As Filed: March 6, 1996 SEC File No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Registration Statement on Form S-3
Under the Securities Act of 1933
LARSON DAVIS INCORPORATED
(Exact name of registrant as specified in its charter)
Nevada 87-0429944
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1681 West 820 North, Provo, Utah 84601 (801) 375-0177
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Dan J. Johnson, 1681 West 820 North, Provo, Utah 84601 (801) 375-0177
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Keith L. Pope, Esq.
Kruse, Landa & Maycock, L.L.C.
Eighth Floor, Bank One Tower
50 West Broadway
Salt Lake City, Utah 84101-2006
Telephone: (801) 531-7090
Telecopy: (801) 359-3954
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
--
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
--
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
--
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
--
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Class Offering Aggregate Amount of
of Securities Amount to be Price Offering Registration
to be Registered Registered (1) Per Unit (2) Price Fee
<S> <C> <C> <C> <C>
Common Stock (3) 2,795,911 $4.50 $11,099,173 $3,828
</TABLE>
[FN]
(1) This amount includes 329,428 shares of Common Stock previously registered
on form SB-2, SEC File No. 33-59963, declared effective August 1, 1995. The
Registrant paid a fee of $426, based on the then current trading price of
$3.75 per share, with respect to these carried forward shares at the time of
filing the prior registration statement. There are also registered pursuant
to rule 416 such additional number of securities as may be issuable under the
antidilution provisions of the Company's warrants to purchase common stock.
(2) Estimated solely for purposes of calculating the registration fee.
(3) The price of the Common Stock is based on the closing price for the Common
Stock of $4.50 as reported by Nasdaq on March 4, 1996 (rule 457(c)).
The Prospectus included in this Registration Statement is a combined
Prospectus that also relates to the Registrant's registration statement on form
SB-2, SEC File No. 33-59963.
Page 1 of 50 pages, including exhibits.
Exhibit index appears on consecutive page number 23.
<PAGE>
Preliminary Prospectus
2,795,911 Shares
LARSON DAVIS INCORPORATED
Common Stock
This Prospectus relates to the public offering by certain shareholders (the
"Selling Shareholders") of (i) 220,911 shares of issued and outstanding common
stock, par value $0.001 per share (the "Common Stock"), of Larson Davis
Incorporated (the "Company"); (ii) 500,000 shares of Common Stock issuable on
the exercise of outstanding warrants to purchase shares of Common Stock at a
purchase price of $3.25 per share of Common Stock (the "$3.25 A Warrants");
(iii) 500,000 shares of Common Stock issuable on the exercise of warrants to be
issued to purchase shares of Common Stock at any time prior to November 1, 1996
(the "$3.25 B Warrants"); (iv) 500,000 shares of Common Stock issuable on the
exercise of warrants to be issued to purchase shares of Common Stock at a
purchase price of $3.25 per share of Common Stock at any time prior to June 30,
1997 (the "$3.25 C Warrants"); (v) 875,000 shares of Common Stock issuable on
the exercise of warrants to be issued to purchase shares of Common Stock at a
purchase price of $3.25 per share of Common Stock at any time prior to December
31, 1997 (the "$3.25 D Warrants"); and (vi) up to 200,000 shares of Common Stock
issuable on the conversion of outstanding shares of 1995 preferred stock, par
value $0.001 per share (the "1995 Preferred Stock"). The $3.25 A, B, C, and D
Warrants are sometimes collectively referred to as the "$3.25 Warrants." (See
"SELLING SHAREHOLDERS" and "PLAN OF DISTRIBUTION.")
The Common Stock is quoted on the Nasdaq Small Cap Market ("Nasdaq") under
the trading symbol "LDII." The last price for the Common Stock as of March 4,
1996, as reported by Nasdaq, was $4.50.
This Offering Involves Certain Risks. (See "RISK FACTORS.")
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR OTHER
REGULATORY AUTHORITY, NOR HAS THE COMMISSION OR ANY
STATE OR OTHER REGULATORY AUTHORITY PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts Selling
Public(1) and Shareholders(3)
Commissions(2)
<S> <C> <C> <C>
Per Share.... $ 4.50 - $ 4.50
Total $12,581,599 - $12,581,599
</TABLE>
(1) The price per share for the securities offered by the Selling Shareholders
is estimated at the last price for the Common Stock of $4.50 per share as
reported by Nasdaq on March 4, 1996.
(2) It is anticipated that the securities being sold by the Selling
Shareholders will be sold in privately negotiated transactions or through
broker-dealers in individual transactions in which the normal commissions and
other charges will be made by the broker-dealer. There is no agreement
between any broker-dealer and the Company with respect to such sales. (See
"PLAN OF DISTRIBUTION.")
(3) All amounts received on the sale of the Common Stock will be received by
the Selling Shareholders, and there will be no proceeds to the Company. The
Company anticipates that it will incur costs related to this offering of
approximately $36,000. (See "PLAN OF DISTRIBUTION.")
The date of this Prospectus is , 1996.
----------
<PAGE>
The Selling Shareholders will offer the Common Stock through or to
securities brokers or dealers designated by them in the over-the-counter market
or in other transactions negotiated by the Selling Shareholders. Any such sale
of Common Stock by Selling Shareholders must be accompanied by, or follow the
delivery of, a Prospectus filed with a current registration statement relating
to the Common Stock being offered, unless a Selling Shareholder elects to rely
on Rule 144 or another exemption from the registration requirements in
connection with a particular transaction. The Selling Shareholders and any
broker, dealer, or agent that participates with the Selling Shareholders in the
sale of the Common Stock offered hereby may be deemed "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), and
any commissions or discounts received by them and any profit on the resale of
the Common Stock purchased by them may be deemed to be underwriting commissions
under the Securities Act. (See "SELLING SHAREHOLDERS" and "PLAN OF
DISTRIBUTION.")
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Shareholders. In connection with this offering, the Company
estimates that it will incur costs of approximately $ for legal,
-------
accounting, printing, and other items. Any separate costs of the Selling
Shareholders will be borne by them. Commissions or discounts paid in connection
with the sale of securities will be paid by the Selling Shareholders and will be
determined by agreement between the Selling Shareholders and the broker-dealer
through, or to which, the securities are to be sold and may vary depending on
the broker-dealers' commission or mark up schedule, the size of the transaction,
and other factors. (See "PLAN OF DISTRIBUTION.")
The Company is subject to the periodic reporting requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such material can be inspected and copied at the public
reference facilities of the Commission in Washington, D.C., and certain regional
offices. Copies can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549, at the prescribed rates. (See "ADDITIONAL
INFORMATION AND INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.")
The Company will provide, without charge, a copy of the information
incorporated in this Prospectus by reference, including copies of the periodic
reports of the Company filed with the Commission (but not the exhibits thereto),
to anyone requesting a copy. Requests should be directed to Dan J. Johnson,
Larson Davis Incorporated, 1681 West 820 North, Provo, Utah 84601, telephone
(801) 375-0177.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed information
and financial statements appearing elsewhere in this Prospectus and the periodic
reports of the Company filed with the Commission.
The Company
Larson Davis Incorporated (the "Company") is primarily engaged in the
development, manufacture, and marketing of precision measuring instrumentation,
including accompanying computer hardware and software technology. The Company
sells such instruments to private industry and governmental agencies for both
industrial and military applications.
The Company recently acquired Sensar Corporation ("Sensar"), a company
engaged in the development and manufacture of highly sensitive, time-of-flight
mass spectrometers. Sensar has entered into a distribution agreement with SAES
Getters S.p.A. ("SAES"), granting SAES the exclusive right to market Sensar's
existing instruments to the semi-conductor industry.
The Company also owns proprietary software for use in environmental
monitoring. The Company has exclusively licensed this software to Harris Miller
Miller & Hanson, noise and vibration consultants to the transportation industry,
for application in the airport noise and operations monitoring industry. The
Company also holds rights to patented technology permitting real time assessment
of the properties of polymers (the "CrossCheck Technology"). The Company
acquired the exclusive right to develop and market this technology from Brigham
Young University in February 1994 and has been funding certain ongoing
development and application studies since that time. This technology has not
been reduced to marketable products.
The Company has three active wholly-owned subsidiaries, Larson Davis
Laboratories ("LDL"), Larson Davis, Ltd. ("LTD"), and Sensar. Unless the
context otherwise requires, when used herein, the term "Company" refers to
Larson Davis Incorporated and its subsidiaries.
The Company's principal executive offices are located at 1681 West 820
North, Provo, Utah 84601. The company's telephone number at that location is
(801) 375-0177.
The Offering
This offering relates to the sale by the Selling Shareholders of up to
2,795,911 shares of Common Stock, either currently issued and outstanding or
issuable on the exercise of the $3.25 Warrants or conversion of the 1995
Preferred Stock.
<PAGE>
The $3.25 Warrants and the 1995 Preferred Stock were, or will be, issued in
private placements (the "Private Placements") to a limited number of investors,
each of whom are included as Selling Shareholders in this offering. The Private
Placements were, and will be, conducted in reliance on exemptions from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and, as such, the $3.25 Warrants and shares of the 1995
Preferred Stock issued in the Private Placements and any Common Stock that may
be issued on exercise of the Warrants or conversion of the 1995 Preferred Stock
are restricted securities and are not transferable, except pursuant to a
registration statement or an available exemption from registration.
This Prospectus is part of a registration statement filed to permit the
sale by the Selling Shareholders of the Common Stock currently held by the
Selling Shareholders and the Common Stock to be issued on exercise of the $3.25
Warrants or conversion of the 1995 Preferred Stock. (See "PLAN OF
DISTRIBUTION.") The resale by the Selling Shareholders of the Common Stock
previously issued in Private Placements was included in a separate registration
statement filed by the Company and previously declared effective by the
Securities and Exchange Commission. The sales of the shares of Common Stock not
previously sold pursuant to such earlier registration are also included in this
Prospectus. (See "PLAN OF DISTRIBUTION.")
<TABLE>
<CAPTION>
<S> <C>
Securities offered by the Selling Shareholders 2,795,911 shares of Common Stock currently issued and
outstanding or issuable on the exercise of the $3.25 Warrants
or conversion of the 1995 Preferred Stock. (See
"PLAN OF DISTRIBUTION.")
Common Stock outstanding before offering 8,234,361 shares (1)
Common Stock outstanding after offering 10,809,361 shares (2)
1995 Preferred Stock outstanding before offering 200,000 shares
1995 Preferred Stock outstanding after offering 0 shares
No Net Proceeds The Company will not receive any proceeds from the sale of the
Common Stock by the Selling Shareholders. (See "USE OF
PROCEEDS.")
Nasdaq Symbol LDII
</TABLE>
<PAGE>
[FN]
(1) Does not include (i) options to purchase 772,800 shares of Common Stock at
exercise prices ranging from $2.26875 to $3.85 per share; (ii) options to
purchase 25,000 shares at an exercise price of $6.00 per share and 25,000
shares at an exercise price of $8.00 per share; (iii) the $3.25 Warrants; or
(iv) shares of Common Stock issuable on the conversion of outstanding shares
of 1995 Preferred Stock with a cost of $2.50 (assuming a one-to-one
conversion) per equivalent share of Common Stock. (See "PRINCIPAL
SHAREHOLDERS" and "PLAN OF DISTRIBUTION.")
(2) Does not include options to purchase 772,800 shares of Common Stock at
exercise prices ranging from $2.26875 to $3.85 per share, 25,000 shares at
$6.00 per share, and 25,000 shares at $8.00 per share.
Use of Proceeds
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Shareholders. If the Selling Shareholders elect to exercise all of
the $3.25 Warrants, the Company would receive gross proceeds of $7,718,750.
(See "USE OF PROCEEDS.")
<PAGE>
RISK FACTORS
The acquisition of the Common Stock involves certain risks. The following
factors, in addition to the other information and financial data set forth
elsewhere in this Prospectus or incorporated herein by reference, should be
considered carefully in evaluating the Company and its business before making an
investment in the Common Stock offered hereby.
The Company's Activities
Need for Additional Funds. The extent of the Company's additional funding
needs for development of its technology and expansion of its business cannot
currently be estimated, but it is likely that the interest of the Company's
shareholders will continue to be diluted as the Company seeks funding through
the sale of additional securities or through joint venture or industry
partnering arrangements. The cash needs of the Company during the preceding two
fiscal years to pay the costs of its business acquisitions and dispositions have
been primarily met by the sale of equity securities. The Company received in
excess of $1,100,000 and $1,500,000 from such sales in the years ended June 30,
1994, and 1995, respectively, and has received $3,000,000 in gross proceeds
since June 30, 1995. There can be no assurance that this source of funds (or
any other source) will be available to the Company when required or, if
available, that such funds can be obtained on terms acceptable or favorable to
the Company. (See "Financial Statements" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" included in the
Company's report on form 10-KSB incorporated herein by reference.)
