Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer — Form SB-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SB-2/A Pre-Effective Amendment to Registration of 142 740K
Securities by a Small-Business Issuer
2: EX-1 Underwriting Agreement 54 225K
3: EX-4.2 Instrument Defining the Rights of Security Holders 31 107K
4: EX-4.3 Instrument Defining the Rights of Security Holders 38 141K
5: EX-4.4 Instrument Defining the Rights of Security Holders 9 46K
6: EX-5 Opinion re: Legality 3 14K
7: EX-9.1 Voting Trust Agreement 6 27K
8: EX-9.2 Voting Trust Agreement 1 10K
9: EX-9.3 Voting Trust Agreement 1 10K
10: EX-9.4 Voting Trust Agreement 1 10K
11: EX-10.1 Material Contract 17 57K
12: EX-10.2 Material Contract 16 57K
13: EX-10.3 Material Contract 13 47K
14: EX-10.35 Material Contract 12 55K
15: EX-10.36 Material Contract 12 55K
16: EX-10.37 Material Contract 12 55K
17: EX-10.38 Material Contract 11 45K
18: EX-10.39 Material Contract 10 40K
19: EX-10.40 Material Contract 1 10K
20: EX-10.41 Material Contract 23 81K
21: EX-10.42 Material Contract 6 22K
22: EX-10.43 Material Contract 5 23K
23: EX-10.44 Material Contract 6 25K
24: EX-10.45 Material Contract 7 30K
25: EX-10.46 Material Contract 2 11K
26: EX-23.1 Consent of Experts or Counsel 1 8K
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT, (this
"Agreement") dated as of April 30, 1996, 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 (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 acknowledges
that Employer is currently seeking to retain a new CEO, and Executive hereby
agrees to resign as CEO upon the commence of employment of a new CEO, such
resignation to be effective automatically upon the appointment of a new CEO by a
majority of the Board of Directors of Employer (the "Board").
Executive, subject to the authority of the CEO and of the Board,
shall have supervision and control over, and responsibility for, the operations
and affairs of Employer involving product development/creative content,
licensing and marketing, and shall have such other powers and duties as may be
from time to time assigned to him by the CEO and 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 $200,000 per annum. Upon the
effectiveness of SSI/DE's pending Registration Statement (No. 33-80827) under
the Securities Act of 1933, as amended, the annual Base salary shall be reduced
by $40,000. 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 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.
At such time as the Company shall have net revenues of $1,500,000
or more for any three consecutive calendar month period during the term
hereof, the Base Salary shall be increased by $40,000 per annum, retroactive
to the first day of the period in question. Such adjustment shall be made one
time only, but shall continue in effect thereafter for the remaining term of
this Agreement.
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
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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. Such
bonuses will be measured only with respect to the financial results related to
products developed by Employer and its current employees ("Included Products"),
and not with respect to any products that may be owned or developed by companies
acquired by or merged with Employer after the date hereof ("Excluded Products").
Bonuses shall be determined based on an allocation of expenses between Included
Products and Excluded Products in accordance with Generally Accepted Accounting
Principles ("GAAP") consistently applied. 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.
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(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:
Cumulative
Revenue Attainment Cash Bonus
------------------ ----------
$ 7,500,000 $ 25,000
$10,000,000 $ 75,000
$15,000,000 $125,000
The foregoing schedule shall apply in respect of the fiscal year ending June 30,
1996. 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:
Cumulative
Gross Profit Cash Bonus
------------ ----------
$ 2,000,000 $ 50,000
$ 2,250,000 $ 75,000
$ 2,500,000 $100,000
The foregoing schedule shall apply respect of the fiscal year ending June 30,
1996. 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:
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Cumulative
Pre-Tax Profitability Cash Bonus
--------------------- ----------
10% $ 50,000
15% $100,000
(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
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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 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.
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(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) MINIMUM COMPENSATION. Notwithstanding any other provision
hereof, in no event shall the cash compensation payable to Executive hereunder
for any fiscal year be less than the lesser of (i) the cash compensation paid to
the CEO during that fiscal year and (ii) $300,000. Employer also agrees to
accord to Executive substantially the same perquisites and fringe benefits
(excluding stock options, stock appreciation rights, restricted stock awards and
similar equity based compensation) as may from time to time be awarded to the
CEO.
(l) STOCK REGISTRATION. Employer shall undertake its best
efforts to cause the underwriters for its pending initial public offering to
cause to be registered and sold pursuant to the underwriters' over-allotment
portion of such offering 10,000 shares of Employer's common stock owned by
Executive.
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 September 15,
1998 (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. 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
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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
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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 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)
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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
(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 Elate, 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
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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 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
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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) Any sale of Registrable Securities pursuant to Section 7(a)
shall be made through The Boston Group, L.P. If the Registrable Securities are
offered and sold through The Boston Group, L.P. on an underwritten basis, then
Executive shall enter into an underwriting agreement with The Boston Group, L.P.
on customary terms and conditions, and shall pay The Boston Group, L.P. a
customary underwriting discount. If the Registrable Securities are offered and
sold through The Boston Group, L.P. on a nonunderwritten basis, then Executive
shall pay The Boston Group, L.P. its customary and reasonable fees.
(c) 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.
(d) 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
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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 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
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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. CONVERSION TO SUBSIDIARY COMMON STOCK.
(a) Employer acknowledges that Executive is or is about to sell
a portion of the common stock of SSI/DE ("Company Common Stock") owned by
Executive on a private basis. The prospective purchasers of such Company Common
Stock as a condition to their purchase of such Company Common Stock, require
that such Company Common Stock be automatically convertible into (or
exchangeable for) shares of the common stock of SSI/CA ("Subsidiary Common
Stock") in the event that SSI/DE has not completed an IPO by the earlier of
December 31, 1996 or the date of the completion of an IPO by SSI/CA.
(b) In consideration for Executive's amending the Prior
Agreement as provided herein, SSI/CA agrees that in the event that SSI/DE has
not completed an IPO by the earlier of December 31, 1996 or the date of the
completion of an IPO by SSI/CA, the shares of Company Common Stock sold by
Executive as provided in the preceding paragraph shall be automatically
converted into (or exchanged for) shares of Subsidiary Common Stock, such that
upon such conversion (or exchange), the percentage of the issued and outstanding
Subsidiary Common Stock owned by the holders of the Subsidiary Common Stock
issued such conversion (or exchange) shall equal the percentage of the issued
and outstanding Company Common Stock owned by such holders immediately prior to
the conversion (or exchange). In no event shall the total number of shares of
Company Common Stock subject to the conversion privilege set forth in this
Section 9(b) exceed 1,000,000 shares (on a pre-split basis).
10. 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
-14-
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.
11. 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.
2985 East Hillcrest Drive
Suite A
Westlake Village, CA 91362
Attention: President
-15-
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.
-16-
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/ Eric H. Winston
----------------------------------
Eric H. Winston, President &
Chief Operating Officer
SOUND SOURCE INTERACTIVE, INC.,
a California corporation
By: /s/ Eric H. Winston
----------------------------------
Eric H. Winston, President &
Chief Operating Officer
EXECUTIVE:
/s/ Vincent J. Bitetti
----------------------------------
Vincent J. Bitetti
-17-
Dates Referenced Herein and Documents Incorporated by Reference
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