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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A (FIRST)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1996
Commission File No. 0-28604
SOUND SOURCE INTERACTIVE, INC.
(Name of Small Business Issuer in its Charter)
Delaware 95-4264046
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2985 E. Hillcrest Drive, Suite A
Westlake Village, California 91362
(Address of principal executive offices) (Zip Code)
(805) 494-9996
(Issuer's telephone number
including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of each class: Name of each exchange
on which registered:
Common Stock, par value $.001
Redeemable Warrants NASDAQ SmallCap Market
Check whether the Issuer (1) filed all reports required to be filed by
Section 12 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes /X/ No / /
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained herein, and such disclosure will not be contained,
to the best of the Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB./X/
The Issuer's revenues for its most recent fiscal year were $2,264,633.
As of August 31, 1996, the aggregate market value of the shares of the
Issuer's voting stock held by nonaffiliates of the Issuer was approximately
$14,928,000, and the number of outstanding shares of the Issuer's common stock,
par value $.001, was 4,367,824.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Issuer's Proxy Statement to be filed with the Securities
and Exchange Commission on October 28, 1996 are incorporated by reference into
Part III of this Form 10-KSB.
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AMENDMENT N0. 1
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1996 as set forth below:
1. Add or substitute Exhibit Nos. 10.5, 10.44, 10.45, 10.46 and 10.47 as
follows:
Exh.
No. Description of Exhibits
---- -----------------------
10.5 Sound Source Interactive, Inc. Amended and Restated 1995 Stock
Option Plan. Filed herewith.
10.44 Indemnification Agreement, dated as of October 1, 1996, between
the Registrant and Ronald W. Hart. Filed herewith.
10.45 Indemnification Agreement, dated as of October 1, 1996, between
the Registrant and Mark A. James. Filed herewith.
10.46 Indemnification Agreement, dated as of October 1, 1996, between
the Registrant and Ernest T. Klinger. Filed herewith.
10.47 Separation and Release Agreement, dated as of October 24, 1996,
among the Registrant, the Subsidiary and Eric H. Winston. Filed
separately pursuant to request for confidential treatment.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Registrant has caused this Amendment No. 1 to
be signed on its behalf by the undersigned thereunto duly authorized.
Date: January 31, 1997 SOUND SOURCE INTERACTIVE, INC.
By /s/ Vincent J. Bitetti
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Vincent J. Bitetti, Chairman of the
Board and Chief Executive Officer
Date: January 31, 1997 By /s/ Ulrich E. Gottschling
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Ulrich E. Gottschling, Chief
Financial Officer Treasurer and
Secretary (principal financial
and accounting officer)
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Exhibit 10.5
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AMENDED AND RESTATED
1995 STOCK OPTION PLAN
OF SOUND SOURCE INTERACTIVE, INC.
1. Purpose
Sound Source Interactive, Inc. (the "Company") desires to attract and
retain the best available talent and encourage the highest level of performance
in order to continue to serve the best interests of the Company and its
stockholders. By affording key personnel the opportunity to acquire proprietary
interests in the Company and by providing them incentives to put forth maximum
efforts for the success of the business, the Amended and Restated 1995 Stock
Option Plan of Sound Source Interactive, Inc. (the "Plan") is expected to
contribute to the attainment of those objectives.
2. Scope and Duration
Options under the Plan may be granted in the form of incentive stock
options ("Incentive Options") as provided in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or in the form of non-qualified stock
options ("Non-qualified Options") (unless otherwise indicated, references in the
Plan to "options" include Incentive Options and Non-qualified Options.) The
maximum aggregate number of shares as to which options may be granted from time
to time under the Plan is 500,000 shares of the Company's Common Stock, par
value $.001 per share (the "Common Stock"), which shares may be, in whole or in
part, authorized but unissued shares or shares reacquired by the Company. If an
option shall expire, terminate or be surrendered for cancellation for any reason
without having been exercised in full, the shares represented by the option or
portion thereof not so exercised shall (unless the Plan shall have been
terminated) become available for subsequent option grants under the Plan. As
provided in Paragraph 13, the Plan shall become effective on November 1, 1995,
and unless terminated sooner pursuant to Paragraph 14, the Plan shall terminate
on October 31, 2005, and no option shall be granted hereunder after that date.
3. Administration
The Plan shall be administered by the Board of Directors of the
Company, at their discretion, by a committee which is appointed by the Board of
Directors to perform such function (the "Committee"). The Committee shall
consist of not less than two members of the Board of Directors, each of whom
shall serve at the pleasure of the Board of Directors and shall be a
"Non-Employee Director" as defined in Rule 16b-3 pursuant to the Securities
Exchange Act of 1934. Vacancies occurring in the membership of the Committee
shall be filled by appointment by the Board of Directors.
The Board of Directors or the Committee, as the case may be, shall
have plenary authority in its discretion, subject to and not inconsistent with
the express provisions of the Plan, to grant options, to determine the purchase
price of the Common Stock covered by each option, the term of each option, the
persons to whom, and the time or times at which, options shall be granted and
the number of shares to be covered by each option; to designate options as
Incentive Options; to interpret the Plan; to prescribe, amend and rescind rules
and regulations relating to the Plan; to determine the terms and provisions of
the option agreements (which need not be identical) entered into in connection
with options under the Plan; and to make all other determinations deemed
necessary or advisable for the administration of the Plan. The Board of
Directors or the Committee, as the case may be, may delegate to one or more of
its members or to one or more agents such administrative duties as it may deem
advisable, and the Board of Directors or the Committee, as the case may be, or
any person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with
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respect to any responsibility the Board of Directors or the Committee, as the
case may be; or such person may have under the Plan.
4. Eligibility; Factors to be Considered in Granting Options
Incentive Options shall be limited to persons who are employees of the
Company or its present and future subsidiaries and at the grant of any option
are in the employ of the Company or its subsidiaries. In determining the
employees to whom Incentive Options shall be granted and the number of shares to
be covered by each Incentive Option, the Board of Directors or the Committee, as
the case may be, shall take into account the nature of the employees' duties,
their present and potential contributions to the success of the Company and such
other factors as it shall deem relevant in connection with accomplishing the
purposes of the Plan. An employee who has been granted an option or options
under the Plan may be granted an additional option or options, subject, in the
case of Incentive Options, to such limitations as may be imposed by the Code on
such options. Except as provided below, a Non-qualified Option may be granted
to any person, including, but not limited to, employees, independent agents,
consultants and attorneys, who the Board of Directors or the committee, as the
case may be, believes has contributed, or will contribute, to the success of the
Company.
5. Option Price
The purchase price of the Common Stock covered by each option shall be
determined by the Board of Directors or the Committee, as the case may be,
and in the case of Incentive Options shall not be less than 100% of the
Fair Market Value (as defined in Paragraph 15(a) below) of a share of
Common Stock on the date on which the option is granted; provided, however,
that the purchase price of Common Stock covered by an Incentive Option
granted to an employee who, at the date of grant, owns more than 10% of the
total combined voting power of all classes of stock of the Company or of
its subsidiaries ("10% Stockholder") may not be less than 110% of the Fair
Market Value of a share of Common Stock on the date on which the Incentive
Option is granted. The purchase price of the Common Stock covered by each
option shall be subject to adjustment as provided in Paragraph 12 below.
The Board of Directors or the Committee, as the case may be, shall
determine the date on which an option is granted; in the absence of such a
determination, the date on which the Board of Directors or the Committee,
as the case may be, adopts a resolution granting an option shall be
considered the date on which such option is granted.
6. Term of Options
The term of each option shall be not more than ten years from the date
of grant, as the Board of Directors or the Committee, as the case may be, shall
determine, subject to earlier termination as provided in Paragraphs 10, 11, and
14 below. Notwithstanding the foregoing, an Incentive Option granted to a 10%
Stockholder shall have a term of no more than five years.