Shortages of Working Capital and Significant Losses. The reports of the
Company's independent auditors on the financial statements for the years ended
June 30, 1994, and 1995, contain a limitation as to the Company's ability to
continue as a going concern based on the Company's net losses for those two
years and the reflection on the Company's balance sheets of significant
intangible assets, the realization of which is not assured. If the Company
continues to experience ongoing operating losses, it would adversely affect the
Company's ability to obtain any additional financing it may need in the future
and may adversely affect the Company's ability to continue as a going concern.
(See Footnote 18 to the Financial Statements for the year ended June 30, 1995,
included in the Company's report on form 10-KSB incorporated herein by
reference.)
Recent Acquisition. During October 1995, the Company acquired Sensar
Corporation, a development stage company with patented technology ("Sensar").
Since that time, the Company has entered into a distribution agreement with SAES
Getters, S.p.A. ("SAES"), which grants exclusive rights to SAES to market
Sensar's time-of-flight mass spectrometer to the semi-conductor industry. While
Sensar has an existing product, its technology will require the expenditure of
significant additional amounts to refine the manufacturing techniques and to
develop additional products. There can be no assurance that the technology of
Sensar can be developed by the Company into a profitable business or even that
the Company will be able to recover the cost of acquiring Sensar.
<PAGE>
Dependence on Key Employees. The business of the Company is to some extent
dependent on its management and technical team and their substantial experience.
The loss of one or more of these individuals could result in adverse effects on
the Company's proposed activities. The Company does not have and does not
intend to acquire key man life insurance on any of its executives or other
employees. (See "MANAGEMENT" included in the Company's report on form 10-KSB
incorporated herein by reference.)
Future Charges Related to Capitalized Costs. Included in "Other Assets" on
the Company's balance sheets are product technology acquisition costs, license
rights, software development costs, and goodwill. Such costs are capitalized
and amortized over the anticipated useful life of the associated asset, ranging
from 10 to 17 years. As of December 31, 1995, the Company had capitalized costs
with respect to these items of $4,245,552. This amount will be expensed over
the relevant amortization periods and will consequently reduce earnings in
future periods. There can be no assurance that the Company's operations will
prove sufficiently profitable to realize the recorded value of the underlying
intangible assets. (See "Financial Statements" included in the Company's report
on form 10-KSB incorporated herein by reference.)
Intense Competition. The development and marketing of precision
measurement instrumentation is highly competitive. Many of the Company's
competitors have greater financial resources, broader development programs, and
a greater number of managerial and technical personnel. Because the Company's
resources are limited, there can be no assurance that it will be able to compete
effectively. (See "BUSINESS: Competition" included in the Company's report on
form 10-KSB incorporated herein by reference.)
General Risks Relating to Offering
Market Impact of Offering. This Prospectus relates to the sale of up to
2,795,911 shares of Common Stock by the Selling Shareholders. The Company will
not receive any proceeds from these sales and has prepared this Prospectus in
order to meet its contractual obligations to the Selling Shareholders. The
shares that can be sold by the Selling Shareholders under this Prospectus
represent approximately 34% of the currently issued and outstanding Common
Stock. The sale of such a significant block of stock, or even the possibility
of its sale, may adversely affect the trading market for the Common Stock and
reduce the prices available in that market.
<PAGE>
Substantial Options and Warrants Outstanding. The Company has issued and
outstanding the $3.25 Warrants and, in addition, options to purchase up to
822,800 shares of Common Stock. Of this amount, 702,800 shares of Common Stock
are subject to options held by executive officers and directors with exercise
prices ranging from $2.26875 to $3.85 per share. The existence of such options
and Warrants may prove to be a hindrance to future financing by the Company and
the exercise of options and Warrants may dilute the interests of the
stockholders of the Company. The sale of the Common Stock pursuant to this
Prospectus and the possible future sale of Common Stock issuable on the exercise
of outstanding options could adversely affect the prevailing market price of the
Company's Common Stock. Further, the holders of the Warrants and options may
exercise them at a time when the Company would otherwise be able to obtain
additional equity capital on terms more favorable to the Company. (See "PLAN OF
DISTRIBUTION" and "SELLING SHAREHOLDERS.")
Lack of Due Diligence Review. The Selling Shareholders reviewed certain
information concerning the Company, its business, and its proposed activities in
connection with their acquisition of Common Stock and Warrants. However, no
securities broker-dealer or other person has been engaged to perform any due
diligence or similar review of this offering or the Company on behalf of the
Selling Shareholders, persons who may purchase Common Stock in this offering, or
any other person.
Issuance of Additional Common Stock. The Company has an authorized capital
of 290,000,000 shares of Common Stock, par value $0.001 per share, and
10,000,000 shares of Preferred Stock. As of February 13, 1996, 8,234,361 shares
of Common Stock and 200,000 shares of 1995 Preferred Stock were issued and
outstanding, with an additional 3,397,800 shares of Common Stock reserved for
issuance on the exercise or conversion of options, the $3.25 Warrants, and the
1995 Preferred Stock. The Company's board of directors has authority, without
action or vote of the shareholders, to issue all or part of the authorized but
unissued shares. Any such issuance will dilute the percentage ownership of
shareholders and may dilute the book value of the Company's Common Stock.
Preferential Rights of Preferred Stock Outstanding. The Company has
200,000 shares of 1995 Preferred Stock issued and outstanding, with a
liquidation preference of $2.50 per share. On liquidation or termination of the
Company, an aggregate of $500,000 in assets would be distributed to the holders
of the currently issued and outstanding 1995 Preferred Stock, after payment of
all of the Company's obligations, prior to any distribution to the holders of
Common Stock. The Preferred Stock votes as a single class with the Common
Stock, except as otherwise required by the corporate statutes of Nevada. If the
Company seeks to amend its articles of incorporation to change the provisions
relating to the 1995 Preferred Stock or to approve a merger containing
provisions that would require a class vote if they were contained in an
amendment to the certificate of incorporation, the approval of the holder of the
1995 Preferred Stock, voting as a separate class, will be required.
Consequently, the holder of the 1995 Preferred Stock, a relatively minor amount
of the total issued and outstanding voting stock, may be able to block such
proposals, even in circumstances where they would be in the best interests of
the holders of Common Stock. (See "PLAN OF DISTRIBUTION.")
<PAGE>
Lack of Recent Shareholder Meetings. The Company has not held a meeting of
its shareholders for the purpose of electing directors or for any other purpose
since 1992. Under Nevada law, the Company has been required since inception to
have an annual shareholders' meeting for the election of directors, but has not
done so recently because of the costs involved in the preparation and mailing of
required proxy materials and conducting meetings. As a result, the Company has
not provided shareholders with a copy of its audited financial statements and
annual report on form 10-KSB. While these documents are publicly available,
they are not routinely provided to shareholders. In any year in which the
Company has not held or does not hold a shareholders' meeting, a shareholder may
force the Company to call such a meeting for the election of directors and such
other purposes as may come before the shareholders for consideration. Such a
meeting could result in a change in management.
Determination of Purchase and Exercise Price. The terms of the $3.25
Warrants were determined by negotiations between the Company and the Selling
Shareholders holding such Warrants. These negotiations took into account the
history of, and recent prices for, the Common Stock as quoted on Nasdaq, the
business history and prospects of the Company, an assessment of the Company's
management, the Company's need for capital, the number of securities to be
offered, and the general condition of the securities market. The prices at
which the Selling Shareholders may sell shares of Common Stock in this offering
will be individually negotiated or based on the market price for the Common
Stock at the time of the transactions. Such prices do not necessarily bear a
relationship to the assets, earnings, or net tangible book value of the Company
or any other traditional criteria of value. (See "MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS" included in the Company's report on form 10-KSB
incorporated herein by reference and "PLAN OF DISTRIBUTION.")
No Dividends. The Company has not paid, and does not plan to pay,
dividends in the foreseeable future, even if it were profitable, other than the
required dividend payments to the holder of the 1995 Preferred Stock. (See
"PLAN OF DISTRIBUTION.") Earnings, if any, are expected to be used to advance
the Company's activities and for general corporate purposes, rather than to make
distributions to shareholders.
Finder's Fee. The Company has issued an aggregate of 25,000 shares of
Common Stock to Fenway Advisory Group, an entity controlled by Neil C. Sullivan,
and to Michael Cunniff and paid a fee equal to 6% of gross amounts received by
the Company on the exercise of the $2.50 and $3.50 Warrants, or $180,000. The
Company will also pay a fee equal to 3% of gross amounts received by the Company
on the exercise of the $3.25 A Warrants, or up to $48,750. These shares were
issued and the cash agreed to be paid for the introduction of the Company to the
Selling Shareholders who purchased stock and warrants in the Private Placements.
Messrs. Sullivan and Cunniff will be given the opportunity to profit from a rise
in the market price for the securities of the Company without assuming the risk
of investing their funds, with a resulting dilution in the interest of other
security holders. Mr. Sullivan and the Fenway Advisory Group are affiliated
with the Corporate Relations Group which provides public and shareholder
relations services to the Company.
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common Stock
by the Selling Shareholders. The Company anticipates that it will incur costs
of approximately $36,000 in connection with the transactions described in this
Prospectus, including filing fees, transfer agent costs, listing fees, and legal
and accounting fees. If all of the $3.25 Warrants are exercised in order to
sell all of the Common Stock subject to this Prospectus, of which there is no
assurance, the Company would receive net proceeds of $7,670,000, after payment
of the remaining finder's fees of $48,750. To the extent that net proceeds from
the exercise of the $3.25 Warrants are received by the Company, such proceeds
will be used to fund the expansion of the business of the Company, the
development of the Sensar and CrossCheck Technology, and general and
administrative expenses.
PLAN OF DISTRIBUTION
Acquisition of Warrants
The Company and the principal holders of the $3.25 Warrants, all of whom
are Selling Shareholders (the "Warrant Holders"), originally entered into an
agreement dated April 7, 1995, pursuant to which the Warrant Holders purchased
an aggregate of 370,000 shares of Common Stock and Warrants to purchase 500,000
shares of Common Stock at an exercise price of $2.50 per share (the "$2.50
Warrants") and 500,000 shares of Common Stock at an exercise price of $3.50 per
share (the "$3.50 Warrants") for cash consideration of $601,250. The Company
and the Warrant Holders entered into a subsequent agreement in August 1995 in
which the Company agreed to issue Warrants to purchase 500,000 shares of Common
Stock at $4.50 per share (the "$4.50 A Warrants") to the Warrant Holders
exercising their $2.50 Warrants prior to August 31, 1995, and in September 1995
a second agreement in which the Company agreed to issue warrants to purchase
500,000 shares of Common Stock at $4.50 per share (the "$4.50 B Warrants") and
1,000,000 shares of Common Stock at $5.75 per share (the "$5.75 Warrants") to
the Warrant Holders exercising their $3.50 Warrants prior to November 1, 1995,
and their $4.50 A Warrants within 30 days of the effectiveness of a registration
statement covering the resale of the Common Stock issuable on the $4.50 A
Warrants.
The $2.50 Warrants and $3.50 Warrants were timely exercised by the Warrant
Holders and the $4.50 A Warrants were issued. Before the Company filed a
required registration statement with respect to the Common Stock issuable on the
$4.50 A Warrants, the agreement between the Company and the Warrant Holders was
amended to provide for: (i) the reduction of the exercise price of the
outstanding $4.50 A Warrants to $3.25 per share of Common Stock (these Warrants,
as reduced in exercise price, are referred to in this Prospectus as the $3.25 A
Warrants); (ii) the issuance of the $3.25 B Warrants to purchase 500,000 shares
at $3.25 in place of the $4.50 B Warrants; (iii) the issuance of the $3.25 C
Warrants to purchase 500,000 shares of Common Stock and the $3.25 D Warrants to
purchase 500,000 shares of Common Stock in place of the $5.75 Warrants. The
foregoing changes and issuances are dependent on the Warrant Holders exercising
the $3.25 A Warrants and at least 23% of the $3.25 B Warrants within 45 days of
the date of this Prospectus and the balance of the $3.25 B Warrants within 90
days of the date of this Prospectus.
