Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant
Check the appropriate box:
Preliminary proxy statement
Confidential, for use of the Commission only
(as permitted by Rule 14a-6(e)(2))
[X} Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14(a)-11(c) or Rule 14a-12
TDK Mediactive, Inc., f/k/a Sound Source Interactive, Inc.
(Name of Registrant as Specified in Its Charter)
Board of Directors of TDK Mediactive, Inc.,
f/k/a Sound Source Interactive, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required
Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
Fee paid previously with preliminary materials:
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
<PAGE>
TDK MEDIACTIVE, INC.
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
To be held on February 12, 2001
To the Stockholders of TDK Mediactive, Inc.:
The 2000 Annual Meeting of Stockholders of TDK Mediactive, Inc. (the
"Company") will be held on February 12, 2001 at 10:00 a.m. local time at the
Company's offices at 26115 Mureau Road, Suite B, Calabasas, California 91302,
for the following purposes:
1. To elect five directors of the Board of Directors of the Company,
each to hold office for a term ending in December 2001 or when their
successors are duly elected and qualified;
2. To ratify the appointment of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year ended March 31, 2001; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only stockholders of record as shown on the books of the Company at the
close of business on January 17, 2001, the record date and time fixed by the
Board of Directors, will be entitled to vote at the Annual Meeting and any
adjournment thereof.
In this package you will find the Proxy, Notice of Annual Meeting, Proxy
Statement and our Annual Report for the year ended June 30, 2000. All
stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors
January 17, 2001 Eugene Code
Calabasas, California Secretary
PLEASE SIGN, DATE AND RETURN YOUR PROXY AS SOON AS POSSIBLE IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON.
STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY REVOKE THEIR PROXIES AND VOTE
IN PERSON IF THEY DESIRE.
<PAGE>
<PAGE>
TDK MEDIACTIVE, INC.
26115 Mureau Road, Suite B
Calabasas, California 91302
---------
PROXY STATEMENT
----------
GENERAL INFORMATION
SOLICITATION OF PROXIES
This Proxy Statement is furnished to holders of the common stock, par
value $.001 per share (the "Common Stock"), of TDK Mediactive, Inc., a
Delaware corporation (the "Company"), which was formerly known as Sound Source
Interactive, Inc., in connection with the solicitation by the Company's Board
of Directors of proxies for use at the Company's 2000 Annual Meeting of
Stockholders (the "Annual Meeting") to be held on February 12, 2001 at 10:00
a.m. local time at the Company's offices at 26115 Mureau Road, Suite B,
Calabasas, California 91302, and any and all adjournments thereof. The
purpose of the Annual Meeting and the matters to be acted on there are set
forth in the accompanying Notice of Annual Meeting of Stockholders.
Solicitations of proxies will be made by preparing and mailing the Notice
of Annual Meeting of Stockholders, Proxy Statement and proxy to stockholders
of record as of the close of business on January 17, 2001. These materials
are expected to be first mailed to stockholders on or about January 19, 2001.
The cost of making the solicitation includes the cost of preparing and mailing
the Notice of Annual Meeting of Stockholders, Proxy Statement and proxy and
the payment of charges imposed by brokerage houses and other custodians,
nominees and fiduciaries for forwarding documents to stockholders. In certain
instances, officers of the Company may make special solicitations of proxies
either in person or by telephone. Expenses incurred in connection with
special solicitations are expected to be nominal. The Company will bear all
expenses incurred in connection with the solicitation of proxies for the
Annual Meeting.
VOTING AND REVOCATION OF PROXIES
A stockholder giving a proxy on the enclosed form may revoke it at any
time prior to the actual voting at the Annual Meeting by filing written notice
of the termination of the appointment with an officer of the Company, by
attending the Annual Meeting and voting in person or by filing a new written
appointment of a proxy with an officer of the Company. The revocation of a
proxy will not affect any vote taken prior to the revocation.
Unless a proxy is revoked or there is a direction to abstain on one or
more proposals, it will be voted on each proposal and, if a choice is made
with respect to any matter to be acted upon, in accordance with such choice.
If no choice is specified, the proxies intend to vote the shares represented
thereby to approve Proposal Nos. 1 and 2 as set forth in the accompanying
Notice of Annual Meeting of Stockholders, and in accordance with their best
judgment on any other matters that may properly come before the Annual
Meeting.
<PAGE>
<PAGE>
VOTING AT THE MEETING
Only stockholders of record at the close of business on January 17, 2001
are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. On January 17, 2001, there were outstanding 22,578,796
shares of Common Stock. Each share of Common Stock is entitled to one vote on
the matters to be presented at the Annual Meeting.
A majority of the votes entitled to be cast on matters to be considered
at the Annual Meeting, present in person or by proxy, will constitute a quorum
at the Annual Meeting. If a share is represented for any purpose at the
Annual Meeting, it is deemed to be present for all other matters. Abstentions
and broker nonvotes will be counted for purposes of determining the presence
or absence of a quorum. "Broker nonvotes" are shares held by brokers or
nominees which are present in person or represented by proxy, but which are
not voted on a particular matter because instructions have not been received
from the beneficial owner. Under applicable Delaware law, the effect of
broker nonvotes on a particular matter depends on whether the matter is one as
to which the broker or nominee has discretionary voting authority. The effect
of broker nonvotes on the specific items to be brought before the Annual
Meeting is discussed under each item.
