Document:

genius_8k-ex1003.htm

    EXHIBIT
10.03

     

    NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE
OF THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THESE SECURITIES AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

     

    GENIUS
PRODUCTS, INC.

     

    COMMON
STOCK WARRANT

     

    Warrant
No. N-___                                       Original Issue Date: February 17,
2009

     

    GENIUS PRODUCTS, INC., a
Delaware corporation (the “Company”), hereby certifies
that, for value received, _______________ or his registered assigns (the “Holder”) is entitled to
purchase from the Company up to a total of ____________ shares of Common Stock
(each such share, a “Warrant
Share” and all such shares, the “Warrant Shares”) for the
price of $0.0001 per share, at any time and from time to time from and after the
earlier of (i) the Authorized Shares Date and (ii) the consummation of a
Fundamental Transaction and through and including February 17, 2014 (the “Expiration Date”), and
subject to the terms and conditions set forth below.  This Warrant is
one of several warrants aggregating up to 1,984,587,356 Warrant Shares (the
“Total Warrant Shares”)
issuable pursuant to the Purchase Agreement (as defined below).

     

    1. 
Definitions.  As
used in this Warrant, the following terms shall have the respective definitions
set forth in this Section 1.  Capitalized terms that are used and not
defined in this Warrant that are defined in the Purchase Agreement shall have
the respective definitions set forth in the Purchase Agreement.

     

    “Authorized Shares Date” shall
have the meaning set forth in Section 4(b).

     

    “Business Day” means any day
except Saturday, Sunday and any day that is a federal legal holiday in the
United States or a day on which banking institutions in the State of New York
are authorized or required by law or other government action to
close.

     

    
      “Common Stock” means the
common stock of the Company, par value $0.0001 per share, and any securities
into which such common stock may hereafter be reclassified.

       

    

    
      
        
        

      

      
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    “Exercise Price” means
$0.0001, subject to adjustment in accordance with Section 9.

     

    “Fundamental Transaction”
means any of the following: (1) the Company effects any merger or consolidation
of the Company with or into another Person, (2) the Company effects any sale of
all or substantially all of its assets in one or a series of related
transactions, (3) any tender offer or exchange offer (whether by the Company or
another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, (4) the Company effects any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property, or (5) any
liquidation, dissolution or winding up of the Company.

     

    “New York Courts” means the
state and federal courts sitting in the City of New York, Borough of
Manhattan.

     

    “Purchase Agreement” means
that certain Note and Warrant Purchase Agreement, dated as of February 17, 2009,
to which the Company and the original Holder are parties.

     

    “Trading Day” means (i) a day
on which the Common Stock is traded on a Trading Market (other than the OTC
Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market
(other than the OTC Bulletin Board), a day on which the Common Stock is traded
in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii)
if the Common Stock is not quoted on any Trading Market, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the Pink
Sheets, LLC (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.

     

    2. 
Registration of
Warrant.  The Company shall register this Warrant upon records
to be maintained by the Company for that purpose (the “Warrant Register”), in the
name of the record Holder hereof from time to time.  The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.

     

    3. 
Registration of
Transfers.  The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at its address specified herein.  Upon any such registration
or transfer, a new Warrant to purchase Common Stock, in substantially the form
of this Warrant (any such new Warrant, a “New Warrant”), evidencing the
portion of this Warrant so transferred shall be issued to the transferee and a
New Warrant evidencing the remaining portion of this Warrant not so transferred,
if any, shall be issued to the transferring Holder. The acceptance of the New
Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a
Warrant.

     

    
      
        
        

      

      
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    4. 
Exercise and Duration of
Warrants.

     

    (a) Exercise
Procedures.  This Warrant shall be exercisable by the
registered Holder at any time and from time to time on or after the earlier of
(i) the Authorized Shares Date and (ii) the consummation of a Fundamental
Transaction through and including the Expiration Date.  At 6:30 p.m.,
New York City time on the Expiration Date, the portion of this Warrant not
exercised prior thereto shall be and become void and of no value.  The
Company may not call or redeem any portion of this Warrant without the prior
written consent of the affected Holder.  Notwithstanding anything to
the contrary herein, if the Authorized Shares Date has not occurred by June 30,
2009, then the Expiration Date shall be extended for each day thereafter that
the Authorized Shares Date has not occurred.

     

    (b) Mandatory
Exercise.  At the earliest time that the Company has a
sufficient number of authorized and unreserved shares of Common Stock to permit
(A) the exercise of all (and not less than all) of the Total Warrant Shares and
(B) the conversion of all (and not less than all) outstanding shares of the
Company’s Series A Interim Convertible Preferred Stock into Common Stock in
accordance with its terms (the “Authorized Shares Date”), the
Company shall provide at least ten (10) days’ prior written notice of such event
(including the notice contemplated under Section 9(e) to the extent there is an
adjustment to the Exercise Price and/or the number of Warrant Shares), and upon
the expiration of the period set forth therein, all of the Warrant Shares shall
be deemed exercised for the maximum number of shares of Common Stock for which
this Warrant is exercisable pursuant to the cashless exercise provisions of
Section 10(b) hereof.  If the Holder desires to exercise this Warrant
for cash, the Holder may so notify the Company prior to the expiration of the
period set forth in such written notice, and the Holder may then exercise this
Warrant for cash on or prior to the expiration of such period.

