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SPATIALIZER AUDIO LABORATORIES, INC.
EXHIBIT 4.9 SPATIALIZER AUDIO LABORATORIES, INC. MODIFICATION AGREEMENT
FOR ESCROWED PERFORMANCE SHARES
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AGREEMENT
This Agreement is made and entered into as of December 30, 1996,
between Spatializer Audio Laboratories, Inc., a Delaware corporation
("Company") with its principal offices at 00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000,
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, 00000 and ____________, an individual with an
address at 00000 Xxxxxxx Xxxxxxxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
("Stockholder"), who is the holder of _______ Escrowed Performance Shares (as
defined below).
W I T N E S S E T H:
WHEREAS, as of the date hereof, the Stockholder holds ________
Escrowed Performance Shares of the Common Stock of the Company (after giving
effect to any concurrent transfers) pursuant to the Escrow Agreement
originally dated June 22, 1992 ("Escrow Agreement") which shares were issued to
the Stockholder, from time to time, under the Escrow Agreement or have been
issued to the Stockholder under the Spatializer Audio Laboratories, Inc. 1996
Incentive Plan ("1996 Plan"); and
WHEREAS, such Shares are subject to release based on the performance
criteria set forth in the Escrow Agreement (the "Escrowed Performance Shares")
or in the Restrictive Share Grant document under the 1996 Plan; and
WHEREAS, in early 1996 the Board of Directors of the Company ("Board")
concluded that it was in the best interest of the Company to modify the current
arrangements for the Escrowed Performance Shares ("Modification") and to
establish definite dates on which the Escrowed Performance Shares would become
fully vested and available for sale or transfer by the Stockholder without
reference to the earnings requirements in the Escrow Agreement ("Fixed
Vesting") and the other individuals holding Escrowed Performance Shares, which
Modification was intended to provide a stable market in the Company's capital
stock and to accommodate certain provisions of the U.S. personal income and
corporate tax and corporate financial accounting rules which impact both the
holders of the Escrowed Performance Shares and the Company; and
WHEREAS, pursuant to the Escrow Agreement and the rules and policies
of the Vancouver Stock Exchange ("VSE") and the British Columbia Securities
Commission ("BCSC") the Company presented the proposed Modification to the VSE
and the BCSC for their consent and support, as applicable ("Support") and to
the stockholders of the Company for their approval ("Approval") at the annual
meeting held on August 6, 1996; and
WHEREAS the Stockholders gave their Approval to the Modification and
to the 1996 Plan at the annual meeting and the VSE gave its Support to the
Modification as presented, but the BCSC has given its Support only after
certain changes which, in effect, have adjusted the Fixed Vesting and provided
to the Company the opportunity to combine the Fixed Vesting with a release,
based on the earnings requirements ("Cashflow Release") set forth in the
original Escrow Agreement; and
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WHEREAS the Company and the Stockholder wish to enter into this
Agreement with respect to the implementation of the Modification (which term
incorporates the changes made in connection with the BCSC Support) including
arrangements under which the Company will hold the Escrowed Performance Shares
in safekeeping on behalf of the Stockholder until the Vesting Dates or the
Cashflow Release.
NOW, THEREFORE, in accordance with the covenants and premises
contained herein, be it agreed that:
1. Implementation of Modification. Effective as of the first
business day following the later of the date of the Approval and the VSE and
the BCSC Supports, the Escrow Agreement shall terminate in all respects and be
of no further force or effect, it being understood that if such Approval and
Support are not received on or before December 31, 1996, this Agreement shall
automatically terminate and the Shares will be subject only to the Escrow
Agreement (as currently in effect or as consented to by persons receiving
grants under the 1996 Plan).
2. Delivery Into Safekeeping. Concurrently with the termination
of the Escrow Agreement, the Escrow Agent designated thereunder shall be
instructed to deliver the certificates representing the Escrowed Performance
Shares to the Company, Attention: Secretary, to be held by the Company in
safekeeping until the applicable Earnout Dates or Vesting Dates set forth in
Section 3 hereof. The Company shall advise the Stockholder of the safekeeping
arrangements and shall be responsible for all costs of maintaining the
certificates in safekeeping. The Company may make such arrangements as it
considers reasonable to assure the safety and security of the certificates
during the safekeeping period.
