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.
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(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>
January ___, 2000
Dear Stockholder:
On behalf of the Board of Directors (the "Board"), I cordially invite you
to a special meeting of the stockholders (the "Annual Meeting") of Spatializer
Audio Laboratories, Inc. (the "Company") which will be held on January 25, 2000
at 10:30 a.m. at the Hilton Hotel, located at 6360 Canoga Avenue, in Woodland
Hills, California. I hope that you will be able to attend in person. Following
the formal business of the Annual Meeting, management will be available to
respond to your questions.
At the Annual Meeting, stockholders will be asked to consider and vote
upon the following matters:
(1) To approve an increase in the total amount of the Company's
authorized common stock, $.01 par value per share (the "Common
Stock"), from 50,000,000 authorized shares of Common Stock, to
65,000,000 authorized shares of Common Stock, and
(2) The nomination and election of three persons to serve as Directors
of the Company until the Annual Meeting of Stockholders to be held
in 2003, and
(3) To consider and vote on such other matters as may properly be
presented incident to the conduct of the Annual 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 increase in the total amount authorized Common Stock of the Company, and
that the stockholders vote FOR the Directors nominated by the Board.
At the Annual Meeting, each holder of record of shares of Common Stock as
of December 27, 1999 (the "Record Date"), will be entitled at the meeting to one
(1) vote on each matter properly brought before the Annual Meeting. The increase
in the Company's authorized Common Stock (the "Capital Stock Increase") requires
the approval of the majority of the outstanding shares of Common Stock. Holders
of Common Stock are not entitled to dissenters' rights in the event the Capital
Stock Increase is approved. The election of directors requires that each person
nominated as a director receive a plurality of the votes cast pursuant to
Article II, Section 3 of the Bylaws of the Company.
The Board of Directors believes the increase in the authorized Common
Stock of the Company will allow it to have greater flexibility in financing the
Company's continuing operations. For a further discussion of the purpose and
effect of the increase in the total amount of the Company's authorized Common
Stock, see "INCREASE IN THE COMPANY'S TOTAL AUTHORIZED COMMON STOCK-Purpose and
Effect of Increase in Total Authorized Common Stock of the Company" in the
accompanying Proxy Statement.
Details of the Capital Stock Increase proposal, and the names and
qualifications of the nominees for Directors of the Company and other important
information are set forth in the accompanying Proxy Statement and should be
considered carefully by stockholders.
<PAGE>
I hope that you will attend the Annual Meeting. Whether or not you plan to
attend the Annual 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 Annual
Meeting and vote in person, even if you have previously returned your proxy
card.
Sincerely,
SPATIALIZER AUDIO LABORATORIES, INC.
HENRY R. MANDELL
Interim Chief Executive Officer,
Secretary and Chief Financial Officer
<PAGE>
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Notice is hereby given that Spatializer Audio Laboratories, Inc. (the
"Company") will hold a Annual Meeting of Stockholders on January 25, 2000 at
10:30 a.m., at the Hilton Hotel, located at 6360 Canoga Avenue, in Woodland
Hills, California, for the following purposes:
Proposal I: To approve the proposal of the Board of Directors to increase
the total amount of the Company's authorized common stock, $.01 par value
per share (the "Common Stock") from 50,000,000 shares to 65,000,000
shares; and
Proposal II: To elect three Directors of the Company to serve until the
Annual Meeting of Stockholders to be held in 2003; and
To act upon other matters that may properly come before the meeting.
The Board of Directors has fixed December 27, 1999 as the Record Date for
the determination of the stockholders entitled to notice of, and to vote at, the
Annual Meeting or any adjournment or postponement of the Annual Meeting.
At the Annual Meeting, each share of Common Stock represented at the
meeting will be entitled to one (1) vote on each matter properly brought before
the Annual Meeting. The increase in the Company's authorized Common Stock (the
"Capital Stock Increase") requires the approval of the majority of the
outstanding shares of Common Stock. Holders of Common Stock are not entitled to
dissenters' rights in the event the Capital Stock Increase is approved. The
election of directors requires that each person nominated as a director receive
a plurality of the votes cast pursuant to Article II, Section 3 of the Bylaws of
the Company.
Your attention is directed to the accompanying Proxy Statement.
Stockholders who do not expect to attend the Annual Meeting in person are
requested to date, sign and mail the enclosed proxy as promptly as possible in
the enclosed envelope.
DATED: January ___, 2000
BY ORDER OF THE BOARD OF DIRECTORS
HENRY R. MANDELL
Interim Chief Executive Officer, Secretary
and Chief Financial Officer
YOUR BOARD OF DIRECTORS HAS REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF PROPOSALS I AND II. THE BOARD BELIEVES THAT PROPOSALS I AND II ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS AND HAS
UNANIMOUSLY APPROVED PROPOSALS I AND II AND RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THEIR APPROVAL.
<PAGE>
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 ANNUAL 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 ANNUAL MEETING.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 25, 2000
The accompanying proxy is solicited by the Board of Directors of
Spatializer Audio Laboratories, Inc. (the "Company") for use at the Annual
Meeting of Stockholders of the Company (the "Annual Meeting") to be held on
January 25, 2000, at 10:30 a.m., at the Hilton Hotel, located at 6360 Canoga
Avenue, in Woodland Hills, California, and at any adjournments or postponements
of the Annual Meeting. This proxy statement and accompanying proxy will be
mailed beginning on or about January ____, 2000, to give holders of record on
December 27, 1999 (the "Record Date"), of the Company's common stock, $.01 par
value per share (the "Common Stock"), an opportunity to vote at the Annual
Meeting.
