AMENDMENT TO EMPLOYMENT AGREEMENT
EXHIBIT
99.1
AMENDMENT
TO EMPLOYMENT AGREEMENT
THIS
AMENDMENT TO EMPLOYMENT AGREEMENT dated as of December 5, 2005 (this
"Amendment"), is entered into by and between Xxxxxx Xxxxxxxxxx (hereinafter
called "Employee"), and Genius Products, Inc. (hereinafter the "Employer"),
with
reference to the following:
RECITALS
WHEREAS,
Employee and Employer entered into that certain Employment Agreement made as
of
July 12, 2005 (the “Employment Agreement”);
WHEREAS,
Employer and The Xxxxxxxxx Company LLC,
a
Delaware limited liability company and The Xxxxxxxxx Company Holdings LLC (the
“LLC”) and Genius Products, Inc., entered into that certain Master Contribution
Agreement dated December 5, 2005 (the “Contribution Agreement”).
WHEREAS,
Employee and Employer desire by this Amendment to amend the Employment Agreement
in order to, among other things, (a) revise the term of the Employment
Agreement, and (b) further amend, modify and supplement the Employment Agreement
as set forth herein.
NOW,
THEREFORE, in consideration of good and valuable consideration, the receipt
and
sufficiency of which are hereby acknowledged by the parties to this Amendment,
Employee and Employer hereby agree as follows:
1. Recitals.
The
Recitals set forth above are incorporated herein as though set forth in full
herein.
2. Term.
(a)
The
first paragraph of paragraph numbered 3 of the Employment Agreement, starting
with the words, “The term of this Agreement” and ending with the words, “to the
date of termination” is deleted in its entirety and replaced with the
following:
“Term
and Termination:
The term
of the Employment Agreement shall be for a period of three (3) years starting
from the date of the Amendment (the “Initial Term”). Before the expiration of
the Initial Term, Employer shall have the option to extend the Agreement for
an
additional twelve months (“Second Term”). Before the expiration of the Second
Term, Employer shall have the option to extend the Agreement for an additional
twelve months (“Third Term”). Unless the parties enter into a new contract
before the expiration of the Third Term or, if before the expiration of the
initial Term or the Second Term the Employer does not exercise the option to
extend the agreement for the Second Term or the Third Term, then Employee’s
employment shall continue on an “at-will” basis. In the event Employee shall be
terminated by Employer without “Cause” during the Initial Term or during the
Second Term or Third Term (if applicable), Employer shall provide Employee
with
the compensation required by clause (a) of Paragraph 2 of the Employment
Agreement as of the termination date for the remaining term of the Initial
Term,
the remaining term of the Second Term or the remaining term of the Third Term,
whichever is applicable (the “Severance Period”) following the date of such
termination and, in addition, at Employer’s discretion, either pay for the
health insurance required by clause (e) of Paragraph 2 of this Agreement during
the Severance period or
pay
Employee the value of such health insurance for the severance period
(collectively “Severance”) plus all accrued but unpaid salary and vacation time
to the date of termination, with
the
salary portion of all such compensation and severance payable in cash in a
lump
sum (less deductions required by law) due immediately upon termination.
Notwithstanding anything herein to the contrary, the Severance Period shall
not
exceed thirty-six (36) months. 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 shall any such payment be reduced by
any
earnings or income that Employee may receive from any other source. In addition
to the foregoing Severance, the vesting of Employee’s stock options shall
accelerate as to the number of shares that would otherwise have vested and
been
exercisable as of the date that is twelve (12) months from the date of such
termination. Employee’s eligibility for severance benefits is conditioned on
Employee having first signed a release agreement in the form attached as Exhibit
A and a termination certificate as provided in paragraph 5. Upon termination
of
Employee's employment with Employer for Cause, Employer shall be under no
further obligation to Employee for salary, severance, or other compensation
except to pay all accrued but unpaid salary and accrued vacation time to the
date of termination.”