3. Vesting and Earnout. The Stockholder agrees that,
notwithstanding the release of such Escrowed Performance Shares from the
restrictions in the Escrow Agreement, commencing concurrently with the release,
the Escrowed Performance Shares shall become, without interruption, subject to
the following vesting and earnout schedule:
(a) 5% of the Stockholder's Escrowed Performance Shares
shall become fully vested and shall be delivered from safekeeping to the
Stockholder on June 22, 1997 (for purposes herein, June 22, 1997, 1998, 1999,
2000 and 2001 are referenced to as "Vesting Dates");
(b) 5% of the Stockholder's Escrowed Performance Shares
shall become fully vested and shall be delivered from safekeeping to the
Stockholder on June 22, 1998;
(c) 10% of the Stockholder's Escrowed Performance Shares
shall become fully vested and shall be delivered from safekeeping to the
Stockholder on June 22, 1999; and
(d) 20% of the Stockholder's Escrowed Performance Shares
shall become fully vested and shall be delivered from safekeeping to the
Stockholder on June 22, 2000; and
(e) 30% of the Stockholder's Escrowed Performance Shares
shall become fully vested and shall be delivered from safekeeping to the
Stockholder on June 22, 2001; and
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(f) any remaining Stockholder's Escrowed Performance
Shares shall become fully vested and shall be delivered from safekeeping to the
Stockholder on June 22, 2002, at which date this Agreement shall terminate in
all respects unless sooner terminated or extended pursuant to the provisions of
this paragraphs 3 or 4; except that,
(g) in addition to and without in any way limiting the
foregoing distributions, on the Vesting Dates, the Stockholder also shall be
entitled to have released each year, on an Earnout Date specified by the
Company, the number of Escrowed Performance Shares the Stockholder would have
been entitled to receive pursuant to the formula in the attached Schedule B to
the Escrow Agreement, provided, however that the maximum number of additional
Escrowed Performance Shares which shall be released to the Stockholder during
any of 1998, 1999, 2000 or 2001 based on an Earnings Release shall not exceed
30% of the original Escrowed Performance Shares held by a Stockholder.
4. Termination, Acceleration and Referrals. The Schedule for the
Stockholder's Shares shall be subject to termination or adjustment as follows:
(a) In the event that the Stockholder shall have
voluntarily terminated his or her relationship with the Company and as a result
thereof, the Stockholder shall no longer be providing services to the Company
or to any of its subsidiaries, whether as an employee, officer, director,
consultant or otherwise, the Escrowed Performance Shares that were to become
fully vested on such Vesting Date shall lapse and be unavailable to the
Stockholder, unless prior to such Vesting Date, the Board, the Compensation and
Stock Option Committee or another similar committee designated by the Board to
administer this Agreement, has, in its discretion, accelerated the Schedule
with respect to some or all of the Escrowed Performance Shares which are not
yet fully vested to the Stockholder. In the event that the Company in its
discretion shall have terminated its relationship with the Stockholder, whether
or not for "cause," and as a result thereof, the Stockholder shall no longer be
providing services to the Company or to any of its subsidiaries, whether as an
employee, officer, director, consultant or otherwise, all of the Escrowed
Performance Shares that have not yet become fully vested shall be accelerated
and shall be fully vested to the Stockholder as of the effective date of such
termination.
(b) In the event that the Stockholder shall die or become
permanently incapacitated prior to the Vesting Date with respect to any of the
Escrowed Performance Shares, the Schedule for all of the Escrowed Performance
Shares shall be automatically accelerated effective on the date of death or the
date the Board determines that the Stockholder is permanently incapacitated.
For purposes of this Agreement, permanently incapacitated shall mean either (i)
mental or physical incapacity, or both (as reasonably determined by the Board
based on a certification of such incapacity by, in the discretion of the Board,
either the Stockholder's regularly attending physician or a duly licensed
physician selected by the Board which renders the Stockholder unable to
continue to provide services to the Company and which appears reasonably
certain to continue for at least six (6) consecutive months without substantial
improvement, or (ii) the Stockholder is unable to continue to provide services
to the Company hereunder for any ninety (90) consecutive days in any three
hundred and sixty-five (365) day period or one hundred and twenty days (120) in
the aggregate in any two (2) year period.
(c) In the event that there shall be a change of control
in the ownership of the Company, the Schedule shall be automatically adjusted
as set forth in paragraph 7 of this Agreement.
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(d) To the extent that the Stockholder is a "covered
employee" pursuant to Section 162(m) of the Internal Revenue Code of 1986, as
amended ("Section 162(m)"), and the delivery to the Stockholder of all or some
portion of the Escrowed Performance Shares on any one of the Earnout or Vesting
Dates would preclude the Company from taking full advantage of the compensation
deductions provided to it under Section 162(m) during the applicable year, then
the number of Escrowed Performance Shares needed to reduce the compensation to
the allowable limits under Section 162(m), shall be deferred to allow the
Company to take full advantage of the compensation deduction and to comply with
requirements of Section 162(m). The Stockholder's Schedule shall be extended
as necessary and, to the extent so required, this Agreement shall continue in
effect until all of the Escrowed Performance Shares have vested in accordance
with such deferral.
5. Voting Dividends, and Liquidation Rights. Prior to the
vesting of the Escrowed Performance Shares, the Stockholder shall be entitled
to exercise all voting rights to which such Shares are entitled, provided,
however, that if the Stockholder is or becomes a director of the Company, the
Stockholder agrees to abstain from voting on any resolution of the Board which
would have the effect, if adopted, of permanently cancelling any of the
Escrowed Performance Shares. The Stockholder also waives the right:
(a) To vote Escrowed Performance Shares that are not yet
vested on any resolution, which, if adopted, would have the effect of
cancelling any of the Escrowed Performance Shares;
(b) To receive dividends on the Escrowed Performance
Shares that are not yet vested; and
(c) To participate in the distribution of assets and
property of the Company on a winding-up or liquidation dissolution of the
Company, with respect to Escrowed Performance Shares which are not yet vested.