Proposal I: To approve the proposal of the Board of Directors increase the
total amount of authorized Common Stock of the Company from 50,000,000
shares to 65,000,000 shares; and
Proposal II: To elect three Directors of the Company to serve until the
Annual Meeting of Stockholders to be held in 2003; and
To act upon other matters that may properly come before the 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 Proposals I and II
and at their discretion on any other matters that may properly come before the
Annual 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
Proposals I and II will, in effect, be treated as a non-vote on Proposal I and
Proposal II, since shares cannot be counted as voting "FOR" Proposal I or
Proposal II 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 Law, 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 INCREASE IN THE TOTAL AMOUNT OF THE
COMPANY'S AUTHORIZED COMMON STOCK, $.01 PAR VALUE.
The election of directors requires that each person nominated as a director
receive a plurality of the votes cast pursuant to Article II, Section 3 of the
Bylaws of the Company.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" PROPOSAL II TO ELECT THREE
DIRECTORS OF THE COMPANY.
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.
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 140, 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 meeting, or any
adjournment thereof, or with the chairman of the meeting on the day of the
meeting. Attendance at the Annual 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 December 27,
1999 ("Record Date") will be entitled to receive notice of and vote at the
meeting. Currently the Company is authorized to issue 50,000,000 shares of
Common Stock, par value of $.01 US per share ("Common Stock") and 1,000,000
shares of Preferred Stock, par value of $.01 US per share ("Preferred Stock").
On the Record Date, there were [__________] of Common Stock and no shares of
Preferred Stock issued and outstanding. The holders of Common Stock are entitled
to one (1) vote for each share held.
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 December 14, 1999, 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, including individuals who were directors in
1999 but who have resigned or are not seeking re-election.
<PAGE>
Name and address of Beneficial Amount and Nature of Percent of Class
Owner (1) Beneficial Ownership (5)
Directors and Officers
Carlo Civelli (2) (4) (5) 4,120,958 9.5%
Stephen W. Desper (3) (4) (5) 1,955,628 4.5%
Steven D. Gershick (4) (5) (7) 1,326,144 3.0%
Scot E. Land 113,947 *
Henry Mandell (6) (7) 176,667 *
James D. Pace (4) (5) 326,997 *
Jerold H. Rubinstein (4) 170,000 *
Gilbert N. Segel (4) 167,000 *
All directors and executive officers
as a group (12 persons) (5) (7) 8,357,341 19.4%
* 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 140, 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. Mr. Land and Mr. Rubinstein resigned as directors in February and
September of 1999 respectively.
(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 them,
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) Includes an aggregate of 3,640,557 escrowed performance shares held as of
December 14, 1999, as follows: Carlo Civelli, 1,112,704 shares; Stephen W.
Desper, 1,543,740 shares; Steven D. Gershick, 674,516 shares; Gilbert N.
Segel 88,000; James D. Pace 101,597; and Jerold H. Rubinstein 120,000.
(5) Calculation includes options to purchase 2,109,467 shares exercisable at
various prices from $0.09 to $3.26 per share, and expiring on various
dated from February, 2000 to October 2004.
(6) Includes 166,667 options held by Mr. Mandell, exercisable at various
prices from $.125 to $1.00 with varying expiration dates of which the
final such expiration date is October, 2004.
(7) In November the Board approved, subject to the finalization of appropriate
documentation, reallocations of equity and the issuance of additional
options. The transactions affect Mr. Gershick and Mr. Mandell. The
transactions will be reflected in the definitive proxy.
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 Capital Stock Increase.
<PAGE>
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 services. 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 ANNUAL MEETING IN PERSON.
<PAGE>
PROPOSAL I. INCREASE IN THE COMPANY'S TOTAL AUTHORIZED COMMON STOCK
General
The Board of Directors of the Company has authorized a vote by the
stockholders on the amendment of the Certificate of Incorporation of the Company
to increase the total amount of the Company's authorized Common Stock, from
50,000,000 shares to 65,000,000 shares (the "Capital Stock Increase").
Currently, the Company is authorized to issue 50,000,000 shares of Common Stock,
par value of $0.01 US per share, and 1,000,000 shares of Preferred Stock, par
value of $0.01 US per share ("Preferred Stock"). The Board is recommending this
proposal to assure that the Company has additional equity available to support
its capital requirements, including through equity financing, and to keep the
Company viable as a going concern.
Proposal I, 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 Annual Meeting. A copy of the Amended
Certificate is attached as Exhibit A.
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 Capital Stock Increase at any time prior
to its approval by the stockholders.
The Capital Stock Increase, if it occurs, may affect any given
stockholder's proportionate equity interest in the Company, but will not affect
the relative rights, preferences, privileges or priorities of any stockholder.
Purpose and Effect of Increase in Total Authorized Common Stock of the Company
The principal effect of the Capital Stock Increase will be to increase the
total amount of authorized Common Stock of the Company from 50,000,000 shares to
65,000,000 shares. The respective voting rights and other rights that accompany
the Common Stock and the Preferred Stock will not be altered by the Capital
Stock Increase, and the par value of the Common Stock will remain at $0.01 per
share. Consequently, the Board of Directors effectively will have the authority
to issue 15,000,000 more shares of Common Stock than it had the authority to
issue prior to the Capital Stock Increase. After giving effect to the Capital
Stock Increase, the number of outstanding shares of Common Stock (as of the
Record Date) would remain the same but the number of shares of Common Stock
which would be available for issuance by the Company would increase to
65,000,000 shares with the result that authorized but unissued shares available
to the Company would be approximately [___________] shares.
