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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 27, 1998
SOUND SOURCE INTERACTIVE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-21938 33-055-7853
(Commission File Number) (IRS Employer Identification No.)
26115 Mureau Road, Suite B, Calabasas, CA 91302
(Address Of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (818) 878-0505
N/A
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On April 27, 1998, Sound Source Interactive, Inc. (the "Company") entered
into a Settlement Agreement dated as of April 24, 1998 with ASSI, Inc., NCD,
Inc., The Boston Group, L.P., Vincent J. Bitetti, Ulrich E. Gottschling, Mark A.
James and Robert G. Kalik. Pursuant to the Settlement Agreement, the Company
has settled with prejudice two legal proceedings which were pending against it,
its Chairman and Chief Executive Officer Vincent J. Bitetti, and its President
and Chief Operating Officer Ulrich E. Gottschling, in Los Angeles Superior Court
and which related to an attempted expansion of the Company's Board of Directors
and the election of four persons to fill the expansion seats. In connection
with the settlement, the Company (a) exchanged 1,100,000 shares of its common
stock for the 4,816,657 common stock purchase warrants held by ASSI, Inc.; (b)
amended and restated its Bylaws to provide for a seven-member Board of
Directors; (c) appointed Wayne Rogers, John Wholihan, Samuel Poole and Richard
Azevedo to fill vacancies on the Board of Directors; and (d) entered into
certain related agreements described below.
Pursuant to the Settlement Agreement, the Company received the consent of
ASSI, Inc. to certain matters relating to the existing Voting Agreement among
the Company, ASSI, Inc., Vincent J. Bitetti and Eric H. Winston. Among other
things, the consent provides that as between the Company, ASSI, Inc., The Boston
Group, L.P. and Vincent J. Bitetti, the nominees for the seven-person board of
Directors will be determined as follows: up to two persons may be nominated by
Bitetti as long as he holds 750,000 or more shares of the Company's common stock
(but only one person, if Bitetti holds more than 500,000 and less than 750,000
shares, and no person if Bitetti holds 500,000 or fewer shares); one person may
be nominated by ASSI, Inc. as long as it holds 500,000 or more shares of the
Company's common stock (but no person if ASSI, Inc. holds fewer than 500,000
shares); up to two persons may be nominated by The Boston Group, L.P. (including
as assignee of the rights of Joseph Stevens & Company, L.P.) pursuant to the
Underwriting Agreement dated July 1, 1996 so long as it may be in effect in
pertinent part; one person (an "Expansion Member") may be nominated by Mr.
Bitetti (subject to approval of such person by ASSI, Inc. (unless a renomination
of a presently serving nominee)), and one person (another "Expansion Member")
may be nominated by ASSI, Inc. (subject to approval of such person by Mr.
Bitetti (unless a renomination of a presently serving nominee)). Each Expansion
Member must be independent of the Company and the person nominating such
Expansion Member, and must meet certain other requirements set forth in the
consent.
Pursuant to the Settlement Agreement, ASSI, Inc., NCD, Inc., Louis Habash
and the Company also entered into a Lock-Up Agreement. Such agreement provides
that during the year ending May 30, 1999, ASSI, Inc., NCD, Inc. and Louis Habash
(who is the beneficial owner of all of the voting securities of ASSI, Inc. and
NCD, Inc.) may not sell shares of the Company's common stock beneficially owned
by them in an aggregate amount in excess of an amount determined by a formula,
which equates to the product of approximately 94,620 shares times the number of
full months, commencing with the month of May 1998, elapsed since the
settlement.
Pursuant to the Settlement Agreement, the Company also entered into a Third
Amended and Restated Employment Agreement with Vincent J. Bitetti. The new
employment agreement extends the term of Mr. Bitetti's existing agreement for
2-1/4 years until December 31, 2000 at a salary increase from $200,000 to
$240,000, grants Mr. Bitetti options to purchase an additional 50,000 shares
2
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of the Company's common stock at prices of $2.50 and $5.00 per share and alters
the bonus structure applicable under the prior agreement.
Pursuant to the Settlement Agreement, the Company entered into an
Employment Memorandum with Ulrich E. Gottschling which amends Mr. Gottschling's
existing employment agreement. The amendment extends the term of the existing
agreement for one year until January 31, 2000 at a salary increase from $150,000
to $180,000, grants Mr. Gottschling similar options to purchase an additional
50,000 shares of the Company's common stock and alters the bonus structure
applicable under the existing agreement.
Certain aspects of the settlement will be submitted for stockholder
approval at the next annual meeting.
A copy of the Settlement Agreement, the Amended and Restated Bylaws, the
Lock-Up Agreement, the Third Amended and Restated Employment Agreement of
Vincent J. Bitetti, the Employment Memorandum amending the Employment Agreement
of Ulrich E. Gottschling and the consent of ASSI, Inc. and the related press
release are attached as exhibits hereto and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
Exhibit Description
Number
3.1 Amended and Restated Bylaws of the Company.
9.1 Consent of ASSI, Inc., dated as of April 27, 1998, pursuant to the
Voting Agreement, dated as of April 30, 1996, among ASSI, Inc.,
Vincent J. Bitetti and Eric H. Winston.
10.1 Settlement Agreement, dated as of April 27, 1998, by and among Sound
Source Interactive, Inc., ASSI, Inc., NCD, Inc., The Boston Group,
L.P., Vincent J. Bitetti, Ulrich E. Gottschling, Mark A. James and
Robert G. Kalik.
10.2 Lock-Up Agreement, dated as of April 27, 1998, among ASSI, Inc., NCD,
Inc., Louis Habash and the Company.
10.3 Third Amended and Restated Employment Agreement of Vincent J. Bitetti,
dated as of April 27, 1998.
10.4 Employment Memorandum of Ulrich E. Gottschling, dated as of April 27,
1998.
99.1 Press release dated April 28, 1998 of Sound Source Interactive, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SOUND SOURCE INTERACTIVE, INC.
Date: May 6, 1998 By: /s/ Vincent J. Bitetti
----------------------
Vincent J. Bitetti
Chairman of the Board & Chief
Executive Officer
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EXHIBIT 3.1
AMENDED AND RESTATED BYLAWS
OF
SOUND SOURCE INTERACTIVE, INC.
A DELAWARE CORPORATION
(AS OF APRIL 24, 1998)
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office of the
corporation shall be located as directed by the board of directors.
SECTION 2. OTHER OFFICES. Other business offices may at any time be
established by the board of directors at any place or places by them or where
the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of stockholders shall be held at
the principal executive office of the corporation, or at any other place within
or without the State of Delaware which may be designated either by the board of
directors or by the written consent of all persons entitled to vote thereat and
not present at the meeting, given either before or after the meeting and filed
with the secretary of the corporation.
SECTION 2. ANNUAL MEETINGS. The annual meetings of stockholders shall be
fixed by the board of directors. At such meetings directors shall be elected,
reports of the affairs of the corporation shall be considered, and any other
business may be transacted which is within the powers of the stockholders.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders, for the
purpose of taking any action permitted by the stockholders under the Delaware
General Corporation Law and the certificate of incorporation of the corporation,
may be called at any time by the chairman of the board or the president, or by
the board of directors, or by one or more holders of shares entitled to cast in
the aggregate not less than ten percent (10%) of the votes at the meeting. Upon
request in writing that a special meeting of stockholders be called for any
proper purpose, directed to the chairman of the board, president, vice president
or secretary by any person (other than the board of directors) entitled to call
a special meeting of stockholders, the officer forthwith shall cause notice to
be given to stockholders entitled to vote that a meeting will be held at a time
requested by the person or persons calling the meeting, not less than thirty-
five (35) nor more than sixty (60) days after receipt of the request.
SECTION 4. NOTICE OF ANNUAL OR SPECIAL MEETING. Written notice of each
annual or special meeting of stockholders shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting to each stockholder
entitled to vote thereat. Such written notice shall be given either personally
or by mail or other means of written communication, charges prepaid, addressed
to such stockholder at his address appearing on the books of the corporation or
given by him to the corporation for the purpose of notice. If any notice or
report addressed to the stockholder at the address of such stockholder appearing
on the books of the corporation is returned to the
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corporation by the United States Postal Service as unable to deliver the notice
or report to the stockholder at such address, all future notices or reports
shall be deemed to have been duly given without further mailing if the same
shall be available for the stockholder upon written demand of the stockholder at
the principal executive office of the corporation for a period of one (1) year
from the date of the giving of the notice or report to all other stockholders.
If a stockholder gives no address, notice shall be deemed to have been given him
if sent by mail or other means of written communication addressed to the place
where the principal executive office of the corporation is situated, or if
published at least once in some newspaper of general circulation in the county
in which said principal executive office is located.
Any such notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any such notice in accordance with
the foregoing provisions, executed by the secretary, assistant secretary or any
transfer agent of the corporation, shall be prima facie evidence of the giving
of the notice.
SECTION 5. QUORUM. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting shall constitute a quorum
for the transaction of business at any meeting of stockholders. The
stockholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
SECTION 6. ADJOURNED MEETING AND NOTICE THEREOF. Any stockholders' meeting,
annual or special, whether or not a quorum is present, may be adjourned from
time to time by the vote of a majority of the shares, the holders of which are
either present in person or represented by proxy thereat, but in the absence of
a quorum at the commencement of the meeting, no other business may be transacted
at such meeting.
When any stockholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, or if after adjournment a new record date is fixed for
the adjourned meeting, notice of the adjourned meeting shall be given as in the
case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of the time and place of the adjourned meeting or
of the business to be transacted thereat, other than by announcement of the time
and place thereof at the meeting at which such adjournment is taken.
SECTION 7. VOTING. The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the Delaware General
Corporation Law (relating to voting of shares held by a fiduciary, in the name
of a corporation, or in joint ownership). The stockholders may vote by voice
vote or by ballot; provided, however, that all elections for director shall be
by ballot. If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on any matter shall be
the act of the stockholders, unless the vote of a greater number of voting by
classes is required by the Delaware General Corporation Law or the certificate
of incorporation.
SECTION 8. VALIDATION OF DEFECTIVELY CALLED OR NOTICED MEETING. The
transactions of any meeting of stockholders, either annual or special, however
called and noticed, shall be as valid as though had at a meeting duly held
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after regular call and notice, if a quorum be present either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not present in person or by proxy, or who, though present, has, at the
beginning of the meeting, properly objected to the transaction of any business
because the meeting was not lawfully called or convened, or to particular
matters of business legally required to be included in the notice, but not so
included, signs a written waiver of notice, or a consent to the holding of such
meeting, or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Neither the business to be transacted at nor the purpose
of any regular or special meeting of stockholders need be specified in any
written waiver of notice or consent, except that if action is taken or proposed
to be taken for approval of any of those matters specified in paragraph (e) of
Section 4 above, the waiver of notice or consent shall state the general nature
of the proposal.
SECTION 9. ACTION WITHOUT MEETING. Directors may be elected without a meeting
by a consent in writing, setting forth the action so taken, signed by all of the
persons who would be entitled to vote for the election of directors, provided
that, without prior notice except as hereinafter set forth, a director may be
elected at any time to fill a vacancy not filled by the directors by the written
consent of persons holding a majority of the outstanding shares entitled to vote
for the election of directors.
Any other action which, under any provision of the Delaware General
Corporation Law, may be taken at a meeting of the stockholders, may be taken
without a meeting, and without prior notice except as hereinafter set forth, if
a consent in writing, setting forth the action so taken, is signed by the
holders of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted, unless the consents
of all stockholders entitled to vote have been solicited in writing.
Unless, as provided in Section 12 of this Article 11, the board of directors
has fixed a record date for the determination of stockholders entitled to notice
of and to give such written consent, the record date for such determination
shall be the day on which the first written consent is given. All such written
consents shall be filed with the secretary of the corporation.
Any stockholder giving a written consent, or the stockholder's proxy holders,
or a transferee of the shares or a personal representative of the stockholder or
their respective proxy holders, may revoke the consent by a writing received by
the corporation prior to the time that written consents of the number of shares
required to authorize the proposed action have been filed with the secretary of
the corporation, but may not do so thereafter. Such revocation is effective
upon its receipt by the secretary of the corporation.
SECTION 10. PROXIES. Every person entitled to vote or execute consents shall
have the right to do so either in person or by one or more agents authorized by
a written proxy executed by such person or his duly authorized agent and filed
with the secretary of the corporation. Subject to the Delaware General
Corporation Law in the case of any proxy which states that it is irrevocable,
any proxy duly executed shall continue in full force and effect until (i) an
instrument revoking it or a duly executed proxy bearing a later date is filed
with the secretary of the corporation prior to the vote pursuant thereto, (ii)
the person executing the proxy attends the meeting and votes in person, or (iii)
written notice of the death or incapacity of the
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maker of such proxy is received by the corporation before the vote pursuant
thereto is counted; provided that no such proxy shall be valid after the
expiration of three (3) years from the date of its execution, unless otherwise
provided for in the proxy. The dates contained on the forms of proxy shall
presumptively determine the order of execution of the proxies, regardless of the
postmark dates on the envelopes in which they are mailed.
Without limiting the manner in which a stockholder may
authorize another person or persons to act for him as proxy, the following shall
constitute a valid means by which a stockholder may grant such authority.
(a) A stockholder may execute a writing authorizing another
person or persons to act for him as proxy. Execution may be
accomplished by the stockholder or his authorized officer, director,
employee or agent signing such writing or causing his or her signature
to be affixed to such writing by any reasonable means including, but
not limited to, by facsimile signature.
(b) A stockholder may authorize another person or persons to act
for him as proxy by transmitting or authorizing the transmission of a
telegram, cablegram, or other means of electronic transmission to the
person who will be the holder of the proxy or to a proxy solicitation
firm, proxy support service organization or like agent duly authorized
by the person who will be the holder of the proxy to receive such
transmission, provided that any such telegram, cablegram or other
means of electronic transmission must either set forth or be submitted
with information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the
stockholder. If it is determined that such telegrams, cablegrams or
other electronic transmissions are valid, the inspectors or, if there
are no inspectors, such other persons making that determination shall
specify the information upon which they relied.
