Document:

EXHIBIT 10.4

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”) is
made and entered into as of August   , 2005 (the “Effective
Date”) by and between Lynn Powers (“Executive”), and Gaiam, Inc.,
a Colorado corporation (“Company”).

 

1.             TERM OF EMPLOYMENT: 
Subject to the terms of this Agreement, Company hereby agrees to employ
Executive, and Executive hereby agrees to accept such employment, for the
period beginning on the Effective Date and ending on the fourth anniversary of
the Effective Date or such earlier date upon which employment is terminated by
Company or Executive in accordance with the terms hereof (the “Term”).

 

2.             POSITION AND
DUTIES:  During the Term, Executive shall serve as
President and Chief Executive Officer of North American Operations of Company,
shall report to the Board of Directors (the “Board”), and shall perform
such duties, consistent with such positions, as the Board may assign, delegate
or limit from time to time.  Executive
shall diligently devote such business time, energy and ability to the business
of Company as is necessary to perform Executive’s duties, and shall perform those
duties fully, faithfully, efficiently and in compliance with law.

 

3.             COMPENSATION AND
BENEFITS:  Company shall pay Executive an annual base salary
of $290,000 (the “Base Salary”), which shall be earned and shall be
payable in regular installments in accordance with Company’s normal payroll
practices, less required or authorized deductions.  Executive shall be eligible to participate in
all of the Company’s bonus programs for executive officers.  The Board shall review Executive’s
performance annually.  Executive shall be
entitled to customary benefits as determined by the Board, including five weeks
of paid vacation days and a certain number of paid sick days, and the right to
participate in Company’s retirement plans and group health plans applicable to
Executive.  Company agrees to reimburse
Executive, subject to its normal policy and practices, for travel and other
expenses reasonably and necessarily incurred or made by Executive in connection
with Company business.

 

4.             NON-COMPETITION,
NONDISPARAGEMENT:

 

(a)           Non-competition and
Nondisparagement:  During
Executive’s employment and thereafter, Executive will not make any disclosure,
issue any public statements or otherwise cause to be disclosed any information
which is designed, intended or might reasonably be anticipated to discourage
suppliers, customers or employees of Company or to have a negative impact or
adverse effect on Company, its major shareholders and/or any affiliate of any
major shareholder.

 

Executive
agrees that, without the prior written consent of the Company, signed by
Company’s Chief Executive Officer, Executive will not, during the term of
Executive’s employment by the Company or for a period of one year thereafter (i) accept
employment with, serve as a consultant to, or accept compensation from any
person, firm or corporation (including any new business started by Executive,
either alone or with others) whose products and or services compete with those
offered by Company, in any geographic market in which Company is then doing
business or to Executive’s knowledge plans to do business, (ii) contact or
solicit

 

 

any customers of the Company for the purposes of
diverting any existing or future business of such customers to a competing
source, (iii) contact or solicit any vendors to Company (directly or
indirectly) for the purpose of causing, inviting or encouraging any such vendor
to alter or terminate his, her or its business relationship with Company, or (iv) contact
or solicit any employees of Company (directly or indirectly) for the purpose of
causing, inviting or encouraging any such employee to alter or terminate his,
her or its employment relationship with Company.

 

Executive
agrees that this covenant is reasonable with respect to its duration,
geographic area and scope.  It is the
desire and intent of the parties that the provisions of this Section 4(a) shall
be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular portion of
this Section 4(a) shall be adjudicated to be invalid or
unenforceable, this Section 4(a) shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable, such
deletion to apply only with respect to the operation of this Section 4(a) in
the particular jurisdiction in which such adjudication is made.

 

(b)           Enforcement:  Executive acknowledges that irreparable
damage would result to Company or other persons or entities who are
beneficiaries of the provisions of this Section 4 if the provisions of
this Section 4 are not specifically enforced, and agrees that Company
shall be entitled to any appropriate legal, equitable, or other remedy,
including injunctive relief, in respect of any failure to comply with the
provisions of this Section 4.

 

5.             MISCELLANEOUS:

 

(a)           Notices:  All notices hereunder shall be in writing and
shall be directed to the applicable address set forth on the signature page hereto.

 

(b)           Survivability:  The expiration or termination of the
employment of Executive or of this Agreement shall not operate to affect such of the provisions hereof as are
expressed to remain in full force and effect notwithstanding such termination
or expiration.

