<PAGE> 1
SCHEDULE 14A PRIVATE
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SPATIALIZER AUDIO LABORATORIES, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee if offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
August , 1998
Dear Stockholder:
On behalf of the Board of Directors (the "Board"), I cordially invite you
to a special meeting of the stockholders (the "Special Meeting") of Spatializer
Audio Laboratories, Inc. (the "Company") which will be held on October 29, 1998
at 10:30 a.m. at the Company's executive office, located at 20700 Ventura
Boulevard, Suite 134, Woodland Hills, California 91364. I hope that you will be
able to attend in person. Following the formal business of the Special Meeting,
management will be available to respond to your questions.
At the Special Meeting, stockholders will be asked to consider and vote
upon the following matters:
(1) to approve a "1-for-6 reverse split" of the Company's authorized
and outstanding shares of Common Stock (the "Reverse Stock Split"); and
(2) to consider and vote on such other matters as may properly be
presented incident to the conduct of the Special Meeting or any adjournment
or postponement thereof.
After careful consideration and consultation with its legal and financial
advisors, the Board has approved, and recommends that the stockholders vote FOR,
the Reverse Stock Split. The Reverse Stock Split requires the approval of the
majority of the outstanding shares of Common Stock.
The Board of Directors believes the Reverse Stock Split will rationalize
the number of outstanding shares, will enhance the acceptability of the Common
Stock in the financial community and the investing public and will assist the
Company in maintaining its NASDAQ listing. For a further discussion of the
purpose and effect of the Reverse Stock Split, see "REVERSE SPLIT OF THE
COMPANY'S OUTSTANDING COMMON STOCK -- Purpose and Effect of the Reverse Stock
Split" in the accompanying Proxy Statement.
Details of the Reverse Stock Split proposal and other important information
are set forth in the accompanying Proxy Statement and should be considered
carefully by stockholders.
I hope that you will attend the Special Meeting. Whether or not you plan to
attend the Special Meeting and regardless of the number of shares of stock you
own, please complete, date and sign the enclosed proxy card and return it
promptly in the accompanying envelope. You may, of course, attend the Special
Meeting and vote in person, even if you have previously returned your proxy
card.
Sincerely,
SPATIALIZER AUDIO LABORATORIES, INC.
STEVEN D. GERSHICK
Chairman of the Board
President and CEO
<PAGE> 3
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Notice is hereby given that Spatializer Audio Laboratories, Inc. (the
"Company") will hold a Special Meeting of Stockholders on October 29, 1998 at
10:30 a.m., at the Company's executive office, located at 20700 Ventura
Boulevard, Suite 134, Woodland Hills, California 91364, for the following
purposes:
Proposal I: To approve the proposal of the Board of Directors to
effect a 1-for-6 reverse split of the Company's authorized and outstanding
shares of Common Stock; and
To act upon other matters that may properly come before the meeting.
The Board of Directors has fixed September 15, 1998, as the Record Date for
the determination of the stockholders entitled to notice of, and to vote at, the
Special Meeting or any adjournment or postponement of the Special Meeting.
At the Special Meeting, each share of Common Stock represented at the
meeting will be entitled to one (1) vote on each matter properly brought before
the Special Meeting.
Your attention is directed to the accompanying Proxy Statement.
Stockholders who do not expect to attend the Special Meeting in person are
requested to date, sign and mail the enclosed proxy as promptly as possible in
the enclosed envelope.
DATED: August , 1998
BY ORDER OF THE BOARD OF DIRECTORS
Steven D. Gershick
President and Chief Executive Officer
YOUR BOARD OF DIRECTORS HAS REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF PROPOSAL I. THE BOARD BELIEVES THAT PROPOSAL I IS FAIR TO, AND IN
THE BEST INTEREST OF, THE COMPANY AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY
APPROVED PROPOSAL I AND RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ITS APPROVAL.
IT IS IMPORTANT THAT ALL STOCKHOLDERS VOTE. WE URGE YOU TO SIGN AND RETURN
THE ENCLOSED PROXY WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. THE
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE. IN ORDER TO FACILITATE
THE PROVIDING OF ADEQUATE ACCOMMODATIONS, PLEASE INDICATE ON THE PROXY WHETHER
YOU PLAN TO ATTEND THE SPECIAL MEETING.
