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EXHIBIT 4.11
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") OR THE SECURITIES COMMISSION OF ANY STATE
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES MAY NOT BE
SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES LAWS,
OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF
THE ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES LAWS.
COMMON STOCK SUBSCRIPTION AGREEMENT
SPATIALIZER AUDIO LABORATORIES, INC.
THIS COMMON STOCK SUBSCRIPTION AGREEMENT (this "Agreement") is executed
in reliance upon the transaction exemption afforded by Regulation D as
promulgated by the Securities and Exchange Commission ("SEC"), under the
Securities Act of 1933, as amended (the "Act").
This Agreement has been executed by the undersigned in connection with
the private placement of the Common Stock, $0.01 par value per share (the
"Common Stock") of Spatializer Audio Laboratories, Inc. (OTC Bulletin Board
symbol "SPAZ"), located at 00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx,
Xxxxxxxxxx 00000, a corporation organized under the laws of Delaware, USA
(hereinafter referred to as the "Company"). In addition, the Company will sell
to the Subscribers listed on Schedule A annexed hereto (collectively referred to
as a "Subscriber" or "Purchaser"), a warrant (the "Warrant") to purchase Two (2)
shares of Common Stock for each One Dollar ($1.00) funded hereunder and shall be
exercisable for a period of three (3) years from the Closing Date (as defined
herein), as per the terms of a separate Stock Purchase Warrant (Exhibit A
annexed hereto). This Subscription and, if accepted by the Company, the offer
and sale of the Common Stock, Warrant and the Common Stock underlying the
Warrant (collectively the "Securities"), are being made in reliance upon the
provisions of Regulation D under the Act.
The Closing Date shall be determined in accordance with Section 9
herein.
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Subscriber hereby represents and warrants to and agrees with the
Company, and the Company hereby represents and warrants to and agrees with
Subscriber, as follows:
SECTION 1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
1.1 Closing. The Company will sell and Subscriber will buy, in
reliance upon the representations and warranties of the Company and Subscriber
contained in this Agreement, upon the terms and conditions hereinafter set
forth, shares of Common Stock and Warrants to purchase Two (2) shares of Common
Stock for each One Dollar ($1.00) funded hereunder, for an aggregate purchase
price of Four Hundred Fifty Thousand U.S. Dollars (US$450,000.00) (the
"Aggregate Purchase Price") based on the purchase price per share of Common
Stock (the "Purchase Price") defined below. The number of shares of Common Stock
to be issued to Subscriber pursuant to this Agreement shall be determined by
dividing Four Hundred Fifty Thousand U.S. Dollars (US$450,000.00) by the
Purchase Price, provided, however, that the Company shall not issue to
Subscriber a fraction of a share of Common Stock and shall instead round the
number of shares of Common Stock issued up to the next whole share of Common
Stock.
1.2. Purchase Price. The Purchase Price shall be determined on
the Closing Date, and shall equal the average of the closing bid prices of
Common Stock for the ten (10) consecutive trading days ending one (1) trading
day prior to the Closing Date. The "closing bid price" shall mean the last bid
price for Common Stock on the OTC Bulletin Board, as reported by Bloomberg L.P.
1.3 Form of Payment. Subscriber shall pay the Aggregate Purchase
Price and the Company shall deliver the shares of Common Stock and Warrants to
counsel for Subscriber, who shall release such shares and Warrants to Subscriber
after the Aggregate Purchase Price has been paid to the Company.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber
acknowledges, represents, warrants and agrees as follows:
2.1 Organization and Authorization. Subscriber is duly
incorporated or organized and is validly existing in the state or country of its
incorporation or organization and has all requisite power and authority to
purchase and hold the Securities. The decision to invest and the execution and
delivery of this Agreement by Subscriber, the performance by Subscriber of its
obligations hereunder and the consummation by Subscriber of the transactions
contemplated hereby have been duly authorized and require no other proceedings
on the part of Subscriber. The undersigned has all right, power and authority to
execute and deliver this Agreement. This Agreement has been duly executed and
delivered by Subscriber and, assuming the execution and delivery hereof and
acceptance thereof by the Company, will constitute the legal, valid and binding
obligation of Subscriber, enforceable against Subscriber in accordance with its
terms.
2.2 No Conflict. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under, or give rise to
a right of termination, cancellation or acceleration of any material obligation
or to a loss of a material benefit with respect to, any provision of
Subscriber's charter, bylaws, partnership agreement, operating agreement or
other organizational document and
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any amendments thereto, or any material mortgage, deed of trust, indenture,
lease or other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree statute, law, ordinance, rule or regulation applicable
to Subscriber.
2.3 Evaluation of Risks. Subscriber has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of, and bearing the economic risks entailed by, an investment
in the Company and of protecting its interests in connection with this
transaction. Subscriber recognizes that its investment in the Company involves a
high degree of risk and it can afford the complete loss of its investment.
2.4 Independent Counsel. Subscriber acknowledges that it has been
advised to consult with its own attorney regarding legal matters concerning the
Company and to consult with its tax advisor regarding the tax consequences of
acquiring the Securities.
2.5 Disclosure Documentation. Subscriber has received and
reviewed copies of the Company's reports filed under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and the Act, including its 10-Ks, 10-Qs,
8-Ks, and registration statements, filed by the Company since March 1, 1998
(collectively, the "Reports"). Except for the Reports and this Agreement,
Subscriber acknowledges that it is not relying on any other information relating
to the offer and sale of the Securities. Subscriber acknowledges that the
Company has offered to make available any additional public information that
Subscriber may reasonably request, including technical information, and other
material information about the Company. Subscriber acknowledges that the Company
has offered its full and unconditional cooperation in making such information
available to Subscriber, and that the Company has recommended that Subscriber
request and review such information prior to making an investment decision.
2.6 Opportunity to Ask Questions. Subscriber has had a reasonable
opportunity to ask questions of and receive answers from the Company concerning
the Company and the offering, and all such questions, if any, have been answered
to the full satisfaction of Subscriber.
2.7 This Agreement and Reports Constitute Sole Representations.
Except for the delivery of the Reports and this Agreement, no oral or written
representations or warranties have been made, or oral or written information
furnished, to Subscriber or its advisors, if any, with respect to the offer and
sale of the Securities by the Company, any agent, employee or affiliate of the
Company, or by any other person. Subscriber acknowledges that in entering into
this transaction Subscriber is not relying upon any information, other than that
contained in the Reports, this Agreement and the results of independent
investigation, if any, by Subscriber.
