DEF 14A
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a71603ddef14a.txt
DEFINITIVE PROXY STATEMENT
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SCHEDULE 14A PRIVATE
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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SPATIALIZER AUDIO LABORATORIES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
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0-11.
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[LOGO]
April 12, 2001
Dear Stockholder:
On behalf of the Board of Directors (the "Board"), I cordially invite you
to the annual meeting of the stockholders (the "Annual Meeting") of Spatializer
Audio Laboratories, Inc. (the "Company") which will be held on May 25, 2001 at
10:00 a.m. at the Hilton Woodland Hills, located at 6360 Canoga Avenue, in
Woodland Hills, California 91637. I hope that you will be able to attend in
person. Following the formal business of the Annual Meeting, management will be
available to respond to your questions.
At the Annual Meeting, stockholders will be asked to consider and vote upon
the following matters:
(1) The nomination and election of two persons to serve as Directors
of the Company until the Annual Meeting of Stockholders to be held
in 2004, and
(2) To consider and vote on such other matters as may properly be
presented incident to the conduct of the Annual Meeting or any
adjournment or postponement thereof.
The Board has approved and recommends that the stockholders vote FOR the
Directors nominated by the Board.
At the Annual Meeting, each holder of record of shares of common stock, par
value $0.01 per share ("Common Stock") as of April 6, 2001, the record date (the
"Record Date") will be entitled at the meeting to one (1) vote on each matter
properly brought before the Annual Meeting. The election of Directors requires
that each person nominated as a Director receive a plurality of the votes cast
pursuant to Article II, Section 3 of the Bylaws of the Company.
The names and qualifications of the nominees for Directors of the Company
and other important information are set forth in the accompanying Proxy
Statement and should be considered carefully by stockholders.
I hope that you will attend the Annual Meeting. Whether or not you plan to
attend the Annual Meeting, and regardless of the number of shares of stock you
own, please complete, date and sign the enclosed proxy card and return it
promptly in the accompanying envelope. You may, of course, attend the Annual
Meeting and vote in person, even if you have previously returned your proxy
card.
Sincerely,
SPATIALIZER AUDIO LABORATORIES, INC.
HENRY R. MANDELL
Chairman of the Board and
Chief Executive Officer
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that Spatializer Audio Laboratories, Inc. (the
"Company") will hold its Annual Meeting of Stockholders on May 25, 2001 at 10:00
a.m., at the Hilton Woodland Hills, located at 6360 Canoga Avenue, in Woodland
Hills, California, for the following purposes:
To elect two Directors of the Company to serve until the Annual
Meeting of Stockholders to be held in 2004; and
To act upon other matters that may properly come before the meeting.
The Board of Directors has fixed April 6, 2001 as the Record Date for the
determination of the stockholders entitled to notice of, and to vote at, the
Annual Meeting or any adjournment or postponement of the Annual Meeting.
At the Annual Meeting, each share of Common Stock represented at the
meeting will be entitled to one (1) vote on each matter properly brought before
the Annual Meeting. The election of Directors requires that each person
nominated as a Director receive a plurality of the votes cast pursuant to
Article II, Section 3 of the Bylaws of the Company.
Your attention is directed to the accompanying Proxy Statement.
Stockholders who do not expect to attend the Annual Meeting in person are
requested to date, sign and mail the enclosed proxy as promptly as possible in
the enclosed envelope.
DATED: April 12, 2001 BY ORDER OF THE BOARD OF DIRECTORS
HENRY R. MANDELL
Chairman of the Board and
Chief Executive Officer
THE BOARD HAS APPROVED AND RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
DIRECTORS NOMINATED BY THE BOARD.
IT IS IMPORTANT THAT ALL STOCKHOLDERS VOTE. WE URGE YOU TO SIGN AND RETURN
THE ENCLOSED PROXY WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. THE
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE. IN ORDER TO FACILITATE
THE PROVIDING OF ADEQUATE ACCOMMODATIONS, PLEASE INDICATE ON THE PROXY WHETHER
YOU PLAN TO ATTEND THE ANNUAL MEETING.
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 2001
The accompanying proxy is solicited by the Board of Directors of
Spatializer Audio Laboratories, Inc. (the "Company") for use at the Annual
Meeting of Stockholders of the Company to be held on May 25, 2001 at 10:00 a.m.,
at the Hilton Woodland Hills, located at 6360 Canoga Avenue, in Woodland Hills,
California, and at any adjournments or postponements of the Annual Meeting. This
proxy statement and accompanying proxy will be mailed beginning on or about
April 16, 2001, to give holders of record on April 6, 2001, the Record Date, of
the Company's Common Stock an opportunity to vote at the Annual Meeting.
To elect two Directors of the Company to serve until the Annual
Meeting of Stockholders to be held in 2004; and
To act upon other matters that may properly come before the meeting.
VOTING
In voting, please specify your choices by marking the appropriate spaces on
the enclosed proxy, signing and dating the proxy and returning it in the
accompanying envelope. If no directions are given and the signed proxy is
returned, the proxy holders will vote the shares in favor of the nominees for
Director at their discretion on any other matters that may properly come before
the Annual Meeting. In situations where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not returned proxies to
the brokers (so-called "broker non-votes"), the affected shares will be counted
for purposes of determining the presence or absence of a quorum for the
transaction of business but will not be included in the vote totals. Therefore,
a failure by a stockholder to return a proxy and indicate their vote concerning
the Directors will, in effect, be treated as a non-vote, since shares cannot be
counted as a "FOR" vote if a proxy is not returned.