All authorized but unissued shares of Common Stock or Preferred Stock will
be available for issuance from time to time for any proper purpose approved by
the Board of Directors including the financing of future operations (including
issuances in connection with stock-based employee benefit plans, stock splits or
dividends and issuances to raise capital or effect acquisitions). There are
currently no arrangements, agreements and understandings for the issuance and
the use of the additional shares of the authorized capital stock of the Company
(other than issuances permitted or required under the Company's stock-based
employee benefit plans or awards made pursuant to those plans). The Board of
Directors does not presently intend to seek further stockholder approval of any
future issuances of shares unless such approval is required by law or the rules
of The Nasdaq Stock Market.
Stockholders do not have any preemptive or similar rights to subscribe for
or purchase any additional shares of Common Stock that may be issued in the
future, and therefore, future issuances of Common Stock or Preferred Stock may,
depending on the circumstances, have a dilutive effect on the earnings per
share, voting power and other interests of the existing stockholders. In
reaching its decisions to submit the Capital Stock
<PAGE>
Increase Proposal to the stockholders, the Board balanced the dilution which
would result if all of the additional Common Stock is issued with the positive
contribution which will be provided from the additional capital which the
Company intends to have available for Company use from the issuance of the
additional equity. The Board concluded that the Capital Stock Increase is
important to the Company since it will enable the Company to continue its
operations on a positive basis.
The proposal could have an anti-takeover effect, although that is not its
intention. For example, if the Company were the subject of a hostile takeover
attempt, it could try to impede the takeover by issuing shares of Common Stock,
thereby diluting the voting power of the other outstanding shares and increasing
the potential cost of the takeover. The availability of this defensive strategy
to the Company could discourage unsolicited takeover attempts, thereby limiting
the opportunity for the Company's stockholders to realize a higher price for
their shares than is generally available in the public markets. The Board of
Directors is not aware of any attempt, or contemplated attempt, to acquire
control of the Company, and this proposal is not being presented with the intent
that it be utilized as a type of anti-takeover device.
The Board of Directors believes that the Capital Stock Increase is in the
best interests of the Company and its stockholders. In this regard, the Board of
Directors believes the Capital Stock Increase will allow the Company to finance
ongoing activities and is therefore critical to its ability to continue
operations and attract new capital. The Board of Directors also believes the
Capital Stock Increase may enhance the Company's flexibility in its future
financing and capitalization needs.
Changes in Stockholders' Equity
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 not
be immediately affected by the Capital Stock Increase. However, if the Board of
Directors issued additional Common Stock made available as a result of the
Capital Stock Increase the Company's stated capital could be reduced. As of the
Record Date the Company's stated capital was [_______]. 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 Capital Stock Increase discussed in the
preceding paragraphs:
<TABLE>
<CAPTION>
Prior to Capital After Capital
Stock Increase Stock Increase
and Amendment to and Amendment
Number of Shares of Common Stock Certificate to Certificate
------------------- ----------------
<S> <C> <C>
Authorized 50,000,000 65,000,000
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 is approved by the stockholders at the
Annual Meeting, the Amended Certificate will be filed with the Secretary of
State of the State of Delaware immediately after the Annual Meeting and the
Amended Certificate and the proposed Capital Stock Increase would become
effective upon the Effective Date.
However, there can be no assurance that the Capital Stock Increase will
increase the Company's ability to finance ongoing activities or that it will not
adversely impact the market price of the Common Stock or that the Capital Stock
Increase will otherwise have any of the effects described herein.
<PAGE>
Federal Income Tax Consequences
The following is a summary of the material anticipated federal income tax
consequences of the Capital Stock Increase 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
Capital Stock Increase 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 Capital Stock Increase, 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 Capital Stock Increase 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 Capital Stock Increase will not result in
any taxable gain or loss to stockholders or the Company for federal income tax
purposes.
THE FEDERAL INCOME TAX DISCUSSION WITH RESPECT TO THE CAPITAL STOCK INCREASE 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 CAPITAL STOCK
INCREASE. ACCORDINGLY, ALL 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 CAPITAL STOCK INCREASE.
Interests of Certain Persons in the Capital Stock Increase
The Company is not currently aware of any arrangements which, as a result
of the Capital Stock Increase, would benefit an officer, director or associate
of such persons, whether such persons are currently nominated to serve as
directors for the coming fiscal year or whether such persons served as directors
during the last fiscal year.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSED AMENDMENT
TO THE COMPANY'S CERTIFICATE OF INCORPORATION.
<PAGE>
PROPOSAL II. NOMINATION AND ELECTION OF DIRECTORS
The current Bylaws of the Company provide for a Board of Directors of no
less than three. The Company currently has five positions on its Board of
Directors. The Board of Directors is classified into three classes, Directors in
each class being elected to serve for three years. Of the current Board, two
Directors have terms expiring in 2001 and three are being nominated for election
for directorships with terms ending in 2003. At this Annual Meeting, Management
intends to nominate Carlo Civelli, Stephen W. Desper and Henry R. Mandell to be
elected for three year terms expiring in 2003.
The elected Directors will continue in office until such Director's
successor is elected and has been qualified, or until such Director's earlier
death, resignation or removal. The Bylaws state that in any election of
Directors, the persons receiving a plurality of the votes cast, up to the number
of Directors to be elected in such election, shall be deemed to be elected.
Shares represented by proxies marked "withhold authority" for one or more
nominees will be counted as a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE NAMED BELOW.
The following table sets forth certain information with respect to the
nominees for directors and certain executive officers of the Company as of
December 14, 1999:
NAME AGE POSITION
- ---- --- --------
Nominees for Terms Ending 2003:
Stephen W. Desper 57 Director -- 7/92 to date.
Chairman of the Board -- 7/92 to
12/95.
Vice Chairman of the Board -- 12/95 to
date.
Principal Holder.
Carlo Civelli 51 Director -- 3/93 to date.
Vice President Finance, Europe -- 8/91
to 3/95.
