Document:

SECURITY AGREEMENT

      THIS SECURITY AGREEMENT (this "Agreement") is made as of December 29,
1999, by and between SPATIALIZER AUDIO LABORATORIES, INC., a Delaware
corporation ("Debtor"), CPR (USA) INC., 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 collectively with CPR and LP, "Secured Party")

      1. Definitions.

      (a) Certain Defined Terms. The following terms, as used herein, have the
meanings set forth below:

      ARI - means that certain Agreement Regarding Indebtedness (including all
Exhibits annexed thereto) of even date herewith, by and between Debtor and
Secured Party.

      Assets - shall mean all of the assets (including but not limited to:
tangible, intangible and goodwill, all "equipment" (as defined in the UCC),
including, without limitation, all machinery, motor vehicles, trucks, trailers,
vessels, and rolling stock and all parts thereof and all additions and
accessions thereto and replacements therefor) of the Debtor.

      Collateral - has the meaning assigned to that term in Section 2.

      Event of Default - has the meaning assigned to that term in Section 9.

      Material Adverse Effect - means any effect on the business, operations,
properties, results of operations, prospects, or financial condition of the
Debtor that is material and adverse to the Debtor 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 Debtor to enter into and perform any of its obligations under
this Agreement or the Notes in any material respect.

      Notes - mean those certain Secured Non-Negotiable Convertible Promissory
Notes of even date herewith, in the aggregate original principal amount of
$225,241.10, made and executed by Debtor and issued to Secured Party, and all
amendments and supplements thereto, restatements thereof and renewals,
extensions, restructuring and refinancings thereof.

      Person - means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.

      Proceeds - means all proceeds of, and all other profits, rentals or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, any
Collateral including, without limitation, all claims against third

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parties for loss of, damage to or destruction of, or for proceeds payable under,
or unearned premiums with respect to, policies of insurance with respect to any
Collateral, and any condemnation or requisition payments with respect to any
Collateral, in each case whether now existing or hereafter arising.

      Secured Obligations - has the meaning assigned to that term in Section 3.

      Security Interests - means the security interests granted pursuant to
Section 2, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Agreement.

      UCC - means the Uniform Commercial Code as in effect on the date hereof in
the State of New York, provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral or the availability of any remedy hereunder
is governed by the Uniform Commercial Code as in effect on or after the date
hereof in any other jurisdiction, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection or availability of
such remedy.

      (b) Other Definition Provisions. References to "Sections", "subsections",
"Exhibits" and "Schedules" shall be to Sections, subsections, Exhibits and
Schedules, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in Section 1(a) may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. All references to statutes and related regulations shall include
(unless otherwise specifically provided herein) any amendments of same and any
successor statutes and regulations.

      2. Grant of Security Interest

      In order to secure the payment and performance of the Secured Obligations
in accordance with the terms thereof, Debtor hereby grants to Secured Party a
continuing security interest in and to all right, title and interest of Debtor
in the Assets (and any Proceeds therefrom) described on Attachment A hereto,
whether now owned or existing or hereafter acquired or arising (all being
collectively referred to as the "Collateral").

      3. Security for Obligations

      This Agreement secures the payment and performance of the ARI and the
Notes, and all renewals, extensions, restructuring and refinancings thereof (the
"Secured Obligations").

      4. Representations and Warranties. Debtor represents and warrants as
follows:

      (a) Binding Obligation. This Agreement has duly executed and delivered by
the Debtor, which is a legal, valid and binding obligation of Debtor,
enforceable against Debtor in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar
laws or equitable principles relating to or limiting creditor's rights
generally. This Agreement is not in violation of any other agreements,

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instruments, orders or judgments by which Debtor is bound or subject. The
execution, delivery and performance of this Agreement by Debtor does not require
the consent or approval of any other person, entity or governmental agency.

            (b) Location of Assets. All of the Assets are located in the State
of California.

            (c) Ownership of Collateral. Debtor owns the Collateral free and
clear of any lien, security interest or encumbrance. No effective financing
statement or other form of lien notice covering all or any part of the
Collateral is on file in any recording office. Debtor is, and as long as this
Agreement shall be in effect pursuant to its terms, shall be the sole, record,
legal and beneficial owner of, and has good and marketable title to, the Assets,
subject to no lien, pledge or encumbrance, except the lien on the Assets created
by this Agreement.

            (d) Office Locations; Debtor Names.

                  (i) As of the date hereof, the chief place of business, the
            chief executive office and the office where Debtor keeps its books
            and records is located at 20700 Ventura Boulevard, Suite 140,
            Woodland Hills, CA 91346. Debtor has not maintained any other street
            address at any time during the five years preceding the date hereof.

                  (ii) Debtor does not do business nor, as of the date hereof,
            has it done business during the past five years under any corporate
            name, trade name or fictitious business name except for Debtor's
            corporate name set forth above.