1
(b)
The
definition of “cause” in the Employment Agreement is deleted and replaced with
the following:
For
purposes of this Agreement, “Cause” shall mean that Employee: has been
repeatedly negligent in the discharge of his or her duties to Employer, or
has
acted in a manner constituting gross negligence or willful misconduct; has
been
dishonest or committed or engaged in an act of theft, embezzlement or fraud,
a
material breach of confidentiality, an unauthorized disclosure or use of inside
information, customer lists, trade secrets or other confidential information;
has breached a fiduciary duty; has been convicted of, or plead guilty or nolo
contendere to any felony, or a misdemeanor (other than minor traffic violations
or similar offenses) injurious to the reputation, business or assets of Employer
or an affiliate; has materially breached any of the material provisions of
this
agreement; has engaged in unfair competition with, or otherwise acted
intentionally in a manner injurious to the reputation, business or assets of,
Employer or an affiliate; has materially violated Employer’s 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
policies, or use or disclosure of Employer’s trade secrets for personal gain; or
has improperly induced a vendor or customer to break or terminate any contract
with Employer or an affiliate or induced a principal for whom Employer or an
affiliate acts as agent to terminate such agency relationship.
3.
Compensation.
(a)
Paragraph 2(a) is deleted and replaced with the following
paragraph:
“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) set forth
below.
2
|
(i)
|
Year
1 - $425,000 per year, plus eligibility for an annual bonus in
an amount
up to 50% of annual salary based on performance factors to be determined
by the Board of Directors.
|
|
(ii)
|
Year
2 - $475,000 per year, plus eligibility for an annual bonus in
an amount
up to 50% of annual salary based on performance factors to be determined
by the Board of Directors.
|
|
(iii)
|
Year
3 - $525,000 per year, plus eligibility for an annual bonus in
an amount
up to 50% of annual salary based on performance factors to be determined
by the Board of Directors.
|
|
(iv)
|
Second
Term - $625,000 per year, plus eligibility for an annual bonus
in an
amount up to 50% of annual salary based on performance factors
to be
determined by the Board of Directors.
|
|
(v)
|
Third
Term - $675,000 per year, plus eligibility for an annual bonus
in an
amount up to 50% of annual salary based on performance factors
to be
determined by the Board of
Directors.
|
In
addition, the Board of Directors will grant Employee an additional 1,000,000
stock
options (“New Options”) to vest in equal installments over 5 years, starting on
the first anniversary of the date of the grant. The initial grant of stock
options will be granted on the date of the Closing of the Contribution
Agreement, as the term Closing is defined in that agreement (“Closing”). The
stock options’ exercise price will be priced at the closing share price on the
date of grant, and will be subject to Employee signing Employer’s form stock
option agreement, in substantially the form attached hereto as Exhibit
B.
The
options shall be governed by the stock option plan, as it may be amended from
time to time.”
(b)
A new
paragraph (h) is added to paragraph 2 of the Employment Agreement and will
read,
“Pay employee a car allowance of $900 per month.”
4.
Stock
Options.
Employee’s New Options shall vest pursuant to the terms of Paragraph 3(a) above.
Employee’s stock options that have vested prior to Closing are referred to
herein as “Existing Options,” and Employee’s stock options that shall vest due
to the Closing or the transactions contemplated thereby are referred to herein
as “Accelerated Options.” Upon Closing, all of the Accelerated Options and
seventy five percent (75%) of the Existing Options (collectively, the “Combined
Options”) shall be subject to a restriction on Employee’s sale, transfer or
other hypothecation of the shares represented by such Combined Options. The
restriction on Employee’s sale, transfer or other hypothecation of the shares
represented by such Combined Options shall be lifted as follows; twenty-five
percent (25%) on the date which is twelve (12) months after the Closing date;
twenty-five percent (25%) on the date which is twenty four (24) months after
the
Closing date; twenty-five percent (25%) on the date which is thirty-six (36)
months after the Closing date; and the remaining twenty-five percent (25%)
on
the date which is forty-eight (48) months after the Closing date. A schedule
of
Employee’s Existing Options is attached as Exhibit A to this
Amendment.
5.
At-Will.
(a)
The
sentence in the recital, which reads, “(b) the terms of Employee’s employment,
including the "at-will" nature of the relationship,” is deleted and replaced
with “(b) the terms of Employee’s employment,”
(b)
The
sentence in paragraph 8, which reads, “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.” is changed to “This Agreement is between Employee
and Employer and shall not form or be deemed to form a partnership or joint
venture.”