7. Exercise of Options
(a) Subject to the provisions of the Plan and unless otherwise
provided in the option agreement, options granted under the Plan shall become
exercisable as determined by the Board of Directors or the Committee, as the
case may be. In its discretion, the Board of Directors or the Committee, as the
case may be, may, in any case or cases, prescribe that options granted under the
Plan become exercisable in installments or provide that an option may be
exercisable in full immediately upon the date of its grant. The Board of
Directors or the Committee, as the case may be, may, in its sole discretion,
also provide that an option granted pursuant to the Plan shall immediately
become
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exercisable in full upon the happening of any of the following events:
(i) the first purchase of shares of Common Stock pursuant to a tender offer or
exchange offer (other than an offer by the Company) for all, or a majority of,
the Common Stock, (ii) the approval by the stockholders of the Company of an
agreement of a merger in which the Company will not survive as an independent,
publicly-owned company, a consolidation, or a sale, exchange or other
disposition of all or substantially all of the Company's assets, (iii) with
respect to an employee, on his 65th birthday, or (iv) with respect to an
employee, on the employee's involuntary termination from employment, subject to
the limitations set forth in Paragraph 10. In the event of a question or
controversy as to whether or not any of the events hereinabove described has
taken place, a determination by the Board of Directors or the Committee, as the
case may be, that such event has or has not occurred shall be conclusive and
binding upon the Company and the participants in the Plan.
(b) Any option at any time granted under the Plan may contain a
provision to the effect that the optionee (or any persons entitled to act under
Paragraph 11 hereof) may, at any time at which the Fair Market Value is in
excess of the exercise price and prior to exercising the option, in whole or in
part, request that the Company purchase all or any portion of the option as
shall then be exercisable at a price equal to the difference between (i) an
amount equal to the option price multiplied by the number of shares subject to
that portion of the option in respect of which such request shall be made and
(ii) an amount equal to such number of shares multiplied by the Fair Market
Value of the Company's Common Stock on the date of purchase. The Company shall
have no obligation to make any purchase pursuant to such request, but if it
elects to do so, such portion of the option as to which the request is made
shall be surrendered to the Company. The purchase price for the portion of the
option to be so surrendered shall be paid by the Company, at the election of the
Board of Directors or the Committee, as the case may be, either in cash or in
shares of Common Stock (valued as of the date and in the manner provided in
clause (ii) above), or in any combination of cash and Common Stock which may
consist, in whole or in part, of authorized but unissued shares of Common Stock
held in the Company's treasury. No fractional share of Common Stock shall be
issued or transferred and any fractional share shall be disregarded. Shares
covered by that portion of any option purchased by the Company pursuant hereto
and surrendered to the Company shall not be available for the granting of
further options under the Plan. All determinations to be made by the Company
hereunder shall be made by the Board of Directors or the Committee, as the case
may be.
(c) An option may be exercised, at any time or from time to time
(subject, in the case of Incentive Options, to such restrictions as may be
imposed by the Code), as to any or all full shares as to which the option has
become exercisable until the expiration of the period set forth in Paragraph 6
hereof, by the delivery to the Company, at its principal place of business in
Los Angeles, California, of (i) written notice of exercise in the form specified
by the Board of Directors or the Committee, as the case may be, specifying the
number of shares of Common Stock with respect to which the option is being
exercised and signed by the person exercising the option as provided herein,
(ii) payment of the purchase price, and (iii) in the case of Non-qualified
Options, payment in cash of all withholding tax obligations imposed on the
Company by reason of the exercise of the option. Upon acceptance of such
notice, receipt of payment in full, and receipt of payment of all withholding
tax obligations, the Corporation shall cause to be issued a certificate
representing the shares of Common Stock purchased. In the event the person
exercising the option delivers the items specified in (i) and (ii) of this
Subsection (b), but not the item specified in (iii) hereof, if applicable, the
option shall still be considered exercised upon acceptance by the Corporation
for the full number of shares of Common Stock specified in the notice of
exercise but the actual number of shares issued shall be reduced by the smaller
number of whole shares of Common Stock which, when multiplied by the Fair Market
Value of the Common Stock as of the date the option is exercised, is sufficient
to satisfy the required amount of withholding tax.
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(d) The purchase price of the shares as to which an option is
exercised shall be paid in full at the time of exercise. Payment shall be made
in cash, which may be paid by check or other instrument acceptable to the
Corporation; in addition, subject to a compliance with applicable laws and
regulations and such conditions as the Board of Directors or the Committee, as
the case may be, may impose, the Board of Directors or the Committee, as the
case may be, in its sole discretion, may, on a case-by-case basis, elect to
accept payment in shares of Common Stock of the Corporation which are already
owned by the option holder, valued at the Fair Market Value thereof (as defined
in Paragraph 15 below) on the date of exercise; provided, however, that no such
discretion may be exercised unless the option agreement permits the payment of
the purchase price in that manner.
(e) Except as provided in Paragraphs 10 and 11 below, no option
granted to an employee may be exercised at any time by such employee unless such
employee is then an employee of the Company or a subsidiary.
8. Incentive Options
(a) With respect to Incentive Options granted, the aggregate Fair
Market Value (determined in accordance with the provisions of Paragraph 15 at
the time the Incentive Option is granted) of the Common Stock or any other stock
of the Company or its current or future subsidiary companies with respect to
which incentive stock options, as defined in Section 422 of the Code, are
exercisable for the first time by any employee during any calendar year (under
all incentive stock option plans of the Company and its parent and subsidiary
companies, as those terms are defined in Section 425 of the Code) shall not
exceed $100,000.
(b) No Incentive Option may be awarded to a 10% Stockholder unless
the exercise price under the Incentive Option is at least 110% of the Fair
Market Value and the option expires within 5 years from the date of grant.
(c) In the event of amendments to the Code or applicable regulations
relating to Incentive Options subsequent to the date hereof, the Company may
amend the provisions of the Plan, and the Company and the employees holding
options may agree to amend outstanding option agreements, to conform to such
amendments.
9. Non-Transferability of Options
Options granted under the Plan shall not be transferable except upon
death as provided in Paragraph 11 below, and options may be exercised during the
lifetime of the optionee only by the optionee. Any purported transfer in
violation of the foregoing prohibition shall be void and of no force and effect.
10. Termination of Employment
In the event that the employment of an employee to whom an option has
been granted under the Plan shall be terminated (except as set forth in
Paragraph 11 below) such option may, subject to the provisions of the Plan,
be exercised (to the extent that the employee was entitled to do so at the
termination of his employment) at any time within 30 days after such
termination, but not later than the date on which the option terminates;
provided, however, that any option which is held by an employee whose
employment is terminated for cause shall, to the extent not theretofore
exercised, automatically terminate as of the date of termination of
employment. As used herein, "cause" shall mean conduct amounting to fraud,
dishonesty, negligence, or engaging in competition or solicitations in
competition with the Company and breaches of any applicable employment
agreement between the Company and the holder.
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Options granted to employees under the Plan shall not be affected by any
change of duties or position so long as the holder continues to be a
regular employee of the Company or any of its current or future
subsidiaries. Any option agreement or any rules and regulations relating
to the Plan may contain such provisions as the Board of Directors or the
Committee, as the case may be, shall approve with reference to the
determination of the date employment terminates and the
effect of any leave of absence. Nothing in the Plan or in any option
granted pursuant to the Plan shall confer upon any employee any right to
continue in the employ of the Company or any of its subsidiaries or parent
or affiliated companies or interfere in any way with the right of the
Company or any such subsidiary or parent or affiliated companies to
terminate such employment at any time.
11. Death or Disability of Employee
(a) If an employee to whom an option has been granted under the Plan
shall die or become permanently disabled while employed by the Company or a
subsidiary or within 30 days after the termination of such employment (other
than termination for cause), such option may be exercised, to the extent
exercisable by the employee on the date of death or permanent disability, at any
time within one year after the date on which the employee died or became
permanently disabled, but not later than the date on which the option terminates
in accordance with its terms.
(b) Upon the death of an employee while an option held by such
employee is exercisable, such option may be exercised, to the extent exercisable
by the employee on the date of death, by the beneficiary specified by such
employee in writing to the Company prior to his death or, in case no such
beneficiary shall have been specified, by a legatee or legatees of the employee
under the employee's last will, or by the employee's personal representatives or
distributees. No transfer of an option by the optionee by will or by the laws
of descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof and a copy of the
will and such other evidence as the Company may deem necessary to establish the
validity of the transfer and the acceptance by the transferor or transferees of
the terms and conditions of such option.
