EMPLOYMENT AGREEMENT
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This Employment Agreement ("Agreement") is made as of July 26, 2005, by and
between Xxxxxx Xxxxxxxxxx ("Employee") and Genius Products, Inc., a Delaware
corporation ("Employer"), located at 000 Xxxxx Xxxxx Xx, Xxxxx 000, Xxxxxx
Xxxxx, Xxxxxxxxxx 00000.
INTRODUCTION:
Employer would like to engage the services of Employee for Employee's skills as
Chief Executive Officer and related services as requested by Employer on a
full-time basis, and Employee would like to be so engaged;
Employer and Employee have agreed on terms for such services and compensation;
and
Employer and Employee wish to enter into a formal written agreement to document
the employment relationship in order to set forth (a) Employee's services and
compensation, (b) the terms of Employee's employment, including the "at-will"
nature thereof, (c) Employer's exclusive ownership of all proprietary
information relating to Employer, (d) certain confidentiality matters, and (e)
the manner in which proprietary information produced or acquired by Employee
during such relationship shall be handled and made the sole property of
Employer;
THEREFORE, in consideration of the foregoing and in exchange for the promises
set forth below, Employee and Employer agree as follows:
1. SERVICES; TITLE. Employee shall be employed as a member of Employer's
management team and provide such services as Employer shall reasonably request
to be performed (the "Services") on a full-time basis and shall devote
substantially all of Employee's work efforts to the business and operations of
Employer. Employee's title shall be "Chief Executive Officer."
2. COMPENSATION, BENEFITS AND REVIEWS. Subject to all the other terms of this
Agreement, in connection with Employee's performance of the Services, Employer
shall:
(a) Pay Employee's salary by check twice per month in equal
installments in accordance with Employer's regular salary payment schedule,
which shall be paid at the rate (before deductions for advances and deductions
made at Employee's request, if any, and for deductions required by federal,
state and local law) of $275,000 per year, subject to annual review by
Compensation Committee.
(b) At the sole discretion of Employer, pay Employee an incentive bonus
according to achievement of Operating Profit Results as shown on the Short-Term
Incentive Opportunity dated May 9, 2005, a copy of which is attached hereto as
EXHIBIT A.
For purposes of this Agreement, "Operating Profit" shall mean the
Employer's earnings before interest, taxes, depreciation, and amortization
(EBITDA).
The incentive bonus shall be paid in installments at the discretion of
the Company's Compensation Company with any adjustment made within a reasonable
period of time following determination of the Employer's year-end financial
results.
(c) grant options, pursuant to the 2004 Stock Incentive Plan, to
Employee in the form of EXHIBIT B to purchase 1,200,000 shares of Genius
Products, Inc. Common Stock, as follows:
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600,000 options shall vest upon date of Grant.
300,000 options shall vest on the second anniversary of the
Grant Date, and
300,000 options shall vest on the third anniversary of the
Grant Date.
The Options shall be priced at the Fair Market Value (as defined in the
2004 Stock Incentive Plan) of the Common Stock on the date of the grant. The
terms of the grant shall be governed by the 2004 Stock Incentive Plan, a copy of
which is attached hereto as EXHIBIT C. All 1,200,000 options will be granted
upon date of Agreement.
Accelerated vesting for all options shall occur on the date of
achievement of $30 million EBITDA with Compass acquisition or on the date of
achievement of $20 million EBITDA without Compass acquisition.
(d) Grant Employee, within 30 days of the Commencement Date (as such
term is defined below) the option to participate in all of the benefit plans
offered by Employer to its Employees generally, including without limitation,
insurance plans, 401(k) and other savings plans, Section 125 (cafeteria) and
similar pre-tax expense plans, holidays, sick leave, etc., which may be amended
from time to time in Employer's discretion. Employee understands that Employer
has only a Blue Cross PPO health plan and no other benefit plan as of the date
of this Agreement.
