KIT DIGITAL, INC.

TRANSITION AGREEMENT WITH KALEIL ISAZA TUZMAN

SUMMARY OF TERMS

 

March 23, 2012

 

General:

Kaleil Isaza Tuzman (“Isaza Tuzman”) is currently the Chairman of the Board and
Chief Executive Officer of KIT digital, Inc., a Delaware corporation (the
“Company”). Isaza Tuzman and the Company (together, the “Principal Parties”)
have agreed that Isaza Tuzman will step down from his role as Chief Executive
Officer, but will continue to serve as Chairman of the Board of Directors (the
“Board”) of the Company, pursuant to the terms and conditions set forth in this
Summary of Terms (“Term Sheet”). The parties agree that promptly following
acceptance of this Term Sheet they shall negotiate and enter into such
definitive agreement(s) as may be necessary or appropriate in accordance with
applicable laws and consistent with the terms hereof (the “Agreement”).

 

Role and Responsibilities: On March 31, 2012 or as soon as practicable
thereafter (the “Transition Date”), Isaza Tuzman shall step down from his role
as Chief Executive Officer of the Company (“Current Role”) but shall remain as
Chairman of the Board (“Continuing Role”). During the period of time between
execution of this Term Sheet and the Transition Date (such period referred to
herein as the “Transition Period”), Isaza Tuzman shall continue to exercise his
day-to-day executive responsibilities of his Current Role. Following the
Transition Period, in his Continuing Role as Chairman, or as a member, of the
Board Isaza Tuzman shall, among other things:

 

 

·

Participate as a member, and Chairman, of the Board  

·

Participate as a member of the committee (the “Search Committee”) created by the
Board to identify, interview, negotiate with and, ultimately, make a
recommendation to the Board regarding hiring a future Chief Executive Officer.  

·

Provide assistance to the Board and the Strategic Transaction Committee in
connection with any strategic alternatives planning process as may be undertaken
from time to time by the Board or the Strategic Transaction Committee.  

·

At the request of management of the Company or the Board, provide assistance to
the executive management of the Company, from time to time, in connection with
operations, financing transactions, and other matters as the Board or executive
management may request from time to time.  

·

Such other customary duties, rights and responsibilities of a chairman of a
board of directors, and any other duties, rights or responsibilities as may be
mutually agreed by the parties.

 

 

 

 

 

 

The Principal Parties acknowledge and agree that the Bylaws of the Company must
be amended by the Board in order to give effect to the non-executive Chairman
role contemplated hereby and the Principal Parties agree to use their reasonable
efforts to cause such amendment to be approved and adopted.

 

Compensation:

The Principal Parties acknowledge and agree that they are parties to several
agreements, plans and documents, including, without limitation, (a) that certain
Offer of Employment entered into on October 23, 2011 by and between Isaza Tuzman
and the Company (the “Employment Agreement”), (b) that certain Performance Share
Agreement entered into by and between the Principal Parties dated August 31,
2011 (the “Performance Agreement”), and (c) that certain Executive Management
Agreement by and between the Principal Parties dated December 18, 2007, as
amended (the “Executive Management Agreement”) (collectively the Employment
Agreement, the Performance Agreement, the Executive Management Agreement and
such other agreements, plans or documents to which the Principal Parties have
entered into and remain bound by are referred to herein as the “Tuzman
Agreements”). The Principal Parties agree that (i) promptly following the
execution of this Term Sheet they shall work together in good faith to identify
all of the currently operative Tuzman Agreements and determine whether such
Tuzman Agreements will be amended, modified, terminated or unchanged by the
Agreement, and (ii) notwithstanding any provision hereof to the contrary, no
provision of this Term Sheet shall be interpreted or construed as to result in
an outcome any worse than what Isaza Tuzman would have otherwise been entitled
to had he not voluntarily agreed to step aside from his role as Chief Executive
Officer, in each case consistent with the terms and intent hereof; provided,
however, that to the extent this Term Sheet modifies or amends Isaza Tuzman’s
Employment Agreement with respect to his title, responsibilities or base
compensation, the provisions of this Term Sheet shall remain in full force and
effect and shall be enforceable by and against the Principal Parties in
accordance with the terms hereof

 

In addition to the foregoing:

   