(c) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission described in Paragraphs
(a) or (b) may be substituted or used in lieu of the original writing
or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
SECTION 11. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the board of directors may appoint any person or persons other
than nominees for office as inspectors of election to act at such meeting or any
adjournment thereof. If inspectors of election be not so appointed, the
chairman of any such meeting may, and on the request of any stockholder or his
proxy shall, make such appointment at the meeting. The number of inspectors
shall be either one (1) or three (3). If appointed at a meeting on the request
of one or more stockholders or proxies, the majority of shares represented in
person or by proxy shall determine whether one (1) or three (3) inspectors are
to be appointed. In case any person appointed as inspector fails to appear or
fails or refuses to act, the vacancy may, and on the request of any stockholder
or a stockholder's proxy shall, be filled by appointment by the board of
directors in advance of the meeting, or at the meeting by the chairman of the
meeting.
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The duties of such inspectors shall be as prescribed by the Delaware
General Corporation Law and shall include: determining the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining when the polls shall close;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all stockholders.
The inspectors of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as is practical.
If there are three (3) inspectors of election, the decision, act or certificate
of a majority is effective in all respects as the decision, act or certificate
of all. Any report or certificate made by the inspectors of election is prima
facie evidence of the facts stated therein.
SECTION 12. RECORD DATE FOR STOCKHOLDER NOTICE, VOTING AND GIVING
CONSENTS. For purposes of determining the stockholders entitled to notice of
any meeting or to vote or entitled to give consent to corporate action without a
meeting, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) days nor less than ten (10) days before the date of
any such meeting nor more than sixty (60) days before any such action without a
meeting, and in this event only stockholders of record on the date so fixed are
entitled to notice and to vote or to give consents, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date, except as otherwise provided in the Delaware General
Corporation Law.
If the board of directors does not so fix a record date:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the
close of business on the business day next preceding the day on which
notice is given, or if notice is waived, at the close of business on
the business day next preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled to
give consent to corporate action in writing without a meeting, (i)
when no prior action by the board has been taken, shall be the day on
which the first written consent is given, or (ii) when prior action of
the board is required by the Delaware General Corporation Law, shall
be at the close of business on the day on which the board adopts the
resolution relating to that action, or the sixtieth (60th) day before
the date of such other action, whichever is later.
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ARTICLE III
DIRECTORS
SECTION 1. POWERS. Subject to the provisions of the Delaware General
Corporation Law, and to any limitations in the certificate of incorporation and
these bylaws, relating to action required to be approved by the stockholders or
approved by the outstanding shares, all corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation shall
be managed by, the board of directors. Without prejudice to such general
powers, but subject to the same limitations, it is hereby expressly declared
that the board of directors shall have the following powers, to wit:
(a) To select and remove all the officers, agents and employees
of the corporation, prescribe such powers and duties for them as may
not be inconsistent with law, with the certificate of incorporation or
with these bylaws, fix their compensation and require from them
security for faithful service.
(b) To conduct, manage and control the affairs and business of
the corporation, and to make such rules and regulations therefor not
inconsistent with law, or with the certificate of incorporation or
with these bylaws as they may deem best.
(c) To change the principal executive office and principal
office for the transaction of the corporation from one location to
another; to fix and locate from time to time one or more subsidiary
offices of the corporation within or without the State of Delaware; to
designate any place within or without the State of Delaware for the
holding of any stockholders' meeting or meetings; and to adopt, make
and use a corporate seal, and to prescribe the forms of certificates
of stock, and to alter the form of such seal and of such certificates
from time to time, as in their judgment they may deem best, provided
such seal and such certificates shall at all times comply with the
provisions of law.
(d) To authorize the issuance of shares of stock of the
corporation from time to time, upon such terms as may be lawful.
(e) To borrow money and incur indebtedness for the purposes of
the corporation, and to cause to be executed and delivered therefor,
in the corporate name, promissory notes, bonds, debentures, deeds of
trust, mortgages, pledges, hypothecations or other evidences of
debt and securities therefor.
SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of directors shall be seven subject to automatic reduction to five
pursuant to the provisions of that certain Stockholder Voting Agreement dated
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as of April 30, 1996 (and the Consent dated April 24, 1998 executed in
connection therewith) to which the corporation is a party.
SECTION 3. ELECTION AND TERM OF OFFICE. The directors shall be elected
at each annual meeting of stockholders but, if any such annual meeting is not
held or the directors are not elected thereat, the directors may be elected at
any special meeting of stockholders held for that purpose. All directors shall
hold office until their respective successors are elected and qualified, subject
to the Delaware General Corporation Law and the provisions of these bylaws with
respect to vacancies on the board of directors. Directors may be removed by the
stockholders with or without cause.
SECTION 4. VACANCIES. A vacancy in the board of directors shall be
deemed to exist in case of the death, resignation or removal of any director, or
if the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by order of court or convicted of a
felony, or if the authorized number of directors be increased, or if the
stockholders fail, at any annual or special meeting of stockholders at which any
director or directors are elected, to elect the full authorized number of
directors to be voted for at that meeting.
Vacancies in the board of directors, except for a vacancy created by
the removal of a director, may be filled by a majority of the remaining
directors, though less than a quorum, or by a sole remaining director, and each
director so elected shall hold office until his successor is elected at an
annual or a special meeting of the stockholders. A vacancy in the board of
directors created by the removal of a director may only be filled by the vote of
a majority of the shares entitled to vote represented at a duly held meeting at
which a quorum is present, or by the written consent of the holders of a
majority of the outstanding shares entitled to vote.
The stockholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. Any such election by
written consent shall require the consent of holders of a majority of the
outstanding shares entitled to vote.
Any director may resign effective upon giving written notice to the
chairman of the board, the chief executive officer, the president, the secretary
or the board of directors of the corporation, unless the notice specifies a
later time for the effectiveness of such resignation. If the board of directors
accepts the resignation of a director tendered to take effect at a future time,
the board of directors or the stockholders shall have power to elect a successor
or take office when the resignation is to become effective.
When one or more directors shall resign from the board, effective at a
future date, a majority of the directors then in office, including those who
have resigned, shall have the power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided under these
bylaws.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
SECTION 5. PLACE OF MEETING. Regular meetings of the board of
directors shall be held at any place within or without the State of Delaware
which has been designated from time to time by resolution by the board or by
written consent of all members of the board of directors. In the absence of
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such designation, regular meetings shall be held at the principal executive
office of the corporation. Special meetings of the board may be held either at
a place so designated or at the principal executive office.
SECTION 6. ANNUAL MEETING. Immediately following each annual meeting
of stockholders, the board of directors shall hold a regular meeting at the
place of said annual meeting or at such other place as shall be fixed by the
board of directors, for the purpose of organization, election of officers, and
the transaction of other business. Call and notice of such meetings are hereby
dispensed with.
SECTION 7. OTHER REGULAR MEETINGS. Other regular meetings of the board
of directors shall be held without call on the date and at the time which the
board of directors may from time to time designate; provided, however, that
should the day so designated fall upon a Saturday, Sunday or legal holiday
observed by the corporation at its principal executive office, then said meeting
shall be held at the same time on the next day thereafter ensuing which is a
full business day. Notice of all such regular meetings of the board of
directors is hereby dispensed with.
SECTION 8. SPECIAL MEETINGS. Special meetings of the board of
directors for any purpose or purposes shall be called at any time by the
chairman of the board, the president, any vice president, the secretary or by
any director.
Special meetings of the board of directors shall be held upon four (4)
days' written notice or forty-eight (48) hours' notice given personally or by
telephone, telegraph, telex or other similar means of communication. Any such
notice shall be addressed or delivered to each director at such director's
address as it is shown upon the records of the corporation or as may have been
given to the corporation by the director for purposes of notice or, if such
address is not shown on such records or is not readily ascertainable, at the
place in which the meetings of the directors are regularly held.
Notice by mail shall be deemed to have been given at the time a
written notice is deposited in the United States mail, postage prepaid. Any
other written notice shall be deemed to have been given at the time it is
personally delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person giving the notice by
electronic means, to the recipient. Oral notice shall be deemed to have been
given at the time it is communicated to the recipient or to a person at the
office of the recipient who the person giving the notice has reason to believe
will promptly communicate it to the recipient.
Any notice shall state the date, place and hour of the meeting.
Notice given to a director in accordance with this section shall constitute due,
legal and personal notice to such director.
SECTION 9. ACTION AT A MEETING: QUORUM AND REQUIRED VOTE. The presence
of a majority of the authorized number of directors at a meeting of the board of
directors constitutes a quorum for the transaction of business, except as
hereinafter provided. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the board of directors, unless a greater number, or the
same number, after disqualifying one or more directors from voting, is required
by law, by the certificate of incorporation or by these bylaws. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, provided that
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any action taken is approved by at least a majority of the required quorum for
such meeting.
SECTION 10. VALIDATION OF DEFECTIVELY CALLED OR NOTICED MEETINGS. The
transactions of any meeting of the board of directors, however called and
noticed or wherever held, shall be as valid as though had at a meeting duly held
after regular call and notice, if a quorum is present and if, either before or
after the meeting, each of the directors not present or who, though present, has
prior to the meeting or at its commencement, protested the lack of proper notice
to him, signs a written waiver of notice or a consent to holding such meeting or
an approval of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes or the
meeting.
SECTION 11. ADJOURNMENT. A majority of the directors present, whether
or not constituting a quorum, may adjourn any board of directors' meeting to
another time or place.
SECTION 12. NOTICE OF ADJOURNMENT. If a meeting is adjourned for more
than twenty-four (24) hours, notice of any adjournment to another time or place
shall be given prior to the time of the adjourned meeting to the directors who
were not present at the time of adjournment; otherwise, notice of the time and
place of holding an adjourned meeting need not be given to absent directors if
the time and place be fixed at the meeting adjourned.
SECTION 13. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the board of directors may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another. Participating in a meeting
as permitted in this Section constitutes presence in person at such meeting.
SECTION 14. ACTION WITHOUT MEETING. Any action by the board of
directors may be taken without a meeting if all members of the board shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
board and shall have the same force and effect as a unanimous vote of such
directors.
SECTION 15. FEES AND COMPENSATION. Directors and members of committees
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
board of directors.
SECTION 16. COMMITTEES. The board of directors may, by resolution
adopted by a majority of the authorized number of directors, designate an
executive and other committees, each consisting of two (2) or more directors, to
serve at the pleasure of the board of directors, and may prescribe the manner in
which proceedings of any such committee meetings of such committee may be
regularly scheduled in advance and may be called at any time by any two (2)
members thereof; otherwise, the provisions of these bylaws with respect to
notice and conduct of meetings of the board of directors shall govern. Any such
committee, to the extent provided in a resolution of the board of directors,
shall have all of the authority of the board of directors, except as limited by
the Delaware General Corporation Law.
<PAGE>
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a
chief executive officer, a president, a secretary and a chief financial officer.
The corporation may also have, at the discretion of the board of directors, a
chairman of the board, one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 3 of this Article. Any
number of offices may be held by the same person.
SECTION 2. ELECTION. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 6 of this Article, shall be chosen annually by, and shall serve at the
pleasure of, the board of directors, and each shall hold his office until he or
she shall resign or shall be removed or otherwise disqualified to serve, or his
or her successor shall be elected and qualified.
SECTION 3. SUBORDINATE OFFICER. The board of directors or the chief
executive officer may appoint such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority and performing such duties as are provided in these bylaws or as
the board of directors may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION. Subject to the rights, if any, of
an officer under any contract of employment, any officer may be removed, either
with or without cause, by the board of directors, at any regular or special
meeting thereof, or, except in case of an officer chosen by the board of
directors, by any officer upon whom such power or removal may be conferred by
the board of directors.
Any officer may resign at any time by giving written notice to the
board of directors, or to the president or to the secretary of the corporation.
Any resignation is without prejudice to the rights, if any, of the corporation
under any contract to which such officer is a party. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these bylaws for regular election or appointment to such
office.
SECTION 6. CHAIRMAN OF THE BOARD. The chairman of the board, if there
be such an office, shall preside at all meetings of the board of directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the board of directors or prescribed by these bylaws.
SECTION 7. CHIEF EXECUTIVE OFFICER. Subject to such supervisory
powers, if any, as may be given by the board of directors to the chairman of the
board, if there be such an officer, the chief executive officer shall be the
chief executive officer of the corporation and shall, subject to the control of
the board of directors, have general supervision, direction and control of the
business and officers of the corporation. He shall preside at all meetings of
the stockholders and at all meetings of the board of directors.
<PAGE>
He shall be ex officio a member of all the standing committees, including the
executive committee, if any, and shall have the general power and duties of
management usually vested in the office of president of a corporation, and shall
have such other powers and duties as may be prescribed by the board of directors
or these bylaws.
SECTION 8. PRESIDENT. The president shall be the chief operating
officer of the corporation, and in the event of absence or disability of the
chief executive officer, or if no chief executive officer has been appointed by
the board of directors, shall perform all the duties of the chief executive
officer, and when so acting shall have all the powers of, and be subject to all
the restrictions upon, the chief executive officer.
SECTION 9. VICE PRESIDENTS. In the absence or disability of the
president, the vice presidents in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, if there be such an officer or officers, shall perform all the duties
of the president, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents, if
there be such an officer or officers, shall have such other powers and perform
such other duties as from time to time may be prescribed for them respectively
by the board of directors or these bylaws.
SECTION 10. SECRETARY. The secretary shall record or cause to be
recorded, and shall keep or cause to be kept, at the principal executive office
or such other place as the board of directors may order, a book of minutes of
all meetings and actions, of the stockholders, the board directors and all
committees thereof, with the time and place of holding of meetings, whether
regular or special, and, if special, how authorized, the notice thereof given,
the names of those present at directors' meetings, the number of shares present
or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent, or
registrar, if one be appointed, a share register, or a duplicate share register,
showing the names of the stockholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same, and the number and date of cancellation of every certificate
surrendered for cancellation.