(e) Grant Employee (i) within 30 days of the Commencement Date, health
insurance for Employee and Employee's dependents, (ii) computers and similar
devices, and (iii) such other benefits as Employer shall determine to provide to
any of its senior executives officers from time to time (in each case subject to
adjustment by the mutual consent of Employer and Employee) and including an auto
allowance not to exceed $800 per month.
(f) Reimburse Employee for all reasonable travel, meals, lodging,
communications, entertainment and other business expenses incurred by Employee
in connection with Employee's performance under this Agreement.
(g) Grant Employee three (3) weeks' vacation with pay for each
twelve-month period, taken at times agreed with Employer. Unused vacation shall
accrue to a maximum of two times the annual accrual (for example a maximum
accrual of six (6) weeks if employee earns three (3) weeks vacation per year.
3. TERM AND TERMINATION. The term of this Agreement is two (2) years from the
date of Agreement unless earlier terminated by Employer in Employer's sole
discretion. The Agreement may be terminated one (1) year from date of Agreement
by mutual consent of the Employer and Employee. The term of this Agreement may
be terminated "at will" by Employer at any time and for any reason or for no
reason. In the event Employee shall be terminated by Employer without "Cause,"
Employer shall provide Employee with the compensation required by clauses (a)
and (e) of Paragraph 2 of this Agreement as of the termination date for a twelve
(12) month period (the "Severance Period") following the date of such
termination ("Severance"), plus all accrued but unpaid salary and vacation time
to the date of termination, with the salary portion of all such compensation
payable in cash in a lump sum (less deductions required by law) due immediately
upon termination. Upon termination of Employee's employment with Employer for
Cause, Employer shall be under no further obligation to Employee for salary or
other compensation except to pay all accrued but unpaid salary and accrued
vacation time to the date of termination.
For purposes of this Agreement, "Cause" shall mean (i) conviction of a
felony, or a misdemeanor where imprisonment is imposed, or (ii) Employee's
entering into any arrangement with or providing of any services to any company,
business or person that produces or markets children's or infant's video or
music other than Genius Products, Inc. and its controlled or controlling
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affiliates and successors, iii) Gross negligence or willful misconduct, iv) a
material breach of this Agreement, (v) a violation of Employers policies and
procedures, and specifically a violation of Employer's sexual harassment and/or
anti-discrimination policies, or a violation of Employer's trade secrets policy,
or use or disclosure of Employer's trade secrets for personal gain. If Employee
shall die during the term of this Agreement, no Severance shall be owed.
4. CHANGE IN CONTROL. In the event of a Corporate Transaction or Change in
Control, all stock options, restricted stock or other stock based awards granted
to Employee shall, immediately prior to the specified effective date of such
Corporate Transaction or Change in Control, automatically become fully vested
and exercisable and be released from any repurchase or forfeiture rights (other
than repurchase rights exercisable at fair market value), provided further that
with respect to Employee's stock options, the options shall remain exercisable
until the earlier of (i) the expiration of the option term or (ii) five (5)
years after the date of the Corporate Transaction or Change in Control.
(a) For purposes of this Agreement, "Corporate Transaction" means
any of the following transactions: (i) a merger or
consolidation in which Employer is not the surviving entity,
except for a transaction the principal purpose of which is to
change the state in which Employer is incorporated; (ii) the
sale, transfer or other disposition of all or substantially
all of the assets of Employer; (iii) the liquidation or
dissolution of Employer involving all or substantially all
Employer's assets; (iv) any reverse merger or series of
related transactions culminating in a reverse merger
(including, but not limited to, a tender offer followed by a
reverse merger) in which Employer is the surviving entity but
in which securities possessing more than forty percent (40%)
of the total combined voting power of Employer's outstanding
securities are transferred to a person or persons different
from those who held such securities immediately prior to such
merger or the initial transaction culminating in such merger;
or (v) acquisition in a single or series of related
transactions by any person or related group of persons (other
than Employer or by a Employer-sponsored employee benefit
plan) of beneficial ownership (within the meaning of Rule
13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of
Employer's outstanding securities.