3
(c)
The
sentence in paragraph 10 of the Employment Agreement, which reads, “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” is changed to “EMPLOYEE UNDERSTANDS ALL OF THE TERMS OF THIS
EMPLOYMENT AGREEMENT, AND HAS REVIEWED THIS AGREEMENT IN DETAIL BEFORE AGREEING
TO EACH AND ALL OF THE PROVISIONS”.
6.
Nonsolicitation.
Employee
acknowledges that, due to his position with Employer, he will have access to
confidential information and trade secrets. Accordingly, Employee agrees that
during his employment with Employer and for a period of one (1) year after
termination of his employment with Employer, he shall not directly or indirectly
(i) divert or attempt to divert from Employer, TWC, or the Distributor any
business of any kind, including without limitation the solicitation of or
interference with any of their customers, clients, members, business partners
or
suppliers or (ii) solicit, induce, recruit or encourage any person employed
by
Employer, TWC, or the Distributor to terminate his or her
employment.
7.
Original
Agreement.
Except
as specifically herein amended, the Employment Agreement is and shall remain
in
full force and effect according to the terms thereof. In the event of any
conflict between the Employment Agreement and this Amendment, this Amendment
shall control.
8. Entire
Agreement.
This
Amendment coupled with the Employment Agreement contain the
entire agreement between Employer and Employee relating to Employee’s employment
with Employer, and they supersede all previous agreements, whether oral or
written.
9. Counterparts.
This
Amendment may be executed in several counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
agreement.
10.
Effectiveness.
This
Amendment shall become effective upon Closing. In the event the Closing does
not
occur, then this Agreement will be null and void. Employee acknowledges and
agrees that the Agreement, as amended by this Amendment, and Employer’s rights
and obligations hereunder and thereunder, are intended to be assigned by
Employer to the LLC effective at the, and that from and after such time Employee
will be employed by the LLC pursuant to the terms of the Agreement as amended
by
this Amendment.
IN
WITNESS WHEREOF, this Amendment has been executed by the parties as of the
date
first referenced above.
“Employee”
/s/
Xxxxxx Xxxxxxxxxx
Xxxxxx
Xxxxxxxxxx
“Employer”
Genius
Products, Inc.
By:
/s/
Xxxxx Xxxxxx
Its:
Chairman of the Board
4
Exhibit
A: Schedule of Existing Stock Options
5
SEVERANCE
AGREEMENT
AND
GENERAL RELEASE OF ALL CLAIMS
6
This
Severance Agreement and General Release of All Claims (“Agreement”) is entered
into between ____________________ (“Employee”) and Genius Products, Inc. and all
related holding, parent or subsidiary entities and their affiliates, directors,
officers, representatives, agents, principals, partners and employees,
stockholders, predecessors and successors and/or assigns, insurers, and
attorneys (all collectively referred to as “Genius” or “Employer”).
1.
Termination
of Employment.
Employee’s employment with Employer is terminated effective ___________ (“ the
termination date”).
2.
Severance.
In
consideration of and in return for the promises contained in this Agreement,
and
as full and final compensation to Employee for all services as an
employee:
a.
Employee shall receive from Employer, with appropriate deductions and
withholdings, _____________________ (weeks or months) pay as severance
as
provided for in Employee’s employment contract with Genius
Products,
payable
commencing on the termination date, in accordance with Genius Products regular
payroll practices, in addition to all accrued and unused wages and vacation
pay
through the termination date;
b.
Employee will continue on Employer’s medical plan up to and including Employee’s
termination date. Employee shall have the right to continue his/her medical
and
dental insurance, at Employee’s sole expense, pursuant to the provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") provided,
however, that Employee timely elects COBRA continuation. The COBRA period shall
be deemed to have commenced on the termination date;
c
.
Employee acknowledges and agrees that the severance provided for in this
Agreement is due under his/her employment contract only if she signs this
Agreement; and
e.
