SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 13, 1998
Commission File Number: 0-17020
Larson Davis Incorporated
(Exact Name of Registrant as Specified in its Charter)
Nevada 87-0429944
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1681 West 820 North
Provo, Utah 84601
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(801) 375-0177
(Former name, former address, and formal fiscal year, if changed since
last report)
ITEM 5. OTHER EVENTS
Larson Davis Incorporated (the "Company") has completed the private
placement of 100 Units, each Unit consisting of 35 shares of 1998 Series A
Preferred Stock (the "Preferred Stock") and 7,000 Warrants ("Warrants") to
purchase Common Stock, at a purchase price of $35,000 per Unit, or an aggregate
gross sales price of $3,500,000. The Preferred Stock is convertible, at the
election of the holder, at any time subsequent to 90 days after the closing of
the offering into that number of shares of Common Stock calculated by dividing
$1,000, plus any accrued but unpaid dividends, by the lower of (i) $3.60 or (ii)
85% of the average closing price of the Common Stock for the ten trading days
preceding the notice of conversion as reported by the Nasdaq National Market
System on which the Company's Common Stock is traded. Until conversion, the
Preferred Stock bears an annual dividend of 4%, or $40 per share per annum.
The Preferred Stock votes as a class with the Common Stock, except as
otherwise required by the corporate laws of the state of Nevada, and each share
has 278 votes on any issue submitted to the shareholders. If not previously
converted, the Preferred Stock will automatically convert into shares of Common
Stock as of December 31, 1999. In addition, the Company can require the
conversion of the Preferred Stock if it makes a public offering of its Common
Stock at any time subsequent to February 1, 1999. The rights of the Preferred
Stock are set forth in detail in the Designation of Rights, Privileges, and
Preferences of 1998 Series A Preferred Stock included as an exhibit to this
report on Form 8-K.
Each Warrant gives the holder the right to purchase one share of Common
Stock at an exercise price of $4.50 per share. If not earlier exercised, the
Warrants expire July 30, 2000. The Company can provide 30 days written notice
to the holders of the Warrants at any time that the closing price of the
Company's Common Stock equals or exceeds $6.50 per share for 20 consecutive
trading days as reported on the Nasdaq National Market System. If the holders
do not exercise the Warrants by the end of the 30 day period, the Warrants would
then expire. The rights associated with the Warrants are set forth in detail in
the form of Warrant attached as an exhibit to this report on Form 8-K.
The Units, the Preferred Stock, the Warrants, and the Common Stock issuable
on the conversion of the Preferred Stock and the exercise of the Warrants are
restricted securities. The Company entered into an agreement to file a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), on or before April 1, 1998, to register the public resale of
the Common Stock issuable on conversion of the Preferred Stock and the exercise
of the Warrants by the purchasers in the offering. The Company also undertook
to utilize its best efforts to cause such registration statement to become
effective at the earliest practicable date and to maintain its effectiveness
until the earlier of (a) the resale of all shares of Common Stock subject to
such registration; or (b) the date on which such shares can be freely sold by
the investors under Rule 144. If the registration statement is not effective by
May 30, 1998, the annual dividend on the Preferred Stock will increase to 8%
until such time as the registration statement is effective. If the registration
statement is not effective by August 31, 1998, the dividend rate on the
Preferred Stock increases to 12% until such time as the registration statement
is effective. The Company's obligations to register the resale of the Common
Stock are set forth in detail in the form of Registration Rights Agreement
attached as an exhibit to this report on Form 8-K.
The holders of the Units have agreed that any shares of Common Stock issued
on conversion of the Preferred Stock or exercise of the Warrants will not be
resold into the public trading market for the Common Stock, notwithstanding the
prior registration under the Securities Act, for 90 days subsequent to the
effective date of any underwritten public offering for cash by the Company of
its Common Stock (or its securities convertible into or exercisable or
exchangeable for its Common Stock).
The Company paid a finder's fee of 6%, or an aggregate of $210,000, to
Mueller & Company, Inc., a member of the National Association of Securities
Dealers, Inc. The Company incurred additional expenses for legal, accounting,
printing, travel, listing fees, subsistence for Company representatives, and
other costs of the offering estimated to be approximately $35,000. The Company
anticipates that the net proceeds of approximately $3,255,000 will be utilized
to fund ongoing operating losses, research and product development costs, and
the costs associated with the market introduction of new products. Assuming
that the Company can successfully launch its proposed new products and that they
are sufficiently accepted in the market to permit a substantial increase in
Company revenues during 1998, the Company would anticipate that the net proceeds
of this offering will provide it with adequate capital to meet its projected
requirements through the end of fiscal 1998.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
Exhibits
<TABLE>
<CAPTION>
SEC
Exhibit Reference
Number Number Title of Document
<S> <C> <C>
1 3 Designation of Rights, Privileges, and Preferences
of 1998 Series A Preferred Stock
2 4 Form of Warrant
3 4 Form of Registration Rights Agreement
</TABLE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange of 1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February 23, 1998 LARSON DAVIS INCORPORATED
By /s/ Craig Allen
Craig Allen
(Principal Financial and
Accounting Officer)
LARSON DAVIS INCORPORATED
DESIGNATION OF RIGHTS, PRIVILEGES, AND PREFERENCES OF
1998 SERIES A PREFERRED STOCK
Pursuant to the provisions of Nevada Revised Statutes, Section 78.195, of
the corporation laws of the state of Nevada, the undersigned corporation hereby
adopts the following Designation of Rights, Privileges, and Preferences of 1998
Series A Preferred Stock (the "Designation"):
FIRST: The name of the Corporation is Larson Davis Incorporated.