12. Adjustments Upon Changes in Capitalization, Etc.
Notwithstanding any other provision of the Plan, the Board of
Directors or the Committee, as the case may be, may, at any time, make or
provide for such adjustments to the Plan, to the number and class of shares
issuable thereunder or to any outstanding options as it shall deem appropriate
to prevent dilution or enlargement of rights, including adjustments in the event
of changes in the outstanding Common Stock by reason of stock dividends,
split-ups, recapitalizations, mergers, consolidations, combinations or exchanges
of shares, separations, reorganizations, liquidations and the like. In the
event of any offer to holders of Common Stock generally relating to the
acquisition of their shares, the Board of Directors or the Committee, as the
case may be, may make such adjustment as it deems equitable in respect of
outstanding options and rights, including in its discretion revision of
outstanding options and rights so that they may be exercisable for the
consideration payable in the acquisition transaction. Any such determination by
the Board of Directors or the Committee, as the case may be, shall be
conclusive. Any fractional shares resulting from such adjustments shall be
eliminated.
13. Effective Date
The Plan shall become effective on May 15, 1996, subject to approval
by the stockholders of the Company on or before May 14, 1997.
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14. Amendments and Termination
The Board of Directors may suspend, terminate, modify or amend the
Plan without stockholder approval, unless such approval is necessary or
appropriate under any Federal, state or other applicable law, rule or
regulation. No suspension, termination, modification or amendment of the
Plan may, without the consent of the employee to whom an option shall
theretofore have been granted, affect the rights of such employee under
such option.
15. Miscellaneous
(a) As said term is used in the Plan, the "Fair Market Value" of a
share of Common Stock on any day means: (i) if the principal market for the
Common Stock is a national securities exchange or if the Common Stock is quoted
on the National Association of Securities Dealers Automated Quotation System
("NASDAQ"), the closing sales price of the Common Stock on such day as reported
by such exchange or NASDAQ, or on a consolidated tape reflecting transactions on
such exchange or NASDAQ; or (ii) if the principal market for the Common Stock is
not a national securities exchange and the Common Stock is not quoted on NASDAQ,
the mean between the highest bid and lowest asked prices for the Common Stock on
such day as reported by the National Quotation Bureau, Inc.; provided that if
clauses (i) and (ii) of this paragraph are all inapplicable, or if no trades
have been made or no quotes are available for such day, the Fair Market Value of
the Common Stock shall be determined by the Board of Directors or the Committee,
as the case may be, which determination shall be conclusive as to the Fair
Market Value of the Common Stock.
(b) The Board of Directors or the Committee, as the case may be, may
require, as a condition to the exercise of any options granted under the Plan,
that to the extent required at the time of exercise, (i) the shares of Common
Stock reserved for purposes of the Plan shall be duly listed, upon official
notice of issuance, upon stock exchange(s) or automated quotation system on
which the Common Stock is listed, (ii) a registration statement under the
Securities Act of 1933, as amended with respect to the shares of Common Stock to
be issued upon exercise shall be effective, and/or (iii) the person exercising
such option delivers to the Corporation such documents, agreements and
investment and other representations as the Board of Directors or the Committee,
as the case may be, shall determine to be in the best interests of the
Corporation. All certificates for shares of stock delivered under the Plan
shall be subject to such stop transfer orders and other restrictions as the
Board of Directors or the Committee, as the case may be, may deem advisable
under the rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange or association upon which the Common
Stock is then listed or traded, any applicable federal or state securities law,
and any applicable corporate law, and the Board of Directors or the Committee,
as the case may be, may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(c) During the term of the Plan, the Board of Directors or the
Committee, as the case may be, in its discretion, may offer one or more option
holders the opportunity to surrender any or all unexpired options for
cancellation or replacement. If any options are so surrendered, the Board of
Directors or the Committee, as the case may be, may then grant new Non-qualified
or Incentive Options to such holders for the same or different numbers of shares
at higher or lower exercise prices than the surrendered options and for the same
or a different exercise period. Such new options shall otherwise be subject to
the provisions of the Plan the same as any other option.
(d) Not later than the date as of which an amount first becomes
includable in the gross income of the optionee for federal income tax purposes
with respect to any option under the Plan, the optionee shall pay to the
Company, or make arrangements satisfactory to the Board of Directors or the
Committee, as the case may be, regarding the payment of, any federal, state and
local
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taxes of any kind required by law to be withheld or paid with respect to
such amount. If permitted by the Board of Directors or the Committee, as the
case may be, tax withholding or payment obligations may be settled with Common
Stock, including Common Stock that is subject to the option that gives rise to
the withholding requirement. The obligations of the Company under the Plan
shall be conditional upon such payment or arrangements and the Company or the
optionee's employer (if not the Company) shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to the optionee from the Company or any of its subsidiaries.
(e) The Plan and all options granted and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Delaware (without regard to choice of law provisions).
(f) Any option granted under the Plan shall not be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or any of its subsidiaries and shall not affect any benefits under any
other benefit plan now or subsequently in effect under which the availability or
amount of benefits is related to the level of compensation (unless required by
specific reference in any such other plan to awards under this Plan).
(g) A leave of absence, unless otherwise determined by the Board of
Directors or the Committee, as the case may be, prior to the commencement
thereof, shall not be considered a termination of employment. Any option
granted under the Plan shall not be affected by any change of employment, so
long as the holder continues to be an employee of the Company or any of its
subsidiaries.
(h) If any of the terms or provisions of the Plan conflict with the
requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as in
effect from time to time, while the Plan is subject to such Rule, or with the
requirements of any other applicable law, rule or regulation, and with respect
to Incentive Options, Section 422 of the Code, then such terms or provisions
shall be deemed inoperative to the extent they so conflict with the requirements
of said Rule 16b-3 (if the Board of Directors or the Committee, as the case may
be, determines that the Plan should be in compliance with such Rule) or any such
other law, rule, or regulation, and with respect to Incentive Options,
Section 422 of the Code. With respect to Incentive options, if this Plan does
not contain any provision required to be included herein under Section 422 of
the Code, such provision shall be deemed to be incorporated herein with the same
force and effect as if such provision had been set out at length herein.
(i) The Board of Directors or the Committee, as the case may be, may
terminate any option granted under the Plan if a written agreement relating
thereto is not executed and returned to the Corporation within 30 days after
such agreement has been delivered to the optionee for his or her execution.
16. Automatic Grants to Nonemployee Directors
Each nonemployee director of the Company shall automatically be
granted options to purchase 10,000 shares of Common Stock for each full year
that he or she serves as a director of the Company. Such options will be
Non-Qualified Options; will vest and become exercisable as to 50 percent of the
shares of Common Stock subject to the option on the first anniversary date of
the grant and as to the remaining 50 percent on the second anniversary date of
the grant; will expire on the earlier of ten years from the date the option was
granted, upon expiration of the 1995 Stock Option Plan, or three weeks after the
optionee ceases to be a director of the Company; and will have an exercise price
equal to 100% of the Fair Market Value of the Common Stock on the date of grant.
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Exhibit 10.44
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SOUND SOURCE INTERACTIVE, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of
October 1, 1996, by and between Sound Source Interactive, Inc., a Delaware
corporation (the "Company"), and Ronald Wilson Hart ("Indemnitee").
W I T N E S S E T H:
--------------------
WHEREAS, the Company and Indemnitee recognize the increasing difficulty
in obtaining liability insurance for its officers and directors, the
significant increases in the cost of such insurance and the general
reductions in the coverage of such insurance; and
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation, subjecting officers and directors to
expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited; and
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and the Indemnitee and other
officers and directors of the Company may not be willing to continue to serve
in such capacities without additional protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in part,
in order to induce Indemnitee to continue to provide services to the Company,
wishes to provide for the indemnification and advancing of expenses to
Indemnitee to the maximum extent permitted by law.