            (e) Perfection. This Agreement, and the filing of an appropriate
UCC-1 financing statement with the Secretary of State of the State of
California, create to secure the Secured Obligations a valid, perfected and
priority security interest in the Collateral.

            (f) Governmental Authorizations; Consents. No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or consent of any other Person is required either
(i) for the grant by Debtor of the Security Interests granted hereby or for the
execution, delivery or performance of this Agreement by Debtor, or (ii) for the
perfection of or the exercise by Secured Party of its rights and remedies
hereunder (except as may have been taken by or at the direction of Debtor or
Secured Party) other than the filing of appropriate UCC-1 financing statements
in connection with the perfection of the Security Interests.

            (g) Value of Collateral. The value of the Collateral as of the date
hereof is equal to not less than Three Hundred Thousand United States Dollars
($300,000).

            (h) Accurate Information. All information heretofore, herein or
hereafter supplied to Secured Party by or on behalf of Debtor with respect to
the Collateral is and will be accurate and complete in all material respects.

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            (i) Deficiency. Debtor will remain liable for any deficiency in the
event that the delivery of the Assets to the Secured Party is insufficient to
satisfy the Debtor's obligations under the Notes.

            (j) Survival. From and after the date hereof and so long as this
Agreement shall be in effect pursuant to its terms, the Debtor agrees that it
shall not take any action that would cause the Debtor to be in breach or default
of any of the Secured Obligations, that all representations and warranties made
by Debtor shall survive this Agreement and that as of the date hereof, the
Secured Party shall be deemed to have a priority lien on the Assets for the
purposes and in accordance with the terms and provisions hereof, and the Debtor
shall cooperate with the Secured Party and take all action requested by the
Secured Party to ensure the representations and warranties shall survive this
Agreement with respect thereto.

            (k) Validity. The Debtor's performance of its obligations under this
Agreement will not result in the creation or imposition by the Debtor of any
liens, charges, claims or other encumbrances upon the Assets, or any of the
assets of the Debtor other than the security interest granted under this
Agreement.

            (l) No Conflicts. The execution, delivery and performance of this
Agreement by the Debtor and the consummation by the Debtor of the transactions
contemplated hereby do not and will not (i) result in a violation of its
Articles of Incorporation or ByLaws or (ii) conflict with, or constitute a
material default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, patent, patent license,
indenture, instrument or any "lock-up" or similar provision of any underwriting
or similar agreement to which the Debtor is a party, or (iii) result in a
violation of any federal, state or local law, rule, regulation, order, judgment
or decree (including federal and state securities laws and regulations)
applicable to the Debtor or by which any property or asset of the Debtor is
bound or affected, nor is the Debtor otherwise in violation of, in conflict
with, or in default under, any of the foregoing except as would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect. The business of the Debtor is not being conducted in violation of any
law, ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate would not reasonably be
expected to have a Material Adverse Effect.

            (m) Insurance. The Debtor is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Debtor believes to be prudent and customary in the businesses
in which the Debtor is engaged. The Debtor has no notice to believe that the
Debtor will not be able to renew its existing insurance coverage 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.

            (n) Taxes. Except for the Debtor '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 Debtor have been filed
and such returns are complete and accurate and disclose all taxes (whether based
upon income, operations,

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purchases, sales, payroll, licenses, compensation, business, capital, properties
or assets or otherwise) required to be paid in the periods covered thereby.

            (o) Title to Assets. Debtor has good and marketable title to the
Assets, and all properties and material assets 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 Debtor.

      5. Further Assurances; Covenants

            (a) Other Documents and Actions. Debtor will, from time to time,
promptly execute and deliver all further instruments and documents prepared by
Secured Party at Secured Party's expense, and take all further action that may
be necessary or desirable, or that Secured Party may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable Secured Party to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, Debtor will: (i) execute such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as Secured Party may reasonably
request, in order to perfect and preserve the security interests granted or
purported to be granted hereby; (ii) at any reasonable time, upon demand by
Secured Party exhibit the Collateral to allow inspection of the Collateral by
Secured Party or persons designated by Secured Party; and (iii) upon Secured
Party's request, appear in and defend any action or proceeding that may affect
Debtor's title to, or Secured Party's security interest in, the Collateral.

            (b) Secured Party Authorized. Debtor hereby authorizes Secured Party
to file one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral without the signature of
Debtor where permitted by law.

            (c) Corporate or Name Change. Debtor will notify Secured Party
promptly in writing at least 30 days prior to (a) any change in Debtor's name
and (b) Debtor's commencing the use of any trade name, assumed name or
fictitious name.

            (d) Business Locations. Debtor will keep the Collateral at the
location specified in Section 4(b) above. Debtor shall give Secured Party thirty
(30) days' prior written notice of any change in its chief place of business or
of any new location of business or any new location for any of the Collateral.
With respect to any new location (which in any event shall be within the
continental United States), Debtor shall execute such documents and take such
actions as Secured Party reasonably deems necessary to perfect and protect the
Security Interests.