<PAGE>
In December 1995, the Company also issued $3.25 D Warrants to acquire
375,000 shares to Connie Lerner, one of the Selling Shareholders, for services
she had provided to the Company in connection with its relations with investors
and broker-dealers and/or market makers engaged in transactions in the Company's
Common Stock.
Warrant Provisions
The Company has authorized the repricing of the currently issued and
outstanding $4.50 A Warrants so that they can be exercised for $3.25 per share
and the issuance, on the completion of certain conditions, of the $3.25 B, $3.25
C, and $3.25 D Warrants. The $3.25 Warrants are, and will be when issued,
governed by warrant agreements (the "Warrant Agreements") between the Company
and the Selling Shareholders. The following statements are subject to the
detailed provisions of the Warrant Agreements.
The $3.25 A Warrants entitle the holder to purchase, at any time prior to
August 31, 1996, at an exercise price of $3.25 per share, one share of Common
Stock. The $3.25 B Warrants entitle the holder to purchase, at any time prior
to November 1, 1996, at an exercise price of $3.25 per share, one share of
Common Stock. The $3.25 C Warrants entitle the holder to purchase at any time
prior to June 30, 1997, at an exercise price of $3.25 per share, one share of
Common Stock. The $3.25 D Warrants entitle the holder to purchase, at any time
prior to December 31, 1997, at an exercise price of $3.25 per share, one share
of Common Stock. If not exercised by the applicable expiration date, the
Warrant will expire. The Warrant exercise period may be extended by action of
the board of directors of the Company. Amendments to the Warrants are
permissible at the election of the board of directors so long as the amendments
do not adversely affect the warrant holders. Unless exercised, holders of the
Warrants will not possess any rights as a shareholder of the Company solely by
reason of holding such Warrants.
The $3.25 Warrants may be exercised, at the discretion of the warrant
holder, by the delivery to the Company at its principal executive offices at
1681 West 820 North, Provo, Utah 84601, of the warrant accompanied by an
election of exercise and payment of the purchase price for each share of Common
Stock purchased in accordance with the terms of such warrant. Payment to the
Company on the exercise of warrants must be made in the form of cash or check
payable to the order of the Company.
The Warrants were issued in a private placement and, as such, are
restricted securities. The Warrants may not be transferred in the absence of
registration or the availability of an applicable exemption from the
registration requirements. The Warrants may not be exercised or redeemed in the
absence of an effective registration statement under the Securities Act and
registration or qualification under applicable state securities laws or an
available exemption from such registration requirements.
<PAGE>
The Warrants contain provisions that protect the holders thereof against
dilution by adjustment of the numbers of shares of Common Stock purchasable on
exercise of the Warrants in certain events such as a stock split, stock
consolidation, or other recapitalization of the Company. In the event that the
number of warrant shares purchasable is increased through the operation of the
antidilution provisions, the exercise price will be reduced proportionately.
Conversely, if the number of warrant shares purchasable is decreased, the
exercise price will be increased proportionately.
On exercise of all or a portion of the $3.25 A Warrants and the receipt of
good funds, the Company will pay to Neil C. Sullivan and Michael Cunniff a
finder's fee of 3% of the exercise price received by the Company.
Determination of Exercise Prices
The exercise prices and other terms of the Warrants were determined in
private negotiations between the Company and the Selling Shareholders, based on
historical and anticipated future trading prices for the Common Stock of the
Company in the over-the-counter market, the historical results of operations of
the Company, the possible future results of operations of the Company, and the
Company's anticipated need for additional capital. The conversion rate and
exercise prices as so determined are not necessarily related to the assets,
earnings, or book value of the Company or any other recognized criteria of
value.
1995 Preferred Stock
The 1995 Preferred Stock is convertible, at any time after May 31, 1995, at
the election of the holder, into the Company's Common Stock at the rate that is
equal to $3.00 divided by the average of the closing bid prices for the Common
Stock for the 20 trading days preceding notice of conversion as reported by
Nasdaq. If not previously converted, the Company may convert the Preferred
Stock into shares of Common Stock, on the same basis as stated above, at any
time subsequent to August 30, 1995, by giving 30 days written notice to the
holder of the Preferred Stock; provided that, the Company has an effective
registration statement concerning the sale of the Common Stock issuable on the
conversion at the time of giving notice and at the time of conversion. The 1995
Preferred Stock carries a preference of $2.50 per share on dissolution and
liquidation of the Company and an annual dividend of $0.225 per share, payable
in monthly installments commencing June 1, 1995. The 1995 Preferred Stock votes
as a single class with the Common Stock, except as otherwise provided by the
corporate laws of the state of Nevada, and holders are entitled to one vote per
share.
<PAGE>
Each share of 1995 Preferred Stock may be converted into the applicable
number of shares of Common Stock at any time at the election of the holder of
the 1995 Preferred Stock by delivery to the Company at its principal executive
offices at 1681 West 820 North, Provo, Utah 84601, of the certificate for the
1995 Preferred Stock to be converted, together with a written election to
convert, indicating the number of shares to be converted, signed by the holder
thereof. Certificates representing the 1995 Preferred Stock to be converted
need not be endorsed for transfer unless the certificate for the Common Stock to
be issued is to be issued in a name different from that in which the certificate
for the 1995 Preferred Stock is registered. If less than the total number of
shares represented by an individual certificate is to be converted, a new
certificate of like tenor will be issued to the holder for the shares of 1995
Preferred Stock not converted. In the event that the 1995 Preferred Stock is
not converted prior to August 31, 1995, the Company can, at its election and on
30 days notice to the holder thereof, require the conversion of the 1995
Preferred Stock to Common Stock. Certificates for the shares of Common Stock
issued on any such conversion will be issued promptly following the conversion
and the receipt of the certificates representing the 1995 Preferred Stock by the
Company.
The 1995 Preferred Stock is redeemable at $2.50 per share, plus any accrued
but unpaid dividends, at any time subsequent to six months after the effective
date of a registration statement with respect to the Common Stock issuable on
conversion. Notice of redemption must be given at least 30 days in advance.
The Preferred Stock can be converted prior to the redemption date fixed in the
notice.
Finders
The Company was introduced to the Warrant Holders by an affiliate of its
public relations advisor, Fenway Advisory Group. The Company agreed to pay a
finder's fee in connection with such introduction of 25,000 shares of Common
Stock and 6% of the proceeds from the $2.50 and $3.50 Warrants and 3% of the
proceeds from the $3.25 A Warrants. The Company has paid an aggregate of
$180,000 under the terms of this agreement to Fenway Advisory Group and to
Michael Cunniff and will pay an additional $48,750 if all of the $3.25 A
Warrants are exercised. The resale of the Common Stock acquired by the Fenway
Advisory Group and Michael Cunniff is covered by this Prospectus. The affiliate
of the Fenway Advisory Group continues to provide public relations services to
the Company and is separately compensated for those services.
<PAGE>
Sale of Common Stock by Selling Shareholders
The Common Stock to be sold by the Selling Shareholders may be sold by them
from time to time directly to purchasers in privately negotiated transactions.
Alternatively, the Selling Shareholders may, from time to time, offer the Common
Stock for sale in the over-the-counter market through or to securities brokers
or dealers that may receive compensation in the form of discounts, concessions,
or commissions from the Selling Shareholders and/or the purchasers of the Common
Stock for whom they may act as agent, either pursuant to the delivery of this
Prospectus or in reliance on an exemption from registration such as provided
under Rule 144 adopted pursuant to the Securities Act. The Selling
Shareholders, and any dealers or brokers that participate in the distribution of
the Common Stock, may be deemed to be "underwriters" as that term is defined in
the Securities Act, and any profit on the sale of Common Stock by them and any
discounts, commissions, or concessions received by any such dealers or brokers,
may be deemed to be underwriting discounts and commissions under the Securities
Act. The Company has no understandings or arrangements with broker-dealers in
connection with such sales.
The Common Stock may be sold by the Selling Shareholders from time to time
in one or more transactions at a fixed price, which may be changed, or at
varying prices determined at the time of sale, or at negotiated prices. The
Company will pay the expenses of this offering incident to the registration of
the offer and sale of the Common Stock to the public, other than commissions and
discounts of broker-dealers through which such Common Stock is sold. The
Company does not intend to enter into any agreement with any securities dealer
concerning solicitation of offers to purchase the Common Stock.
Determination of Offering Price
With respect to the shares of Common Stock offered for sale by the Selling
Shareholders, such shares shall be sold from time to time at such prices as the
Selling Shareholders shall determine may be in their best interests and at which
a willing buyer can be found. Such prices may not be related to the assets,
earnings, or book value of the Company or any other recognized criteria of
value.
SELLING SHAREHOLDERS
The following table sets forth certain information, as of the date of this
Prospectus, with respect to the Selling Shareholders and the shares of Common
Stock to be sold by them. The total for each Selling Shareholder gives effect
to the purchase of Common Stock on the exercise of all $3.25 Warrants held by
the Selling Shareholders. Except as specifically noted, none of the Selling
Shareholders hold securities of the Company that are not being sold pursuant to
this Prospectus.
<PAGE>
The Selling Shareholders named below who hold $3.25 Warrants and the 1995
Preferred Stock confirmed at the time they acquired the Warrants or the 1995
Preferred Stock that such securities were acquired for investment purposes only
and without a view toward their resale and acknowledged the existence of
restrictions on resale applicable to such securities. Such Selling Shareholders
can sell such securities only in limited circumstances. The Company is not
aware of any intention by any Selling Shareholder to sell $3.25 Warrants or the
1995 Preferred Stock prior to their conversion or exercise. This offering
relates only to the sale of shares of Common Stock held or to be held by the
Selling Shareholders named in the following table on exercise of the $3.25
Warrants or conversion of the 1995 Preferred Stock. If a Selling Shareholder
sells the 1995 Preferred Stock or $3.25 Warrants held by such Selling
Shareholder prior to converting or exercising such securities into shares of
Common Stock, the shares of Common Stock subsequently issued on exercise of the
Warrants will not be registered and may not be resold pursuant to this offering.