NOW, THEREFORE, in consideration for Indemnitee's agreement to continue
to serve the company, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Indemnification of Expenses. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any threatened, pending
or completed action, suit, proceeding or alternative dispute resolution
mechanism, or any hearing, inquiry or investigation that Indemnitee in good
faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil,
criminal, administrative, investigative or other (hereinafter a "Claim") by
reason of (or arising in part out of) any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee or agent of the
Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by
reason of any action or inaction on the part of Indemnitee while serving in
such capacity (hereinafter an "Indemnifiable Event") against any and all
expenses (including attorneys' fees and all other costs, expenses and
obligations incurred in connection with investigating, defending, being a
witness in or participating in (including an appeal), or preparing to defend,
be a witness in or participate in, any such action, suit, proceeding,
alternative dispute resolution mechanism, hearing, inquiry or investigation),
judgments, fines, penalties and amounts paid in settlement (if such
settlement is; approved in advance by the Company, which approval shall not
be unreasonably withheld) of such Claim and any federal, state, local or
foreign taxes imposed on the Indemnitee as a result of the actual or deemed
receipt of any payments under this Agreement (collectively, hereinafter
("Expenses"),
<PAGE>
including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses. Such payment of Expenses
shall be made by the Company as soon as practicable but in any event no later
than five days after written demand by Indemnitee therefor is presented to
the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the
obligation of the Company under Section 1(a) shall be subject to the
condition that the Reviewing Party (as described in Section 10(e) hereof)
shall not have determined (in a written opinion in any case in which the
Independent Legal Counsel referred to in section 1(c) hereof is involved)
that Indemnitee would not be permitted to be indemnified under applicable
law, and (ii) the obligation of the Company to make an advance payment of
Expenses to Indemnitee pursuant to Section 2(a) (an "Expense Advance") shall
be subject to the condition that, if, when and to the extent that the
Reviewing Party shall have determined that Indemnitee would not be permitted
to be so indemnified under applicable law, the Company shall be entitled to
be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for
all such amounts theretofore paid; provided, however, that if Indemnitee has
commenced or thereafter commences legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, any determination made by the Reviewing Party that
Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee's obligation to reimburse the Company for
any Expense Advance shall be unsecured and no interest shall be charged
thereon. If there has not been a Change in Control (as defined in Section
10(c) hereof), the Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a
Change in Control which has been approved by a majority of the Company's
Board of Directors who were directors immediately prior to such Change in
Control), the Reviewing Party shall be the Independent Legal Counsel referred
to in Section 1(c) hereof. If there has been no determination by the
Reviewing Party or if the Reviewing Party determines that Indemnitee
substantively would not be permitted to be indemnified in whole or in part
under applicable law, Indemnitee shall have the right to commence litigation
seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the
legal or factual bases therefor, and the Company hereby consents to service
of process and to appear in any such proceeding. Any determination by the
Reviewing Party otherwise shall be conclusive and binding on the Company and
Indemnitee.
(c) Change in Control. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control which has
been approved by a majority of the Company's Board of Directors who were
directors immediately prior to such Change in Control) then with respect to
all matters thereafter arising concerning the rights of Indemnitee to
payments of Expenses and Expense Advances under this Agreement or any other
agreement or under the Company's Certificate of Incorporation or Bylaws as
now or hereafter in effect, Independent Legal Counsel, (as defined in Section
10(d) hereof) shall be selected by Indemnitee and approved by the Company
(which approval shall not be unreasonably withheld). Such counsel, among
other things, shall render its written opinion to the Company and Indemnitee
as to whether and to what extent Indemnitee would be permitted to be
indemnified under applicable law and the Company agrees to abide by such
opinion. The Company agrees to pay the reasonable fees of the Independent
Legal Counsel referred to above and to indemnify fully such counsel against
any and all expenses (including attorneys' fees), claims, liabilities and
damages arising out of or relating to this Agreement or its engagement
pursuant hereto.
(d) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 9 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in
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<PAGE>
defense of any action, suit, proceeding, inquiry or investigation referred to
in Section 1(a) hereof or in the defense of any claim, issue or matter
therein, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
2. Expenses; Indemnification Procedures.
(a) Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee. The advances to be made hereunder shall be
paid by the Company to Indemnitee as soon as practicable but in any event no
later than five days after written demand by Indemnitee therefor to the
Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be
sought under this Agreement. Notice to the Company shall be directed to the
Chief Executive Officer of the Company at the address shown on the signature
page of this Agreement (or such other address as the Company shall designate
in writing to Indemnitee). In addition, Indemnitee shall give the Company
such information and cooperation as it may reasonably require and as shall be
within Indemnitee's power.
(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any Claim by Judgment, order, settlement
(whether with or without court approval) or conviction, or upon a plea of
nolo contendere, or its equivalent, shall not create a presumption that
indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law. In addition, neither the failure of the
Reviewing Party to have made a determination as to whether Indemnitee has not
any particular standard of conduct or had any particular belief, nor an
actual determination by the Reviewing Party that Indemnitee has not met such
standard of conduct or did not have such belief, prior to the commencement of
legal proceedings by Indemnitee to secure a judicial determination that
Indemnitee should be indemnified under applicable law, shall be a defense to
Indemnitee's claim or create a presumption that Indemnitee has not met any
particular standard of conduct or did not have any particular belief. In
connection with any determination by the Reviewing Party or otherwise as to
whether the Indemnitee is entitled to be indemnified hereunder, the burden of
proof shall be on the Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
Company, of a notice of a Claim pursuant to Section 2(b) hereof, the Company
has liability insurance in effect which may cover such claim, the Company
shall give prompt notice of the commencement of such Claim to the insurers in
accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of the Indemnitee, all amounts payable as a result
of such action, suit, proceeding, inquiry or investigation in accordance with
the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim, the Company, if
appropriate, shall be entitled to assume the defense of such Claim with
counsel approved by Indemnitee, upon the delivery to Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of
such counsel by Indemnitee and the retention of such counsel by the Company,
the Company will not be liable to Indemnitee under this Agreement for any
fees of counsel subsequently incurred by Indemnitee with respect to the same
Claim; provided that, (i) Indemnitee shall have the right to employ
Indemnitee's counsel in any such Claim at Indemnitee's expense and (ii) if
(A) the employment of counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there may
3
<PAGE>
be a conflict of interest between the Company and Indemnitee in the conduct
of any such defense, or (C) the Company shall not continue to retain such
counsel to defend such Claim, then the reasonable fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
3. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute.
In the event of any change after the date of this Agreement in any applicable
law, statute or rule which expands the right of a Delaware corporation to
indemnify a member of its Board of Directors or an officer, such changes
shall be, ipso facto, within the purview of an Indemnitee's rights, and the
Company's obligations, under this Agreement. In the event of any change in
any applicable law, statute or rule which narrows the right of a Delaware
corporation to indemnify a member of its Board of Directors or an officer,
such changes, to the extent not otherwise required by such law, statute or
rule to be applied to this Agreement, shall have no effect on this Agreement
or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which an Indemnitee may be
entitled under the Company's Certificate of Incorporation, the Company's
Bylaws, any agreement, any vote of stockholders or disinterested Directors,
the General Corporation Law of the State of Delaware, or otherwise, both as
to action in Indemnitee's official capacity and as to action in another
capacity while holding such office. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though Indemnitee may have
ceased to serve in such capacity at the time of any action, suit or other
covered proceeding.
4. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Certificate of Incorporation, Bylaw or
otherwise) of the amounts otherwise indemnifiable hereunder.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred by him in connection with any Claim, but not,
however, for the total amount thereof, the Company shall nevertheless
indemnify Indemnitee for the portion of such Expenses to which Indemnitee is
entitled.
6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may
override Delaware law and prohibit the Company from indemnifying its
directors and officers under this Agreement or otherwise. For example, the
Company and Indemnitee acknowledge that the Securities and Exchange
Commission has taken the position that indemnification is not permissible for
liabilities arising under certain federal securities laws, and federal
legislation prohibits indemnification for certain ERISA violations.