     

    (c) Put
Right.  If the Authorized Shares Date has not occurred by June
30, 2009, then the Holder will have the right, at any time and from time to time
prior to the Authorized Shares Date, to require the Company to purchase all or
any portion of this Warrant for a purchase price, payable in cash within five
(5) Business Days after such request, equal to the Black Scholes value of the
portion of this Warrant to be so purchased on the date of such request
(calculated by the Company using (i) an expected volatility equal to the lesser
of 100% and the 100 day volatility obtained from the HVT function on Bloomberg
Financial Markets as of the trading day immediately preceding such date
(provided that if such information is not available on Bloomberg, actual
volatility will be as mutually agreed-upon by the Company and holders of a
majority in interest of the Warrants being purchased) and (ii) a time to
expiration equal to the lesser of 260 days and the actual number of days until
expiration of this Warrant).

     

    5. Delivery of Warrant
Shares.

     

    (a) To effect
exercises hereunder, the Holder shall not be required to physically surrender
this Warrant unless the aggregate Warrant Shares represented by this Warrant is
being exercised.  Upon delivery of the Exercise Notice (in the form
attached hereto) to the Company (with the attached Warrant Shares Exercise Log)
at its address for notice set forth herein and upon payment of the Exercise
Price multiplied by the number of Warrant Shares that the Holder intends to
purchase hereunder, the Company shall promptly (but in no event later than three
Trading Days after the Date of Exercise (as defined herein)) issue and deliver
to the Holder, a certificate for the Warrant Shares issuable upon such exercise,
which, unless otherwise required by the Purchase Agreement, shall be free of
restrictive legends.  The Company shall, upon request of the Holder
and subsequent to the date on which a registration statement covering the resale
of the Warrant Shares has been declared effective by the Securities and Exchange
Commission, use its reasonable best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions, if available, provided, that, the
Company may, but will not be required to change its transfer agent if its
current transfer agent cannot deliver Warrant Shares electronically through the
Depository Trust Corporation.  A “Date of Exercise” means the
date on which the Holder shall have delivered to the Company: (i) the Exercise
Notice (with the Warrant Exercise Log attached to it), appropriately completed
and duly signed and (ii) if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, payment of the Exercise Price for the
number of Warrant Shares so indicated by the Holder to be
purchased.

     

    
      
        
        

      

      
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    (b) If by the
third Trading Day after a Date of Exercise the Company fails to deliver the
required number of Warrant Shares in the manner required pursuant to Section
5(a), then the Holder will have the right to rescind such exercise.

     

    (c) In
addition to any other right available to the Holder, if by the third Trading Day
after a Date of Exercise the Company fails to deliver the required number of
Warrant Shares in the manner required pursuant to Section 5(a), and if after
such third Trading Day and prior to the receipt of such Warrant Shares, the
Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares
which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company
shall, within three Trading Days after the Holder’s request and in the Holder’s
discretion, either (1) pay in cash to the Holder an amount equal to the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the “Buy-In Price”), at which point
the Company’s obligation to deliver such certificate (and to issue such Common
Stock) shall terminate, or (2) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Common Stock and pay cash
to the Holder in an amount by which (x) the Buy-In Price exceeds (y) the amount
obtained by multiplying (A) the number of Warrant Shares that the Company was
required to deliver to the Holder in connection with the exercise at issue by
(B) the closing bid price of the Common Stock on the Date of
Exercise.  The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In.

     

    (d) The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of Warrant Shares.  Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing Warrant Shares upon exercise
of the Warrant as required pursuant to the terms hereof.

     

    
      
        
        

      

      
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    6. 
Charges, Taxes and
Expenses.  Issuance and delivery of Warrant Shares upon
exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
or Warrants in a name other than that of the Holder.  The Holder shall
be responsible for all other tax liability that may arise as a result of holding
or transferring this Warrant or receiving Warrant Shares upon exercise
hereof.

     

    7. 
Replacement of
Warrant.  If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity (which shall not include a surety bond), if
requested.  Applicants for a New Warrant under such circumstances
shall also comply with such other reasonable regulations and procedures and pay
such other reasonable third-party costs as the Company may
prescribe.  If a New Warrant is requested as a result of a mutilation
of this Warrant, then the Holder shall deliver such mutilated Warrant to the
Company as a condition precedent to the Company’s obligation to issue the New
Warrant.

