SONICblue Fires Boss After Loan Dispute

SONICblue late Thursday fired Chairman, President and CEO, Kenneth Potashner following a clash with the company
board over loan policies.

The company installed L. Gregory Ballard, currently the executive vice president for marketing and product management, as CEO until
they can appoint a long-term boss. The Santa Clara, Calif. maker of audio, DVD and VCR players refused to detail the termination of
Potashner, but the outgoing skipper told the Wall Street Journal that he had called for the resignation of three board
members — Terry N. Holdt, Robert P. Lee, and James T. Schraith — over repayment of company loans totaling almost $600,000.

The loans were used to buy stock in SONICblue subsidiary RioPort, maker of the highly popular Rio audio players, at a time when the
economic climate was more stable. Potashner claimed the board finagled with the terms of the loans so they didn’t need to be repaid.
However, Ballard and the company disputed the clash as the reason for Potashner’s firing in on an investor conference call Friday
morning. He also said information about the company loans to executives and board members has been disclosed in all the relevant

“SONICblue is at an important turning point,” said Ballard. Indeed — the company is in the process of morphing from a well-known
graphics chip supplier to a consumer electronics provider.

Ballard, who said on the call that there are no searches underway for a new CEO, conceded that his company is not in any position to
make mistakes on account of all the financing the company took on in the last year. He also acknowledged the management turnover, and said the current management team has
gelled quickly. When Ballard joined, Marcus Smith signed on as the company’s interim chief financial officer. Smith replaced David
Sugishita, who had only been on the job since February 1 and left to pursue other opportunities.

“I think I’m the right person to manage this company for the next 10 years,” Ballard said.

Before joining SONICblue, Ballard served as CEO of 3dfx, where he grew revenue from $4 million to a run-rate of over $400 million
over a three-year period, and served as CEO at, a subscription-based Internet service.

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