SECTION 11. CHIEF FINANCIAL OFFICER. The chief financial officer
shall keep and maintain, or cause to be kept and maintained, adequate and
colored accounts of the properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings and shares. The books of account shall at
all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all of his transactions as chief financial officer and of the financial
condition of the corporation, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or these bylaws.
SECTION 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. In the
absence or disability of the secretary or the chief financial officer, their
<PAGE>
duties shall be performed and their powers exercised, respectively, by any
assistant secretary or any assistant treasurer which the board of directors may
have elected or appointed. The assistant secretaries and the assistant
treasurers shall have such other duties and powers as may have been delegated to
them, respectively, by the secretary or the chief financial officer or by the
board of directors.
ARTICLE V
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER AGENTS
SECTION 1. DEFINITIONS. For the purpose of this Article V, "agent"
means any person who is or was a director, officer, employee or other agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or was a director,
officer, employee or agent of a foreign or domestic corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation; "proceeding" means any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes, without limitation,
attorneys' fees and any expenses of establishing a right to indemnification
under Section 4 or Section 5(c) of this Article V.
SECTION 2. ACTIONS BY THIRD PARTIES. The corporation shall indemnify
any person who was or is a party, or is threatened to be made a party, to any
proceeding (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was an agent of the corporation,
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding to the fullest extent
permitted by the laws of the State of Delaware as they may exist from time to
time.
SECTION 3. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any person who was or is a party, or is threatened
to be made a party, to any threatened, pending or completed action by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that such person is or was an agent of the corporation, against expenses
actually and reasonably incurred by such person in connection with the defense
or settlement of such action to the fullest extent permitted by the laws of the
State of Delaware as they may exist from time to time.
SECTION 4. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the corporation prior to the final disposition of
such proceeding upon receipt of a request therefor and an undertaking by or on
behalf of the agent to repay such amount unless it shall be determined
ultimately that the agent is not entitled to be indemnified as authorized in
this Article V.
SECTION 5. CONTRACTUAL NATURE. The provision of this Article V shall
be deemed to be a contract between the corporation and each director and officer
who serves in such capacity at any time while this Article is in effect, and any
repeal or modification thereof shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore existing or
<PAGE>
any action, suit or proceeding theretofore or thereafter brought based in whole
or in part upon any such state of facts.
SECTION 6. INSURANCE. Upon and in the event of a determination by
the board of directors to purchase such insurance, the corporation shall
purchase and maintain insurance on behalf of any agent of the corporation
against any liability asserted against or incurred by the agent in such capacity
or arising out of the agent's status as such whether or not the corporation
would have the power to indemnify the agent against such liability under the
provisions of this Article V. All amounts received by an agent under any such
policy of insurance shall be applied against, but shall not limit, the amounts
to which the agent is entitled pursuant to the foregoing provisions of this
Article V.
SECTION 7. ERISA. To assure indemnification under this provision of
all such persons who are or were "fiduciaries" of an employee benefit plan
governed by the Employee Retirement Income Security Act of 1974, as amended from
time to time ("ERISA"), the provisions of this Article V shall, except as
limited by Section 410 of ERISA, be interpreted as follows: an "other
enterprise" shall be deemed to include an employee benefit plan; the corporation
shall be deemed to have requested a person to serve as an employee of an
employee benefit plan where the performance by such person of his duties to the
corporation also imposes duties on, or otherwise involves services by, such
person to the plan or participants or beneficiaries of the plan; excise taxes
assessed on a person with respect to an employee benefit plan in the performance
of such person's duties for a purpose reasonably believed by such person to be
in compliance with ERISA and the terms of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the corporation.
ARTICLE VI
GENERAL CORPORATE MATTERS
SECTION 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For
purposes of determining the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any right in respect of any other lawful action (other than as provided
in Section 12 of Article II of these bylaws), the board of directors may fix, in
advance, a record date, which shall not be more than sixty (60) days before any
such action, and in that case only stockholders of record on the date so fixed
are entitled to receive the dividend, distribution, or allotment of rights or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Delaware General Corporation Law,
If the board of directors does not so fix a record date, the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
SECTION 2. INSPECTION OF CORPORATE RECORDS. The accounting books and
records, the records of stockholders, and minutes of proceedings of the
stockholders and the board and committees of the board of directors of the
corporation and any subsidiary of the corporation shall be open to inspection
upon the written demand on the corporation of any stockholder or holder of a
voting trust certificate at any reasonable time during usual business hours,
<PAGE>
for a purpose reasonably related to such holder's interests as a shareholder or
as the holder of such voting trust certificate. Such inspection by a stockholder
or holder of a voting trust certificate may be made in person or by an agent or
attorney, and the right of inspection includes the right to copy and make
extracts.
A stockholder or stockholders holding at least five percent (5%) in
the aggregate of the outstanding voting shares of the corporation or who hold at
least one percent (1%) of such voting shares and have filed a Schedule 14B with
the United States Securities and Exchange Commission relating to the election of
directors of the corporation shall have (in person, or by agent or attorney) the
right to inspect and copy the record of stockholders' names and addresses and
shareholdings during usual business hours upon five (5) business days' prior
written demand upon the corporation and to obtain from the transfer agent, if
any, for the corporation, upon written demand and upon the tender of its usual
charges, a list of the stockholders' names and addresses, who are entitled to
vote for the election of directors, and their shareholdings, and of the most
recent record date for which it has been compiled or as of a date specified by
the stockholder subsequent to the date of demand. The list shall be made
available on or before the later of five (5) business days after the demand is
received or the date specified therein as the date as of which the list is to be
compiled.
Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records and documents of every kind and to inspect
the physical properties of the corporation. Such inspection by a director may
be made in person or by agent or attorney, and the right of inspection includes
the right to copy and make extracts.
SECTION 3. INSPECTION OF BYLAWS. The corporation shall keep in its
principal executive office in California, or if its principal executive office
is not in California, then at its principal business office in California (or
otherwise provide upon written request of any stockholder) the original or a
copy of the bylaws as amended or otherwise altered to date, certified by the
secretary, which shall be open to inspection by the stockholders at all
reasonable times during office hours.
SECTION 4. CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for payment of money, notes or other evidences of indebtedness, issued in the
name of or payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the board of directors.
SECTION 5. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The board of
directors, except as in these bylaws otherwise provided, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances; and, unless so authorized or
ratified by the board of directors, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or to any amount.
SECTION 6. CERTIFICATE FOR SHARES. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the chairman of the board or the president or a vice president
and by the chief financial officer or an assistant treasurer or the secretary or
any assistant secretary, certifying the number of shares and the Class or series
of shares owned by the stockholder. Any of the signatures on the
<PAGE>
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such person were an officer, transfer agent or registrar at the date of
issue.
Any such certificate shall also contain such legend or other statement
as may be required by applicable state securities laws, the federal securities
laws, and any agreement between the corporation and the stockholders thereof.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the board of directors or these bylaws may
provide; provided, however, that on any certificate issued to represent any
partly paid shares, the total amount of the consideration to be paid therefor
and the amount paid thereon shall be stated.
Except as provided in this Section 6, no new certificate for shares
shall be issued in lieu of an old one unless the latter is surrendered and
canceled at the same time. The board of directors may, however, in case any
certificate for shares is alleged to have been lost, stolen, or destroyed,
authorize the issuance of a new certificate in lieu thereof, and the corporation
may require that the corporation be given a bond or other adequate security
sufficient to indemnify it against any claim that may be made against it
(including expense or liability) on account of the alleged loss, theft, or
destruction of such certificate of the issuance of such new certificate.
SECTION 7. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
president or any other officer or officers authorized by the board of directors
or the president are each authorized to vote, represent and exercise on behalf
of the corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the corporation. The
authority herein granted may be exercised either by any such officer in person
or by any other person authorized so to do by proxy or power of attorney duly
executed by said officer.
SECTION 8. CONSTRUCTION AND DEFINITIONS. Unless the context otherwise
requires, the general provisions, rules of construction and definitions
contained in the Delaware General Corporation Law shall govern the construction
of these bylaws. Without limiting the generality of the foregoing, the
masculine gender includes the feminine and neuter, the singular number includes
the plural and the plural number includes the singular, and the term "person"
includes a corporation as well as a natural person.
ARTICLE VII
AMENDMENTS TO BYLAWS
SECTION 1. AMENDMENT BY STOCKHOLDERS. The stockholders shall have
the power to amend, alter, change, adopt and repeal the bylaws at any regular or
special meeting.
SECTION 2. AMENDMENT BY BOARD OF DIRECTORS. The board of directors
shall have the power to amend, alter, change, adopt and repeal the bylaws at any
meeting of the board of directors, provided that the proposed action in respect
thereof shall be stated in the notice or waiver of notice of such meeting or
that all of the directors of the corporation shall be present
<PAGE>
at such meeting. Notwithstanding the foregoing, the board of directors shall not
have the power to amend, alter, change, adopt or repeal any provision of the
bylaws which expressly states that it may be amended, altered, changed, adopted
or repealed only by the stockholders.
<PAGE>
EXHIBIT 9.1
CONSENT OF ASSI, INC.
PURSUANT TO
STOCKHOLDER VOTING AGREEMENT
----------------------------
ASSI, a Nevada corporation, hereby consents as of April 27, 1998 pursuant
to Section 1(a)(ii) of that certain Stockholder Voting Agreement dated as of
April 30, 1996 among Sound Source Interactive, Inc. (the "Company"), Vincent J.
Bitetti ("Bitetti"), Eric H. Winston, and ASSI, Inc. (the "Stockholder Voting
Agreement") upon the following terms and conditions to an amendment of the
Company's Bylaws to provide for an increase in the authorized number of
directors from 5 to 7:
(a) Article III, Section 2 (Number and Qualification of Directors) of the
Company's Bylaws may be immediately amended to read as follows and will not be
further amended without the consent of ASSI, Inc.:
"The authorized number of directors shall be seven subject to
automatic reduction to five pursuant to the provisions of that certain
Stockholder Voting Agreement dated as of April 30, 1996 (and the
Consent as of April 27, 1998 executed in connection therewith) to
which the corporation is a party."
(b) As between the Company, ASSI, Inc., The Boston Group, L.P., and
Bitetti, the nominees for the 7-person board of directors will be determined as
follows: up to 2 persons may be nominated by Bitetti as long as he holds 750,000
or more shares of the Company's common stock per value $.001 (but only 1 person,
if Bitetti holds more than 500,000 and less than 750,000, and no person if
Bitetti holds 500,000 or fewer shares), 1 person may be nominated by ASSI, Inc.
as long as it holds 500,000 or more shares of the Company's common stock par
value $.001 (but no person if ASSI, Inc. holds fewer than 500,000 shares), up to
2 persons may be nominated by The Boston Group, L.P. (including as assignee of
the rights of Joseph Stevens & Company, L.P.) pursuant to the Underwriting
Agreement dated July 1, 1996 so long as it may be in effect in pertinent part, 1
person (an "Expansion Member") may be nominated by Bitetti pursuant to this
Consent (subject to approval of such person by ASSI, Inc. (unless a renomination
of a presently serving nominee), the approval of such person not to be
unreasonably withheld or delayed) and 1 person (another "Expansion Member") may
be nominated by ASSI pursuant to this Consent (subject to approval of such
person by Bitetti (unless a renomination of a presently serving nominee), the
approval of such person not to be unreasonably withheld or delayed), provided
that (i) the Expansion Member must be independent of the Company and the persons
nominating such Expansion Member, possess skills or experience reasonably
calculated to assist the board of directors in the management of the affairs of
the Company, and may not be a person described in Rule 258(a)(5) or (6) of
Regulation A of the U.S. Securities and Exchange Commission, (ii) if, pursuant
to the terms and conditions of this Consent, the number of authorized directors
is reduced from 7 to 5, the positions of the Expansion Members will be
eliminated at the next annual meeting of stockholders and the provisions of the
Stockholder Voting Agreement will govern the Bitetti and ASSI, Inc. nominations
for directors, (iii) if either Expansion Member ceases to be a director for any
<PAGE>
reason prior to the next annual meeting of stockholders, the person who
nominated such Expansion Member may designate a replacement upon the same terms
and conditions applicable to the original nomination, (iv) if Bitetti, ASSI,
Inc., or The Boston Group (or its permitted assignees, if any) does not exercise
or ceases (under circumstances where the number of authorized directors has not
been reduced) to have nomination rights, nominations for the positions
previously allocated to it will be made by action of a majority of the directors
of the Company, (v) after the Company's 1998 annual stockholders meeting no
person (other than Bitetti and L. Habash) who is an employee of the Company or
ASSI, Inc. or any affiliate thereof may be a director of the Company, and (vi)
committees of the board of directors will consist of at least 1 non-management
director and no more than 1 management director as may be determined by the
board of directors.
(c) During the term of this Consent, to the extent not provided by the
Stockholder Voting Agreement, each of Bitetti and ASSI, Inc. will vote all
voting securities of the Company held by them and eligible to vote for the
election of directors in accordance with the nominations made pursuant to (P)(b)
of this Consent and will take all other actions (including without limitation
the execution of additional reciprocal proxies between Bitetti and ASSI, Inc.
similar to those executed in connection with the Stockholder Voting Agreement)
as may be reasonably requested by either of them to effect the election of such
directors or nominees.
(d) If at any time during the term of this Consent for any reason not
contemplated by this Consent, the Stockholder Agreement, or the Underwriting
Agreement, the Company's board of directors fails to be constituted as described
in (P)(b) of this Consent, then at the request of Bitetti or ASSI, Inc., the
Company will as soon as practicable cause a special meeting of the board of
directors (or, if the action can only be taken by stockholders, of the
stockholders of the Company) to be held or will cause the requisite action to be
taken by written consent in order to take whatever action may be necessary to
constitute the board of directors as described in (P)(b) of this Consent.