     

    8. 
Reservation of Warrant
Shares.  The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued
and otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other
contingent purchase rights of Persons other than the Holder (taking into account
the adjustments and restrictions of Section 9). The Company covenants that all
Warrant Shares so issuable and deliverable shall, upon issuance and the payment
of the applicable Exercise Price in accordance with the terms hereof, be duly
and validly authorized, issued and fully paid and nonassessable.

     

    9. 
Certain
Adjustments.  The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.

     

    (a) Stock Dividends and
Splits.  If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event.  Any adjustment made pursuant to clause (i) of this paragraph
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.

     

    
      
        
        

      

      
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    (b) Rights Upon Distribution of
Assets. If the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a
“Distribution”), at any time after the issuance of this Warrant, then, in each
such case, the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant (assuming, for this purpose, that this Warrant is exercisable in
full regardless of whether the Authorized Shares Date has occurred at such time)
immediately before the date on which a record is taken for such Distribution,
or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the participation in such
Distribution.

     

    (c) Adjustments for Certain
Issuances.  For so long as this Warrant shall remain
outstanding, if the Company shall, at any time and from time to
time:

     

    (i)   Issue
Additional Shares of Common Stock to the Company’s directors, officers,
employees or consultants pursuant to an employee benefit plan or similar
arrangement (which shall in any event exclude shares issued to such individuals
as a dividend or distribution or stock split or combination in which all holders
of Common Stock participate) (the “Management Retention Shares”),
then and in such event, the aggregate number of Warrant Shares issuable upon
exercise of this Warrant shall be increased to a number of Warrant Shares equal
to the product of (i) the quotient of the aggregate number of Warrant Shares
issuable upon exercise of this Warrant immediately prior to the issue of
Additional Shares of Common Stock divided by the aggregate number of issued and
outstanding shares of Common Stock immediately prior to the issue of Additional
Shares of Common Stock and (ii) the sum of the aggregate number of issued and
outstanding shares of Common Stock immediately prior to the issue of Additional
Shares of Common Stock and the aggregate number of Management Retention Shares
issued as of the date of such calculation.  For purposes of this
Subsection 9(c)(i), “Additional Shares of Common Stock” shall mean all shares of
Common Stock issued or issuable by the Company pursuant to (i) restricted stock
grants, (ii) the exercise of rights, options or warrants to subscribe for,
purchase or otherwise acquire Common Stock, or (iii) the conversion or exchange
of equity securities of the Company, but shall exclude the options to purchase
or grants of restricted stock in the amount of 1,014,136,410 shares of Common
Stock contemplated by Section 4.7 (and Schedule 4.7) of the Purchase
Agreement.

     

    (ii)   Issue
additional warrants covering warrant shares that are part of the Total Warrant
Shares (which shall in any event exclude shares issued to individuals as a
dividend or distribution or stock split or combination in which all holders of
Common Stock participate) then and in such event, the aggregate number of
Warrant Shares issuable upon exercise of this Warrant shall be increased to a
number of Warrant Shares equal to the product of (i) the quotient of the
aggregate number of Warrant Shares issuable upon exercise of this Warrant
immediately prior to the issue of such additional warrants divided by the
aggregate number of issued and outstanding shares of Common Stock immediately
prior to the issue of such additional warrants and (ii) the sum of the aggregate
number of issued and outstanding shares of Common Stock immediately prior to the
issue of such additional warrants and the aggregate number of warrant shares
underlying such additional warrants.

     

    
      
        
        

      

      
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    (d) Fundamental
Transactions.  If, at any time while this Warrant is
outstanding there is a Fundamental Transaction, then the Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant
Shares then issuable upon exercise in full of this Warrant (assuming, for this
purpose, that this Warrant is exercisable in full regardless of whether the
Authorized Shares Date has occurred at such time) (the “Alternate
Consideration”).  For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders
of Common Stock are given any choice as to the securities, cash or property to
be received in a Fundamental Transaction, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon any exercise of
this Warrant following such Fundamental Transaction.  At the Holder’s
option and request, any successor to the Company or surviving entity (including,
without limitation, the Company) in such Fundamental Transaction shall, either
(1) issue to the Holder a new warrant substantially in the form of this Warrant
and consistent with the foregoing provisions and evidencing the Holder’s right
to purchase the Alternate Consideration for the aggregate Exercise Price upon
exercise thereof, or (2) purchase the Warrant from the Holder for a purchase
price, payable in cash within five Trading Days after such request (or, if
later, on the effective date of the Fundamental Transaction), equal to the Black
Scholes value of the remaining unexercised portion of this Warrant on the date
of such request (calculated by the Company using (i) an expected volatility
equal to the lesser of 100% and the 100 day volatility obtained from the HVT
function on Bloomberg Financial Markets as of the trading day immediately
preceding such date (provided that if such information is not available on
Bloomberg, actual volatility will be as mutually agreed-upon by the Company and
holders of a majority in interest of the Warrants being purchased) and (ii) a
time to expiration equal to the lesser of 260 days and the actual number of days
until expiration of this Warrant).  The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions
of this paragraph (d) and insuring that the Warrant (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.