2.8 Subscriber is an Accredited Investor. Subscriber is an
"Accredited Investor" as defined below and represents and warrants it is
included within one or more of the following categories of Accredited Investors:
(i) Any bank as defined in Section 3(a)(2) of the Act, or
any savings and loan associated or other institution as
defined in Section 3(a)(5)A of the Act whether acting in
its individual or fiduciary capacity; any broker or
dealer registered pursuant to Section 15 of the 1934
Act; any insurance company as
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defined in Section 2(13) of the Act; any investment
company registered under the Investment Company Act of
1940 or a business development company as defined in
Section 2(a)(48) of that Act; any Small Business
Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small
Business Act of 1958; any plan established and
maintained by a state, its political subdivisions, or
any agency or instrumentality of a state or its
political subdivision, for the benefits of its employees
if such plan has total assets in excess of US$5,000,000;
and employee benefit plan within the meaning of Title I
of the Employee Retirement Income Security Act of 1974
if the investment decision is made by a plan fiduciary,
as defined in Section 3(21) of such Act, which is either
a bank, savings and loan association, insurance company,
or registered investment advisor, or if the employee
benefit plan has total assets in excess of US$5,000,000
or, if a self-directed plan, with investment decisions
made solely by persons that are accredited investors;
(ii) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of
1940;
(iii) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed for
the specific purpose of acquiring the securities
offered, with total assets in excess of US$5,000,000;
(iv) Any director, executive officer, or general partner of
the issuer of the securities being offered or sold, or
any director, executive officer, or general partner of a
general partner of that issuer;
(v) Any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his
purchase exceeds US$1,000,000;
(vi) Any natural person who had an individual income in
excess of US$200,000 in each of the two (2) most recent
years or joint income with that person's spouse in
excess of US$300,000 in each of those years and has a
reasonable expectation of reaching that same income
level in the current year;
(vii) Any trust, with total assets in excess of US$5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person as described in Section
230.506(b)(2)(ii) of Regulation D under the Act;
(viii) Any entity in which all of the equity owners are
accredited investors;
(ix) Any self-directed employee benefit plan with investment
decisions made solely by persons that are accredited
investors within the meaning of Rule 501 of Regulation D
promulgated under the Act; or
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(x) Any private investment company with assets under
management in excess of US$________________________.
2.9 No Registration, Review or Approval. Subscriber acknowledges
and understands that the limited private offering and sale of Securities
pursuant to this Agreement has not been reviewed or approved by the SEC or by
any state securities commission, authority or agency, and is not registered
under the Act or under the securities or "blue sky" laws, rules or regulations
of any state. Subscriber acknowledges, understands and agrees that the
Securities are being offered and sold hereunder pursuant to (i) a private
placement exemption to the registration provisions of the Act pursuant to
Section 3(b) or Section 4(2) of such Act and Regulation D promulgated under such
Act, and (ii) a similar exemption to the registration provisions of applicable
state securities laws. Subscriber understands that the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of Subscriber set forth herein in order to
determine the applicability of such exemptions and the suitability of Subscriber
to acquire the Securities.
2.10 Investment Intent. Without limiting its ability to resell
the Securities pursuant to an effective registration statement or pursuant to an
available exemption to registration, Subscriber is acquiring the Securities
solely for its own account and not with a view to the distribution, assignment
or resale to others. Subscriber understands and agrees that it may bear the
economic risk of its investment in the Securities for an indefinite period of
time.
2.11 No Advertisements. Subscriber is not subscribing for the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting.
2.12 Registration Rights. The parties have entered into a
Registration Rights Agreement (Exhibit B annexed hereto).
2.13 Restricted Securities. Subscriber hereby confirms that it
has been informed that the Securities will be, when issued, restricted
securities under the Act and may not be resold or transferred unless first
registered under the federal securities laws or unless an exemption from such
registration is available with respect to a resale in the United States.
Accordingly, without agreeing to hold the Securities for any specific period of
time, Subscriber hereby acknowledges that it is prepared to hold the Securities
for an indefinite period. Subscriber is aware that Rule 144 and Regulation S,
promulgated under the Act, permit limited public resales of securities acquired
in non-public offerings, subject to the satisfaction of certain conditions.
Subscriber understands that under Rule 144 the conditions include, among other
things: the availability of certain current public information about the issuer,
the resale occurring not fewer than one (1) year or two (2) years, as
applicable, after the party has purchased and paid for the securities to be
sold, the sale being through a broker in an unsolicited "broker's transaction"
and the amount of securities being sold during any three-month period not
exceeding specified volume limitations (such restrictions not in effect after
two years). Subscriber acknowledges and understands that the Company may not be
satisfying the current public information requirement of Rule 144 at the time
Subscriber wishes to sell the Securities (Subscriber is however entering into
this transaction based upon the Company's
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representations and covenants below in Section 5), or other conditions under
Rule 144 which are required of the Company. Subscriber understands that
Regulation S, as currently in effect, allows resales in private and public
transactions in certain circumstances, only in qualified offshore transactions
and only when certain holding periods of at least one (1) year have been
fulfilled. Subscriber understands that he or she may be precluded from selling
any of the Securities under Rule 144 or Regulation S even if the holding periods
have been satisfied either because the other conditions may not have been
fulfilled or because markets for resales do not exist. Prior to its acquisition
of the Securities, Subscriber acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities.
Subscriber has such knowledge and experience in financial and business matters
as to make it capable of utilizing said information to evaluate the risks of the
prospective investment and to make an informed investment decision.
2.14. Authorized Shares. Subscriber hereby acknowledges that, as
of the Closing Date, the Company may not be able to reserve from its authorized
but unissued shares of Common Stock a sufficient number of shares of Common
Stock to permit the exercise in full of all of the outstanding Warrants.
Subscriber understands that the Company is currently taking steps to increase
the number of authorized shares of Common Stock.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. For so long as
any Securities held by Subscriber remain outstanding, the Company acknowledges,
represents, warrants and agrees as follows:
3.1 Organization/Qualification. The Company is a corporation duly
organized and validly existing under the laws of the State of Delaware and is in
good standing under such laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets, and to carry on
its business as presently conducted. The Company is qualified to do business as
a foreign corporation in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except where
failure to so qualify would not have a Material Adverse Effect. A "Material
Adverse Effect" shall mean any effect on the business, operations, properties,
results of operations, prospects, or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates, taken
as a whole, and/or any condition, circumstance, or situation that would prohibit
or otherwise in any material respect interfere with the ability of the Company
to enter into and perform any of its obligations under this Agreement, the
Registration Rights Agreement, or Warrants in any material respect. Except as
set forth in Section 2.14, the Company is not in violation of any material terms
of its Certificate of Incorporation (as defined below) or Bylaws (as defined
below).
3.2 Accuracy of Reports and Information. The Company is in
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12(g) or 15(d) of the 1934 Act, and shall maintain such
status on a timely basis. The Company has registered its Common Stock pursuant
to Section 12 of the 1934 Act and the Common Stock is listed and trades on the
OTC Bulletin Board. The Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the 1934 Act for a period of at least twelve (12) months immediately preceding
the offer and sale of the Securities (or for such shorter period that the
Company has been required to file such material).
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3.3 SEC Filings/Full Disclosure. For a period of at least twelve
(12) months immediately preceding the Closing Date: (i) none of the Company's
filings with the SEC contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were made, not
misleading; and (ii) the Company has timely (after giving effect to any filings
on Form 12b-25) filed all requisite forms, reports and exhibits thereto with the
SEC. There is no fact known to the Company (other than general economic
conditions known to the public generally) that has not been publicly disclosed
by the Company or disclosed in writing to Subscriber which (i) could reasonably
be expected to have a Material Adverse Effect on the Company. The financial
statements of the Company included in the Company's filings with the SEC as
referenced above comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
3.4 Authorization. The Company has all requisite corporate right,
power and authority to execute and deliver this Agreement (and all Exhibits
annexed hereto) and to consummate the transactions contemplated hereby. All
corporate action on the part of the Company, its directors and stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement (and all Exhibits annexed hereto) by the Company, the authorization,
sale, issuance and delivery of the Securities and the performance of the
Company's obligations hereunder has been taken. This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in this Agreement. Upon their
issuance and delivery pursuant to this Agreement, the Securities will be validly
issued, fully paid and non-assessable and will be free of any liens or
encumbrances; provided, however, that the Securities are subject to restrictions
on transfer under state and/or federal securities laws. The issuance and sale of
the Securities will not give rise to any preemptive right or right of first
refusal or right of participation on behalf of any person.