<PAGE> 4
PROXY STATEMENT
------------------------
SPECIAL MEETING OF STOCKHOLDERS
OCTOBER 29, 1998
The accompanying proxy is solicited by the Board of Directors of
Spatializer Audio Laboratories, Inc. (the "Company") for use at the Special
Meeting of Stockholders of the Company (the "Special Meeting") to be held on
October 29, 1998, at 10:30 a.m., at the Company's executive office, located at
20700 Ventura Boulevard, Suite 134, Woodland Hills, California 91364, and at any
adjournments or postponements of the Special Meeting. This proxy statement and
accompanying proxy will be mailed beginning on or about , 1998, to
give holders of Common Stock of the Company of record on September 15, 1998 (the
"Record Date"), an opportunity to vote at the Special Meeting.
1. Proposal I: To approve the proposal of the Board of Directors to effect
a 1-for-6 reverse split of the Company's authorized and outstanding
shares of Common Stock (the "Reverse Stock Split"); and
2. To act upon other matters that may properly come before the meeting.
The Board of Directors has fixed September 15, 1998 as the Record Date for
the determination of the stockholders entitled to notice of, and to vote at, the
Special Meeting or any adjournment or postponement of the Special Meeting.
VOTING
In voting, please specify your choices by marking the appropriate spaces on
the enclosed proxy, signing and dating the proxy and returning it in the
accompanying envelope. If no directions are given and the signed proxy is
returned, the proxy holders will vote the shares in favor of Proposal I, and at
their discretion on any other matters that may properly come before the Special
Meeting. In situations where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not returned proxies to
the brokers (so-called "broker non-votes"), the affected shares will be counted
for purposes of determining the presence or absence of a quorum for the
transaction of business but will not be included in the vote totals. Therefore,
a failure by a stockholder to return a proxy and indicate their vote on Proposal
I will, in effect, be treated as a non-vote on Proposal I, since shares cannot
be counted as voting "FOR" the Proposal I if a proxy is not returned.
The approval of Proposal I requires that the Company's Certificate of
Incorporation be amended. Under the Delaware General Corporations Act, Section
242, amendment of the Company's Certificate of Incorporation requires the
affirmative vote of a majority of the outstanding shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" PROPOSAL I TO AMEND THE
CERTIFICATE OF INCORPORATION TO EFFECT THE ONE-FOR-SIX REVERSE SPLIT OF THE
COMPANY'S AUTHORIZED AND OUTSTANDING COMMON STOCK.
A STOCKHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A
STOCKHOLDER) TO ATTEND AND ACT FOR HIM AND ON HIS BEHALF AT THE MEETING OTHER
THAN THE PERSONS DESIGNATED IN THE ACCOMPANYING FORM OF PROXY. TO EXERCISE THIS
RIGHT, THE STOCKHOLDER MAY INSERT THE NAME OF THE DESIRED PERSON IN THE BLANK
SPACE PROVIDED IN THE PROXY AND STRIKE OUT THE OTHER NAMES OR MAY SUBMIT ANOTHER
PROXY.
THE SHARES REPRESENTED BY PROXIES IN FAVOR OF MANAGEMENT WILL BE VOTED ON
ANY BALLOT (SUBJECT TO ANY RESTRICTIONS THEY MAY CONTAIN) IN FAVOR OF THE
MATTERS DESCRIBED IN THE PROXY.
<PAGE> 5
REVOCABILITY OF PROXIES
Any stockholder giving a proxy has the power to revoke it at any time
before the proxy is voted. In addition to revocation in any other manner
permitted by law, a proxy may be revoked by instrument in writing executed by
the stockholder or by his attorney authorized in writing, or, if the stockholder
is a corporation, under its corporate seal or by an officer or attorney thereof
duly authorized, and deposited at the executive office of the Company located at
20700 Ventura Boulevard, Suite 134, Woodland Hills, California, 91364, or at
Harris Trust Company of California located at 601 South Figueroa, 49th Floor,
Los Angeles, California 90017 (the "Exchange Agent"), at any time up to and
including the last business day preceding the day of the Special Meeting, or any
adjournment thereof, or with the chairman of the meeting on the day of the
meeting. Attendance at the Special Meeting will not in and of itself constitute
revocation of a proxy.