Brian G. Larson, one of the Selling Shareholders who is offering 75,000
shares of Common Stock, is the president, chief executive officer, and chairman
of the board of the Company. Mr. Larson is also one of the original founders of
the Company. The shares held by Mr. Larson have not previously been registered,
but have been held for a sufficient period that they would be eligible for sale
under the exemption from registration set forth in Rule 144 adopted under the
Securities Act. Additional information concerning Mr. Larson's relationship
with the Company is included in the Company's report on form 10-KSB for the year
ended June 30, 1995, and will be updated from time to time in the periodic
reports of the Company filed with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Securities
Now Owned After Offering
Selling Shareholders Number Percent(1) To Be Sold Number Percent
<S> <C> <C> <C> <C> <C>
Brian G. Larson
Common Stock(2) 775,019 9.4% 75,000 700,019 8.5%
Laura Huberfeld
Common Stock 0 0.0% 0 0.0%
$3.25 A Warrants 200,104 1.9% 200,104 0.0%
$3.25 B Warrants 200,104 1.9% 200,104 0.0%
$3.25 C Warrants 30,000 0.3% 30,000 0.0%
Total 430,208 4.0% 430,208 0 0.0%
Naomi Bodner
Common Stock 0 0.0% 0 0.0%
$3.25 A Warrants 200,104 1.9% 200,104 0.0%
$3.25 B Warrants 200,104 1.9% 200,104 0.0%
$3.25 C Warrants 30,000 0.3% 30,000 0.0%
Total 430,208 4.0% 430,208 0 0.0%
Jeffrey Rubin
Common Stock 12,900 0.2% 12,900 0.0%
$3.25 A Warrants 24,948 0.2% 24,948 0.0%
$3.25 B Warrants 24,948 0.2% 24,948 0.0%
$3.25 C Warrants 24,948 0.2% 24,948 0.0%
$3.25 D Warrants 24,948 0.2% 24,948 0.0%
Total 112,692 1.0% 112,692 0 0.0%
Lenore Katz
Common Stock 8,316 0.1% 8,316 0.0%
$3.25 A Warrants 8,316 0.1% 8,316 0.0%
$3.25 B Warrants 8,316 0.1% 8,316 0.0%
$3.25 C Warrants 8,316 0.1% 8,316 0.0%
$3.25 D Warrants 8,316 0.1% 8,316 0.0%
Total 41,580 0.3% 41,580 0 0.0%
Robert Cohen
Common Stock 45,580 0.6% 45,580 0.0%
$3.25 A Warrants 41,580 0.4% 41,580 0.0%
$3.25 B Warrants 41,580 0.4% 41,580 0.0%
$3.25 C Warrants 41,580 0.4% 41,580 0.0%
$3.25 D Warrants 41,580 0.4% 41,580 0.0%
Total 211,900 2.0% 211,900 0 0.0%
Jeffrey Cohen
Common Stock 8,316 0.1% 8,316 0.0%
$3.25 A Warrants 8,316 0.1% 8,316 0.0%
$3.25 B Warrants 8,316 0.1% 8,316 0.0%
$3.25 C Warrants 8,316 0.1% 8,316 0.0%
$3.25 D Warrants 8,316 0.1% 8,316 0.0%
Total 41,580 0.3% 41,580 0 0.0%
Allyson Cohen
Common Stock 8,316 0.1% 8,316 0.0%
$3.25 A Warrants 8,316 0.1% 8,316 0.0%
$3.25 B Warrants 8,316 0.1% 8,316 0.0%
$3.25 C Warrants 8,316 0.1% 8,316 0.0%
$3.25 D Warrants 8,316 0.1% 8,316 0.0%
Total 41,580 0.3% 41,580 0 0.0%
Shawn Zimberg
Common Stock 0 0.0% 0 0.0%
$3.25 A Warrants 8,316 0.1% 8,316 0.0%
$3.25 B Warrants 8,316 0.1% 8,316 0.0%
$3.25 C Warrants 8,316 0.1% 8,316 0.0%
$3.25 D Warrants 8,316 0.1% 8,316 0.0%
Total 33,264 0.3% 33,264 0 0.0%
Connie Lerner
$3.25 D Warrants 375,000 3.5% 375,000 0 0.0%
Congregation Elitz Chaim
Common Stock(3) 252,000 2.3% 252,000 0 0.0%
Congregation Ahavas
Tzdokah Z'Chesed(3)
$3.25 C Warrants 170,104 1.6% 170,104
$3.25 D Warrants 200,104 1.9% 200,104
Total 370,208 3.4% 370,208 0 0.0%
Ezer Mzion
Organization(3) 170,104 1.6% 170,104
$3.25 C Warrants 200,104 1.9% 200,104
$3.25 D Warrants 370,208 3.4% 370,208 0 0.0%
Total
Summit Enterprises, Inc.
of Virginia
Common Stock(4) 16,483 0.2% 16,483 0 0.0%
Common Stock
Issuable on
Conversion of
Preferred Stock 200,000 1.9% 200,000 0.1%
Total 216,483 216,483 0.1%
Fenway Advisory Group
Common Stock(5) 76,000 0.9% 26,000 50,000 0.0%
Michael Cunniff
Common Stock 20,000 0.2% 20,000 0 0.0%
</TABLE>
(1) The percentage ownership of Common Stock is calculated based on the total
number of issued and outstanding shares of 8,234,361 as of February 13, 1996.
The percentage ownership of the $3.25 Warrants and 1995 Preferred Stock and
the totals presented assume the exercise of all $3.25 Warrants and the
conversion of the 1995 Preferred Stock to increase the issued and outstanding
Common Stock to 10,809,361.
(2) The indicated number of shares held by Mr. Larson includes 250,000 shares
subject to currently exercisable options with exercise prices ranging from
$2.27 per share of Common Stock to $3.75 per share of Common Stock.
(3) These shares and $3.25 Warrants were gifted to the respective entities from
two of the Selling Shareholders as part of a charitable donation.
(4) Shares issuable on the exercise of Warrants, at $0.001 per share, currently
exercisable by Summit.
(5) The shares of Common Stock indicated to be held by the Fenway Advisory
Group include 25,000 shares subject to an option with an exercise price of
$6.00 per share and 25,000 shares subject to an option with an exercise price
of $8.00 per share held by Neil C. Sullivan, who controls Fenway Advisory
Group. These options are currently exercisable and expire August 8, 1997.
<PAGE>
LEGAL MATTERS
The law firm of Kruse, Landa & Maycock, L.L.C., Salt Lake City, Utah,
counsel to the Company, has rendered an opinion that the shares of Common Stock
issuable on exercise of the Warrants will be, when issued in accordance with the
terms of the Warrant Agreements, legally issued, fully paid, and nonassessable
under the Nevada corporation laws.
EXPERTS
The consolidated financial statements of the Company as of June 30, 1995
and 1994, and the years then ended included in this Prospectus have been audited
by Peterson, Siler & Stevenson, certified public accountants, as stated in their
report, and have been so included in reliance on the authority of such firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION AND
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied
at the public reference facilities of the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; Room 1204, Everett McKinley Dirksen
Building, 219 South Dearborn Street, Chicago, Illinois 60604; and Room 1100,
Jacob K. Javits Federal Building, 26 Federal Plaza, New York, New York 10278.
Copies of such materials can be obtained from the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company's Common Stock is listed on the Nasdaq SmallCap Market and
trading under the symbol "LDII." Reports and other information concerning the
Company can be inspected at the offices of Nasdaq at 1735 "K" Street, N.W.,
Washington, D.C. 20006-1500.
The Company, by this reference, hereby incorporates its annual report on
form 10-KSB for the fiscal year ended June 30, 1995, its quarterly report on
form 10-QSB for the quarter ended September 30, 1995, and its interim report on
form 8-K, as amended, dated October 27, 1995, into this Prospectus. The Company
also incorporates the description of its Common Stock included in its
registration statement on form 8-A, SEC Number 1-10013.
In addition, all documents subsequently filed by the Company pursuant to
sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as
amended, prior to the termination of the offering described in this Prospectus
shall be deemed to be incorporated in this Prospectus by this reference.
<PAGE>
Additional information regarding the Company and the Securities offered
hereby is contained in the registration statement and exhibits thereto, of which
this Prospectus forms a part, filed with the Commission under the Securities Act
of 1933, as amended (the "Securities Act"). This Prospectus omits certain
information contained in the registration statement. For further information,
reference is made to the registration statement and to the exhibits and other
schedules filed therewith. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and where such contract or other document is an exhibit to the
registration statement, each such statement is deemed to be qualified and
amplified in all respects by the provisions of the exhibit. Copies of the
complete registration statement, including exhibits, may be examined at, or
copies obtained from the offices of, the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, on the payment of prescribed fees for reproduction.
COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The articles of incorporation of the Company provide for the
indemnification of the officers and directors to the full extent permitted by
Nevada corporate law. Such indemnification includes the advancement of costs
and expenses and extends to all matters, except those in which there has been
intentional misconduct, fraud, a knowing violation of law, or the payment of
dividends in violation of the Nevada Revised Statutes and could include
indemnification for liabilities under the provisions of the Securities Act of
1933, as amended. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer, or controlling person of the Company in the successful
defense of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities subject to this
offering, the Company will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
<PAGE> representation must not be relied on
as having been authorized by the
TABLE OF CONTENTS Company. This Prospectus does not
constitute an offer to sell or the
Section Page solicitation of an offer to buy any
securities covered by this Prospectus
Prospectus Summary............3 in any state or other jurisdiction to
Risk Factors..................5 any person to whom it is unlawful to
Use of Proceeds...............7 make such offer or solicitation in
Plan of Distribution..........8 such state or jurisdiction.
Selling Shareholders.........11
Legal Matters................13
Experts......................14
Additional Information and
Incorporation of Certain
Information by Reference.....14
Commission Position on
Indemnification for
Securities Act Liabilities .15
Index to Financial StatementsF-1
No dealer, salesman, or other
person has been authorized in
connection with this offering to give
any information or to make any
representation other than as
contained in this Prospectus and, if
made, such information or
LARSON DAVIS
INCORPORATED
, 1996
----------
2,795,911 Shares of Common Stock
PROSPECTUS
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses in connection with the
distribution of the securities being registered:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee $3,828
Legal fees 17,000
State "blue sky" fees and expenses (including 3,000
attorneys' fees)
Accounting fees and expenses 2,000
Printing expenses 2,000
Listing fees 7,500
Total $35,328
</TABLE>
All expenses, except the SEC fees, are estimates.
The Selling Shareholders will not bear any portion of the foregoing
expenses, but will pay fees in connection with the sale of the Common Stock
offered hereby in those transactions completed to or through securities broker
and/or dealers in the form of markups, markdowns, or commissions.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.037 of the Nevada corporation law and "ARTICLE VII.
INDEMNIFICATION OF DIRECTORS AND OFFICERS" of the Registrant's articles of
incorporation provide for indemnification of the Registrant's directors and
officers in a variety of circumstances, which may include liabilities under the
Securities Act of 1933, as amended.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons pursuant to the
foregoing provisions, the Registrant has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is contrary to
public policy as expressed in the Securities Act and, therefore, is
unenforceable. (See "ITEM 28. UNDERTAKINGS.")
<PAGE>
ITEM 16. EXHIBITS
Copies of the following documents are included as exhibits to this
Registration Statement, pursuant to item 601 of regulation S-K. The index to
exhibits required by such item appears at page 23.
Exhibits
<TABLE>
<CAPTION>
SEC
Exhibit Reference
No. No. Title of Document Location
<S> <C> <C> <C>
1 (3) Articles of Incorporation, Exhibit to report
as amended November 3, 1987 on form 10-K for
the year ended
June 30, 1988*
2 (3) Certificate of Amendment to the Exhibit to report
Articles of Incorporation on form 10-K for
the year ended
June 30, 1989*
3 (3) Designation of Rights, Privileges, Registration
and Preferences of 1995 Series Statement filed
Preferred Stock on form SB-2,
Exhibit 3, SEC
File No. 33-59963*
4 (3) Bylaws Registration
Statement filed
on form S-18,
Exhibit 5, SEC
File No. 33-3365-D*
5 (4) Form of $4.50 A Warrant with Exhibit to report
list of investors form 10-KSB for
the year ended
June 30, 1995*
6 (4) Form of $3.25 Warrant with
list of investors This Filing
7 (4) Agreement between Larson Davis Exhibit to report
Incorporated and Warrant Holders on form 10-KSB for
dated September 19, 1995 the year ended
June 30, 1995*
8 (4) Form of Agreement between
Larson Davis Incorporated
and Warrant Holders
dated March 6, 1996 This Filing
9 (5) Opinion of Kruse, Landa & Maycock,
L.L.C. regarding legality of
Common Stock This Filing
10 (23) Consent of Pritchett Siler & Hardy,
P.C. (formerly Peterson, Siler &
Stevenson, P.C.) This Filing
11 (23) Consent of Kruse, Landa & Maycock, See Exhibit
L.L.C. No. 9
</TABLE>
[FN]
*Incorporated by reference
<PAGE>
ITEM 17. UNDERTAKINGS
Post-Effective Amendments. [Regulation S-B, Item 512(a)]
The undersigned Registrant will:
(1) File, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to include any
additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
Indemnification. [Regulation S-B, Item 512(e)]
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer, or controlling person of the small business issuer
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Rule 430. [Regulation S-B, Item 512(f)]
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this preliminary prospectus in reliance on rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
preliminary prospectus of the time it was declared effective.
(2) For the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Provo, state of Utah, on the 6th day of March, 1996.
LARSON DAVIS INCORPORATED
(Registrant)
By /s/ Brian G. Larson
Brian G. Larson, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Brian G. Larson and Dan J. Johnson, and each of
them, with power of substitution, as his or her attorney-in-fact for him or her,
in all capacities, to sign any amendments to this Registration Statement and to
file the same with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorney-in-fact or his substitutes may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities
indicated and on the 6th day of March, 1996.
/s/ Brian G. Larson
Brian G. Larson, Director and President
(Principal Executive Officer)
/s/ Larry J. Davis
Larry J. Davis, Director and Vice-President
/s/ Dan J. Johnson
Dan J. Johnson, Director and Vice-President, Secretary,
and Treasurer (Principal Financial and Accounting Officer)
Exhibit Index
Date Filed: March 6, 1996 SEC File No.