 

(c)           Successors; No
Assignment of Agreement: 
Except as otherwise provided herein, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
legal representatives, heirs, successors and assigns.  Executive acknowledges that her services are
unique and personal.  Accordingly,
Executive may not assign her rights or delegate her duties or obligations under
this Agreement to any person or entity.

 

(d)           Additional Representations:  Executive represents and warrants that she
has the full capacity, right and authority to enter into this Agreement and to
render the services as required under this Agreement, and that by signing this
Agreement she is not breaching any contract or legal obligation she owes to any
third party.  Executive represents and
warrants to Company that she is knowledgeable and sophisticated as to business
matters, including the subject matter of this Agreement, that she has read this
Agreement and that she understands its terms. 
Executive acknowledges that, prior to assenting to the terms of this Agreement, she had been given a
reasonable time to review it, to consult with counsel of her choice, and to
negotiate at arm’s length with Company as to its contents.  Company and Executive agree that the

 

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language used in this
Agreement is the language chosen by the parties to express their mutual intent,
and that Executive has entered into this Agreement freely and voluntarily and
without pressure or coercion from anyone. Executive represents and warrants to
Company that she is not bound by any agreement or subject to any restriction
that would interfere with or prevent her from entering into or carrying out
this Agreement.

 

(e)           Rights and Waivers:  All rights and remedies of the parties hereto
are separate and cumulative, and no one of them, whether exercised or not,
shall be deemed to be to the exclusion of any other rights or remedies or shall
be deemed to limit or prejudice any other legal or equitable rights or remedies
which either of the parties hereto may have. 
No party to this Agreement shall be deemed to waive any rights or
remedies under this Agreement unless such waiver is in writing and signed by
such party.  No delay or omission on the
part of either party in exercising any right or remedy shall operate as a
waiver of such right or remedy or any other rights or remedies.  A waiver on any one occasion shall not be
construed as a bar to or a waiver of any right or remedy on any future
occasion.

 

(f)            Withholding:  Company may withhold from any amounts payable
under this Agreement such federal,
state or local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.

 

(g)           Miscellaneous:  Any
provision of this Agreement may be waived or amended if, and only if, such
amendment or waiver is in writing and signed by all of the parties.  This Agreement constitutes the entire
agreement and understanding of the parties hereto and supersedes all prior agreements and understandings,
both written and oral, among the parties hereto with respect to the subject
matter hereof.  This Agreement shall be
governed by the laws of the State of Colorado (without regard to the choice of
law provisions thereof).  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but such
counterparts together shall constitute one and the same instrument.  The section headings of this Agreement
are for convenience of reference only and shall not be deemed to limit or
affect any of the provisions hereof.  If
a court of competent jurisdiction determines that any provision of this
Agreement is invalid or unenforceable under applicable law, such provision shall
be ineffective only to the extent of such invalidity or unenforceability,
without invalidating the remainder of this Agreement.  The parties also intend that, if a court of
competent jurisdiction finds any provision of this Agreement overly restrictive
or unenforceable as written, it will reform such provision to the least extent
necessary and, as so reformed, will enforce such provision to the maximum
degree permitted under applicable law.

 

[Remainder of page intentionally
left blank]

 

3

 

IN WITNESS WHEREOF, Company and Executive, intending to be
legally bound, have executed this Agreement on the day and year first above
written.

 

 

	
  EXECUTIVE:

  	
  COMPANY: GAIAM, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  Name:
  Lynn Powers

  	
   

  	
   

  	
  Name:

  
	
   

  	
  Address:

  	
  c/o
  Gaiam, Inc.

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
  360
  Interlocken Blvd.

  	
   

  	
   

  	
  Address:

  	
  360
  Interlocken Blvd.

  
	
   

  	
   

  	
  Broomfield,
  CO 80021

  	
   

  	
   

  	
   

  	
  Broomfield,
  CO 80021

  
	
   

  	
  Facsimile:
  303-222-3609

  	
   

  	
   

  	
  Facsimile:
  303-222-3609

  

 

S-1Exhibit 10.5

 

INSURANCE AND STOCK REDEMPTION AGREEMENT

 

This INSURANCE AND STOCK REDEMPTION AGREEMENT
(this “Agreement”), dated as of August 4,
2005, is made by and among Gaiam, Inc., a Colorado corporation (“Gaiam”) and Jirka Rysavy, on behalf
of himself, his heirs and anyone claiming any interest in his estate (“Rysavy”).