(e) If at any time and from time to time during the term of this Consent
ASSI, Inc. requests from the Company that Louis Habash be afforded observer
status at one or more meetings of the board of directors, such observer status
will be provided.
(f) This Consent will be effective for a period commencing on the date
hereof and ending on the earlier of (i) the termination of the Stockholder
Voting Agreement and (ii), at the election of ASSI, Inc., the failure by
Bitetti, the Company, or Ulrich E. Gottschling to fully perform (after notice
and a reasonable opportunity to cure) any material obligation or provision
applicable to any of them pursuant to that certain Settlement Agreement dated as
of April 27, 1998 among, inter alia, them and ASSI, Inc., the Stockholder Voting
----- ----
Agreement, or this Consent (other than a failure after a bona fide attempt to
---- ----
agree on a nominee for either Expansion Member); provided that the determination
of ASSI, Inc. as to such failure will not preclude challenge of ASSI, Inc.'s
election to terminate this Consent.
(g) If this Consent is terminated pursuant to the provisions of (P)(f)(ii)
above, the authorized number of directors will be automatically reduced from 7
to 5 at the next stockholders annual meeting and nominations and elections for
the resulting 5 member board of directors will be governed by the Stockholder
Voting Agreement and the Underwriting Agreement.
2
<PAGE>
IN WITNESS WHEREOF, ASSI, Inc. has duly executed and delivered this Consent
as of the date first written above.
ASSI, INC.
/s/ Louis Habash
----------------
Louis Habash,
President
Acknowledged and Accepted:
- -------------------------
SOUND SOURCE INTERACTIVE, INC.
/s/ Vincent J. Bitetti
- ----------------------
Vincent J. Bitetti,
Chief Executive Officer
/s/ Vincent J. Bitetti
- ----------------------
VINCENT J. BITETTI,
individually
THE BOSTON GROUP, L.P.
/s/ Robert DiMinico
- -------------------
Robert DiMinico,
President
3
<PAGE>
Exhibit 10.1
SETTLEMENT AGREEMENT
--------------------
This SETTLEMENT AGREEMENT ("Agreement") is made and effective as of
this April 24, 1998 by and among (i) Sound Source Interactive, Inc. (the
"Company"), a Delaware corporation, (ii) ASSI, Inc. ("ASSI"), a Nevada
corporation, (iii) NCD, Inc. ("NCD"), a Delaware corporation, (iv) The Boston
Group, L.P. ("TBG"), a California limited partnership, (v) Vincent J. Bitetti
("VJB"), an individual resident of Los Angeles County, California, (vi) Ulrich
E. Gottschling ("UEG"), an individual resident of Orange County, California,
(vii) Mark A. James ("MAJ"), an individual resident of Las Vegas, Nevada, and
(viii) Robert G. Kalik ("RGK"), an individual resident of Montgomery County,
Maryland (each individually a "Party" and collectively the "Parties").
R E C I T A L S
WHEREAS, disputes have arisen among the Parties including without
limitation the legal proceedings currently pending in Los Angeles Superior Court
and bearing case numbers LASC BC 187 656 ("Lawsuit #1") and LASC BC 188 459
("Lawsuit #2") which have to date resulted in the issuance of a temporary
restraining order in each case (the "Temporary Restraining Orders") enjoining
the Company, VJB, and UEG from holding directors' meetings consisting of a board
of directors of more than 5 members of which 2 are nominees of TBG and 1 is a
nominee of ASSI and;
WHEREAS, the Parties now desire to irrevocably and forever settle by
agreement all pending and past disputes between them, including without
limitation the issuance of the Temporary Restraining Orders;
A G R E E M E N T
NOW THEREFORE, in consideration of the mutual promises, the releases
contained herein, the payments described in Sections 5.1 and 5.2 hereof, and
other consideration, the value, sufficiency, and receipt of which are hereby
acknowledged, the Parties agree as follows.
ARTICLE I
MUTUAL RELEASES AND DISMISSAL OF
--------------------------------
PENDING LITIGATION
------------------
Section 1.1 Release of Claims. Each of the Parties (a "Releasing
-----------------
Party") on behalf of itself and its employees, partners, agents, subsidiaries,
officers, directors, and all others claiming through it hereby jointly and
severally forever and irrevocably releases and discharges each of the other
Parties, Wayne Rogers, Alan Lyons, John Wholihan, Ernest Klinger, Ronald Hart,
Samuel Poole, Richard Azevedo, Robert DiMinico, Joseph Sorbara, Robert Burke,
Joseph Stevens & Co., L.P., the law firm of Jeffer, Mangels, Butler & Marmaro
LLP, the law firm of James, Driggs & Walch (and the law firm of James, Driggs,
Walch, Santoro & Thompson), the law firm of McDermott, Will & Emery, the law
firm of Nateman & Kalik, LLP, the law firm of Clarkson, Gore & Marsella, APLC,
the law firm of Horwitz & Beam, the law firm of Margolis & Morin, and Louis
Habash and their respective employees, partners, officers, directors, agents,
shareholders, subsidiaries, successors, and assigns (each a "Released Person")
from any and all claims, losses, demands, liabilities, obligations,
<PAGE>
indemnities, charges, and causes of action (collectively "Claims") of any and
all nature whatsoever whether based on tort, contract, statute, equitable theory
of recovery, or otherwise, whether now known, unknown, unforeseen, or
unsuspected, which the Releasing Party may now or in the future have jointly or
severally against the Released Persons individually or in combination with
others from the beginning of time until the date of this Agreement and which
arise out of any Released Person's activities to the date hereof with respect
to, or are in any way connected with, the Company, including without limitation
the issuance, acquisition, ownership, holding, or voting of any securities of
the Company, the management or conduct of the Company's affairs by any Party
acting as or entitled to nominate a member (or observer) of the Company's Board
of Directors, and all Claims asserted by any Party in Lawsuit #1 or Lawsuit #2;
provided that the releases and discharges contained herein do not apply to the
Claims (a) by the Company, VJB or TBG pursuant to the indemnification provisions
of that certain Underwriting Agreement dated July 1, 1996, among TBG, Joseph
Stevens & Co., L.P., the Company, VJB, and Eric Winston or pursuant to
indemnification and contribution rights and obligations available under
applicable law with respect to Claims of third parties against any Party, or (b)
by the Company to the extent the giving of such release or discharge would
violate a director's fiduciary duty to the Company, its stockholders, or its
creditors.
Section 1.2 Dismissal of Lawsuit #1. Concurrently with the execution
-----------------------
and delivery of this Agreement, ASSI, MAJ, and NCD will deliver a fully executed
dismissal of action in the form of Exhibit A hereto to the Company, which the
Company will promptly file in the Superior Court of the State of California for
the County of Los Angeles.
Section 1.3 Dismissal of Lawsuit #2. Concurrently with the execution
-----------------------
and delivery of this Agreement, TBG will deliver a fully executed dismissal of
action in the form of Exhibit B hereto to the Company, which the Company will
promptly file in the Superior Court of the State of California for the County of
Los Angeles.
Section 1.4 Waiver of Section 1542. Each Party hereby irrevocably
----------------------
and forever expressly waives any right or claim or right to assert hereafter
that any claim, loss, demand, liability, obligation, indemnity, charge, or cause
of action has through ignorance, oversight, or error been omitted from the terms
of this Agreement and further expressly waives any right or claim that it may
have under the law of any jurisdiction to the effect that releases and
discharges (such as those given herein) do not apply to unknown or unstated
claims. It is the express intent of the Parties that each Party hereby waives
any and all claims it may have related to the subject matter of this Settlement
Agreement, including any which are presently unknown, unsuspected,
unanticipated, or undisclosed. Each Party expressly waives the provisions of
Section 1542 of the Civil Code of California, which provides as follows:
[a] general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
Section 1.5 Certain Trial or Appeal Rights. Each Party hereby
------------------------------
irrevocably and forever expressly waives any rights it may have with respect to
any one or more other Parties to proceed to trial or to appeal any matter
relating to Lawsuit #1, Lawsuit #2, or the Temporary Restraining Orders and all
2
<PAGE>
such Party's rights under Section 473 of the Code of Civil Procedure of
California.
ARTICLE II
CORPORATE RESTRUCTURING
------------------------
Section 2.1 Resignations. Within 5 business days after the execution
------------
and delivery of this Agreement, the Company, UEG, and VJB will deliver to the
Secretary of the Company, ASSI and TBG fully executed resignations of Wayne
Rogers, Alan Lyons, John Wholihan, and Robert Kalik in the form attached hereto
as Exhibit C.
Section 2.2 Bylaws; ASSI Consent. The Company's Bylaws will
--------------------
concurrently with the execution and delivery of this Agreement be amended and
restated by the Company's Board of Directors as set forth in Exhibit D, which
among other things provides for the authorized number of directors to be changed
to 7 and ASSI will, concurrently with the execution and delivery of this
Agreement, execute and deliver its consent to such amendment in the form
attached hereto as Exhibit E ("Consent").
Section 2.3 Recapitalization. Concurrently with the execution and
----------------
delivery of this Agreement all warrants to acquire the Company's common stock
par value $.001 ("Common Stock") currently held by ASSI (being 4,816,657
warrants) will be exchanged (the "Exchange") for 1,100,000 shares of the
Company's Common Stock upon terms and conditions whereby provisions relating to
registration rights as may be enhanced by supplemental agreements and any other
rights and privileges of ASSI to be enjoyed upon an exercise of the warrants
will survive in full force and effect and without any diminution. ASSI will
execute and deliver a lock-up agreement in the form of Exhibit F hereto upon
consummation of the Exchange. The Parties acknowledge that this Agreement
effects multiple settlements and agree that the value of the Claims (as affect
the warrants) which ASSI has against the Company and which ASSI has released and
discharged herein has been factored into the Exchange. Pursuant to (P)5(t) of
the Underwriting Agreement (if applicable), TBG consents to the Exchange and
will on or before the Exchange obtain and deliver to ASSI and the Company the
written consent (if required) of Joseph Stevens & Company, L.P.
Section 2.4 Approval of Transactions; Corporate Governance.
----------------------------------------------
(a) Concurrently with the execution and delivery of this Agreement,
the Board of Directors consisting of VJB, UEG, and MAJ (in accordance with the
Temporary Restraining Orders) and acting by unanimous written consent in the
form attached hereto as Exhibit G will approve the transactions contemplated by
this Agreement and take such further actions as are set forth therein, including
without limitation acceptance of the resignations described in Section 2.1,
amendment of the Bylaws as described in Section 2.2, approval of the Exchange,
approval of the employment arrangements described in Article III, and the
election of directors to fill all vacancies on the expanded Board of Directors
("New Board of Directors"). Each party which has nominated one or more directors
as reflected in Exhibit G, to its best knowledge, represents and warrants that
its nominee(s) will accept election.
(b) The Company will hold its 1997 annual stockholders meeting on or
before June 30, 1998 ("1997 Annual Meeting") and its 1998 annual stockholders
meeting on or before December 31, 1998 ("1998 Annual Meeting").
3
<PAGE>
(c) (i) The Company's slate of directors for the 1997 Annual Meeting
will be as follows:
VJB (as a nominee of VJB to the extent permitted by the
Stockholder Voting Agreement dated as of April 30,
1996 between the Company, VJB, Eric Winston, and ASSI
and the Consent)
UEG (as a 2nd nominee of VJB to the extent permitted by
the Stockholder Voting Agreement and the Consent)
Richard Azevedo (as a nominee of TBG under the Underwriting
Agreement)
Samuel Poole (as a 2nd nominee of TBG under the Underwriting
Agreement)
MAJ (as a nominee of ASSI to the extent permitted by the
Stockholder Voting Agreement and the Consent)
Wayne Rogers (as the Expansion Member nominee of VJB as provided
in the Consent)
John Wholihan (as the Expansion Member nominee of ASSI as provided
in the Consent).
(ii) At the 1997 Annual Meeting, the Company will submit the
transactions in Article II (except Sections 2.1, 2.3, 2.5 and 2.6) and Article
III of this Agreement for stockholder approval together with such other matters
as the New Board of Directors may deem advisable.
(d) The Company's slate of directors for a 7 person board of directors
at the 1998 Annual Meeting will be as follows:
VJB (as a nominee of VJB to the extent permitted by
the Stockholder Voting Agreement and the Consent)
a person selected (as a 2nd nominee of VJB to the extent permitted
by the
by VJB Stockholder Voting Agreement and the Consent)
Richard Azevedo (as a nominee of TBG under the Underwriting
Agreement)
Samuel Poole (as a 2nd nominee of TBG under the Underwriting
Agreement)
a person nominated (as a nominee of ASSI to the extent permitted by
by ASSI the Stockholder Voting Agreement and the Consent)
Wayne Rogers (as the Expansion Member nominated by VJB as
provided in the Consent)
4
<PAGE>
John Wholihan (as the Expansion Member nominee of ASSI as
provided in the Consent).
Section 2.5 CFO. The Company (acting through the New Board of
---
Directors or a committee thereof) will identify and engage a qualified chief
financial officer within 90 days or as soon as otherwise practicable as
determined by such board or committee.
Section 2.6 Filings. All governmental securities filings will be
-------
submitted to each member of the New Board of Directors for his review and
approval prior to the filing thereof by the Company, VJB, or UEG. The Parties
hereto approve the filing of SEC Form 8-K Report in the form attached hereto as
Exhibit K.
ARTICLE III
EMPLOYMENT AGREEMENTS
---------------------
Section 3.1 VJB Contract.
------------
(a) Concurrently with execution and delivery of this Agreement, VJB
and the Company will execute and deliver an employment agreement in the form
attached hereto as Exhibit H ("VJB Employment Agreement") as previously
negotiated by the compensation committee of the Company's then Board of
Directors which the Company may in its discretion submit to the New Board of
Directors (or the compensation committee thereof) for approval.
(b) Pursuant to (P)5(x) of the Underwriting Agreement, TBG hereby
consents to the terms and conditions of the VJB Employment Agreement.
Section 3.2 UEG Contract.
