Code of Ethics
For Directors and Officers
SOURCE HOME ENTERTAINMENT, Inc. and its subsidiaries (“Company”) demands the highest possible ethical conduct from individuals serving as its directors, officers and senior management. Full compliance with this Code is mandatory, and individuals are expected to foster a culture of transparency, integrity and honesty.
Construction and Implementation
The provisions of this Code are intended to be broadly construed in accordance with the purpose of this Code. The Company Board of Directors shall be the body responsible for implementing these provisions and advising persons as to their application. Any senior management member may file with the Chair of the Board a complaint alleging a violation of this Code. If a complaint relates to a Board member, such Board member may not participate in the process of determining whether he/she has a conflict or appearance of a conflict on any matter subject to this Code.
Accurate Periodic Reports and Public Disclosures
Public disclosure of certain Company information is part of Company’s policies. It is Company’s policy to make full, fair, accurate, timely and understandable disclosures in its periodic reports, and in public statements, such as press releases. Senior management must exercise the highest standard of care in preparing such reports and public disclosures in accordance with the following guidelines:
• All accounting records, as well as reports produced from these records, must be in
accordance with applicable law.
• All records must fairly and accurately reflect the transactions or occurrences to which they relate.
• All records must fairly and accurately reflect, in reasonable detail, Company’s assets, liabilities, revenues and expenses.
• Company’s accounting records must not contain any false or intentionally misleading entries.
• No transactions should be intentionally misclassified as to accounts, departments or accounting periods.
• All transactions must be supported by accurate documentation in reasonable detail and recorded in the proper account and in the proper accounting period.
• No information should be concealed from the internal auditors or the independent
• Compliance with Company’s system of internal accounting controls is required.
Senior management is expected to comply with both the letter and spirit of all applicable
Governmental laws, rules and regulations. If a Company officer or senior team leader fails to comply with this Code and/or with any applicable laws, such person will be subject to disciplinary measures, up to and including immediate discharge. If a Company director fails to comply with any of the foregoing codes or applicable law, the director will be subject to reprimand or removal consistent with the Company’s Stockholder Agreement, Charter and By-Laws.
Conflicts of Interest
All Directors, Officers and senior management must avoid any personal activity, investment or association that could appear to interfere with good judgment concerning Company’s best interests, and must not exploit their positions or relationships with Company for personal gain. In this regard, Company acknowledges the importance of having a comprehensive policy for identifying and effectively handling potential “Conflicts of Interest” (defined below) that may arise between Company and “Interested Persons” (defined below). The adoption of a Conflicts of Interest policy as part of this Code is an important measure to assure that members act in accordance with their fiduciary duties under Delaware law.
Conflict of Interest exists in the case of any proposed contract or business dealings between Company and an Interested Person or a party with which an Interested Person has a direct or indirect family, social, business or employment relationship or financial interest in such contract. For purposes of this Conflicts of Interest policy, a person is deemed to have an “interest” in a contract or business dealing if he or she is a director, trustee, officer, employee or agent of, or has a significant financial interest in, or an influential position with, the entity contracting or dealing with Company (other than another entity owned, controlled, or managed by Company). Entities include any entity whether private, public or governmental and regardless of form. A conflict of interest also exists when a Interested Person’s private activities or involvement could reasonably be expected to interfere in any way with the Interested Person’s objectivity or judgment in protecting and promoting the interests of Company, or when an Interested Person or his/her family members receive improper personal benefits as a result of the Interested Person’s position with Company. Interested Person Defined. An Interested Person is any person that is a director, officer or senior team leader of Company.
All Interested Persons shall exercise good faith in all transactions relating to their duties to Company and shall not use their positions in any manner that is contrary to the best interests of Company or to promote their own business interests or those of family, friends or business partners. Moreover, each Interested Person shall (i) promptly and fully disclose all known and potential Conflicts of Interest to the Board or a committee of the Board that will consider a contract, transaction or arrangement to which a known or potential Conflict of Interest relates (a “Contract”), including any relevant facts known to such person regarding a potential Conflict of Interest, (ii) refrain from participating in, or acting on, the decision on any matter in which a Conflict of Interest, or the appearance of a Conflict of Interest, is present with respect to such Interested Person, and (iii) remove himself or herself from any meeting or deliberations on the matter. Any doubts on the part of any Interested Person as to the existence of, or proper conduct in light of, any perceived Conflict of Interest should be directed to the DEO and the Chair of the Board for resolution.
Conflicts of Interest Disclosure Statements
Each Interested Person shall submit an initial statement disclosing any potential or existing Conflict of Interest upon adoption of this Code or prior to starting his or her position(s) with Company, as applicable. All Interested Persons shall submit an annual statement, at such time as determined by Company, disclosing any potential or existing Conflicts of Interest. Such statements shall be submitted to the Board.
Review of Potential Conflicts of Interest
The full Board of Directors will review information relevant to a request for an advisory opinion or a complaint filed with the Board under this Code. Determinations regarding Conflicts of Interest shall be made by the majority vote of the members of the Board. If a Conflict of Interest is known or deemed to exist after disclosure, the Board or the Committee, as applicable, shall not approve the Contract with the Interested Person unless it is determined that (a) entering into such Contract is in the best interests of Company, (b) the Contract is fair and reasonable to Company, and (c) a more advantageous Contract cannot be obtained under the circumstances.
The Board or the Committee considering a known or potential Conflict of Interest matter shall maintain detailed minutes and records regarding the matter. Such minutes shall reflect the name of the Interested Person and any disclosure made, the vote on whether a Conflict of Interest is present, the names of the persons participating in any discussions and deliberations with regard to approving or rejecting the Contract involving the Interested Person and the substance of such discussions and deliberations, adherence with the procedures described above, the abstention from voting and participation by the Interested Person, and that a quorum was present.