Principal Holder.
Henry R. Mandell 43 Interim Chief Executive Officer and
Secretary -- 9/98 to date.
Chief Financial Officer -- 3/98 to
date.
Directors with Terms ending in 2001:
James D. Pace 44 Director - 2/95 to date.
Member of Compensation
Committee - 2/95 to date.
Gilbert N. Segel 67 Director - 5/95 to date.
Member of Audit Committee -- 5/95 to
date.
Directors with Terms Ending in 2000:
Steven D. Gershick 44 Director -- 7/92-11/99.
Chairman of the Board since 12/95.
President and Chief Executive
Officer -- 7/92 to 9/98.
President of Operating Subsidiary
Desper Products, Inc. ("DPI") -- 3/97
to 1/98.
<PAGE>
Chief Executive Officer of DPI --
10/91 to 9/98.
President of Operating Subsidiary
MultiDisc Technologies, Inc.
("MDT") -- 9/97 to 9/98.
Chief Executive Officer of MDT --
6/96 to 9/98.
Member of Audit Committee - 8/91 to
11/99.
CARLO CIVELLI. Director since March 1993. VP Finance -- Europe from August 1991
to March 1995. Has extensive experience in financing emerging public companies.
Managing director of Clarion Finanz AG, Zurich, Switzerland, for more than the
last five years. Director and Financial Consultant to Clarion Finanz AG.
STEPHEN W. DESPER. Vice Chairman of the Board, Inventor. Devoted his full time
for a number of years to developing and refining Spatializer(R) technology.
Recording engineer, over twenty (20) years experience; Director of Engineering
for The Beach Boys Organization. Acoustician, Acoustic Design and Noise Control
Engineer. December, 1991 to December, 1995, Chairman of Spatializer Audio
Laboratories, Inc. Since December, 1995 Vice Chairman of Spatializer Audio
Laboratories, Inc. Inventor and President of Desper Products; Inc. ("DPI") from
June 1986 to October, 1991. Vice President and Director of Research, DPI from
October 1991 to December 1996.
STEVEN D. GERSHICK. Chairman of the Board, President and Chief Executive
Officer. Director since July 1992. Resigned all positions except Chairman of the
Board, September 1998. Since December 1995, Chairman of Spatializer Audio
Laboratories, Inc. Certified Public Accountant, KPMG Peat Marwick from May 1977
through June, 1980. From 1981 through September, 1991, the principal of a
Certified Public Accounting firm specializing in business consulting and
entertainment business management. Since October 1, 1991, CEO of DPI. From
October, 1991 to June, 1996, President of DPI. From March 1997 to January 1998,
resumed role as President of DPI. Since June 1996, CEO of MDT. President of MDT
since September 1997. Since December 1991, President and CEO of Spatializer
Audio Laboratories, Inc. Practicing C.P.A. to October 1991.
HENRY R. MANDELL. Interim Chief Executive Officer and Secretary since September
1998; Chief Financial Officer since March 1998; Senior Vice President, Finance
from March 1998 until September 1998. Executive Vice President and Chief
Financial Officer of The Sirena Apparel Group, Inc. from November 1990 to
January, 1998 (The Sirena Apparel Group filed for protection under Chapter 11 of
the Bankruptcy Code in June of 1999). Senior Vice President of Finance and
Administration for Media Home Entertainment, Inc. from April 1985 to November
1990. Director of Finance and Accounting for Oak Media Corporation from June
1982 to April 1985. Senior Corporate Auditor for Twentieth Century Fox Film
Corporation from June 1981 to June 1982. Senior Auditor for Arthur Young and
Company from August 1978 to June 1981, where he qualified as a Certified Public
Accountant.
JAMES D. PACE. Director since February 1995. Director of DPI since July 1992.
For more than the last five years, Mr. Pace has specialized in the introduction
and distribution of new technologies into the professional recording and film
industries. He is an electronics engineer with broad experience in recording and
live sound reinforcement.
GILBERT N. SEGEL. Director since May 1995. Mr. Segel has spent more than thirty
(30) years as an independent business manager representing musical artists, film
actors and entertainment industry entrepreneurs. Since 1985, he has concentrated
on his personal investments and serves as a director of various private business
and charitable enterprises.
<PAGE>
Resignations of Certain Directors
Mr. Land and Mr. Rubinstein resigned as Directors on March 1999 and
November 1999 respectively. Mr. Land and Mr. Rubinstein did not resign as a
result of any disagreement with the Board of Directors.
Compensation of Directors
None of the Company's Directors received any cash compensation or other
arrangements for services provided in their capacity as Directors. However, the
Company has granted stock options to Directors in that capacity. Under the 1995
Stock Option Plan, each director who is not an employee of the Company is
entitled to an automatic annual grant of an option to purchase 50,000 shares of
Common Stock, which are granted as options and are available for grant under the
1995 Stock Option Plan. If the recipient has received a grant in the last two
years, the actual grant is delayed until the person is eligible. Employee
Directors may receive such a grant at the discretion of the Board of Directors.
The Company issued such options to its non-employee directors in April of 1999.
Activities of the Board of Directors and its Committees
Members of the Board of Directors are elected by the holders of the Common
Stock of the Company and represent the interests of all stockholders. The Board
of Directors meets periodically to review significant developments affecting the
Company and to act on matters requiring Board approval. Although the Board of
Directors delegates many matters to others, it reserves certain powers and
functions to itself.
During fiscal 1999, the Board of Directors of the Company, which consisted
of seven (7) members, had 4 formal meetings. All incumbent Directors of the
Company were present at, or participated in taking actions for, one hundred
percent (100%) of the total number of meetings of the Board of Directors of the
Company and the Committees on which he served.