OUTSTANDING COMMON STOCK
Holders of record of Common Stock at the close of business on September 15,
1998 ("Record Date") will be entitled to receive notice of and vote at the
Special Meeting. The Company is authorized to issue 50,000,000 shares of Common
Stock, par value of $0.01 US per share ("Common Stock") and 1,000,000 shares of
Preferred Stock, par value of $0.01 US per share ("Preferred Stock"). On the
Record Date, there were shares of Common Stock and shares of
Preferred Stock authorized and outstanding. The holders of Common Stock are
entitled to one (1) vote for each share held. All matters presented to the
meeting require approval by simple majority of votes cast at the meeting.
SOLICITATION
The Company will bear the entire cost of the solicitation of proxies,
including preparation, assembly and mailing of this proxy statement, the proxy
and any additional material furnished to stockholders. Proxies may be solicited
by directors, officers and a small number of regular employees of the Company
personally or by mail, telephone or telegraph, but such persons will not be
specially compensated for such service. Copies of solicitation material will be
furnished to brokerage houses, fiduciaries and custodians which hold shares of
Common Stock of record for beneficial owners for forwarding to such beneficial
owners. The Company may reimburse persons representing beneficial owners for
their costs of forwarding the solicitation material to such owners.
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR MARKED PROXY PROMPTLY SO YOUR
SHARES CAN BE REPRESENTED, EVEN IF YOU PLAN TO ATTEND THE SPECIAL MEETING IN
PERSON.
PROPOSAL I.
REVERSE SPLIT OF THE COMPANY'S OUTSTANDING COMMON STOCK
GENERAL
The Board of Directors of the Company has authorized a vote by the
stockholders on the 1-for-6 Reverse Stock Split of the authorized and
outstanding shares of Common Stock. The Reverse Stock Split, if adopted, will be
effected pursuant to an amendment of the Certificate of Incorporation (the
"Amended Certificate"), which has been unanimously approved by the Board of
Directors and recommended to the stockholders for their approval at the Special
Meeting. A copy of the Amended Certificate is attached as Exhibit A. If the
Reverse Stock Split is approved and the Amended Certificate is adopted, each
share of Common Stock issued and outstanding as of the close of business on the
date the Amended Certificate is approved by the stockholders of the Company (the
"Effective Date") will be converted into one-sixth of one share of Common Stock,
with any resulting fractional shares being rounded up to the nearest whole
share.
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<PAGE> 6
However, under the Amended Certificate, the Board of Directors will have
the authority to determine, in its sole discretion, that it is in the best
interest of the Company to abandon the Reverse Stock Split at any time prior to
the vote at the Special Meeting.
The Reverse Stock Split, if it occurs, will not affect any stockholder's
proportionate equity interest in the Company (other than as a result of the
additional shares issued in lieu of fractional shares as discussed below) or the
relative rights, preferences, privileges or priorities of any stockholder. In
addition, pursuant to the terms of the Company's stock option plans, warrants
and preferred stock, the number of shares issuable upon the exercise of
outstanding options and warrants, and the conversion of convertible preferred
stock, and the related exercise or conversion price per share, will be
proportionately adjusted.
PURPOSE AND EFFECT OF THE REVERSE STOCK SPLIT
The principal effect of the Reverse Stock Split will be to decrease the
number of outstanding shares of Common Stock from shares, as of
the Record Date, to approximately shares, (assuming that the
Reverse Stock Split occurred on the Record Date). The respective voting rights
and other rights that accompany the Common Stock will not be altered by the
Reverse Stock Split (other than as a result of the issuance of additional shares
in lieu of fractional shares as discussed below), and the par value of the
Common Stock will remain at $0.01 per share. Additionally, the Reverse Stock
Split will not affect the Company's accumulated deficit and total stockholders'
equity will remain unchanged. Consummation of the Reverse Stock Split will not
alter the number of authorized shares of the Company's Common Stock, which will
remain at 50,000,000. Consequently, the Board of Directors effectively will have
the authority to issue six times as many shares of Common Stock as it had the
authority to issue prior to the Reverse Stock Split. The currently authorized
and outstanding shares of the Company's Preferred Stock will not be affected by
this vote, other than a pro-rata reduction in the number of shares of Common
Stock into which the Preferred Stock are convertible and a pro-rata increase in
the per share conversion price. Additionally, outstanding options and warrants
will be adjusted, in the manner described in the preceding sentence,
automatically on the Effective Date. After giving effect to the Reverse Stock
Split, the number of outstanding shares of Common Stock (as of the Record Date)
would be approximately shares, and the number of outstanding
Preferred Shares would remain shares, with the result that
authorized but unissued shares available to the Company would be approximately
shares. Accordingly, the Reverse Stock Split could result in a
significant increase in possible dilution to present stockholders' percentage of
ownership of Common Stock due to possible issuances of Common Stock after the
Reverse Stock Split.