A list of those stockholders entitled to vote at the Annual Meeting will
be available for a period of ten days prior to the Annual Meeting for
examination by any stockholder at the Company's principal executive offices,
26115 Mureau Road, Suite B, Calabasas, California 91302, and at the Annual
Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 17, 2001, information
concerning the beneficial ownership of the Common Stock of the Company by (i)
each person who is known by the Company to own beneficially more than five
percent of the Company's Common Stock, (ii) each director of the Company, and
(iii) all directors and executive officers of the Company as a group. Where
the persons listed have the right to acquire additional shares of Common Stock
through the exercise of options or warrants within 60 days, such additional
shares are deemed to be outstanding for the purpose of computing the
percentage of outstanding shares owned by such persons, but are not deemed to
be outstanding for the purpose of computing the percentage ownership interests
of any other person. Unless otherwise indicated, each of the persons shown in
the table below has sole voting and investment power with respect to the
shares beneficially owned.
Shares Name and Address
Beneficially of
Owned Beneficial Owner (1) Shares Percent
-------------- --------------------- ----------- -------
CURRENT DIRECTORS
Kenichi Aoshima 0 0%
Vincent J. Bitetti 1,284,634 (2) 5.68%
Masatoshi Shikanai 0 0%
Shin Tanabe 0 0%
John T. Wholihan 17,000 (3) 0%
OTHER NAMED EXECUTIVES
Tanya Baker 21,250 (4) 0%
All directors and executive
officers as a group (5) 1,394,557 (6) 6.17%
OTHER BENEFICIAL OWNERS
Louis A. Habash 1,140,000 (7) 5.05%
TDK U.S.A. Corporation 16,667,000 (8) 73.82%
TDK Corporation 16,667,000 (8) 73.82%
* Less than 1%
(1) The address of Vincent J. Bitetti, John T. Wholihan and Tanya Baker is
26115 Mureau Road, Suite B, Calabasas, California 91302. The address of
Masatoshi Shikanai and Shin Tanabe is Z.I. Bommelscheuer P.O. Box 120 L-
4902 Bascharage, Grand Duchy of Luxembourg. The address of Kenichi
Aoshima is 901 Franklin Avenue, Garden City, N.Y. 11530. The address of
Louis A. Habash is 5075 Spyglass Hill Drive, Las Vegas, Nevada 89122. The
address of TDK U.S.A. Corporation is 901 Franklin Avenue, Garden City,
N.Y. 11530. The address of TDK Corporation is 1-13-1, Nihonbashi, Chuo-
ku, Tokyo 103 Japan.
(2) Includes 50,000 shares of Common Stock issuable to Mr. Bitetti under
presently exercisable options. Also includes 100,000 shares of Common
Stock which Eric H. Winston is entitled to acquire from Mr. Bitetti
pursuant to a presently exercisable option. On September 8, 2000, Vincent
J. Bitetti granted TDK U.S.A. Corporation an irrevocable proxy to vote
all shares of capital stock of the Company then owned or thereafter
acquired by Mr. Bitetti, subject to certain limitations.
(3) Includes 15,000 shares of Common Stock issuable upon exercise of
presently exercisable options. Excludes 83,472 shares vested to such
director's account under the 1999 Director Stock Plan, as to which such
director disclaims beneficial ownership.
(4) Includes 21,250 shares of Common Stock issuable upon exercise of
presently exercisable options.
(5) Includes 8 persons.
(6) Includes 6,673 shares of Common Stock issuable to Eugene Code upon
exercise of presently exercisable options, 30,000 shares of Common Stock
owned by the Company's Chief Financial Officer, Martin G. Paravato, and
35,000 shares of Common Stock issuable to Mr. Paravato upon exercise of
presently exercisable options.
(7) Based on information set forth in the Schedule 13D filed by ASSI, Inc.
with the Securities and Exchange Commission on April 11, 1998, all such
Common Stock is owned of record by ASSI, Inc., of which Mr. Habash is the
sole beneficial owner.
(8) Based on information set forth in the Schedule 13D filed jointly by TDK
Corporation and TDK U.S.A. Corporation with the Securities and Exchange
Commission on September 21, 2000 and information set forth in the
Schedule 13D/A filed jointly by TDK Corporation and TDK U.S.A.
Corporation with the Securities and Exchange Commission on December 7,
2000, such shares are owned of record by TDK U.S.A. Corporation, which is
a wholly owned subsidiary of TDK Corporation. Excludes all shares of
Common Stock beneficially owned by Vincent J. Bitetti, as to which Mr.
Bitetti has granted TDK U.S.A. Corporation an irrevocable proxy.