3.5 No Conflict. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under, or give rise to
a right of termination, cancellation or acceleration of any material obligation
or to a loss of a material benefit with respect to, any provision of the
Company's Certificate of Incorporation and any amendments thereto, Bylaws, or
any material mortgage, deed of trust, indenture, lease or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree
statute, law, ordinance, rule or regulation applicable to the Company, its
properties or assets, which would have a Material Adverse Effect.
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3.6 No Undisclosed Liabilities or Events. The Company has no
liabilities or obligations other than those disclosed in the Reports, this
Agreement or those incurred in the ordinary course of the Company's business
since December 31, 1998, and which individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company. No event or
circumstance has occurred or exists with respect to the Company or its
properties, business, condition (financial or otherwise), results of operations
or prospects, which, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed.
3.7 No Default. Except as set forth in this Agreement, the
Reports or on Schedule B annexed hereto, the Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its property
is bound, and neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement, including
the exercise provision of the Securities, will conflict with or result in the
breach or violation of any of the terms or provisions of, or constitute a
default or result in the creation or imposition of any lien or charge on any
assets or properties of the Company under, any material indenture, mortgage,
deed of trust or other material agreement applicable to the Company or
instrument to which the Company is a party or by which it is bound or any
statute or the Certificate of Incorporation or Bylaws of the Company, or any
decree, judgment, order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, or the Company's
listing agreement for its Common Stock.
3.8 Absence of Events of Default. Except as set forth in this
Agreement, the Reports or on Schedule B annexed hereto, no default, as defined
in the respective agreement to which the Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become a
default, has occurred and is continuing, which would have a Material Adverse
Effect on the Company.
3.9 Governmental Consent, etc. No consent, approval or
authorization of, or designation, declaration or filing with, any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Securities, or the consummation of any other transaction contemplated hereby,
except as may be required by applicable securities laws.
3.10 Intellectual Property Rights. Except as disclosed in the
Reports, the Company has sufficient trademarks, trade names, patent rights,
copyrights and licenses to conduct its business as presently conducted. To the
Company's knowledge, and except as disclosed in the Reports, neither the Company
nor its products is infringing or will infringe any trademark, trade name,
patent right, copyright, license, trade secret or other similar right of others
currently in existence; and there is no claim being made against the Company
regarding any trademark, trade name, patent, copyright, license, trade secret or
other intellectual property right which could have a Material Adverse Effect on
the Company.
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3.11 Material Contracts. Except as set forth in the Reports, the
agreements to which the Company is a party described in the Reports are valid
agreements, in full force and effect, and the Company is not in material breach
or material default under any of such agreements.
3.12 Litigation. Except as disclosed in the Reports, there is no
action, proceeding or investigation pending, or to the Company's knowledge
threatened, against the Company which might result, either individually or in
the aggregate, in a Material Adverse Effect on the Company. The Company is not a
party to or subject to the provisions of any order, writ, injunction, judgment
or decree of any court or government agency or instrumentality.
3.13 Title to Assets. Except as set forth in Reports, the Company
has good and marketable title to all properties and material assets described in
the Reports as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest other than such as are not
material to the business of the Company.
3.14 Subsidiaries. Except as disclosed in the Reports, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.
3.15 Required Governmental Permits. The Company is in possession
of and operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities which are material to the conduct of its business, all of which are
valid and in full force and effect.
3.16 Listing. The Company will use its best efforts to maintain
the listing of its Common Stock on the OTC Bulletin Board or another organized
United States market or quotation system. The Company has not received any
notice, oral or written, regarding continued listing and, as long as the Common
Stock and Warrants are outstanding, the Company will take no action which would
impact their continued listing or eligibility of the Company for such listing.
3.17 Other Outstanding Securities/Financing Restrictions. Except
as disclosed in the Reports, the Company has no outstanding restricted shares,
or shares of Common Stock sold under Regulation S, Regulation D or outstanding
under any other exemption from registration, which are available for sale as
unrestricted ("free trading") stock.
3.18 Registration Alternative. The Company covenants and agrees
that for so long as any of the Common Stock issuable upon exercise of the
Warrants remain outstanding and continue to be "restricted securities" within
the meaning of Rule 144 under the Act, the Company shall permit resales of the
underlying Common Stock pursuant to Rule 144 under the Act. The Company and
Subscriber shall provide the Company's transfer agent any and all papers
necessary to complete the transfer under Rule 144, including, but not limited
to, opinions of counsel to such transfer agent, and the Company shall continue
to file all material required to be filed pursuant to Sections 13(a) or 15(d) of
the 0000 Xxx.
3.19 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, $0.01 par value per share, of
which 43,033,477 shares were
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outstanding as of December 14, 1999, and 1,000,000 shares of Preferred Stock,
$0.01 par value per share, none of which are outstanding as of the date hereof.
All issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. No shares of Common Stock
or preferred stock of the Company are entitled to preemptive or similar rights.
Except (i) as disclosed in the Reports, (ii) for the issuance to Subscribers and
other investors of Common Stock and Warrants pursuant to a private placement
involving an aggregate investment of up to Xxx Xxxxxxx Xxxxxx-xxxx Xxxxxxxx
Xxxxxx Xxxxxx Dollars (US$1,025,000), (iii) for the delivery to Subscribers of
promissory notes in an aggregate principal amount of Two Hundred Twenty-five
Thousand, Two Hundred Forty-one and 10/100 Dollars (US$225,241.10) that are
convertible into Common Stock according to their terms, and (iv) the issuance of
Series B 10% Redeemable Convertible Preferred Stock to certain investors that is
convertible into Common Stock according to the terms of the Company's
Certificate of Designation of Series B 10% Redeemable Convertible Preferred
Stock, there are no outstanding options, warrants, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any subsidiary is or may
become bound to issue additional shares of Common Stock or securities or rights
convertible or exchangeable into shares of Common Stock. Except as disclosed in
the Reports, to the knowledge of the Company, no Person or group of Persons
beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the
0000 Xxx) or has the right to acquire by agreement with or by obligation binding
upon the Company beneficial ownership of in excess of five percent of the Common
Stock.
3.20 Dilution. The Company is aware and acknowledges that
exercise of the Warrant would cause dilution to existing stockholders and could
significantly increase the outstanding number of shares of Common Stock.
3.21 Corporate Documents. The Company has furnished or made
available to the Subscribers true and correct copies of the Company's
Certificate of Incorporation, as amended and in effect on the date hereof (the
"Certificate of Incorporation"), and the Company's bylaws, as amended and in
effect on the date hereof (the "Bylaws"). The Certificate of Incorporation and
Bylaws are in full force and effect as of the Closing Date, without change or
amendment.
3.22 No Material Adverse Effect. Since January 1, 1999, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the Reports, or as publicly announced.
3.23 Employee Relations. The Company is not involved in any labor
dispute, nor, to the knowledge of the Company, is any such dispute threatened
which could reasonably be expected to have a Material Adverse Effect. None of
the Company's employees is a member of a union and the Company believes that its
relations with its employees are good.