            (e) Bailees. No Collateral shall at any time be in the possession or
control of any warehouseman, bailee or Debtor's agents or processors without
Secured Party's prior written consent and unless Secured Party, if Secured Party
has so requested, has received warehouse receipts or bailee letters reasonably
satisfactory to Secured Party prior to the commencement of such storage. Debtor
shall, upon the request of Secured Party, notify any such warehouseman, bailee,
agent or processor of the Security Interests.

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            (f) Insurance. Debtor currently does maintain and shall maintain
insurance with respect to the Collateral of types and in amounts that are
customary for similarly situated businesses. Debtor hereby direct all insurers
under such policies of insurance with respect to its assets to pay all material
proceeds of such insurance policies to Secured Party.

            (g) Taxes and Claims. Debtor will pay (i) all taxes, assessments and
other governmental charges imposed upon the Collateral before any penalty
accrues thereon and (ii) all claims (including claims for labor, services,
materials and supplies) for sums that have become due and payable and that by
law have or may become a lien upon any of the Collateral before any penalty or
fine is incurred with respect thereto; provided that no such tax, charge or
claim need be paid if Debtor is contesting same in good faith by appropriate
proceedings promptly instituted and diligently conducted and if Debtor has
established such reserve or other appropriate provision, if any, as shall be
required in conformity with generally accepted accounting principles
consistently applied.

            (h) Collateral Description. Debtor will furnish to Secured Party,
from time to time, statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral as
Secured Party may reasonably request, all in reasonable detail.

            (i) Use of Collateral. Debtor will not use or permit any Collateral
to be used unlawfully or in violation of any provision of this Agreement or any
applicable statue, regulation or ordinance or any policy of insurance covering
any of the Collateral.

            (j) Records of Collateral. Debtor shall keep full and accurate books
and records relating to the Collateral and shall stamp or otherwise mark such
books and records in such manner as Secured Party may reasonably request
indicating that the Collateral is subject to the Security Interests.

            (k) Other Information. Debtor will, promptly upon request, provide
to Secured Party all information and evidence it may reasonably request
concerning the Collateral to enable Secured Party to enforce the provisions of
this Agreement.

            (l) Maintenance. The Debtor will maintain the condition of the
Collateral in such condition as is customary in the businesses in which the
Debtor is engaged, and shall take any and all actions necessary for such
maintenance as are customary.

      6. Secured Party Appointed Attorney-in-Fact. Debtor hereby irrevocably
appoints each Secured Party as its attorney-in-fact, with full authority in the
place and stead of Debtor and in the name of Debtor, Secured Party or otherwise,
from time to time in Secured Party's discretion to take any action and to
execute any instrument that Secured Party may deem necessary or advisable after
the occurrence and during the continuation of an Event of Default to accomplish
the purposes of this Agreement, including, without limitation:

            (a) to obtain and adjust insurance required to be paid to Secured
Party;

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            (b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for monies due and to become due under or in
respect of any of the Collateral;

            (c) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral;

            (d) to pay or discharge taxes or liens, levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, and such payments made by Secured Party to become obligations
of Debtor, due and payable immediately without demand and secured by the
Security Interests; and

            (e) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though Secured Party were the absolute owner thereof for all purposes, and to
do, at Secured Party's option and Debtor's expense, at any time or from time to
time, all acts and things that Secured Party deems necessary to protect,
preserve or realize upon the Collateral.

      Neither Secured Party nor any Person designated by Secured Party shall be
liable for any acts or omissions or for any error of judgment or mistake of fact
or law other than as a result of Secured Party's or such Person's gross
negligence or willful misconduct. These powers, being coupled with an interest,
is irrevocable so long as this Agreement shall remain in force.

      7. Transfers and Other Liens

      Debtor shall not, without Secured Party's prior written consent:

            (a) Sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Collateral other
than (i) in the ordinary course of its business, (ii) in connection with the
replacement of any Collateral of equivalent use and value, or (iii) with respect
to the capital stock of Multidisc Technologies, Inc. (a wholly-owned inactive
subsidiary of Debtor) or any of the assets of such subsidiary.

            (b) Create or suffer to exist any lien, security interest or other
charge or encumbrance upon or with respect to any of the Collateral to secure
indebtedness of any Person except for the security interest created by this
Agreement.

      8. Events of Default.

      The occurrence of any one or more of the following events shall constitute
an Event of Default by Debtor under this Agreement:

            (a) General Default. Debtor shall fail to observe or perform any
covenant, obligation, term or condition contained in the ARI, the Notes or this
Agreement.

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            (b) Nonpayment. Debtor shall fail to pay any principal, interest or
other amount owing under the Notes when and as the same shall be due and
payable.