The election of Directors requires that each person nominated as a Director
receive a plurality of the votes cast pursuant to Article II, Section 3 of the
Bylaws of the Company.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE ELECTION OF THE TWO
PERSONS NOMINATED AS DIRECTORS OF THE COMPANY.
A STOCKHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A
STOCKHOLDER) TO ATTEND AND ACT FOR HIM AND ON HIS BEHALF AT THE MEETING OTHER
THAN THE PERSONS DESIGNATED IN THE ACCOMPANYING FORM OF PROXY. TO EXERCISE THIS
RIGHT, THE STOCKHOLDER MAY INSERT THE NAME OF THE DESIRED PERSON IN THE BLANK
SPACE PROVIDED IN THE PROXY AND STRIKE OUT THE OTHER NAMES OR MAY SUBMIT ANOTHER
PROXY.
THE SHARES REPRESENTED BY PROXIES IN FAVOR OF MANAGEMENT WILL BE VOTED ON
ANY BALLOT (SUBJECT TO ANY RESTRICTIONS THEY MAY CONTAIN) IN FAVOR OF THE
MATTERS DESCRIBED IN THE PROXY.
REVOCABILITY OF PROXIES
Any stockholder giving a proxy has the power to revoke it at any time
before the proxy is voted. In addition to revocation in any other manner
permitted by law, a proxy may be revoked by instrument in writing executed by
the stockholder or by his attorney authorized in writing, or, if the stockholder
is a corporation, under its corporate seal or by an officer or attorney thereof
duly authorized, and deposited at the executive office of the Company located at
20700 Ventura Boulevard, Suite 140, Woodland Hills, California, 91364, or at
Computershare Investor Services, 515 S. Figueroa, Suite 1020, Los Angeles,
California 90067 ("The Transfer Agent") at any time and up to and including the
last business day preceding the day of the meeting, or any adjournment thereof,
or with the chairman of the meeting on the day of the meeting. Attendance at the
Annual Meeting will not in and of itself constitute revocation of a proxy.
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OUTSTANDING STOCK
Holders of record of Common Stock at the close of business on April 6,
2001, the Record Date, will be entitled to receive notice of and vote at the
meeting. Currently, the Company is authorized to issue 65,000,000 shares of
Common Stock and 1,000,000 shares of preferred stock, par value of $.01 US per
share ("Preferred Stock"). On the Record Date, there were 47,401,939 shares of
Common Stock and 87,113 shares of Preferred Stock issued and outstanding. The
holders of Common Stock are entitled to one (1) vote for each share held.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information (except as otherwise indicated
by footnote) as to shares of Common Stock owned as of April 6, 2001 or which can
be acquired in sixty days, by (i) each person known by management to
beneficially own more than five percent (5%) of the Company's outstanding Common
Stock, (ii) each of the Company's Directors, and officers, (iii) all executive
officers and Directors as a group, including one Director who did not seek
re-election at our annual meeting in 2000. On April 6, 2001 there were
47,401,939 shares outstanding.
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP CLASS(5)
--------------------------------------- -------------------- ----------
DIRECTORS AND OFFICERS
Carlo Civelli(2)(3)(4)...................................... 4,170,958 8.4%
Stephen W. Desper(3)(4)..................................... 1,654,902 3.3%
Steven D. Gershick(3)(4)(6)................................. 0 *
Henry Mandell(3)(4)(5)...................................... 1,989,516 4.0%
James D. Pace(3)(4)......................................... 376,967 *
Gilbert N. Segel(3)(4)...................................... 193,000 *
All directors and executive officers as a group (6
persons)(4)(6)............................................ 8,385,373 17.0%
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* Indicates that the percentage of shares beneficially owned does not exceed
one percent (1%) of the class.
(1) Each of the Directors and officers named can be reached at the Company's
executive offices located at 20700 Ventura Boulevard, Suite 140, Woodland
Hills, California, 91364, except for Carlo Civelli, whose address is
Gerberstrasse 5, 8023 Zurich, Switzerland. The persons named in the table
have sole voting and investment power with respect to all shares shown to be
beneficially owned by them, subject to community property laws, where
applicable, and the information contained in the footnotes to this table.
Mr. Gershick did not stand for re-election as a Director in February 2000.
(2) Carlo Civelli controls Clarion Finanz AG, a non-reporting investment
company. Holdings of Mr. Civelli and Clarion Finanz AG are combined, and
include all shares of the Company held of record or beneficially by them,
and all additional shares over which he either currently exercises full or
partial control, without duplication through attribution.
(3) Includes an aggregate of 2,640,420 performance shares held in escrow as of
April 6, 2001, as follows: Carlo Civelli, 834,528 shares; Stephen W. Desper,
1,157,806 shares; Steven D. Gershick, no shares; Gilbert N. Segel 66,000;
James D. Pace 76,198 and Henry Mandell 505,888. Includes 50,000 vested
options granted to each Director on January 2, 2001, and exercisable at
$0.22 per share.
(4) Calculation includes options and warrants to purchase 2,043,800 shares
exercisable at various prices from $0.09 to $3.26 per share, and expiring on
various dated from February, 2000 to January 2006.