----------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
THE
REGISTRATION STATEMENT
ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
LARSON DAVIS INCORPORATED
<PAGE>
EXHIBIT INDEX
The following exhibits to the registration statement on form
S-3 of Larson Davis Incorporated are included in this filing
and are being filed electronically:
<TABLE>
<CAPTION>
SEC
Exhibit Reference
No. No. Title of Document Location
<S> <C> <C> <C>
6 (4) Form of $3.25 Warrant with
list of investors This Filing
8 (4) Form of Agreement between
Larson Davis Incorporated
and Warrant Holders
dated March 6, 1996 This Filing
9 (5) Opinion of Kruse, Landa & Maycock,
L.L.C. regarding legality of
Common Stock This Filing
10 (23) Consent of Pritchett Siler & Hardy,
P.C. (formerly Peterson, Siler &
Stevenson, P.C.) This Filing
11 (23) Consent of Kruse, Landa & Maycock, See Exhibit
L.L.C. No. 9
</TABLE>
LARSON DAVIS INCORPORATED
(a Nevada corporation)
Warrant for the Purchase of
Shares of Common Stock, Par Value $0.001
- -------
THIS WARRANT WILL BE VOID
AFTER 11:59 P.M. MOUNTAIN TIME ON , 19
--------------- ---
This Warrant has not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and is a "restricted security" within the
meaning of Rule 144 promulgated under the Securities Act. This Warrant has been
acquired for investment and may not be sold or transferred without complying
with Rule 144 in the absence of an effective registration or other compliance
under the Securities Act.
This certifies that, for value received, (the "Holder"), is
----------
entitled to subscribe for, purchase, and receive fully paid and
-------
nonassessable shares of common stock, par value $0.001 (the "Warrant Shares"),
of Larson Davis Incorporated, a Nevada corporation (the "Company"), at the price
of $3.25 per Warrant Share (the "Exercise Price"), at any time or from time to
time on or before 11:59 p.m. mountain time on , 19 (the "Exercise
---------- ---
Period"), on presentation and surrender of this Warrant with the purchase form
attached hereto, duly executed, at the principal office of the Company at 1681
West 820 North, Provo, Utah 84601, and by paying in full and in lawful money of
the United States of America by cash or cashier's check, the Exercise Price for
the Warrant Shares as to which this Warrant is exercised, on all the terms and
conditions hereinafter set forth. The number of Warrant Shares to be received
on exercise of this Warrant and the Exercise Price may be adjusted on the
occurrence of such events as described herein. If the subscription rights
represented hereby are not exercised by 11:59 p.m. mountain time on ,
----------
19 , this Warrant shall automatically become void and of no further force or
---
effect, and all rights represented hereby shall cease and expire.
Subject to the terms set forth herein, this Warrant may be exercised by the
Holder in whole or in part by execution of the form of exercise attached hereto
and payment of the Exercise Price in the manner described above.
1. Exercise of Warrants. On the exercise of all or any portion of this
Warrant in the manner provided above, the Holder exercising the same shall be
deemed to have become a holder of record of the Warrant Shares for all purposes,
and certificates for the securities so purchased shall be delivered to the
Holder within a reasonable time, but in no event longer than ten days after this
Warrant shall have been exercised as set forth above. If this Warrant shall be
exercised in respect to only a part of the Warrant Shares covered hereby, the
Holder shall be entitled to receive a similar Warrant of like tenor and date
covering the number of Warrant Shares with respect to which this Warrant shall
not have been exercised. On the exercise of all or any portion of this Warrant,
at the instruction of the Holder, the Company shall offset any amounts due by it
to Holder against payment of the exercise price for the Warrants.
<PAGE>
2. Limitation on Transfer. Subject to the restrictions set forth in
paragraph 7 hereof, this Warrant is transferable at the offices of the Company.
In the event this Warrant is assigned in the manner provided herein, the
Company, upon request and upon surrender of this Warrant by the Holder at the
principal office of the Company accompanied by payment of all transfer taxes, if
any, payable in connection therewith, shall transfer this Warrant on the books
of the Company. If the assignment is in whole, the Company shall execute and
deliver a new Warrant or Warrants of like tenor to this Warrant to the
appropriate assignee expressly evidencing the right to purchase the aggregate
number of shares of common stock purchasable hereunder; and if the assignment is
in part, the Company shall execute and deliver to the appropriate assignee a new
Warrant or Warrants of like tenor expressly evidencing the right to purchase the
portion of the aggregate number of Warrant Shares as shall be contemplated by
any such transfer, and shall concurrently execute and deliver to the Holder a
new Warrant of like tenor to this Warrant evidencing the right to purchase the
remaining portion of the Warrant Shares purchasable hereunder which have not
been transferred to the assignee.
3. Exchange of Warrants. This Warrant is exchangeable, on the
presentation and surrender hereof by the Holder at the office of the Company,
for a new Warrant or Warrants of like tenor representing in the aggregate the
right to subscribe for and purchase the number of Warrant Shares which may be
subscribed for and purchased hereunder.
4. Fully Paid Shares. The Company covenants and agrees that the Warrant
Shares which may be issued on the exercise of the rights represented by this
Warrant will be, when issued, fully paid and nonassessable and free from all
taxes, liens, and charges with respect to the issue thereof. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will have authorized
and reserved a sufficient number of shares of common stock to provide for the
exercise of the rights represented by this Warrant.
5. Antidilution Provisions. The Warrant Price and number of Warrant
Shares purchasable pursuant to this Warrant may be subject to adjustment from
time to time as follows:
(a) If the Company shall take a record of the holders of its common
stock for the purpose of entitling them to receive a dividend in shares,
the Warrant Price in effect immediately prior to such record date shall be
proportionately decreased, such adjustment to become effective immediately
after the opening of business on the day following such record date.
(b) If the Company shall subdivide the outstanding shares of common
stock into a greater number of shares, combine the outstanding shares of
common stock into a smaller number of shares, or issue by reclassification
any of its shares, the Warrant Price in effect immediately prior thereto
shall be adjusted so that the Holder of this Warrant thereafter surrendered
for exercise shall be entitled to receive, after the occurrence of any of
the events described, the number of Warrant Shares to which the Holder
would have been entitled had such Warrant been exercised immediately prior
to the occurrence of such event. Such adjustment shall become effective
immediately after the opening of business on the day following the date on
which such subdivision, combination, or reclassification, as the case may
be, becomes effective.
<PAGE>
(c) If any capital reorganization or reclassification of the
Company's common stock, or consolidation or merger of the Company with
another corporation or the sale of all or substantially all of its assets
to another corporation shall be effected in such a way that holders of
common stock shall be entitled to receive stock, securities, or assets with
respect to or in exchange for common stock, then, as a condition of such
reorganization, reclassification, consolidation, merger, or sale, lawful
adequate provisions shall be made whereby the Holder of this Warrant shall
thereafter have the right to acquire and receive on exercise hereof such
shares of stock, securities, or assets as would have been issuable or
payable (as part of the reorganization, reclassification, consolidation,
merger, or sale) with respect to or in exchange for such number of
outstanding common shares of the Company as would have been received on
exercise of this Warrant immediately before such reorganization,
reclassification, consolidation, merger, or sale.
In any such case, appropriate provision shall be made with respect to
the rights and interests of the Holder of this Warrant to the end that the
provisions hereof shall thereafter be applicable in relation to any shares
of stock, securities, or assets thereafter deliverable on the exercise of
this Warrant. In the event of a merger or consolidation of the Company
with or into another corporation or the sale of all or substantially all of
its assets which results in the issuance of a number of shares of common
stock of the surviving or purchasing corporation greater or less than the
number of shares of common stock of the Company outstanding immediately
prior to such merger, consolidation, or purchase are issuable to holders of
common stock of the Company, then the Warrant Price in effect immediately
prior to such merger, consolidation, or purchase shall be adjusted in the
same manner as though there was a subdivision or combination of the
outstanding shares of common stock of the Company. The Company will not
effect any such consolidation, merger, or sale unless prior to the
consummation thereof the successor corporation resulting from such
consolidation or merger or the corporation purchasing such assets shall
assume by written instrument mailed or delivered to the Holder hereof at
its last address appearing on the books of the Company, the obligation to
deliver to such Holder such shares of stock, securities, or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
acquire on exercise of this Warrant.
(d) If: (i) the Company shall take a record of the holders of its
shares of common stock for the purpose of entitling them to receive a
dividend payable otherwise than in cash, or any other distribution in
respect of the shares of common stock (including cash), pursuant to,
without limitation, any spin-off, split-off, or distribution of the
Company's assets; or (ii) the Company shall take a record of the holders of
its shares of common stock for the purpose of entitling them to subscribe
for or purchase any shares of any class or to receive any other rights; or
(iii) in the event of any classification, reclassification, or other
reorganization of the shares which the Company is authorized to issue,
consolidation or merger of the Company with or into another corporation, or
conveyance of all or substantially all of the assets of the Company; or
(iv) in the event of the voluntary or involuntary dissolution, liquidation,
or winding up of the Company; then, and in any such case, the Company shall
mail to the Holder of this Warrant, at least 30 days prior thereto, a
notice stating the date or expected date on which a record is to be taken
for the purpose of such dividend, distribution or rights, or the date on
which such classification, reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation, or winding up, as the case
may be. Such notice shall also specify the date or expected date, if any
is to be fixed, as of which holders of shares of common stock of record
shall be entitled to participate in such dividend, distribution, or rights,
or shall be entitled to exchange their shares of common stock for
securities or other property deliverable upon such classification,
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation, or winding up, as the case may be.
<PAGE>
(e) If the Company, at any time while this Warrant shall remain
unexpired and unexercised, sells shares of common stock to an affiliate of
the Company, excluding shares issued on the exercise of options issued and
outstanding as of the date hereof and shares issued to officers and
directors under stock option plans of the Company existing as of the date
hereof, at a price lower than the Exercise Price provided herein, as the
same may from time to time be adjusted pursuant to this section 5, then the
Exercise Price of these Warrants shall be reduced automatically to such
lower price at which the Company has sold common stock.
(f) No fraction of a share shall be issued on exercise, but, in lieu
thereof, the Company, notwithstanding any other provision hereof, may pay
therefor in cash at the fair value of any such fractional share at the time
of exercise.
6. Disposition of Warrants or Warrant Shares. The registered owner of
this Warrant, by acceptance hereof, agrees for himself and any subsequent
owner(s) that, before any disposition is made of any Warrant Shares, the
owner(s) shall give written notice to the Company describing briefly the manner
of any such proposed disposition. No such disposition shall be made unless and
until:
(a) the Company has received an opinion from counsel for the owner(s)
of the Warrant Shares stating that no registration under the Securities Act
is required with respect to such disposition; or
(b) a registration statement or post-effective amendment to a
registration statement under the Securities Act has been filed by the
Company and made effective by the Commission covering such proposed
disposition.
7. Registration of Warrant Shares. The Company shall use its best
efforts to file a registration statement under the Securities Act to register
the Warrant Shares issuable on the exercise of this Warrant, shall utilize its
best efforts to cause such registration statement to become effective as soon as
is practicably possible, and shall maintain the effectiveness of such
registration statement for a period of two years, unless the Company's legal
counsel is of the reasonable opinion that registration is not required in order
to dispose of the Warrant Shares. The Holder(s) shall cooperate with the Company
and shall furnish such information as the Company may request in connection with
any such registration statement hereunder, on which the Company shall be
entitled to rely.
<PAGE>
8. Governing Law. This agreement shall be construed under and be
governed by the laws of the state of Nevada.
9. Notices. All notices, demands, requests, or other communications
required or authorized hereunder shall be deemed given sufficiently if in
writing and if personally delivered; if sent by facsimile transmission,
confirmed with a written copy thereof sent by second day express delivery or
registered mail, return receipt requested and postage prepaid; if sent by
registered mail or certified mail, return receipt requested and postage prepaid;
or if sent by second day express delivery:
If to the Company, to: Larson Davis Incorporated
Attn: Brian G. Larson, President
1681 West 820 North
Provo, Utah 84601
Facsimile Transmission: (801) 375-0182
Confirmation: (801) 375-0177
If to the Holder:
==================
------------------
Facsimile Transmission: ( )
--- ----------
Confirmation: ( )
--- ---------
or other such addresses and facsimile numbers as shall be furnished by any party
in the manner for giving notices hereunder, and any such notice, demand,
request, or other communication shall be deemed to have been given as of the
date so delivered or sent by facsimile transmission, three days after the date
so mailed, or two days after the date so sent by second day delivery.
10. Loss, Theft, Destruction, or Mutilation. Upon receipt by the Company
of reasonable evidence of the ownership of and the loss, theft, destruction, or
mutilation of this Warrant, the Company will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
11. Taxes. The Company will pay all taxes in respect of the issue of this
Warrant or the Warrant Shares issuable upon exercise thereof.
