construed in
accordance with the internal laws of the State of California regardless of
the
laws that might otherwise govern under principles of conflict of laws applicable
thereto.
b. Transferor
agrees to reasonably cooperate with the Company to register or otherwise
perfect
the Company’s interest in the assets assigned hereby.
c. Transferor
understands and acknowledges that the assignment of Assets effected hereby
is
for the purpose of investing in the Company the exclusive right to hold such
Assets for use in the Business and Transferor (for itself and its affiliates)
hereby agrees not to use the Assets or otherwise compete with the Company
in the
Business.
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d. This
Assignment and Royalty Agreement supersedes and shall operate to terminate
all
prior license and other agreements relating to the subject matter hereof
between
the parties hereto.
IN
WITNESS WHEREOF, the Company and Transferor have executed this Assignment
and
Royalty Agreement effective as of the date first above written.
“TRANSFEROR”
TWO
DOG NET, INC.
By:
/s/
Xxxxxx Xxxxxxxx
Name:
Xxxxxx Xxxxxxxx
Title:
CEO
|
“COMPANY”
THE
CHILDRENS INTERNET, INC.
By:
/s/
Xxxxxx Xxxxxxxx
Name:
Xxxxxx Xxxxxxxx
Title:
CEO
|
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APPENDIX
I
DESCRIPTION
OF ASSETS
The
“Assets” include the following:
1.
All of
Two Dog Net, Inc.’s right, title, and interest in and to the children's oriented
global computer network programming and internet service, including all previous
versions and any discontinued or disconnected functionality of that product,
currently being used and sold in Version 9.4 and 9.5 of The Children’s Internet
software/online service , including but not limited to the monitor program,
proxy service, flash animations (copyrighted or otherwise), search engine
service, browser program, secure e-mail software and services, education
and
entertainment portals, and all its proprietary characters and content (including
costumes and mascots), web pages, manuals, Two Dog Net copyrights, other
written
materials and home rooms and all trade secrets and other Proprietary Assets
relating thereto and including discontinued or disconnected features (the
“The
Children’s Internet Technology”) as used in the business of selling,
distributing, marketing, manufacturing, building, designing, writing, installing
or creating children’s secured content based internet software (the
“Business”);
2.
Two
Dog Net, Inc.’s right, title, and interest in that certain software technology
known as Safe Zone Technology (the “Safe Zone Technology”) as used in the
Business;
3.
All of
Two Dog Net, Inc.’s right, title, and interest in and to the trademark
“Children's Internet” (the “The Children’s Internet Xxxx”), and any other
trademarks or trademark registrations related to the foregoing xxxx or The
Children’s Internet Technology;
4.
All of
Two Dog Net, Inc.’s right, title, and interest in and to the url “Two Dog Home”
and any registrations related to the foregoing and any trademarks, service
marks
or trademark registrations relating to any of the Two Dog characters, costumes
or mascots;
5.
All
of
Two Dog Net, Inc.’s right, title, interest
in the promotional website content and domain names
xxx.xxxxxxxxxxxxxxxxx.xxx,
xxx.xxxxxxxxxxxxxxxxx.xxx, xxx.xxxxxxxxxxxxxxxxxxxx.xxx and xxx.xxxxxxxxxxxxxxxxxxxx.xxx.
The
“Assets” do not include the following:
1.
Two
Dog Net, Inc.’s right, title, and interest in the Safe Zone Technology as used
in businesses or applications other than the Business; and
2.
Two
Dog Net Inc.’s right, title and interest in the Two Dog Net name and any
trademarks or trademark registrations relating to the Safe Zone Technology
name.
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