SECOND: The following resolution establishing a series of preferred stock
designated as the "1998 Series A Preferred Stock" consisting of 3,500 shares,
par value $0.001, was duly adopted by the board of directors of the Corporation
on February 2, 1998, in accordance with the articles of incorporation of the
Corporation and the corporation laws of the state of Nevada:
RESOLVED, there is hereby created a series of preferred stock of the
Corporation to be designated as the "1998 Series A Preferred Stock"
consisting of 3,500 shares, par value $0.001, with the following
powers, preferences, rights, qualifications, limitations, and
restrictions:
1. Liquidation.
1.01 In the event of any voluntary or involuntary liquidation (whether
complete or partial), dissolution, or winding up of the Corporation, the
holders of the 1998 Series A Preferred Stock shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
shareholders, whether from capital, surplus, or earnings, an amount in cash
equal to One Thousand Dollars ($1,000.00) per share plus all unpaid
dividends, whether or not previously declared, accrued thereon to the date
of final distribution. No distribution shall be made on any common stock
of the Corporation, par value $0.001 (the "Common Stock"), or other
subsequently authorized series of preferred stock of the Corporation by
reason of any voluntary or involuntary liquidation (whether complete or
partial), dissolution, or winding up of the Corporation unless each holder
of any 1998 Series A Preferred Stock shall have received all amounts to
which such holder shall be entitled under this subsection 1.01.
1.02 If on any liquidation (whether complete or partial), dissolution,
or winding up of the Corporation, the assets of the Corporation available
for distribution to holders of 1998 Series A Preferred Stock shall be
insufficient to pay the holders of outstanding 1998 Series A Preferred
Stock the full amounts to which they otherwise would be entitled under
subsection 1.01, the assets of the Corporation available for distribution
to holders of 1998 Series A Preferred Stock shall be distributed to them
pro rata on the basis of the number of shares of 1998 Series A Preferred
Stock held by each such holder.
2. Voting Rights. The 1998 Series A Preferred Stock shall be voted with
the Common Stock as a single class and shall not be entitled to vote as a
separate class, except to the extent that the consent of the holders of the 1998
Series A Preferred Stock, voting as a class, is specifically required by the
provisions of the corporation laws of the state of Nevada, as now existing or as
hereafter amended. Each holder of 1998 Series A Preferred Stock shall be
entitled to Two Hundred Seventy-Eight (278) votes for each share of such stock
held by him or her.
3. Dividends.
3.01 The Corporation shall pay to the holders of the 1998 Series A
Preferred Stock, out of the assets of the Corporation, dividends at the
times and in the amounts provided for in this Section 3.
3.02 The cumulative annual dividend rate for each share of 1998 Series
A Preferred Stock shall be Forty Dollars ($40.00), payable in annual
installments twenty (20) days subsequent to the end of the calendar year,
with the first such installment due payable on January 20, 1999. The first
payment shall be pro rated based on the number of days the shares of 1998
Series A Preferred Stock were outstanding during 1998 vis-a-vis the number
of days in 1998. All dividends shall be paid, at the election of the
Corporation, in cash or fully registered, free-trading shares of Common
Stock of the Corporation. Dividends not paid when due shall cumulate but
shall not bear interest.
3.03 Any payment of dividends declared and due under this Section 3
with respect to any shares of 1998 Series A Preferred Stock, if made in
cash, shall be made by means of a check drawn on funds immediately
available for the payment thereof to the order of the record holder of such
shares at the address for such record holder shown on the stock records
maintained by or for the Corporation, which check shall be mailed by United
States first class mail, postage prepaid. Any such payment shall be deemed
to have been paid by the Corporation on the date that such payment is
deposited in the United States mail as provided above; provided, that in
the event the check by which any payment shall be made shall prove not to
be immediately collectible on the date of payment, such payment shall not
be deemed to have been made until cash in the amount of such payment shall
actually be received by the person entitled to receive such payment.
3.04 Any payment of dividends declared and due under this Section 3
with respect to any shares of 1998 Series A Preferred Stock, if made in
shares of Common Stock, shall be calculated based on the average closing
price for the Common Stock of the Corporation for the twenty (20) trading
days preceding the declaration of the dividend by the board of directors.
Such stock shall be issued pursuant to a registration statement and shall
not be subject to any restrictions on transfer when issued. The
certificates shall be sent to the record holder at the address shown on the
stock records maintained by the Corporation, United States first class
mail, postage prepaid. The dividend shall be deemed to have been paid by
the Corporation on the date it is deposited in the United States mail.
3.05 No dividend or other distribution shall be declared or paid or
set apart for payment on Common Stock or any subsequently authorized series
of preferred stock, for any period unless the holders of the 1998 Series A
Preferred Stock shall have then been or contemporaneously are paid (or
declared and a sum sufficient for the payment thereof set apart for such
payment) all dividends for all periods terminating on or prior to the date
of payment of the distribution on the Common Stock or any subsequently
authorized preferred stock.
