MARKET STAND OFF AND REDEMPTION AGREEMENT
THIS MARKET STAND OFF AND REDEMPTION AGREEMENT (this "Agreement") is
entered into this day of January, 1999, by and between LARSONoDAVIS
INCORPORATED, a Nevada corporation ("LarsonoDavis"), on the one hand, and the
undersigned (the "Investor"), on the other, based on the following:
Premises
A. The Investor holds that number of shares of 1998 Series A Preferred
Stock of LarsonoDavis (the "Preferred Stock") and warrants, exercisable at $4.50
per share (the "Warrants"), to purchase common stock (the "Common Stock") of
LarsonoDavis indicated on the signature page. The Preferred Stock is
convertible, at the election of the Investor, into shares of Common Stock of
LarsonoDavis. The sale of the Common Stock issuable on conversion of the
Preferred Stock or exercise of the Warrants is subject to a registration
statement filed on Form S-3 by LarsonoDavis pursuant to its obligations under
the terms of a Registration Rights Agreement entered into by LarsonoDavis and
the Investor (the "Registration Rights Agreement").
B. Since the time of the acquisition of the Preferred Stock and Warrants
by the Investor, the price for LarsonoDavis' Common Stock in the public market
has declined to a point lower than originally anticipated by the parties,
adversely affecting the ability of the Investor to sell the Common Stock in the
public market should the Investor desire to do so.
C. LarsonoDavis has entered into an Asset Purchase Agreement with PCB
Group, Inc. (the "Asset Purchase Agreement"), pursuant to which it will, subject
to the fulfillment of certain conditions precedent including obtaining the
approval of its shareholders, sell the assets and operations associated with
LarsonoDavis' acoustics business (the "Acoustics Business"). In addition,
LarsonoDavis has taken a number of additional steps and is investigating other
potential avenues that may materially change its business, operations, and
prospects.
Agreement
NOW THEREFORE, based on the foregoing premises and for and in consideration
of the mutual promises and covenants contained herein, the adequacy of which is
hereby acknowledged, it is hereby agreed as follows:
1. Redemption of Preferred Stock and Reformation of Warrants.
LarsonoDavis agrees to redeem, and the Investor irrevocably agrees to sell any
and all rights the Investor may have in and to, the Preferred Stock, the Common
Stock issuable on the conversion of the Preferred Stock, and the Registration
Rights Agreement, all on the terms and conditions set forth in this Agreement.
In addition, the number of shares of Common Stock subject to the Warrants held
by the Investor shall be reduced to equal one hundred (100) shares of Common
Stock for each share of Preferred Stock sold by the Investor pursuant to this
Agreement and the exercise price of such remaining Warrants shall be reduced to
$0.50 per share (the "Reformed Warrants"). Notwithstanding the foregoing,
LarsonoDavis will use its commercially reasonable efforts to maintain the
effectiveness of the registration statement currently covering the sale of the
Common Stock issued on conversion of the Preferred Stock until July 31, 2001.
2. Redemption Price. The redemption price (the "Redemption Price") to be
paid to the Investor shall be cash equal the purchase price to the Investor of
the Preferred Stock currently held by the Investor plus all accrued but unpaid
dividends on such Preferred Stock as of the date of redemption. LarsonoDavis
shall redeem the Preferred Stock (or the Common Stock issuable on conversion)
and the Warrants shall be reformed within fifteen (15) days of the closing of
the sale of the Acoustics Business to PCB Group, Inc. The cash portion of the
Redemption Price shall be paid by bank check, wire transfer, or other
immediately available funds as directed by the Investor.
3. Closing of PCB Transaction; Delivery of Certificates. As a condition
precedent to any obligation of LarsonoDavis under the terms of this Agreement,
the sale of the Acoustics Business to PCB Group, Inc., must be completed. As a
condition precedent to the payment of the Redemption Price and the reformation
of the Warrants, the Investor shall deliver to LarsonoDavis the original of the
certificates representing the Preferred Stock and the Warrants.
4. Agreement Not to Convert or Sell. During the term of this Agreement,
the Investor agrees that, without the prior consent of LarsonoDavis, the
Investor will not exercise the Investor's right to convert the Preferred Stock
or to exercise the Warrants. In addition, the Investor agrees not to sell or
transfer the Preferred Stock or Warrants during the term of this Agreement.
5. Agreement of Other Holders. The Preferred Stock and Warrants were
acquired by the Investor in connection with a private placement by LarsonoDavis
to a number of investors (the "Placement"). An aggregate of 3,500 shares of
Preferred Stock and Warrants to acquire 700,000 shares of Common Stock were
issued in the Placement. Of this amount, 3,040 shares of Preferred Stock and
all of the Warrants remain issued and outstanding. In the event that the
holders of at least 2,750 shares of Preferred Stock do not enter into an
agreement on the same terms and conditions as set forth in this Agreement on or
before December 31, 1998, LarsonoDavis may elect not to redeem any shares of
Preferred Stock or reform the Warrants. If it makes this election, LarsonoDavis
shall provide written notice to the holders of Preferred Stock on or before
January 8, 1999, and this Agreement shall thereafter be null and void.
6. Termination of Equity Interest in LarsonoDavis. The redemption of the
Preferred Stock and the reformation of the Warrants, and the Common Stock
issuable on conversion or exercise, will completely terminate any equity
interest of the Investor in LarsonoDavis associated with such securities other
than as represented by the Reformed Warrants. In the event that the Preferred
Stock, Warrants, or Common Stock of LarsonoDavis thereafter increases in value,
the Investor would not participate in or benefit from such increase, except to
the extent the Investor could acquire shares of Common Stock on exercise of the
Reformed Warrants.