The Board of Directors believes that the Reverse Stock Split is in the best
interests of the Company and its stockholders. In this regard, the Board of
Directors believes the Reverse Stock Split will enhance the acceptability of the
Company's Common Stock to the financial community and investing public, will
rationalize the number of shares and will assist the Company in maintaining its
NASDAQ listing. The Board of Directors also believes that the reduction in the
number of outstanding shares of Common Stock caused by the Reverse Stock Split
will increase the post-split market price per share of the Common Stock over the
pre-split market price per share of the Common Stock. The Board of Directors
further believes that the proposed Reverse Stock Split will result in a broader
market for the Common Stock than which currently exists. Theoretically, the
number of shares outstanding should not, by itself, affect the marketability of
the Common Stock, the type of investor who acquires it, or the Company's
reputation in the financial community. In practice, this is not necessarily the
case, as certain investors view low-priced stock as unattractive, although
certain other investors may be attracted to low-priced stock because of the
greater trading volatility sometimes associated with such securities. The Board
of Directors also believes the Reverse Stock Split may enhance the Company's
flexibility in its future financing and capitalization needs.
In addition, a variety of brokerage house policies and practices tend to
discourage individual brokers within those firms from dealing with lower-priced
stocks. Some of those policies and practices pertain to the payment of broker's
commissions and to time-consuming procedures that function to make the handling
of lower-priced stocks economically unattractive to brokers. Furthermore, many
brokerage houses do not permit low-priced stocks to be used as collateral for
margin accounts or to be purchased on margin. In addition, the structure of
trading commissions also tends to have an adverse impact upon holders of
lower-priced stock
3
<PAGE> 7
because the brokerage commission on a sale of lower-priced stock generally
represents a higher percentage of the sales price than the commission on a
relatively higher-priced stock. The Board of Directors believes that the
proposed Reverse Stock Split could result in a price level for the Common Stock
that will reduce, to some extent, the effect of the above-referenced policies
and practices of brokerage firms and diminish the adverse impact of trading
commissions on the market for the Common Stock. The expected increased price
level may also encourage interest and trading in the Common Stock, particularly
by institutional investors, and possibly promote greater liquidity for the
Company's stockholders, although such liquidity could be adversely affected by
the reduced number of shares of Common Stock outstanding after the Effective
Date.
The Reverse Stock Split also will result in some stockholders owning "odd
lots" of less than 100 shares of the Common Stock received as a result of the
Reverse Stock Split. Brokerage commissions and other costs of transactions in
odd lots may be higher, particularly on a per-share basis, than the cost of
transactions in even multiples of 100 shares.
However, there can be no assurance that the Reverse Stock Split will
increase or will not adversely impact the market price of the Common Stock, that
the marketability of the Common Stock will improve as a result of the Reverse
Stock Split or that the Reverse Stock Split will otherwise have any of the
effects described herein.
CHANGES IN STOCKHOLDERS' EQUITY
As an additional result of the Reverse Stock Split, the Company's stated
capital, which consists of the par value per share of Common Stock multiplied by
the number of shares of Common Stock issued, will be reduced by approximately
to on the Effective Date. Correspondingly, the Company's
capital in excess of par value, which consists of the difference between the
Company's stated capital and the aggregate amount paid to the Company upon the
issuance by the company of all currently outstanding Common Stock, will be
increased by approximately . The following table illustrates the
principal effects of the Reverse Stock Split discussed in the preceding
paragraphs:
<TABLE>
<CAPTION>
PRIOR TO REVERSE AFTER REVERSE
SPLIT AND SPLIT AND
AMENDMENT AMENDMENT
TO CERTIFICATE TO CERTIFICATE
---------------- --------------
<S> <C> <C>
NUMBER OF SHARES OF COMMON STOCK
Authorized............................................... 50,000,000 50,000,000
Outstanding..............................................