 

WHEREAS, as of the
date of this Agreement, Rysavy owns approximately 18% of the outstanding shares
of Gaiam’s Class A common stock, par value $.0001 per share (the “Class A Shares”) and 100% of
the outstanding shares of Gaiam’s Class B common stock, par value $.0001
per share (the “Class B Shares”),
which are convertible into Class A Shares; and

 

WHEREAS, the Class A
Shares are publicly traded, and Gaiam believes that the interests of Gaiam’s
shareholders would be protected and shareholder valuation would be preserved
and enhanced if Rysavy and Gaiam agree to an orderly mechanism for Gaiam to
redeem certain of the Class A Shares and Class B Shares owned by
Rysavy so as to provide liquidity to any personal representative of Rysavy’s
estate to fund debts and expenses and to pay federal and state taxes of any
such future estate; and

 

WHEREAS, the
parties desire that any purchase of shares by Gaiam pursuant to this Agreement
be treated as a redemption under Section 303 of the Internal Revenue Code
of 1986, as amended (the “Code”).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and certain other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

 

1.             Insurance Policies.  Following execution and delivery of this
Agreement, Gaiam may purchase one or more term life insurance policies on the
life of Rysavy in an aggregate amount as Gaiam shall determine (the “Policies”).  The proceeds of the Policies paid to Gaiam
upon Rysavy’s death shall be for the benefit of Gaiam and for no other
person.  Gaiam shall be the sole owner of
the Policies, and neither Rysavy nor any of his successors, transferees,
assignees, or personal representatives shall have any collateral interest in
the Policies. Rysavy agrees to cooperate with Gaiam in connection with Gaiam’s
purchase and maintenance of the Policies, including, but not limited to,
providing Gaiam or its designees any records or information and submitting to
any required medical or other examinations that are necessary or desirable in
connection with the purchase of the Policies. 
Rysavy shall not be obligated to contribute to Gaiam all or any portion
of the premiums or related costs associated with the purchase of the
Policies.  Gaiam shall not be obligated
to maintain the Policies and may terminate the Policies at any time.

 

2.             Purchase of Shares.  So long as the Policies are in effect at Rysavy’s
death, Gaiam agrees to purchase from Rysavy’s estate, and Rysavy’s estate shall
sell to Gaiam, a number of Class A Shares, up to the number of Class A
Shares acquired by Rysavy’s estate upon Rysavy’s death (including any Class A
Shares acquired by Rysavy’s estate upon the exercise of derivative securities
including stock options acquired by Rysavy’s estate upon Rysavy’s death), equal
to (a) the proceeds of the Policies paid to Gaiam upon Rysavy’s death, net
of any taxes, expenses or other costs incurred by Gaiam, including, without
limitation, any alternative minimum taxes, which Gaiam may be subject to or
incur as a consequence of receiving insurance proceeds upon the death of Rysavy
(the “Net Proceeds”), divided by (b) the
Purchase Price (as defined in Section 5), rounded to the nearest whole
share.  If the Net Proceeds remain
following such purchase, then Gaiam agrees to purchase from Rysavy’s estate,
and Rysavy’s

 

 

estate shall sell to Gaiam, a number of Class B Shares, up to the
number of Class B Shares acquired by Rysavy’s estate upon Rysavy’s death
(including any Class B Shares acquired by Rysavy’s estate upon the
exercise of derivative securities including stock options acquired by Rysavy’s
estate upon Rysavy’s death), equal to (a) the remaining Net Proceeds
divided by (b) the Purchase Price, rounded to the nearest whole share; provided, however, that this Section 2 shall only
require Rysavy’s estate to sell Class B Shares acquired by Rysavy’s estate
that exceed 3,000,000 Class B Shares (as such number is appropriately
adjusted to reflect any stock splits, stock dividends or similar transactions
after the date of this Agreement). Promptly
after Gaiam’s receipt of the Net Proceeds or Gaiam’s determination that no Net
Proceeds will be received, and in any event within thirty (30) days following
such receipt or determination, Gaiam shall give the executor or other personal
representative of Rysavy’s estate (the “Executor”)
a written notice (the “Purchase Notice”)
indicating (a) the aggregate amount of Net Proceeds, (b) the closing
date of any purchase, which shall be within 10 business days of the date of the
Purchase Notice, and (c) an estimate of the applicable Purchase Price and
the number of Class A Shares and the number of Class B Shares being purchased
by Gaiam under this Section 2.