<PAGE>
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 8, 2000, the Company and TDK U.S.A. Corporation, a New York
corporation ("TUC"), which is a wholly owned subsidiary of TDK Corporation, a
publicly traded Japanese corporation ("TDK"), entered into a common stock
purchase agreement (the "Purchase Agreement"). Pursuant to the Purchase
Agreement, on September 11, 2000, TUC acquired 4,750,000 shares of the
Company's Common Stock for an aggregate purchase price of $1,425,100, and on
November 27, 2000, TUC acquired an additional 11,917,000 shares of Common
Stock for an aggregate purchase price of $3,575,000 (the "Subsequent
Closing"). Thus, pursuant to the Purchase Agreement, TUC has purchased a
total of 16,667,000 shares of Common Stock at a purchase price of $.30 per
share and an aggregate purchase price of $5,000,100. Also contemporaneous
with the Subsequent Closing, on November 27, 2000, Richard Azevedo, Mark A.
James and Samuel L. Poole each resigned as directors of the Company, and the
resulting vacancies were filled by the appointment by the remaining directors
of nominees designated by TUC. TUC now owns approximately 74% of the
outstanding Common Stock, and accordingly has the ability to elect the
Company's entire Board.
On September 8, 2000, in connection with the Purchase Agreement, Vincent
J. Bitetti granted TUC an irrevocable proxy to vote, or to execute and deliver
written consents or otherwise to act with respect to, all shares of capital
stock of the Company then owned or thereafter acquired by Mr. Bitetti (the
"Proxy"). The voting rights contained in the Proxy, however, contain the
limitation that for so long as the Underwriting Agreement referred to below
remains in effect, TUC may not vote Mr. Bitetti's stock in connection with the
election of directors of the Company or any other matters covered by the
Underwriting Agreement. Furthermore, the Proxy provides that after the
Subsequent Closing, which occurred on November 27, 2000, TUC may not vote the
stock of Mr. Bitetti unless TUC's stockholding percentage in the Company is
reduced to 50% or less.
Although the Company utilizes several international distributors actively
to promote and sell the Company's English language products throughout most of
the English speaking countries, the majority of international business is
conducted via a Republishing and Distribution agreement with TDK Recording
Media Europe S.A., a Luxembourg corporation and wholly owned subsidiary of TDK
("TRE") to distribute its software titles throughout Europe and other
territories. The Company signed an expanded worldwide agreement with TRE on
February 28, 2000. Under the terms of the TRE agreement, the Company is paid
a republishing fee on each product sold. During the two years ended June 30,
2000, the Company received $5,527,000 from TRE under such agreements. All
costs of localization of the product, product boxes and collateral materials,
as well as all costs or replication, marketing, warehousing and fulfillment,
are borne by TRE. The success of the localization is dependent upon the
international appeal of certain of the Company's products, growth of the
interactive software market internationally, the ability of the republishing
partners to successfully localize and market the products and the ability of
the Company to continue to obtain licenses with worldwide appeal.
Pursuant to the Underwriting Agreement (the "Underwriting Agreement")
dated July 1, 1996 pertaining to the Company's initial public offering, the
Company granted the underwriters for such offering, The Boston Group, L.P.
and Joseph Stevens & Co., L.P., each the right to nominate from time to time
one director of the Company or to have an individual designated thereby attend
all Board meetings as a nonvoting advisor. In addition, Vincent J. Bitetti
and Eric H. Winston agreed to vote all of their Common Stock in favor of the
<PAGE>
<PAGE>
two director nominees selected by the underwriters. The voting agreement with
the underwriters will terminate on July 8, 2001. Effective November 20, 1997,
Joseph Stevens & Co., L.P. assigned to The Boston Group, L.P. it director
nomination rights under the foregoing agreement. The Boston Group, L.P. has
declined to exercise its right of nomination with respect to the pending
solicitation of proxies.
ELECTION OF DIRECTORS
(Proposal No. 1)
GENERAL INFORMATION
Directors are elected to serve a term ending on the date of the next
annual meeting of stockholders. Directors being elected at the Annual Meeting
will serve until the Company's next annual meeting of stockholders, which is
currently scheduled to be held in the spring of 2002, or until their
successors have been duly elected and qualified.
The Bylaws of the Company provide that the Company is authorized to have
seven directors. The Company is currently seeking to identify two additional
persons to serve as directors. At such time as such persons are identified
and consent to serve as directors, it is anticipated that they will be
appointed to fill the two existing vacancies on the Board of Directors.
VOTE REQUIRED
The five nominees receiving the highest number of affirmative votes of
the shares present in person or represented by proxy and entitled to vote for
them, a quorum being present, shall be elected as directors. Only votes cast
for a nominee will be counted, except that the accompanying proxy will be
voted for all nominees in the absence of instruction to the contrary.
Abstentions, broker nonvotes and instructions on the accompanying proxy to
withhold authority to vote for one or more nominees will result in the
respective nominees receiving fewer votes. However, the number of votes
otherwise received by the nominee will not be reduced by such action.
THE BOARD RECOMMENDS A VOTE "FOR"
THE ELECTION OF EACH OF THE DIRECTOR NOMINEES NAMED BELOW.