(5) Includes 1,505,000 options and warrants held by Mr. Mandell of which
1,255,000 are vested, and 1,250,000 are exercisable at various prices from
$.125 to $1.00 and the 250,000 options granted in January 2001 are
exercisable at $0.22. The options and warrants have varying expiration dates
of which the final such expiration date is January, 2006.
(6) In November 1999, the Board of Directors approved, subject to the
finalization of appropriate documentation, the reallocation of the 674,516
performance shares held in escrow for Steven D. Gershick to Henry R. Mandell
and the transfer among Mr. Gershick, the Company and Mr. Mandell of the
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168,628 performance shares previously released from escrow to Mr. Gershick.
The documentation was finalized and Mr. Gershick exercised or allowed to
have cancelled all remaining options. Accordingly, during 2000, 168,628
performance shares were released from escrow for Mr. Mandell but he
renounced this release and in January 2001 he was granted options to acquire
250,000 shares in lieu of the performance shares.
SOLICITATION
The Company will bear the entire cost of the solicitation of proxies,
including preparation, assembly and mailing of this proxy statement, the proxy
and any additional material furnished to stockholders. Proxies may be solicited
by Directors, officers and a small number of regular employees of the Company
personally or by mail, telephone or telegraph, but such persons will not be
specially compensated for such services. Copies of solicitation material will be
furnished to brokerage houses, fiduciaries and custodians which hold shares of
Common Stock of record for beneficial owners for forwarding to such beneficial
owners. The Company may reimburse persons representing beneficial owners for
their costs of forwarding the solicitation material to such owners.
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR MARKED PROXY PROMPTLY SO YOUR
SHARES CAN BE REPRESENTED, EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING IN
PERSON.
NOMINATION AND ELECTION OF DIRECTORS
The current Bylaws of the Company provide for a Board of Directors of no
less than three. The Company currently has five Directors. The Board is
classified into three classes, Directors in each class being elected to serve
for three years. Of the current Board of Directors, three Directors have terms
expiring in 2003 and two are being nominated for election for directorships with
terms ending in 2004. At this Annual Meeting, Management intends to nominate
James D. Pace and Gilbert N. Segel to be elected for three year terms expiring
in 2004.
Each of the elected Directors will continue in office until such Director's
successor is elected and has been qualified, or until such Director's earlier
death, resignation or removal. The Bylaws state that in any election of
Directors, the persons receiving a plurality of the votes cast, up to the number
of Directors to be elected in such election, shall be deemed to be elected.
Shares represented by proxies marked "withhold authority" for one or more
nominees will be counted as a negative vote.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE NAMED BELOW.
The following table sets forth certain information with respect to the
nominees for Directors and certain executive officers of the Company as of April
6, 2001:
NAME AGE POSITION
---- --- --------
DIRECTORS WITH TERMS ENDING
IN 2001:
James D. Pace........................ 45 Director -- 2/95 to date.
Member of Compensation Committee -- 2/95 to date.
Gilbert N. Segel..................... 68 Director -- 5/95 to date.
Member of Audit and Compensation Committee -- 5/95 to
date.
DIRECTORS WITH TERMS ENDING
2003:
Stephen W. Desper.................... 58 Director -- 7/92 to date.
Chairman of the Board -- 7/92 to 12/95.
Vice Chairman of the Board -- 12/95 to date.
Member of Audit Committee.
Carlo Civelli........................ 52 Director -- 3/93 to date.
Vice President Finance, Europe -- 8/91 to 3/95.
Member of Audit Committee.
Henry R. Mandell..................... 44 Chairman of the Board and Chief Executive
Officer -- 2/00 to date, Secretary -- 9/98 to date.
Chief Financial Officer -- 3/98 to date.
CARLO CIVELLI. Director since March 1993. VP Finance -- Europe from August
1991 to March 1995. Has extensive experience in financing emerging public
companies. Managing director of Clarion Finanz AG, Zurich, Switzerland, for more
than the last five years. Director and Financial Consultant to Clarion Finanz
AG.
STEPHEN W. DESPER. Vice Chairman of the Board, Inventor. Mr. Desper devoted
his full time for a number of years to developing and refining Spatializer(R)
technology. Recording engineer, over twenty (20) years experience; Director of
Engineering for The Beach Boys Organization. Acoustician, Acoustic Design and
Noise Control Engineer. December, 1991 to December, 1995, Chairman of
Spatializer Audio Laboratories, Inc. Since December, 1995 Vice Chairman of
Spatializer Audio Laboratories, Inc. Inventor and President of Desper Products;
Inc. ("DPI") from June 1986 to October, 1991. Vice President and Director of
Research, DPI from October 1991 to December 1996.
HENRY R. MANDELL. Chairman and Chief Executive Officer since February 2000.
Interim Chief Executive Office from September 1998 to February 2000. Secretary
since September 1998; Chief Financial Officer since March 1998; Senior Vice
President, Finance from March 1998 until September 1998. Executive Vice
President and Chief Financial Officer of The Sirena Apparel Group, Inc. from
November 1990 to January, 1998 (The Sirena Apparel Group filed for protection
under Chapter 11 of the Bankruptcy Code in June of 1999). Senior Vice President
of Finance and Administration for Media Home Entertainment, Inc. from April 1985
to November 1990. Director of Finance and Accounting for Oak Media Corporation
from June 1982 to April 1985. Senior Corporate Auditor for Twentieth Century Fox
Film Corporation from June 1981 to June 1982. Mr. Mandell was a Senior Auditor
for Arthur Young and Company from August 1978 to June 1981, where he qualified
as a Certified Public Accountant.