3.06 Registration of transfer of any shares of 1998 Series A Preferred
Stock on the stock records maintained by or for the Corporation to a person
other than the transferor shall constitute a transfer of any right which
the transferor may have had to receive any accrued but unpaid dividends as
of the date of transfer, whether declared or undeclared, and the
Corporation shall have no further obligation to the transferor with respect
to such accrued and unpaid dividends. Any shares of 1998 Series A
Preferred Stock represented by a new certificate issued to a new holder
shall continue to accrue dividends as provided in this Section 3.
4. Conversion.
4.01 Each share of 1998 Series A Preferred Stock, plus accrued but
unpaid dividends, is convertible into Common Stock at the times, in the
manner, and subject to the conditions provided in this Section 4. On
conversion, the accrued dividend shall be deemed to include a dividend for
the year in which the conversion occurs, calculated by multiplying the
annual dividend for such year by a fraction equal to the number of days in
such year prior to the conversion notice divided by the total number of
days in such year.
4.02 Each share of 1998 Series A Preferred Stock may be converted at
any time after ninety (90) days subsequent to issuance, at the election of
the holder. Such conversion shall be effective when the holder shall give
written notice of such election to the Corporation (which may be effected
by facsimile) confirmed by delivery of the certificate representing the
share, duly endorsed, by overnight courier, such delivery to be received by
the Corporation within three (3) days of the notice, together with written
instructions specifying the number of shares of 1998 Series A Preferred
Stock to be converted and the name and address of the person to whom
certificate(s) representing the Common Stock issuable on conversion are to
be issued at the principal office of the Corporation. The Corporation
shall, within three (3) business days of receipt of the original
certificate, issue a certificate for the Common Stock issuable on such
conversion and deliver it at the holder's direction. If the Corporation
fails to deliver the certificate for Common Stock as required then, without
limiting the holder's other rights and remedies, the Corporation shall
forthwith pay to the holder an amount equal to Twenty Dollars ($20.00) for
each day of delay.
4.03 Each share of 1998 Series A Preferred Stock shall be convertible
into the number of shares of Common Stock of the Corporation, calculated by
dividing the sum of One Thousand Dollars ($1,000.00) plus any accrued but
unpaid dividends by an amount equal to the lower of (i) Three Dollars and
Sixty Cents ($3.60) or (ii) Eighty-Five Percent (85%) of the average of the
closing price for the Common Stock for the ten (10) consecutive trading
days immediately prior to the date that the holder provides notice of such
conversion to the Corporation pursuant to subsection 4.02, as reported on
the Nasdaq Stock Market or a national exchange on which the Common stock is
listed or, if not quoted on Nasdaq or listed on an exchange, as reported on
the electronic bulletin board maintained by the NASD, or if not on the
electronic bulletin board, on any other reliable medium of quotation (the
"Conversion Rate").
4.04 Notwithstanding the foregoing provisions of this Section 4, if at
any time the conversion of a share of 1998 Series A Preferred Stock would
result in the total number of shares of Common Stock issued on conversion
of the 1998 Series A Preferred Stock exceeding 2,332,984 then, to the
extent required by Schedule D of the NASD Bylaws to maintain the listing of
the Corporation's Common Stock on the Nasdaq National Market System, such
1998 Series A Preferred Stock may not be converted unless and until the
transaction has been approved by the shareholders of the Corporation. In
such case, the Corporation shall use its reasonable best efforts to hold a
shareholders' meeting within ninety (90) days of the notice to convert
given by the affected Holder and shall submit the transaction to the
shareholders at such meeting, with the recommendation of the board of
directors that the transaction be approved. If the Corporation is unable
to obtain the necessary shareholder approval as set forth above, it shall,
within ninety (90) days of such failure, redeem the 1998 Series A Preferred
Stock that is then issued and outstanding at a redemption price of One
Thousand Dollars ($1,000.00) per share, plus all accrued and unpaid
dividends.
4.05 The Corporation covenants and agrees that:
(a) The shares of Common Stock issuable on any conversion of any
shares of 1998 Series A Preferred Stock shall have been deemed to have
been issued to the person on the Conversion Date, and on the
Conversion Date, such person shall be deemed for all purposes to have
become the record holder of such Common Stock.
(b) All shares of Common Stock which may be issued on any
conversion of the 1998 Series A Preferred Stock will, on issuance, be
fully paid and nonassessable and free from all taxes, liens, and
charges with respect to the issuance thereof.
(c) The issuance of certificates for Common Stock on conversion
of the 1998 Series A Preferred Stock shall be made without charge to
the registered holder thereof for any issuance tax in respect thereof
or other costs incurred by the Corporation in connection with the
conversion of the 1998 Series A Preferred Stock and the related
issuance of Common Stock or other securities.