  · At the end of the Transition Period, the Company shall issue a promissory
note in the principal amount calculated in accordance with the last sentence in
this clause, which shall accrue interest at a rate of 10% per annum, and shall
be repaid by the Company in equal monthly installments over a six (6) month term
(the “Isaza Tuzman Note”); provided, however, that the entire principal and
interest due and owing under the Isaza Tuzman Note shall immediately mature and
become due and payable upon (a) any substantial equity or debt financing
transaction of the Company, or (b) a Change of Control as defined under the
Company’s most recent equity incentive plan. The Isaza Tuzman Note is being
issued by the Company in respect to certain amounts that the Company was
previously obligated to pay Isaza Tuzman pursuant to the Executive Management
Agreement. The principal amount will be the sum of the nominal amount due under
the Executive Management Agreement (without discount) as of the date hereof plus
four months of Isaza Tuzman’s nominal gross salary as of the date hereof less
the tax benefit Isaza Tuzman will receive from such payment.

 

-2-

 

 

 

  ·  The Company shall pay Isaza Tuzman, in the ordinary course of business, his
management bonus for 2011 as per the Company’s standard policies and procedures
(“2011 Management Bonus”). The amount of this bonus shall be determined and paid
by the Compensation Committee of the Board (or paid by the Company upon its
authorization) in due haste, and shall take into account the period of time
Isaza Tuzman worked prior to March 31, 2012.    ·  All stock options (the “Stock
Options”) granted and issued to Isaza Tuzman pursuant to the Company’s incentive
stock plans over time (together, the “Stock Option Plans”) together with all
restricted stock units (the “RSUs”) and performance contingent restricted stock
units (the “PCRSUs”) awarded and issued to Isaza Tuzman pursuant to those
certain Restricted Stock Unit Program (the “RSU Program”) and Performance
Contingent Restricted Stock Unit Program (the “PCRSU Program”) shall continue to
vest pursuant to the terms and conditions of the Stock Option Plans, the RSU
Program and the PCRSU Program, as the case may be, irrespective of Isaza
Tuzman’s ongoing role in the Company or on the Board.    ·  At the end of the
Transition Period, the Company shall pay Isaza Tuzman an amount, in cash,
determined pursuant to Section 7.1 of the Employment Agreement, which amount
shall be equal to the greater of (i) the total amount paid to Isaza Tuzman by
KIT Capital, Ltd. (“KIT Capital”) during the twelve (12) month period prior to
the effective date of the Employment Agreement, pursuant to the terms of the
Executive Management Agreement, and (ii) the amount of base compensation paid to
Isaza Tuzman by the Company during March 2012 multiplied by twelve (12) (the
product of the calculation described in (i) and (ii) above referred to herein as
the “Cash Severance Payment”). 

 

 

-3-

 

 

 

  ·  The Company shall reimburse Isaza Tuzman for his actual, out-of-pocket
reimbursable business expenses incurred in connection with his Current Role
including, but not limited to, the balance due on Isaza Tuzman’s Company
American Express Credit Card as of the end of the Transition Period to the
extent so incurred (collectively, the “Expense Reimbursement”). Following the
Transition Period, Isaza Tuzman shall be entitled to have his actual,
out-of-pocket expenses that are incurred in connection with the Services,
reimbursed in connection with the Company’s then-current expense reimbursement. 

 

  The Principal Parties agree that, in the context of negotiating the Agreement,
they shall negotiate in good faith a mutual release of any and all claims or
losses that one Principal Party may have against the other.      Indemnification
and Advancement:

Isaza Tuzman shall be entitled to full and complete indemnification and
advancement, as provided under the Delaware General Corporation Law, the
Company’s Certificate of Incorporation, the Company’s Bylaws, and Section 10 of
the Employment Agreement. Without limiting the generality of the foregoing,
Isaza Tuzman shall be entitled to indemnification, reimbursement and advancement
by the Company to the fullest extent permitted by Delaware law and expressly set
forth in the Agreement, including, but not limited, for any and all costs, fees,
expenses (including, but not limited to, attorneys’ fees, costs and expenses),
damages, claims, losses, fines, penalties, or otherwise, that may be incurred by
him by reason of the fact of his service as an officer or director of the
Company, including, without limitation, in any proceeding by or before any
foreign or domestic governmental body, judicial body, regulatory agency, or
other body.