INFORMATION REGARDING NOMINEES
All nominees have consented to serve if elected, but if any becomes
unable to serve, the persons named as proxies may exercise their discretion to
vote for a substitute nominee. The stockholders have previously elected
director nominees Vincent J. Bitetti and John T. Wholihan. The remaining
director nominees were appointed as directors on November 27, 2000 to fill the
existing vacancies on the Board of Directors. The name, age, business
experience and offices held by each director nominee are as follows:
Kenichi Aoshima, age 55, has been the President and a director of TUC
since 1995. Mr. Aoshima has been a director of the Company since November
2000.
<PAGE>
<PAGE>
Vincent J. Bitetti, age 45, founded Sound Source Interactive, Inc., a
California corporation, now known as "TDK Mediactive, Inc." (the
"Subsidiary"), in 1989 and served as the President of the Subsidiary from its
formation. For the period from the acquisition by the Company of the
Subsidiary in 1994 until November 12, 1999, Mr. Bitetti served as the Chairman
of the Board and Chief Executive Officer and as a director of both the Company
and the Subsidiary. Effective November 12, 1999, Mr. Bitetti resigned as
Chairman of the Board of the Company. Mr. Bitetti has been a director and the
Chief Executive Officer of the Company since 1994.
Masatoshi Shikanai, age 51, has been the President of TRE since April
1999. He served as TRE's Executive Vice-President, General Manager of Sales
Division from April 1995 to April 1999, and TRE's Executive Director
Corporate Strategies from January 1990 to March 1995. Mr. Shikanai has been a
director of the Company since November 2000.
Shin Tanabe, age 47, has been an Executive Director of TRE since April
1999, where he is responsible for a dedicated business unit for the
entertainment software business established in April 1999. He served as TRE's
Recording Media Sales Executive Director from June 1995 to March 1999, and
TRE's Recording Media Marketing Director from June 1991 to May 1995. Mr.
Tanabe has been a director of the Company since November 2000 and the
President of the Company since December 19, 2000.
John T. Wholihan, age 63, has been Dean of the College of Business
Administration at Loyola Marymount University since 1984. Previously, he
served for five years as an Associate Dean at Bradley University, where he
also served as Director of the MBA Program and as 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. Mr. Wholihan holds a B.S. from the University of Notre
Dame, an MBA from Indiana University and a Ph.D. from The American University.
He has published numerous articles and other scholarly works. He is a member
of several academic associations and honor societies, including the Academy of
Management, the Small Business Institute Directors Association, Beta Gamma
Sigma and Alpha Sigma Nu. He currently is President of the Western
Association of Collegiate Schools of Business. He is past President of the
Association of Jesuit Colleges and Universities - Business Deans. He was the
founding President of the International Association of Jesuit Business
Schools. He is a member of the Rotary Club of Los Angeles, the Financial
Executives Institute and the Jonathan Club. He has served on the board of
directors of several small companies and currently is a member of the Board of
Trustees of the TIP Funds, a family of publicly traded mutual funds. He is
the immediate past Chairman of the Board of Notre Dame Academy in Los Angeles.
Mr. Wholihan has been a director of the Company since April 1998.
BOARD COMMITTEES
The Board of Directors currently has appointed four standing committees:
the Audit Committee, the Compensation Committee, the Strategic Planning
Committee and the Conflicts Committee.
The Audit Committee currently consists of Messrs. Aoshima, Shikanai and
Wholihan. The Audit Committee's purpose is to recommend the appointment of an
independent auditor for the Company, review the scope of the audit, examine
the auditor's reports, make appropriate recommendations to the Board of
Directors as a result of such review and examination and make inquiries into
<PAGE>
<PAGE>
the effectiveness of the financial and accounting functions and controls of
the Company. The Board of Directors has adopted a written charter for the
Audit Committee.
The Audit Committee has reviewed and discussed the audited financial
statements with management. The Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-KSB for the last fiscal year for filing with the
Securities and Exchange Commission. The Audit Committee has discussed with
BDO Seidman, LLP the matters required to be discussed by SAS 61. The Audit
Committee has received the written disclosures and the letter from BDO
Seidman, LLP required by Independent Standards Board Standard No. 1.
The National Association of Securities Dealers (the "NASD") has adopted
regulations that apply to companies whose securities are listed on the Nasdaq
Stock Market which govern the composition of such companies audit committees.
Generally, these regulations require that an audit committee must consist of
three or more "independent" directors. Because the Company's securities are
not currently listed on the Nasdaq Stock Market, it is not subject to these
requirements. However, the Company intends to comply voluntarily with these
requirements as soon as possible. At present, only Mr. Wholihan is
"independent" as defined by the NASD. The Company therefore intends to
appoint two additional independent directors as soon as appropriate candidates
can be identified and agree to serve. When the two additional independent
directors are appointed, those persons will replace Messrs. Aoshima and
Shikanai on the Audit Committee.
The Compensation Committee consists of Messrs. Aoshima, Shikanai and
Wholihan. It is responsible for reviewing and setting the compensation of
executive officers of the Company and for administering the Company's stock
option plans.
