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 William L. Arnold
("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.
1
<PAGE>
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.
2
<PAGE>
INITIAL OPTIONS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
DATE TO ISSUE
TYPE OF OPTION NUMBER OF
OPTIONS
PRICE
VALUE
-------------
--------------
-----------------
-----
-----
<S>
<C>
<C>
<C>
<C>
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
-----------------------------------------------------------------------------------------------------
TOTAL
500,000
-----------------------------------------------------------------------------------------------------
</TABLE>
VESTING OPTIONS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
VESTING PERIOD
TYPE OF OPTION NUMBER OF
OPTIONS
PRICE
VALUE
--------------
--------------
-----------------
-----
-----
<S>
<C>
<C>
<C>
<C>
Monthly for 36 months Non-qualified
500,000
.55
$132,000
-----------------------------------------------------------------------------------------------------
TOTAL
500,000
-----------------------------------------------------------------------------------------------------
</TABLE>
(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.
3
<PAGE>
(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 ("