In the event an Interested Person fails to act in accordance with this Conflicts of Interest policy, the Board may take corrective action against such Person. In the event that a formal reprimand, or in an extreme case, the removal of such Person from his or her position(s), is proposed, such recommendation must be presented with supporting documentation. The Interested Person involved shall be given an opportunity to be heard prior to the Board’s final decision on the matter.
Additional Conflicts Provisions for Members of the Board
Members of the Board may not:
• Within one year following termination of their term on the Board assist or represent another party for compensation in a case, contract or other specific matter involving Company if that matter is one in which the member participated while affiliated with Company.
• Solicit or accept any gift for personal benefit of greater than $25.00 in value or a series of gifts totaling $100.00 in value in one year from any entity or person who has an interest in an entity which would be affected by the Board member’s vote on a proposed matter or that has or is negotiating a contract with Company.
• Disclose or use confidential information acquired by reason of their position as a Board member for their own gain or that of another, or for purposes which are inconsistent with the Board member’s fiduciary duty to Company.
• While serving on the Board and within one year following termination of their Board service be employed by or enter into any contract for compensation in excess of $2500 with a Company either personally or in a manner from which they would so benefit directly. A member of the Board upon declaring a candidacy for election to public office shall resign from the Board.
Persons in the family of a member of the Board may not receive any remuneration for any work performed with the exception of dependent children employed on a part time or seasonal basis.
Code of Conduct
This Code of Conduct is intended to be used in concert with Company’s governing documents including its stockholder agreement, charter, by-laws and such policies as the Board may adopt as well as applicable Delaware law. It outlines a set of fundamental principles, whether or not they are the basis for certain operational or legal requirements or prohibitions. These principles are intended to help officers and senior management understand why Company’s documents direct behavior in certain ways, why the laws require or prohibit certain actions and what is to be done when the governing documents and legal strictures are ambiguous or subject to interpretation. This Code of Conduct addresses the values of Company and how they reflect the values of the larger society. It is intended to help define what is right, fair, just and good in those cases where it may be less than obvious which path constitutes the high road.
This Code of Conduct has several goals:
• It is an ethical document defining what Company means when it holds Officers and senior management to the highest ethical standards–it details the fundamental maxim–do the right thing, by defining right and wrong in some detail.
• It has official standing, in that the standards articulated here become concrete evidence of Company’s expectations and intentions, with respect to the behavior of directors, officers, and senior management.
• It is pragmatic in that it provides an agreed-to description of both organizational values and the behaviors that those values prescribe.
• It is intended to remind directors, officers and senior management that their primary duty is to Company.
Directors, officers and senior management are expected to behave morally according to general expectations of any person in any society, acting in any capacity. The principles of personal ethics include:
• Concern for the well-being of others.
• Respect for the autonomy of others.
• Trustworthiness and honesty.
• Compliance with the law.
• Basic justice: being fair.
• Refusal to take unfair advantage.
• Benevolence: doing good.
• Prevention of harm.
An individual acting as a senior management member takes on an additional burden of ethical responsibility. These codes provide rules of conduct and standards of behavior based on the principles of professional ethics, which include:
• Openness and full disclosure.
• Due diligence and duty of care.
• Fidelity to professional responsibilities.
• Avoiding potential or apparent conflict of interest.
Directors, officers and senior management’s conduct can reinforce an ethical atmosphere and positively influence the conduct of fellow officers and team members. If a senior management member is powerless to stop suspected misconduct or discovers it after it has occurred, he or she must report it to the Chair of the Board, as appropriate.
Additional Provisions for Members of the Board
In addition to the personal and professional ethical responsibilities for senior management stated above, members of the Board are expected to understand and comply with the following legal strictures governing their behavior.
The Duty of Care
The satisfaction of the duty of care requires:
• Reasonable and prudent care, informing oneself and acting in good faith.
• Regular attendance at meetings of the Board, sharing equally in the work of the Board, and exercising independent and informed judgment on all corporate decisions.
• Acting in reliance on information and reports received from regular sources that the Board member reasonably regards as trustworthy.
The Duty of Loyalty
The duty of loyalty requires directors to exercise their powers in good faith and in the best interests of Company rather than in their own interest or the interest of another entity or person. The duty of loyalty primarily relates to:
• Conflicts of Interest – A director must act with candor and care in dealing with situations which have the potential for a conflict of interest.
• Corporate Opportunity – Before a director engages in a business transaction that may be of interest to Company, the director must disclose the transaction to the Board to enable the Board to act or decline to act with regard to the transaction.
• Confidentiality — A director shall not disclose information about Company unless that information is a matter of public record.
The Best Interests of Company
Members of the Board shall bear in mind the purposes in Company’s governing documents. When determining the best interests of Company each Board member must consider the Company’s financial ability to remain viable and to continue to achieve its purpose and mission. Each member of the Board must act in the interest of Source Home Entertainment and its subsidiaries. In accordance with the foregoing Code of Conduct, and in addition to the requirements of this Code, no member of the Board shall:
• Make personal criticisms of other board members inside or outside of board meetings.
• Discuss the confidential proceedings of the Board outside the boardroom or release confidential information not previously available to the public by order of the Board.
• Act in a way which is intended to intimidate another person in the conduct of their office or which a reasonable person would conclude had such intent and which, in fact, did intimidate.
• Undermine the authority of the Board, it’s Chair or the Company President to perform his/her duties, or interfere with the duties of Company’s management and staff or treat Company’s management and staff with disrespect.
• Commit an act which a person would reasonably expect to cause harm to the reputation of Company or the Board.
• Speak for or act on behalf of Company unless specifically authorized to do so by the Board.