------------
(a) Concurrently with the execution and delivery of this Agreement,
UEG and the Company will execute and deliver a memorandum of employment terms in
the form attached hereto as Exhibit I ("UEG Employment Memorandum") which the
Company may submit to the New Board of Directors (or the compensation committee
thereof) for action.
(b) Pursuant to (P)5(x) of the Underwriting Agreement, TBG hereby
consents to the terms and conditions of the UEG Employment Memorandum subject to
any review and ratification by the New Board of Directors or the compensation
committee thereof and any recommendations made thereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1 Each of the Parties represents and warrants to each other
Party as follows.
(a) It has not heretofore assigned, transferred, or otherwise
hypothecated to any person (other than as contemplated by Section
1.1 of this Agreement) any of its Claims and will not hereafter
do so, except as expressly permitted by this Agreement.
5
<PAGE>
(b) All Claims of such Party are free and clear of all liens,
encumbrances, and rights of others and may be released and
discharged without the consent or approval of or notice to any
other person, including without limitation any governmental
agency.
(c) It has had the opportunity to consult with, and the benefit of,
legal counsel of its own choosing with respect to the
negotiation, execution, delivery, and performance of this
Agreement and the transactions contemplated hereby. Prior to the
execution of this Agreement by such Party, its attorney reviewed
the Settlement Documents (defined below), made all changes (if
any) necessary for the Settlement Documents to be acceptable to
such Party, and fully explained the provisions thereof to such
Party with respect to the advisability of making the settlements
and agreements provided herein. Such Party has read the
Settlement Documents and is fully aware of and understands all
the terms, conditions, and legal consequences thereof.
(d) It has not relied on any promise, representation, or warranty
whatsoever, express or implied, made by another Party and not
contained in the Settlement Documents in determining whether to
execute and deliver this Agreement and any other Settlement
Documents.
(e) This Agreement (and any other Settlement Documents to which such
Party is a party) has been duly executed and delivered by it and,
when duly executed and delivered by all other parties thereto (if
any), is legal, valid, and binding obligations of such Party
enforceable against it in accordance with its terms.
ARTICLE V
OTHER AGREEMENTS
----------------
Section 5.1 Certain Directors Fees. Concurrently with execution and
----------------------
delivery of this Agreement, the Company will pay to MAJ $5,000 as accrued unpaid
directors fees and to Ronald Hart $2,500 as accrued unpaid directors fees
against an appropriate receipt from the payee acknowledging payment in full.
Section 5.2 Legal Fees. (a) The Company will promptly pay the legal
----------
fees of various Parties as follows:
(i) the Company: (A) counsel's fees and costs of negotiation,
preparation, review and closing of this Agreement and the other Settlement
Documents by company check to McDermott, Will & Emery; (B) unpaid accrued legal
fees for services rendered in connection with other matters to James, Driggs &
Walch by company check in the amount of $5,467.43; and (C) counsel's fees and
costs incurred in connection with various securities advice rendered to the
Company and with Lawsuit #1 and Lawsuit #2 to Horwitz & Beam;
(ii) VJB and UEG: counsel's fees and costs incurred in connection
with Lawsuit #1 and Lawsuit #2 as directors and the costs of negotiation,
preparation, review, and closing of this Agreement and the other Settlement
Documents by company check to Margolis & Morin; and
6
<PAGE>
(iii) RGK: counsel's fees and incurred costs in connection with
Lawsuit #1 and the costs of negotiation, preparation, review, and closing of
this Agreement and the other Settlement Documents by company check to Clarkson,
Gore & Marsella, APLC in the amount of $2,750.
(b) The Company will not be obligated to pay any other Party's legal fees
(except pursuant to Section 6.8). To the extent the Company receives any
proceeds of insurance (or from other sources) as reimbursement of any Party's
fees in connection with Lawsuit #1, Lawsuit #2, or other matters related
thereto, the Company will retain such amounts.
Section 5.3 Effect On Other Agreements. The Parties hereto ratify
--------------------------
and confirm that the Stockholder Voting Agreement and Underwriting Agreement
(including without limitation the rights of TBG to indemnification thereunder
and the assignment of the Joseph Stevens & Co. director nomination rights) are
in full force and effect and nothing contained in this Agreement or the other
Settlement Documents, unless expressly set forth therein, in any way modifies,
amends, or changes the provisions of such agreements.
Section 5.4 Side Arrangements.
-----------------
(a) Each Party hereto acknowledges and agrees that in order to achieve
the settlements contained herein one or more Parties may have arrangements with
other Parties not contained herein. Nothing in this Section 5.4 or any such
arrangements will in any way affect the representation and warranty of a Party
contained in Section 4.1.
(b) The Parties acknowledge and agree that pursuant to this Section
5.4 ASSI may pay the legal fees of one or more Parties other than itself.
Section 5.5 Third Party Beneficiary Consent. To the extent any Party
-------------------------------
considers itself a third party beneficiary of the Stockholder Voting Agreement
or the Underwriting Agreement, such Party hereby consents to any action by a
Party hereunder with respect thereto.
ARTICLE VI
MISCELLANEOUS
-------------
Section 6.1 Notices. All notices, consents, approvals, and other
-------
communications required or permitted hereunder will be in writing; will be
deemed to have been given when actually received; will be delivered either
personally (such as by hand delivery or overnight or other receipted delivery
service) or by certified or registered mail, return receipt requested, postage
prepaid affixed; and will be addressed to the recipient as follows:
<TABLE>
<S> <C>
If to the Company, with a copy to,
Sound Source Interactive, Inc. McDermott, Will & Emery
26115 Mureau Road 600 13th Street, N.W.
Suite B Washington, D.C. 20006-3096
Calabasas, CA 91302-3126 Attention: Sean P. McGuinness, Esq.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
if to ASSI or NCD, with a copy to,
James, Driggs, Walch, Santoro & Thompson Kathryn Tschopik, Esq.
3773 Howard Hughes Parkway, Suite 290-N Suite 200
Las Vegas, NV 89109 100 Wilshire Boulevard
Attn: Mark A. James, Esq. Los Angeles, CA 90401-1113
if to TBG, with a copy to,
The Boston Group, L.P. Heller, Ehrman, White & McAuliffe
2049 Century Park East 601 South Figueroa Street
30th Floor Los Angeles, CA 90017
Los Angeles, CA 90067 Attention: Darryl Snider, Esq.
if to VJB, with a copy to,
Vincent J. Bitetti Margolis & Morin
Chairman and Chief Executive Officer 444 South Flower Street
Sound Source Interactive, Inc. Sixth Floor
26115 Mureau Road, Suite B Los Angeles, CA 90071
Calabasas, CA 91302-3126 Attn: Michael D. Morin, Esq.
if to UEG, with a copy to,
Ulrich E. Gottschling Margolis & Morin
President 444 South Flower Street
Sound Source Interactive, Inc. Sixth Floor
26115 Mureau Road, Suite B Los Angeles, CA 90071
Calabasas, CA 91302 Attention: Michael D. Morin, Esq.
if to MAJ, with a copy to
Mark A. James Kathryn Tschopik, Esq.
James, Driggs, Walch, Santoro & Thompson Suite 200
3773 Howard Hughes Parkway 100 Wilshire Boulevard
Suite 290-N Los Angeles, CA 90401-1113
Las Vegas, NV 89109
if to RGK, with a copy to
Robert G. Kalik, Esq. Clarkson, Gore & Marsella, APLC
Nateman & Kalik, LLP Suite 350
1200 "G" Street, N.W. 3424 Carson Street
Suite 363 Torrance, CA 90503
Washington, D.C. 20005 Attention: Scott C. Clarkson, Esq.
</TABLE>
or such other address as a party may have previously furnished for itself to the
others by a notice in accordance with this section.
8
<PAGE>
Section 6.2 Further Assurances. Each of the Parties agrees to
------------------
execute and deliver such instruments and to take such actions as the Company
(acting through a majority of the authorized number of the New Board of
Directors), TGB, or ASSI may reasonably request in order to further evidence,
confirm, or effectuate the settlements contemplated by this Agreement. In
particular and without limiting the preceding, it is specifically contemplated
by the Parties that further action, proceedings, inquiries, discussions, or
negotiations with one or more governmental entities may be necessary or
convenient in order to completely expunge, vacate, or otherwise terminate issues
raised by the Claims ("Further Proceedings"). Each Party agrees to cooperate
with and support the Company, TBG, or ASSI in connection with Further
Proceedings to the extent they occur or the Company, TBG, or ASSI participates
therein, including without limitation the giving of prompt notice to the Company
(which will in turn promptly notify all directors of the new Board of Directors
thereof) and each other Party affected thereby of the existence of each of the
Further Proceedings.
Section 6.3 No Further Lawsuits. Except as may be necessary to
-------------------
enforce rights pursuant to the Settlement Documents, each Party will forever
refrain and forebear from commencing, instituting, or participating, either as
named or unnamed parties, in any action, lawsuit, or other proceeding against
any other Party (or other Released Persons), whether brought by the former or by
others on its behalf or for its benefit based on, relating to, or arising out of
any facts, matters, or circumstances covered by the Claims. Each Party agrees
that this Agreement may be pleaded by any other Party (or other Released Person)
as a full and complete defense to any claim, loss, demand, liability,
obligation, indemnity, charge, action, investigation, inquiry, or other
proceeding which may be brought or alleged by or on behalf of any one or more of
the other Parties or their respective successors or assigns.
Section 6.4 No Admissions. No aspect of the settlements contained
-------------
herein or of the Settlement Documents, including without limitation the
negotiation, execution, or delivery thereof, is intended or will constitute in
any way an admission of liability by any Party for any purpose.
Section 6.5 Press Release; Confidentiality.
------------------------------
(a) Promptly after execution and delivery of the Settlement Documents,
the Company will issue the press release attached hereto as Exhibit J.
(b) Each Party will hold in confidence and, except as permitted hereby
or as required by law, will not disclose to any other person the circumstances
surrounding or the negotiations involved with achievement of the settlements
contained herein or the other Settlement Documents, unless otherwise approved by
the Company, TBG, and ASSI in advance. Each Party may disclose information
regarding the settlements herein and the other Settlement Documents to those of
their advisors (including attorneys, accountants, and banks) who have a need to
know such information in order to effectuate the transactions contemplated
hereby, provided such advisors must undertake to maintain the confidentiality of
such information. The obligation of each Party under this section will survive
for a period of 10 years from the date hereof.
Section 6.6 Successors and Assigns. This Agreement will be binding
----------------------
upon and inure to the benefit of the Parties and their respective successors and
permitted assigns.
9
<PAGE>
Section 6.7 Assignment. No Party may assign, transfer, or otherwise
----------
hypothecate either this Agreement or any of the rights, interests, or
obligations of such Party herein without the prior approval of VJB and ASSI.
Section 6.8 Attorneys' Fees. In any action between any two or more
---------------
of the Parties seeking interpretation or enforcement of any terms or provisions
of any of the Settlement Documents, the prevailing party in such action will be
entitled, in addition to any damages, injunctive, or other relief, to receive
from the Parties opposing such prevailing party its reasonable costs and
expenses, including without limitation attorneys fees, incurred by the
prevailing party in connection with such action or proceeding.
Section 6.9 Amendment. This Agreement may not be amended, modified,
---------
or supplemented in any manner except in a writing executed by each of the
Parties (other than RGK, unless such amendment, modification, or supplement has
an adverse effect on the releases and discharges in Section 1.1 in favor of
RGK).
Section 6.10 Severability. Any provision of this Agreement which
------------
is prohibited or unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in a jurisdiction will not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 6.11 Waiver. No waiver of any provision of this Agreement
------
will be enforceable unless in a writing executed by the Party against whom
enforcement is sought. No delay or failure of a Party to exercise any right,
power, or privilege hereunder or to strictly enforce the provisions hereof will
constitute a waiver with respect thereto. No waiver of any provision of this
Agreement on a given occasion will constitute a waiver thereof on any subsequent
occasion unless in writing.
Section 6.12 Third Party Beneficiaries. This Agreement and the
-------------------------
transactions contemplated hereby are for the sole benefit of the Parties, other
Released Persons, and their respective successors-in-interest and permitted
assigns. No other person or entity is entitled to rely upon or receive any
benefit from any of the Settlement Documents or any provisions thereof, except
to the extent expressly stated therein.
Section 6.13 Captions. The article and section headings contained
--------
in this Agreement are for convenience or reference only and do not affect in any
way the interpretation or enforcement of this Agreement.
Section 6.14 Complete Agreement. This Agreement, including the
------------------
Settlement Documents, constitutes the entire agreement of the Parties with
respect to subject matter hereof and thereof. In particular and without limiting
the foregoing, each Party acknowledges that no representation or promise not
expressly contained in one or more of the Settlement Documents has been made to
it and that there are no promises or representations, express or implied, not
set forth in the Settlement Documents relating to the subject matter thereof.
Section 6.15 Definition of Settlement Documents. "Settlement
----------------------------------
Documents" means collectively this Agreement, the documents attached hereto as
Exhibits to be executed and delivered concurrently with this Agreement, and such
additional instruments as may be concurrently executed and delivered pursuant to
this Agreement.
10
<PAGE>
Section 6.16 Gender and Number. As used in this Agreement, the
-----------------
masculine, feminine, or neuter gender, and the singular or plural number, will
each be deemed to include the others whenever the context so indicates.
Section 6.17 Remedies Cumulative; Specific Performance.
-----------------------------------------
(a) The rights and remedies of the Parties under this Agreement are
cumulative with one another and with any other remedies available at law, in
equity, or otherwise.
(b) Without limiting the generality of clause (a) and in recognition
of the special and unique character of each Party's obligations in connection
with the settlements and other agreements made herein by the Parties and of the
inadequacy of an action at law for damages to compensate for a breach thereof,
each Party agrees that specific performance and other equitable relief may be
had by any other Party hereto in the event of actual, threatened, or
anticipatory breach of any such obligations.