Employer warrants and Employee acknowledges that the agreements described under
this Paragraph 2 constitute full payment of any and all claims of every nature
and kind arising out of or relating in any way to Employee’s employment by
Employer or the termination thereof, benefits owed, or any other claims as
outlined below.
3.
Release.
In
consideration of the above described payment, and for other good and valuable
consideration, Employee agrees employment with Employer has terminated as of
the
termination date, and that Employee has received full payment of all wages,
vacation accrued but not used, and any and all other sums due as a result of
such employment by Employer. In further consideration of and in return for
the
promises and covenants undertaken herein, Employee does hereby unconditionally,
irrevocably and absolutely release and discharge Employer and all related
holding, parent or subsidiary entities and their affiliates, directors,
officers, representatives, agents, principals, partners and employees,
stockholders, predecessors and successors and/or assigns, insurers, and
attorneys from any and all liability, claims, demands, causes of action, or
suits of any type, whether in law and/or in equity, known or unknown, related
directly or indirectly or in any way connected with any transaction, affairs
or
occurrences between them to date, including, but not limited to, Employee’s
employment with Employer and the termination of said Employment. This Agreement
shall include but not be limited to a release of claims arising under any state
or federal statute or common law regulating or affecting employment, including
Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act,
the Equal Pay Act, Age Discrimination in Employment Act, the Fair Labor
Standards Act, federal and state wage and hour laws including, without
limitation, the California Labor Code, California Government Code Sections
12940
et seq., any applicable California Industrial Wage Orders, all as amended,
all
claims for breach of contract, employment discrimination, sexual harassment,
wages, severance, overtime compensation, vacation, torts, fraud, and/or claims
any other local, state or federal law, rule, or regulation relating to or
affecting Employee’s employment by Employer, except any claim for unemployment
insurance or worker’s compensation.
7
4.
Claims.
In
further consideration of the above described payments and benefits, and for
other good and valuable consideration, Employee irrevocably and absolutely
agrees that he/she will not prosecute nor allow to be prosecuted on his/her
behalf in any administrative agency, whether federal or state, or in any court,
whether federal or state, any claim or demand of any type related to the matters
released above. It is the intention of the parties that, with the execution
of
this Agreement, Employer and all related holding, parent or subsidiary entities
and their affiliates, directors, officers, representatives, agents, principals,
partners and employees, stockholders, predecessors and successors and/or
assigns, insurers, and attorneys will be absolutely, unconditionally and forever
discharged of and from all obligations to or on behalf of Employee related
in
any way to the matters released. Employee represents that he/she has not filed
any complaint, charges or lawsuits against Employer and all related holding,
parent or subsidiary corporations (including their affiliates, officers,
directors, and employees) with any governmental agency or any
court.
5.
Unknown
Claims.
Employee understands and agrees that this Agreement extends to all claims of
every nature, known or unknown, suspected or unsuspected, past or present,
and
that any and all rights granted to Employee under Section 1542 of the California
Civil Code or any analogous federal law or regulation are hereby expressly
waived. Section 1542 provides:
“A
general release does not extend to claims which the creditor does not know
of or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the
debtor.”
Employee
certifies that he/she has read this release, the quoted Civil Code section
and
that he/she fully understands this release.
6.
Binding
Effect.
This
Agreement and all promises and agreements set forth in this Agreement shall
be
binding upon and shall inure to the benefit of the respective parties, their
legal successors, heirs, assigns, partners, representatives, agents, attorneys,
officers, directors and shareholders.
7.
Entire
Agreement.
Employee further declares and represents that no promise or representation
not
contained in this Agreement has been made to him/her and acknowledges and
represents that this Agreement contains the entire understanding between the
parties and contains all terms and conditions pertaining to the compromise
and
settlement of the subjects referenced in this Agreement. However, any
Proprietary or Trade Secrets agreement or any agreement regarding ownership
of
intellectual property by Genius Products entered into previously shall remain
in
full force and effect. Employee further acknowledges that the terms of this
Agreement are contractual and not a mere recital
8.
Confidentiality.