JAMES D. PACE. Director since February 1995. Director of DPI since July
1992. For more than the last seventeen years, Mr. Pace has specialized in the
introduction and distribution of new technologies into the professional
recording and film industries. He has broad experience in various audio
industries, including audio for DVD.
GILBERT N. SEGEL. Director since May 1995. Mr. Segel has spent more than
thirty (30) years as an independent business manager representing musical
artists, film actors and entertainment industry entrepre-
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neurs. Since 1985, he has concentrated on his personal investments and serves as
a director of various private business and charitable enterprises.
RESIGNATIONS OF CERTAIN DIRECTORS
None.
COMPENSATION OF DIRECTORS
None of the Company's Directors received any cash compensation or other
arrangements for services provided in their capacity as Directors. However, the
Company has granted stock options to Directors in that capacity. Under the 1995
Stock Option Plan, each Director who is not an employee of the Company is
entitled to an automatic annual grant of an option to purchase 50,000 shares of
Common Stock which are granted as options and are available for grant under the
1995 Stock Option Plan. Employee Directors may receive such a grant at the
discretion of the Board of Directors. The Company issued such options to its
employee and non-employee directors in January 2001 for the year 2000 period.
ACTIVITIES OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
Members of the Board of Directors are elected by the holders of the Common
Stock of the Company and represent the interests of all stockholders. The Board
of Directors meets periodically to review significant developments affecting the
Company and to act on matters requiring Board approval. Although the Board of
Directors delegates many matters to others, it reserves certain powers and
functions to itself.
During fiscal 2000, the Board of Directors of the Company, which consisted
of five (5) members, had four formal meetings and took various actions by
written consent. All incumbent Directors of the Company were present at, or
participated in taking actions for, one hundred percent (100%) of the meetings
of the Board of Directors of the Company and the Committees on which he served.
COMMITTEES OF THE BOARD OF DIRECTORS
As of April 6, 2001 standing committees of the Board of Directors of the
Company included an Audit Committee and a Compensation and Stock Option
Committee.
AUDIT COMMITTEE
The Audit Committee of the Company's Board of Directors consisted of
Messrs. Segel, Civelli and Desper. Mr. Mandell also participates as an
ex-officio member. Messrs. Segel and Civelli are non-employee Directors of the
Company. This committee is directed to review the scope, cost and results of the
independent audit of the Company's books and records, the results of the annual
audit with Management and the internal auditors and the adequacy of the
Company's accounting, financial, and operating controls; to recommend annually
to the Board of Directors the selection of the independent auditors; to consider
proposals made by the Company's independent auditors for consulting work; and to
report to the Board of Directors, when so requested, on any accounting or
financial matters. The Audit Committee of the Board of Directors held one
meeting during fiscal 2000.
COMPENSATION AND STOCK COMMITTEE
The Compensation and Stock Option Committee of the Company (the
"Compensation Committee") currently consists of Messrs. Pace and Segel, each of
whom is a non-employee Director of the Company and a "disinterested person" with
respect to the plans administered by such committee, as such term is defined in
Rule 16b-3 adopted under the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (collectively, the "Exchange Act"). The
Compensation Committee reviews and approves annual salaries, bonuses and other
forms and items of compensation for senior officers and employees of the
Company. Except for plans that are, in accordance with their terms or as
required by law, administered by the Board of Directors or another particularly
designated group, the Compensation Committee also administers and implements all
of the Company's stock option and other stock-based and equity-based benefit
plans
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(including performance-based plans), recommends changes or additions to those
plans, and reports to the Board of Directors on compensation matters. The
Compensation Committee held two meetings in 2000. To the extent required by law,
a separate committee of disinterested parties administers the 1996 Incentive
Plan. No Compensation Committee interlock relationships existed in 2000.
REPORT OF COMPENSATION COMMITTEE
GENERAL
The Company's Compensation Committee is responsible for formulating and
overseeing the general executive and employee compensation policies for the
Company. Its responsibilities include determination of the compensation of
senior executive officers and administration of the annual and long-term
incentive plans and stock option plans of the Company unless such plans, in
accordance with their terms, are administered by the Board of Directors or
another particularly designated group. Specific decisions relating to
compensation earned by or awarded to the senior officers of the Company,
including the Chief Executive Officer and the other four highest paid executive
officers (collectively, the "Named Executive Officers"), are governed by the
Compensation Committee. The Compensation Committee was formed in June 1995.
The Compensation Committee has adopted the following policy framework on
which it intends to base the Company's compensation program and its decisions:
- Efforts should be made to achieve base salaries for the senior executives
which are competitive with compensation at the Company's peer group of
companies, not withstanding the significantly larger revenues at many of
the entities in the peer group.
- Annual incentives should consider Company performance and individual
contribution. Efforts should be made to establish parity among
individuals with similar responsibilities and performance.