3.24 Insurance. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company is engaged. The Company has no notice to believe that it
will not be able to renew its existing insurance coverage
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as and when such coverage expires, or obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect.
3.25 Board Approval. The Board of Directors of the Company has
concluded, in its good faith business judgment that the issuances of the
Securities in connection with this Agreement are in the best interests of the
Company.
3.26 Patents and Trademarks. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses, trade secrets and other
intellectual property rights which are necessary for use in connection with its
business or which the failure to so have would have a Material Adverse Effect
(collectively, the "INTELLECTUAL PROPERTY RIGHTS"). To the best knowledge of the
Company, none of the Intellectual Property Rights infringe on any rights of any
other Person, and the Company either owns or has duly licensed or otherwise
acquired all necessary rights with respect to the Intellectual Property Rights.
The Company has not received any notice from any third party of any claim of
infringement by the Company of any of the Intellectual Property Rights, and has
no reason to believe there is any basis for any such claim. To the best
knowledge of the Company, there is no existing infringement by another Person on
any of the Intellectual Property Rights.
3.27 Use of Proceeds. The net proceeds are to be used for general
working capital and not for the repayment of any judgment.
3.28 Taxes. Except for the Company's failure to (i) file its
federal and state tax returns for its fiscal year 1998, and (ii) pay any federal
or state taxes owed for its fiscal year 1998, (which taxes are not of a material
amount), all federal, state, city and other tax returns, reports and
declarations required to be filed by or on behalf of the Company have been filed
and such returns are complete and accurate and disclose all taxes (whether based
upon income, operations, purchases, sales, payroll, licenses, compensation,
business, capital, properties or assets or otherwise) required to be paid in the
periods covered thereby.
3.29 No Bankruptcy. The Company is aware of no facts or claims
against it that would, and the Company has no present intention to, liquidate
the assets of the Company and/or seek bankruptcy protection either voluntarily
or involuntarily.
SECTION 4. COVENANTS OF THE COMPANY. For so long as any Securities held
by Subscriber remain outstanding, the Company acknowledges, represents, warrants
and agrees as follows:
(i) The Company shall use its best efforts to reserve, prior
to February 15, 2000, a sufficient number of shares of
Common Stock from its authorized but unissued shares of
Common Stock to permit the exercise in full of all of
the outstanding Warrants. The Company is currently
organizing a stockholder meeting to increase the number
of authorized shares of Common Stock of the Company, and
has filed with the SEC prior to the date hereof a
preliminary proxy statement in connection with such
stockholder meeting.
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(ii) It will maintain the listing of its Common Stock on the
OTC Bulletin Board. The Company shall (a) not later than
the fifth Business Day following the Closing Date
prepare and file with the OTC Bulletin Board an
additional shares listing application covering at least
the sum of (i) the shares of Common Stock issued on the
Closing Date, and (ii) the Warrant Shares issuable upon
exercise in full of the Warrants, (b) take all steps
necessary to cause such shares to be approved for
listing on the OTC Bulletin Board (as well as on any
other national securities exchange, market or trading
facility on which the Common Stock is then listed) as
soon as possible thereafter, and (c) provide to the
Subscribers evidence of such listing, and the Company
shall maintain the listing of its Common Stock on such
exchange or market for so long as the Securities is
owned by any of the Subscribers. In addition, if at any
time the number of shares of Common Stock issuable on
exercise in full of the Warrant is greater than the
number of shares of Common Stock theretofore listed with
the OTC Bulletin Board (and any such other national
securities exchange, market or trading facility), the
Company shall promptly take such action (including the
actions described in the preceding sentence), if
required pursuant to the rules and regulations of the
OTC Bulletin Board, to file an additional shares listing
application with the OTC Bulletin Board (and any such
other national securities exchange, market or trading
facility) covering at least a number of shares equal to
the number of Warrant Shares as would be issuable upon
exercise in full of the Warrants. The Company warrants
that it (i) has not received any notice, oral or
written, affecting its continued listing on the OTC
Bulletin Board, and (ii) is in full compliance with the
requirements for continued listing on the OTC Bulletin
Board. The Company will take no action, which would
impact its continued listing or the eligibility of the
Company for such listing. The Company will comply with
the listing and trading requirements of its Common Stock
on the OTC Bulletin Board and will comply in all
respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the OTC
Bulletin Board. If the Company receives notification
from Nasdaq or any other controlling entity stating that
the Company is not in compliance with the listing
qualifications of such OTC Bulletin Board, the Company
will immediately thereafter give written notice to the
Subscribers and take all action necessary to bring the
Company into compliance with all applicable listing
standards of the OTC Bulletin Board.
(iii) It will permit Subscriber to exercise its right to
exercise the Warrants and shall deliver the shares of
Common Stock to the Subscriber upon exercise of the
Warrants as per the terms of the Warrant.
SECTION 5. RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Securities to the public without registration, the
Company agrees to:
12
13
(i) make and keep public information available, as those
terms are understood and defined in Rule 144 under the
Act, at all times after the effective date on which the
Company becomes subject to the reporting requirements of
the Act or the 1934 Act;
(ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act
and the 1934 Act;
(iii) not take any action or file any document (whether or not
permitted by the 1934 Act or the rules thereunder) to
terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under
said Act.
(iv) furnish to Subscriber forthwith, upon request, a written
statement by the Company as to its compliance with the
reporting requirements of said Rule 144, and of the Act
and the 1934 Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports
and documents of the Company and other information in
the possession of or reasonably obtainable by the
Company as Subscriber may reasonably request in availing
itself of any rule or regulation of the SEC allowing
Subscriber to sell any such Securities without
registration.
SECTION 6. INDEMNIFICATION. The Company and Subscriber agree to
indemnify the other and to hold the other harmless from and against any and all
losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees and costs) which the other may sustain or incur in connection
with the breach by the indemnifying party of any representation, warranty or
covenant made by it in this Agreement.
SECTION 7. REGISTRATION OR EXEMPTION REQUIREMENTS. Subscriber
acknowledges and understands that the Securities may not be resold or otherwise
transferred except in a transaction registered under the Act and any applicable
state securities laws, or unless an exemption from such registration is
available. Subscriber understands that the Securities will be imprinted with a
legend that prohibits the transfer of the Securities unless they are registered
or such registration is not required.
SECTION 8. LEGEND. The certificates representing shares of Common Stock,
including shares of Common Stock to be issued upon exercise of the Warrants,
shall bear a legend restricting transfer under the Act, such legend to be
substantially as follows:
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"). SUCH SECURITIES MAY NOT BE OFFERED OR SOLD OR
TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE
ACT WHICH, EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE
144 UNDER THE ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY
TO THE COMPANY.
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14
The certificates representing these Securities, and each certificate issued in
transfer thereof, will also bear any legend required under any applicable state
securities law.
SECTION 9. CLOSING DATE. The Closing Date hereunder shall be December
29, 1999, or such earlier date on or before December 31, 1999, on which the
terms and conditions hereof are satisfied (the "Closing Date"), and all acts,
deliveries and confirmations comprising the Closing Date regardless of
chronological sequence, shall be deemed to occur contemporaneously and
simultaneously, and such acts, deliveries, or confirmations shall not be
effective unless and until the last of same shall have occurred, and as shall be
mutually agreed upon as to time and place.