            (c) Material Misrepresentations. Any representation or warranty by
the Debtor set forth herein shall prove to be false in any material respect.

            (d) Going Concern. Debtor shall terminate its corporate existence or
shall cease to operate as a going concern.

            (e) Judgments. A judgment shall be entered against Debtor or a
warrant of execution or similar process shall be issued or levied against its
property and within thirty (30) days after such judgment, warrant or process
shall not have been paid in full or proper appeal of the same made.

            (f) Relief - Voluntary. Debtor shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing.

            (g) Relief - Involuntary. Any involuntary case or other proceeding
shall be commenced against Debtor seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of thirty (30) days; or an
order for relief shall be entered against Debtor under the federal bankruptcy
laws as now or hereafter in effect.

            (h) Transfer. The Collateral is sold or transferred by the Debtor in
violation of Section 7.

            (i) Other. The occurrence of any "Event of Default" as that term is
defined in the Notes.

      9. Remedies

            (a) If any Event of Default shall have occurred and be continuing,
Secured Party may declare the entire outstanding principal amount of the Notes
immediately due and payable without any notice, demand or other action on the
part of Secured Party.

            (b) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on

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default under the UCC (whether or not the UCC applies to the affected
Collateral) and also may: (i) require Debtor to, and Debtor hereby agrees that
it will, at its expense and upon request of Secured Party forthwith, assemble
all or part of the Collateral as directed by Secured Party and make it available
to Secured Party at a place to be designated by Secured Party which is
reasonably convenient to both parties; (ii) without notice or demand or legal
process, enter upon any premises of Debtor and take possession of the Collateral
for sale pursuant to this Section 9; (iii) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of Secured Party's offices or elsewhere, at such time or
times, for cash, on credit or for future delivery, and at such price or prices
and upon such other terms as Secured Party may deem commercially reasonable;
(iv) notify the obligors on any Accounts or Instruments to make payments there
under directly to Secured Party; (v) without notice to Debtor, renew, modify or
extend any of the Accounts and Instruments or grant waivers or indulgences with
respect thereto or accept partial payment thereof, or substitute any obligor
thereon, in any manner as Secured Party may deem advisable, without affecting or
diminishing Debtor's continuing obligations hereunder; and (v) and shall have
all applicable remedies set forth in the UCC. Debtor agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to Debtor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. At any sale of the
Collateral, if permitted by law, Secured Party may bid (which bid may be, in
whole or in part, in the form of cancellation of indebtedness) for the purchase
of the Collateral or any portion thereof for the account of Secured Party.
Secured Party shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. To the extent permitted by law, Debtor
hereby specifically waives all rights of redemption, stay or appraisal, which it
has or may have under any law now existing or hereafter enacted.

            (c) Upon the occurrence of an Event of Default hereunder, Secured
Party shall have the right to enter upon the premises of Debtor where the
Collateral is located (or is believed to be located) without any obligation to
pay rent to Debtor, or any other place or places where the Collateral is
believed to be located and kept, to render the Collateral useable or saleable,
to remove the Collateral therefrom to the premises of Secured Party or any agent
of Secured Party for such time as Secured Party may desire in order to
effectively collect or liquidate the Collateral, and/or to require Debtor to
assemble the Collateral and make it available to Secured Party at a place or
places to be designated by Secured Party. Upon the occurrence of an Event of
Default hereunder, Secured Party shall have the right to take possession of
Debtor's original books and records, to obtain access to Debtor's data
processing equipment, computer hardware and software relating to the Collateral
and to use all of the foregoing and the information contained therein in any
manner Secured Party deems appropriate; and Secured Party shall have the right
to notify postal authorities to change the address for delivery of Debtor's mail
to an address designated by Secured Party and to receive, open and dispose of
all mail addressed to Debtor.

      10. Limitation on Duty of Secured Party with Respect to Collateral. Beyond
the safe custody thereof, Secured Party shall have no duty with respect to any
Collateral in its possession or control (or in the possession or control of any
agent or bailee) or with respect to any income thereon or the preservation of
rights against prior parties or any other rights pertaining thereto.

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Secured Party shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it accords its own
property. Secured Party shall not be liable or responsible for any loss or
damage to any of the Collateral, or for any diminution in the value thereof, by
reason of the act or omission of any warehouseman, carrier, forwarding agency,
consignee or other agent or bailee selected by Secured Party in good faith.

      11. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default as set forth herein, the proceeds of any sale
of, or other realization upon, all or any part of the Collateral shall be
applied (pro rata among each participant in the Secured Party based on the
indebtedness then owing): first, to all fees, costs and expenses incurred by
Secured Party with respect to the Collateral; and second, to the Secured
Obligations. Secured Party shall pay over to Debtor any surplus and Debtor shall
remain liable for any deficiency.