Section 6.18 Counterparts. Any of the Settlement Documents may be
------------
executed in two or more counterparts, all of which together will constitute one
and the same document, and may be executed and delivered by facsimile or
telecopier; provided that any Party which elects to execute and deliver a
Settlement Document or counterpart thereof by facsimile or telecopier will
within 3 days of the date of such delivery provide to each other Party (or its
attorney) a manually executed original counterpart.
Section 6.19 Venue. In the event any legal proceeding is necessary
-----
to enforce, interpret, or resolve any disputes arising under this Agreement, the
sole and exclusive forum for such proceeding will be the Municipal and Superior
Courts for the County of Los Angeles, California or the federal district court
for the Central District of California, and all related appellate courts. Each
Party hereby consents to the jurisdiction and venue of such courts.
Section 6.20 Construction. The Parties directly or through their
------------
respective counsel have mutually participated in the negotiation and preparation
of this Agreement and agree that no provision herein will be construed against
any Party due to the activities of that Party or its attorney in the preparation
of this Agreement.
Section 6.21 Governing Law. This Agreement and each of the other
-------------
Settlement Documents (unless expressly stated otherwise therein) will be
interpreted and enforced in accordance with the laws of the State of California
without regard to its conflicts-of-laws rules.
11
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered this
Agreement as of the date first set forth above.
APPROVED AS TO FORM: PARTIES:
- -------------------- --------
COMPANY:
McDERMOTT WILL & EMERY
SOUND SOURCE INTERACTIVE, INC.
/s/ Sean P. McGuinness /s/ Vincent J. Bitetti
- ---------------------- ----------------------
Sean P. McGuinness Vincent J. Bitetti
Attorneys for Sound Source Chief Executive Officer
Interactive, Inc.
HELLER EHRMAN WHITE & McAULIFFE TBG:
THE BOSTON GROUP, L.P.
/s/ Darryl Snider
- ----------------- /s/ Robert A. Diminico
Darryl Snider ----------------------
Attorneys for the Boston Group Robert A. DiMinico,
President
COUDERT BROTHERS ASSI:
ASSI, INC.
/s/ Gregory Keever /s/ Louis Habash
- ------------------ ----------------
Gregory Keever Louis Habash,
Attorneys for ASSI, Inc. President
COUDERT BROTHERS NCD:
NCD, INC.
/s/ Gregory Keever /s/ Louis Habash
- ------------------ ----------------
Gregory Keever Louis Habash
Attorneys for NCD, Inc. President
MARGOLIS & MORIN
/s/ Michael D. Morin /s/ Vincent J. Bitetti
- -------------------- ---------------------
Michael D. Morin VINCENT J. BITETTI,
Attorneys for Vincent J. Bitetti individually
MARGOLIS & MORIN
/s/ Michael D. Morin /s/ Ulrich E. Gottschling
- -------------------- -------------------------
Michael D. Morin ULRICH E. GOTTSCHLING,
Attorneys for Vincent J. Bitetti individually
12
<PAGE>
KATHRYN TSCHOPIK, ESQ.
/s/ Kathryn Tschopik /s/ Mark A. James
- -------------------- -----------------
Kathryn Tschopik MARK A. JAMES,
Attorneys for Mark A. James individually
CLARKSON, GORE & MARSELLA, APLC
/s/ Scott C. Clarkson /s/ Robert G. Kalik
- --------------------- -------------------
Scott C. Clarkson ROBERT G. KALIK,
Attorneys for Robert G. Kalik individually
13
<PAGE>
Exhibit 10.2
LOCK-UP AGREEMENT
-----------------
(April 24, 1998)
The undersigned, intending to be legally bound, understand and agree as
follows.
Simultaneously herewith, ASSI, Inc. ("ASSI") and NCD, Inc. ("NCD") are
entering into a Settlement Agreement (the "Settlement Agreement") with Sound
Source Interactive, Inc. (the "Company") and certain other parties referred to
therein. Louis Habash ("Habash") is the beneficial owner of all of the equity
securities of ASSI and NCD.
After consultation, the undersigned have agreed that any significant sales
of the Company's common stock, par value $.001 per share (the "Common Stock")
beneficially owned by Habash, including without limitation any such shares owned
of record by ASSI, NCD and/or Habash, within the 12-month period commencing May
1, 1998 could have an adverse effect on the market price for the Common Stock.
The undersigned have further agreed that it is in the best interests of the
Company and its stockholders that there be a stable and orderly market for the
Common Stock.
Therefore, ASSI, NCD and Habash hereby agree that they will not, directly
or indirectly, offer, offer to sell, sell, grant an option to purchase or sell,
transfer, assign, pledge, hypothecate or otherwise encumber (whether pursuant to
Rule 144 under the Securities Act of 1933, as amended, or otherwise), or enter
into any agreement to do any of the foregoing with respect to, any Common Stock
during the period commencing April 24, 1998 and ending May 30, 1999, without the
prior written consent of the Company; provided, however, that the foregoing
limitation shall not prohibit the sale of shares of Common Stock beneficially
owned by Habash in an aggregate amount not to exceed the product of the number
of such shares on the date hereof and .083 times the number of full calendar
months (commencing with the month of May 1998) elapsed since the date hereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this agreement, or caused
this agreement to be executed by their duly authorized officers, as of the date
set forth above.
ASSI, INC. NCD, INC.
By: /s/ Louis Habash By: /s/ Louis Habash
---------------- ----------------
Louis Habash, Louis Habash,
President President
/s/ Louis Habash
- ----------------
LOUIS HABASH, individually
Accepted and agreed to:
SOUND SOURCE INTERACTIVE, INC.
By: /s/ Vincent J. Bitetti
----------------------
Vincent J. Bitetti,
Chairman of the Board and
Chief Executive Officer
2
<PAGE>
Exhibit 10.3
THIRD AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT, (this "Agreement")
dated as of April 24 1998, by and among Sound Source Interactive, Inc., a
Delaware corporation ("SSI/DE"), and Sound Source Interactive, Inc., a
California corporation ("SSI/CA") (SSI/DE and SSI/CA collectively, "Employer"),
and Vincent J. Bitetti ("Executive").
W I T N E S S E T H:
WHEREAS, Executive has served as Chief Executive Officer of Employer since
1988;
WHEREAS, Employer and Executive entered into an Amended and Restated
Employment Agreement dated as of September 15, 1995, and a Second Amended and
restated Employment Agreement dated as of April 30, 1996 (collectively, the
"Prior Agreement");
WHEREAS, Employer and Executive mutually desire to amend and restate the
Prior Agreement in its entirety as set forth herein;
WHEREAS, Executive continues to possess an intimate knowledge of the
business and affairs of Employer, its policies, methods, personnel,
opportunities and problems;
WHEREAS, Employer desires to assure itself of Executive's continued
employment by Employer and to compensate him for such efforts; and
WHEREAS, Executive is desirous of committing himself to serve Employer on
the terms herein provided;
NOW, THEREFORE, in consideration of the covenants herein contained, the
parties hereto hereby agree as follows:
1. EMPLOYMENT. Executive is hereby employed as the Chairman of the Board
and Chief Executive Officer ("CEO") of Employer. Executive, subject to the
direction and control of the Board of Directors of Employer (the "Board"), shall
have supervision and control over, and responsibility for, the operations and
affairs of Employer, and shall have such other powers and duties as may be from
time to time assigned to him by the Board; provided, that in no event shall
Executive be required to perform duties not in keeping with his position as an
executive officer of Employer. Executive hereby accepts such employment, all
subject to the terms and conditions herein contained. Executive hereby agrees
that during the period of his employment hereunder he shall devote substantially
all of his business time, attention and skills to the business and affairs of
Employer and its subsidiaries.
2. PLACE OF PERFORMANCE. In connection with his employment by Employer,
Executive shall be based at Employer's principal executive offices.
3. COMPENSATION.
(a) BASE SALARY. Employer shall pay to Executive, and Executive shall
accept, for all services which may be rendered by him pursuant to this
Agreement, a base salary ("Base Salary") as hereinafter set forth. The initial
Base Salary of Executive hereunder shall be $240,000 per annum. At the end of
the first full year of this Agreement, the Base Salary shall be increased by an
amount equal to the Base Salary then in effect multiplied by a fraction, the
<PAGE>
numerator of which shall be the difference between (a) the Consumer Price Index
(as hereinafter defined) as of the first anniversary of the Effective Date (as
hereinafter defined) and (b) the Consumer Price Index as of the Effective Date,
and the denominator of which shall be the Consumer Price Index as of the
Effective Date; provided, that the "fraction" set forth in this sentence shall
never be zero or less. At the end of each succeeding full year of this
Agreement, the Base Salary shall be increased in a like manner.
Any increase in Base Salary or other compensation granted by Employer, the
Board or any committee thereof shall in no way limit or reduce any other
obligation of Employer hereunder and, once established at an increased specified
rate, Executive's Base Salary hereunder shall not thereafter be reduced, other
than as necessitated by Employer's adverse financial condition. Executive's
salary shall be payable in accordance with Employer's payroll practices as from
time to time in effect.
For purposes of this Agreement, the "Consumer Price Index" as of any
particular date means the Consumer Price Index for Urban Consumers for All
Items, as reported in the Monthly Labor Review (published by the Bureau of Labor
Statistics of the United States Department of Labor) in respect of the month
immediately preceding such particular date. In the event that the Consumer
Price index is not available, a successor or substitute index shall be used for
the computations herein set forth. In the event that the Consumer Price Index
or such successor or substitute index is not published, a reliable governmental
or other nonpartisan publication evaluating the information theretofore used in
determining the Consumer Price index shall be used for the computations herein
set forth.
(b) ADDITIONAL CASH COMPENSATION. Employer shall pay Executive
compensation in addition to Executive's Base Salary upon Employer's attainment
of one or more revenue or profitability levels. This additional compensation
shall be computed on an annual basis at the close of the Employer's fiscal year
and paid to Executive within ten days of completion of the annual audit. Any
disagreements regarding the calculation of the bonuses payable under this
Section 3(b) shall be determined by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in Los
Angeles, California. Such arbitration shall be conducted by a single arbitrator
who shall be a certified public accountant associated with a "Big Six"
accounting firm and not affiliated with either party. Such arbitrator shall be
selected by Employer and shall be reasonably acceptable to Executive.
(i) REVENUE ATTAINMENT. Employer shall pay Executive a cash bonus
if Employer realizes certain gross revenues. The cash bonus shall be based upon
the following schedule:
2
<PAGE>
<TABLE>
<CAPTION>
Cumulative
Revenue Attainment Cash Bonus
------------------ ----------
<S> <C>
$ 7,500,000 $ 25,000
$10,000,000 $ 75,000
$15,000,000 $125,000
</TABLE>
The foregoing schedule shall apply in respect of the fiscal year ending June 30,
1998. The revenue attainment levels set forth in the schedule shall be
increased annually by 60 percent per annum for each subsequent fiscal year
during the term of this Agreement.
(ii) EMPLOYER GROSS PROFIT. Employer shall pay Executive a cash
bonus if Employer achieves successful gross profit levels. For purposes hereof,
"gross profit" means total revenues less cost of sales as determined by
Employer's independent public accountants in accordance with GAAP consistently
applied. The cash bonus shall be calculated based upon the following performance
schedule:
<TABLE>
<CAPTION>
Cumulative
Gross Profit Cash Bonus
------------ ----------
<S> <C>
$2,000,000 $ 50,000
$2,250,000 $ 75,000
$2,500,000 $100,000
</TABLE>
The foregoing schedule shall apply respect of the fiscal year ending June 30,
1998. The gross profit levels set forth in the schedule shall be increased
annually by 60 percent per annum for each subsequent year during the term of
this Agreement.
(iii) PRE-TAX PROFITABILITY. Employer shall pay Executive a cash
bonus upon Employer's achieving certain levels of pre-tax profitability. For
purposes hereof, "pre-tax profitability" shall mean earnings before interest,
amortization, depreciation and income taxes divided by gross revenues as
determined by Employer's independent public accountants in accordance with GAAP
consistently applied. For each fiscal year during the term of this Agreement,
the cash payment shall be based on the following pre-tax profitability schedule:
3
<PAGE>
<TABLE>
<CAPTION>
Pre-Tax Cumulative
Profitability Cash Bonus
------------- ----------
<S> <C>
10% $ 50,000
15% $100,000
</TABLE>
(iv) SEPARATE BONUS CATEGORIES. Each of the three bonus categories
set forth above shall be independent of each other and Executive may obtain cash
bonuses from one or more of the categories in the same fiscal year.
(c) AUTOMOBILE. In order to facilitate travel by Executive in the
performance of his duties hereunder, Employer shall furnish Executive, at no
expense to him, with an automobile owned or leased by Employer; provided, that
the total cost to the Company for lease/purchase payments shall not exceed
$1,000 per month. The manufacturer and type of such automobile shall be chosen
by Employer. Employer shall reimburse Employee for all expenses of maintaining,
insuring and operating such automobile upon the presentation of appropriate
vouchers and/or receipts (to the extent that Employer does not pay such expenses
directly). At the discretion of Executive, Employer shall, in lieu of
furnishing Executive with an automobile owned or leased by Employer and paying
all maintenance, insurance and operation expenses in connection therewith,
reimburse Executive for all expenses he incurs in maintaining, insuring and
operating one automobile owned or leased by Executive upon the presentation of
appropriate vouchers and/or receipts (to the extent that Employer does not pay
such expenses directly); provided, that the aggregate amount of such expenses
subject to reimbursement shall not exceed $1,000 per month.
(d) LIFE INSURANCE. During the term of his employment hereunder, the
Company shall purchase and keep in effect life insurance in the amount of
$5,000,000 on the life of the Executive; provided, that the total cost to the
Company for such insurance shall not exceed $7,500 per annum. Such life
insurance will name as beneficiaries those individuals designated by the
Executive.
(e) EXPENSES. During the term of his employment hereunder, Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by him in performing services hereunder, provided that Executive
properly accounts therefor in accordance with Employer's policy relating
thereto. Without limiting the generality of the foregoing, the parties agree
that any travel Executive undertakes in connection with the performance of his
duties hereunder shall be in business class or better, and Employer shall
reimburse Executive for such expenses.