6. Transfer of Escrow Performance Shares. Escrowed Performance
Shares shall not be sold or transferred until vested, and then only in
accordance with this Agreement and the legend on the certificate representing
the Shares (a copy of which is attached as Exhibit B).
7. Adjustment Provisions. Escrowed Performance Shares shall be
subject to adjustments as follows:
(a) If the Company shall at any time change the number of
shares of Common Stock issued without new consideration to the Company (such as
by stock dividend, stock split, recapitalization, reorganization, exchange of
shares, liquidation, combination or other change in corporate structure
affecting the Common Stock) or makes a distribution of cash or property which
has a substantial impact on the value of issued Common Stock, except to the
extent specifically limited by this Agreement, the total number of Escrowed
Performance Shares shall be appropriately adjusted; and
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(b) In addition to any adjustments pursuant to paragraph
7(a), all of the Shares shall vest immediately in the event of any merger,
consolidation, sale of assets, acquisition of property or stock,
recapitalization, or reorganization with a previously unaffiliated and as a
result thereof, the Company is not the surviving entity or in the event of a
change of control of the Company. For the purposes of this Plan, a "change in
control" of the Company shall mean a change in control of a nature that would
be required to be reported (assuming the Company were then subject to the
provisions of law referred to in this paragraph) in a proxy statement with
respect to the Company in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended, except
that any merger, consolidation or corporate reorganization in which the owners
of the Company capital stock entitled to vote in the election of directors
("Voting Stock") prior to said combination receive 75% or more of the resulting
entity's Voting Stock shall not be considered a change in control for the
purposes of the Plan; provided further, however, that a "change in control"
shall for purposes of this Agreement be deemed not to have occurred with
respect to any specific acquisition or other transaction if the Board, in its
sole discretion, passes a resolution to such effect at the time of such
transaction. "Control" is the power to direct, or cause the direction, of the
management and policies of a corporation, whether through the ownership of
securities, by contract or otherwise.
8. Withholding. When Escrowed Performance Shares are delivered
from safekeeping to the Stockholder, the Company may elect, in its discretion,
to require the Stockholder to remit to it cash or may give the Stockholder the
option of delivering cash or Escrowed Performance Shares in an amount
sufficient to satisfy such tax withholding requirements prior to the delivery
of any certificates for Escrowed Performance Shares. The Company may, in its
discretion and subject to such rules as it may adopt, permit the Stockholder to
pay all or a portion of the U.S. federal, state and local withholding taxes
arising in connection with the vesting of Shares, by electing to have the
Company withhold Escrowed Performance Shares having a fair market value equal
to the amount to be withheld.
9. Tenure. The Stockholder's right, if any, to continue to serve
the Company or a subsidiary as an officer, director, employee, independent
contractor, or otherwise, shall not be enlarged or otherwise affected by this
Agreement, nor shall the existence of this Agreement interfere with the right
of the Company, subject to the terms of any separate employment agreement to
the contrary, at any time to terminate such service or to increase or decrease
the compensation of the Stockholder.
10. Nonexclusivity of the Modification. Neither the adoption of
the Modification by the Board nor the submission of the Modification to the
stockholders of the Company for approval shall be construed as having any
impact on any other benefit plans of the Company, or as creating any
limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock awards, options or other incentive awards or rights other
than the Escrowed Performance Shares to the Stockholder or any other persons.
11. General Provisions.
(a) Binding Effect. This Agreement and the agreements
herein contained shall be binding upon and inure to the benefit of the parties
and their respective successors and assigns.
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(b) Severability. Any provision of this Agreement which
is invalid, illegal or unenforceable in any jurisdiction, as to that
jurisdiction, shall be ineffective to the extent of such invalidity, illegality
or unenforceability, without affecting in any way the remaining provisions
hereof in such jurisdiction or rendering that or any other provision of this
Agreement invalid, illegal or unenforceable in any other jurisdiction.
(c) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
(d) Headings. The headings contained in this Agreement
are for the purposes of convenience only and shall not affect the meaning or
interpretation of this Assignment.
(e) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.
(f) Notices, Etc. All notices, demands, instruments and
other communications required or permitted to be given to or made upon a party
hereto shall be in writing and shall be personally delivered or sent by
overnight mail or courier, by registered mail or certified mail, postage
prepaid, or by prepaid telecopy, followed by overnight mail or courier and
shall be deemed to be given for purposes of this Agreement on the day that such
writing is delivered at the address provided for herein or, if given by
telecopy followed by mail, or the later of 72 hours after such communication is
sent by telecopy or the date on which the mailed copy, directed to such
address, is delivered as provided herein. Unless otherwise specified in a
notice sent or delivered in accordance herewith; notices, demands, instructions
and other communications in writing shall be given to or made upon the
respective parties hereto at their respective address first set forth above.
IN WITNESS WHEREOF the parties have executed this Agreement effective
on the date set forth above.
"Company"
SPATIALIZER AUDIO LABORATORIES, INC.
By: ________________________________
Xxxxxx X. Xxxxxxxx
Chairman and Chief Executive Officer
"Stockholder"
By: ________________________________