Committees of the Board of Directors
As of December 14, 1999, standing committees of the Board of Directors of
the Company included an Audit Committee and a Compensation and Stock Option
Committee.
Audit Committee
The Audit Committee of the Company's Board of Directors currently consists
of Messrs. Segel and Mandell. Mr. Segel is a non-employee Director of the
Company and Mr. Mandell currently serves as a Director and the Interim Chief
Executive Officer, Chief Financial Officer and Secretary of the Company. This
committee is directed to review the scope, cost and results of the independent
audit of the Company's books and records, the results of the annual audit with
Management and the internal auditors and the adequacy of the Company's
accounting, financial, and operating controls; to recommend annually to the
Board of Directors the selection of the independent auditors; to consider
proposals made by the Company's independent auditors for consulting work; and to
report to the Board of Directors, when so requested, on any accounting or
financial matters. The Audit Committee of the Board of Directors held one
meeting during fiscal 1999.
<PAGE>
Compensation and Stock Committee
The Compensation and Stock Option Committee of the Company (the
"Compensation Committee") currently consists of Messrs. Pace and Segel, each of
whom is a non-employee director of the Company and a "disinterested person" with
respect to the plans administered by such committee, as such term is defined in
Rule 16b-3 adopted under the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (collectively, the "Exchange Act"). The
Compensation Committee reviews and approves annual salaries, bonuses and other
forms and items of compensation for senior officers and employees of the
Company. Except for plans that are, in accordance with their terms or as
required by law, administered by the Board or another particularly designated
group, the Compensation Committee also administers and implements all of the
Company's stock option and other stock-based and equity-based benefit plans
(including performance-based plans), recommends changes or additions to those
plans, and reports to the Board of Directors on compensation matters. The
Compensation Committee held one meeting in 1999. To the extent required by law,
a separate committee of disinterested parties administers the 1996 Incentive
Plan. No Compensation Committee interlock relationships existed in 1999.
Report of Compensation Committee
General
The Company's Compensation Committee is responsible for formulating and
overseeing the general executive and employee compensation policies for the
Company. Its responsibilities include determination of the compensation of
senior executive officers and administration of the annual and long-term
incentive plans and stock option plans of the Company unless such plans, in
accordance with their terms, are administered by the Board or another
particularly designated group. Specific decisions relating to compensation
earned by or awarded to the senior officers of the Company, including the chief
executive officer and the other four highest paid executive officers
(collectively, the "Named Executive Officers") are governed by the Compensation
Committee. The Compensation Committee was formed in June, 1995.
The Compensation Committee has adopted the following policy framework on
which it intends to base the Company's compensation program and its decisions:
- Efforts should be made to achieve base salaries for the senior
executives which are competitive with compensation at the Company's peer
group of companies, not withstanding the significantly larger revenues at
many of the entities in the peer group.
- Annual incentives should consider Company performance and individual
contribution. Efforts should be made to establish parity among individuals
with similar responsibilities and performance.
- The long-term incentive program should be performance-based and
emphasize stock options to ensure that long-term compensation primarily
depends on increases in stock price. Other awards, including restricted
stock, performance units or a combination may be utilized to provide
incentives that might otherwise be reflected in stock option grants.
- Stock option grants (or other performance-based long-term incentives
that may be awarded in the future) should be competitive with peer
practices to allow the Company to attract and retain senior personnel and
to reflect the Company's operating growth and performance.
<PAGE>
- The relative mix of annual and long-term incentives should reflect
levels within the organization, so that senior executives receive a
greater proportion of long-term incentives and others receive compensation
that emphasizes annual compensation and incentives.
To implement these policies, the Compensation Committee will take into
account current market data and compensation trends for similar enterprises,
compare corporate performance of the Company to the performance of a selected
peer group, gauge achievement of corporate and individual objectives and
consider the overall effectiveness of the Company's compensation programs.
To assist in formulating its operating framework, in December, 1995 the
Compensation Committee engaged an independent executive compensation consultant
to assess the current competitive position of the Company's executive
compensation program and to assist the Company in implementing an ongoing long-
term incentive program. Given the Company's reduced operations and financial
constraints, no independent adviser was engaged during 1998 or 1999. However,
the Compensation Committee has continued to consider comparisons of current
compensation levels at the Company with other small capital publicly traded
companies. In addition, broader published compensation surveys of compensation
levels for executives holding similar positions at comparable industrial
entities or organizations were used to establish competitive norms. These
assessments indicated that actual cash compensation (salary plus annual
incentives) of the Named Executive Officers were below total cash compensation
levels of the peer group.
Annual Compensation
The Compensation Committee annually reviews base salary levels of
executives and employees annually, subject to any provisions or limitations
included in their Employment Agreements and in the context of the above
policies. The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to
the Internal Revenue Code of 1986, as amended (the "Code"). Section 162(m)
creates a new limit on the deductibility of compensation paid to certain
officers. With respect to the Company, the covered officers are the Chief
Executive Officer and the next four most highly compensated persons in office at
the end of the year. Compensation paid to these officers in excess of $1,000,000
per person, that is not performance-based, cannot be claimed by the Company as a
tax deduction. It is the Compensation Committee's intention to continue to
utilize performance-based compensation and to conform such compensation to these
limits. In order to conform to these new limitations, the Company is seeking
stockholder approval of the material terms of the performance goals under the
Plan.
CEO Compensation
The Compensation for Henry R. Mandell, as interim CEO of the Company, was
determined in accordance with the guidelines discussed above. Based on the
performance of the Company and the compensation of the CEOs at several peer
companies, no annual bonus was paid in 1999 and base salary was set at $175,000.