The Strategic Planning Committee consists of Messrs. Bitetti, Tanabe and
Wholihan. The Strategic Planning Committee is responsible for overseeing the
development of the Company's strategic planning process.
On December 19, 2000, the Board created a Conflicts Committee, which
currently consists solely of John T. Wholihan. When the two additional
independent directors are appointed to the Board as described above, those
persons shall also serve on the Conflicts Committee. The Conflicts Committee
will be responsible for evaluating and approving transactions between the
Company and TUC and its affiliated entities.
BOARD AND COMMITTEE MEETINGS
In fiscal 2000, the Board of Directors held four meetings. Board
committees met as follows during fiscal 2000: the Compensation Committee did
not meet, the Audit Committee met once and the Strategic Planning Committee
met once. The total combined attendance for all Board and Committee meetings
was 91%. All directors attended at least 91% of the meetings of the Board and
of the committees on which they served.
<PAGE>
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
the Company's Chief Executive Officer and its only other employee who received
salary and bonus compensation from the Company in excess of $100,000 for the
fiscal year ended June 30, 2000 (the "Named Executives").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Name and ------------------- ---------------------------
Principal Fiscal Stock Options All Other
Position Year Salary Bonus(1) (Shares) Compensation
----------- ------- ------ -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Vincent J. Bitetti 2000 $290,692 $29,412 0 $24,612
Chief Executive Officer 1999 240,000 12,500 0 23,288
1998 210,466 79,000 50,000 22,543
Tanya Baker 2000 100,436 0 10,000 11,858
Vice President of Sales(3) 1999 61,167 0 15,000 4,682
</TABLE>
(1) The bonus paid in fiscal 1999 was earned in fiscal 1998. $60,000 of
Mr. Bitetti's 1999 bonus was accrued in fiscal 1998.
(2) The amounts in this column consist of the following: (1) personal use of
Company car: Mr. Bitetti - $12,000 (2000), $12,000 (1999), $12,000
(1998); Ms. Baker - $3,200 (2000), $1,400 (1999); (b) life insurance
premiums: Mr. Bitetti - $7,333 (2000), $6,358 (1999), $6,143 (1998); (c)
medical insurance premiums: Mr. Bitetti - $5,279 (2000), $4,930 (1999),
$4,400 (1998); Ms. Baker - $8,658 (2000), $3,282 (1999).
(3) Ms. Baker became an employee of the Company during October 1998.
<PAGE>
<PAGE>
OPTION GRANTS
The following table sets forth information regarding grants of options to
and exercises of options by the Named Executives during the fiscal year ended
June 30, 2000.
<TABLE>
<CAPTION>
OPTION GRANT TABLE
Number of Percentage of Total Exercise
Securities Options Granted to Base Expiration
Name Underlying Options Employees in Fiscal Year Price Date
---- ------------------ ------------------------ ------- ----------
<S> <C> <C> <C> <C>
Vincent J. Bitetti 0 -- -- --
Tanya Baker 10,000 11% $.315 3/1/10
</TABLE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning each exercise of a
stock option during the fiscal year ended June 30, 2000 by each of the Named
Executives and the number and value of unexercised options granted by the
Company held by each of the Named Executives on June 30, 2000.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Shares
Underlying
Unexercised Value of Unexercised
Number of Options at 6/30/00 In-the-Money Options
Shares Value Exercisable/ at 6/30/00 Exercisable/
Name Acquired Realized(1) Unexercisable Unexercisable (2)
---- ----------- ---------- ------------------ ----------------------
<S> <C> <C> <C> <C>
Vincent J. Bitetti 0 $0 50,000/0 $0/$0
Tanya Baker 0 $0 21,250/3,750 $0/$0
</TABLE>
(1) Market value on the date of exercise of shares covered by options
exercised, less option exercise price.
(2) Market value of the shares covered by in-the-money options on June 30,
2000, less the option exercise price.
<PAGE>
<PAGE>
COMPENSATION OF DIRECTORS
For the fiscal year ending June 30, 2000, each director who was not an
employee of the Company was entitled to receive a director's fee of $15,000
per year, and to be reimbursed for out-of-pocket expenses incurred in
connection with his attendance at meetings. This amount, however, was reduced
to $5,000 per year, effective December 19, 2000. Also, effective as of such
date, all employee directors or directors who are not "independent," as such
standard is defined under the regulations of the NASD, are entitled to be
compensated only by the reimbursement of out-of-pocket expenses incurred in
connection with his attendance at meetings. No such fees have been paid since
June 1998. Instead, each director of the Company agreed to accept shares of
the Company's Common Stock in lieu of cash in payment of the accrued fees and
all fees that became payable through June 30, 2000 pursuant to the Company's
1999 Director Stock Plan (the "1999 Director Stock Plan"). The Company paid
all of the director fees accrued through June 30, 2000, which totaled $120,000
in the aggregate, in 333,888 shares of its Common Stock. The purchase price
for the Common Stock issuable in payment of such director fees was $.3594 per
share, which was the fair market value of the Common Stock on December 29,
1999, the date on which the Company's stockholders approved the 1999 Director
Stock Plan and the issuance of such 333,888 shares of Common Stock in payment
of the director's fees.
