Document:

EXHIBIT 4.2  

CONVERTIBLE PROMISSORY
NOTE 

For value received, the undersigned
QSound Labs, Inc., an Alberta corporation having its head office at #400, 3115 – 12th
Street NE, Calgary, Alberta, T2E 7J2, (“Borrower”) promises to pay to or to the
order of  (“Lender”) the principal amount specified below
(“Principal”) together with interest at the rate specified below
(“Interest”) on the amount of Principal from time to time outstanding at the
rate specified below. 

The following are the terms and
conditions of this Convertible Promissory Note (“Note”): 

	1.  	   	Principal  

	  	
a)              The
Principal of this Note is Five Hundred Thousand ($500,000 US) Dollars U.S.  

	  	
b)The
Principal shall be advanced by the Lender to the Borrower by wire transfer concurrent
with the execution and delivery of this Note by the Borrower to the Lender.  

	2.  	   	Term  

	  	
The
term of this Note is the earlier of five years from the date of Principal advance and the
date of conversion of the entire principal amount of the Principal to common shares of
the Borrower (“Term”).  

	3.  	   	Interest
Rate  

	  	
Simple
interest shall be payable upon the Principal amount outstanding from time to time under
this Note and shall be paid in arrears at the end of each calendar quarter for the
immediately preceding calendar quarter. The rate of interest for each calendar quarter
shall be the United States prime rate in effect on the last day of the immediately
preceding calendar quarter. The “United States prime rate” shall mean such rate
as printed in the Wall Street Journal.  

	4.  	   	Conversion  

	  	
a)
                         The Lender or Lender’s
assignee shall have the right to convert the                     Principal into fully
paid and non-assessable common shares of the Borrower                     (“Shares”)
at the conversion price of $3.25 U.S. at any time during                     the Term.
The Principal may be so converted in whole or from time to time during
                    the Term in increments of at least 25,000 shares by notice in writing
to the                     Borrower.  

	  	
b)
                         Upon receipt of the
written notice of conversion from the Lender, Borrower                     shall issue
and deliver to the Lender share certificate(s) representing the
                    Shares as set out in the notice to the Lender. All repayments of
Principal by                     way of conversion to Shares under this Note shall be
evidenced by endorsement by                     Borrower and Lender upon the grid
attached to this Note as Schedule                     “A” and each such
endorsement shall be prima facie evidence of the                     amounts so repaid
and the balance of Principal outstanding under this Note.  

	  	
c)
                         All action taken pursuant
hereto shall be made in accordance with all Canadian                     and United
States securities laws and all applicable rules and regulations of
                    the NASDAQ Stock Market. The Lender acknowledges that Shares issuable
upon                     conversion of the Principal are being acquired solely for the
Lender’s own                     account and not as a nominee for any other party
(provided that the Lender shall                     have the right to assign some or all
of this Note to an accredited third                     party(s) reasonably satisfactory
to the Borrower), and for investment, and that                     the Lender will not
offer, sell or otherwise dispose of Shares  

1 

	  	
acquired
hereunder except under circumstances that will not result in a violation of the Act or
any state securities laws.  

	  	
d)
                         QSound agrees, at its
expense, to file a short form registration statement                     under the United
States Securities Act of 1933 to register the Shares issued                     upon any
conversion of the Principal, provided that QSound is not obligated to
                    file more than one such registration statement annually during the
Term and for                     a period of one year thereafter. Upon written notice by
the Lender requesting                     the filing of a registration statement, the
Borrower shall use its best efforts                     to file such registration
statement within thirty (30) days of such notice.                     QSound represents
and warrants that it is currently eligible to file such a                     short form
registration statement under the United States Securities Act of
                    1933. In addition, in the event QSound intends to file a registration
statement                     under the United States Securities Act of 1933 to register
the sale of common                     stock by QSound or by another security holder
during or for a period of one year                     following the Term, QSound will
notify Lender of that intent and offer to                     include any or all of the
Shares held by Lender at QSound’s expense, and if                     Holder accepts
such offer, it will not count against the above annual limit of
                    registration of Shares.  

	  	
e)
                                            If during the Term the
Company (a) consolidates its common shares into a lesser                     number of
shares, subdivides its common shares into a greater number of shares
                    or reclassifies its common shares, then when the right to acquire
Shares                     pursuant hereto is exercised, the Lender shall have the right
to receive and the                     obligation to take Shares in such number and
description as the Lender would                     otherwise have if he had exercised
the right of acquisition before such event                     and had held the Shares
which he would have received until the actual exercise                     of the right
of acquisition, or (b) consolidates, amalgamates or merges with any
                    other company, then when the right to acquire pursuant hereto is
exercised, the                     Lender shall have the right to receive and the
obligation to take securities in                     the consolidated, amalgamated or
merged company as the Lender would otherwise                     have if it had exercised
the right of acquisition before such event and had held                     the
securities it would have received until the actual exercise of the right of
                    acquisition. If during the Term the Borrower issues securities
(excluding                     employee options) convertible into common shares at a
price lower than the                     Lender’s conversion price, the Borrower
agrees to adjust the Lender’s                     conversion price to such lower
price.  