Indemnitee understands and acknowledges that the Company has undertaken or
may be required in the future to undertake with the Securities and Exchange
Commission to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy
to indemnify Indemnitee.
7. Officer and Director Liability. The Company shall, from time to
time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the
Company's performance of
4
<PAGE>
its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies
of director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and
benefits as are accorded to the most favorably insured of the Company's
directors, if the Indemnitee is a director; or of the Company's officers, if
the Indemnitee is not a director of the Company but is an officer; or of the
Company's key employees, if Indemnitee is not an officer or director but is a
key employee. Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain such insurance if the Company determines in
good faith that such insurance is not reasonably available, the premium costs
for such insurance are disproportionate to the amount of coverage provided,
the coverage provided by such insurance is limited by exclusions so as to
provide an insufficient benefit, or Indemnitee is covered by a similar
insurance maintained by a subsidiary or parent of the Company.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for
acts, omissions or transactions from which Indemnitee may not be relieved of
liability under applicable law;
(b) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to Claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except (i) with respect
to actions or proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other agreement or insurance
policy or under the Company's Certificate of Incorporation or Bylaws now or
hereafter in effect relating to Claims for Indemnifiable Events, (ii) in
specific cases if the Board of Directors has approved the initiation or
bringing of such Claim, or (iii) as otherwise required under Section 145 of
the Delaware General Corporation Law, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, advance
expense payment or insurance recovery, as the case may be;
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of intent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous;
(d) Insured Claims. To indemnify indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, Judgments,
fines ERISA excise taxes or Penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy
of officers' and directors' liability insurance maintained by the Company or
any parent or subsidiary of the Company; or
(e) Claims Under Section 16(b). To indemnify Indemnitee for
expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
9. Period of Limitation. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or
legal representatives after the expiration of two years from the date of
accrual of such cause of action, and any claim or cause of action of the
Company shall be extinguished and deemed released unless asserted by the
timely filing of a legal action within such two-year period; provided, that
if any shorter period of limitations is otherwise applicable to any such
cause of action, such shorter period shall govern.
5
<PAGE>
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its officers and directors, so that
if Indemnitee is or was an officer or director of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as
Indemnitee would have with respect to such constituent corporation if its
separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on Indemnitee with respect to an
employee benefit plan; and references to "serving at the request of the
Company" shall include any service as an officer or director of the Company
which imposes duties on, or involves services by, such officer or director
with respect to an employee benefit plan, its participants or its
beneficiaries and if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner "not opposed to the best interests of the Company" as
referred to in this Agreement.
(c) For purposes of this Agreement a "Change in Control" shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other
than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned directly or indirectly by
the stockholders of the company in substantially the same proportions as
their ownership of stock of the Company, (A) who is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 10%
or more of the combined voting power of the Company's then outstanding Voting
Securities, increases his beneficial ownership of such securities by 5% or
more over the percentage so owned by such person, or (B) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 20% of the
total voting power represented by the Company's then outstanding Voting
Securities, (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination or
election was previously so approved, cease for any reason to constitute a
majority thereof, or (iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all of substantially all of the Company's assets.
(d) For purposes of this Agreement, "Independent Legal Counsel"
shall mean an attorney or firm of attorneys, selected in accordance with the
provisions of Section 1(c) hereof, who shall not have otherwise performed
services for the Company or Indemnitee within the last three years
6
<PAGE>
(other than with respect to matters concerning the rights of Indemnitee under
this Agreement, or of other indemnitee under similar indemnity agreements).
(e) For purposes of this Agreement, a "Reviewing Party" shall mean
any appropriate person or body consisting of a member or members of the
Company's Board of Directors or any other person or body appointed by the
Board of Directors who is not a party to the particular claim for which
Indemnitee is seeking indemnification, or Independent Legal Counsel.
(f) For purposes of this Agreement, "Voting Securities" shall mean
any securities of the Company that vote generally in the election of
directors.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the company, spouses,
heirs and personal and legal representatives. The Company shall require and
cause any successor (whether direct or indirect by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part,
of the business and/or assets of the Company, by written agreement in form
and substance satisfactory to Indemnitee, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as a director or officer of the Company or of any other
enterprise at the Company's request.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the
advancement of Expenses with respect to such action, unless as a part of such
action a court of competent jurisdiction over such action determines that
each of the material assertions made by Indemnitee as a basis for such action
were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled
to be paid all Expenses incurred by Indemnitee in defense of such action
including costs and expenses incurred with respect to Indemnitee's
counterclaims and crossclaim made in such action), and shall be entitled to
the advancement of Expenses with respect to such action, unless as a part of
such action a court having jurisdiction over such action determines that each
of Indemnitee's material defenses to such action were made in bad faith or
were frivolous.
14. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i)
if delivered by hand and signed for by the party addressed, on the date of
such delivery, or (ii) if mailed by domestic certified or registered mail
with postage prepaid, on the third business day after the date postmarked.
Addresses for notice to either party are as shown on the signature page of
this Agreement, or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of
Delaware for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action
instituted under this Agreement shall be commenced, prosecuted and continued
only in the Court of Chancery
7
<PAGE>
of the State of Delaware in and for New Castle County, which shall be the
exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision
within a single section, paragraph or sentence) are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and
the remaining provisions shall remain enforceable to the fullest extent
permitted by law. Furthermore, to the fullest extent possible, the provisions
of this Agreement (including, without limitations, each portion of this
Agreement containing any provision held to be invalid, void or otherwise
unenforceable, that is not itself invalid, void or unenforceable) shall be
construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable.
17. Choice of Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the State of
Delaware, as applied to contracts between Delaware residents, entered into
and to be performed entirely within the State of Delaware, without regard to
the conflict of laws principles thereof.
18. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all documents required
and shall do all acts that say be necessary to secure such rights and to
enable the Company effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction As Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SOUND SOURCE INTERACTIVE, INC.
By: /s/ Vincent J. Bitetti
------------------------------------------------
Vincent J. Bitetti, Chairman of the
Board and Chief Executive Officer
Address: 2985 E. Hillcrest Drive, Suite A
Westlake Village, California, 91362
AGREED TO AND ACCEPTED
INDEMNITEE:
/s/ Ronald W. Hart
- -----------------------------------
2200 Andover Square
- -----------------------------------
Little Rock, Arkansas 72227
- -----------------------------------
(address)
9
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Exhibit 10.45
<PAGE>
SOUND SOURCE INTERACTIVE, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of October 1,
1996, by and between Sound Source Interactive, Inc., a Delaware corporation (the
"Company"), and Mark A. James ("Indemnitee").
W I T N E S S E T H:
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining liability insurance for its officers and directors, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance; and
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation, subjecting officers and directors to expensive
litigation risks at the same time as the availability and coverage of liability
insurance has been severely limited; and
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and the Indemnitee and other officers
and directors of the Company may not be willing to continue to serve in such
capacities without additional protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in part, in
order to induce Indemnitee to continue to provide services to the Company,
wishes to provide for the indemnification and advancing of expenses to
Indemnitee to the maximum extent permitted by law.