5. Registration Rights. The Corporation shall, on or before April 1,
1998, file a registration statement with the Securities and Exchange Commission
registering the resale of the Common Stock issuable or issued on conversion of
the 1998 Series A Preferred Stock (the "Conversion Stock") (but not the 1998
Series A Preferred Stock itself) and shall thereafter diligently use its
commercially reasonable best efforts to seek the effectiveness of such
registration statement and to keep such registration statement effective for a
period of two years. The holder shall furnish to the Corporation in writing
such information, and enter into such agreements as the Corporation may
reasonably request from such holder, all as may be required in connection with
the registration described in this Section 5 or in compliance with applicable
state securities laws. All expenses of such registration, other than
commissions or fees paid on the resale of the Common Stock by the holder, shall
be paid by the Corporation. If such registration statement is not declared
effective by the Securities and Exchange Commission on or before May 30, 1998,
the annual dividend rate shall be increased to Eighty Dollars ($80.00) per share
until the registration statement is declared effective. If the registration
statement has not been declared effective on or before August 31, 1998, the
annual dividend rate shall be One Hundred and Twenty Dollars ($120.00) per share
until the registration statement is declared effective.
6. Mandatory Conversion. If not earlier converted, the 1998 Series A
Preferred Stock shall be automatically converted effective December 31, 1999.
In the event the Corporation proposes to offer its Common Stock to the public in
a registered offering at any time subsequent to February 1, 1999, it can require
the conversion of the 1998 Series A Preferred Stock, at the conversion rate set
forth in Section 4, by providing thirty (30) days prior written notice to the
holders. Such conversion shall be deemed to have occurred as of the last day of
the thirty (30) day notice period.
7. Antidilution Provisions. The maximum conversion price limit of Three
Dollars and Sixty Cents ($3.60) per share of Common Stock (the "Cap Rate") shall
be subject to adjustment from time to time as follows:
(a) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend in
shares, the Cap Rate in effect immediately prior to such record date shall
be equitably adjusted, such adjustment to become effective immediately
after the opening of business on the day following such record date.
(b) If the Corporation 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 Cap Rate in effect immediately
prior thereto shall be equitably adjusted so that the holder of 1998 Series
A Preferred Stock would be entitled to receive, after the occurrence of any
of the events described, the number of shares of Common Stock to which the
holder would have been entitled had such 1998 Series A Preferred Stock been
converted 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.
(c) If the Corporation shall issue a security that is exercisable or
convertible into shares of Common Stock at any time prior to the date that
is one year from the date that the 1998 Series A Preferred Stock issued,
and the maximum exercise price or conversion rate of such security is less
than Three Dollars and Sixty Cents ($3.60) per share of Common Stock, the
Cap Rate shall be reduced to the maximum exercise price or conversion rate
of such security. The provisions of this subsection (c) shall not apply to
securities granted to officers, directors, or employees of the Corporation
under the terms of a Stock Option or Award Plan intended primarily to
benefit employees of the Corporation.
8. Reservation of Common Stock. The Corporation shall initially reserve
2,332,984 shares of Common Stock for issuance on conversion the 1998 Series A
Preferred Stock. The Corporation shall at all times keep a sufficient number of
shares of Common Stock reserved to permit the conversion of any 1998 Series A
Preferred Stock then outstanding. The number of shares shall be equitably
adjusted if the Corporation issues Common Stock as a dividend upon Common Stock
or in lieu of the payment of a dividend thereon, shall subdivide the number of
outstanding shares of its Common Stock into a greater number of shares or shall
contract the number of outstanding shares of its Common Stock into a lesser
number of shares.
9. Events of Default. An "event of default" shall exist if any of the
following shall occur:
(a) The Corporation shall breach or fail to comply with any provision
hereof and such breach or failure shall continue for thirty (30) days after
written notice by any Holder to the Corporation.
(b) A receiver, liquidator, or trustee of the Corporation or of a
substantial part of its properties shall be appointed by court order and
such order shall remain in effect for more than thirty (30) days; or the
Corporation shall be adjudicated bankrupt or insolvent; or a substantial
part of the property of the Corporation shall be sequestered by court order
and such order shall remain in effect for more than thirty (30) days; or a
petition to reorganize the Corporation under any bankruptcy reorganization
or insolvency law shall be filed against the Corporation and shall not be
dismissed within forty-five (45) days after such filing.
(c) The Corporation shall file a petition in voluntary bankruptcy or
request reorganization under any provision of any bankruptcy,
reorganization, or insolvency law, or shall consent to the filing of any
petition against it under any such law.
(d) The Corporation shall make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as
they become due, or consent to the appointment of a receiver, trustee, or
liquidator of the Corporation, or of all or any substantial part of its
properties.
If an event of default shall occur, any Holder of shares of the 1998 Series A
Preferred Stock may, in addition to such holder's other remedies, by written
notice to the Corporation, require the Corporation forthwith to redeem the
shares of Series A Preferred Stock held, at a redemption price equal to One
Thousand Dollars ($1,000.00) per share plus all accrued but unpaid dividends.
The obligation to pay the redemption price shall accrue interest, payable on
demand, at eighteen percent (18%) per annum, or, if less, at the highest rate
permitted by law.
10. Additional Provisions.
10.01 No change in the provisions of the 1998 Series A Preferred
Stock set forth in this Designation affecting any interests of the holders
of any shares of 1998 Series A Preferred Stock shall be binding or
effective unless such change shall have been approved or consented to by
the holders of a majority of the 1998 Series A Preferred Stock in the
manner provided in the corporation laws of the state of Nevada, as the same
may be amended from time to time.
