LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT ("Agreement") is made and entered into as of this
8th day of September, 2000, by and among SOUND SOURCE INTERACTIVE, INC., a
Delaware corporation ("SSI/DE"), TDK USA CORPORATION, a New York corporation
("Purchaser"), and XXXXXXX X. XXXXXXX, an individual ("Bitetti").
R E C I T A L S
A. WHEREAS, SSI/DE and Purchaser are parties to a Common Stock
Purchase Agreement, dated as of even date herewith (the "Purchase Agreement"),
pursuant to which SSI/DE has agreed to issue and sell to Purchaser, and
Purchaser has agreed to purchase and acquire from SSI/DE, certain shares of
the common stock of SSI/DE.
B. WHEREAS, Bitetti is the founder of SSI/DE and its wholly-owned
subsidiary, SOUND SOURCE INTERACTIVE, INC., a California corporation, and, as
of the date hereof, Bitetti owns or holds, beneficially and of record,
1,234,634 shares of the common stock of SSI/DE and options to acquire 50,000
shares of such common stock.
C. WHEREAS, as a material inducement and condition for Purchaser to
enter into and consummate the transactions contemplated by the Purchase
Agreement, the parties hereto desire to restrict the sale, assignment,
transfer, encumbrance or other disposition by Bitetti of the common stock of
SSI/DE in the manner provided herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby
agree as follows:
1. Prohibition on Transfers. Except as permitted by this Agreement,
Bitetti shall not, directly or indirectly, (i) offer, sell, contract to sell,
grant or sell any option, warrant or other right to purchase, purchase or
acquire any option, contract or other right to sell, exchange, pledge,
encumber, hypothecate, lend, gift, devise, bequest or otherwise transfer or
dispose of any of the shares of the common stock of SSI/DE now owned by him or
hereafter issued or granted to him by SSI/DE pursuant to options, warrants or
otherwise (collectively, the "Shares"), or (ii) enter into any swap, hedge or
other arrangement that transfers to another person or entity, in whole or in
part, any of the economic value or consequences of ownership of any of the
Shares (collectively, a "Transfer"); provided, however, that the foregoing
restriction shall lapse and expire as follows: (a) on the first anniversary
date of the date of the Subsequent Closing (as defined in the Purchase
Agreement), as to forty percent (40%) of the Shares then owned by Bitetti, (b)
on the second anniversary date of the date of the Subsequent Closing (as
defined in the Purchase Agreement), as to one-third (1/3) of the Shares then
owned by Bitetti that are subject to restriction hereunder immediately prior
to such anniversary date, (c) on the third anniversary date of the date of the
Subsequent Closing (as defined in the Purchase Agreement), as to one-half
(1/2) of the Shares then owned by Bitetti that are subject to restriction
hereunder immediately prior to such anniversary date; and (d) on the fourth
anniversary date of the date of the Subsequent Closing (as defined in the
Purchase Agreement), as to any remaining Shares then owned by Bitetti.
Notwithstanding anything set forth above, Bitetti shall be free to buy and
sell SSI/DE common stock (other than the Shares) in the open market subsequent
to the date hereof.
2. Permitted Transfers. The restrictions set forth in Section 1
hereof shall not apply to (i) the Transfer, if any, by Bitetti of up to
100,000 Shares to Xxxx Xxxxxxx pursuant to that certain Share Purchase
Agreement, dated as of April 3, 1995, by and between them, or (ii) any other
Transfer by Bitetti to any other person or entity that is approved in advance
by the Board of Directors of SSI/DE (the "Board"), which approval may be
granted or denied in its sole and absolute discretion. Bitetti may, in
addition, without the consent of the Board, Transfer Shares (i) by way of gift
to his spouse, children, parents, siblings, aunts, uncles, nieces, nephews and
cousins by blood or by marriage (collectively, "Family Members"), (ii) to any
trustee, fiduciary, trust, partnership, limited liability company or other
entity for the sole and exclusive benefit of himself or Family Members in
connection with a bona fide estate planning transaction, or (iii) by way of
bequest, devise or inheritance to any person or entity upon the death of
Bitetti; provided, however, that in the case of any Transfer permitted by the
foregoing clauses (i) and (ii), Bitetti shall give written notice describing
such Transfer in reasonable detail to SSI/DE and Purchaser at least thirty
(30) days prior to effecting such Transfer, the Shares so Transferred shall
remain subject to the provisions hereof, and the transferee shall have
executed and delivered to SSI/DE and Purchaser, prior to the completion of
such Transfer, an appropriate instrument in form and substance reasonably
satisfactory to SSI/DE and Purchaser confirming such transferee's assumption
of and agreement to all of the provisions of this Agreement. For purposes of
the proviso contained in Section 1 hereof, any Shares owned or held by a
permitted transferee under clauses (i) or (ii) of the preceding sentence shall
be treated as owned by Bitetti and any subsequent Transfer of Shares by such
permitted transferee shall be treated as a Transfer by him.