     

    (e) Number of Warrant
Shares.  Simultaneously with any adjustment to the Exercise
Price pursuant to this Section 9, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such
adjustment.

     

    
      
        
        

      

      
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    (f) Calculations.  All
calculations under this Section 9 shall be made to the nearest cent or the
nearest share, as applicable, except for calculations of Exercise Price per
share, which shall be made without any rounding.  The number of shares
of Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.

     

    (g) Notice of
Adjustments.  Upon the occurrence of each adjustment pursuant
to this Section 9, the Company at its expense will promptly compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment, including a statement of the adjusted
Exercise Price and adjusted number or type of Warrant Shares or other securities
issuable upon exercise of this Warrant (as applicable), describing the
transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based.  Upon written request, the
Company will promptly deliver a copy of each such certificate to the Holder and
to the Company’s Transfer Agent.

     

    (h) Notice of Corporate
Events.  If the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common
Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction (but only to the extent such disclosure
would not result in the dissemination of material, non-public information to the
Holder) at least 10 calendar days prior to the applicable record or effective
date on which a Person would need to hold Common Stock in order to participate
in or vote with respect to such transaction, and the Company will take all steps
reasonably necessary in order to insure that the Holder is given the practical
opportunity to exercise this Warrant prior to such time so as to participate in
or vote with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.

     

    10. Payment of Exercise
Price. The Holder may pay the Exercise Price in one of the following
manners:

     

    (a) Cash
Exercise.  The Holder may deliver immediately available funds;
or

     

    (b) Cashless
Exercise.  The Holder may notify the Company in an Exercise
Notice of its election to utilize cashless exercise, in which event the Company
shall issue to the Holder the number of Warrant Shares determined as
follows:

     

    X = Y
[(A-B)/A]

     

    
      
        
        

      

      
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    where:

     

    X = the
number of Warrant Shares to be issued to the Holder.

     

    Y = the
number of Warrant Shares with respect to which this Warrant is being
exercised.

     

    A = the
closing price (or average of the closing bid and asked if there is no closing
price) for the Trading Day immediately prior to (but not including) the Exercise
Date.

     

    B = the
Exercise Price.

     

    For
purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued.

     

    11. 
No Fractional
Shares.  No fractional shares of Warrant Shares will be issued
in connection with any exercise of this Warrant.  In lieu of any
fractional shares which would, otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the closing price of one
Warrant Share as reported by the applicable Trading Market on the date of
exercise.

     

    12. 
Notices.  Any
and all notices or other communications or deliveries hereunder (including,
without limitation, any Exercise Notice) shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (ii) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (iii) the Trading Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be
given.  The addresses for such communications shall be:  (i)
if to the Company, to Genius Products, Inc., 3301 Exposition Blvd., Suite 100,
Santa Monica, CA 90404, Attention: Chief Executive Officer, or to facsimile no.:
(310) 401-2865 (or such other address as the Company shall indicate in writing
in accordance with this Section), or (ii) if to the Holder, to the address or
facsimile number appearing on the Warrant Register or such other address or
facsimile number as the Holder may provide to the Company in accordance with
this Section.

     

    13. 
Warrant
Agent.  The Company shall serve as warrant agent under this
Warrant.  Upon 10 days’ notice to the Holder, the Company may appoint
a new warrant agent.  Any corporation into which the Company or any
new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or
any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further
act.  Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder’s last address as shown on the Warrant
Register.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    14. 
Miscellaneous.

     

    (a) This
Warrant shall be binding on and inure to the benefit of the parties hereto and
their respective successors and assigns.  Subject to the preceding
sentence, nothing in this Warrant shall be construed to give to any Person other
than the Company and the Holder any legal or equitable right, remedy or cause of
action under this Warrant.  This Warrant may be amended only in
writing signed by the Company and the Holder and their successors and
assigns.

     

    (b) All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York (except for matters governed by
corporate law in the State of Delaware), without regard to the principles of
conflicts of law thereof.  Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of this
Warrant and the transactions herein contemplated (“Proceedings”) (whether
brought against a party hereto or its respective Affiliates, employees or
agents) shall be commenced exclusively in the New York Courts.  Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the New
York Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim
that it is not personally subject to the jurisdiction of any New York Court, or
that such Proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Warrant and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.  Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Warrant or the transactions
contemplated hereby.  If either party shall commence a Proceeding to
enforce any provisions of this Warrant, then the prevailing party in such
Proceeding shall be reimbursed by the other party for its attorney’s fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.

     

    (c) The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

     

    (d) In case
any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

     

    (e) Prior to
exercise of this Warrant, the Holder hereof shall not, by reason of being a
Holder, be entitled to any rights of a stockholder with respect to the Warrant
Shares.