      12. Expenses. Debtor agrees to pay all insurance expenses and all expenses
of protecting, storing, warehousing, appraising, insuring, handling, maintaining
and shipping the Collateral and any and all excise, property, sales and use
taxes imposed by any state, federal or local authority on any of the Collateral,
or with respect to periodic appraisals and inspections of the Collateral, or
with respect to the sale or other disposition thereof. If Debtor fails promptly
to pay any portion of the above expenses when due or to perform any other
obligation of Debtor under this Agreement, Secured Party may, at its option, but
shall not be required to, pay or perform the same, and Debtor agree to reimburse
Secured Party therefor on demand, or the Secured Party may deem it to be an
Event of Default. All sums so paid or incurred by Secured Party for any of the
foregoing, any and all other sums for which Debtor may become liable hereunder
and all costs and expenses (including attorneys' fees, legal expenses and court
costs) incurred by Secured Party in enforcing or protecting the Security
Interests or any of their rights or remedies under this Agreement shall be
payable on demand, shall constitute Secured Obligations, shall bear interest
until paid at the rate provided in the Notes and shall be secured by the
Collateral.

      13. Termination of Security Interests; Release of Collateral. Upon payment
in full of all Secured Obligations or upon the conversion of all principal
outstanding under the Notes and all interest accrued thereon into shares of
common stock, par value $0.01 per share, of the Debtor, the Security Interests
shall terminate and all rights to the Collateral shall revert to Debtor. Upon
such termination of the Security Interests or release of any Collateral, Secured
Party will, at the expense of, and preparation by, the Debtor, execute and
deliver to Debtor such documents as Debtor shall reasonably request to evidence
the termination of the Security Interests or the release of such Collateral, as
the case may be.

      14. Notices. Each notice, communication and delivery under this Agreement:
(a) shall be made in writing signed by the party giving it; (b) shall specify
the section of this Agreement pursuant to which given; (c) shall either be
delivered in person or by telecopier, a nationally recognized next business day
courier service or Express Mail; (d) unless delivered in person, shall be given
to the address specified below; (e) shall be deemed to be given (i) if delivered
in person, on the date delivered, (ii) if sent by telecopier, on the date of
telephonic confirmation of receipt, (iii) if sent by a nationally recognized
next business day courier service with all costs paid, on the next business day
after it is delivered to such courier, or (iv) if sent by

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Express Mail (with postage and other fees paid), on the next business day after
it is mailed. Such notice shall not be effective unless copies are provided
contemporaneously as specified below, but neither the manner nor the time of
giving notice to those to whom copies are to be given (which need not be the
same as the addressee) shall control the date notice is given or received. The
addresses and requirements for copies are as follows:

      If to Debtor: at the address set forth in Section 4(d) above.

      If to Secured Party at their respective addresses set forth in the Notes.
Except as otherwise expressly set forth in any particular provision of this
Agreement, any consent or approval required or permitted by this Agreement to be
given by Secured Party may be given, and any term of this Agreement or of any
other instrument related hereto or mentioned herein may be amended, and the
performance or observance by Debtor of any term of this Agreement, the ARI or
the Notes may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written specific
consent of Secured Party. No waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon. No course of dealing or
delay or omission on the part of Secured Party in exercising any right shall
operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or
demand upon Debtor shall entitle Debtor to other or further notice or demand in
similar or other circumstances. The rights in this Agreement, the ARI and the
Notes are cumulative and are not exclusive of any other remedies provided by
law. The invalidity, illegality or unenforceability of any provision in or
obligation under this Agreement shall not affect or impair the validity,
legality or enforceability of the remaining provisions or obligations under this
Agreement.

      15. Successors and Assigns. This Agreement is for the benefit of Secured
Party and its successors and assigns, and in the event of an assignment of all
or any of the Secured Obligations, the rights hereunder, to the extent
applicable to the Secured Obligations so assigned, may be transferred with such
Secured Obligations. This Agreement shall be binding on Debtor and its
successors and assigns, provided that Debtor shall not assign this Agreement
without Secured Party's prior written consent.

      16. Changes in Writing. No amendment, modification, termination or waiver
of any provision of this Agreement or consent to any departure by Debtor
therefrom, shall in any event be effective without the written concurrence of
Secured Party and Debtor.

      17. Governing Law/Venue/Jurisdiction. This Agreement shall be exclusively
governed by and construed in accordance with the laws of the State of New York,
without giving effect to the conflicts of law principles thereof. Each of the
parties consents to the exclusive jurisdiction of the U.S. District Court
sitting in the Southern District of the State of New York sitting in Manhattan
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 the other 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
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

                                       11
<PAGE>

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. Each party waives
its right to a trial by jury.

      18. Headings. Cross reference pages and headings contained herein are for
convenience of reference only, do not constitute a part of this Agreement, and
shall not be deemed to limit or affect any of the provisions hereof.