SECTION 10. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. Subscriber
understands that the Company's obligation to sell the Common Stock and Warrants
are conditioned upon:
(i) The receipt and acceptance by the Company of this
Subscription Agreement and all duly executed Exhibits
thereto by an authorized officer of the Company;
(ii) Delivery by Subscriber of immediately available funds in
United States Dollars by wire transfer to an account
designated by the Company prior to the Closing Date as
payment in full for the purchase of the Securities;
(iii) All representations and warranties of Subscriber set
forth in this Agreement shall remain true and correct as
of the Closing Date; and
(iv) The sale and issuance of the Common Stock, Warrants, and
the proposed issuance of the Common Stock underlying the
Warrants shall be legally permitted by all laws and
regulations to which Subscriber and the Company are
subject.
SECTION 11. CONDITIONS TO SUBSCRIBER'S OBLIGATION TO PURCHASE. The
Company understands that Subscriber's obligation to purchase the Common Stock
and Warrants is conditioned upon:
(i) Acceptance by Subscriber of a satisfactory Subscription
Agreement and all duly executed Exhibits hereto for the
sale of the Securities;
(ii) Delivery of the original Common Stock and Warrants;
(iii) All representations and warranties of the Company
contained herein shall remain true and correct as of the
Closing Date; and
(iv) At the Closing Date, the sale and issuance of the Common
Stock and Warrants shall be legally permitted by all
laws and regulations to which the Company and Subscriber
are subject.
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SECTION 12. MISCELLANEOUS.
12.1 Governing Law/Jurisdiction. This Agreement will be
exclusively construed and enforced in accordance with and governed by the laws
of the State of New York except for matters arising under the Act, without
reference to principles of conflicts of law. Each of the parties consents to the
exclusive jurisdiction of the xxxxxxx xxxxx, xxxxxxx xxxxxxxx of the State of
New York in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
state or country having jurisdiction over the party against whom such judgment
was obtained, and each party hereby waives any defenses available to it under
local law and agrees to the enforcement of such a judgment. Each party to this
Agreement irrevocably consents to the service of process in any such proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
law.
12.2 Confidentiality. The Company and Subscriber agree to keep
confidential and not to disclose to or use for the benefit of any third party
the terms of this Agreement (or any Exhibit annexed hereto) or any other
information which at any time is communicated by the other party as being
confidential without the prior written approval of the other party; provided,
however, that this provision shall not apply to information which, at the time
of disclosure, is already part of the public domain (except by breach of this
Agreement) and information which is required to be disclosed by law. If for any
reason the transactions contemplated by this Agreement are not consummated, each
of the parties hereto shall keep confidential any information obtained from any
other party, except information publicly available or in such party's domain
prior to the date hereof, and except as required by court order and shall
promptly return to the other parties all schedules, documents, instruments, work
papers or other written information, without retaining copies thereof,
previously furnished by it as a result of this Agreement or in connection
herewith.
12.3 Facsimile/Counterparts/Entire Agreement. Except as otherwise
stated herein, in lieu of the original, a facsimile transmission or copy of the
original shall be as effective and enforceable as the original. This Agreement
may be executed in counterparts which shall be considered an original document
and which together shall be considered a complete document. This Agreement and
Exhibits hereto constitute the entire agreement between Subscriber and the
Company with respect to the subject matter hereof. This Agreement may be amended
only by a writing executed by all parties.
12.4 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
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12.5 Entire Agreement. This Agreement and Exhibits hereto
constitute the entire agreement between Subscriber and the Company with respect
to the subject matter hereof. This Agreement may be amended only by a writing
executed by all parties.
12.6 Reliance by Company. Subscriber represents to the Company
that the representations and warranties of Subscriber contained herein are
complete and accurate and may be relied upon by the Company in determining the
availability of an exemption from registration under federal and state
securities laws in connection with a private offering of securities.
12.7 Legal Fees and Expenses. Each of the parties shall pay its
own fees and expenses (including the fees of any accountants, appraisers or
others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby.
12.8 Authorization. Each of the parties hereto represents that
the individual executing this Agreement on its behalf has been duly and
appropriately authorized to execute the Agreement.
[Remainder of Page Intentionally Left Blank]
16
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IN WITNESS WHEREOF, this Agreement was duly executed on and as of
December 29, 1999.
SPATIALIZER AUDIO LABORATORIES, INC.,
By: /s/ XXXXX X. XXXXXXX
-------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Interim Chief Executive Officer
CPR (USA) INC.
By: /s/Xxxxxx X. Xxxxxx
-------------------
Name: Xxxxxx X. Xxxxxx
----------------
Title: Managing Director, CPR (USA), Inc.
----------------------------------
LIBERTYVIEW FUNDS, L.P.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
----------------
Title: Authorized Signatory
--------------------
LIBERTYVIEW FUND, LLC
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name:
-------------------------------
Title: Authorized Signatory
--------------------
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SCHEDULE A
SUBSCRIBER NUMBER OF SHARES NUMBER
NAME AND ADDRESS PURCHASE PRICE OF COMMON STOCK OF WARRANTS
---------------- -------------- --------------- -----------
CPR (USA) Inc. US$225,000 403,769 450,000
c/o LibertyView Capital
Management, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
LibertyView Funds, L.P. US$180,000 323,015 360,000
c/o LibertyView Capital
Management, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
LibertyView Fund, LLC US$45,000 80,754 90,000
c/o LibertyView Capital
Management, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
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SCHEDULE B
1. The Company has failed to pay at the stated maturity on December 31,
1998, the principal and accrued interest due under that certain
Nonnegotiable Unsecured Promissory Note, issued April 14, 1998, by the
Company to Clarion Finanz, A.G. in the original principal amount of
US$650,000.00. This note is being restructured on or before January 1,
2000, by agreement between the parties.
2. The Company has failed to pay at the stated maturity on November 30,
1999, the principal and accrued interest due under that certain
Nonnegotiable Secured Promissory Note, issued December 14, 1998, by the
Company to Xxxxx Xxxxxxx and certain officers and directors of the
Company in the original principal amount of US$95,000.00. This note is
being restructured on or before January 1, 2000, by agreement between
the parties.
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EXHIBIT A
Stock Purchase Warrant
21
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY
NOT BE OFFERED OR SOLD OR TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH,
EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT, IS
CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY.
STOCK PURCHASE WARRANT
To Purchase 450,000 Shares of Common Stock of
SPATIALIZER AUDIO LABORATORIES, INC.
THIS STOCK PURCHASE WARRANT (this "Warrant") certifies that, for value
received, CPR (USA) INC. (the "Investor"), is entitled, upon the terms and
subject to the conditions hereinafter set forth, at any time after the date
hereof and on or prior to December 31, 2002 (the "Termination Date") but not
thereafter, to subscribe for and purchase from SPATIALIZER AUDIO LABORATORIES,
INC., a Delaware corporation (the "Company"), Four Hundred Fifty Thousand
(450,000) shares of Common Stock (the "Warrant Shares"). The purchase price of
one share of Common Stock (the "Exercise Price") under this Warrant shall be
Sixty-seven United States Cents (US$0.67). The Exercise Price and the number of
shares for which the Warrant is exercisable shall be subject to adjustment as
provided herein. This Warrant is being issued in connection with the Common
Stock Subscription Agreement (the "Agreement"), dated as of December 29, 1999,
in the amount of Two Hundred Twenty-five Thousand United States Dollars
(US$225,000) between the Company, the Investor, LIBERTYVIEW FUNDS, L.P., and
LIBERTYVIEW FUND, LLC, and is subject to its terms. Capitalized terms not
otherwise defined herein shall have that meaning as set forth in the Agreement.