     

    
      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK,

      
        SIGNATURE
PAGE FOLLOWS]

         

      

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.

     

    
      
        	 	

                GENIUS
      PRODUCTS, INC.

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Trevor
      Drinkwater            	 
	 	 	Name: Trevor
      Drinkwater	 
	 	 	Title: Chief
      Executive Officer	 
	 	 	 	 

      

    

    
    

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    
    

    
    

    
    

    EXERCISE
NOTICE

    GENIUS
PRODUCTS, INC.

    WARRANT
DATED FEBRUARY 17, 2009

     

    

     

    The
undersigned Holder hereby irrevocably elects to
purchase  _____________ shares of Common Stock pursuant to the above
referenced Warrant.  Capitalized terms used herein and not otherwise
defined have the respective meanings set forth in the Warrant.

     

    (1) The
undersigned Holder hereby exercises its right to purchase _________________
Warrant Shares pursuant to the Warrant.

     

    (2) The
Holder intends that payment of the Exercise Price shall be made as (check
one):

     

    ____                 “Cash
Exercise” under Section 10

     

    ____                 “Cashless
Exercise” under Section 10

     

    (3) If the
holder has elected a Cash Exercise, the holder shall pay the sum of
$____________ to the Company in accordance with the terms of the
Warrant.

     

    (4) Pursuant
to this Exercise Notice, the Company shall deliver to the holder _______________
Warrant Shares in accordance with the terms of the Warrant.

     

    

    

    
      	 
      	 
      	 
      
	 
      	 
      	 
      
	
              Dated:                                      ,         
      

            	 
      	
              Name
      of Holder:

            
	 
      	 
      	 
      
	 
      	 
      	
              (Print)
                                                                   

            
	 
      	 
      	 
      
	 
      	 
      	
              By:                                                               
  

            
	 
      	 
      	
              Name:                                                             

            
	 
      	 
      	
              Title:                                                               

            
	 
      	 
      	 
      
	 
      	 
      	
              (Signature
      must conform in all respects to name of holder as specified on the face of
      the Warrant)

            

    

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Warrant Shares Exercise
Log

     

    
      	
              Date

            	
              Number
      of Warrant Shares Available to be Exercised

            	
              Number
      of Warrant Shares Exercised

            	
              Number
      of Warrant Shares Remaining to be Exercised

            
	 
      	 
      	 
      	 
      

    

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    GENIUS
PRODUCTS, INC.

    WARRANT
ORIGINALLY ISSUED FEBRUARY 17, 2009

    WARRANT
NO. 1

     

     

    FORM OF
ASSIGNMENT

     

    [To be
completed and signed only upon transfer of Warrant]

     

    FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the above-captioned
Warrant to purchase  ____________ shares of Common Stock to which such
Warrant relates and appoints ________________ attorney to transfer said right on
the books of the Company with full power of substitution in the
premises.

     

    Dated:                      _______________,
____

     

     

    _______________________________________

    (Signature
must conform in all respects to name of holder as specified on the face of the
Warrant)

     

     

    _______________________________________

    Address
of Transferee

     

     

    _______________________________________

     

    _______________________________________

     

    In the
presence of:

     

    __________________________<PAGE>
EXHIBIT 10.1

Dean L. Julia
Chief Executive Officer
Ace Marketing & Promotions, Inc.
457 Rockaway Avenue
Valley Stream, NY 11581
Phone: 516-256-7766
Fax: 516-256-7805

          RE: INVESTMENT BANKING AGREEMENT WITH LEGEND SECURITIES, INC.

Dear Mr. Julia,

         This letter (THE "AGREEMENT") shall confirm the engagement of Legend
         Securities, Inc., ("LEGEND") by Ace Marketing & Promotions, Inc. (the
         "COMPANY" and collectively the "Parties") for purposes of providing, on
         a non-exclusive basis, investor awareness and business advisory
         services as set forth below in consideration for the fees and
         compensation described hereinafter:

1. The Agreement shall be effective as of February 24, 2009 (THE "EFFECTIVE
DATE").

2. The Company agrees to provide Legend such information, historical financial
data, projections, proformas, business plans, due diligence documentation, and
other information (collectively the "INFORMATION") in the possession of the
Company that Legend may reasonably request or require to perform the Services
(as hereinafter defined) set forth herein. The Information provided by the
Company to Legend shall be true, complete and accurate in all material respects
as of the date specified therein and shall not set forth any untrue statements
nor omit any fact required or necessary to make the Information provided not
misleading. The Company acknowledges that Legend may rely during the Term on the
accuracy and completeness of all Information provided by the Company without
independent verification. The Company authorizes Legend to use such Information
solely in connection with its performance of the Services.