3. Stop Transfer Instructions. Bitetti hereby agrees and consents to
the entry of stop transfer instructions with the transfer agent for the
capital stock of SSI/DE against any Transfer or attempted Transfer of Shares
by him in contravention of this Agreement.
4. Legend. Bitetti hereby agrees that, during the term of this
Agreement, the certificates representing the Shares shall bear the following
legend, and he shall make such certificates available to SSI/DE for the
affixation of such legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS SET FORTH IN A LOCK-UP AGREEMENT, DATED AS OF
SEPTEMBER 8, 2000, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER OR
FROM THE HOLDER OF THIS SECURITY. NO TRANSFER OF SUCH SECURITIES WILL BE
MADE ON THE BOOKS OF THE ISSUER UNLESS ACCOMPANIED BY EVIDENCE OF
COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT.
The foregoing legend shall be removed from (i) certificates representing
Shares which are Transferred by Bitetti pursuant to the first sentence of
Section 2 hereof, (ii) certificates representing Shares that are no longer
subject to the transfer restrictions cotained herein, and (iii) all
certificates representing Shares upon the expiration of the term of this
Agreement. Upon the request of a holder of Shares not subject to this
Agreement, SSI/DE shall issue a new certificate for such Shares not bearing
the foregoing legend upon the surrender of the legended certificate for such
Shares.
5. Copy of Agreement. A copy of this Agreement shall be filed with
the corporate secretary of SSI/DE and shall be kept with the records of SSI/DE
and shall be made available for inspection by any stockholder of SSI/DE.
6. Recordation. SSI/DE shall not record upon its books any Transfer
or purported Transfer of Shares to any person or entity in contravention of
this Agreement. Any such Transfer or purported Transfer shall be null and
void.
7. Term. The term of this Agreement shall commence on the date
hereof and shall terminate and expire upon the earlier of the fourth (4th)
anniversary date of the date hereof or the death of Bitetti.
8. Specific Performance. Bitetti acknowledges that there would be no
adequate remedy at law if he fails to perform any of his obligations
hereunder, and accordingly agrees that the other parties hereto, in addition
to any other remedy to which they may be entitled at law or in equity, shall
be entitled to compel specific performance of Bitetti's obligations under this
Agreement in accordance with the terms and conditions hereof, without proof of
damages or the posting of any security.
9. Notices. All notices, statements, instructions or other documents
required to be given hereunder shall be in writing and shall be given either
personally or by mailing the same in a sealed envelope, first-class mail,
postage prepaid and either certified or registered, return receipt requested,
or by overnight delivery, or by telecopy, and shall be addressed as follows:
If to SSI/DE, to: Sound Source Interactive, Inc.
00000 Xxxxxx Xxxx, Xxxxx X
Xxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxx Tanabe
If to Purchaser, to: TDK USA Corporation
00 Xxxxxx Xxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Mr. Kenichi Aoshima
If to Bitetti, to: Xxxxxxx X. Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
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).
10. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
assigns, except as otherwise provided herein.
11. Recapitalizations And Exchanges Affecting Shares. The provisions
of this Agreement shall apply to the full extent set forth herein with respect
to the Shares, and to any and all shares of capital stock or equity securities
of SSI/DE which may be issued by reason of any stock dividend, stock split,
reverse stock split, combination, recapitalization, reclassification or
otherwise.
12. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents, made and to be performed entirely within the State of
California.
13. Separability. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, it shall, to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
14. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof.
15. Amendment And Waiver. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance, either retroactively or prospectively,
and either for a specified period of time or indefinitely), with the written
consent of SSI/DE, Purchaser and Bitetti. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon Bitetti, each future
holder of the Shares (that are subject to the transfer restrictions contained
herein), Purchaser and SSI/DE.
16. Titles And Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
18. Delays Or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to SSI/DE or
Purchaser, upon any breach or default of Bitetti under this Agreement, shall
impair any such right, power or remedy of SSI/DE or Purchaser nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of SSI/DE or
Purchaser, or any waiver on the part of SSI/DE or Purchaser of any provisions
or conditions of this Agreement, must be in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies,
either under this Agreement or by law or otherwise afforded to SSI/DE or
Purchaser, shall be cumulative and not alternative.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto as of the date first above written.
SOUND SOURCE INTERACTIVE, INC.,
a Delaware Corporation
By
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TDK USA CORPORATION,
a New York Corporation
By
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XXXXXXX X. XXXXXXX