In the event of any conflict between the terms of this Warrant and the
Agreement, the Agreement shall control.
1. Title of Warrant. This Warrant shall be issued in the name of the
Investor. This Warrant is not transferable or assignable other than to an
affiliate of the Investor.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights represented by
this Warrant may be made at any time or times one day after the date hereof, in
whole or in part, before the close of business on the Termination Date, or such
earlier date on which this Warrant may terminate as provided in Section 12
below, by the surrender of this Warrant and the Notice of Exercise annexed
hereto duly executed, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the Investor
at the address of the Investor appearing on the books of the Company) and upon
payment of the Exercise Price of the shares thereby purchased;
22
whereupon the Investor shall be entitled to receive a certificate for the number
of shares of Common Stock so purchased. Certificates for shares purchased
hereunder shall be delivered to the Investor within five business days after the
date on which this Warrant shall have been exercised as aforesaid. Payment of
the Exercise Price of the shares may be by certified check or cashier's check or
by wire transfer to an account designated by the Company in an amount equal to
the Exercise Price multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the Investor for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the Investor.
6. Restrictions on Transfer of Warrant Shares.
(a) Warrant Shares may not be sold, transferred, pledged,
hypothecated or otherwise disposed of except in accordance with applicable
federal and state securities laws.
(b) Unless the Warrant Shares have been registered under the Act,
or are exempt from registration, upon exercise of the Warrant or any portion
thereof and the issuance of any Warrant Shares, all certificates representing
Warrant Shares shall bear on the face thereof substantially the following
legend:
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). SUCH SECURITIES MAY NOT BE OFFERED OR SOLD OR TRANSFERRED
IN THE UNITED STATES OR TO U.S. PERSONS IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH,
EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER
SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE
COMPANY.
The Investor agrees and acknowledges that this Warrant is being purchased for
its own account, for investment purposes only, and not for the account of any
other person, and not with a view to distribution, assignment, pledge or resale
to others or to fractionalization in whole or in part. The Investor further
represents, warrants and agrees as follows: no other person has or will have a
direct or indirect beneficial interest in this Warrant and the Investor will not
sell, hypothecate or otherwise transfer the Warrant except in accordance with
the Act thereunder and applicable state securities laws or unless, in the
opinion of counsel for the Investor acceptable to the Company, an exemption from
the registration requirements of the Act and such laws is available.
7. Closing of Books. The Company will at no time close its stockholder
books or records in any manner which interferes with the timely exercise of this
Warrant.
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8. No Rights as Stockholder until Exercise. This Warrant does not
entitle the Investor to any voting rights or other rights as a stockholder of
the Company prior to the exercise thereof. If, however, at the time of the
surrender of this Warrant and purchase of Warrant Shares the Investor shall be
entitled to exercise this Warrant, the shares so purchased shall be and be
deemed to be issued to the Investor as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been exercised.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant,
and in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such
Warrant, if mutilated, the Company will make and deliver a new Warrant of like
tenor and dated as of such cancellation, in lieu of this Warrant.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.
11. Effect of Certain Events.
(a) If at any time the Company proposes to sell or otherwise
convey all or substantially all of its assets, a sale in which the consideration
to be received by the Company or its stockholders consists solely of cash, the
Company shall give the Investor thirty (30) days' notice of the proposed
effective date of the transaction specifying that the Warrant shall terminate if
the Warrant has not been exercised by the effective date of the transaction.
(b) In case the Company shall at any time effect any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed into
the same or a different number of shares of the same or another class or classes
of stock or securities of the Company or another entity, or other property, the
Investor shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately prior thereto.
(c) The Investor shall be granted registration rights for the
Warrant Shares pursuant to a Registration Rights Agreement dated of even date
herewith.
12. Adjustments of Exercise Price and Number of Warrant Shares. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following:
In case the Company shall (i) declare or pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide
24
its outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) issue any
shares of its capital stock in a reclassification of the Common Stock, then, in
such events, the number of Warrant Shares purchasable upon exercise of this
Warrant immediately prior thereto shall be adjusted so that the Investor shall
be entitled to receive the kind and number of Warrant Shares or other securities
of the Company which he would have owned or have been entitled to receive had
such Warrant been exercised in advance thereof. An adjustment made pursuant to
this Section 12 shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at its
discretion, at any time during the term of this Warrant, reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the Investor notice of such adjustment or adjustments setting forth the
number of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth computation by which such adjustment was made. Such
notice, in absence of manifest error, shall be conclusive evidence of the
correctness of such adjustment.
15. Authorized Shares. The Investor hereby acknowledges that, as of the
Closing Date (as defined in the Agreement), the Company may not be able to
reserve from its authorized but unissued shares of Common Stock a sufficient
number of shares of Common Stock to permit the exercise in full of all of the
outstanding Warrants. The Company shall use its best efforts to reserve, prior
to February 15, 2000, a sufficient number of shares of Common Stock from its
authorized but unissued shares of Common Stock to permit the exercise in full of
all of the outstanding Warrants. The Company covenants that, after such time as
it has increased the number of authorized shares of Common Stock and for the
remainder of the period the Warrant is outstanding, it will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of the Warrant Shares upon the exercise of any rights under
this Warrant. Subject to the foregoing, the Company further covenants that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of the Company's Common Stock upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such shares of Common
Stock may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of the OTC Bulletin Board or any domestic
securities exchange upon which the Common Stock may be listed.
16. Miscellaneous.
(a) Issue Date; Jurisdiction. The provisions of this Warrant
shall be construed and shall be given effect in all respects as if it had been
issued and delivered by the Company on the
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date hereof. This Warrant shall be binding upon any successors or assigns of the
parties hereto. This Warrant shall constitute a contract under the laws and
jurisdiction of California and for all purposes shall be construed in accordance
with and governed by the laws of said state without regard to its conflict of
law, principles or rules.
(b) Restrictions. The Investor acknowledges that the Common Stock
acquired upon the exercise of this Warrant, if not registered, may have
restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Investor or the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
the Investor at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
[Remainder of Page Intentionally Left Blank]
26
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated as of: December 29, 1999
SPATIALIZER AUDIO LABORATORIES, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
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NOTICE OF EXERCISE
To: Spatializer Audio Laboratories, Inc.
(1) The undersigned hereby elects to purchase _________________
shares of Common Stock of Spatializer Audio Laboratories, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned.
Dated: CPR (USA) INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
NOTE: Signature must conform in all respects to holder's name as specified on
the face of the attached warrant.
28
EXHIBIT B
Registration Rights Agreement
29
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the 29th day of December,
1999, between a Delaware corporation ("CPR"), LIBERTYVIEW FUNDS, L.P., a Cayman
Islands exempted limited partnership ("LP") and successor-in-interest to
LIBERTYVIEW PLUS FUND, a Cayman Islands corporation, and LIBERTYVIEW FUND, LLC,
a Delaware limited liability company ("LLC", and together with CPR and LP,
collectively referred to as the "Holder" or "Holders"), and SPATIALIZER AUDIO
LABORATORIES, INC., a Delaware corporation having its principal place of
business at 00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
(the "Company").