Conclusion
The Compensation Committee believes that the policies and concepts
discussed above will be an effective strategy since a significant portion of
compensation to the Named Executive Officers will be based on the operating
results of the Company, the commensurate results for its stockholders, and the
need to attract and retain senior management, technical and operating personnel
as the Company matures and the technology and market conditions change and
evolve. At the same time, it is intended that the policies will encourage
responsible management for both long-term and short-term results and will
further the interests of the Company's stockholders. In implementing its
policies, the Compensation Committee intends to base its review on the
<PAGE>
experience of its members, on Company and management information, and on
discussions with and information compiled by various independent compensation
consultants and other appropriate sources.
Submitted by the Compensation Committee of the Company's Board of
Directors,
James D. Pace
Gilbert N. Segel
Performance Graph of Company Stock
The following Performance Graph reflects a comparison of the performance
of the Company's Common Stock to the common stock of other peer group companies
and to the NASDAQ Market Index:
[The following table was depicted as a line graph in the printed material.]
COMPARISON OF CUMULATIVE TOTAL RETURN OF
COMPANY, PEER GROUP AND BROAD MARKET
-------------- FISCAL YEAR ENDING ------------
COMPANY/INDEX/MARKET 8/22/95 12/31/95 12/31/96 12/31/97 12/31/98
Spatializer Audio Laboratories 100.00 89.74 74.36 30.77 2.56
Peer Group Index 100.00 69.50 68.15 71.38 51.90
NASDAQ Market Index 100.00 100.02 124.29 152.03 214.42
The peer group, for purposes of the above graph, consists of other
comparable technology companies. The peer group was expanded in 1996 to include
a competitor in the advanced audio technology industry that went public during
1996.
Indemnification of Directors and Executive Officers
The Company's Certificate of Incorporation and its Amended and Restated
Bylaws provide that the Company will indemnify any officer or director of the
Company who is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, against expenses (including, but not limited to, attorneys' fees)
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding to the fullest extent
and in the manner set forth in and permitted by Delaware law and any other
applicable law as from time to time in effect.
Executive Compensation
The following table sets forth separately, for the last three complete
fiscal years, each component of compensation paid or awarded to, or earned by,
the Chief Executive Officer ("CEO") of the Company and each of the other most
highly compensated executive officers who were serving as executive officers at
December 31,
<PAGE>
1998 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
===================================================================================================================
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
--------------------------------------------------------------------------
Securities
Under
Options/ Restricted
SARs Stock Awards LTIP
Name and Principal Position Year Salary Bonus Other Granted (#) ($) Payouts
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Henry R. Mandell(1)
Interim Chief Executive 12/99 $175,000 $ -- $9,000 N/A N/A N/A
Officer 12/98 $105,833 $ -- $6,750 500,000 N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Eric Rene Bos(2) 12/99 $30,000 N/A N/A N/A N/A N/A
Vice President, Product 12/98 $120,000 $75,000 N/A N/A N/A N/A
Development for MDT 12/97 $120,000 $136,500 N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Robert L. Montelius(2) 12/99 $30,000 N/A N/A N/A N/A N/A
Vice President, Engineering 12/98 $120,000 $75,000 N/A N/A N/A N/A
for MDT 12/97 $120,000 $136,500 N/A N/A(5) N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Theodore C. Tanner(3) 12/99 $30,000 N/A -- -- -- --
Vice President, Engineering 12/98 $122,427 $ -- $4,800 50,000 N/A N/A
for DPI 12/97 $98,770 $13,000 $6,000 15,000(4) See note 6 N/A
- -------------------------------------------------------------------------------------------------------------------
Peter S. Birch 12/99 $120,000 -- -- 120,000 -- --
Sr.Vice President, Sales
and Marketing for DPI 12/98 $129,654 $ -- $5,400 30,000 N/A N/A
===================================================================================================================
</TABLE>
(1) Mr. Mandell became an employee of the Company in March, 1998. He became
Interim Chief Executive Officer of the Company on September 25, 1998, concurrent
with the effective date of Mr. Gershick's resignation as President and Chief
Executive Officer.
(2) Messrs. Bos and Montelius became employees upon the Company's acquisition of
MultiDisc Technologies, Inc. in June, 1996 and left the Company in April, 1999.
(3) Mr. Tanner became an employee of DPI in March, 1996 and left the Company in
March, 1999.
(4) The exercise price for these options was adjusted to the closing market
price on July 18, 1997.
(5) The exercise price for these options was adjusted to the closing market
price on December 12, 1997.
(6) Of the 5,776,700 originally issued performance shares, 5% were released on
each of June 22, 1997 and 1998, and, in accordance with the escrow arrangement,
10% were released on June 23, 1999. During 1998 the vesting of 55,000 shares was
accelerated when the recipient left the Company. As a result, as of December 14,
1999, 4,527,359 of the originally issued performance shares remained in escrow.
Unless released earlier based on cumulative positive cash flow of $.6285 Cdn.
per share or in a discretionary acceleration where the recipient leaves the
Company, the remainder of these shares will vest based on the following
schedule: 20% June, 2000; 30% June 2001; and, 30% June, 2002.