DATED this day of , 1996.
------ ----------
LARSON DAVIS INCORPORATED
By /s/ Brian G. Larson
Brian G. Larson, President
<PAGE>
Form of Assignment
(to be signed only upon assignment of Warrant)
TO: Larson Davis Incorporated
Attn: President
1681 West 820 North
Provo, Utah 84601
FOR VALUE RECEIVED, does hereby sell, assign, and
-----------------
transfer unto the right to purchase shares of
-------------------- -----------
common stock of LARSON DAVIS INCORPORATED (the "Company"), evidenced by the
attached Warrant, and does hereby irrevocably constitute and appoint
attorney to transfer such right on the books of the Company
- -----------------
with full power of substitution in the premises.
DATED this day of , 19 .
----- ---------- ---
Signature:
Signature Guaranteed:
NOTICE: The signature to the form of assignment must correspond with the name
as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
Form Of Purchase
(to be signed only upon exercise of Warrant)
TO: Larson Davis Incorporated
Attn: President
1681 West 820 North
Provo, Utah 84601
The undersigned, the owner of the attached Warrant, hereby irrevocably
elects to exercise the purchase rights represented by the Warrant for, and to
purchase thereunder, shares of the common stock of LARSON DAVIS
-----------
INCORPORATED and herewith makes payment of $ therefor (at the rate of
-----------
$4.50 per share of common stock). Please issue the shares of common stock as to
which this Warrant is exercised in accordance with the enclosed instructions
and, if the Warrant is being exercised with respect to less than all of the
shares to which it pertains, prepare and deliver a new Warrant of like tenor for
the balance of the shares of common stock purchasable under the attached
Warrant.
DATED this day of , 19 .
----- ---------- ---
Signature:
Signature Guaranteed:
<PAGE>
LIST OF WARRANT HOLDERS
Laura Huberfeld
Naomi Bodner
Jeffrey Rubin
Lenore Katz
Robert Cohen
Jeffrey Cohen
Allyson Cohen
Shawn Zimberg
Connie Lerner
Congregation Ahavas Tzdokah Z'Chesed
Ezer Mzion Organization
AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into this 6th day of March,
1996, by and among Larson Davis Incorporated, a Nevada corporation (the
"Company"), and Laura Huberfeld, Naomi Bodner, Jeffrey Rubin, Lenore Katz,
Robert Cohen, Jeffrey Cohen, Allyson Cohen, and Shawn Zimberg, (collectively
referred to herein as "Holders"), based on the following premises.
Premises
A. The Company and the Holders entered into a Stock Purchase Agreement
dated April 7, 1995, as amended (the "Stock Purchase Agreement"), pursuant to
which the Holders acquired warrants (the "$4.50 A Warrants") to purchase an
aggregate of 500,000 shares of common stock of the Company, par value $0.001 per
share (the "Common Stock"), at $4.50 per share of Common Stock and the right to
acquire, under certain circumstances, warrants (the "$4.50 B Warrants") to
purchase an aggregate of 500,000 shares of Common Stock at $4.50 per share, and
warrants (the "$5.75 Warrants") to purchase an aggregate of 1,000,000 shares of
Common Stock at $5.75 per share.
B. The Company and the Holders have agreed to a repricing of the $4.50 A
Warrants and the issuance of other warrants as set forth herein in lieu of the
$4.50 B and $5.75 Warrants on the satisfaction of certain conditions and wish to
set forth such agreement in writing.
Agreement
NOW, THEREFORE, based on the stated premises, which are incorporated herein
by reference, and for and in consideration of the mutual covenants and
agreements hereinafter set forth and the mutual benefit to the parties to be
derived therefrom, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, it is hereby agreed as follows:
Article I
Issuance of Warrants
1.1 Repricing and Issuance of Warrants. If the Holders meet the timely
exercise conditions set forth in section 1.2, the Company agrees to:
(a) reprice the $4.50 A Warrants to $3.25 per share of Common Stock
(as repriced, the "$3.25 A Warrants");
(b) issue warrants to acquire 500,000 shares of Common Stock at $3.25
per share at any time prior to November 1, 1996 (the "$3.25 B Warrants"),
in lieu of the Company's obligation to issue the $4.50 B Warrants; and
<PAGE>
(c) issue warrants to acquire 1,000,000 shares of Common Stock at
$3.25 per share, 500,000 of which may be exercised at any time prior to
June 30, 1997 (the "$3.25 C Warrants"), and 500,000 of which may be
exercised at any time prior to December 31, 1997 (the "$3.25 D Warrants"),
in lieu of the Company's obligation to issue $5.75 Warrants.
The $3.25 A, B, C, and D Warrants are collectively referred to as the "Warrants"
or the "$3.25 Warrants."
1.2 Time of Exercise. The Company will file a registration statement (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") covering the resale by the Holders of the Common Stock issued on the
exercise of the $3.25 Warrants or the $4.50 A, $4.50 B, and $5.75 Warrants, as
the case may be. As a condition precedent to the repricing and issuance of
$3.25 Warrants as set forth in section 1.1, the Holders shall (i) exercise, and
the Company shall receive good funds on such exercise, all of the $3.25 A
Warrants and at least 115,385 of the $3.25 B Warrants within 45 days of the
effective date of the Registration Statement; and (ii) exercise, and the Company
receive good funds on such exercise, the remaining $3.25 B Warrants within 90
days of the effectiveness of the Registration Statement.
1.3 Issuance of Warrants. As soon as practicable following the execution
of this Agreement, the Company shall issue and deliver the $3.25 B Warrants to
the Holders. The Company will, at any time following the execution of this
Agreement, accept $3.25 per share of Common Stock as payment of the exercise
price of the $4.50 A Warrants, as tentatively changed to $3.25 A Warrants
hereunder. As soon as practicable following the satisfaction of the timely
exercise commitments of section 1.2 by the Holders, the Company shall issue and
deliver the $3.25 C and $3.25 D Warrants to the Holders. Each Holder shall be
entitled to receive the number of Warrants set forth next to his or her name on
Exhibit "A" attached hereto and incorporated herein by this reference.
1.4 Termination of Agreement. If the Holders fail to meet the timely
exercise condition of section 1.2, this Agreement shall become null and void and
the parties shall continue to have the rights set forth in the Stock Purchase
Agreement. Any amounts previously received by the Company on the exercise of
the $3.25 A or B Warrants shall be deemed to be payment for the exercise of the
$4.50 A Warrants or $4.50 B Warrants and the number of shares of Common Stock to
be delivered to the Holders reduced accordingly. The balance of any unexercised
$4.50 A and $4.50 B Warrants shall remain exercisable in accordance with their
terms prior to modification hereunder.
1.5 Exercise of Warrants. To exercise the Warrants in accordance with the
terms hereof, the Holders desiring to exercise shall present and surrender to
the Company the Warrant, with the purchase form attached thereto duly executed,
and shall pay to the Company the exercise price for the number of shares being
purchased in cash or immediately available funds by wire transfer, certified or
official bank check, or other means of payment acceptable to the Company.
<PAGE>
1.6 Delivery of Common Stock. The Company will promptly issue a
certificate representing the shares of Common Stock acquired by a Holder on
exercise of the Warrants. Until such time as the timely exercise conditions of
the Holders under section 1.2 are satisfied, the Company shall hold such
certificates. Thereafter, the Company shall deliver such certificates, and all
certificates representing subsequently acquired Common Stock, to the Holders.
Notwithstanding the preceding sentences, if such conditions have not been
satisfied and the time for satisfying such conditions has expired, or the
Holders have waived their right to satisfy such conditions, the certificates
shall be returned to the transfer agent of the Company and the number of shares
represented thereby reduced to represent the number of shares that would have
been acquired at an exercise price of $4.50 per share. Such certificates shall
thereafter be promptly delivered to the Holders.
Article II
Representations, Covenants, and Warranties of the Company
As an inducement to, and to obtain the reliance of, Holders, the Company
represents and warrants as follows:
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing, and in good standing under laws of the state of
Nevada, and has the corporate power and is duly authorized, qualified,
franchised, and licensed under all applicable laws, regulations, ordinances, and
orders of public authorities to own all of its properties and assets and to
carry on its business in all material respects as it is now being conducted.
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated by this Agreement in accordance with the terms
hereof will not, violate any provision of the Company's certificate of
incorporation or bylaws. The Company has taken all action required by law, its
certificate of incorporation, its bylaws, or otherwise to authorize the
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated.
2.2 Approval of Agreement. The board of directors of the Company have
authorized the execution and delivery of this Agreement by the Company and has
approved the consummation of the transactions contemplated hereby. This
Agreement is the legal, valid, and binding agreement of the Company enforceable
between the parties in accordance with its terms.
2.3 Financial Information. Each of the financial statements contained in
the information referred to in section 2.4 present fairly the financial
condition of the Company as of the date of such financial statement and the
results of its operations for the periods indicated. All such audited and
unaudited financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved as explained in the notes to such financial statements and have been
presented in accordance with the requirements of Regulation S-X promulgated by
the Securities and Exchange Commission (the "SEC") regarding the form and
content of and requirements for financial statements to be filed with the SEC.
<PAGE>
2.4 Information. The information concerning the Company set forth in this
Agreement, in the schedules delivered by the Company pursuant to the Stock
Purchase Agreement and this Agreement, the annual report on form 10-KSB filed
with the SEC for the year ended June 30, 1995, and all amendments thereto, and
the quarterly report on form 10-QSB for the quarter ended September 30, 1995,
is, as of the date of the respective reports, complete and accurate in all
material respects and did not contain any untrue statement of a material fact or
omit to state a material fact required to make the statements made, in light of
the circumstances under which they were made, not misleading.
2.5 Third-Party Consents. None of the contracts, agreements, leases, or
other commitments, written or oral, to which the Company is a party or to which
any of its properties or assets are subject require the consent of any other
party in order to consummate the transactions herein contemplated, except where
the failure to obtain such consent would not have a material adverse effect on
the transactions contemplated herein. Except for the satisfaction of
requirements of federal and state securities and corporation laws, no
authorization, approval, consent, or order of, or registration, declaration, or
filing with, any court or other governmental body is required in connection with
the execution and delivery by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby.
2.6 No Conflict With Other Instruments. The execution of this Agreement
and the consummation of the transactions contemplated by this Agreement will not
result in the breach of any term or provision of, or constitute an event of
default under, any indenture, mortgage, deed of trust, lease, or other contract,
agreement, or instrument to which the Company is a party or to which any of its
properties or operations are subject and the breach of which would have a
material adverse effect on the Company.
Article III
Representations, Covenants, and Warranties of Holders
As an inducement to, and to obtain the reliance of the Company, each Holder
represents and warrants as follows:
3.1 Binding Agreement. This Agreement is the legal, valid, and binding
obligation of each Holder enforceable in accordance with its terms.
3.2 Third-Party Consents. None of the contracts, agreements, leases, or
other commitments, written or oral, to which any Holder is a party or to which
any of its properties or assets are subject require the consent of any other
party in order to consummate the transactions herein contemplated, except where
the failure to obtain such consent would not have a material adverse effect on
the transactions contemplated herein. No authorization, approval, consent, or
order of, or registration, declaration, or filing with, any court or other
governmental body is required in connection with the execution and delivery by
any Holder of this Agreement and the consummation by any Holder of the
transactions contemplated hereby.
<PAGE>
3.3 No Conflict With Other Instruments. The execution of this Agreement
and the consummation of the transactions contemplated hereby, will not result in
the breach of any term or provision of, constitute an event of default under, or
require the consent or approval of any third-party pursuant to, any material
contract, agreement, or instrument to which any Holder is a party or to which
any of their respective properties or operations are subject.
3.4 Information. The information concerning Holders set forth in this
Agreement and in the schedules delivered by Holders pursuant hereto is complete
and accurate in all material respects and does not contain any untrue statement
of a material fact or omit to state a material fact required to make the
statements made, in light of the circumstances under which they were made, not
misleading.