(b) For purposes of this Agreement, "Change of Control." shall
mean a change in ownership or control of Employer effected
through either of the following transactions: (i) a direct or
indirect change in ownership or control of Employer effected
through a merger, consolidation or acquisition by any person
or related group of persons (other than an acquisition by
Employer or by a Employer-sponsored employee benefit plan or
by a person or persons that directly or indirectly controls,
is controlled by, or is under common control with, Employer)
of beneficial ownership (within the meaning of Rule 13d-3 of
the Securities Exchange Act of 1934) of securities possessing
more than fifty percent of the total combined voting power of
the outstanding securities of Employer or Employer's parent
company or (ii) a change in the composition of the Board over
a period of thirty-six (36) months or less such that a
majority of the Board members (rounded up to the next whole
number) ceases, by reason of one or more contested elections
for Board membership, to be comprised of individuals who are
Continuing Directors (as such term is defined in Employer's
2004 Stock Incentive Plan.
5. TERMINATION CERTIFICATE. Upon the termination of Employee's engagement under
this Agreement for any reason whatsoever, Employee agrees to sign, date and
deliver to Employer a "Termination Certificate" in the form of EXHIBIT D, and to
deliver and take all other action necessary to transfer promptly to Employer all
records, materials, equipment, drawings, documents and data of any nature
pertaining to any invention, trade secret or confidential information of
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Employer or to Employee's engagement, and Employee will not take with Employee
any documents containing or pertaining to any confidential information,
knowledge or data of Employer that Employee may produce or obtain during the
course of Employee's engagement under this Agreement. This Paragraph 4 shall
survive indefinitely any termination of this Agreement or Employee's engagement
hereunder.
6. NONDISCLOSURE. Employee agrees to keep confidential and not to disclose or
make any use of (except for the benefit of Employer), at any time, either during
or after Employee's engagement under this Agreement, any trade secrets,
confidential information, knowledge, data or other information of Employer
relating to products, processes, know-how, designs, formulas, test data,
customer lists, business plans, marketing plans and strategies, pricing
strategies or other subject matters pertaining to any business or future
business of Employer or any of its clients, customers, Employees, licensees or
affiliates ("Confidential Information"), which Employee may produce, obtain or
otherwise acquire or become aware of during the course of Employee's engagement
under this Agreement. Employee further agrees not to deliver, reproduce or in
any way allow any such Confidential Information to be delivered or used by any
third party without specific direction or consent of a duly authorized officer
of Employer. The above provisions will not prohibit the disclosure or use of
Confidential Information by Employee: (a) as is necessary to carry out
Employee's duties under, or for the purposes authorized in, this Agreement or
(b) to the extent necessary to comply with properly authorized civil or criminal
subpoena or other legal process. This Paragraph 5 shall survive indefinitely any
termination of this Agreement or Employee's employment.
7. WORK FOR HIRE; OWNERSHIP OF INTELLECTUAL PROPERTY. Employee understands and
agrees that all of Employee's work and the results thereof in connection with
Employer and the Services, whether made solely by Employee or jointly with
others, during the period of Employee's employment by Employer, that relate in
any manner to the actual or anticipated business, work, activities, research or
development of Employer or its affiliates, or that result from or are suggested
by any task assigned to Employee or any activity performed by Employee on behalf
of Employer, shall be the sole property of Employer, and, to the extent
necessary to ensure that all such property shall belong solely to Employer,
Employee by Employee's execution of this Agreement transfers to Employer any and
all right and interest Employee may possess in such intellectual property and
other assets created in connection with Employee's employment by Employer, and
that may be acquired by Employee during the term of this Agreement from any
source that relates, directly or indirectly, to Employer's business and future
business. Employee also agrees to take any and all actions requested by Employer
to preserve Employer's rights with respect to any of the foregoing. This
Paragraph 6 shall survive indefinitely any termination of this Agreement or
Employee's employment.