 

Notwithstanding
anything to the contrary contained in this Agreement, Gaiam shall have no
obligation to purchase any securities under this Section 2 if in the
reasonable opinion of Gaiam or its counsel, such purchase (i) would be
prohibited by the Colorado Business Corporation Act or would violate any other
law applicable federal or state laws or regulations, or (ii) would violate
or result in an event of default and/or acceleration of payment of indebtedness
under the provisions of any loan agreements or material contract to which Gaiam
or any of its subsidiaries are a party or their assets are subject.

 

3.             Option.  Rysavy hereby
grants to Gaiam an option (the “Option”),
at Gaiam’s sole discretion, to purchase from Rysavy’s estate, at a price equal
to the Purchase Price, all or any portion of the Class A Shares or Class B
Shares held by Rysavy’s estate that will not be purchased by Gaiam pursuant to Section 2
(including any Class A Shares or Class B Shares acquired by Rysavy’s
estate upon the exercise of derivative securities, including stock options);
provided, however, that this Section 3
shall only require Rysavy’s estate to sell Class B Shares acquired by
Rysavy’s estate that exceed 3,000,000 Class B Shares (as such number is
appropriately adjusted to reflect any stock splits, stock dividends or similar
transactions after the date of this Agreement). If Gaiam elects to exercise the Option, Gaiam shall include in the
Purchase Notice delivered pursuant to Section 2 notification (a) that
Gaiam has elected to exercise the Option, and (b) an estimate of the
applicable Purchase Price and the number of Class A Shares and the number
of Class B Shares being purchased by Gaiam pursuant to the Option. Gaiam
shall first purchase all Class A Shares available for purchase pursuant to
this Section 3 prior to purchasing any Class B Shares.

 

4.             Closing.  On the closing date as set forth in the
Purchase Notice, Rysavy’s estate shall sell to Gaiam, and Gaiam shall purchase
from Rysavy’s estate, the number of Class A Shares and Class B Shares
determined pursuant to Section 2 and Section 3, and the Executor
shall deliver, or cause to be delivered, to Gaiam any applicable stock
certificates, together with such stock powers or other similar documents as are
necessary or advisable to fully and unconditionally transfer such Class A
Shares and Class B Shares to Gaiam, and Gaiam shall deliver to the
Executor or the Executor’s designee(s) the applicable Purchase Price, by check
or by wire transfer. The securities acquired by Gaiam pursuant to Section 2
and Section 3 shall be free and clear of any liens or encumbrances of any
kind, and the Executor shall so represent and warrant in writing to Gaiam at
the time of such closing.

 

5.             Purchase Price.  For purposes of this Agreement the “Purchase Price” means the fair market value of the Class A Shares
being acquired by the Company pursuant to this Agreement, as of the date of the
acquisition, as determined by a nationally recognized valuation expert that has
not been

 

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employed by the Company, Rysavy or Rysavy’s
estate during the previous five years and that was selected in good faith by
the Board of Directors of Gaiam.

 

6.             Transfer Restriction.  Rysavy’s estate shall not sell, pledge or
otherwise transfer any Class A Shares or Class B Shares or any
derivative securities permitting the acquisition or disposition of any Class A
Shares or Class B Shares until it is conclusively determined that such
securities will not be purchased by Gaiam pursuant to Section 2 or Section 3;
provided, however, that such restriction
shall not prohibit Rysavy’s estate from exercising or converting any derivative
securities.

 

7.             Representations and Warranties
of Gaiam.  Gaiam represents and
warrants to Rysavy that:

 

(a)           Organization
and Qualification.  Gaiam is a
Colorado corporation, duly organized, validly existing, and in good standing
under the laws of Colorado.  Gaiam is
duly authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required.

 

(b)           Authorization
of Transaction.  Gaiam has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and all corporate action necessary for such
execution, delivery and performance has been taken.  This Agreement constitutes the valid and
legally binding obligation of Gaiam, enforceable in accordance with its terms
and conditions.