10.02 The 1998 Series A Preferred Stock and the Common Stock
issuable on conversion of the 1998 Series A Preferred Stock are "restricted
securities" and, consequently, will be subject to the restrictions on
transfer set forth in the Securities Act and the rules and regulations
promulgated thereunder. In addition, the 1998 Series A Preferred Stock and
the Common Stock issuable on conversion will be subject to restrictions on
transfer under applicable state securities laws under which such securities
are sold in reliance on certain exemptions or under the provisions of
certain qualifications. In the event that a Holder wishes to transfer the
1998 Series A Preferred Stock or the Common Stock issuable on conversion,
such holder must establish prior to transfer, to the satisfaction of the
Corporation and its counsel, that all of the requirements necessary to
effect such a transfer have been satisfied. A share of 1998 Series A
Preferred Stock shall be transferable on the books of the Corporation only
by delivery of the original certificate representing such shares duly
endorsed by the holder or by his duly authorized attorney or representative
or accompanied by proper evidence of succession, assignment, or authority
to transfer. In all cases of transfer by an attorney, the original letter
of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited and remain with the Corporation. In case of transfer by
executors, administrators, guardians, or other legal representatives, duly
authenticated evidence of their authority shall be produced and may be
required to be deposited and remain with the Corporation in its discretion.
On any registration or transfer, the Corporation shall deliver a new
certificate representing the share of 1998 Series A Preferred Stock so
transferred to the person entitled thereto.
10.03 The Corporation shall not be required to issue any
fractional shares of Common Stock on the conversion of any share of 1998
Series A Preferred Stock. If any fraction of a share of Common Stock
would, except for the provisions of this subsection 7.03, be issuable on
the conversion of any shares of 1998 Series A Preferred Stock, the
Corporation shall round the number of shares of Common Stock issuable on
the conversion to the nearest whole share.
10.04 Any notice required or permitted to be given to the holders
of the 1998 Series A Preferred Stock under this Designation shall be deemed
to have been duly given if mailed by first class mail, postage prepaid, to
such holders at their respective addresses appearing on the stock records
maintained by or for the Corporation and shall be deemed to have been given
as of the date deposited in the United States mail.
IN WITNESS WHEREOF, the foregoing Designation of Rights, Privileges, and
Preferences of 1998 Series A Preferred Stock of the Corporation has been
executed this 2nd day of February, 1998.
ATTEST: LARSON DAVIS INCORPORATED
By /s/ Craig Allen By /s/ Andrew Bebbington
Craig Allen, Secretary Andrew Bebbington, President
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
On February 2, 1998, before me, the undersigned, a notary public in and
for the above county and state, personally appeared Andrew Bebbington and Craig
Allen, who being by me duly sworn, did state, each for themselves, that he,
Andrew Bebbington is the president, and that he, Craig Allen is the secretary,
of LarsonoDavis Incorporated, a Nevada corporation, and that the foregoing
Designation of Rights, Privileges, and Preferences of 1998 Series A Preferred
Stock of LarsonoDavis Incorporated was signed on behalf of such corporation by
authority of a resolution of its board of directors, and that the statements
contained therein are true.
WITNESS MY HAND AND OFFICIAL SEAL
/s/ Paula J. Chapman
Notary Public
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 JULY 30, 2000
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, [Name of Holder] (the
"Holder"), is entitled to subscribe for, purchase, and receive [Number] fully
paid and nonassessable shares of common stock, par value $0.001 (the "Warrant
Shares"), of LarsonoDavis Incorporated, a Nevada corporation (the "Company"), at
the price of $4.50 per Warrant Share (the "Exercise Price"), at any time or from
time to time prior to the earlier of: (i) 11:59 p.m. mountain time on July 30,
2000; or (ii) 30 days subsequent to the notice provided by the Company in
accordance with the provisions of paragraph 2 of this Warrant (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 during the Exercise Period, this Warrant
shall automatically become void and be 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 herein.
1. Exercise of Warrants. On the exercise of all or any portion of this
Warrant, 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. Such certificates shall bear appropriate
restrictive legends in accordance with applicable securities laws. In the event
that the Company fails to deliver the certificate representing Common Stock
within the time frame set forth above, then, without limiting the Holder's other
rights and remedies, the Company shall forthwith pay to the Holder an amount
equal to $1,000 for each day of delay for each 20,000 shares of Common Stock,
with a pro rata amount for less than 20,000 shares. 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.
2. Required Exercise. If at any time during the Exercise Period (i) the
closing price for the common stock of the Company (the "Common Stock"), as
reported by the Nasdaq Stock Market or a national exchange on which the Common
Stock is then listed or, if not quoted on the Nasdaq Stock Market or a national
exchange, as reported by such other trading market in which the Common Stock is
listed, is equal to or exceeds $6.50 for 20 consecutive trading days, and (ii)
the registration statement referred to in paragraph 8 of this Agreement is then
effective and has been effective for at least 90 days, the Company can provide
written notice to the Holder, requiring the exercise of this Warrant in full
within 30 days. If this Warrant is not exercised within such 30 days, it shall
expire and thereafter be void and of no further force or effect. Such notice
shall be sent by United States first class mail, postage prepaid, to the address
of the Holder shown on the stock records maintained by the Company and shall be
deemed effective when deposited in the United States mail.
3. 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 Warrant Shares 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.
4. 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.