- The long-term incentive program should be performance-based and emphasize
stock options to ensure that long-term compensation primarily depends on
increases in stock price. Other awards, including restricted stock,
performance units or a combination, may be utilized to provide incentives
that might otherwise be reflected in stock option grants.
- Stock option grants (or other performance-based long-term incentives that
may be awarded in the future) should be competitive with peer practices
to allow the Company to attract and retain senior personnel and to
reflect the Company's operating growth and performance.
- The relative mix of annual and long-term incentives should reflect levels
within the organization, so that senior executives receive a greater
proportion of long-term incentives and others receive compensation that
emphasizes annual compensation and incentives.
To implement these policies, the Compensation Committee will take into
account current market data and compensation trends for similar enterprises,
compare corporate performance of the Company to the performance of a selected
peer group, gauge achievement of corporate and individual objectives and
consider the overall effectiveness of the Company's compensation programs.
In December 1995, to assist in formulating its operating framework, the
Compensation Committee engaged an independent executive compensation consultant
to assess the current competitive position of the Company's executive
compensation program and to assist the Company in implementing an ongoing long-
term incentive program. Given the Company's reduced operations and financial
constraints, no independent adviser was engaged during 1999 or 2000. However,
the Compensation Committee has continued to consider comparisons of current
compensation levels at the Company with other small capital publicly traded
companies. In addition, broader published compensation surveys of compensation
levels for executives holding similar positions at comparable industrial
entities or organizations were used to establish competitive norms. These
assessments indicated that actual cash compensation (salary plus annual
incentives) of the Named Executive Officers were below total cash compensation
levels of the peer group.
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ANNUAL COMPENSATION
The Compensation Committee annually reviews base salary levels of
executives and employees annually, subject to any provisions or limitations
included in their Employment Agreements and in the context of the above
policies. The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to
the Code. Section 162(m) creates a new limit on the deductibility of
compensation paid to certain officers. With respect to the Company, the covered
officers are the Chief Executive Officer and the next four most highly
compensated persons in office at the end of the year. Compensation paid to these
officers in excess of $1,000,000 per person, that is not performance-based,
cannot be claimed by the Company as a tax deduction. It is the Compensation
Committee's intention to continue to utilize performance-based compensation and
to conform such compensation to these limits.
CEO COMPENSATION
The compensation for Henry R. Mandell, as CEO of the Company, was
determined in accordance with the guidelines discussed above. Based on the
performance of the Company and the compensation of the CEOs at several peer
companies, he was paid a base salary of $200,000 in 2000. He also is entitled to
an annual bonus equal to 5% of the Company's income after taxes (not to exceed
$100,000). In addition, the 168,628 performance shares held by Mr. Gershick
directly and the 674,516 performance shares held in escrow for him were
reallocated to Mr. Mandell. In December 2000, Mr. Mandell renounced all interest
in 168,628 performance shares distributed out of escrow in June 2000. These
shares are retained in escrow and are available for later grant or retirement.
In November 2000, Mr. Mandell was eligible for a salary increase under the terms
of his employment agreement. Effective February 2001, the Compensation Committee
and Board of Directors, in view of the Mr. Mandell's contributions to the
continued profitability of the Company, approved an increase in Mr. Mandell's
base salary to $210,000. In January, Mr. Mandell was granted options to acquire
250,000 shares in lieu of the shares renounced and was granted options to
acquire 50,000 shares as a Director, all of which are exercisable at $0.22 per
share.
CONCLUSION
The Compensation Committee believes that the policies and concepts
discussed above will be an effective strategy since a significant portion of
compensation to the Named Executive Officers will be based on the operating
results of the Company, the commensurate results for its stockholders, and the
need to attract and retain senior management, technical and operating personnel
as the Company matures and technology and market conditions change and evolve.
At the same time, it is intended that the policies will encourage responsible
management for both long-term and short-term results and will further the
interests of the Company's stockholders. In implementing its policies, the
Compensation Committee intends to base its review on the experience of its
members, on Company and management information, and on discussions with and
information compiled by various independent compensation consultants and other
appropriate sources.
Submitted by the Compensation
Committee of the Company's Board of
Directors,
James D. Pace
Gilbert N. Segel
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PERFORMANCE GRAPH OF COMPANY STOCK
The following Performance Graph reflects a comparison of the performance of
the Company's Common Stock to the common stock of other peer group companies and
to the NASDAQ Market Index:
COMPARE CUMULATIVE TOTAL RETURN
AMONG SPATIALIZER AUDIO LABORATORIES, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
LOGO
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FISCAL YEAR ENDED
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COMPANY/INDEX/MARKET 12/29/95 12/31/96 12/31/97 12/31/98 12/31/99 12/29/00
Spatializer Audio
Laboratories 100.00 82.86 34.29 2.85 2.34 0.58
Peer Group Index 100.00 97.76 106.80 92.37 98.46 121.06
NASDAQ Market Index 100.00 124.27 152.00 214.39 378.12 237.66
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The peer group, for purposes of the above graph, consists of other
comparable technology companies. The peer group was expanded in 1996 to include
a competitor in the advanced audio technology industry that went public during
1996.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Company's Certificate of Incorporation and its Amended and Restated
Bylaws provide that the Company will indemnify any officer or Director of the
Company who is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, against expenses (including, but not limited to, attorneys' fees)
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding to the fullest extent
and in the manner set forth in and permitted by Delaware law and any other
applicable law as from time to time in effect.