Reserved for future issuance under stock compensation
plans..................................................
Available for future issuance by action of the Board of
Directors (after giving effect to the above
reservations)..........................................
</TABLE>
Assuming the Amended Certificate effecting the Reverse Stock Split is
approved, the Amended Certificate will be filed with the Secretary of State of
the State of Delaware immediately after the Special Meeting and the Amended
Certificate and the proposed Reverse Stock Split would become effective upon the
Effective Date.
CERTIFICATES AND FRACTIONAL SHARES
If approved by the stockholders, the Reverse Stock Split will occur as of
the Effective Date without regard to the date or dates certificates currently
representing shares of the Common Stock (the "Old Certificates") are physically
surrendered for certificates representing the number of shares of the Common
Stock such stockholders are entitled to receive as a consequence of the Reverse
Stock Split (the "New Certificates"). In such event, the Old Certificates will
be deemed to represent the number of shares of Common Stock resulting from the
application of the 1-for-6 Reverse Stock Split. New Certificates will be issued
in due course as Old Certificates are tendered to Harris Trust Company of
California, which has been designated as the Company's exchange agent ("the
Exchange Agent") for exchange or transfer. No fractional shares of Common Stock
will be issued upon the effectiveness of the Reverse Stock Split. New
Certificates,
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<PAGE> 8
representing the amount of Old Certificates with any fractional shares created
by the Reverse Stock Split rounded up to the nearest whole share ("Additional
Shares"), will be issued upon transfer or the request of the individual
stockholder. On the Effective Date, the Exchange Agent will be provided with
2,200 shares of unissued Common Stock to hold in trust and to use for those
Additional Shares issued in lieu of the fractional shares created by the Reverse
Stock Split. Based on information available to the Company, there are an
estimated 2200 stockholders and, therefore, 2200 shares should be sufficient to
accommodate the required Additional Shares. New Certificates will not be made
until a stockholder presents Old Certificates to the Exchange Agent. Also, to
the extent that a stockholder presents more than one certificate, the Exchange
Agent may aggregate the ownership before calculating whether or not an
Additional Share needs to be issued.
SOURCE OF FUNDS; NUMBER OF HOLDERS
The Company has available and will pay from its cash reserves the funds
required to purchase the fractional shares. The Company's stockholder list
indicates that a substantial portion of the outstanding shares of Common Stock
is registered in the names of clearing agencies and broker nominees. It is,
therefore, not possible to predict with certainty the number of fractional
shares and the total amount of additional Shares that the Company will be
required to issue.
No service charges will be payable by holders of shares of Common Stock in
connection with the exchange of certificates, all expenses of which will be
borne by the Company. However, if a transfer of ownership is requested, a fee
may be charged by the Exchange Agent for such transfer.
As of April 30, 1998, the Company had approximately 126 registered
stockholders of the Common Stock and, based on market information, 2,000
stockholders not directly registered with the Company. The Company does not
expect that the Reverse Stock Split and issuance of Additional Shares of Common
Stock in lieu of fractional shares will result in a significant reduction in the
number of stockholders of record or beneficial owners of Common Stock.
5
<PAGE> 9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information (except as otherwise indicated
by footnote) as to shares of Common Stock owned as of August 14, 1998, or which
can be acquired in sixty days, by (i) each person known by management to
beneficially own more than five percent (5%) of the Company's outstanding Common
Stock, (ii) each of the Company's directors, and officers, (iii) all executive
officers and directors as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF PERCENT OF
BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP CLASS
-------------------- -------------------- ----------
<S> <C> <C>
DIRECTORS
Carlo Civelli(2)(5)..................................... 4,070,958 16.7%
Stephen W. Desper(3)(5)................................. 1,976,128 8.1%
Steven D. Gershick(5)................................... 1,126,144 4.6%
James D. Pace(4)(5)..................................... 326,997 1.3%
Jerold H. Rubinstein(5)................................. 250,000 1.0%
Gilbert N. Segel(5)..................................... 220,000 *
Scot E. Land............................................ 63,947 *
EXECUTIVE OFFICERS
Michael Bolcerek........................................ 66,667 *
Eric Rene Bos........................................... 16,667 *
Henry Mandell........................................... 0 *
Robert Montelius........................................ 16,667 *
Theodore Tanner(5)...................................... 41,667 *
OTHERS
CPR (USA) Inc........................................... 2,856,000 4.99%(7)
LibertyView Plus Fund................................... 1,142,400 4.99%(7)
LibertyView Fund, LLC................................... 285,600 4.99%(7)
All directors and executive officers as a group (12
persons)(5)(6)........................................ 8,175,841 33.6%
</TABLE>
- - ---------------
* Indicates that the percentage of shares beneficially owned does not exceed
one percent (1%) of the class.