Employee acknowledges and agrees that the confidential nature of this Agreement
is a material inducement for Employer to enter into this Agreement. Employee
agrees that the fact of, and the terms and conditions of this Agreement, and
any
and all actions by the parties to this Agreement, are confidential and shall
not
be disclosed, discussed or revealed by Employee to any other person or entity
except spouse, significant other, parent, attorney, financial advisor, or as
required by law. Employee further agrees he/she will not make any statement
or
take any action, directly or indirectly, that xxxxx, or could harm, Employer’s
business interests, reputation, or good will. EMPLOYEE SPECIFICALLY AGREES
NOT
TO DISCLOSE THE TERMS OF THIS AGREEMENT TO OTHER CURRENT OR FORMER EMPLOYEES
OF
EMPLOYER.
8
9.
Confidential
Information and Trade Secrets.
Employee acknowledges that all confidential materials, records and documents
concerning Employer that have come into Employee’s possession during his/her
employment with Employer have been returned to Employer. Employee agrees not
to
disclose to any person or entity, including any competitor of Employer and
any
future employer, any of Employer’s trade secrets or other confidential
information. Employee acknowledges all Employer’s property obtained during the
course of her employment with Employer has been returned to Employer. To the
extent Employee has entered into any Proprietary or Trade Secrets agreement
or
any agreement regarding ownership of intellectual property by Genius Products,
if such Agreements provide greater protection to Genius Products than this
Agreement, such other Agreements shall take precedence over this
Agreement.
10.
Interpretation
and Severability.
The
validity, interpretation, and performance of this Agreement shall be construed
and interpreted according to the laws of the State of California. This Agreement
shall not be interpreted for or against either party hereto on the ground that
such party drafted or caused this Agreement to be drafted. If any provision
of
this Agreement, or part thereof, is held invalid, void or voidable as against
public policy or otherwise, the invalidity shall not affect other provisions,
or
parts thereof, which may be given effect without the invalid provision or part.
To this extent, the provisions, and parts thereof, of this Agreement are
declared to be severable.
11.
Arbitration
of Disputes.
Any
dispute arising out of this Agreement or Employee’s employment or termination
shall be resolved by binding arbitration in San Diego, California, and the
findings of the arbitrator shall be final and binding upon the
parties.
12.
Attorneys’
Fees.
In any
dispute involving this Agreement, the prevailing party shall be entitled to
attorneys’ fees and costs.
|
13.
|
IF
EMPLOYEE IS UNDER THE AGE OF 40, A SIGNATURE ON THIS RELEASE WILL
BE
IMMEDIATELY EFFECTIVE. IF
EMPLOYEE IS OVER THE AGE OF 40, THE FOLLOWING PROVISIONS
APPLY:
|
Age
Discrimination in Employment Act Release.
A.
Employee acknowledges Employer hereby has advised Employee in writing to discuss
this Agreement with an attorney before executing it and that Employer has
provided Employee at least twenty-one (21) days within which to review and
consider this Agreement before signing it.
B.
The
Parties acknowledge and agree that Employee may revoke this Agreement for up
to
seven (7) calendar days following the execution of this Agreement, and that
it
shall not become effective or enforceable until the revocation period has
expired. The Parties further acknowledge and agree that such a revocation must
be in writing, addressed to Xxxxxx X. Xxxxxx, Esq., Xxxx, Xxxxxx & Xxxxxxxx,
LLP, 000 Xxxx “X” Xxxxxx, Xxxxx 0000, Xxx Xxxxx, XX 00000, and received not
later than 5:00 p.m. on the seventh (7th) day following execution of this
Agreement by Employee. If Employee revokes this Agreement, it shall not be
effective or enforceable and Employee will not receive the monies and benefits
described above.
C.
If
Employee does not revoke this Agreement in the time frame specified in this
section 20, the Agreement shall become effective at 12:01 a.m. on the eighth
(8th) day after it is signed by Employee.
9
I
have
read the foregoing Severance Agreement and General Agreement of All Claims
and I
accept and agree to the provisions contained in this Agreement and execute
it
voluntarily and with full understanding of its consequences.
PLEASE
READ CAREFULLY, THIS AGREEMENT CONTAINS A GENERAL RELEASE OF ALL KNOWN AND
UNKNOWN CLAIMS.
Dated:
________________, 2005 _____________________________
10