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EXECUTIVE COMPENSATION
The following table sets forth separately, for the last three complete
fiscal years, each component of compensation paid or awarded to, or earned by,
Henry R. Mandell as the Chief Executive Officer of the Company. There were no
other executive officers who were serving as executive officers at December 31,
2000 who had annual income of at least $100,000.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-----------------------------------
AWARDS PAYOUTS
------------------------- -------
SECURITIES
UNDER
ANNUAL COMPENSATION OPTIONS/ RESTRICTED
---------------------------- SARS STOCK AWARDS LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER GRANTED(#) ($) PAYOUTS
--------------------------- ----- -------- ------- ------- ---------- ------------ -------
Henry R. Mandell(1).................. 12/00 $200,000 $20,000 $ 9,000
Chief Executive Officer.............. 12/99 $175,000 $ -- $34,000 750,000 N/A N/A
---------------
(1) Mr. Mandell became an employee of the Company in March 1998. He became
Interim Chief Executive Officer of the Company on September 25, 1998,
concurrent with the effective date of Mr. Gershick's resignation as
President and Chief Executive Officer. He became Chairman and Chief
Executive Officer in February 2000, with his base salary in 2000 set at
$200,000 and he will be entitled to a bonus equal to 5% of the Company's
income after taxes (not to exceed $100,000). The 500,000 options shown above
were treated as having been fully vested at November 12, 1999 and at that
time he was granted options to acquire 750,000 additional shares (250,000
shares exercisable at $.50 and immediately vested; 250,000 shares
exercisable at $.55 to vest on November 12, 2000; and 250,000 shares
exercisable at $.75 to vest on November 12, 2001). In addition, the 168,628
performance shares held by Mr. Gershick directly and the 674,516 performance
shares were reallocated to Mr. Mandell. During 2000 he renounced ownership
in 168,628 performance shares which were released on 2000 and in lieu
thereof in January 2001 he was granted vested options to acquire 250,000
shares at an exercise price of $0.22 per share.
OPTION/STOCK APPRECIATION RIGHT ("SAR") GRANTS DURING THE
MOST RECENTLY COMPLETED FINANCIAL YEAR
The following table presented in accordance with the Securities Exchange
Act of 1934, as amended ("the Exchange Act") and the Regulations thereunder sets
forth stock options granted under the Company's Stock Option Plan ("the Stock
Option Plan") during the most recently completed financial year to each of the
Named Executive Officers:
ALTERNATIVE
TO
INDIVIDUAL GRANTS REALIZABLE
------------------------------------------------------------------------------------------- VALUE:
GRANT
VALUE
DATE
MARKET VALUE POTENTIAL REALIZABLE -----------
OF VALUE AT ASSUMED
% OF TOTAL SECURITIES ANNUAL RATES OF
SECURITIES OPTIONS/ UNDERLYING STOCK PRICE
UNDER SARS OPTIONS/ APPRECIATION FOR GRANT
OPTIONS/ GRANTED TO EXERCISE OR SARS ON DATE OPTION TERM DATE
SARS EMPLOYEES IN BASE PRICE OF GRANT EXPIRATION --------------------- PRESENT
GRANTED FISCAL YEAR ($/SECURITY) ($/SECURITY) DATE 5%($) 10%($) VALUE $
---------- ------------ ------------ ------------ ---------- --------- --------- -----------
All Others........... 400,000 100.0% $0.19 $0.19 12/28/05 $20,997 $46,399 N/A
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AGGREGATED OPTIONS/SAR EXERCISES IN LAST FINANCIAL YEAR
AND FINANCIAL YEAR-END OPTION/SAR VALUES
The following table (presented in accordance with the Exchange Act and the
Regulations) sets forth details of all exercises of stock options/SARs granted
during the year ended December 31,2000 by each of the Named Executive Officers
and the financial year-end value of unexercised options/SARs on an aggregated
basis:
VALUE OF UNEXERCISED IN-THE-MONEY
SECURITIES UNEXERCISED OPTIONS/SARS AT FISCAL YEAR-END
ACQUIRED ON AGGREGATE OPTIONS/SARS AT ($)
NAME EXERCISE VALUE REALIZED FISCAL YEAR-END EXERCISABLE/UNEXERCISABLE
---- ----------- -------------- --------------- ---------------------------------
Henry R. Mandell...... N/A N/A 250,000 $10,500/$10,500
TEN-YEAR OPTION/SAR REPRICINGS
During the year ended December 31, 2000 there were no repricings of stock
options/SARs held by Henry R. Mandell, the only named executive officer:
EMPLOYMENT AGREEMENTS
Effective November 12, 1999, the Company entered into a three-year
employment agreement with Mr. Mandell to be the Company's Chief Executive
Officer. In 2000, Mr. Mandell's salary was set at $200,000 and he will be
entitled to a bonus equal to 5% of the Company's income after taxes (not to
exceed $100,000). He is also entitled to reasonable travel and housing expenses
while away from the Woodland Hills, CA executive office on company business. In
connection with the employment agreement, 500,000 options previously granted to
Mr. Mandell were treated as having been fully vested at November 12, 1999 and at
that time he was granted options to acquire 750,000 additional shares (250,000
shares exercisable at $.50 and immediately vested; 250,000 shares exercisable at
$.55 which vested on November 12, 2000; and 250,000 shares exercisable at $.75
to vest on November 12, 2001). In addition, 168,628 performance shares held by
Mr. Gershick, the former Chairman directly and the 674,516 performance shares
were reallocated to Mr. Mandell. During 2000, Mr. Mandell renounced ownership in
the 168,628 performance shares released in 2000. In lieu thereof, in January
2001, Mr. Mandell was granted an additional 250,000 options immediately
exercisable at $.22 per share.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 2000, the Company was not a party to any transaction in which the
amount involved exceeded $60,000 and in which any Director, executive officer,
nominee for Director, security holder of more than 5% of the Company's voting
securities, or any member of the immediate family of any of the foregoing
persons had or will have a direct or indirect material interest.