 

(c)           Noncontravention.  Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (a) violate any valid constitutional provision, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which Gaiam is subject or
any provision of its charter or bylaws; or (b) conflict with, result in a
material breach of, constitute a material default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any material agreement,
contract, lease, license, instrument, or other arrangement to which Gaiam is a
party or by which it is bound or to which any of its material assets is subject
(or result in the imposition of any security interest upon any of its material
assets). Gaiam does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order to execute and deliver this Agreement or
consummate the transactions contemplated hereby.

 

8.             Representations
and Warranties of Rysavy.  Rysavy
represents and warrants to Gaiam that:

 

(a)           Authorization
of Transaction.  Rysavy has the power
and authority to execute and deliver this Agreement and to perform his
obligations hereunder and all action necessary for such execution, delivery and
performance has been taken.  This
Agreement constitutes the valid and legally binding obligation of Rysavy,
enforceable in accordance with its terms and conditions.

 

(b)           Noncontravention.  Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (a) violate any valid constitutional provision, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which Rysavy is subject; or
(b) conflict with, result in a material breach of, constitute a material
default under,

 

3

 

result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any material agreement,
contract, lease, license, instrument, or other arrangement to which Rysavy is a
party or by which he is bound or to which any of his material assets is subject
(or result in the imposition of any security interest upon any of his material
assets).  Rysavy does not need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to execute and
deliver this Agreement or consummate the transactions contemplated hereby.

 

9.             Binding Effect;
Third Party Beneficiaries.  This
Agreement shall be binding upon and inure to the benefit of Rysavy and Gaiam
and their respective heirs, representatives and successors, and shall not
confer any rights or remedies upon any person other than Rysavy and Gaiam and
their respective heirs, representatives and successors. Executive, in
furtherance of this Agreement, shall execute a will directing his Executor to
act pursuant to this Agreement and to execute such documents as may be
necessary to effectuate the purposes of this Agreement, but failure to execute
such a will shall not affect any rights or obligations of either the Executive
or his Executor.

 

10.           Entire Agreement.  This Agreement constitutes the entire
agreement between the parties and supersedes any prior understandings, agreements,
or representations by or between the parties, written or oral, to the extent
they related in any way to the subject matter hereof. This Agreement may be
altered, amended or revoked only by subsequent written instrument executed by
Gaiam and Rysavy, or, following Rysavy’s death, the Executor.

 

11.           Choice of Law.  To the extent not superseded by federal law,
the laws of the state of Colorado shall control in all matters relating to this
Agreement and any action relating to this Agreement must be brought in Denver,
Colorado.

 

12.           Notices.  All notices, requests, demands, claims, and
other communications under this Agreement shall be in writing.  Any notice, request, demand, claim, or other
communication under this Agreement shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient at the
address set forth below the recipient’s signature to this Agreement.  Either party to this Agreement may send any
notice, request, demand, claim, or other communication under this Agreement to
the intended recipient at such address using any other means (including
personal delivery, expedited courier, messenger service, telecopy, ordinary
mail, or electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Either party to this Agreement
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other party notice
in the manner set forth in this section.

 

13.           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

14.           Specific
Performance. The parties acknowledge that it would be impossible to fix the
amount of money damages caused by a breach of this Agreement by the other
party, and, therefore, this Agreement may be enforced by specific
performance.  The parties hereby waive
any defense that an action to enforce this Agreement by specific performance is
inappropriate because of an adequate remedy at law, provided,
however, that nothing in this Section 14 is intended to
prohibit any party from bringing an action for money damages for breach of this
Agreement (either in lieu of or in addition to an action for specific
performance).

 

4

 

15.           Further Assurances.  Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out
the provisions and purposes of this Agreement and the transactions contemplated
hereby.

 

16.           Termination.  This Agreement shall terminate and be of no
further force and effect if the Class A Shares are no longer listed on a
securities exchange, quoted in the NASDAQ System, or quoted in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization.

 

IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.

 

 

	
   

  	
  GAIAM, INC.

  
	
   

  	
   

  
	
   

  	
  /s/ Lynn Powers

  	
   

  
	
   

  	
  By: Lynn Powers

  
	
   

  	
  Its: President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JIRKA RYSAVY

  
	
   

  	
   

  
	
   

  	
  /s/ Jirka Rysavy

  	
   

  

 

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