3. Legend will use its best efforts to furnish ongoing investor awareness and
business advisory services (THE "SERVICES") as the Company may from time to time
reasonably request the Services may include, without limitation, the following:

         o        assistance with investor presentations such as, but not
                  limited to, PowerPoint slide presentations, broker/dealer fact
                  sheets, financial projections and budgets;

         o        sponsorship to capital conferences;

         o        identification and evaluation of financing transactions;

         o        identification and evaluation of acquisition and/or merger
                  candidates;

         o        introductions to broker dealers, research analysts, and
                  investment companies that Legend believes could be helpful to
                  the Company.

<PAGE>

4. The term of this Agreement shall be TWELVE (12) months from the Effective
Date of this Agreement; provided that the Company may, in its discretion, extend
the Term for up to an additional six (6) months by providing notice of such
extension to Legend at any time prior to the expiration of this Agreement (such
period, as it may be extended pursuant to this sentence, the "TERM"), and the
additional compensation owed to Legend during any such extension shall be the
Monthly Advisory Fee described in Section 5. The Agreement may not be terminated
by the Parties during the first ninety days following the Effective Date (the
"INTRODUCTION PERIOD") other than as a result of a material breach of any
provision of this agreement that is not uncured within ten (10) days following
notification thereof by the non- breaching party. Following the Introduction
Period and in the event that the Company desires to terminate this Agreement at
any time prior to the expiration date, it shall provide Legend with written
notice of its intention to terminate this Agreement and this Agreement shall so
terminate immediately following delivery of such notice by the Company (the
"TERMINATION DATE"), without any further responsibility for either party;
provided, however, that Legend shall be entitled to retain all Warrants (as
defined below) vested as of the Termination Date, Legend shall be reimbursed for
all authorized unreimbursed expenses and it shall be entitled to be paid for all
Monthly Advisory Fees (as defined below) earned through the Termination Date. As
for the Monthly Advisory Fees accrued as of the Termination Date, such fees will
be paid to Legend, if and only if, the Company completes a Capital Transaction
(as defined below) within twelve (12) months of the Termination Date of this
Agreement. Legend's obligations under Section 2 regarding Information of the
Company shall survive such termination. Notice shall be deemed delivered when
sent via e-mail, facsimile, or when deposited with a bonded overnight courier.

5. In consideration for the services described herein and subject to the
completion of the Company's successful raise of net proceeds of at least
$1,250,000 from the sale of its common stock, excluding common stock sold
pursuant to commitments obtained prior to the date of this agreement
(hereinafter referred to the "CAPITAL TRANSACTION"), the Company shall accrue a
monthly advisory fee of ten thousand dollars ($10,000.00) per month (the
"MONTHLY ADVISORY FEE"). All accrued monthly advisory fees shall be paid to
Legend on the Closing Date of the Capital Transaction and thereafter the Monthly
Advisory Fee shall be paid no later than the fifteenth (15th) day of each
monthly anniversary of the Effective Date during the Term of this Agreement. The
Monthly Advisory Fee shall be mailed to Legend at the following address:

Legend Securities, Inc
Attention: Salvatore C. Caruso
39 Broadway, Suite 740 New York, NY 10006
Phone: 212-344-5747 ext 231
Fax: 212-898-1224

6. Simultaneously with the execution of this Agreement, the Company shall issue
and deliver to Legend a common stock purchase warrant (THE "WARRANT") for the
purchase of three hundred and fifty thousand (350,000) shares of the Company's
common stock. The Warrant shall have an exercise price equal to $.80 per share.
The Warrant shall vest completely and in favor of the Legend as follows:

                                                            NUMBER OF SHARES
DATE                                                      UNDERLYING THE WARRANT
--------------------------------------------------------  ----------------------
The Effective Date                                                87,500
Each monthly anniversary of the Effective Date
  beginning May 13, 2009                                          30,000
Effective January 13, 2010                                        22,500

     In the event that this Agreement is terminated by either party, then all
non-vested warrants as of the Termination Date shall terminate and shall be
considered null and void as of the Termination Date of this Agreement.

<PAGE>

7. The Warrant, upon issuance, shall be fully paid, non-assessable, and free of
any restrictions on transfer, but for those restrictions that are the result of
state or federal securities laws. The Warrant shall be issued to Legend in the
form of a warrant agreement (the "Warrant Agreement"), which shall be in a form
and content reasonably satisfactory to Legend and its counsel and the Company
and its counsel. The Warrant Agreement shall provide for, among other
provisions, the above terms and the following: (1) The Warrant shall expire five
years after the date that the Warrant Agreement is issued; (2) The Warrant shall
have customary anti-dilution provisions for stock dividends, splits, mergers,
and sale of substantially all assets of the Company; (3) Legend may exercise the
Warrant at any time after signing the Warrant Agreement to the extent vested as
described in Section 6; (4) The Warrants shall contain a "Cashless Exercise"
provision that may be utilized 180 after issuance if there is not an effective
Registration Statement covering the underlying common shares; and (5). The
Company shall reserve, and at all times have available, a sufficient number of
shares of its common stock to be issued upon the exercise of the Warrant.