In addition, pursuant to the 1999 Director Stock Plan, each non-employee
director is entitled to receive nonqualified stock options to acquire 10,000
shares of Common Stock upon appointment as a director, and to receive
nonqualified stock options to acquire an additional 10,000 shares of Common
Stock for each additional year that the non-employee director continues to
serve on the Board of Directors. Such options previously were granted pursuant
to the Company's 1995 Amended and Restated Stock Option Plan (the "1995 Stock
Option Plan"). Each option granted to a non-employee director vests and
becomes exercisable as to 50 percent of the shares of Common Stock subject to
the option on the first anniversary date of the grant and as to the remaining
50 percent on the second anniversary date of the grant, and expires on the
earlier of ten years from the date the option was granted, the expiration of
the 1995 Stock Option Plan or the 1999 Director Stock Plan, as applicable, or
three weeks after the optionee ceases to be a director of the Company. The
exercise price of such options is equal to 100 percent of the fair market
value of the Common Stock issuable upon exercise of the option on the date on
which such options are granted. Each option is subject to the other provisions
of the 1995 Stock Option Plan or the 1999 Director Stock Plan, as applicable.
Options were granted to all of the Company's non-employee directors for
the fiscal year ended June 30, 2000. However, directors Kenichi Aoshima,
Masatoshi Shikanai and Shin Tanabe all have advised the Company that they do
not intend to accept any option grants pursuant to the 1999 Director Stock
Plan.
Each of Richard Azevedo, Mark A. James and Samuel L. Poole resigned as
directors of the Company effective as of the Subsequent Closing on November
27, 2000. As of that date, each of such persons held options to purchase
shares of Common Stock which were unvested. On August 29, 2000, the Board
resolved that the unvested options to purchase 15,000 shares of Common Stock
held by each of Richard Azevedo, Mark A. James and Samuel L. Poole would
immediately accelerate and vest in full upon consummation of the Subsequent
Closing.
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EMPLOYMENT AGREEMENT
The Company has entered into an Employment Agreement with Vincent J.
Bitetti dated as of November 27, 2000 (the "Employment Agreement"), pursuant
to which Mr. Bitetti serves as the Company's Chief Executive Officer. The
Employment Agreement entitles Mr. Bitetti to receive an annual base salary of
$253,000 effective November 27, 2000, subject to annual increases in
accordance with the Consumer Price Index (the "CPI") commencing on November
27, 2001.
Pursuant to the Employment Agreement, Mr. Bitetti will be entitled to
receive a bonus based upon the Board of Director's evaluation of his
performance, including, but not limited to, his performance in achieving
certain targets related to revenue, profit, marketing expenses, sales volume,
number of new-release product titles, product development schedules and cost
control. Pursuant to the Employment Agreement, Mr. Bitetti and the Company
agreed to negotiate with one in another in good faith to determine such
targets by February 27, 2001. In no event, however, shall the aggregate
amount of bonuses payable exceed $150,000 in any full one-year period.
Pursuant to the Employment Agreement, Mr Bitetti was granted options
under the Company's 1995 Stock Option Plan to purchase 500,000 shares of
Common Stock, of which options to purchase 125,000 shares vest each year over
the four-year term of the Employment Agreement.
Mr. Bitetti is entitled to receive certain fringe benefits under the
Employment Agreement, including use of a Company automobile or automobile
allowance, $5,000,000 in life insurance coverage (provided that in no event
could the Company be required to pay a premium for such insurance in excess of
$7,500 per year) and the right to participate in the Company's customary
benefit plans. The Employment Agreement further provides that following the
voluntary or involuntary termination of his employment by the Company, Mr.
Bitetti would be entitled to two demand registration rights with respect to
the Common Stock held by or issuable to him.
The Employment Agreement terminated the Succession Agreement which was
entered into between the Company and Mr. Bitetti dated as of November 12,
1999, and was amended pursuant to an amendment dated as of April 15, 2000 (the
"Succession Agreement"). In turn, the Succession Agreement terminated Mr.
Bitetti's Third Amended and Restated Employment Agreement, dated as of April
24, 1998 (the "Third Employment Agreement"). The Succession Agreement,
however, provides that Mr. Bitetti would remain entitled to receive
substantially the same compensation and benefits to which he would have been
entitled under the Third Employment Agreement until December 31, 2002. A
description of the compensation and benefits that Mr. Bitetti was entitled to
receive pursuant to the Third Employment Agreement, and which he remained
entitled to receive during the fiscal year ended June 30, 2000 by virtue of
the Succession Agreement, is set forth below.
The Third Employment Agreement entitled Mr. Bitetti to receive annual
base salary of $240,000 effective April 27, 1998, subject to annual increases
in accordance with the CPI commencing on April 27, 1999.