Article IV
Special Covenants
4.1 Indemnification by Holders. Each Holder will indemnify and hold
harmless the Company and its directors and officers, and each person, if any,
who controls the Company within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), from and against any and all losses, claims,
damages, expenses, liabilities, or actions to which any of them may become
subject under applicable law (including the Securities Act and the Exchange Act)
and will reimburse them for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any claims or actions,
whether or not resulting in liability, insofar as such losses, claims, damages,
expenses, liabilities, or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in any
application or statement filed with a governmental body 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 in order to make the statements
therein not misleading, but only insofar as any such statement or omission was
made in reliance upon and in conformity with information furnished in writing by
any Holder expressly for use therein. Holders agree at any time upon the
request of the Company to furnish to it a written letter or statement confirming
the accuracy of the information with respect to Holders contained in any report
or other application or statement referred to in this Article IV, or in any
draft of any such documents, and confirming that the information with respect to
Holders contained in such document or draft was furnished by Holders, indicating
the inaccuracies or omissions contained in such document or draft or indicating
the information not furnished by Holders expressly for use therein. The
indemnity agreement contained in this section 4.1 shall remain operative and in
full force and effect, regardless of any investigation made by or on behalf of
the Company and shall survive the consummation of the transactions contemplated
by this Agreement.
<PAGE>
4.2 Indemnification by the Company. The Company will indemnify and hold
harmless Holders from and against any and all losses, claims, damages, expenses,
liabilities, or actions to which any of them may become subject under applicable
law (including the Securities Act and the Exchange Act) and will reimburse them
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any claims or actions, whether or not resulting in
liability, insofar as such losses, claims, damages, expenses, liabilities, or
actions arise out of or are based upon any breach of this Agreement or any
untrue statement or alleged untrue statement of a material fact contained in any
application or statement filed with a governmental body 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 in order to make the statements
therein not misleading, but only insofar as any such statement or omission was
made in reliance upon and in conformity with information furnished in writing by
the Company expressly for use therein. The Company agrees at any time upon the
request of Holders to furnish to them a written letter or statement confirming
the accuracy of the information with respect to the Company contained in any
report or other application or statement referred to in this Article IV, or in
any draft of any such document, and confirming that the information with respect
to the Company contained in such document or draft was furnished by the Company,
indicating the inaccuracies or omissions contained in such document or draft or
indicating the information not furnished by the Company expressly for use
therein. The indemnity agreement contained in this section 4.2 shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of Holders and shall survive the consummation of the transactions
contemplated by this Agreement.
4.3 The Acquisition of Purchased Stock. The consummation of this
Agreement and the issuance of Common Stock to Holders contemplated herein
constitutes the offer and sale of securities as those terms are defined under
the Securities Act and applicable state statutes. Such transactions shall be
consummated in reliance on certain exemptions from the registration requirements
of federal and state securities laws, which depend, among other items, on the
circumstances under which such securities are acquired.
(a) In order to provide documentation for reliance upon such
exemptions, the Holders make the following representations and warranties:
(i) Each Holder acknowledges that neither the SEC nor the
securities commission of any state or other federal agency has made
any determination as to the merits of acquiring the Warrants or the
shares of Common Stock issuable on exercise of the Warrants, and that
this transaction involves certain risks.
(ii) Each Holder has received and read this Agreement and
understands the risks related to the consummation of the transactions
herein contemplated.
(iii) Each Holder has such knowledge and experience in
business and financial matters that he or she is capable of evaluating
the Company and its business operations.
<PAGE>
(iv) Each Holder has adequate means of providing for his or her
current needs and possible personal contingencies and has no need now,
and anticipates no need in the foreseeable future, to sell any of the
Warrants or the shares of Common Stock issuable on exercise of the
Warrants. Each Holder is able to bear the economic risks of this
investment, and, consequently, without limiting the generality of the
foregoing, is able to hold the Warrants and the shares of Common Stock
issuable on exercise of the Warrants for an indefinite period of time,
and has a sufficient net worth to sustain a loss of the entire
investment, in the event such loss should occur.
(v) The Holders have been provided with all information
contained in the Company's annual report on form 10-K for the year
ended June 30, 1994, and all subsequent interim reports filed by the
Company with the Securities and Exchange Commission. The Holders'
representatives, including their legal counsel, have personally met
with the officers and directors of the Company and have investigated
the intellectual property assets of the Company. Each Holder and
their representatives have been given the opportunity to meet with and
ask questions of the officers and directors of the Company and to
obtain any additional information they consider material to the
acquisition of the Warrants and the shares of Common Stock issuable on
exercise of the Warrants.
(vi) Each Holder is acquiring the Warrants and the shares of
Common Stock issuable on exercise of the Warrants for his or her own
account and not for resale to others.
(vii) Each Holder confirms that he or she is an "accredited
investor" as defined under rule 501 of regulation D promulgated under
the Securities Act. Each Holder confirms that his or her individual
net worth, or joint net worth with that person's spouse, at the time
of his or her purchase exceeds $1,000,000, or he or she had an
individual income in excess of $200,000 in each of the two most recent
years or joint income with that person's spouse in excess of $300,000
in each of those years and has a reasonable expectation of reaching
the same income level in the current year.
(viii) The Holder is a resident of the state set forth in the
address below the Holder's name on the signature pages hereto.
<PAGE>
(ix) Each Holder understands that none of the Warrants or the
shares of Common Stock issuable on exercise of the Warrants has been
registered, but is being acquired by reason of a specific exemption
under the Securities Act as well as under certain state statutes for
transactions by an issuer not involving any public offering and that
any disposition of the Warrants and the shares of Common Stock
issuable on exercise of the Warrants may, under certain circumstances,
be inconsistent with this exemption and may make the Holder an
"underwriter" within the meaning of the Securities Act. Each Holder
further acknowledges that the Warrants and the shares of Common Stock
issuable on exercise of the Warrants must be held and may not be sold,
transferred, or otherwise disposed of for value unless it is
subsequently registered under the Securities Act or an exemption from
such registration is available; the Company is under no obligation to
register the Warrants or the shares of Common Stock issuable on
exercise of the Warrants under the Securities Act or under section 12
of the Exchange Act, except as provided herein or as may be expressly
agreed to by it in writing; if rule 144 is available, and no assurance
is given that it will be, initially only routine sales of the Warrants
and the shares of Common Stock issuable on exercise of the Warrants in
limited amounts can be made in reliance on rule 144 in accordance with
the terms and conditions of that rule; the Company is under no
obligation to the undersigned to make rule 144 available, except as
may be expressly agreed to by it in writing; in the event rule 144 is
not available, compliance with regulation A or some other exemption
may be required before any Holder can sell, transfer, or otherwise
dispose of the Warrants or the shares of Common Stock issuable on
exercise of the Warrants without registration under the Securities
Act; the Company's registrar and transfer agent will maintain a stop
transfer order against the registration of transfer of the Warrants
and the shares of Common Stock issuable on exercise of the Warrants;
and the certificate(s) representing the Warrants and the shares of
Common Stock issuable on exercise of the Warrants will bear a legend
in substantially the following form so restricting the sale of the
Warrants and the shares of Common Stock issuable on exercise of the
Warrants:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ARE "RESTRICTED SECURITIES" WITHIN
THE MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES
ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE
144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER
COMPLIANCE UNDER THE SECURITIES ACT.
(b) In order to more fully document reliance on the exemptions as
provided herein, each Holder shall execute and deliver to the Company such
further letters of representation, acknowledgment, suitability, or the
like, as the Company and its counsel may reasonably request in connection
with reliance on exemptions from registration under such securities laws.
<PAGE>
(c) The Company and Holders acknowledge that the basis for relying on
exemptions from registration or qualifications are factual, depending on
the conduct of the various parties, and that no legal opinion or other
assurance will be required or given to the effect that the transactions
contemplated hereby are in fact exempt from registration or qualification.
Article V
Registration Rights
5.1 Demand Registration. The Company shall use its best efforts to
prepare and file with the SEC as soon as practicable within 20 days from the
date of this Agreement, but in any event within 40 days of the date of this
Agreement, a Registration Statement that includes the shares of Common Stock
issuable on exercise of all the $3.25 Warrants, or the $4.50 A , $4.50 B, and
$5.75 Warrants, as the case may be, and thereafter to use its best efforts to
cause such Registration Statement to become effective as soon as is practicably
possible and remain effective as provided herein. The Company further agrees
to:
(a) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep the
Registration Statement effective for a period of not less than two (2)
years, or such shorter period which will terminate when all securities
covered by such Registration Statement have been sold or withdrawn; cause
the prospectus which is part of the Registration Statement to be
supplemented by any required prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Securities Act; and comply with
the provisions of the Securities Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement during
the applicable period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement
or supplement to the prospectus;
(b) Notify Holders at any time when a prospectus relating to
securities of any Selling Shareholder included in a Registration Statement
is required to be delivered under the Securities Act, when the Company
becomes aware of the happening of any event as a result of which the
prospectus included in such Registration Statement (as then in effect)
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances
under which they were made) not misleading and, as promptly as practicable
thereafter, prepare and file with the SEC and furnish to Holders a
supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of such securities, such prospectus will not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(c) Enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such
securities;
<PAGE>
(d) Use its best efforts to cause all securities of Holders included
in such Registration Statement to be listed, by the date of the first sale
of securities pursuant to such Registration Statement, on each securities
exchange on which the Company's securities of the same class are then
listed or proposed to be listed, if any;
(e) On or prior to the date on which the Registration Statement is
declare effective, use its best efforts to register or qualify, and
cooperate with Holders, the underwriter or underwriters, if any, and their
counsel, in connection with the registration or qualification of, the
securities of Holders covered by the Registration Statement for offer and
sale under the securities or blue sky laws of each state and other
jurisdiction of the United States as Holders or the underwriter reasonably
requests in writing, to use its best efforts to keep each such registration
or qualification effective, including through new filings, or amendment or
renewals, during the period such Registration Statement is required to be
keep effective and to do any and all other acts or things necessary or
advisable to enable the disposition in all such jurisdictions of the
securities of Holders covered by the Registration Statement; provided that
the Company will not be required to (1) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but
for this paragraph (e), (2) consent to general service of process in any
such jurisdiction, or (3) subject itself to general taxation in any such
jurisdiction;
(f) Cooperate with Holders and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities
to be sold by Holders under the Registration Statement, and enable such
securities to be in such denominations and registered in such names as the
managing underwriter or underwriters, if any, or Holders may request; and
(g) Use it best efforts to cause the securities of Holders covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States as may be
necessary to enable Holders or the underwriter or underwriters, if any, to
consummate the disposition of such securities.
5.2 Piggyback Registration. If at any time prior to the date that is
three years from the acquisition of Common Stock by the Holders pursuant to the
exercise of the $3.25 Warrants the Company elects to file a registration
statement and the resale by the Holders of the Common Stock acquired on the
exercise of the $3.25 Warrants is not then covered by an effective registration
statement, the Company shall give the Holders notice of its intent to do so.
The Holders shall have ten days subsequent to such notice to elect to have
shares of Common Stock acquired on the exercise of the $3.25 Warrants then held
by them included in such registration statement; provided that, such shares
shall not be included if, in the judgment of the head underwriter involved in
the transaction, the inclusion of such shares would adversely affect the
underwriting or the completion of the proposed financing. The provisions of
this paragraph shall not apply to a registration statement filed on forms S-8,
S-4, or similar forms.
<PAGE>
5.3 Cooperation by Holders.
(a) Holders shall furnish to the Company in writing such information
and affidavits as the Company may reasonably require from Holders in
connection with any registration, qualification or compliance with respect
to such securities. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement with respect to
the securities of any selling Holder that such Holder shall furnish to the
Company such information regarding the Holder, the securities to be
registered and other securities in the Company held, and the intended
method of disposition of such securities as shall be required to effect the
registration of such Holder's securities.
(b) By exercising their Warrants, Holders shall be deemed to have
confirmed at the time of such exercise the continuing accuracy of the
information respecting their status as accredited investors and the
suitability of an investment in the Common Stock for them that is contained
herein, all except as such investors may then advise the Company in
writing. The Company may also require, as a condition precedent to
exercise, that the Holder complete and deliver to the Company a suitability
letter containing representations and warranties regarding suitability of
the investment of like tenor to those contained herein.
(c) Holders, upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraph (b) of section
5.1, will forthwith discontinue disposition of the securities until
Holders' receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (b) of section 5.1 or until they are advised in
writing (the "Advice") by the Company that the use of the prospectus may be
resumed, and have received copies of any additional or supplemental filings
which are incorporated by reference in the prospectus, and, if so directed
by the Company, Holders will, or will request the managing underwriter or
underwriters, if any, to, deliver to the Company all copies, other than
permanent file copies then in Holders' possession, of the prospectus
covering such securities current at the time of receipt of such notice. In
the event the Company shall give any such notice, the time period mentioned
in paragraph (a) of section 5.1 shall be extended by the number of days
during the period from and including the date of the giving of such notice
to and including the date when Holders shall have received the copies of
the supplemented or amended prospectus contemplated by paragraph (b) of
section 5.1 hereof or the Advice.