<PAGE>
OPTION/STOCK APPRECIATION RIGHT ("SAR") GRANTS DURING THE
MOST RECENTLY COMPLETED FINANCIAL YEAR
The following table presented in accordance with the Securities Exchange
Act of 1934, as amended ("the Exchange Act") and the Regulations thereunder sets
forth stock options granted under the Company's Stock Option Plan ("the Stock
Option Plan") during the most recently completed financial year to each of the
Named Executive Officers:
<TABLE>
<CAPTION>
===================================================================================================================================
Alternative
Individual Grants to
- --------------------------------------------------------------------------------------------- Potential Realizable Realizable
Value at Assumed Value:
Annual Rates of Stock Grant
Market Value Price Appreciation for Value
of Option Term Date
% of Total Securities -----------------------------------
Securities Options Underlying
Under /SARs Options/ Grant
Options/ Granted to Exercise or SARs on Date Date
SARs Employees in Base Price of Grant Expiration Present
Granted Fiscal Year ($/Security) ($/Security) Date 5% ($) 10% ($) Value $
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Henry R. Mandell
- -----------------------------------------------------------------------------------------------------------------------------------
Eric Rene Bos N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Steven D. Gershick(1) N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Robert L. Montelius N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Theodore C. Tanner N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Peter S. Birch(2) 20,000 3.1% $0.1875/shr(2) $0.1875/shr(2) 1/16/03 $188 $375 $0
10,000 1.5% $0.1875/shr $0.1875/shr 10/30/03 $94 $188 $0
===================================================================================================================================
</TABLE>
(1) In 1999 Mr. Gershick was granted 50,000 options, exercisable at $.09 per
share until April 1, 2004.
(2) In 1999, Mr. Birch was granted 130,000 options, exercisable at $.08 per
share until May 14, 2004.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FINANCIAL YEAR
AND FINANCIAL YEAR-END OPTION/SAR VALUES
The following table (presented in accordance with the Exchange Act and the
Regulations) sets forth details of all exercises of stock options/SARs granted
during the year ended December 31, 1999 and in the most recently completed
financial year by each of the Named Executive Officers and the financial
year-end value of unexercised options/SARs on an aggregated basis:
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================
Value of Unexercised In-the-Money
Securities Unexercised Options/SARs at Fiscal Year-End
Acquired on Aggregate Options/SARs at ($)
Name(1) Exercise Value Realized Fiscal Year-End Exercisable/Unexercisable
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Henry R. Mandell N/A N/A 500,000 $0/$0
- --------------------------------------------------------------------------------------------------------------
Eric Rene Bos N/A N/A 25,000 $0/$0
- --------------------------------------------------------------------------------------------------------------
Steven D. Gershick N/A N/A 333,000 $0/$0
- --------------------------------------------------------------------------------------------------------------
Robert L. Montelius N/A N/A 25,000 $0/$0
- --------------------------------------------------------------------------------------------------------------
Theodore C. Tanner N/A N/A 110,000 $0/$0
- --------------------------------------------------------------------------------------------------------------
Peter S. Birch N/A N/A 30,000 $0/$0
==============================================================================================================
</TABLE>
(1) As of December 14, 1999, only Mr. Mandell continues as a named executive
officer. The valuation information for the other parties has not been
included.
TEN-YEAR OPTION/SAR REPRICINGS
The following table (presented in accordance with the Exchange Act and
the Regulations) sets forth details of all repricings of stock options/SARs
during the year ended December 31, 1999 for the Named Executive Officers:
<TABLE>
<CAPTION>
===============================================================================================================
Length of
Number of Original
Securities Market Price Exercise Term
Underlying of Stock at Price at Remaining at
Options/SARs Time of Time of Date of
Repriced or Repricing or Repricing or New Exercise Repricing or
Name Date Amended Amendment Amendment Price Amendment
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Henry R. Mandell 11/12/98 100,000 $0.125 $1.18 $0.125 4 yrs 4 mths
- ---------------------------------------------------------------------------------------------------------------
Eric Rene Bos N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Steven D. Gershick N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Robert L. Montelius N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Theodore C. Tanner(1) 1/25/99 60,000 $0.125 $1.31 $.0125 1997
1/25/99 50,000 $.0125 $2.15 $.0125 1998
- ---------------------------------------------------------------------------------------------------------------
Peter S. Birch 10/30/98 20,000 $0.1875 $1.62 $0.1875 4 yrs 2 mths
===============================================================================================================
</TABLE>
(1) Mr. Tanner resigned from the Company in March 1999, and has exercised
51,666 options; the balance have lapsed.
The above referenced stock option repricings were effected to bring the
exercise prices down to reflect the current market price in order to properly
incentivize the option holders. The modifications to the exercise prices
effected on October 30, 1998 were generally applied to all Spatializer and DPI
employees whose option
<PAGE>
exercise prices were above the then current market price. The modifications to
the exercise prices effected on November 12, 1998 were generally applied to the
interim chief executive officer whose option exercise prices were above the then
current market price.
Employment Agreements
Effective June 1996, MDT entered into employment agreements that had
original terms continuing until December 1997, with extensions, pursuant to
which Mr. Eric Rene Bos was designated as Vice President of Product Development
and Mr. Robert Montelius was designated as Vice President of Engineering, at
annual salaries of $120,000 each. In May 1997, the Company notified Messrs. Bos
and Montelius that it did not intend to renew their agreements beyond December
1997. In September 1997, the Company notified both parties that it would extend
their agreements through June 1998. Both Mr. Bos and Mr. Montelius left the
Company in April, 1999.
Effective October 1996, DPI entered into an employment agreement through
December 1997 (which, by its terms, was extended through December 1998) with
Theodore Tanner pursuant to which he was designated as Vice President of
Engineering, at an annual salary of $85,000. As of May 16, 1997, the annual
salary for Mr. Tanner was increased to $100,000. As of July 1, 1997, the annual
salary for Mr. Tanner was again increased to $110,000. As of July 31, 1998, Mr.
Tanner's annual salary was increased to $120,000. Mr. Tanner resigned from the
Company effective March 12, 1999.
Transactions with Management and Others
In December 1998, the Company entered into a loan agreement with the
directors and officers pursuant to which Carlo Civelli advanced $75,000 to the
Company and Messrs. Mandell, Rubenstein, Pace and Segel each advanced $5,000 to
the Company as a loan to fund immediate operating requirements. The loan bears
interest at the rate of 10% per annum and matured on November 30, 1999.