NOW, THEREFORE, in consideration for Indemnitee's agreement to continue to
serve the company, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Indemnification of Expenses. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any threatened, pending or
completed action, suit, proceeding or alternative dispute resolution mechanism,
or any hearing, inquiry or investigation that Indemnitee in good faith believes
might lead to the institution of any such action, suit, proceeding or
alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other (hereinafter a "Claim") by reason of (or
arising in part out of) any event or occurrence related to the fact that
Indemnitee is or was a director, officer, employee or agent of the Company, or
any subsidiary of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action or inaction on the part of Indemnitee while serving in such capacity
(hereinafter an "Indemnifiable Event") against any and all expenses (including
attorneys' fees and all other costs, expenses and obligations incurred in
connection with investigating, defending, being a witness in or participating in
(including an appeal), or preparing to defend, be a witness in or participate
in, any such action, suit, proceeding, alternative dispute resolution mechanism,
hearing, inquiry or investigation), judgments, fines, penalties and amounts paid
in settlement (if such settlement is; approved in advance by the Company, which
approval shall not be unreasonably withheld) of such Claim and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement (collectively,
hereinafter ("Expenses"),
<PAGE>
including all interest, assessments and other charges
paid or payable in connection with or in respect of such Expenses. Such payment
of Expenses shall be made by the Company as soon as practicable but in any event
no later than five days after written demand by Indemnitee therefor is presented
to the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the
obligation of the Company under Section 1(a) shall be subject to the condition
that the Reviewing Party (as described in Section 10(e) hereof) shall not have
determined (in a written opinion in any case in which the Independent Legal
Counsel referred to in section 1(c) hereof is involved) that Indemnitee would
not be permitted to be indemnified under applicable law, and (ii) the obligation
of the Company to make an advance payment of Expenses to Indemnitee pursuant to
Section 2(a) (an "Expense Advance") shall be subject to the condition that, if,
when and to the extent that the Reviewing Party shall have determined that
Indemnitee would not be permitted to be so indemnified under applicable law, the
Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to
reimburse the Company) for all such amounts theretofore paid; provided, however,
that if Indemnitee has commenced or thereafter commences legal proceedings in a
court of competent jurisdiction to secure a determination that Indemnitee should
be indemnified under applicable law, any determination made by the Reviewing
Party that Indemnitee would not be permitted to be indemnified under applicable
law shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any
Expense Advance shall be unsecured and no interest shall be charged thereon. If
there has not been a Change in Control (as defined in Section 10(c) hereof), the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section 1(c) hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law, Indemnitee shall have the right to commence
litigation seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the legal
or factual bases therefor, and the Company hereby consents to service of process
and to appear in any such proceeding. Any determination by the Reviewing Party
otherwise shall be conclusive and binding on the Company and Indemnitee.
(c) Change in Control. The Company agrees that if there is a Change
in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel, (as defined in Section 10(d) hereof) shall be
selected by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be permitted to be indemnified under applicable law and the
Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to
indemnify fully such counsel against any and all expenses (including attorneys'
fees), claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto.
(d) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 9 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in
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defense of any action, suit, proceeding, inquiry or investigation referred to
in Section 1(a) hereof or in the defense of any claim, issue or matter
therein, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
2. Expenses; Indemnification Procedures.
(a) Advancement of Expenses. The Company shall advance all expenses
incurred by Indemnitee. The advances to be made hereunder shall be paid by the
Company to Indemnitee as soon as practicable but in any event no later than five
days after written demand by Indemnitee therefor to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any Claim by Judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has not any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
applicable law, shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief. In connection with any determination by the Reviewing
Party or otherwise as to whether the Indemnitee is entitled to be indemnified
hereunder, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
Company, of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such action,
suit, proceeding, inquiry or investigation in accordance with the terms of such
policies.
(e) Selection of Counsel. In the event the Company shall be obligated
hereunder to pay the Expenses of any Claim, the Company, if appropriate, shall
be entitled to assume the defense of such Claim with counsel approved by
Indemnitee, upon the delivery to Indemnitee of written notice of its election so
to do. After delivery of such notice, approval of such counsel by Indemnitee
and the retention of such counsel by the Company, the Company will not be liable
to Indemnitee under this Agreement for any fees of counsel subsequently incurred
by Indemnitee with respect to the same Claim; provided that, (i) Indemnitee
shall have the right to employ Indemnitee's counsel in any such Claim at
Indemnitee's expense and (ii) if (A) the employment of counsel by Indemnitee has
been previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may
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<PAGE>
be a conflict of interest between the Company and Indemnitee in the conduct
of any such defense, or (C) the Company shall not continue to retain such
counsel to defend such Claim, then the reasonable fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
3. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change after the date of this Agreement in any applicable law, statute or rule
which expands the right of a Delaware corporation to indemnify a member of its
Board of Directors or an officer, such changes shall be, ipso facto, within the
purview of an Indemnitee's rights, and the Company's obligations, under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
Board of Directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which an Indemnitee may be
entitled under the Company's Certificate of Incorporation, the Company's Bylaws,
any agreement, any vote of stockholders or disinterested Directors, the General
Corporation Law of the State of Delaware, or otherwise, both as to action in
Indemnitee's official capacity and as to action in another capacity while
holding such office. The indemnification provided under this Agreement shall
continue as to Indemnitee for any action taken or not taken while serving in an
indemnified capacity even though Indemnitee may have ceased to serve in such
capacity at the time of any action, suit or other covered proceeding.
4. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Certificate of Incorporation, Bylaw or otherwise)
of the amounts otherwise indemnifiable hereunder.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred by him in connection with any Claim, but not,
however, for the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may override
Delaware law and prohibit the Company from indemnifying its directors and
officers under this Agreement or otherwise. For example, the Company and
Indemnitee acknowledge that the Securities and Exchange Commission has taken the
position that indemnification is not permissible for liabilities arising under
certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
7. Officer and Director Liability. The Company shall, from time to
time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the
Company's performance of
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<PAGE>
its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if the
Indemnitee is a director; or of the Company's officers, if the Indemnitee is not
a director of the Company but is an officer; or of the Company's key employees,
if Indemnitee is not an officer or director but is a key employee.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain such insurance if the Company determines in good faith that such
insurance is not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or Indemnitee is covered by a similar insurance maintained by a
subsidiary or parent of the Company.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for acts,
omissions or transactions from which Indemnitee may not be relieved of liability
under applicable law;
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise required under Section 145 of the Delaware General Corporation Law,
regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be;
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of intent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous;
(d) Insured Claims. To indemnify indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, Judgments,
fines ERISA excise taxes or Penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company or any
parent or subsidiary of the Company; or
(e) Claims Under Section 16(b). To indemnify Indemnitee for expenses
or the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
9. Period of Limitation. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, that if any shorter period of
limitations is otherwise applicable to any such cause of action, such shorter
period shall govern.
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<PAGE>
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its officers and directors, so that if Indemnitee is or
was an officer or director of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, employee benefit
plan, trust or other enterprise, Indemnitee shall stand in the same position
under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as an officer or director of the Company which imposes duties on, or
involves services by, such officer or director with respect to an employee
benefit plan, its participants or its beneficiaries and if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan, Indemnitee
shall be deemed to have acted in a manner "not opposed to the best interests of
the Company" as referred to in this Agreement.
(c) For purposes of this Agreement a "Change in Control" shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned directly or indirectly by the stockholders
of the company in substantially the same proportions as their ownership of stock
of the Company, (A) who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding Voting Securities,
increases his beneficial ownership of such securities by 5% or more over the
percentage so owned by such person, or (B) becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing more than 20% of the total voting power represented by
the Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by the
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination or election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
transactions) all of substantially all of the Company's assets.
(d) For purposes of this Agreement, "Independent Legal Counsel" shall
mean an attorney or firm of attorneys, selected in accordance with the
provisions of Section 1(c) hereof, who shall not have otherwise performed
services for the Company or Indemnitee within the last three years
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(other than with respect to matters concerning the rights of Indemnitee under
this Agreement, or of other indemnitee under similar indemnity agreements).
(e) For purposes of this Agreement, a "Reviewing Party" shall mean
any appropriate person or body consisting of a member or members of the
Company's Board of Directors or any other person or body appointed by the Board
of Directors who is not a party to the particular claim for which Indemnitee is
seeking indemnification, or Independent Legal Counsel.
(f) For purposes of this Agreement, "Voting Securities" shall mean
any securities of the Company that vote generally in the election of directors.
11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the company, spouses, heirs
and personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all, or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. This Agreement shall
continue in effect regardless of whether Indemnitee continues to serve as a
director or officer of the Company or of any other enterprise at the Company's
request.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless as a part of such action a court
of competent jurisdiction over such action determines that each of the material
assertions made by Indemnitee as a basis for such action were not made in good
faith or were frivolous. In the event of an action instituted by or in the name
of the Company under this Agreement to enforce or interpret any of the terms of
this Agreement, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee in defense of such action including costs and expenses incurred with
respect to Indemnitee's counterclaims and crossclaim made in such action), and
shall be entitled to the advancement of Expenses with respect to such action,
unless as a part of such action a court having jurisdiction over such action
determines that each of Indemnitee's material defenses to such action were made
in bad faith or were frivolous.