(1) Each of the directors and officers named can be reached at the Company's
executive offices located at 20700 Ventura Boulevard, Suite 134, Woodland
Hills, California, 91364, except for Carlo Civelli, whose address is
Seefeldstrasse 214, 8034 Zurich, Switzerland. The persons named in the table
have sole voting and investment power with respect to all shares shown to be
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes to this table.
The address for CPR (USA) Inc. and LibertyView Fund, LLC is 101 Hudson
Street, 37th Floor, Jersey City, New Jersey 07302. The address for
LibertyView Plus Fund is Bermuda Corp., Hemisphere House, 9 Church Street,
Hamilton, Bermuda HMDX.
(2) Carlo Civelli controls Clarion Finanz AG, a non-reporting investment
company. Holdings of Mr. Civelli and Clarion Finanz AG are combined, and
include all shares of the Company held of record or beneficially by either,
and all additional shares over which he either currently exercises full or
partial control, without duplication through attribution.
(3) Does not include 37,853 shares held by Sparkle Co. on behalf of the Estate
of Stephen Desper's deceased father, Ira Desper, as to which Mr. Desper
disclaims any direct or indirect beneficial interest or control.
(4) Does not include 134,497 shares held by Jeffrey C. Evans, a member of the
Advisory Committee of Desper Products, Inc. ("DSI"), and co-owner with Mr.
Pace of Audio Intervisual Design and Developing Technologies Distributors.
Mr. Pace disclaims any direct or indirect beneficial interest or control of
Mr. Evans' shares.
6
<PAGE> 10
(5) Includes an aggregate of 4,109,127 escrowed performance shares held as of
August 14, 1998 as follows: Carlo Civelli, 1,251,792 shares; Jerold H.
Rubinstein, 135,000 shares; Stephen W. Desper, 1,736,708 shares; Steven D.
Gershick, 758,830 shares; James D. Pace, 114,297 shares; Gilbert N. Segel,
99,000 shares; Theodore Tanner, 13,500 shares.
(6) Includes options to purchase 1,078,468 shares exercisable at various prices
from $0.85 to $3.26 per share, and expiring on various dated from February,
2000 to January, 2003.
(7) CPR (USA) Inc., LibertyView Plus Fund and LibertyView Fund LLC are
affiliated entities but each has made an individual investment in the
Company. In addition to limitations set forth in the Certificate of
Designation for the Series A Preferred Stock, which limits ownership of the
Common Stock by any holder to 4.99% of the Company's outstanding Common
Stock, the three entities have independent legal obligations and internal
practices which bar them from collectively owning more than 4.99% of any
company's outstanding common stock at any particular time. Therefore, the
disclosure reflects beneficial ownership of the aggregate percentage of
Common Stock that could be beneficially owned by the three entities combined
at any one time, during the effectiveness of this Registration Statement.
Except as described above, no officer, director, associate or affiliate of
the Company will derive any material benefit from the Reverse Stock Split other
than the benefits that would be enjoyed by any other person holding the same
number of shares.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated federal income tax
consequences of the Reverse Stock Split to stockholders of the Company. This
summary is based on the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury Department Regulations (the "Regulations")
issued pursuant thereto, and published rulings and court decisions in effect as
of the date hereof, all of which are subject to change. This summary does not
take into account possible changes in such laws or interpretations, including
amendments to the Code, applicable statutes, Regulations and proposed
Regulations or changes in judicial or administrative rulings, some of which may
have retroactive effect. No assurance can be given that any such changes will
not adversely affect the discussion of this summary.