(f) BENEFIT PLANS. Executive shall be entitled to participate in or
receive benefits under any employee benefit plan or arrangement currently
available, or made available by Employer in the future, to its executives and
key management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plan or arrangement. Employer
shall not make any changes in any employee benefit plans or arrangements in
effect on the date hereof or during the term of this Agreement in which
Executive participates (including, without limitation, any
4
<PAGE>
pension and retirement plan, supplemental pension and retirement plan, savings
and profit sharing plan, stock ownership plan, stock purchase plan, stock option
plan, life insurance plan, medical insurance plan, disability plan, dental plan,
health-and-accident plan or arrangement) which would adversely affect
Executive's rights or benefits thereunder, unless such change occurs pursuant to
a program applicable to all executives of Employer and does not result in a
proportionately greater reduction in the rights of or benefits to Executive as
compared with any other executive of Employer. Any payments or benefits payable
to Executive hereunder in respect of any calendar year during which Executive is
employed by Employer for less than the entire such year shall, unless otherwise
provided in the applicable plan or arrangement, be prorated in accordance with
the number of calendar days in such calendar year during which he is so
employed.
(g) VACATIONS, HOLIDAYS AND SICK LEAVE. Executive shall be entitled to
the number of paid holidays, personal days off, vacation days and sick leave
days in each calendar year as are determined by Employer from time to time for
its senior executive officers, but not less than four weeks in any calendar year
(prorated, in any calendar year during which Executive is employed under this
Agreement for leans than the entire such year, in accordance with the number of
calendar days in such calendar year during which he is so employed). Vacation
may be taken in Executive's discretion, so long as it is not inconsistent with
the reasonable business needs of Employer. Executive shall be entitled to accrue
from year to year all vacation days not taken by him.
(h) PERQUISITES. Executive shall be entitled to continue to receive the
perquisites and fringe benefits appertaining to the office of the Chief
Executive Officer of Employer in accordance with present practice and
appropriate to the industry.
(i) KEY MAN LIFE INSURANCE. Executive shall cooperate with Employer to
secure, for Employer, a key man life insurance policy on the life of Executive
in the amount of $2,000,000 to $5,000,000, to be paid to Employer upon
Executive's death.
(j) BASE SALARY NOT EFFECTED BY OTHER BENEFITS. None of the benefits to
which Executive is entitled under any of the provisions of Sections 3(b) - 3(g)
hereof shall in any manner reduce or be deemed to be in lieu of the Base Salary
payable to Executive pursuant to Section 3(a) hereof.
(k) STOCK OPTIONS. SSI/DE shall grant to Executive options to purchase
50,000 shares of the common stock of SSI/DE pursuant to the 1995 Stock Option
Plan of SSI/DE. Such options shall be fully vested on the date of grant, which
shall be not later than April 30, 1998. The exercise price of 25,000 of such
options shall be $2.50 per share, and the exercise price of 25,000 of such
options shall be $5.00 per share.
4. TERM OF EMPLOYMENT. The employment by Employer of Executive pursuant
hereto shall commence as of the date hereof (the "Effective Date") and, subject
to the provisions of Section 5 hereof, shall terminate on December 31, 2000 (the
"Termination Date"). This Agreement shall automatically be extended for one
additional year beyond the Termination Date (the "Extended Termination Date")
unless at least 30 calendar days prior to the Termination Date, Executive or
Employer shall have given notice that he or it does not wish to extend this
Agreement.
5
<PAGE>
5. PREMATURE TERMINATION. Anything in this Agreement contained to the
contrary notwithstanding:
(a) DEATH. Executive's employment hereunder shall terminate
forthwith upon the death of Executive.
(b) DISABILITY. Executive's employment hereunder shall terminate, at
the option of Employer, in the event that the Board makes a good faith
determination that Executive suffers from Disability (as hereinafter defined) so
as to be unable to substantially perform his duties hereunder for an aggregate
of 180 calendar days during any period of 12 consecutive months. As used in
this Agreement, the term "Disability" shall mean the material inability, in the
opinion of three-fourths of the entire membership of the Board set forth in a
resolution giving the particulars thereof, of Executive to render his agreed-
upon services to Employer due to physical and/or mental infirmity, which opinion
is concurred in by a physician or psychiatrist selected by Executive or his duly
appointed representative or guardian and reasonably acceptable to Employer.
(c) TERMINATION FOR CAUSE. Employer may terminate Executive's
employment hereunder for Cause. For purposes of this Agreement, Employer shall
have "Cause" to terminate Executive's employment hereunder upon (i) the willful
and continued failure by Executive to substantially perform his duties hereunder
(other than any such failure resulting from Executive's incapacity due to
physical or mental illness) after demand for substantial performance is
delivered by Employer specifically identifying the manner in which Employer
believes Executive has not substantially performed his duties, or (ii) the
willful engaging by Executive in misconduct which is materially injurious to
Employer, monetarily or otherwise, or (iii) the willful violation by Executive
of the provisions of Section 8 hereof provided that such violation results in
material injury to Employer. No act, or failure to act, on Executive's part
shall be considered "willful" unless done, or omitted to be done, by him not in
good faith and without reasonable belief that his action or omission was in the
best interest of Employer. Notwithstanding the foregoing, Executive shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to Executive a copy of a resolution, duly adopted by the
affirmative vote of not less than a majority of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Executive and an opportunity for him, together with his
counsel, to be heard before the Board), finding that, in the good faith opinion
of the Board, Executive conducted, or failed to conduct, himself in a manner set
forth above in clause (i), (ii), or (iii) of this Section 5(c), and specifying
the particulars thereof in detail. Any dispute as to whether Cause to dismiss
Executive exists, shall be resolved by arbitration conducted in Los Angeles,
California in accordance with the rules of the American Arbitration Association
and by a single arbitrator reasonably acceptable to Executive and Employer.
(d) TERMINATION BY EXECUTIVE. Executive may terminate his employment
hereunder (i) for Good Reason (as hereinafter defined) or (ii) if his physical
or mental health becomes impaired to an extent that makes the continued
performance of his duties hereunder hazardous to his physical or mental health
or his life, provided that Executive shall have furnished Employer with a
written statement from a doctor or psychiatrist to such effect, and provided
further, that, at Employer's request and expense, Executive shall submit to an
examination by a physician or psychiatrist selected by Employer and such
physician or psychiatrist shall have concurred
6
<PAGE>
in the conclusion of Executive's physician or psychiatrist. Until Executive
terminates his employment pursuant to clause (ii) of this Section 5(d), he shall
continue to receive his full Base Salary, payable at the time such payments are
due.
(e) "GOOD REASON" DEFINED. For purposes of this Agreement, "Good
Reason" shall mean (i) any removal of Executive as, or any failure to re- elect
Executive as, Chairman of the Board of Employer except in connection with
termination of Executive's employment for Cause (as hereinafter defined) or
Disability, provided, however, that any removal of Executive as, or any failure
to re-elect Executive as, Chairman of the Board of Employer (except in
connection with termination of Executive's employment for Cause or Disability)
shall not diminish or reduce the obligations of Employer to Executive under this
Agreement, or (ii) a reduction of ten percent or more in Executive's then
current Base Salary, other than a reduction necessitated by Employer's adverse
financial condition, or any failure by Employer to comply with any of the
provisions of Sections 1, 2, 3 or 4 hereof, or (iii) the failure of Employer to
obtain the assumption of the agreement to perform this Agreement by any
successor to Employer, as provided for in Section 8 hereof.
(f) NOTICE OF TERMINATION. Any termination of Executive's employment
by Employer or by Executive (other than termination pursuant to Section 5(a)
hereof) shall be communicated by written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice Of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(g) DATE OF TERMINATION. For purposes of this Agreement, "Date of
Termination" shall mean (i) if Executive's employment is terminated by his
death, the date of his death, (ii) if Executive's employment is terminated
pursuant to Section 5(b) hereof, 30 calendar days after Notice of Termination is
given (provided that Executive shall not have returned to the performance of his
duties on a full- time basis during such 30-day period), (iii) if Executive's
employment is terminated pursuant to Section 5(c) hereof, the date specified in
the Notice of Termination, and (iv) if Executive's employment is terminated for
any other reason, the date on which a Notice of Termination is given.
6. PAYMENTS AND BENEFITS UPON EARLY TERMINATION.
(a) EARLY TERMINATION FOR DEATH, DISABILITY OR CAUSE. Upon the
termination of this Agreement prior to the Termination Date (or, if this
Agreement shall have been extended to the Extended Termination Date, as provided
in Section 4 hereof, prior to the Extended Termination Date) (X) by Employer as
a result of death, Disability or termination of Executive for Cause or (Y) by
Executive for any of the reasons set forth in clause (ii) of Section 5(d)
hereof, Employer shall pay Executive:
(i) his Base Salary through the Date of Termination at the
rate in effect at the time of Notice of Termination is given or, in the case of
the death of Executive, the Date of Termination, payable at the time such
payments are due; and
7
<PAGE>
(ii) all other amounts to which Executive is entitled,
including, without limitation, expense reimbursement amounts or amounts due
under any benefit plan of Employer accrued to the Date of Termination, at the
time such payments are due.
(b) EARLY TERMINATION OTHER THAN FOR DEATH, DISABILITY OR CAUSE. Upon
the termination of this Agreement prior to the Termination Date (or, if this
Agreement shall have been extended to the Extended Termination Date, as provided
in Section 4 hereof, prior to the Extended Termination Date) (X) by Employer
other than for death, Disability or Cause or (Y) by Executive for Good Reason or
as a result of a breach of this Agreement by Employer, Employer shall pay to
Executive:
(i) his Base Salary through the Termination Date at the rate
in effect at the time Notice of Termination is given, payable at the time such
payments are due (or, if this Agreement shall have been extended to the Extended
Termination Date, as provided in Section 4 hereof, his Base Salary through the
Extended Termination Date at the rate in effect at the time Notice of
Termination is given, payable at the time such payments are due); and
(ii) all other amounts to which Executive is entitled,
including, without limitation, expense reimbursement amounts or amounts due
under any benefit plan of Employer accrued to the Date of Termination, at the
time such payments are due.
In addition, for the 36-month period after termination for any of the
reasons specified in this Section 6(b), Employer shall arrange to provide
Executive with life and health insurance benefits substantially similar to those
which Executive was receiving immediately prior to the Notice of Termination.
(c) PAYMENT OF DAMAGES. Upon the early termination of this
Agreement, Employer shall pay all other damages to which Executive may be
entitled as a result of Employer's termination of his employment under this
Agreement, including damages for any and all loss of benefits to Executive under
Employer's employee benefit plans which he would have received if Employer had
not breached this Agreement and had his employment continued for the full term
provided in Section 4 hereof, and including all legal fees and expenses incurred
by him in contesting or disputing any such termination of in seeking to obtain
or enforce any right or benefit provided by this Agreement.
(d) MITIGATION NOT REQUIRED. Executive shall not be required to
mitigate the amount of any payment provided for in this Section 6 by seeking
other employment or otherwise. However, the amount of any payment provided for
in this Section 6 shall be reduced by any compensation earned by Executive as
the result of employment by another employer engaged in the business of
interactive educational computer software after the Date of Termination, or
otherwise.
7. REGISTRATION RIGHTS.
(a) At the request of Executive made at any time subsequent to the
Date of Termination, SSI/DE, on not more than two occasions, will, as promptly
as practicable (and in any event no later than 120 days following the
Executive's request): (i) prepare and file under the Securities Act of 1933, as
amended ("Securities Act"), using its year-end financial statements
8
<PAGE>
for the preceding year, a registration statement relating to all of the common
stock of SSI/DE held by or issuable to Executive pursuant to any option or other
agreement between SSI/DE and Executive (collectively, the "Registrable
Securities"); and (ii) prepare and file with the appropriate Blue Sky
authorities the necessary documents to register or qualify such Registrable
Securities. Notwithstanding the foregoing, Executive shall not be entitled to
exercise his rights under this Section 7(a) for a period of one year following
the initial public offering of common stock of the employer without the consent
of the lead underwriters in the initial public offering.
(b) As a condition for the inclusion of any Registrable Securities in
any registration statement pursuant to this paragraph 7, at the request of
SSI/DE, Executive shall enter into an underwriting agreement with SSI/DE and the
underwriter(s) with respect to the registration of the Registrable Securities,
in such form as may be reasonably agreed upon by Employer and such
underwriter(s), as long as such agreement is consistent with those then in use
by major underwriters and with the provisions hereof.
(c) SSI/DE shall pay all registration expenses relating to any
registration of Registrable Securities pursuant to this paragraph 7. Executive
shall pay all brokerage fees, underwriting fees and discounts, transfer taxes,
if any, and the fees and expenses of Executive's legal counsel in connection
with the registration and sale of the Registrable Securities.
8. NONDISCLOSURE; NONCOMPETE.
(a) CONFIDENTIAL INFORMATION. Executive shall not, to the detriment
of Employer, knowingly use for his own benefit or disclose or reveal to any
unauthorized person, any trade secret or other confidential information received
by Executive in the course of his employment or engagement in any capacity by
employer which relates to Employer or to any of the businesses operated by it,
including, but not limited to, any customer lists, customer needs, price and
performance information, specifications, hardware, software, devices, supply
sources and characteristics, business opportunities, marketing, promotional,
pricing and financing techniques, or other information relating to the business
of Employer, and Executive confirms that such information constitutes the
exclusive property of Employer. However, said restriction on confidential
information shall not apply to information which is: (i) generally available in
the industry in which Employer operates, (ii) disclosed in published literature
or (iii) obtained by Executive from a third party without binder or secrecy.
Executive agrees that, except as otherwise expressly agreed to by Employer, he
will return to Employer, promptly upon the request of the Board or any executive
officer designated by the Board, any physical embodiment of such confidential
information.