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Pursuant to the Third Employment Agreement, Mr. Bitetti was entitled to
receive a bonus in the following amounts if the Company attained the specified
gross revenues for fiscal 2000:
Cumulative
Gross Revenues Cash Bonus
--------------- -----------
$19,200,000 $ 25,000
25,600,000 75,000
38,400,000 125,000
The gross revenue attainment levels required to receive each bonus level
for each subsequent fiscal year were to increase by 60% annually.
Pursuant to the Third Employment Agreement, Mr. Bitetti was entitled to
receive a bonus in the following amounts if the Company attained the specified
gross profits for fiscal 1999:
Cumulative
Gross Profits Cash Bonus
------------- ----------
$5,120,000 $50,000
5,760,000 75,000
6,400,000 100,000
The gross profit levels required to receive each bonus level for each
subsequent fiscal year were to increase by 60% annually.
The Third Employment Agreement entitled Mr. Bitetti to receive a bonus in
the following amounts if the Company attained the specified levels of pre-tax
profitability (defined as annual earnings before interest, taxes, depreciation
and amortization divided by gross revenues) for any fiscal year during the
term of Mr. Bitetti's employment agreement:
Cumulative
Pre-Tax Profitability Cash Bonus
---------------------- ----------
10% $ 50,000
15% 100,000
For the fiscal year ended June 30, 2000, Mr. Bitetti did not qualify to
receive a bonus under any of the three standards described above.
Mr. Bitetti was entitled to receive certain fringe benefits under the
Third Employment Agreement, including use of a Company automobile or
automobile allowance, $5,000,000 in life insurance coverage (provided that in
no event could the Company be required to pay a premium for such insurance in
excess of $7,500 per year) and the right to participate in the Company's
customary benefit plans. The Third Employment Agreement further provided that
following the voluntary or involuntary termination of his employment by the
Company, Mr. Bitetti would be entitled to two demand registration rights with
respect to the Common Stock held by or issuable to him. The Third Employment
Agreement further provided that if the Company employs a new Chief Executive
Officer, Mr. Bitetti's salary could not be less than that of such new Chief
Executive Officer, up to a maximum of $300,000.
In addition, pursuant to the April 15, 2000 amendment to the Succession
Agreement, the Company agreed to pay Mr. Bitetti (i) additional compensation
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of $100,000 during the remainder of calendar year 2000, and (ii) a bonus of
$35,000 for each calendar quarter during which the Company realized a profit.
No such bonus was earned for the quarter ended June 30, 2000, the first
quarter for which Mr. Bitetti was eligible to receive this bonus.
RATIFICATION OF INDEPENDENT AUDITORS
(Proposal No. 2)
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT
OF BDO SEIDMAN, LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
FISCAL 2001.
The Board of Directors, upon recommendation of its Audit Committee,
composed of independent members of the Board, has appointed BDO Seidman, LLP
as independent auditors of the Company with respect to its operations for
fiscal 2001, and has further directed that management submit such appointment
for ratification by the holders of the Common Stock. In taking this action,
the members of the Board and the Audit Committee considered carefully BDO
Seidman, LLP's reputation in providing accounting services to other companies
in the software industry, its independence with respect to the services to be
performed, its general reputation for adherence to professional auditing
standards and the performance of BDO Seidman, LLP during the audit of the
Company's consolidated financial statements for fiscal year 2000.
Representatives of the firm will be present at the Annual Meeting to make a
statement if they desire to do so and to answer appropriate questions that may
be asked by stockholders.
Stockholder ratification of the selection of BDO Seidman, LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. The Board, however, is submitting the selection of BDO Seidman,
LLP to the stockholders for ratification as a matter of good corporate
practice. Therefore, there will be presented at the Annual Meeting a proposal
for the ratification of this appointment, which the Board of Directors
believes is advisable and in the best interests of the stockholders. If the
appointment of BDO Seidman, LLP is not ratified, the matter of the appointment
of independent public accountants will be considered by the Board of
Directors.
On November 29, 1999, Deloitte & Touche LLP ("D&T") resigned as the
principal accountant to audit the Company's financial statements. The reports
of D & T on the Company's financial statements for years ended June 30, 1998
and 1999 did not contain any adverse opinion or a disclaimer of opinion, and
were not qualified or modified as to, audit scope, or accounting principles. D
& T's report on the June 30, 1999 financial statements included an explanatory
paragraph regarding the Company's ability to continue as a going concern.
During the Company's fiscal years ended June 30, 1999 and June 30, 1998,
and the period subsequent to June 30, 1999 preceding D & T's resignation,
there was no disagreement between the Company and D & T on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of D & T, would have caused D & T to make a reference to the
subject matter of the disagreement in connection with its report on the
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<PAGE>
Company's financial statements. By letter dated September 10, 1999 (the
"Management Letter"), D & T advised the Company and the Audit Committee of the
Company's Board of Directors that in planning and performing their audit for
the year ended June 30, 1999, they had noted certain matters involving the
Company's internal controls and its operations that they considered to be
material weaknesses under standards established by the American Institute of
Certified Public Accountants. Material weaknesses involve matters coming to
their attention in which the design or operation of one or more of the
internal control components does not reduce to a relatively low level the risk
that misstatements caused by error or fraud in amounts that would be material
in relation to the financial statements being audited may occur and not be
detected within a timely period by employees in the normal course of
performing their assigned functions. The following material weaknesses were
noted in the Management Letter: production and distribution contracts were not
evaluated to determine if the related prepaid royalty asset was realizable;
and the recoverability of inventory was not adequately evaluated, and the
related inventory reserves were not appropriately adjusted as necessary.