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Holders are purchasing from the Company, pursuant to that certain
Common Stock Subscription Agreement (the "Subscription Agreement"), dated of
even date herewith, an aggregate of Eight Hundred Seven Thousand Five Hundred
Thirty-eight (807,538) shares of Common Stock, and a Warrant to purchase an
aggregate of Nine Hundred Thousand (900,000) shares of Common Stock. The shares
of Common Stock of the Company underlying the Warrants acquired by the Holders
are referred to as the "Warrant Shares" (capitalized terms defined in the
Subscription Agreement and not otherwise defined herein have the meanings
specified in the Subscription Agreement); and
WHEREAS, the Company desires to grant to the Holders the registration
rights set forth herein.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term "Registrable
Securities" means the shares of Common Stock subscribed for and purchased by the
Holders pursuant to the Subscription Agreement, and the Warrant Shares;
provided, however, that with respect to any particular Registrable Security,
such security shall cease to be a Registrable Security when, as of the date of
determination, (i) it has been effectively registered under the Securities Act
of 1933, as amended (the "Act") and disposed of pursuant thereto, (ii)
registration under the Act is no longer required for the immediate public
distribution of such security as a result of the provisions of Rule 144, or
(iii) it has ceased to be outstanding. In the event of any merger,
reorganization, consolidation, recapitalization or other change in corporate
structure affecting the Common Stock, such adjustment shall be made in the
definition of Registrable Security as is appropriate in order to prevent any
dilution or enlargement of the rights granted pursuant to this Section 1.
Section 2. Restrictions on Transfer. The Holder acknowledges and
understands that prior to the registration of the Registrable Securities as
provided herein, the Registrable Securities are "restricted securities" as
defined in Rule 144 promulgated under the Act. The Holder understands that no
disposition or transfer of the Registrable Securities may be made by Holder in
the absence of (i) an opinion of counsel reasonably satisfactory to the Company
that such transfer may be made or (ii) a registration statement under the Act is
then in effect with respect thereto.
30
Section 3. Registration Rights.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission (the "SEC"), within thirty (30) days after
the date hereof, a registration statement on Form S-3 or if the Company is not
eligible to use such Form S-3, another appropriate form of registration
statement (the "Registration Statement"), at the sole expense of the Company
(except as provided in Section 3(c) hereof), in respect of Holder's Registrable
Securities, so as to permit resale of the Registrable Securities under the Act.
The Company agrees that it will cause the Registration Statement to become
effective by April 15, 2000. The number of securities to be registered shall
include all of Holder's Registrable Securities.
(b) The Company will maintain the Registration Statement or
post-effective amendment filed under this Section 3 hereof current under Act
until the earlier of (i) the date that all of the Registrable Securities have
been sold pursuant to the Registration Statement, (ii) the date that the
Registrable Securities may be sold under the provisions of Rule 144 or (iii)
three (3) years after the effective date of the Registration Statement (the
"Effective Date").
(c) All fees, disbursements and out-of-pocket expenses and costs
incurred by the Company in connection with the preparation and filing of the
Registration Statement under Section 3(a) and in complying with applicable
securities and Blue Sky laws (including, without limitation, all attorneys'
fees) shall be borne by the Company. The Holder shall bear the costs of
underwriting discounts and commissions, if any, applicable to the Registrable
Securities being registered on its behalf and all of the other fees and expenses
of such registration, including of its counsel and such other expenses as are
necessary to qualify the sale of Registrable Securities in compliance with any
state Blue Sky laws. The Company shall use its best efforts to qualify any of
the securities for sale in such states as the Holder reasonably designates and
shall furnish indemnification in the manner provided in Section 9 hereof.
However, the Company shall not be required to qualify the Registrable Securities
in any state or jurisdiction which will require an escrow or other restriction
relating to the Company and/or the sellers, or where the Company would be
required to qualify as a dealer in securities under the securities or blue sky
laws of such state or jurisdiction. The Company at its expense will supply the
Holder with copies of such Registration Statement and the prospectus or offering
circular included therein and other related documents in such quantities as may
be reasonably requested by the Holder.
(d) The Company shall not be required by this Section 3 to
include Holder's Registrable Securities in the Registration Statement which is
to be filed if, in the opinion of counsel for both the Holder and the Company
(or, should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and the Company),
the proposed offering or other transfer as to which such registration is
requested is exempt from applicable federal and state securities laws and would
result in all purchasers or transferees obtaining securities which are not
restricted securities, as defined in Rule 144 under the Act.
(e) No provision contained herein shall preclude the Company from
selling securities pursuant to any registration statement in which it is
required to include Registrable Securities pursuant to this Section 3.
31
(f) In the event the Registration Statement to be filed by the
Company pursuant to Section 3(a) above is not filed by the Company by the
thirtieth (30th) day after the Closing Date, or if the Registration Statement is
not declared effective by the SEC by the April 15, 2000 (the "EFFECTIVE DATE"),
then the Company will pay, in cash, to the Holders on a pro-rata basis by wire
transfer, as liquidated damages for such failure and not as a penalty, two (2%)
percent of the then value of the Registrable Securities then outstanding each
month thereafter until the Registration Statement has been filed and/or declared
effective. The liquidated damages shall be payable within five (5) calendar days
of written demand by the Holder(s).
If the Company does not remit the damages to the Holder as set
forth above, the Company will pay the to the Holders the reasonable costs of
collection, including attorneys fees, in addition to the liquidated damages.
Such payment shall be made to the Holders in cash immediately if the
registration of the Registrable Securities are not effected; provided, however,
that the payment of such liquidated damages shall not relieve the Company from
its obligations to register the Registrable Securities pursuant to this Section.
The registration of the Securities pursuant to this provision shall not affect
or limit Holder's other rights or remedies as set forth in this Agreement.
(g) The Company agrees that within three Business Days after
being notified by the SEC that the Registration Statement(s) has been cleared to
go effective, the Company it will declare such Registration Statement effective.
The Company also agrees that it shall respond in writing to any questions and/or
comments from the SEC that relate to the Registration Statement(s) within ten
business days of receipt of such question or comment.
(h) In the event the number of shares of Common Stock included in
the Registration Statement shall be insufficient to cover the number of
Registrable Securities due to the Holder under the terms of the Purchase
Agreement and/or the Notes, the Company agrees that it shall file either a new
Registration Statement including such additional shares or amend the then
existing Registration Statement. The Company agrees that in such event it will
file with the SEC either an amendment to the then existing Registration
Statement or a new Registration Statement within 30 days of when required
hereunder, and use its best efforts to cause either the amendment or such
Registration Statement to become effective within 90 calendar days from when
required. If such amendment or new Registration Statement is not filed and/or
declared effective in a timely manner as set forth herein, the Company shall be
subject to liquidated damages as pursuant to the provisions of Section 3(f).
Section 4. Cooperation with Company. Holder will cooperate with the
Company in all respects in connection with this Agreement, including, timely
supplying all information reasonably requested by the Company and executing and
returning all documents reasonably requested in connection with the registration
and sale of the Registrable Securities.