      19. Counterparts. This Agreement may be executed by each party upon a
separate copy, and in such case one counterpart of this Agreement shall consist
of enough of such copies to reflect the signatures of all of the parties. This
Agreement may be executed in two or more counterparts, each of which shall be an
original, and each of which shall constitute one and the same agreement. Any
party may deliver an executed copy of this Agreement and of any documents
contemplated hereby by facsimile transmission to another party and such delivery
shall have the same force and effect as any other delivery of a manually signed
copy of this Agreement or of such other documents.

                                       12
<PAGE>

      DULY EXECUTED and delivered by the parties on the date first written
above.

SPATIALIZER AUDIO LABORATORIES, INC.

By: /s/ Henry R. Mandell
    ----------------------------------
Name:  Henry R. Mandell
Title: Interim Chief Executive Officer

                                        CPR (USA) INC.

                                        By: /s/ Steven S. Rogers
                                            ------------------------------------
                                        Name:  Steven S. Rogers
                                        Title: Managing Director

                                        LIBERTYVIEW FUNDS, L.P.

                                        By: /s/ Steven S. Rogers
                                            ------------------------------------
                                        Name:  Steven S. Rogers
                                        Title: Authorized Signatory

                                        LIBERTYVIEW FUND, LLC

                                        By: /s/ Steven S. Rogers
                                            ------------------------------------
                                        Name:  Steven S. Rogers
                                        Title: Authorized Signatory

                                       13
<PAGE>

                                  ATTACHMENT A

                            Description of Collateral

      The Collateral consists of all Assets (as such term is defined in Section
1(a) of this Agreement) of the Debtor.

                                       14Bank Insinger de Beaufort

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 20700 Ventura Boulevard, Suite 140, Woodland Hills,
California 91364, a corporation organized under the laws of Delaware, USA
(hereinafter referred to as the "Company"). In addition, the Company will sell
to the Subscriber listed on Schedule A annexed hereto ("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.

<PAGE>

      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 for an aggregate purchase price of Two Hundred
Fifty Thousand U.S. Dollars (US$250,000.00) (the "Aggregate Purchase Price")
based on the purchase price per share (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 Two Hundred Fifty Thousand U.S.
Dollars (US$250,000.00) 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 any authoritative source
acceptable to the Company.

            1.3 Form of Payment. Subscriber shall pay the Aggregate Purchase
Price by delivering immediately available funds in United States Dollars by wire
transfer to an account designated by the Company prior to the Closing Date
against delivery of the Common Stock and Warrants as payment in full for the
Securities. In connection with this transaction, the parties agree that the
Company shall pay a finder's fee to Bristol Capital, LLC, pursuant to the
Finder's Fee Agreement between the Company and Bristol Capital, LLC dated as of
December 27, 1999.

      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
<PAGE>

            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 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.

                                       3
<PAGE>

            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 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;

                                       4
<PAGE>

            (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

            (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, 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 or in an "offshore
transaction"

                                       5
<PAGE>

(as such term is defined in Regulations S under the Act). Accordingly,
Subscriber hereby acknowledges that it is prepared to hold the Securities for an
indefinite period. Subscriber is aware that Rule 144 promulgated by the SEC
under the Act is not presently available to exempt the sale of the Securities
from the registration requirements of the Act. 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. 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, 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 on the Company.

            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)

                                       6
<PAGE>

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).

            3.3 SEC Filings/Full Disclosure. For a period of at least twelve
(12) months immediately preceding the Closing Date, to the Company's knowledge:
(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 condition (financial or
otherwise) or on earnings, business affairs, properties or assets of the
Company, or (ii) could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to this
Agreement.

            3.4 Authorization. The Company has all requisite corporate right,
power and authority to execute and deliver this Agreement 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 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

                                       7
<PAGE>

Company, its properties or assets, which would have a material adverse effect on
the Company's business and financial condition.

            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 properties, business, condition
(financial or otherwise), results of operations or prospects of 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 conversion or 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's business, properties, prospects, condition (financial or
otherwise) or results of operations.

            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 in the
Reports. To the Company's knowledge, and except as

                                       8
<PAGE>

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 business or financial
condition of the Company.

            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 any material adverse change in the business, prospects,
conditions, affairs or operations of 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

                                       9
<PAGE>

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 1934 Act.

            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 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.

            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.

      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.

            (ii)  It will maintain the listing of its Common Stock on the OTC
                  Bulletin Board.