8. NO PARTNERSHIP; NOT ASSIGNABLE BY EMPLOYEE. This Agreement is between
Employee and Employer, as at-will employer, and shall not form or be deemed to
form a partnership or joint venture. Employer's rights, benefits, duties and
obligations under this Agreement shall inure to its successors and assigns.
Employee's rights, obligations and duties under this Agreement are personal to
Employee and may not be assigned.
9. TRADE SECRETS OF OTHERS: Employee represents that Employee's performance of
all the terms of this Agreement and as Employer's Employee does not, and will
not breach any agreement to keep in confidence any proprietary information,
knowledge or data acquired by Employee in confidence or in trust before
Employee's engagement under this Agreement, and Employee will not disclose to
Employer or induce Employer to use any confidential or proprietary information
or material belonging to any other person or entity. Employee agrees not to
enter into any agreement, either written or oral, in conflict with this
Paragraph 8.
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10. REPRESENTATIONS AND WARRANTIES. Each party represents and warrants that such
party has the right, power and authority to enter into and execute this
Agreement and to perform and discharge all of the obligations hereunder; and
that this Agreement constitutes the valid and legally binding agreement and
obligation of such party and is enforceable in accordance with its terms.
Employee represents, promises, understands and agrees that: (i) other than as
required by law, Employee shall not at any time divulge, directly or indirectly,
any of the terms of this Agreement to any person or entity other than Employee's
legal counsel; (ii) Employee shall not use any material or content of any kind
in connection with Employer's products, software or website that is copyrighted
or owned or licensed by a party other than Employer or that would or could
infringe the rights of any other party; (iii) Employee shall not use in the
course of Employee's performance under this Agreement, and shall not disclose to
Employer, any confidential information belonging, in part or in whole, to any
third party; (iv) EMPLOYEE UNDERSTANDS ALL OF THE TERMS OF THIS "AT WILL"
EMPLOYMENT AGREEMENT, AND HAS REVIEWED THIS AGREEMENT IN DETAIL BEFORE AGREEING
TO EACH AND ALL OF THE PROVISIONS; and (v) no statement, representation,
promise, or inducement has been made to Employee, in connection with the terms
of this Agreement, except as is expressly set forth in this Agreement.
11. GOVERNING LAW; ARBITRATION. This Agreement shall be subject to and construed
in accordance with the laws of the State of California, and without giving
effect to conflicts of laws principles. In the event of any dispute in
connection with the Services or this Agreement that cannot be resolved privately
between the parties, resolution shall be through binding arbitration conducted
in the County of San Diego, California under the rules of the Judicial
Arbitration and Mediation Service (JAMS) then in effect that are not contrary to
the provisions of this Agreement. Any arbitration shall be conducted in
accordance with the provisions of the California Code of Civil Procedure, Part
3, Title 9 (commencing with Section 1280). The parties may obtain discovery in
aid of the arbitration in accordance with California Code of Civil Procedure
Section 1283.05. Nothing contained in this paragraph 10 shall limit either
party's right to seek temporary restraining orders or injunctive or other
equitable relief in the Superior Court of California in connection with this
Agreement. EMPLOYEE UNDERSTANDS THAT BY AGREEING TO ARBITRATION IN THE EVENT OF
A DISPUTE BETWEEN EMPLOYER AND EMPLOYEE, EMPLOYEE IS EXPRESSLY WAIVING
EMPLOYEE'S RIGHT TO REQUEST A TRIAL BY JURY IN A COURT OF LAW.
12. NOTICES. All notices or other communications required or permitted hereunder
shall be made in writing and shall be deemed to have been duly given if
delivered: (a) by hand; (b) by a nationally recognized overnight courier
service; or (c) by United States first class registered or certified mail,
return receipt requested, to the principal address of the other party, as set
forth below. The date of notice shall be deemed to be the earlier of (i) actual
receipt of notice by any permitted means, or (ii) five business days following
dispatch by overnight delivery service or the United States Mail. Employee shall
be obligated to notify Employer in writing of any change in Employee's address.