The Warrant shall be issued in the name of LEGEND SECURITIES, INC. and mailed to
the following address:

                           Legend Securities, Inc
                           Attention: Salvatore C. Caruso
                           39 Broadway, Suite 740
                           New York, NY 10006
                           Phone: 212-344-5747 ext 231
                           Fax: 212-898-1224

8. [LEFT INTENTIONALLY BLANK]

9. The Company recognizes that Legend now renders and may continue to render
financial consulting, management, investment banking and other services to other
companies that may or may not conduct business and activities similar to those
of the Company. Legend shall be free to render such advice and other services
and the Company hereby consents thereto. Legend shall not be required to devote
its full time and attention to the performance of its duties under this
Agreement, but shall devote only so much of its time and attention as it deems
reasonable or necessary to fulfill its obligation hereunder.

10. During the Term of this Agreement the Company covenants, promises and agrees
that:

         (a) Company shall immediately notify Legend if it is the subject of any
         material investigation or material litigation.

11. This Agreement shall be governed by and construed under the laws of the
State of New York without regard to principals of conflicts of laws provisions.
In the event of any dispute between the Company and Legend arising under or
pursuant to the terms of this Agreement, or any matters arising under the terms
of this Agreement, the same shall be settled only by arbitration through FINRA
Dispute Resolution in County of New York, New York City, State of New York, in
accordance with the Code of Arbitration Procedure published by FINRA Dispute
Resolution. The determination of the arbitrators shall be final and binding upon
the Company and Legend and may be enforced in any court of appropriate
jurisdiction. This Agreement shall be construed by and governed exclusively
under the laws of the State of New York, without regard to its conflicts of law
provisions. The venue shall be in County of New York, NY.

12. The Company shall reimburse Legend for all approved out of pocket expenses,
including without limitation acceptable travel and lodging, printing, legal, and
mailing cost that Legend may incur in performance of the Services under this
Agreement, provided Legend receives the Company's prior approval for any and all
out of pocket expenses above five hundred dollars.

<PAGE>

13. The Company may disclose to Legend certain Information that is Proprietary
Information (as defined below) relating to certain privileged and confidential
business matters that it would like Legend to evaluate. These disclosures will
be given in strict secrecy and confidence and the Parties agree to use their
best efforts to protect the integrity and confidentiality of the Proprietary
Information. As used herein, Proprietary Information means any and all
non-public data, ideas and information, in whatever form, tangible or
intangible, which is provided to Legend by the Company in connection with the
Agreement. If oral, in order to be considered "Proprietary Information" it must
be followed by a written memo detailing the confidential nature of same and
stamped "Proprietary Information."

14. [A] The Company shall indemnify and hold harmless Legend and its directors,
officers, employees, agents, attorneys and assigns from and against any and all
losses, claims, costs, damages or liabilities (including the reasonable fees and
expenses of legal counsel) to which any of them may become subject in connection
with the investigation, defense or settlement of any actions or claims: (i)
caused by any untrue statement or alleged untrue statement of any material fact
contained in any Information provided by the Company or the omission or alleged
omission to state a material fact required to be stated in any such Information
or necessary to make the statements in any Information not misleading, provided
such Information was used by Legend in rendering any Service hereunder; (ii)
arising in any manner out of or in connection with the rendering of Services by
Legend hereunder; or (iii) otherwise in connection with this Agreement;
provided, however, that the Company will not be liable in any such case if and
to the extent that any such loss, claim, cost, damage or liability arises out of
any breach of this Agreement by Legend, or any misrepresentation or alleged
misrepresentation of the material facts provided to Legend by the Company or
arising from acts of gross negligence or malfeasance by Legend or any breach by
Legend of this Agreement.

         [B] Legend shall indemnify and hold harmless the Company and its
directors, officers, employees, agents, attorneys and assigns from and against
any and all losses, claims, costs, damages or liabilities (including the
reasonable fees and expenses of legal counsel) to which any of them may become
subject in connection with the investigation, defense or settlement of any
actions or claims: (i) caused by any untrue statement or alleged untrue
statement of any material fact contained in any information provided by Legend
other than Information provided to Legend by the Company ("Legend Information")
or the omission or alleged omission to state a material fact required to be
stated in any such Legend Information or necessary to make the statements in any
Legend Information not misleading; (ii) arising in any manner out of or in
connection with the rendering of Services by Legend hereunder; or (iii)
otherwise in connection with this Agreement; provided, however, that Legend will
not be liable in any such case if and to the extent that any such loss, claim,
cost, damage or liability arises out of any breach of this Agreement by the
Company or arising from acts of gross negligence or malfeasance by the Company
or any breach by the Company of this Agreement