	5.  	   	Legend  

	  	
The
Lender acknowledges that the Shares to be issued upon the conversion of the Principal
will not be registered pursuant to the Securities Act of 1933 (“Act”) and will
be subject to certain transfer restrictions, and the certificates representing the Shares
may contain the following legend or such legend as may be requires from time to time to
comply with the Act:  

	  	
“THE
SECURITES REPRESENTED HEREBY HAVE NOT BEEN REGISTERES UNDER UNITED STATES FEDERAL OR
STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE
TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED
ON THE BOOKS OF THE COMPANY, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE
UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE
EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE COMPANY, TO BE
EVIDENCED BY AN OPINION OF SECURITYHOLDER’S COUNSEL, ACCEPTABLE TO THE COMPANY, THAT
NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED
TRANSFER OR ASSIGNMENT.” 

2 

	6.  	   	Payment  

	  	
The
Principal outstanding together with interest payable under this Note shall be due and
payable in full on the last day of the Term.  

	7.  	   	Default  

	  	
The
following are acts or events of default:  

	  	
a)
                         an admission in writing by
the Borrower of its inability to pay debts                     generally;  

	  	
b)
                         the insolvency of the
Borrower or the appointment of a receiver, manager,                     trustee,
liquidator, for any of the property of the Borrower or an assignment
                    for the benefit of the Borrower’s creditors;  

	  	
c)
                         the institution of a
proceeding in bankruptcy against the Borrower, whether                     voluntarily or
involuntarily, or the institution of proceedings by a Borrower to
                    obtain relief against its creditors; or  

	  	
d)
                         Borrower fails to pay in
full any due and payable installment of interest                     within 10 business
days of notice from Holder that it is due.  

	  	
In
the event of a default, then unpaid principal amount of this Note shall immediately
become due and payable and the effective interest rate from any after the date of default
shall be increased to 3% over the United State prime rate. The Borrower shall pay all
costs incurred by the Lender in enforcing and collecting upon this Note, including legal
fees.  

	8.  	   	Presentment  

	  	
The
Borrower hereby waives presentment, demand, notice of dishonor, notice of protest, notice
of non-payment and any other notice required by law to be given to the Borrower on this
Note in connection with the delivery, acceptance, performance, default or enforcement of
this Note.  

	9.  	   	Governing
Law  

	  	
This
Note shall be governed by and construed in accordance with the Province of Alberta. All
disputes and litigation regarding this Agreement and matters connected with its
performance shall be subject to the exclusive jurisdiction of the courts of the Province
of Alberta.  

	  	
DATED at the City of Calgary 

in the Province of Alberta 

this 27th day of March, 2006. 

	  	
QSOUND LABS, INC. 

per:  _________________________________

3 

Appendix “A” 

Conversion and Payment of
Principal (USD) 

	
Date	
Amount of

Principal Payment	
Amount of

Principal Converted	
Unpaid

Balance	
Signatures
	

	 	 	 	 		 	 	 	Lender:

Borrower:	 
	

	 
	

	 
	

	 
	

	 
	

4EXHIBIT 4.3  

QSOUND LABS, INC. 

SHARE PURCHASE WARRANT  

WARRANT CERTIFICATE
NO. 2006-*

WARRANT TO PURCHASE **** COMMON SHARES 

        THIS
WARRANT HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”) OR QUALIFIED UNDER THE SECURITIES LAW OF ANY STATE IN THE
UNITED STATES AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED
FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THIS WARRANT BE TRANSFERRED ON THE BOOKS OF THE
UNDERSIGNED, WITHOUT REGISTRATION AND QUALIFICATION OF THE WARRANT UNDER ALL APPLICABLE
SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM. 

        THIS
IS TO CERTIFY THAT ***** (the “Holder”) is entitled to acquire in the
manner herein provided, subject to the restrictions herein contained, up to ***** (*****)
fully paid and non-assessable common shares (“Shares”) without nominal or par
value of the Company, as such are constituted as of the date hereof, at the exercise price
of Four Dollars and Fifty Cents U.S. ($4.50 U.S.) per Share (“Exercise Price”). 

     1.      
          The expiry date of this Share Purchase Warrant (“Warrant”) is March
          27, 2011 (“Expiry Date”). 

     2.      
          The Holder shall have the right to exercise this Warrant from time to time in
          whole or in part (in increments of at least 25, 000 Shares) up to 5:00 PM
          (Calgary time) on the Expiry Date. Following the Expiry Date this Warrant shall
          be void and of no force and effect. 

     3.      
          The right to acquire Shares of the Company may be exercised by the Holder or the
          Holder’s assignee by duly completing and executing the exercise form
          attached hereto, delivering to the Company a wire transfer or certified cheque
          in an amount equal to the number of common shares in respect of which this
          Warrant is being exercised multiplied by the Exercise Price, and delivering to
          the Company this Warrant. 