            (iii) It will permit Subscriber to exercise its right to exercise
                  the Warrants by telecopying an executed and completed Notice
                  of Exercise to the Company and delivering the original Notice
                  of Exercise and the original Warrant to the Company by
                  overnight courier. Each business date on which a Notice of
                  Exercise is telecopied to and received by the Company in
                  accordance with the provisions hereof shall be deemed an
                  "Exercise Date". The Company will transmit the certificates
                  representing shares of Common Stock issuable upon exercise of
                  any Warrants (together with the certificates representing the
                  Warrants not so exercised) to Subscriber via express courier,
                  by electronic transfer or otherwise within three (3) business
                  days

                                       10
<PAGE>

                  after the Exercise Date if the Company has received the
                  original Notice of Exercise and Warrant being exercised by
                  such date. In addition to any other remedies which may be
                  available to Subscriber, in the event that the Company fails
                  to effect delivery of such shares of Common Stock within such
                  three (3) business day period, Subscriber will be entitled to
                  revoke the relevant Notice of Exercise by delivering a notice
                  to such effect to the Company whereupon the Company and
                  Subscriber shall each be restored to their respective
                  positions immediately prior to delivery of such Notice of
                  Exercise. The Notice of Exercise and Warrant representing the
                  portion of the Warrant exercised shall be delivered as
                  follows:

                  To the Company:

                        Spatializer Audio Laboratories, Inc.
                        20700 Ventura Boulevard, Suite 140
                        Woodland Hills, CA  91364-2357
                        Fax:  (818) 227-9750
                        Attn: Henry R. Mandell, Interim Chief Executive Officer

      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:

            (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) 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

                                       11
<PAGE>

registration is available. Subscriber understands that the Securities will be
imprinted with a legend that prohibits the transfer of the Securities unless (i)
they are registered or such registration is not required, and (ii) if the
transfer is pursuant to an exemption from registration other than Rule 144 under
the Act and, if the Company shall so request in writing, an opinion of counsel
reasonably satisfactory to the Company is obtained to the effect that the
transaction is so exempt.

      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.

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

                                       12
<PAGE>

                  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 Dates;
                  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.

      Section 12. Miscellaneous.

            12.1 Governing Law/Jurisdiction. This Agreement will be construed
and enforced in accordance with and governed by the laws of the State of
California except for matters arising under the Act, without reference to
principles of conflicts of law. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the State of
California or the state courts of the State of California 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 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

                                       13
<PAGE>

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.

            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.

            12.9 Restriction on Trading Prior to Exercise of Warrants.
Subscriber hereby agrees that, during the ten (10) trading days immediately
preceding any exercise of its right to purchase Common Stock under the Warrant,
it shall not, whether directly or indirectly, engage in any short sales of any
shares of capital stock of the Company. Subscriber hereby agrees that it shall
not be entitled to exercise its rights under the Warrant until ten (10)
consecutive trading days have elapsed during which Subscriber has not engaged in
any transaction prohibited by this Section 12.9.

                  [Remainder of Page Intentionally Left Blank]

                                       14
<PAGE>

            IN WITNESS WHEREOF, this Agreement was duly executed on and as of
the date first written below.

Agreed to and Accepted on this 29th day of December, 1999:

SPATIALIZER AUDIO LABORATORIES, INC., a
Delaware corporation

By: /s/ Henry R. Mandell
    ----------------------------------
Name:  Henry R. Mandell
Title: Interim Chief Executive Officer

                                   Subscriber:

                                   BANK INSINGER DE BEAUFORT, a Netherlands bank

                                   By: /s/ R. Mooij
                                       -----------------------------------------
                                   Name:  R. Mooij
                                   Title: Director

                                   Executed this 29th day of December, 1999.

                                       15
<PAGE>

                                   SCHEDULE A

  Subscriber                                     Number of Shares       Number
Name and Address              Purchase Price     of Common Stock     of Warrants
----------------              --------------     ---------------     -----------

BANK INSINGER DE BEAUFORT      US $250,000           448,632           500,000
Herengracht 551
1017 BW Amsterdam
The Netherlands

<PAGE>

                                   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 Carlo
      Civelli 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.

<PAGE>

                                    EXHIBIT A

                             Stock Purchase Warrant
<PAGE>

                                                       Bank Insigner de Beaufort

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 500,000 Shares of Common Stock of

                      Spatializer Audio Laboratories, Inc.

      THIS STOCK PURCHASE WARRANT (this "Warrant") certifies that, for value
received, BANK INSINGER DE BEAUFORT, a Netherlands Bank (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"),
Five Hundred Thousand (500,000) 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 Agreement 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.

      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; 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

<PAGE>

                                                       Bank Insigner de Beaufort

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 as follows: (i) to a person who, in
the opinion of counsel to the Company, is a person to whom the Warrant Shares
may legally be transferred without registration and without the delivery of a
current prospectus under the Act with respect thereto, and then only against
receipt of the written agreement of such person to comply with the provisions of
this Section 6(a) with respect to any resale or other disposition of such
securities; or (ii) to any person upon the effectiveness of the Company's
Registration Statement on Form S-3 to be filed pursuant to that certain
Registration Rights Agreement (the "Registration Rights Agreement"), dated of
even date herewith, between the Company and the Investor.

            (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

                                       2
<PAGE>

                                                       Bank Insigner de Beaufort

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.

      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) 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 would have been entitled to receive after the
happening of such transaction had this Warrant been exercised immediately prior
thereto.