(d) At the end of any period during which the Company is obligated to
keep any Registration Statement current and effective as provided by
section 5.1 hereof (and any extensions thereof required by paragraph (c) of
this section 5.2), Holders shall discontinue sales of securities pursuant
to such Registration Statement upon receipt of notice from the Company of
its intention to remove from registration the securities covered by such
Registration Statement which remain unsold, and Holders shall notify the
Company of the number of securities registered which remain unsold promptly
after receipt of such notice from the Company.
<PAGE>
(e) The Holders acknowledge that the registration of the resale of
the securities or the availability of an exemption from registration in
certain states may impose certain limitations and conditions on the manner
and nature of such sales. The Company shall advise the Holder in writing
of such registration or exemption and the related limitations and
conditions from time to time. The Holders shall be solely responsible for
such Holders' own compliance with such limitations and conditions.
5.4 Holdback Agreement. Holders, if requested by the managing underwriter
or underwriters for any underwritten piggyback registration in which the Holders
chose to have shares included, agree not to effect any public sale or
distribution of securities, including a sale pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act, during the 15 days
prior to, and during the 90-day period commencing on the effective date of such
registration (except as part of such registration). In the event Holders are
prohibited from effecting a sale of securities pursuant to this section 5.3, the
time period in paragraph (a) of section 5.1 shall be extended by the number of
days Holders are so prohibited.
5.5 Registration and Selling Expenses. All of the costs and expenses of
registration provided for herein will be borne by the Company, including the
fees and expenses of the counsel and accountants for the Company (including the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), and all other costs and expenses of the Company incident
to the preparation, printing, and filing under the Securities Act of the
Registration Statement (and all amendments and supplements thereto) and
furnishing copies thereof and of the prospectus included therein, and the costs
and expenses incurred by the Company in connection with the qualification of the
Purchased Stock and shares of Common Stock received on exercise of Warrants
under the state securities or blue sky laws of various jurisdictions; provided
that the Company shall not bear the costs and expenses of Holders comprising
underwriters' commissions, brokerage fees, transfer taxes, or the fees and
expenses of any counsel, accountant, or other representative retained by
Holders.
5.6 Rule 144. The Company agrees that it will use its best efforts to
file in a timely manner all reports required to be filed by it pursuant to the
Exchange Act and, at any time and upon request of Holders, will furnish Holders
with such information generated by the Company in the ordinary course of
business as may be reasonably necessary to enable Holders to effect sales of
Common Stock received on exercise of Warrants without registration pursuant to
Rule 144 under the Securities Act. Notwithstanding the foregoing, the Company
may deregister any class of its securities under section 12 of the Exchange Act
or suspend its duty to file reports with respect to any class of its securities
pursuant to section 15(d) of the Exchange Act if it is then permitted to do so
pursuant to the Exchange Act and the rules and regulations thereunder.
5.7 Participation in Underwritten Registrations. Holders may not
participate in any underwritten piggyback registration in which they chose to
have stock included unless Holders (a) agree to sell shares of Common Stock
received on exercise of Warrants on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements, and (b) complete and execute all questionnaires, powers of
attorney, underwriting agreements and other documents customarily required under
the terms of such underwriting arrangements.
<PAGE>
Article VI
Miscellaneous
6.1 No Brokers. Holders and the Company agree that no third person has in
any way brought the parties together or been instrumental in the negotiation,
execution, or consummation of this Agreement. Notwithstanding the foregoing,
the Company has agreed to pay a three percent finder's fee to Neil C. Sullivan
and Michael Cunniff, who were instrumental in the prior transaction between the
parties, on the exercise of the $3.25 A Warrants. Holders and the Company each
agree to indemnify the other against any claim by any third person for any
commission, brokerage, finder's fee, or other payment with respect to this
Agreement or the transactions contemplated hereby based upon any alleged
agreement or understanding between such party and such third person, whether
expressed or implied, arising from the actions of such party. The covenants set
forth in this section 6.1 shall survive the date hereof and the consummation of
the transactions herein contemplated.
6.2 Governing Law. This Agreement shall in all respects, including all
matters of construction, validity, and performance, be governed by, and
construed and enforced in accordance with, the laws of the state of Utah
applicable to contracts entered into in that state between citizens of that
state and to be performed wholly within that state without reference to any
rules governing conflicts of laws
6.3 Notices. All notices, demands, requests, or other communications
required or authorized hereunder shall be deemed given sufficiently if in
writing and if personally delivered; if sent by facsimile transmission,
confirmed with a written copy thereof sent by overnight express delivery; if
sent by registered mail or certified mail, return receipt requested and postage
prepaid; or if sent by overnight express delivery:
If to the Company, to: Larson Davis Incorporated
Attn.: Brian G. Larson, President
1681 West 820 North
Provo, Utah 84601
Facsimile Transmission: (801) 375-0182
Confirmation: (801) 375-0177
With copies to: Keith L. Pope, Esq.
Kruse, Landa & Maycock, L.L.C.
Eighth Floor, Bank One Tower
50 West Broadway
Salt Lake City, Utah 84101
Facsimile Transmission: (801) 359-3954
Confirmation: (801) 531-7090
If to Holders: At the address set forth below their respective names
on the signature pages hereto.
With copies to: Michael Solovay, Esq.
Solovay Marshall & Edlin
845 Third Avenue
New York, New York 10022
Facsimile Transmission: (212) 355-4608
Confirmation: (212) 752-1000
<PAGE>
or such other addresses and facsimile numbers as shall be furnished in writing
by any party in the manner for giving notices hereunder, and any such notice,
demand, request, or other communication shall be deemed to have been given as of
the date personally delivered or on the first business day after a legible copy
sent by facsimile transmission is received, three days after the date mailed by
registered or certified mail, or on the first business day after the date sent
by overnight delivery.
6.4 Attorneys' Fees. In the event that any party institutes and prevails
in any action or suit to enforce this Agreement or to secure relief from any
default hereunder or breach hereof, the defaulting or breaching party or parties
shall reimburse the nonbreaching party or parties for all costs, including
reasonable attorneys' fees, incurred in connection therewith and in enforcing or
collecting any judgment rendered therein.
6.5 Best Knowledge. Whenever any representation is made to the "best
knowledge" of any party, it shall be deemed to be a representation that an
officer or director of such party, after reasonable investigation, has any
current actual knowledge of such matters.
6.6 Entire Agreement. This Agreement, together with the documents to be
delivered pursuant hereto, represents the entire agreement between the parties
relating to the subject matter hereof. There are no other courses of dealing,
understanding, agreements, representations, or warranties, written or oral,
except as set forth herein.
6.7 Survival; Termination. The representations, warranties, and covenants
of the respective parties as set forth in this Agreement shall survive the
closing and consummation of the transactions contemplated by this Agreement for
a period of two years from the date of this Agreement. The Company's cumulative
liability to Holders for breaches of this Agreement shall not exceed the
Purchase Price.
6.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
6.9 Amendment or Waiver. Every right and remedy provided herein shall be
cumulative with every other right and remedy, whether conferred herein, at law,
or in equity, and may be enforced concurrently herewith, and no waiver by any
party of the performance of any obligation by the other shall be construed as a
waiver of the same or any other default then, theretofore, or thereafter
occurring or existing. This Agreement may be amended by a writing signed by all
parties hereto, with respect to any of the terms contained herein, and any term
or condition of this Agreement may be waived or the time for performance thereof
may be extended by a writing signed by the party or parties for whose benefit
the provision is intended.
6.10 Third-Party Beneficiaries. This Agreement is solely between the
Company and Holders and no director, officer, stockholder, employee, agent,
independent contractor, or any other person or entity shall be deemed to be a
third-party beneficiary of this Agreement.
<PAGE>
6.11 No Public Announcement. None of the parties to this Agreement shall,
without the approval of each other party, make any press release or other public
announcement concerning the transactions contemplated by this Agreement without
first providing a copy of such press release or public announcement to the other
parties to this Agreement at least five days prior to release. Nothing
contained herein shall prohibit any party from making any pubic disclosure or
announcement which is required by law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
The Company:
Larson Davis Incorporated
By
Brian G. Larson, President
Holders:
Laura Huberfeld
Address: 152 West 57th Street
New York, New York 10019
Naomi Bodner
Address: 152 West 57th Street
New York, New York 10019
Jeffrey Rubin
Address: 336 Atlantic Avenue
East Rockaway, New York 11518
Lenore Katz
Address: 336 Atlantic Avenue
East Rockaway, New York 11518
Robert Cohen
Address: 336 Atlantic Avenue
East Rockaway, New York 11518
(signatures continued on following page)
<PAGE>
Jeffrey Cohen
Address: 336 Atlantic Avenue
East Rockaway, New York 11518
Allyson Cohen
Address: 336 Atlantic Avenue
East Rockaway, New York 11518
Shawn Zimberg
Address: 336 Atlantic Avenue
East Rockaway, New York 11518
<PAGE>
Exhibit A
Allocation of Warrants among Holders
Number of Number of Combined
$3.25 A and $3.25 B Number of
B Warrants to $3.25 C and
Number of Warrants to be D
$4.50 A be Exercised Warrants to
Name Warrants Exercised Within be
Held Within 90 Days of Issued on
45 Days of Effectivene Timely
Effectivene ss Exercise
ss
Laura 200,104 246,282 153,926 400,208(1)
Huberfeld
Naomi 200,104 246,283 153,925 400,208(1)
Bodner
Jeffrey 24,948 30,705 19,191 49,896
Rubin
Lenore Katz 8,316 10,235 6,397 16,632
Robert 41,580 51,175 31,985 83,160
Cohen
Jeffrey 8,316 10,235 6,397 16,632
Cohen
Allyson 8,316 10,235 6,397 16,632
Cohen
Shawn 8,316 10,235 6,397 16,632
Zimberg
Total 500,000 615,385 384,615 1,000,000
(1) Mrs. Huberfeld and Mrs. Bodner have each previously gifted their respective
rights to receive 370,208 of these warrants to charitable organizations and
the warrants, if and when issued, will be issued directly to such
organizations.
KRUSE, LANDA & MAYCOCK, L.L.C
EIGHTH FLOOR, BANK ONE TOWER
50 WEST BROADWAY (300 SOUTH)
SALT LAKE CITY, UTAH 84101-2034
KEITH L. POPE TELEPHONE: (801) 531-7090
TELECOPY: (801) 359-3954
(801) 531-9892
March 6, 1996
Board of Directors
Larson Davis Incorporated
1681 West 820 North
Provo, Utah 84601
Re: Larson Davis Incorporated
Registration Statement on Form S-3
Gentlemen:
We have been engaged by Larson Davis Incorporated (the "Company") to render
our opinion respecting the legality of certain securities to be offered and sold
pursuant to the registration statement on form S-3 being filed by the Company
with the Securities and Exchange Commission (the "Registration Statement").
Capitalized terms used but not defined herein have the same meanings as set
forth in the Registration Statement.
In connection with this engagement, we have examined the following:
1. Articles of incorporation of the Company;
2. Bylaws of the Company;
3. The Registration Statement; and
4. Unanimous consents of the Company's board of directors.
We have examined such other corporate records and documents and have made
such other examination as we deemed relevant.
Based upon the above examination, we are of the opinion that the Common
Stock to be sold pursuant to the Registration Statement will be, when sold in
accordance with the terms set forth in the Registration Statement, legally
issued, fully paid, and nonassessable under the Nevada Revised Statutes, as
amended.
This firm consents to being named in the Prospectus included in the
Registration Statement as having rendered the foregoing opinion and as having
represented the Company in connection with the Registration Statement.
Sincerely yours,
/s/ Kruse, Landa & Maycock, L.L.C.
KRUSE, LANDA & MAYCOCK, L.L.C.
KL&M/KLP:pjc
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 for Larson Davis Incorporated, of our report
dated August 4, 1995, relating to the June 30, 1995, financial statements of
Larson Davis Incorporated, which appears in such Prospectus. We also consent to
the reference to use under the heading "Experts."
/s/ Pritchett Siler & Hardy
PRITCHETT SILER & HARDY, P.C.
(formerly Peterson, Siler & Stevenson, P.C.)
Salt Lake City, Utah
February 29, 1996