In particular, and without limiting the foregoing, this summary does not
consider the federal income tax consequences to stockholders of the Company in
light of their individual investment circumstances or to holders subject to
special treatment under the federal income tax laws (for example, tax exempt
entities, life insurance companies, regulated investment companies and foreign
taxpayers). In addition, this summary does not address any consequences of the
Reverse Stock Split under any state, local or foreign tax laws. As a result, it
is the responsibility of each stockholder to obtain and rely on advice from his,
her or its personal tax advisor as to: (i) the effect on his, her or its
personal tax situation of the Reverse Stock Split, including the application and
effect of state, local and foreign income and other tax laws; (ii) the effect of
possible future legislation and Regulations; and (iii) the reporting of
information required in connection with the Reverse Stock Split on his, her or
its own tax returns. It will be the responsibility of each stockholder to
prepare and file all appropriate federal, state and local tax returns.
The Company believes that the Reverse Stock Split will not result in any
taxable gain or loss to stockholders or the Company for federal income tax
purposes. The tax basis of Common Stock received as a result of the Reverse
Stock Split will be equal, in the aggregate, to the basis of the shares
exchanged for such Common Stock. For tax purposes, the holding period of the
shares exchanged will be included in the holding period of the Common Stock
received as a result of the Reverse Stock Split, provided that the shares
exchanged were held as capital assets as of the Effective Date.
THE FEDERAL INCOME TAX DISCUSSION WITH RESPECT TO THE REVERSE STOCK SPLIT
SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY AND IS NOT
INTENDED AS TAX ADVICE TO ANY PERSON OR ENTITY. NO RULING FROM THE INTERNAL
REVENUE SERVICE OR OPINION OF COUNSEL WILL BE OBTAINED REGARDING THE FEDERAL
INCOME TAX CONSEQUENCES TO THE STOCKHOLDERS OF THE COMPANY AS A RESULT OF THE
REVERSE STOCK SPLIT. ACCORDINGLY, ALL
7
<PAGE> 11
STOCKHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO ANY FEDERAL,
STATE, LOCAL OR FOREIGN TAX CONSEQUENCE APPLICABLE TO THEM WHICH COULD RESULT
FROM THE REVERSE STOCK SPLIT.
DISSENTING STOCKHOLDERS RIGHTS
Dissenting Stockholders have no appraisal rights under Delaware law or
under the Company's Certificate of Incorporation or Bylaws in connection with
the Reverse Stock Split.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
for consideration at the Special Meeting. If other matters are properly brought
before the meeting, however, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
DATED: August , 1998
BY ORDER OF THE BOARD
Steven D. Gershick
Chairman, President & CEO
8
<PAGE> 12
EXHIBIT A
RESOLVED, that the Certificate of Incorporation of Spatializer Audio
Laboratories, Inc. (the "Corporation") be amended by means of a Certificate of
Amendment substantially in the form set forth below:
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SPATIALIZER AUDIO LABORATORIES, INC.
Pursuant to Section 242 of the Delaware General Corporation Law,
Spatializer Audio Laboratories, Inc., a Delaware corporation (the
"Corporation"), hereby certifies as follows:
FIRST: The name of the Corporation is Spatializer Audio Laboratories, Inc.
SECOND: The Certificate of Incorporation of the Corporation is hereby
amended to effect a one-for-six reverse split of the Common Stock by adding a
new paragraph after the first paragraph of ARTICLE IV, AUTHORIZED CAPITAL STOCK
to read as follows:
"Simultaneously with the effective date of this amendment (the
"Effective Date"), each share of the Common Stock authorized and
outstanding immediately prior to the Effective Date (the "Old Common
Stock") shall automatically and without any action on the part of the
holder thereof be reclassified as and changed into one-sixth ( 1/6) of a
share of the Common Stock, par value $0.01 per share (the "Common Stock"),
with all resulting fractional shares created thereby rounded up to the
nearest whole share. Each holder of a certificate or certificates which
immediately prior to the Effective Date represented outstanding shares of
the Old Common Stock (the "Old Certificates," whether one or more) shall be
entitled to receive upon surrender of the Old Certificates to the
Corporation's Exchange Agent for transfer cancellation or exchange, a
certificate or certificates representing the number of whole shares of the
Common Stock (the "New Certificates") into which and for which the shares
of the Old Common Stock formerly represented by the Old Certificates are
reclassified under the terms hereof. No fractional shares of Common Stock
will be issued. The New Certificates, representing one-sixth ( 1/6) the
amount of the Old Certificates with any resulting fractional shares created
thereby rounded up to the nearest whole share ("Additional Shares"), will
be issued upon transfer, cancellation or exchange by the individual
stockholder.