Currently, the Company and the lenders are in discussions with respect to the
restructuring of the loan arrangement.
In April 1998, Clarion Finanz AG advanced $650,000 in a working capital
loan to the Company. The loan bears interest at the rate of 10% per annum and
matured on December 31, 1998 but has been extended from time to time through the
date hereof. Clarion Finanz AG is an affiliate of Carlo Civelli, a member of the
Board. Currently, the Company and Clarion Finanz AG are in discussions with
respect to the restructuring of the loan arrangement.
<PAGE>
Compliance with Section 16(a) of the Exchange Act
Under the Exchange Act, the Company's directors, certain executive and
other officers, and any person holding more than ten percent (10%) of the
Company's Common Stock are required to report their ownership and any changes in
that ownership to the Securities and Exchange Commission (the "Commission") and
any exchange or quotation system on which the Common Stock is listed or quoted.
Specific due dates for these reports have been established and the Company is
required to report in this proxy statement any failure to file by directors and
officers and ten percent (10%) holders. Based solely on a review of the copies
of reports furnished to the Company as filed with the Commission, the Company
believes that its executive officers and directors have complied with the filing
requirements applicable to them for the year ended December 31, 1998.
Annual Report
The Company has previously forwarded to each stockholder who so requested
in writing a copy of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 as filed with the Securities and Exchange
Commission and the quarterly reports for the interim periods in 1999. Requests
for additional copies of these reports should be sent to the Company at 20700
Ventura Boulevard, Suite 140, Woodland Hills, California 91364, Attention:
Investor Relations.
Information Incorporated By Reference
In addition to the materials set forth herein, this Proxy Statement
incorporates by reference the following items previously filed with the SEC:
1. The Company's Report on Form 10-K for the year ended December 31, 1998, as
amended to date; and
2. The Company's Reports on Form 10-Q for the quarters ended March 31, June 30
and September 30, 1999.
DATED: January ____, 2000
BY ORDER OF THE BOARD
Henry R. Mandell
Interim Chief Executive Officer, Secretary and
Chief Financial Officer
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
SPATIALIZER AUDIO LABORATORIES, INC.
FIRST: That at a meeting of the Board of Directors of Spatializer Audio
Laboratories, Inc. (the "Corporation") resolutions were duly adopted setting
forth a proposed amendment of the Certificate of Incorporation of the
Corporation, declaring said amendment to be advisable and calling for such
amendment to be voted upon by the stockholders of the Corporation at the annual
meeting of such stockholders. The resolution setting forth the proposed
amendment is as follows:
"RESOLVED, that the Certificate of Incorporation of Spatializer Audio
Laboratories, Inc. (the "Corporation") be amended by changing the Article
thereof numbered "IV" so that, as amended, said Article shall be and read as
follows:
"SECTION 1. The total number of shares of all classes of stock which
the Corporation shall have the authority to issue is 66,000,000 shares,
consisting of 65,000,000 shares of Common Stock, par value $.01 per share
("Common Stock"), and 1,000,000 shares of Preferred Stock, par value $.01
per share ("Preferred Stock")."
SECOND: That thereafter, pursuant to a resolution of its Board of
Directors, the above amendment was put forth for a vote of the stockholders of
the Corporation at the Corporation's Annual Meeting of Stockholders, duly called
and held, upon notice in accordance with Section 222 of the General Corporations
Law of the State of Delaware, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with Section 242
of the General Corporation law of the State of Delaware.
FOURTH: That the capital of the Corporation shall not be reduced under or
by reason of said amendment.
SPATIALIZER AUDIO LABORATORIES, INC.
By:
------------------------------------------
Henry R. Mandell
Interim Chief Executive Officer, Secretary
and Chief Financial Officer
<PAGE>
SPATIALIZER AUDIO LABORARTORIES, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JANUAURY 25, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Steven D. Gershick and Henry R. Mandell,
and each one of them, as proxy and attorney-in-fact of the undersigned, with
full power of substitution, to represent and vote, as designated below, all
shares of Common Stock of Spatializer Audio Laboratories, Inc. (the "Company")
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of the Company to be held at the Hilton Hotel located at 6360 Canoga Avenue, in
Woodland Hills, California, on Tuesday, January 25, 2000, at 10:30 a.m., and at
any adjournments thereof.
The Board of Directors recommends a vote FOR Proposal I and FOR all nominees
listed in Proposal II.
Proposal I: To approve the proposal of the Board of Directors to increase
the total amount of the Company's authorized common stock,
$.01 par value per share (the "Common Stock") from 50,000,000
shares to 65,000,000 shares.
|_| FOR |_| AGAINST |_| ABSTAIN
Proposal II: To elect three Directors of the Company to serve until the
Annual Meeting of Stockholders to be held in 2003.
Nominees: Stephen W. Desper, Carlo Civelli, Henry R. Mandell
|_| FOR all nominees listed above. |_| WITHHOLD authority to vote
(except as marked to the contrary below).
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
(Continued on reverse side)
- --------------------------------------------------------------------------------
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL I AND FOR ALL NOMINEES LISTED IN PROPOSAL II, AND IN THE DISCRETION
OF EITHER PROXY HOLDER WITH RESPECT TO ANY OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING.
Dated: _________, 2000
Signed
(Stockholder(s) sign above)
NOTE: Please sign exactly as your name
appears hereon. Joint owners should each
sign personally. A corporation should
sign full corporate name by duly
authorized officers and affix corporate
seal. When signing as attorney,
executor, administrator, trustee or
guardian, give full title as such.
PLEASE RETURN PROMPTLY IN ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED
IN THE U.S.