         [C] Promptly after receipt of notice of the commencement of any action,
the party against whom an action is brought (the "Indemnified Party") shall, if
a claim is also being made against the other party (the "Indemnifying Party")
for indemnification pursuant to this Agreement, notify the Indemnifying Party in
writing of such action; provided that, the Indemnifying Party shall be relieved
from any obligation to indemnify the Indemnified Party pursuant to this
Agreement to the extent that any delay by the Indemnified Party to provide
notice to the Indemnifying Party pursuant to this Section impairs or prejudices
the Indemnifying Party's ability to assume and defend any such action. In case
any such action shall be brought against the Indemnified Party it shall notify
the Indemnifying Party of the commencement of such action, and the Indemnifying
Party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel reasonably satisfactory to
the Indemnified Party, and, after notice from the Indemnifying Party to the
Indemnified Party of its election so to assume and undertake the defense of such
action, the Indemnifying Party shall not be liable to the Indemnified Party
under this paragraph 13 for any legal expenses subsequently incurred by the
Indemnified Party in connection with the defense of such action; if the
Indemnified Party retains its own counsel, then Indemnified Party shall pay all
fees, costs and expenses of such counsel, provided, however, that, if the
defendants in any such action include both the Indemnified Party and the
Indemnifying Party and the Indemnified Party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the Indemnifying Party or if the interests
of the Indemnified Party reasonably may be deemed to conflict with the interests
of the Indemnifying Party, the Indemnifying Party and the Indemnified Party
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the Indemnifying Party as incurred.

<PAGE>

16. The Company acknowledges that Legend has made no guarantees that its
performance hereunder will achieve any particular result with respect to the
Company's business, stock price, trading volume, market capitalization or
otherwise.

17. All notices hereunder shall be in writing and shall be validly given, made
or served if in writing and delivered in person or when received by facsimile
transmission, or five days after being sent first class certified or registered
mail, postage prepaid, or one day after being sent by nationally recognized
overnight carrier to the party for whom intended at the address set forth after
each Parties signatures.

18. If any clause or provision of this Agreement is illegal, invalid or
unenforceable under applicable present or future Laws effective during the Term,
the remainder of this Agreement shall not be affected. In lieu of each clause or
provision of this Agreement that is illegal, invalid or unenforceable, there
shall be added as a part of this Agreement a clause or provision as nearly
identical as may be possible and as may be legal, valid and enforceable. In the
event any clause or provision of this Agreement is illegal, invalid or
unenforceable as aforesaid and the effect of such illegality, invalidity or
unenforceability is that either party no longer has the substantial benefit of
its bargain under this Agreement and a clause or provision as nearly identical
as may be possible cannot be added, then, in such event, such party may in its
discretion cancel and terminate this entire Agreement provided such party
exercises such right within a reasonable time after such occurrence.

19. The Parties agree and acknowledge that they have jointly participated in the
negotiation and drafting of this Agreement and that this Agreement has been
fully reviewed and negotiated by the Parties and their respective counsel. In
the event of an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and no
presumptions or burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement.

20. This Agreement may not be modified, amended, supplemented, canceled or
discharged, except by written instrument executed by all Parties. No failure to
exercise, and no delay in exercising, any right, power or privilege under this
Agreement shall operate as a waiver, nor shall any single or partial exercise of
any right, power or privilege hereunder preclude the exercise of any other
right, power or privilege. No waiver of any breach of any provision shall be
deemed to be a waiver of any preceding or succeeding breach of the same or any
other provision, nor shall any waiver be implied from any course of dealing
between the Parties. To be effective, all waivers must be in writing, signed by
both Parties. The rights and remedies of the Parties under this Agreement are in
addition to all other rights and remedies, at law or equity, that they may have
against each other except as may be specifically limited herein.

21. This Agreement contains the entire understanding of the Parties in respect
of its subject matter and supersedes all prior agreements and understandings
(oral or written) between or among the Parties with respect to such subject
matter. The Parties agree that prior drafts of this Agreement shall not be
deemed to provide any evidence as to the meaning of any provision hereof or the
intent of the Parties with respect thereto. Any amendment or modification to the
Agreement shall be by written instrument only and must be executed by a
representative, with complete authority, from the Company and Legend.

<PAGE>

22. This Agreement may be executed in any number of counterparts, each of which
shall bean original but all of which together shall constitute one and the same
instrument. A telecopy signature of any party shall be considered to have the
same binding legal effect as an original signature.

23. In the event that any dispute among the Parties to this Agreement should
result in litigation, the substantially prevailing party in such dispute shall
be entitled to recover from the losing party all fees, costs and expenses of
enforcing any right of such substantially prevailing party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals and collection.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

<PAGE>

If the foregoing is in accordance with your understanding, kindly confirm your
acceptance and agreement by signing and returning the enclosed duplicate of this
Agreement that will thereupon constitute an agreement between us.

Very truly yours,

/S/Salvatore C. Caruso
President

Accepted and approved this 24th day of February, 2009

By: /s/ Dean L. Julia
    -------------------------------------
    Dean L. Julia
    Chief Executive Officer
    Ace Marketing & Promotions, Inc.

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