Section 5. Registration Procedures. Whenever the Company is required by
the provisions of this Agreement to effect the registration of any of the
Registrable Securities under the Act, the Company shall (except as otherwise
provided in this Agreement), as expeditiously as possible:
32
(a) prepare and file with the SEC such amendments and supplements
to such registration statement and the Prospectus used in connection therewith
as may be necessary to keep such registration statement effective as per Section
3(b) herein and to comply with the provisions of the Act with respect to the
sale or other disposition of all securities covered by such registration
statement when the Holder of such securities shall desire to sell or otherwise
dispose of the same (including prospectus supplements with respect to the sales
of securities from time to time in connection with a registration statement
pursuant to Rule 415 under the Act);
(b) furnish to the Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Act, and such other documents, as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such Holder;
(c) use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as the Holder shall reasonably request, and do any
and all other acts and things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition in such jurisdiction
of the securities owned by the Holder; provided, however, that: (i) the Company
shall not for any such purpose be required to qualify to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified or to
file therein any general consent to service of process, and (ii) the Company
shall not be obligated to take any action to effect any such registration,
qualification or compliance pursuant to this Section 5(c) in any jurisdiction in
which the Company would be required to qualify as a dealer in securities under
the securities or blue sky laws of such jurisdiction.
(d) list such securities on the OTC Bulletin Board or any
securities exchange on which any securities of the Company is then listed, if
the listing of such securities is then permitted under the rules of such
exchange;
(e) enter into and perform its obligations under an underwriting
agreement, if the offering is an underwritten offering, in usual and customary
form, with the managing underwriter or underwriters of such underwritten
offering;
(f) notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto covered
by such registration statement is required to be delivered under the Act, of the
happening of any event of which it has knowledge as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
Section 6. Assignment. The rights granted the Holder under this
Agreement shall be assigned to affiliates, heirs, and successors of the Holders.
This Agreement is binding upon and inures to the benefit of the parties hereto
and their respective heirs, successors and permitted assigns.
33
Section 7. Termination of Registration Rights. The rights granted
pursuant to this Agreement shall terminate as to the Holder upon the occurrence
of any of the following:
(a) all of the Holder's securities subject to this Agreement
have been registered;
(b) such Holder's securities subject to this Agreement may
be sold without such registration pursuant to Rule 144
promulgated by the SEC pursuant to the Act;
(c) such Holder's securities subject to this Agreement can
be sold pursuant to Rule 144(k).
Section 8. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Holder
and each person, if any, who controls Holder within the meaning of the Act
("Distributing Holders") against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all attorneys'
fees), to which the Distributing Holder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
or any related preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, preliminary prospectus, final
prospectus, offering circular, notification or amendment, or supplement thereto
in reliance upon, and in conformity with, written information furnished to the
Company by the Distributing Holders, specifically for use in the preparation
thereof. This Section shall not inure to the benefit of any Distributing Holder
with respect to any person asserting such loss, claim, damage or liability who
purchased the Registrable Securities which are the subject thereof if the
Distributing Holder failed to send or give (in violation of the Act or the rules
and regulations promulgated thereunder) a copy of the prospectus contained in
the Registration Statement to such person at or prior to the written
confirmation to such person of the sale of such Registrable Securities, where
the Distributing Holder was obligated to do so under the Act or the rules and
regulations promulgated hereunder. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and
hold harmless the Company, and each officer, director of the Company or person,
if any, who controls the Company within the meaning of the Act, against any
losses, claims, damages or liabilities (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees) to which the Company or any such officer,
director or controlling person may become subject under the Act or otherwise,
insofar as such losses claims, damages or liabilities (or actions in respect
thereof); arise out of or are based upon any untrue statement or alleged untrue
34
statement of any material fact contained in the Registration Statement prepared
by the Company, or any related preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in such Registration Statement, preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
such Distributing Holder, specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the Distributing
Holders may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than as to the particular item as to which indemnification is then
being sought solely pursuant to this Section. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, assume the defense thereof, subject to the provisions herein
stated and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Distributing Holder, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Distributing Holder and the indemnifying party and the Distributing Holder shall
have been advised by such counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the Distributing Holder (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Distributing Holder, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
35
Section 9. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) the Distributing Holder, or
the Company, makes a claim for indemnification, but is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of this Agreement provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
Distributing Holder, or the Company, then the Company and the applicable
Distributing Holder shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), in either such case (after contribution
from others) on the basis of relative fault as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the applicable
Distributing Holder, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Holder agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
Section 10. Notices. Any notice pursuant to this Agreement by the
Company or by the Holder shall be in writing and shall be deemed to have been
duly given if delivered by (i) hand, (ii) by facsimile and followed by mail
delivery or (iii) if mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to the Holder, to its address set forth herein.
(b) If to the Company, at the address set forth herein, or to
such other address as any such party may designate by notice to the other party.
Notices shall be deemed given at the time they are delivered personally or five
(5) business days after they are mailed in the manner set forth above. If notice
is delivered by facsimile and followed by mail, delivery shall be deemed given
two (2) days after such facsimile is sent.
Section 11. "Piggy-Back" Registration. The Holder shall have the right
to include the Registrable Securities as part of any registration of securities
filed by the Company (other than in connection with a transaction contemplated
by Rule 145(a) promulgated under the Act or pursuant to Form S-8) and must be
notified in writing of such filing; provided, however, that the Holder agrees it
shall not have any piggy-back registration rights pursuant to this Section if
the Registrable Securities may be sold in the United States pursuant to the
provisions of Rule 144. The Holder shall have five (5) business days to notify
the Company in writing as to whether the Company is to
36
include the Holder or not include the Holder as part of the registration;
provided, however, that if any registration pursuant to this Section shall be
underwritten, in whole or in part, the Company may require that the Registrable
Securities requested for inclusion pursuant to this Section be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the underwriter
evidenced in writing of such offering only a limited number of Registrable
Securities should be included in such offering, or no such shares should be
included, the holder, and all other selling stockholders, shall be limited to
registering such proportion of their respective shares as shall equal the
proportion that the number of shares of selling stockholders permitted to be
registered by the underwriter in such offering bears to the total number of all
shares then held by all selling stockholders desiring to participate in such
offering. Those Registrable Securities which are excluded from an underwritten
offering pursuant to the foregoing provisions of this Section (and all other
Registrable Securities) shall be withheld from the market by the holders thereof
for a period, not to exceed one hundred eighty (180) days, which the underwriter
may reasonably determine is necessary in order to effect such underwritten
offering. The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section prior to the effectiveness of
such registration. All registration expenses incurred by the Company in
complying with this Section shall be paid by the Company, exclusive of
underwriting discounts, commissions and legal fees and expenses for counsel to
the Holder.
Section 12. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 13. Headings. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 14. Governing Law, Venue. This Agreement shall be exclusively
construed and enforced in accordance with and governed by the laws of the State
of New York except for matters arising under the Act, without reference to
principles of conflicts of law. Each of the parties consents to the exclusive
jurisdiction of the xxxxxxx xxxxx, xxxxxxx xxxxxxxx of the State of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. Each party hereby agrees that if another party to this Agreement
obtains a judgment against it in such a proceeding, the party which obtained
such judgment may enforce same by summary judgment in the courts of any state or
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. Each party to this
Agreement irrevocably consents to the service of process in any such proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
law. Section 15.
Severability/Defined Terms. If any provision of this Agreement
shall for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid or unenforceable provision
37
had never been contained herein. Terms not otherwise defined herein shall be
defined in accordance with the Subscription Agreement.
[Remainder of Page Intentionally Left Blank]
38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, on the day and year first above written.
SPATIALIZER AUDIO LABORATORIES, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
WITNESSED:
-------------------------
Xxxxxxxx X. Xxxx
CPR (USA) INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
LIBERTYVIEW FUNDS, L.P.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
LIBERTYVIEW FUND, LLC
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