If more than one Old Certificate shall be surrendered at one time for
the account of the same stockholder, the number of full shares of the
Common Stock for which New Certificates shall be issued shall be computed
on the basis of the aggregate number of shares represented by the Old
Common Certificates so surrendered.
In the event that the Corporation's Exchange Agent determines that a
holder of Old Certificates has not tendered all of his, her or its Old
Certificates for exchange, the Exchange Agent shall carry forward any
fractional shares created until all Old Certificates of such holder have
been presented for exchange so that all fractional shares may be aggregated
to result in the minimum amount of Additional Shares being issued to such
holder.
If any New Certificate is to be issued in a name other than that in
which the Old Certificates are issued, the Old Certificates so surrendered
shall be properly endorsed and otherwise in proper form for transfer, and
the person or persons requesting such exchange shall affix any requisite
stock transfer tax stamps to the Old Common Certificates surrendered, or
provide funds for their purchase, or establish to the satisfaction of the
Exchange Agent that such taxes are not payable."
THIRD: This Certificate of Amendment of Certificate of Incorporation shall
be effective as of October 29, 1998.
A-1
<PAGE> 13
FOURTH: That at any time prior to a vote of the stockholders on the
foregoing Certificate of Amendment of Certificate of Incorporation of the
Corporation, the Board of Directors may abandon such proposed Certificate of
Amendment.
FIFTH: This Certificate of Amendment of Certificate of Incorporation was
duly adopted by the requisite vote of the Board of Directors and by the vote of
the holders of a majority of the outstanding shares of the Corporation entitled
to vote thereon in accordance with Section 242 of the Delaware General
Corporation Law.
IN WITNESS WHEREOF, Spatializer Audio Laboratories, Inc., has caused this
Certificate of Amendment of Certificate of Incorporation to be executed by its
President and attested by its Secretary this 29th day of October, 1998.
SPATIALIZER AUDIO LABORATORIES, INC.
By:
--------------------------------------
Steven D. Gershick
President
ATTEST:
--------------------------------------
Secretary
A-2
<PAGE> 14
PROXY PROXY
SPATIALIZER AUDIO LABORATORIES, INC.
20700 VENTURA BOULEVARD, SUITE 134
WOODLAND HILLS, CALIFORNIA 91364
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MANAGEMENT OF
SPATIALIZER AUDIO LABORATORIES, INC.
The undersigned does hereby appoint Steven D. Gershick and Henry R.
Mandell as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares
of Common Stock of Spatializer Audio Laboratories, Inc. held of record by the
undersigned on September 15, 1998, at the special meeting of stockholders to be
held on October 29, 1998 or any adjournment thereof.
Please check this box only if you intend to
attend and vote at the Annual Meeting. [ ]
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE> 15
SPATIALIZER AUDIO LABORATORIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
<TABLE>
<S> <C> <S>
1. REVERSE STOCK SPLIT -- Amendment of the FOR AGAINST ABSTAIN In their discretion, the Proxies are authorized to
Certificate of Incorporation to reflect vote upon such other business as may properly come
1-for-6 Reverse Stock Split of the [ ] [ ] [ ] before the meeting. This Proxy, when properly
authorized and outstanding shares of executed, will be voted in the manner directed by
Spatializer Audio Laboratories, Inc. the undersigned stockholder.
Common Stock.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1.
DATED: 1998
-----------------------------------------
-----------------------------------------------------
(Signature)
-----------------------------------------------------
(Signature, if held jointly)
Please sign exactly as name appears below. When
shares are held jointly, both should sign. When
signing as attorney, as executor, administrator,
trustee or guardian, please give full title as
such. If a corporation, please sign in full
corporate name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
</TABLE>