REPORT OF THE AUDIT COMMITTEE
Neither the following report of the Audit Committee nor any other
information included in this proxy statement pursuant to item 7(d)(3) of
Schedule 14A promulgated under the Securities Exchange Act of 1934 or pursuant
to Rule 306 of Regulation S-K constitutes "soliciting material" and none of such
information should be deemed to be "filed" with the Securities and Exchange
Commission or incorporated by reference into any other filing of the Company
under the Securities Act of 1933 or the Securities Exchange Act of 1934, except
to the extent that the Company specifically incorporates such information by
reference in any of those filings.
The Audit Committee has a written charter, a copy of which is reproduced as
Appendix A to this proxy statement.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended December 31, 2000 with the
Company's management.
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The Audit Committee has discussed with Farber & Hass ("F&H") the matters
required to be discussed pursuant to Statement on Auditing Standards No. 61
(Codification of Statements on Auditing Standards, AU sec. 380). Additionally,
the Audit Committee has received from F&H the written disclosures and the letter
required by Independence Standards Board Standard No. 1 (Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees). The Audit
Committee also has discussed with F&H matters relating to their independence.
Based on the review and discussions described above, the Audit Committee
recommended to the Board of Directors of the Company that the audited financial
statements of the Company be included in its Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.
Members of the Audit Committee:
Carlo Civelli
Stephen W. Desper
Gilbert N. Segel
AUDIT FEES
The aggregate fees billed by F&H for professional services rendered for the
audit of the Company's financial statements for the fiscal year ended December
31, 2000 and for the reviews of the financial statements included in the
Company's Form 10-Qs for that fiscal year were $21,250.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company was not billed any fees for professional services described in
Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X rendered by F&H for the
fiscal year ended December 31, 2000.
ALL OTHER FEES
F&H did not bill for any services (other than for the services described
above under the headings "Audit Fees" and "Financial Information Systems Design
and Implementation Fees" above) for the fiscal year ended December 31, 2000.
The Audit Committee has not yet considered whether the provision of
services other than those described above under the heading "Audit Fees" are
compatible with maintaining the independence of F&H.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the Exchange Act, the Company's directors, certain executive and
other officers, and any person holding more than ten percent (10%) of the
Company's Common Stock are required to report their ownership and any changes in
that ownership to the Securities and Exchange Commission (the "Commission") and
any exchange or quotation system on which the Common Stock is listed or quoted.
Specific due dates for these reports have been established and the Company is
required to report in this proxy statement any failure to file by directors and
officers and ten percent (10%) holders. Based solely on a review of the copies
of reports furnished to the Company as filed with the Commission, the Company is
informed that Mr. Desper was late in reporting transactions which occurred in
September and October of 2000 because of a change in his financial service
provider. The Company believes that its remaining executive officers and
directors have complied with the filing requirements applicable to them for the
year ended December 31, 2000.
ANNUAL REPORT
The Company has previously forwarded to each stockholder who so requested
in writing a copy of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000 as filed with the Securities and Exchange
Commission and the quarterly reports for the interim periods in 2000. Requests
for
11
15
additional copies of these reports should be sent to the Company at 20700
Ventura Boulevard, Suite 140, Woodland Hills, California 91364, Attention:
Investor Relations.
OTHER BUSINESS
F&H was selected as the Company's independent accountants for the fiscal
year ended December 31, 2000. F&H has been selected as the Company's auditors
for the current fiscal year. Representatives for F&H are expected to be present
at the Annual Meeting with the opportunity to make a statement, if they desire
to do so, and are expected to be available to respond to the appropriate
questions from shareholders.
The Board of Directors does not know of any business to be presented at the
Annual Meeting other than the matters set forth above, but if other matters came
before the Annual Meeting, it is the intention of the proxies to vote in
accordance with their best judgment on such matters.
DATED: April 12, 2001 BY ORDER OF THE BOARD
Henry R. Mandell
Chairman and Chief Executive Officer
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APPENDIX A
SPATIALIZER AUDIO LABORATORIES, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Board of Directors (the "Board") of Spatializer Audio Laboratories,
Inc. (the "Company") has oversight responsibilities to, among other things,
promote an environment in which the Company maintains adequate systems of
internal control, presents reliable financial information and complies with
applicable laws, regulations and Company policies. To assist the Board in
fulfilling certain of those oversight responsibilities, the Board has
established an Audit Committee. The following sets forth certain guidelines and
requirements with respect to the Audit Committee and its responsibilities.