 

Non-Disparagement:

Subject to each Principal Party’s disclosure obligations or duty of candor
before any governmental body or in any judicial process, each Principal Party
agrees that it shall not disparage the other. Subject to the Company’s
obligations and duty described in the foregoing sentence, the Company shall
respond to any third party inquiry regarding Isaza Tuzman, that Isaza Tuzman and
the Company mutually agreed that Isaza Tuzman would step down from his Chief
Executive Officer role and that Isaza Tuzman will remain as Chairman of the
Board, will remain a valuable member of the Company, and will continue to lead
overall corporate strategy in his Continuing Role. The Company shall also ensure
that its corporate and employee/consultant policies and procedures adequately
disclose the Company’s non-disparagement obligations set forth herein or in the
Agreement. In addition to the foregoing, each Principal Party shall use its
reasonable best efforts to cause, as applicable, its officers, directors,
employees, agents, consultants and advisors to comply with this
Non-Disparagement provision and, in the case of the Company, the Company
statement regarding Isaza Tuzman. In addition to the liability of any officer,
director, employee, agent, consultant or advisor for breach of the foregoing,
each Principal Party shall be jointly and severally liable for the breach of the
foregoing by any of its officers, directors, employees, agents, consultants or
advisors who or that breaches the foregoing

 

 

-4-

 

 

 

Non-Competition:

At such time as Isaza Tuzman no longer serves on the Board, Isaza Tuzman shall
be released from and no longer bound by any and all non-competition clauses
previously executed on behalf of the Company; provided, however, that Isaza
Tuzman shall not work for a “direct competitor” of the Company for a period of
the later to occur of (a) three (3) months following the expiration of his term
as a director of the Company and (b) six (6) months following the execution of
the Agreement.

 

Press Release

The Principal Parties shall collaborate and must mutually agree upon the
content, substance and language set forth in the Company’s press release
announcing the material terms and conditions of this Term Sheet, if required by
either Principal Party.

 

Expenses:

The Company shall pay all of Isaza Tuzman’s fees, costs and expenses (including
attorneys’ fees, costs and expenses) incurred in connection with the negotiation
and documentation of this Term Sheet and the definitive Agreement, and all other
documents and agreements contemplated in this Term Sheet.

 

Commercial

Guarantees;

Other Matters

As promptly as is practicable and in any event within 180 days after signing the
Agreement, the Company will arrange for the release or satisfaction of any
commercial obligations or guarantees in favor of third parties to which Isaza
Tuzman became and is obligated on the Company’s behalf in the ordinary course of
business or at the Company’s request.

 

As long as Isaza Tuzman is the Chairman of the Board, he will have full use of
an office and executive assistant as is made available by the Company.

   

Governing Law;
Jurisdiction and
Venue: This Term Sheet and the Agreement shall be governed by the laws of the
State of Delaware, without regard to the principles of conflict of laws thereof.
The parties agree to submit to the personal jurisdiction of the state and
Federal courts sitting in the State of Delaware, City of Wilmington. Any dispute
under this Term Sheet or the Agreement shall be resolved in the state or Federal
courts of the State of Delaware and each party agrees not to dispute or contest
the jurisdiction of the courts of such jurisdiction concerning any such dispute.

 

-5-

 

 

 

THE PARTIES SHALL PROMPTLY NEGOTIATE IN GOOD FAITH CONCERNING THE DEFINITIVE
AGREEMENT(S) (THE “AGREEMENT”) NECESSARY TO FORMALIZE THE TERMS AND CONDITIONS
SET FORTH HEREIN. NOTWITHSTANDING THE FOREGOING, THE PARTIES INTEND TO BE
LEGALLY BOUND BY THE TERMS AND PROVISIONS SET FORTH IN THIS SUMMARY OF TERMS AND
IF THE PARTIES ARE UNABLE TO AGREE UPON THE FORM OF SUCH DEFINITIVE AGREEMENT(S)
THIS SUMMARY OF TERMS SHALL CONTROL ISAZA TUZMAN’S TRANSITION FROM HIS CURRENT
ROLE TO HIS CONTINUING ROLE AND ALL MATTERS RELATED THERETO.

 

 

 

* * *

 

IN WITNESS WHEREOF, the parties have entered into this Summary of Terms this
23rd day of March, 2012.

 

  KIT DIGITAL, INC.             By: /s/Robin Smyth     Name: Robin Smyth    
Title: CFO                     /s/Kaleil Isaza Tuzman     Kaleil Isaza Tuzman  

 

 

 

 

-6-