14. Notice. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of
Delaware for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action
instituted under this Agreement shall be commenced, prosecuted and continued
only in the Court of Chancery
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of the State of Delaware in and for New Castle County, which shall be the
exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement shall be governed by and its provisions
construed and enforced in accordance with the laws of the State of Delaware, as
applied to contracts between Delaware residents, entered into and to be
performed entirely within the State of Delaware, without regard to the conflict
of laws principles thereof.
18. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that say be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction As Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SOUND SOURCE INTERACTIVE, INC.
By: /s/ Vincent J. Bitetti
-----------------------------------------
Vincent J. Bitetti, Chairman of the
Board and Chief Executive Officer
Address: 2985 E. Hillcrest Drive, Suite A
Westlake Village, California, 91362
AGREED TO AND ACCEPTED
INDEMNITEE:
/s/ Mark A. James
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(address)
9
<PAGE>
Exhibit 10.46
<PAGE>
SOUND SOURCE INTERACTIVE, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of October
1, 1996, by and between Sound Source Interactive, Inc., a Delaware
corporation (the "Company"), and Ernest T. Klinger ("Indemnitee").
W I T N E S S E T H:
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining liability insurance for its officers and directors, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance; and
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation, subjecting officers and directors to expensive
litigation risks at the same time as the availability and coverage of liability
insurance has been severely limited; and
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and the Indemnitee and other
officers and directors of the Company may not be willing to continue to serve
in such capacities without additional protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in part,
in order to induce Indemnitee to continue to provide services to the Company,
wishes to provide for the indemnification and advancing of expenses to
Indemnitee to the maximum extent permitted by law.
NOW, THEREFORE, in consideration for Indemnitee's agreement to continue
to serve the company, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Indemnification of Expenses. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any threatened, pending
or completed action, suit, proceeding or alternative dispute resolution
mechanism, or any hearing, inquiry or investigation that Indemnitee in good
faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil,
criminal, administrative, investigative or other (hereinafter a "Claim") by
reason of (or arising in part out of) any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee or agent of the
Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by
reason of any action or inaction on the part of Indemnitee while serving in
such capacity (hereinafter an "Indemnifiable Event") against any and all
expenses (including attorneys' fees and all other costs, expenses and
obligations incurred in connection with investigating, defending, being a
witness in or participating in (including an appeal), or preparing to defend,
be a witness in or participate in, any such action, suit, proceeding,
alternative dispute resolution mechanism, hearing, inquiry or investigation),
judgments, fines, penalties and amounts paid in settlement (if such
settlement is; approved in advance by the Company, which approval shall not
be unreasonably withheld) of such Claim and any federal, state, local or
foreign taxes imposed on the Indemnitee as a result of the actual or deemed
receipt of any payments under this Agreement (collectively, hereinafter
("Expenses"),
<PAGE>
including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses. Such payment of Expenses
shall be made by the Company as soon as practicable but in any event no later
than five days after written demand by Indemnitee therefor is presented to
the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the
obligation of the Company under Section 1(a) shall be subject to the
condition that the Reviewing Party (as described in Section 10(e) hereof)
shall not have determined (in a written opinion in any case in which the
Independent Legal Counsel referred to in section 1(c) hereof is involved)
that Indemnitee would not be permitted to be indemnified under applicable
law, and (ii) the obligation of the Company to make an advance payment of
Expenses to Indemnitee pursuant to Section 2(a) (an "Expense Advance") shall
be subject to the condition that, if, when and to the extent that the
Reviewing Party shall have determined that Indemnitee would not be permitted
to be so indemnified under applicable law, the Company shall be entitled to
be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for
all such amounts theretofore paid; provided, however, that if Indemnitee has
commenced or thereafter commences legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, any determination made by the Reviewing Party that
Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee's obligation to reimburse the Company for
any Expense Advance shall be unsecured and no interest shall be charged
thereon. If there has not been a Change in Control (as defined in Section
10(c) hereof), the Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a
Change in Control which has been approved by a majority of the Company's
Board of Directors who were directors immediately prior to such Change in
Control), the Reviewing Party shall be the Independent Legal Counsel referred
to in Section 1(c) hereof. If there has been no determination by the
Reviewing Party or if the Reviewing Party determines that Indemnitee
substantively would not be permitted to be indemnified in whole or in part
under applicable law, Indemnitee shall have the right to commence litigation
seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the
legal or factual bases therefor, and the Company hereby consents to service
of process and to appear in any such proceeding. Any determination by the
Reviewing Party otherwise shall be conclusive and binding on the Company and
Indemnitee.
(c) Change in Control. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control which has
been approved by a majority of the Company's Board of Directors who were
directors immediately prior to such Change in Control) then with respect to
all matters thereafter arising concerning the rights of Indemnitee to
payments of Expenses and Expense Advances under this Agreement or any other
agreement or under the Company's Certificate of Incorporation or Bylaws as
now or hereafter in effect, Independent Legal Counsel, (as defined in Section
10(d) hereof) shall be selected by Indemnitee and approved by the Company
(which approval shall not be unreasonably withheld). Such counsel, among
other things, shall render its written opinion to the Company and Indemnitee
as to whether and to what extent Indemnitee would be permitted to be
indemnified under applicable law and the Company agrees to abide by such
opinion. The Company agrees to pay the reasonable fees of the Independent
Legal Counsel referred to above and to indemnify fully such counsel against
any and all expenses (including attorneys' fees), claims, liabilities and
damages arising out of or relating to this Agreement or its engagement
pursuant hereto.
(d) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 9 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice,
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in defense of any action, suit, proceeding, inquiry or investigation referred
to in Section 1(a) hereof or in the defense of any claim, issue or matter
therein, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
2. Expenses; Indemnification Procedures.
(a) Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee. The advances to be made hereunder shall be
paid by the Company to Indemnitee as soon as practicable but in any event no
later than five days after written demand by Indemnitee therefor to the
Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be
sought under this Agreement. Notice to the Company shall be directed to the
Chief Executive Officer of the Company at the address shown on the signature
page of this Agreement (or such other address as the Company shall designate
in writing to Indemnitee). In addition, Indemnitee shall give the Company
such information and cooperation as it may reasonably require and as shall be
within Indemnitee's power.
(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any Claim by Judgment, order, settlement
(whether with or without court approval) or conviction, or upon a plea of
nolo contendere, or its equivalent, shall not create a presumption that
indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law. In addition, neither the failure of the
Reviewing Party to have made a determination as to whether Indemnitee has not
any particular standard of conduct or had any particular belief, nor an
actual determination by the Reviewing Party that Indemnitee has not met such
standard of conduct or did not have such belief, prior to the commencement of
legal proceedings by Indemnitee to secure a judicial determination that
Indemnitee should be indemnified under applicable law, shall be a defense to
Indemnitee's claim or create a presumption that Indemnitee has not met any
particular standard of conduct or did not have any particular belief. In
connection with any determination by the Reviewing Party or otherwise as to
whether the Indemnitee is entitled to be indemnified hereunder, the burden of
proof shall be on the Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
Company, of a notice of a Claim pursuant to Section 2(b) hereof, the Company
has liability insurance in effect which may cover such claim, the Company
shall give prompt notice of the commencement of such Claim to the insurers in
accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of the Indemnitee, all amounts payable as a result
of such action, suit, proceeding, inquiry or investigation in accordance with
the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim, the Company, if
appropriate, shall be entitled to assume the defense of such Claim with
counsel approved by Indemnitee, upon the delivery to Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of
such counsel by Indemnitee and the retention of such counsel by the Company,
the Company will not be liable to Indemnitee under this Agreement for any
fees of counsel subsequently incurred by Indemnitee with respect to the same
Claim; provided that, (i) Indemnitee shall have the right to employ
Indemnitee's counsel in any such Claim at Indemnitee's expense and (ii) if
(A) the employment of counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there may
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be a conflict of interest between the Company and Indemnitee in the conduct
of any such defense, or (C) the Company shall not continue to retain such
counsel to defend such Claim, then the reasonable fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
3. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute.