Notice of change of address shall be effective only when done in accordance with
this paragraph.
Employer's Notice Address:
000 Xxxxx Xxxxx Xx Xxxxx, Xxxxx 000
Xxxxxx Xxxxx, XX 00000
Employee's Notice Address:
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
13. ENTIRE AGREEMENT; MODIFICATION; WAIVER; CONSTRUCTION GENERALLY. This
Agreement constitutes the entire agreement between Employer and Employee
relating to Employee's employment, and supersedes all previous agreements,
whether oral or written. No provision of this Agreement shall be construed
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strictly against any party, including, without limitation, the drafter. Neither
this Agreement nor any provision hereof may be amended, waived or modified in
any way other than by a writing executed by the party against whom such
amendment, waiver or modification would be enforced. No failure to exercise, and
no delay in exercising with respect to any right shall operate as a waiver. A
waiver by any party of a breach of any provision shall not be deemed a waiver of
any later breach. The exercise of any right or remedy by either party (or by its
successor), whether pursuant to this Agreement, to any other agreement, or to
law, shall not preclude or waive its right to exercise any or all other rights
and remedies. If any provision of this Agreement shall be held by a court or
arbitrator to be invalid, unenforceable, or void, such provision shall be
enforced to the fullest extent permitted by law, and the remainder of this
Agreement shall remain in full force and effect. In the event that the time
period or scope of any provision is declared by a court or arbitrator of
competent jurisdiction to exceed the maximum time period or scope that such
court or arbitrator deems enforceable, then such court or arbitrator shall
reduce the time period or scope to the maximum time period or scope permitted by
law. The headings or titles of the several paragraphs of this Agreement are
inserted solely for convenience and shall not be used in the construction of any
provision of this Agreement. Words in the singular shall include the plural, and
vice versa. All references to the masculine or feminine shall mean all genders.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original of this Agreement, but all of which together shall
constitute one and the same instrument.
Each of the parties has set forth Employee's, Employer's or its signature as of
the date first set forth above.
EMPLOYER:
Genius Products, Inc., a Delaware corporation
By: ____________________________________
Print Name: ___________________________
Its: (title) __________________________
EMPLOYEE:
By: ____________________________________
Print Name: ___________________________
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EXHIBIT A
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[SHORT-TERM INCENTIVE OPPORTUNITY]
EXHIBIT B
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[STOCK OPTION AGREEMENT]
EXHIBIT C
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[2004 STOCK OPTION PLAN]
EXHIBIT D
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TERMINATION CERTIFICATE
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This is to certify that undersigned does not have in the undersigned's
possession, nor has undersigned failed to return, any customer information,
records, files, programs, documents, data, specifications, drawings, blueprints,
reproductions, sketches, notes, reports, proposals, or copies of them, or other
documents or materials, equipment, or other property or asset belonging to
Genius Products, Inc. ("Employer"), its successors and assigns.
Undersigned further certify that undersigned has fully complied with and will
continue to comply with all the terms of the Employment Agreement dated as of
[date], 2005 between Employer and the undersigned (the "Agreement").
Undersigned further agree that, in compliance with the Agreement, undersigned
will preserve as confidential all any trade secrets, confidential information,
knowledge, data or other information of Employer relating to products,
processes, know-how, designs, formulas, test data, customer lists, business
plans, marketing plans and strategies, pricing strategies or other subject
matters pertaining to any business of Employer or any of its clients, customers,
Employees, licensees or affiliates, that Employee produced, obtained or
otherwise acquired or became aware of during the course of Employee's engagement
under the Agreement.
EMPLOYEE:
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Xxxxxx Xxxxxxxxxx
Date:
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