            (b) The Investor shall be granted registration rights for the
Warrant Shares pursuant to the Registration Rights Agreement.

      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 its outstanding shares of Common Stock,
(iii) combine its outstanding shares of

                                       3
<PAGE>

                                                       Bank Insigner de Beaufort

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. 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 date hereof.

                                       4
<PAGE>

            (b) Governing Law; Jurisdiction. 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. The Company consents
to the jurisdiction of the federal courts whose districts encompass any part of
the State of California or the state courts of the State of California in
connection with any dispute arising under this Warrant 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. The Company hereby agrees that if Investor 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 Company, and the Company hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. The Company 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.

            (c) 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.

            (d) 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.

            (e) 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.

            (f) Legal Costs and Fees. In any action to enforce the provisions of
this Warrant, the prevailing party shall be able to collect as damages from the
other party, in addition to all other remedies provided by applicable law, the
prevailing party's court costs and reasonable attorneys' fees.

                  [Remainder of Page Intentionally Left Blank]

                                       5
<PAGE>

                                                       Bank Insigner de Beaufort

      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:  Henry R. Mandell
                                          Title: Interim Chief Executive Officer

                                       6
<PAGE>

                                                       Bank Insigner de Beaufort

                               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:___________________              BANK INSINGER DE BEAUFORT

                                       By:______________________________________
                                       Name:____________________________________
                                       Title:___________________________________

NOTE: Signature must conform in all respects to holder's name as specified on
the face of the attached warrant.

                                       7

<PAGE>

                                    EXHIBIT B

                          Registration Rights Agreement
<PAGE>

                                                       Bank Insinger de Beaufort

                          REGISTRATION RIGHTS AGREEMENT

      THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated the 29th day
of December, 1999, between BANK INSINGER DE BEAUFORT, a Netherlands Bank with an
address at Herengracht 551, 1017 BW Amsterdam, The Netherlands (the "Holder"),
and SPATIALIZER AUDIO LABORATORIES, INC., a Delaware corporation having its
principal place of business at 20700 Ventura Boulevard, Suite 140, Woodland
Hills, California 91364 (the "Company").

      WHEREAS, simultaneously with the execution and delivery of this Agreement,
the Holder is purchasing from the Company, pursuant to that certain Common Stock
Subscription Agreement (the "Subscription Agreement"), dated of even date
herewith, Four Hundred Forty-eight Thousand Six Hundred Thirty-two (448,632)
shares of Common Stock, and a Warrant to purchase an aggregate of Five Hundred
Thousand (500,000) shares of Common Stock. The shares of Common Stock of the
Company underlying the Warrants acquired by the Holder or the other purchasers
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 Holder 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
Holder 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.
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                                                       Bank Insinger de Beaufort

      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 (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 May 1, 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 by Holder 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, the fees and expenses of any counsel
it selects, and such other extraordinary expenses as are necessary to qualify
the sale of the 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) 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 April 15, 2000, then the Company will pay,
in cash, to the Holder by wire transfer, as liquidated damages for such failure
and not as a penalty, two percent (2%) of the Purchase Price (as defined in the
Subscription Agreement) per share of Registrable Security each month thereafter
until such 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.

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                                                       Bank Insinger de Beaufort

            (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.

      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:

            (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;

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                                                       Bank Insinger de Beaufort

            (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 not be assigned. This Agreement is binding upon and inures to the benefit
of the parties hereto and their respective heirs, successors and permitted
assigns.

      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,

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                                                       Bank Insinger de Beaufort

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 Amended 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 statement
of any material fact contained in the Amended 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

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                                                       Bank Insinger de Beaufort

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.

      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

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                                                       Bank Insinger de Beaufort

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) days after they are mailed in the manner set forth above. If notice is
delivered by facsimile to the Company 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 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. 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

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                                                       Bank Insinger de Beaufort

considered an original document and which together shall be considered a
complete document. This Agreement constitutes 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.

      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 will be construed and
enforced in accordance with and governed by the laws of the State of California,
except for matters arising under the Act, without reference to principles of
conflicts of law. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the State of California or
the state courts of the State of California 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 had never been
contained herein. Terms not otherwise defined herein shall be defined in
accordance with the Subscription Agreement.

      Section 16. Legal Costs and Fees. In any action to enforce the provisions
of this Agreement, the prevailing party shall be able to collect as damages from
the other party, in addition to all other remedies provided by applicable law,
the prevailing party's court costs and reasonable attorneys' fees.

                  [Remainder of Page Intentionally Left Blank]
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                                                       Bank Insinger de Beaufort

      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:  Henry R. Mandell
                                    Title: Interim Chief Executive Officer

WITNESSED:

------------------------
Margaret G. Graf

                                    BANK INSINGER DE BEAUFORT

                                    By:
                                       -----------------------------------
                                    Name:
                                    Title:

                                       8

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