7. Review of Information. LarsonoDavis' reports to the SEC are available
and have been reviewed by the Investor, including its report on Form 10-K for
the year ended December 31, 1997; its reports on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 1998; and its reports on Form 8-K
dated January 7, February 13, May 1, October 7, and December 10, 1998.
LarsonoDavis has also provided a preliminary draft of its Proxy Statement for
the special shareholders' meeting to be held in the first quarter of 1999 to the
Investor. The draft of the Proxy Statement is preliminary in nature, is
currently being reviewed by the staff of the Securities and Exchange Commission,
and is subject to change and amendment. Implementation of the proposals
included in the current draft is subject, in addition to the approval of the
shareholders, the further approval of the board of directors of LarsonoDavis.
In addition, LarsonoDavis is actively seeking, and is engaged in discussions
with, potential acquisition targets and/or merger candidates. Such efforts may
lead to a transaction that could materially affect the long-term financing and
business prospects of LarsonoDavis and could result in increased liquidity and
market price for the Common Stock. The foregoing materials are collectively
referred to as the "Disclosure Materials". LarsonoDavis will provide, free of
charge, a copy of any document contained in the Disclosure Materials, on
request. Requests should be directed to Xxxxxx X. Xxxxxxxxxx (000) 000-0000,
0000 Xxxx 000 Xxxxx, Xxxxx, Xxxx 00000. In addition, the officers and directors
of LarsonoDavis are available to discuss any information contained in the
Disclosure Materials and, on execution of suitable confidentiality agreements,
the current status of LarsonoDavis' ongoing efforts to restructure the Company
and identify suitable business partners and/or merger candidates. The Investor
has reviewed the Disclosure Materials and understands the risks involved in
agreeing to the redemption of the Preferred Stock and reformation of the
Warrants, including the risk that LarsonoDavis will be successful in the future
and the price of its securities may increase and wishes to enter into this
Agreement despite such risks.
8. Reaffirmation of Certain Assurances. In connection with the
Placement, the Investor provided representations and warranties to LarsonoDavis
contained in a Subscription Agreement, Suitability Letter, and Investor Letter
executed by the Investor and delivered to LarsonoDavis. The Investor reaffirms
all of such representations and warranties as if made as of the date of this
Agreement, including, without limitation, the Investor's status as an accredited
investor as defined in Rule 501 of Regulation D promulgated under the Securities
Act of 1933, as amended; the Investor's sophistication, knowledge, and
experience concerning investments similar to the Placement; the Investor's
investment intent in acquiring the Preferred Stock and Warrants; and the
Investor's financial ability to assume the risks involved in the Placement.
9. Effect of Redemption. Payment of the Redemption Price to the Investor
and reformation of the Warrants shall be in full and complete satisfaction of
all rights the Investor may have under the Preferred Stock, the original
Warrants, the Registration Rights Agreement, the Placement, and the ownership of
the Preferred Stock and the original Warrants since the completion of the
Placement. The Investor fully and completely releases LarsonoDavis and its
officers, directors, and others associated with the Placement from any and all
claims or liabilities related to the Preferred Stock, the original Warrants, the
Registration Rights Agreement, and the Placement, subject only to the payment of
the Redemption Price by LarsonoDavis and the reformation of the Warrants.
10. Termination of Agreement. In the event that the closing of the sale
of the Acoustics Business to PCB Group, Inc., and the redemption of the
Preferred Stock and reformation of the Warrants has not been completed on or
before March 31, 1999, this Agreement shall terminate and neither party shall
have any further rights or obligations hereunder.
11. Assignment. In order to preserve its working capital, LarsonoDavis
may seek to identify investors who may be willing to acquire the Preferred
Stock, or the Common Stock issuable on conversion and exercise thereof. In the
event that LarsonoDavis is able to do so, the Investor agrees that the right to
purchase all or any portion of the Preferred Stock or the Common Stock issuable
on conversion or exercise, may be assigned by LarsonoDavis to another person or
entity and the Investor agrees to sell the Investor's Preferred Stock, or the
Common Stock issuable thereon, to such other person or entity at a price equal
to the Redemption Price and to deliver the original of the certificates
representing the original Warrants to LarsonoDavis to permit the issuance of the
Reformed Warrants. At the request of such other person or entity, and on
assurance of payment satisfactory to the Investor, the Investor agrees to
exercise the Investor's right to convert the Preferred Stock to Common Stock.
Neither the Preferred Stock, the Warrants, this Agreement, nor any benefits
hereunder are otherwise assignable by the Investor.
12. Entire Agreement. The provisions herein constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements, oral or written, and all other communications
relating to the subject matter hereof. No amendment or modification of any
provision of this agreement will be effective unless set forth in a document
that purports to amend this Agreement and is executed by both parties.
13. Governing Law. The validity, construction, and performance of this
Agreement shall be governed by the substantive laws of the state of Nevada to
the extent applicable to the redemption of the Preferred Stock and Warrants and
otherwise by the substantive laws of the state of Utah.
14. Jurisdiction. The parties agree that the state or federal courts of
the state of Utah shall have jurisdiction for resolving any disputes under the
terms of this Agreement and consent to such jurisdiction for such purpose.
15. Costs. In the event of an action under the terms of this Agreement,
the non-prevailing party shall pay the reasonable costs and expenses of the
prevailing party, including all reasonable attorneys' fees.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LarsonoDavis:
LARSONoDAVIS INCORPORATED
By
Xxxxxx Xxxxxxxxxx, President
The Investor:
Shares of Preferred Stock Held ------------------------------------
(Signature)
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Warrants Held (Print Name)
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