(b) NONCOMPETITION. During the term of his employment by Employer,
Executive shall not engage, directly or indirectly (which includes, but is not
limited to, owning, managing, operating, controlling, being employed by, giving
financial assistance to, participating in or being connected in any material way
with any business or person so engaged), anywhere in the continental United
States, in the business of interactive educational computer software based on
licensed products from major motion pictures and televisions; provided, however,
that Executive's ownership as a passive investor of less than five percent of
the issued and outstanding stock of any publicly held corporation or partnership
so engaged shall not by
9
<PAGE>
itself be deemed to constitute such engagement by Executive; and provided
further that, subject to obtaining (as and when required) prior written consent,
which consent will not be unreasonably withheld, nothing herein shall be
construed to prevent Executive from engaging, directly or indirectly, in any
capacity in any business in the computer software or movie industries not
specified above. During such period, Executive shall not act to induce any of
Employer's or its subsidiaries, customers or employees to take action which
might be disadvantageous to Employer.
(c) REMEDIES. Executive recognizes that the possible restrictions on
his activities which may occur as a result of his performance of his obligations
under this Section 8 are required for the reasonable protection of Employer and
its investments, and Executive expressly acknowledges that damages alone will be
an inadequate remedy for any breach or violation of this Section 8, and that
Employer, in addition to all other remedies at law or in equity, shall be
entitled, as a matter of right, to injunctive relief, including specific
performance, with respect to any such breach or violation, in any court of
competent jurisdiction. If any of the provisions of this Section 8 are held to
be in any respect an unreasonable restriction upon Executive, then they shall be
deemed to extend only over the maximum period of time, geographic area, and/or
range of activities as to which they may be enforceable.
(d) NONEXCLUSIVITY. The undertakings of Executive contained in
Sections 8(a), 8(b) and 8(c) hereof shall be in addition to, and not in lieu of,
any obligations which he may have with respect to the subject matter hereof,
whether by contract, as a matter of law or otherwise.
9. SUCCESSORS; BENEFITS.
(a) SUCCESSORS. Employer shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Employer, by agreement in
form and substance satisfactory to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that Employer
would be required to perform it if no such succession had taken place. Failure
of Employer to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Executive to
compensation from Employer in the same amount and on the same terms as he would
be entitled to hereunder if he terminated his employment for Good Reason, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used
in this Agreement, "Employer" shall mean Employer as hereinbefore defined and
any successor to its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this Section 9 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law.
(b) BENEFITS. This Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any amounts
would still be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Executive's devisee, legatee, or other designee or,
if there be no such designee, to Executive's estate.
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<PAGE>
10. MISCELLANEOUS PROVISIONS.
(a) EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
(b) NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made as of the date delivered, if delivered personally, or three calendar days
after having been mailed, if mailed by registered or certified mail, postage
prepaid, return receipt requested, as follows:
If to Employer, to: Sound Source Interactive, Inc.
26115 Mureau Road, Suite B
Calabasas, CA 91302-3126
If to Executive, to: Vincent J. Bitetti
776 Emerson Street
Thousand Oaks, CA 91362
or to such other address as either party hereto shall have designated by like
notice to the other party hereto (except that a notice of change of address
shall only be effective upon receipt).
(c) AMENDMENT. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
(d) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements and understandings of the parties hereto, oral
and written, with respect to the subject matter hereof, except that the
entitlement of Executive under paragraph 7 of the Prior Agreement to receive a
bonus from Employer computed as a percentage of Employer's net sales revenue
shall continue in effect until November 30, 1995.
(e) APPLICABLE LAW. This Agreement shall be governed by the laws of
the State of California applicable to contracts made and to be wholly performed
therein.
(f) HEADINGS. The headings contained herein are for the sole purpose
of convenience of reference and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
(g) WAIVER, ETC. The failure of either of the parties hereto to at
any time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Agreement or any provision hereof or the right of either of the
parties hereto to thereafter enforce each and every provision of this Agreement.
No waiver of any breach of any of the provisions of this Agreement shall be
effective unless set forth in a written instrument executed by the party against
whom or which enforcement of such waiver is sought; and no waiver of any such
breach shall be construed or deemed to be a waiver of any other or subsequent
breach.
11
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the date first above written.
EMPLOYER:
SOUND SOURCE INTERACTIVE, INC.,
a Delaware corporation
By: /s/ Ulrich E. Gottschling
-------------------------
Ulrich E. Gottschling, President &
Chief Operating Officer
SOUND SOURCE INTERACTIVE, INC.,
a California corporation
By: /s/ Ulrich E. Gottschling
-------------------------
Ulrich E. Gottschling, President &
Chief Operating Officer
EXECUTIVE:
/s/ Vincent J. Bitetti
----------------------
Vincent J. Bitetti
12
<PAGE>
Exhibit 10.4
------------
UEG EMPLOYMENT MEMORANDUM
-------------------------
The existing Amended and Restated Employment Agreement dated as of February
7, 1997 (the "Agreement") by and between Sound Source Interactive, Inc., a
Delaware corporation ("Employer"), and Ulrich E. Gottschling ("Executive") is
hereby amended as follows:
1. The term of the Agreement shall expire on January 31, 2000.
2. Executive's Base Salary for 1999 shall be $180,000 per annum.
3. Employer shall grant to Executive options to purchase 50,000 shares of
the common stock of Employer pursuant to the 1995 Stock Option Plan of Employer.
Such options shall be fully vested on the date of grant, which shall be not
later than April 30, 1998. The exercise price of 25,000 of such options shall
be $2.50 per share, and the exercises priced of 25,000 of such options shall be
$5.00 per share.
4. Section 3(b)(i) of the Agreement is hereby amended and restated in its
entirety as follows:
(i) Revenue Attainment. Employer shall pay Executive a cash bonus
------------------
if Employer realizes certain gross revenues. The cash bonus shall be based
upon the following schedule:
<TABLE>
<CAPTION>
Revenue Attainment Cumulative Cash Bonus
------------------ ---------------------
<S> <C>
$ 7,500,000 $ 20,000
10,000,000 60,000
15,000,000 100,000
</TABLE>
The foregoing schedule shall apply in respect of the fiscal year ending
June 30, 1998. The revenue attainment levels in the schedule shall be
increased annually by 60 percent per annum for each subsequent year during
the term of this Agreement.
5. Section 3(b)(ii) of the Agreement is hereby amended and restated in
its entirety as follows:
(ii) Employer Gross Profit. Employer shall pay Executive a cash
---------------------
bonus if Employer achieves successful gross profit levels. For purposes
hereof, "gross profit" means total revenues less cost of sales as
determined by Employer's independent public accountants in accordance with
GAAP consistently applied. The cash bonus shall be calculated based upon
the following performance schedule:
<TABLE>
<CAPTION>
Gross Profit Cumulative Cash Bonus
------------ ---------------------
<S> <C>
$2,000,000 $40,000
2,250,000 60,000
2,500,000 80,000
</TABLE>
The foregoing schedule shall apply in respect of the fiscal year ending
June 30, 1998. The gross profit levels set forth in the schedule shall be
increased annually by 60 percent per annum for each subsequent year during
the term of this Agreement.
<PAGE>
6. Capitalized terms used herein without definition are as defined in the
Agreement.
IN WITNESS WHEREOF, the parties have executed this UEG Employment Agreement
Memorandum as of April 24, 1998.
SOUND SOURCE INTERACTIVE, INC.
a Delaware corporation
By: /s/ Vincent J. Bietti
---------------------
Vincent J. Bitetti,
Chairman of the Board &
Chief Executive Officer
/s/ Ulrich E. Gottschling
-------------------------
Ulrich E. Gottschling,
individually
2
<PAGE>
Exhibit 99.1
------------
CALABASAS, Calif.--(BUSINESS WIRE)--April 28, 1998--Sound Source Interactive,
Inc. (NASDAQ: SSII - news), today announced the settlement and dismissal of the
---- ----
previously announced lawsuits against the Company, Chairman and CEO Vincent
Bitetti and President and COO Ulrich Gottschling brought by its primary
underwriter, The Boston Group LP; a stockholder; ASSI, Inc.; and an independent
director Mark James.
The lawsuits had alleged breach of contract concerning the board of directors'
nominations and breach of duty with respect to an attempt to increase the size
of the board of directors and fill new positions with management's nominees.
The settlement effects a mutual release of all claims and provides for the
expansion of the Company's board of directors from five to seven members.
In addition to current members Vincent Bitetti, Ulrich Gottschling and Senator
Mark James of Nevada, the following new members have been added: Wayne Rogers,
Samuel Poole, John Wholihan and Richard Azevedo.
The following are the backgrounds of the newly appointed directors:
Wayne M. Rogers received his Bachelor of Arts from Princeton University after
which he served in the Armed Forces for three years. In addition to his
activities as a well-known actor, he has been involved in investment activities
for over thirty years. Currently, Mr. Rogers is the General Partner of Balanced
Value Fund, which is a partnership that advises and invests in middle market
companies with sales of $10 million to $50 million as well as serving as an
advisor on the board of several different publicly held companies. He is
founder of Plaza Bank of Commerce and serves on its advisory board. He is also
a General Partner of several partnerships devoted to the development and
management of real estate. Most recently, Mr. Rogers acquired a chain of 62
convenience stores in the Southeast.
Samuel L. Poole has extensive management experience with Fortune 500 companies
and provides a solid base of knowledge for creating long term value in a
company. His proven track record of growing technology driven companies
includes his most recent position at Maxis, Inc., where he served as President
and CEO for five years; Director of Sales at Disney Software, Inc. for
approximately two years; two years as VP of Marketing and Sales at Cinemaware
Corp.; and as Regional Sales Manager of Parker Brothers for almost a year. He
was president and owner of Intellicreations, Inc., an interactive entertainment
software company that he acquired through a leveraged buy out from the Gillette
Company [NYSE:G - news], and then successfully took public and sold five years
- ----
later. His other experience includes having worked in sales management for
Polaroid Corporation {NYSE:PRD-news] and Procter & Gamble. He received his MBA
--- ----
from Kent State University in 1971 and has a Bachelor of Arts degree in
economics and mathematics from Thiel College in Greenville, PA.
John T. Wholihan has been Dean of the College of Business Administration at
Loyola Marymount University since 1984. Prior to coming to L.M.U., his
administrative experience included five years as Associate Dean at Bradley
University, also serving several years as Director of the MBA Program and
Director of the Small Business Institute. During this period, he also taught in
the areas of Strategic Management and International Business. He was a
Fulbright Scholar in Brazil in 1977. John prepared for his career with a
bachelors degree from the University of Notre Dame, MBA from Indiana University,
and Ph.D. from The American University. He has served on the
<PAGE>
Board of Directors of small companies and currently is on the Board of Trustees
of the Turner Funds. He is the immediate past Chairman of the Board of Notre
Dame Academy in Los Angeles.
Richard Azevedo is president of Azevedo and Associates, Inc., which was formed
in 1995 as a consulting firm to the nursing industry and which owns 40% of
Unified Health Services. Azevedo's involvement in the healthcare industry has
included formulating and operating skilled nursing facilities through the Jesse
Lee Group from 1991 to 1995. During his association with Medicrest of
California, a corporation comprised of 18 skilled nursing facilities, he was
responsible for facilitating an operational takeover of the company. Prior to
that, Azevedo was a real estate developer with Ron-Mar Construction Company,
Inc.
In addition to reconstituting the board, the Company agreed to extend the
employment contract of Chairman ad CEO Vincent Bitetti for 2 1/4 years from
September 15, 1998 and of President and COO Ulrich Gottschling for 1 year from
January 1999. The Company also agreed to issue 1,100,000 shares of common stock
to ASSI, Inc. in exchange for 4,816,657 privately held common stock purchase
warrants. The shares received by ASSI, Inc. in the exchange are subject to a
conditional 12-month lock-up.
Vincent Bitetti Chairman & CEO of the company stated, "I am elated that this is
behind us. As we end our fiscal year and ramp up for Christmas '98 there is a
great optimism at Sound Source. I am looking forward to working with the
expanded board of directors to maximize the full potential of the Company for
this holiday season and beyond."
Under the terms of the settlement agreement, the Company will record a
significant one time non-cash charge to earnings.
Sound Source Interactive, Inc. (NASDAQ: SSII - news), develops and publishes
---- ----
licensed children's software products, including a line of Animated
Moviebooks(TM), Activity Centers and Learning Adventures, each designed to be a
fun and educational experience. Notably, The Land Before Time(TM) Animated
MovieBook(TM) was named one of the top 50 software products for 1997 by Newsweek
Magazine and received a 1997 EdPress Educational Software Award. Additionally,
Sound Source produces a line of entertainment utilities and interactive games,
such as The Abyss: Incident at Europa(TM), slated for release in 1998. The
Company currently licenses the rights upon which their software is based from:
Universal Studios (NYSE: MC - news), Viacom/Paramount Pictures Corp. (NYSE:
-- ----
VIA - news), Warner Bros. (NYSE: TWX - news), CBS Entertainment (NYSE: CBS -
- --- ---- --- ---- ---
news), MGM/UA (NYSE: MGM - news), Harvey Entertainment, Inc. (NASDAQ: HRVY -
- ---- --- ---- ----
news), 20th Century Fox (NYSE: NWS - news), New Line Cinema and Caroloc
- ---- --- ----
Pictures.
Safe Harbor Statement under the Private Securities Reform Act of 1995: The
statements contained herein which are not historical facts are forward-looking
statements that involve risk and uncertainties including, but not limited to,
the risk associated with the Company's future growth and operating results, the
ability of the Company to successfully integrate the business and personnel of a
newly acquired entity into its operations, market acceptance of this settlement
agreement referred to herein, the ability to make new software products with
wide market appeal, inventory obsolescence, technology changes, competitive
factors, and unfavorable general economic conditions. Actual results may vary
significantly from such forward-looking statements.
2
<PAGE>
Note: All trademarks and copyrights indicated herein are the property of their
respective owners.
For further info. contact: Sound Source Interactive, Inc., Calabasas, CA -
Ulrich Gottschling, 818-878-0505, ext. 202; e-mail [email protected].
-------------------------
3