5. 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 issuance 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.
6. 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 number of Warrant Shares subject to this Warrant shall be
proportionately increased, and the Warrant Price proportionately decreased,
such adjustments 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 number of Warrant Shares and the Warrant Price in
effect immediately prior thereto shall be adjusted so that the Holder of
this Warrant 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 at the same total exercise price as existed
immediately prior to the change. 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.
(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 number of Warrant Shares and 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.
(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 6, 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.
7. 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 this Warrant or any Warrant
Shares, the Holder 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 Holder
of this Warrant or the Warrant Shares stating that no registration under
the Securities Act is required with respect to such disposition and the
proposed transferee has provided the Company with a statement (in form
acceptable to the Company and its counsel) that this Warrant or the Warrant
Shares are being acquired for investment and not with a view to their
distribution or resale; or
(b) a registration statement or post-effective amendment to a
registration statement under the Securities Act has been filed by the
Company and declared effective by the Commission covering such proposed
disposition.
8. Registration of Warrant Shares. The Warrant Shares are subject to a
Registration Rights Agreement of even date herewith pursuant to which the
Company shall use its best efforts to file a registration statement under the
Securities Act to register the resale of the Warrant Shares issuable on the
exercise of this Warrant, shall utilize its best efforts to cause such
registration statement to become effective, and shall maintain the effectiveness
of such registration statement for a period of two years beyond the date this
Warrant is exercised. 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.
9. Limitation on Exercise. Notwithstanding anything to the contrary
contained herein, the Holder shall not have the right to exercise this Warrant
so long as and to the extent that at the time of such exercise, such exercise
would cause the Holder to be the "beneficial owner" (as defined in Section 13(d)
of the Securities Exchange Act of 1934, as amended) of 5% or more of the
Company's then outstanding Common Stock. The opinion of counsel to Holder shall
prevail in the event of any dispute on the calculation of Holder's beneficial
ownership.
10. Exercise of Warrant. The rights represented by this Warrant may be
exercised at any time within the period above specified by faxed notice of
exercise which is followed within three business days by (i) surrender of this
Warrant at the principal executive office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the Holder
at the address of the Holder appearing on the books of the Company); (ii)
payment to the Company of the exercise price for the number of shares of common
stock specified in the above-mentioned purchase form together with applicable
stock transfer taxes, if any; and (iii) the delivery to the Company of a
statement by the Holder (in a form acceptable to the Company and its counsel)
that such shares are being acquired by the Holder for investment and not with a
view to their distribution or resale (unless such distribution or resale is
permitted under the Securities Act).
11. Governing Law. This agreement shall be construed under and be
governed by the laws of the state of Nevada.
12. 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: Andrew Bebbington, President
1681 West 820 North
Provo, Utah 84601
Facsimile Transmission: (801) 375-0182
Confirmation: (801) 375-0177
If to the Holder, to: [Address]
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.
13. 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.
14. 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 , 1998.
LARSON DAVIS INCORPORATED
By
Andrew Bebbington, President
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:
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION AGREEMENT (this "Agreement") is made as of the day
of February, 1998, among and between LARSON DAVIS INCORPORATED, a Nevada
corporation (the "Company"), and the undersigned INVESTOR (the "Investor" or
collectively, with other Investors, the "Investors").
Premises
A. The Company has, contemporaneous with the execution of this Agreement,
issued and sold units (the "Units") to the Investor, each Unit consisting of 35
shares of preferred stock designated as the 1998 Series A Preferred Stock of the
Company, par value $0.001 (the "Preferred Stock"), and 7,000 common stock
purchase warrants (the "Warrants").
B. In order to induce the Investor to purchase, and the Company to issue,
the Units (consisting of Preferred Stock and Warrants), the Investors and the
Company hereby agree that this Agreement shall govern the rights of the parties
with respect to the ownership, transferability, and registration of the Units,
the Preferred Stock, the Warrants, the Conversion Shares, and the Warrant
Shares, as those terms are defined below.
Agreement
NOW, THEREFORE, based on the foregoing premises, which are incorporated
herein by reference, and for and in consideration of the mutual promises and
covenants of the parties set forth herein, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Common Stock" shall mean the common stock of the Company, par
value $0.001.
(b) "Conversion Shares" means the Common Stock issuable on conversion
of the Preferred Stock.
(c) "Exchange Act" means the Securities Exchange Securities Act of
1934, as amended.
(d) "Holder" means the Investor or any permitted assignee of the
Investor, if the transfer to such assignee has been recorded in the
corporate books and records of the Company, in accordance with the
provisions of this Agreement.
(e) "Offering" refers to the private placement of the Units by the
Company.
(f) "Preferred Stock" means the preferred stock, par value $0.001, of
the Company that is designated as its "1998 Series A Preferred Stock."
(g) "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act and the declaration
or ordering of effectiveness of such registration statement or document.
(h) "Registrable Securities" means the Conversion Shares issuable on
conversion of the Preferred Stock and the Warrant Shares issuable on
exercise of the Warrants so long as such securities are "Restricted
Securities."
(i) "Registration Statement" means the registration statement to be
filed with the SEC by the Company under the terms of this Agreement.