I. AUTHORITY OF THE AUDIT COMMITTEE
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee may
request any officer or employee of the Company or the Company's outside counsel
or independent accountants to attend meetings of the Audit Committee or to meet
with any members of, or consultants to, the Audit Committee. The Audit Committee
shall be given unrestricted access to Company personnel and documents and to the
Company's independent accountants.
II. MEMBERSHIP
The Audit Committee shall consist of at least two Directors or such
additional number as the Board or the Audit Committee may determine. The Audit
Committee shall not have less than two directors without prior approval of the
Board. In the event that the Audit Committee has less than two Directors thereon
due to the resignation, death or removal of a Director or other similar event,
the Board shall appoint promptly another member thereto.
III. GENERAL RESPONSIBILITIES
A. Matters relating to Annual Audit and Quarterly Financial Reports. The
Audit Committee shall recommend to the Board the appointment of the independent
accountants, which firm shall be accountable to the Audit Committee and the
Board, and the fees to be paid to the accountants. The Audit Committee shall
meet with the Company's independent accountants prior to the audit to review the
planning and staffing of the audit. In connection with the audit, the Audit
Committee will review with management and the independent accountants any
material financial reporting issues and judgments made in connection with the
preparation of the Company's financial statements. Following the completion of
the audit, the Audit Committee shall meet with the independent accountants to
review with the independent accountants any problems or difficulties the
accountants may have encountered in connection with the audit, the adequacy of
the internal accounting controls, the financial and accounting personnel and any
management letter provided by the independent accountants and the Company's
response to that letter. The Audit Committee shall discuss with the independent
accountants any matters that are required to be discussed under applicable
rules, including without limitation those matters required to be discussed by
Statement on Auditing Standards No. 61 relating to the conduct of the audit.
The Audit Committee shall also provide to the Company's independent
accountants copies of the quarterly financial statements for review in
accordance with the rules of the Securities and Exchange Commission.
B. Matters Relating to Internal Controls. The Audit Committee shall review
with management the adequacy of internal controls that could materially affect
the Company's financial statements. Additionally,
A-1
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the Audit Committee shall inquire of management and the independent accountants
about material financial risk exposures and review the steps management has
taken to monitor and control such exposures.
C. Matters relating to Auditor Independence. The Audit Committee shall
review periodic written reports from the independent accountants regarding the
independent accountants' independence, discuss such reports with the independent
accountants, and, if so determined by the Audit Committee, recommend that the
Board take appropriate action to satisfy itself as to the independence of the
independent accountants.
D. Miscellaneous Matters. The Audit Committee shall review major changes to
the Company's auditing and accounting principles and practices as suggested by
the independent accountants or management and evaluate together with the Board
the performance of the independent accountants. If so determined by the Audit
Committee, it shall recommend that the Board replace the independent
accountants. The Audit Committee shall prepare such reports as may be required
by the rules of the Securities and Exchange Commission to be included in the
Company's Annual Proxy Statement.
IV. MEETINGS OF THE AUDIT COMMITTEE
The Audit Committee shall meet such number of times in each fiscal year of
the Company as the Audit Committee believes are reasonable or necessary. The
Audit Committee shall maintain minutes or other records of those meetings and
its activities.
This Charter is intended to be flexible so that the Audit Committee is able
to meet changing conditions. The Audit Committee is authorized to take such
further actions as are consistent with the above-described responsibilities and
to perform such other actions as applicable law, the Company's charter documents
and/or the Board may require. To that end, the Audit Committee shall review and
reassess the adequacy of this Charter annually. Any proposed changes shall be
put before the Board for its approval.
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PROXY PROXY
SPATIALIZER AUDIO LABORATORIES, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 25, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Henry R. Mandell as proxy and attorney-in-fact
of the undersigned, with full power of substitution, to represent and vote, as
designated below, all shares of Common Stock of Spatializer Audio Laboratories,
Inc. (the "Company") which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Company to be held at the Hilton Woodland Hills,
located at 6360 Canoga Avenue, in Woodland Hills, California, 91637 on Friday,
May 25, 2001 at 10:00 a.m., and at any adjournments thereof.
(Continued on reverse side)
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
19
SPATIALIZER AUDIO LABORATORIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
The Board of Directors recommends a vote FOR all nominees listed in Proposal 1.
FOR ALL
FOR WITHHOLD EXCEPT NOMINEES
PROPOSAL 1: ALL ALL WRITTEN IN BELOW
To elect two Directors of the Company to serve [] [] []
until the Annual Meeting of the Shareholders to
be held in 2004.
Nominees: James D. Pace, Gilbert N. Segel
(INSTRUCTION: To withhold authority to vote for
any individual nominee, write that nominee's
name in the space provided below.)
-------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1, AND IN THE DISCRETION OF [THE]
[EITHER] PROXY HOLDER WITH RESPECT TO ANY OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING.
NOTE: Please sign exactly as your name appears herein. Joint owners should each
sign personally. A corporation should sign full corporate name by duly
authorized officers and affix corporate seal. When signing as attorney,
executor, administrator, trustee or guardian, give full title as such.
--------------------------------------------------------------------------------
Signature
--------------------------------------------------------------------------------
(Stockholder(s) sign above)
Dated: ,2001
--------------------------------------------------------------------
PLEASE RETURN PROMPTLY IN ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE U.S.
--------------------------------------------------------------------------------
X FOLD AND DETACH HERE X