The Audit Committee discussed each of the material weaknesses described
in the Management Letter with D & T. The Company did not disagree with D & T's
identification of material weaknesses. The Company subsequently selected BDO
Seidman, LLP as successor accountant to audit the Company's financial
statements. The Company authorized D & T to respond fully to the inquiries of
the successor accountant regarding the matters addressed in the Management
Letter.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of the copies of the forms furnished to the
Company and written representations of the Company's directors and executive
officers, the Company believes that all filing requirements applicable to its
officers, directors and ten-percent beneficial owners were complied with
during fiscal 2000.
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company is required to identify any person
who, at any time during fiscal year 2000, was a director of the Company, an
executive officer of the Company or its subsidiaries, or a beneficial owner of
more than 10% of the Common Stock or any other person who was subject to
Section 16(a) of the Exchange Act with respect to the Company that during
fiscal 2000 and failed to file on a timely basis with the Securities and
Exchange Commission any report required by Section 16(a) of the Exchange Act,
(which reports are on Form 3 (an initial report of beneficial ownership of
common stock) and on Form 4 and Form 5 (relating to changes in beneficial
ownership of common stock)). Based solely on a review of such Forms 3, 4 and
5, and amendments thereto, furnished to the Company by the reporting persons
known to it, as required by Exchange Act Rule 16a-3(e), no reporting person
that was required during fiscal 2000 to comply with Section 16(a) of the
Exchange Act failed to comply with such requirements, except that Wayne
Rogers, a former Company director, filed a Form 5 two days late.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR 2001
The rules of the Securities and Exchange Commission permit stockholders
of the Company, after notice to the Company, to present proposals for
stockholder action in the Company's proxy statement where such proposals are
consistent with applicable law, pertain to matters appropriate for stockholder
action and are not properly omitted by Company action in accordance with the
proxy rules published by the Securities and Exchange Commission. The
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<PAGE>
Company's 2001 annual meeting of stockholders is expected to be held in the
spring of 2002, and proxy materials in connection with that meeting are
expected to be mailed on or about February 28, 2002. Stockholder proposals
prepared in accordance with the proxy rules must be received by the Company on
or before December 1, 2001.
OTHER MATTERS
The Board of Directors of the Company does not intend to present any
business at the Annual Meeting other than the matters specifically set forth
in this Proxy Statement and knows of no other business to come before the
Annual Meeting. However, on all matters properly brought before the Annual
Meeting by the Board or by others, the persons named as proxies in the
accompanying proxy will vote in accordance with their best judgment.
It is important that your shares are represented and voted at the Annual
Meeting, whether or not you plan to attend. Accordingly, we respectfully
request that you sign, date and mail your Proxy in the enclosed envelope as
promptly as possible.
BY ORDER OF THE BOARD OF DIRECTORS
Eugene Code
Secretary
January 17, 2001
TDK Mediactive, Inc.
26115 Mureau Road, Suite B
Calabasas, California 91302
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<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Martin G. Paravato and Eugene Code, and each
of them with full power of substitution, as his or her proxies to represent
and vote, as designated below, all of the shares of the Common Stock of TDK
Mediactive, Inc., registered in the name of the undersigned on January 17,
2001, with the powers the undersigned would posses if personally present at
the 2000 Annual Meeting of Stockholders to be held at the Company's offices at
26115 Mureau Road, Suite B, Calabasas, California 91302 at 10:00 a.m. on
February 12, 2001, and at any adjournment thereof, hereby revoking any proxy
or proxies previously given.
1. ELECTION [ ] FOR all nominees listed [ ]WITHHOLD AUTHORITY
OF DIRECTORS: below (except as marked to vote for all
to the contrary below) nominees listed below
(To withhold authority to vote for any individual nominee strike a line
through the nominee's name below)
Kenichi Aoshima Vincent J. Bitetti Masatoshi Shikanai
Shin Tanabe John T. Wholihan
2. Proposal to ratify the appointment of BDO Seidman, LLP as the Company's
independent auditors for fiscal 2001:
[ ] For [ ] Against [ ] Abstain
Discretionary authority is hereby granted with respect to such other
matters as may properly come before the Annual Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN, THE PROXY WILL BE VOTED "FOR" ALL NOMINEES FOR DIRECTOR,
"FOR" PROPOSAL #2 AND IN THE PROXY'S DISCRETION ON ANY OTHER MATTERS TO COME
BEFORE THE MEETING.
Dated: , _____
-----------------------------------
(Signature)
-----------------------------------
(Second signature)
PLEASE DATE AND SIGN ABOVE exactly as
your name appears at left, indicating
where appropriate, official position
or representative capacity.