(j) "Restricted Securities" means the Units, the shares of Preferred
Stock, and Warrants included therein, and the shares of Common Stock
issuable on conversion of the Preferred Stock and on exercise of the
Warrants until such time as such securities (i) have been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering the transaction or (ii) have been held,
either separately or in the aggregate, to the extent tacking is permitted
under the Securities Act, for the period specified in subsection (k) of
Rule 144 (or any similar provision then in force) under the Securities Act,
so as to permit the sale of such shares under Rule 144.
(k) "Securities Act" means the Securities Act of 1933, as amended.
(l) "SEC" means the Securities and Exchange Commission.
(m) "Warrant Shares" means the shares of Common Stock issuable on
exercise of the Warrants.
2. Units. Each Unit consists of 35 shares of Preferred Stock and 7,000
Warrants.
(a) The Preferred Stock has the rights, privileges, and preferences
set forth in the Designation of Rights, Privileges and Preferences of the
1998 Series A Preferred Stock filed under the corporate laws of the state
of Nevada. Each share of Preferred Stock is convertible, at any time after
90 days subsequent to their issuance, into shares of Common Stock (the
"Conversion Shares"), subject to the registration requirements of the
Securities Act or the availability of an exemption from such registration
requirements which must be established to the reasonable satisfaction of
the Company and its legal counsel. On their issuance, the Conversion
Shares shall be Restricted Securities and shall bear on their face a legend
to the foregoing effect.
(b) Each Warrant gives the Holder the right to acquire a share of
Common Stock (the "Warrant Shares") at an exercise price of $4.50 per
share. Under the terms of the Warrants, they are exercisable at any time
before the earlier of July 30, 2000, or 30 days after the Company provides
written notice to the Holders if the closing price of the Common Stock of
the Company exceeds $6.50 for 20 consecutive trading days and a
registration statement covering the resale of the Common Stock issuable on
exercise has been effective for at least 90 days. The exercise of the
Warrants and the acquisition of the underlying Warrant Shares are subject
to the registration requirements of the Securities Act or the availability
of an exemption from such registration requirements, which must be
established to the reasonable satisfaction of the Company and its legal
counsel. On their issuance, the Warrant Shares shall be Restricted
Securities, and shall bear on their face a legend to the foregoing effect.
The holders of the Warrants, as such, shall not have rights as shareholders
of the Company.
3. Registration by the Company.
(a) The Units, the Preferred Stock, and the Warrants are Restricted
Securities and the Conversion Shares and Warrant Shares, when issued, shall
be Restricted Securities. The Company has no obligation to register the
Units, the Preferred Stock, or the Warrants or make any exemption from the
registration requirements of the Securities Act and applicable state
securities law available in order to permit the sale or transfer of the
Units, the Preferred Stock, or the Warrants by Investors.
(b) The Company agrees to register the resale by the Holders of the
Conversion Shares and the Warrant Shares and to bear all costs related to
such registration. On or before April 1, 1998, the Company will file an
appropriate Registration Statement with the SEC and will thereafter use
commercially reasonable best efforts to seek the effectiveness of such
registration statement within 120 days after the completion of the
Offering.
4. Obligations of the Company. Whenever required under this Agreement to
effect the registration of any Registrable Securities, the Company shall proceed
diligently and in good faith 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 from the date of exercise of the Warrants, 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 any Holder of Common Stock covered by the Registration
Statement (the "Selling Shareholders") when a prospectus 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 Selling Shareholders 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;
(d) Use its best efforts to cause all securities of Selling
Shareholders 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 or trading 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 Selling Shareholders, the underwriter or underwriters, if
any, and their counsel, in connection with the registration or
qualification of, the securities of Selling Shareholders 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 Selling
Shareholders 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 Selling
Shareholders 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 Selling Shareholders 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 Selling Shareholders 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 Selling Shareholders may request; and
(g) Use it best efforts to cause the securities of Selling
Shareholders 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 Selling Shareholders or the
underwriter or underwriters, if any, to consummate the disposition of such
securities.
5. Cooperation by the Holder.
(a) The Holder shall furnish to the Company in writing such
information and affidavits as the Company may reasonably require 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 Shareholder that such Selling Shareholder
shall furnish to the Company such information regarding the Selling
Shareholder, 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 securities.
(b) By exercising the Warrants, Holder 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 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) Holder, upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraph (b) of section
4.2, will forthwith discontinue disposition of the securities until their
receipt of copies of the supplemented or amended prospectus contemplated by
paragraph (b) of section 4.2 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, Holder 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 their 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 4.2 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 Holder shall have received the copies of the
supplemented or amended prospectus contemplated by paragraph (b) of section
4.2 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 (and any required
extensions), Holder 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 Holder shall notify the
Company of the number of securities registered which remain unsold promptly
after receipt of such notice from the Company.
(e) Holder 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 Holder in writing of such
registration or exemption and the related limitations and conditions from
time to time. Holder shall be solely responsible for his or her own
compliance with such limitations and conditions.
6. Expenses of Registration. All expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications, including (without limitation) all registration, filing and
qualification fees, printer's and accounting fees, and fees and disbursements of
counsel for the Company, shall be borne by the Company.
7. Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
8. Indemnification. In the event any Registrable Securities are included
in a registration statement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities
Act) for such Holder, and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities to which they may
become subject under the Securities Act, insofar as such losses, claims,
damages, or liabilities arise out of or are based upon any of the following
statements, omissions or violations (collectively, a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained
in such registration statement, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements
thereto, (ii) the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act or any rule or regulation promulgated under
the Securities Act; and the Company will pay to each such Holder,
underwriter or controlling person, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by any such Holder, underwriter, or
controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any
underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other
Holder, against any losses, claims, damages, or liabilities to which any of
the foregoing persons may become subject under the Securities Act or the
Exchange Act, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation,
in each case to the extent (and only to the extent) that such Violation
occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such
registration; and each such Holder will pay any legal or other expenses
reasonably incurred by any person intended to be indemnified in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld. Notwithstanding the
foregoing provision, the Holder's indemnification obligation under this
subparagraph shall not exceed the amount received by such Holder on the
sale of securities pursuant to the registration statement.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this paragraph, deliver to the indemnifying
party a written notice of the commencement thereof, and the indemnifying
party shall have the right to participate in, and to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented
without conflict by one counsel) shall have the right to retain one
separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interest between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this paragraph, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under
this paragraph.
(d) If the indemnification provided for in this section is held by a
court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission. Notwithstanding the foregoing provision, the contribution
obligation of each Holder shall not exceed the amount received by that
Holder from the sale of securities pursuant to the registration statement.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this paragraph
shall survive the completion of any offering of Registrable Securities
pursuant to a registration statement.
9. Reports Under Exchange Act. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the SEC that may at any time permit a Holder to sell
the Conversion Shares issuable on conversion of the Preferred Stock, or the
Warrant Shares issuable on exercise of the Warrants, the Company agrees to:
(a) use commercially reasonable best efforts to make and keep public
information available, as those terms are understood and defined in SEC
Rule 144, at all times that there are shares of Common Stock issued and
outstanding that are Registrable Securities;
(b) use commercially reasonable best efforts to file with the SEC in
a timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act; and
(c) use commercially reasonable efforts to furnish to any Holder, so
long as the Holder owns any Registrable Securities, forthwith upon request
(i) a written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144, the Securities Act and the Exchange
Act, or that it qualifies as a registrant whose securities may be resold
pursuant to the appropriate registration form; (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company; and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation of
the SEC which permits the selling of any such securities without
registration or pursuant to such form.
10. Transfer of Registration Rights. The rights and all related
obligations under this Agreement shall automatically be transferred to and
binding on any transferee or assignee of the Common Stock; provided that: (a)
the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
(b) such transferee or assignee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement; (c) the transfer or assignment is in
compliance with the Securities Act and applicable state securities law or an
exemption from the registration requirements of the Securities Act and
applicable state securities laws; and (d) such assignment shall be effective
only if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
11. "Market Stand-Off" Agreement. In order to facilitate the possibility
of future public offerings of Common Stock, Conversion Shares, and Warrant
Shares, such Conversion Shares and Warrant Shares will be subject to the
contractual restriction that, in the absence of the consent of the underwriter
for any such offering, (a) none of such shares shall be sold in any public
trading market for a period of 90 days after the effectiveness of any
underwritten public offering and (b) subsequent sales shall be limited to 1% of
the number of shares of Common Stock then issued and outstanding during any four
week period during the twelve weeks thereafter. Holders agree that during the
above restricted period they will not directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale), grant
any option to purchase or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) Conversion Shares or Warrant Shares at any time
during such period except securities included in such registration. In order to
enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to such Conversion Shares or Warrant Shares of each
Holder, which shall be binding on any assignee or successor of such Holder (and
the shares or securities of every other person subject to the foregoing
restriction), until the end of such restricted period.
12. Miscellaneous.
(a) Except as otherwise provided herein, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties (including permitted
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
(b) This Agreement shall be governed by and construed under the laws
of the state of Nevada.
(c) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(d) The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
(e) Unless otherwise provided, any notice required or permitted under
this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or upon deposit
with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten days' advance written notice to
the other parties. For the purposes of any notice required to be given to
Holders, the Company can rely on the address for the registered holder of
the securities in question as reflected on its stock transfer records and
such notice shall be deemed adequate notice to the original or any
subsequent Holder.
(f) If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements
in addition to any other relief to which such party may be entitled.
(g) The parties hereby specifically acknowledge that monetary damages
for breach of this Agreement may be difficult to determine and/or
inadequate to compensate the parties for such breach and hereby agree that,
in the event of any breach, the parties, in addition to any other remedies
they may have under the terms of this Agreement or at law, shall have the
right to bring an action in equity for an injunction against the breach or
threatened breach or seeking specific performance of the obligations of the
other party under the terms of this Agreement.
(h) Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
the written consent of the Company and the Holders of at least two-thirds
of the Registrable Securities then outstanding. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each
Holder of any Registrable Securities then outstanding, each future holder
of all such Registrable Securities, and the Company.
(i) If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from
this Agreement, and the balance the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with
its terms.
(j) All shares of Registrable Securities held or acquired by
affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
(k) This Agreement constitutes the full and entire understanding and
agreement between the parties with regard to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
The Company:
LARSON DAVIS INCORPORATED
By
Andrew Bebbington, President
Address: 1681 West 820 North
Provo, Utah 84601
INVESTOR:
By
Address:
