STOCK OPTION AGREEMENT
                             ----------------------
                                (FORM S-8 SHARES)
                                 ---------------


         Stock Option Agreement dated as of May 25, 2000, between Genius
Products, Inc. (the "COMPANY") and Howard Balaban (the "GRANTEE").

         WHEREAS, the Grantee is an officer of the Company and has rendered
valuable services; and

         WHEREAS, the Company in recognition of such services has granted a
non-qualified option (the "OPTION") to Grantee as set forth therein and herein;
and

         WHEREAS, the parties wish to ratify and memorialize the grant and the
terms and conditions by which the Option is governed; and

         WHEREAS, the Company has adopted a stock option plan entitled 2000
Non-Qualified Stock Option Plan (the "PLAN") under which shares of the Company's
common stock into which the Option is exercisable have been registered with the
Securities and Exchange Commission pursuant to a Form S-8 filed on May 25, 2000;

         NOW THEREFORE, in consideration of the mutual covenants set forth
herein, and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereby agree as follows:

         Section 1. GRANT OF OPTION. The Company hereby confirms the grant to
Grantee of the Option to purchase shares of common stock of the Company (the
"SHARES"), subject to the terms and conditions of this Option Agreement and
those of the Plan (which is incorporated herein by reference), as follows:

    DATE OF GRANT    NO. OF SHARES    EXERCISE PRICE    VESTING DATE    TERM
    -------------    -------------    --------------    ------------    ----

    May 25, 2000     350,000          $0.54             May 25, 2000    3 years

         In the event of a conflict between the terms and conditions of the Plan
and this Option Agreement, the terms and conditions of the Plan shall prevail.
This Option is intended to be treated as a non-statutory (non-qualified) stock
option.

         Section 2. EXERCISE OF OPTION. (a) RIGHT TO EXERCISE. This Option to
purchase Shares shall be exercisable at any time after the applicable Vesting
Date and prior to the end of the Term, subject to the applicable provisions of
the Plan and this Option Agreement.

         (b) METHOD OF EXERCISE. This Option shall be exercisable by delivery of
an exercise notice in the form attached as EXHIBIT A (the "EXERCISE NOTICE")
which shall state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and such other representations
and agreements as may be required by the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by the aggregate Exercise
Price.

         (c) COMPLIANCE WITH APPLICABLE LAW. No Shares shall be issued pursuant
to the exercise of an Option unless such issuance and such exercise complies
with all applicable laws. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to the Grantee on the date on which the
Option is exercised with respect to such Shares.

<PAGE>

         Section 3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price
shall be by any of the following, or a combination thereof, at the sole
discretion of the Company:

         (a)      cash or check;

         (b)      consideration received by the Company under a formal cashless
                  exercise program adopted by the Company in connection with the
                  Plan; or

         (c)      surrender of other Shares which, (i) in the case of Shares
                  acquired upon exercise of an Option, have been owned by the
                  Grantee for more than six (6) months on the date of surrender,
                  and (ii) have a fair market value on the date of surrender
                  equal to the aggregate Exercise Price of the Exercised Shares.

         Section 4. NON-TRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Grantee only by
Grantee. The terms of the Plan and this Option Agreement shall be binding upon
the executors, administrators, heirs, successors and assigns of the Grantee.

         Section 5. TERM OF OPTION. This Option may be exercised only prior to
the Expiration Date set out in the Notice of Grant, and may be exercised during
such term only in accordance with the Plan and the terms of this Option.

         Section 6. TAX CONSEQUENCES. Set forth below is a brief summary as of
the date of this Option of some of the federal tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.

         (a)      EXERCISE OF NON-QUALIFIED STOCK OPTION. There may be a regular
                  federal income tax liability upon the exercise of a
                  Non-Qualified Stock Option. The Grantee will be treated as
                  having received compensation income (taxable at ordinary
                  income tax rates) equal to the excess, if any, of the fair
                  market value of the Shares on the date of exercise over the
                  Exercise Price. If Grantee is an employee or a former
                  employee, the Company will be required to withhold from
                  Grantee's compensation or collect from Grantee and pay to the
                  applicable taxing authorities an amount in cash equal to a
                  percentage of this compensation income at the time of
                  exercise, and may refuse to honor the exercise and refuse to
                  deliver the Shares if such withholding amounts are not
                  delivered at the time of exercise.

         (b)      DISPOSITION OF SHARES. In the case of a Non Qualified Stock
                  Option, if Shares are held for at least one year, any gain
                  realized on disposition of the Shares will be treated as
                  long-term capital gain for federal income tax purposes.

         Section 7. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated
herein by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Grantee with respect to the subject matter hereof, and may not be modified
adversely to the Grantee's interest except by means of a writing signed by the
Company and Grantee. This agreement is governed by the internal substantive laws
but not the choice of law rules of California.

         Section 8. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company. Subject
to the restrictions on transfer herein set forth, this Agreement shall be
binding upon Grantee and his or her heirs, executors, administrators, successors
and assigns.

         Section 9. INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Grantee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.

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<PAGE>

         Section 10. RECEIPT OF PLAN. Grantee acknowledges receipt of a copy of
the Plan and represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. Grantee has reviewed the Plan and this Option Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option
Agreement. Grantee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising
under the Plan or this Option. Grantee further agrees to notify the Company upon
any change in the residence address indicated below.


GRANTEE:                                                   GENIUS PRODUCTS, INC.


/S/ HOWARD BALABAN                                         /S/ KLAUS MOELLER
---------------------                                      ---------------------
Howard Balaban                                             Klaus Moeller, CEO

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<PAGE>

                                    EXHIBIT A
                                    ---------

                             [LETTERHEAD OF GRANTEE]


[Date]

Genius Products, Inc.
11250 El Camino Real, Suite 100
San Diego, CA  92130

Attention:  Corporate Secretary


                                 EXERCISE NOTICE
                      2000 NON-QUALIFIED STOCK OPTION PLAN
                      ------------------------------------


         1. EXERCISE OF OPTION. Effective as of this ___ day of ___________,
_____, the undersigned ("Grantee") hereby elects to exercise Grantee's option to
purchase _________ shares of the Common Stock (the "SHARES") of Genius Products,
Inc. (the "COMPANY") under and pursuant to that certain plan entitled 2000
Non-Qualified Stock Option Plan adopted by the Company as of May 25, 2000 (the
"PLAN") and the Stock Option Agreement dated ________, ____ (the "OPTION
AGREEMENT").

         2. DELIVERY OF PAYMENT. Grantee herewith delivers to the Company the
full purchase price of the Shares, as set forth in the Option Agreement.

         3. REPRESENTATIONS OF GRANTEE. Grantee acknowledges that Grantee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

         4. RIGHTS AS SHAREHOLDER. Until the issuance of the Shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Shares,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Grantee as soon as practicable after the Option is exercised.

         5. TAX CONSULTATION. Grantee understands that Grantee may suffer
adverse tax consequences as a result of Grantee's purchase or disposition of the
Shares. Grantee represents that Grantee has consulted with any tax consultants
Grantee deems advisable in connection with the purchase or disposition of the
Shares and that Grantee is not relying on the Company for any tax advice.

         6. TRANSFER RESTRICTIONS; STOP-TRANSFER ORDER.

         (a) REFUSAL TO TRANSFER. Grantee acknowledges and agrees that the
         Company shall not be required (i) to transfer on its books any Shares
         that have been sold or otherwise transferred in violation of any of the
         provisions of the Stock Option Agreement or the Plan or (ii) to treat
         as owner of such Shares or to accord the right to vote or pay dividends
         to any purchaser or other transferee to whom such Shares shall have
         been so transferred.

         (b) STOP-TRANSFER NOTICES. Grantee agrees that, in order to ensure
         compliance with the restrictions referred to in the Stock Option
         Agreement, the Company may issue appropriate "stop transfer"
         instructions to its transfer agent, if any, and that, if the Company
         transfers its own securities, it may make appropriate notations to the
         same effect in its own records.

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<PAGE>

Submitted by:                               Accepted by:

GRANTEE:                                    GENIUS PRODUCTS, INC.

____________________________________        ____________________________________
Signature                                   Name:
                                            Title:

____________________________________        ____________________________________
Print Name                                  Date received

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