In the event of any change after the date of this Agreement in any applicable
law, statute or rule which expands the right of a Delaware corporation to
indemnify a member of its Board of Directors or an officer, such changes
shall be, ipso facto, within the purview of an Indemnitee's rights, and the
Company's obligations, under this Agreement. In the event of any change in
any applicable law, statute or rule which narrows the right of a Delaware
corporation to indemnify a member of its Board of Directors or an officer,
such changes, to the extent not otherwise required by such law, statute or
rule to be applied to this Agreement, shall have no effect on this Agreement
or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which an Indemnitee may be
entitled under the Company's Certificate of Incorporation, the Company's
Bylaws, any agreement, any vote of stockholders or disinterested Directors,
the General Corporation Law of the State of Delaware, or otherwise, both as
to action in Indemnitee's official capacity and as to action in another
capacity while holding such office. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though Indemnitee may have
ceased to serve in such capacity at the time of any action, suit or other
covered proceeding.
4. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Certificate of Incorporation, Bylaw or
otherwise) of the amounts otherwise indemnifiable hereunder.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred by him in connection with any Claim, but not,
however, for the total amount thereof, the Company shall nevertheless
indemnify Indemnitee for the portion of such Expenses to which Indemnitee is
entitled.
6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may
override Delaware law and prohibit the Company from indemnifying its
directors and officers under this Agreement or otherwise. For example, the
Company and Indemnitee acknowledge that the Securities and Exchange
Commission has taken the position that indemnification is not permissible for
liabilities arising under certain federal securities laws, and federal
legislation prohibits indemnification for certain ERISA violations.
Indemnitee understands and acknowledges that the Company has undertaken or
may be required in the future to undertake with the Securities and Exchange
Commission to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy
to indemnify Indemnitee.
7. Officer and Director Liability. The Company shall, from time to
time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the
Company's performance of
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its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies
of director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and
benefits as are accorded to the most favorably insured of the Company's
directors, if the Indemnitee is a director; or of the Company's officers, if
the Indemnitee is not a director of the Company but is an officer; or of the
Company's key employees, if Indemnitee is not an officer or director but is a
key employee. Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain such insurance if the Company determines in
good faith that such insurance is not reasonably available, the premium costs
for such insurance are disproportionate to the amount of coverage provided,
the coverage provided by such insurance is limited by exclusions so as to
provide an insufficient benefit, or Indemnitee is covered by a similar
insurance maintained by a subsidiary or parent of the Company.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for
acts, omissions or transactions from which Indemnitee may not be relieved of
liability under applicable law;
(b) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to Claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except (i) with respect
to actions or proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other agreement or insurance
policy or under the Company's Certificate of Incorporation or Bylaws now or
hereafter in effect relating to Claims for Indemnifiable Events, (ii) in
specific cases if the Board of Directors has approved the initiation or
bringing of such Claim, or (iii) as otherwise required under Section 145 of
the Delaware General Corporation Law, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, advance
expense payment or insurance recovery, as the case may be;
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of intent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous;
(d) Insured Claims. To indemnify indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, Judgments,
fines ERISA excise taxes or Penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy
of officers' and directors' liability insurance maintained by the Company or
any parent or subsidiary of the Company; or
(e) Claims Under Section 16(b). To indemnify Indemnitee for
expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
9. Period of Limitation. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or
legal representatives after the expiration of two years from the date of
accrual of such cause of action, and any claim or cause of action of the
Company shall be extinguished and deemed released unless asserted by the
timely filing of a legal action within such two-year period; provided, that
if any shorter period of limitations is otherwise applicable to any such
cause of action, such shorter period shall govern.
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10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its officers and directors, so that
if Indemnitee is or was an officer or director of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as
Indemnitee would have with respect to such constituent corporation if its
separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on Indemnitee with respect to an
employee benefit plan; and references to "serving at the request of the
Company" shall include any service as an officer or director of the Company
which imposes duties on, or involves services by, such officer or director
with respect to an employee benefit plan, its participants or its
beneficiaries and if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner "not opposed to the best interests of the Company" as
referred to in this Agreement.
(c) For purposes of this Agreement a "Change in Control" shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other
than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned directly or indirectly by
the stockholders of the company in substantially the same proportions as
their ownership of stock of the Company, (A) who is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 10%
or more of the combined voting power of the Company's then outstanding Voting
Securities, increases his beneficial ownership of such securities by 5% or
more over the percentage so owned by such person, or (B) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 20% of the
total voting power represented by the Company's then outstanding Voting
Securities, (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination or
election was previously so approved, cease for any reason to constitute a
majority thereof, or (iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of transactions) all of substantially all of the Company's assets.
(d) For purposes of this Agreement, "Independent Legal Counsel"
shall mean an attorney or firm of attorneys, selected in accordance with the
provisions of Section 1(c) hereof, who shall not have otherwise performed
services for the Company or Indemnitee within the last three years
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(other than with respect to matters concerning the rights of Indemnitee under
this Agreement, or of other indemnitee under similar indemnity agreements).
(e) For purposes of this Agreement, a "Reviewing Party" shall mean
any appropriate person or body consisting of a member or members of the
Company's Board of Directors or any other person or body appointed by the
Board of Directors who is not a party to the particular claim for which
Indemnitee is seeking indemnification, or Independent Legal Counsel.
(f) For purposes of this Agreement, "Voting Securities" shall mean
any securities of the Company that vote generally in the election of
directors.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the company, spouses,
heirs and personal and legal representatives. The Company shall require and
cause any successor (whether direct or indirect by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part,
of the business and/or assets of the Company, by written agreement in form
and substance satisfactory to Indemnitee, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as a director or officer of the Company or of any other
enterprise at the Company's request.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the
advancement of Expenses with respect to such action, unless as a part of such
action a court of competent jurisdiction over such action determines that
each of the material assertions made by Indemnitee as a basis for such action
were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled
to be paid all Expenses incurred by Indemnitee in defense of such action
including costs and expenses incurred with respect to Indemnitee's
counterclaims and crossclaim made in such action), and shall be entitled to
the advancement of Expenses with respect to such action, unless as a part of
such action a court having jurisdiction over such action determines that each
of Indemnitee's material defenses to such action were made in bad faith or
were frivolous.
14. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i)
if delivered by hand and signed for by the party addressed, on the date of
such delivery, or (ii) if mailed by domestic certified or registered mail
with postage prepaid, on the third business day after the date postmarked.
Addresses for notice to either party are as shown on the signature page of
this Agreement, or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of
Delaware for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action
instituted under this Agreement shall be commenced, prosecuted and continued
only in the Court of Chancery
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of the State of Delaware in and for New Castle County, which shall be the
exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision
within a single section, paragraph or sentence) are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and
the remaining provisions shall remain enforceable to the fullest extent
permitted by law. Furthermore, to the fullest extent possible, the provisions
of this Agreement (including, without limitations, each portion of this
Agreement containing any provision held to be invalid, void or otherwise
unenforceable, that is not itself invalid, void or unenforceable) shall be
construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable.
17. Choice of Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the State of
Delaware, as applied to contracts between Delaware residents, entered into
and to be performed entirely within the State of Delaware, without regard to
the conflict of laws principles thereof.
18. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all documents required
and shall do all acts that say be necessary to secure such rights and to
enable the Company effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction As Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SOUND SOURCE INTERACTIVE, INC.
By: /s/ Vincent J. Bitetti
------------------------------------------------------
Vincent J. Bitetti, Chairman of the
Board and Chief Executive Officer
Address: 2985 E. Hillcrest Drive, Suite A
Westlake Village, California, 91362
AGREED TO AND ACCEPTED
INDEMNITEE:
/s/ Ernest T. Klinger
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30165 Avenida Esplendida
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Rancho Palos Verdes, California 90275
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(address)
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