     4.      
          Upon each exercise of this Warrant the Company shall forthwith issue and deliver
          to the Holder share certificate(s) for the number of Shares purchased, and a new
          Share Purchase Warrant for the remaining warrants, if any. 

     5.      
          The Company agrees to file, at its expense, a short form registration statement
          under the United States Securities Act of 1933 to register the Shares issued
          upon any exercise of this Warrant, provided that the Company is not obligated to
          file more that one such registration statement annually (including any
          registration statement the Company may be required to file in connection with
          the convertible promissory note of even date). Subject to the foregoing
          restriction, upon written notice by the Holder requesting the filing of a
          registration statement, the Company shall use its best efforts to file such
          registration statement with thirty (30) days of such notice. the Company
          represents and warrants that it is currently eligible to file such a short form
          registration statement under the United States Securities Act of 1933. In
          addition, in the event the Company intends to file a registration statement
          under the United States Securities Act of 1933 to register the sale of common
          stock by the Company or by another security holder during or for a period of one
          year following the Term, the Company will notify Lender of that intent and offer
          to include any or all of the Shares held by Lender at the Company’s
          expense, and if Holder accepts such offer, it will not count against the above
          annual limit of registration of Shares. 

     6.      
          The holding of this Warrant Certificate shall not constitute the Holder a
          shareholder of the Company or entitle the Holder to any right or interest in
          respect hereof except as herein expressly provided. 

     7.      
          If the Company, between the date hereof and the Expiry Date, (a) consolidates
          its common shares into a lesser number of shares, subdivides its common shares
          into a greater number of shares or reclassifies its common shares, then when the
          right to acquire Shares pursuant hereto is exercised, the Holder shall have the
          right to receive and the obligation to take Shares in such number and
          description as the Holder would otherwise have if he had exercised the right of
          acquisition before such event and had held the Shares which he would have
          received until the actual exercise of the right of acquisition, or (b)
          consolidates, amalgamates or merges with any other company, then when the right
          to acquire pursuant 

hereto is exercised, the Holder shall
have the right to receive and the obligation to take securities in the consolidated,
amalgamated or merged company as the Holder would otherwise have if it had exercised the
right of acquisition before such event and had held the securities it would have received
until the actual exercise of the right of acquisition. If during the Term the Company
issues securities (excluding employee options) convertible into common shares at a price
lower than the Lender’s exercise price, the Company agrees to adjust the
Holder’s exercise price to such lower price. 

     7.      
          The Holder acknowledges that the Shares to be issued upon the exercise of
          Warrants may not be registered pursuant to the Securities Act of 1933
          (“Act”) and may be subject to certain transfer restrictions, and the
          certificates representing the Shares may contain the following legend or such
          legend as may be requires from time to time to comply with the Act: 

“THE SECURITES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERES UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND
MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY
OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE COMPANY, WITHOUT
REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE
SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT
THE OPTION OF THE COMPANY, TO BE EVIDENCED BY AN OPINION OF SECURITYHOLDER’S COUNSEL,
ACCEPTABLE TO THE COMPANY, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT
FROM ANY PROPOSED TRANSFER OR ASSIGNMENT.” 

     8.      
          All action taken pursuant hereto shall be made in accordance with all Canadian
          and United States securities laws and all applicable rules and regulations of
          the NASDAQ Stock Market. The Holder acknowledges that Shares issuable upon
          exercise of this Warrants are being acquired solely for the Holder’s own
          account and not as a nominee for any other party (provided that the Holder shall
          have the right to assign some or all of this Warrant to an accredited third
          party(s) reasonably satisfactory to the Company), and for investment, and that
          the Investor will not offer, sell or otherwise dispose of Shares acquired
          hereunder except under circumstances that will not result in a violation of the
          Act or any state securities laws. 

     9.      
          This Warrant shall not be valid for any purpose whatsoever unless and until it
          has been signed by or on behalf of the Company. 

        IN
WITNESS WHEREOF the Company has caused this Share Purchase Warrant to be signed by a
duly authorized officer as of March 27, 2006.  

	  	
QSOUND LABS, INC.

Per:  ___________________________________

President  

	To:	
QSound Labs, Inc.

400 - 3115 12th Street NE

Calgary, AB T2E 7J2

Canada

phone: 403 291 2492

fax: 403 250-1521

email: legal@qsound.com 

Attention:  Secretary

ELECTION TO EXERCISE 

        The
undersigned hereby exercises his, her or its rights to purchase ______________ Shares covered by
the within Warrant and tenders payment herewith in the amount of $_________ in accordance
with the terms thereof, and requests that certificates for such securities be issued
delivered to the address set out below and, if such number of Shares shall not be all of the
Shares covered by the within Warrant, that a new Warrant for the balance of the Shares
covered by the within Warrant be registered in the name of, and delivered to, the
undersigned at the address stated below. 

Dated:  _________________________________________

Signature:  ______________________________________

Name:  _________________________________________

Address:    ______________________________________

______________________________________________

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