Document:

EX-10.2

 Exhibit 10.2 

 
  
 SILVERCREST ASSET MANAGEMENT GROUP INC. 
 TAX RECEIVABLE AGREEMENT

 Dated as of [            ], 2013 

 
  

 TABLE OF CONTENTS 

 

							
	 	  	 	  	Page	 
			
	 ARTICLE 1
	  	    DEFINITIONS	  	 	1	  
			
	 1.1
	  	Definitions	  	 	1	  
			
	 1.2
	  	Other Definitional and Interpretative Provisions	  	 	8	  
			
	 ARTICLE 2
	  	    DETERMINATION OF CUMULATIVE REALIZED TAX BENEFIT	  	 	9	  
			
	 2.1
	  	Basis Adjustment	  	 	9	  
			
	 2.2
	  	Exchange Basis Schedule	  	 	9	  
			
	 2.3
	  	Tax Benefit Schedule	  	 	10	  
			
	 2.4
	  	Procedures, Amendments	  	 	10	  
			
	 ARTICLE 3
	  	    TAX BENEFIT PAYMENTS	  	 	11	  
			
	 3.1
	  	Payments	  	 	11	  
			
	 3.2
	  	No Duplicative Payments	  	 	12	  
			
	 3.3
	  	Pro Rata Payments	  	 	12	  
			
	 3.4
	  	Termination of Payments under Certain Circumstances	  	 	12	  
			
	 ARTICLE 4
	  	    TERMINATION	  	 	13	  
			
	 4.1
	  	Early Termination and Breach of Agreement	  	 	13	  
			
	 4.2
	  	Early Termination Notice	  	 	14	  
			
	 4.3
	  	Payment upon Early Termination	  	 	14	  
			
	 4.4
	  	Scheduled Termination	  	 	15	  
			
	 ARTICLE 5
	  	    SUBORDINATION AND LATE PAYMENTS	  	 	15	  
			
	 5.1
	  	Subordination	  	 	15	  
			
	 5.2
	  	Late Payments by the Company	  	 	15	  
			
	 ARTICLE 6
	  	    NO DISPUTES; CONSISTENCY; COOPERATION	  	 	15	  
			
	 6.1
	  	Limited Partner Participation in the Company and Silvercrest LP’s Tax Matters	  	 	15	  
			
	 6.2
	  	Consistency	  	 	16	  
			
	 6.3
	  	Cooperation	  	 	16	  
			
	 ARTICLE 7
	  	    MISCELLANEOUS	  	 	16	  
			
	 7.1
	  	Notices	  	 	16	  
			
	 7.2
	  	Counterparts	  	 	17	  
			
	 7.3
	  	Entire Agreement; No Third-Party Beneficiaries	  	 	17	  

  
 -i-

 TABLE OF CONTENTS 

(continued) 
  

							
	 	  	 	  	Page	 
			
	 7.4
	  	Governing Law	  	 	17	  
			
	 7.5
	  	Severability	  	 	17	  
			
	 7.6
	  	Successors; Assignment; Amendments; and Waivers	  	 	18	  
			
	 7.7
	  	Interpretation	  	 	19	  
			
	 7.8
	  	Resolution of Disputes	  	 	19	  
			
	 7.9
	  	Reconciliation	  	 	20	  
			
	 7.10
	  	Withholding	  	 	21	  
			
	 7.11
	  	Admission of the Company into a Consolidated Group; Transfers of Corporate Assets	  	 	21	  
			
	 7.12
	  	Confidentiality	  	 	22	  
			
	 7.13
	  	No Joint Venture	  	 	22	  
			
	 7.14
	  	Partnerships	  	 	23	  
			
	 7.15
	  	Construction	  	 	23	  
			
	 7.16
	  	Further Assurances	  	 	23	  

  
 -ii-

 TAX RECEIVABLE AGREEMENT 

This TAX RECEIVABLE AGREEMENT (as amended from time to time, this “Agreement”), dated as of
            , 2013, is hereby entered into by and among Silvercrest Asset Management Group Inc., a Delaware corporation (the “Company”), Silvercrest L.P., a Delaware
limited partnership (“Silvercrest LP”), and each of the other undersigned parties hereto identified as “Limited Partners.” 
 RECITALS 
 WHEREAS, the Limited Partners hold Class B Units
(“Class B Units”) in Silvercrest LP, which is treated as a partnership for U.S. federal income tax purposes; 

WHEREAS, the Company is the general partner of, and holds Class A Units in, Silvercrest LP; 

WHEREAS, the Limited Partners shall from time to time transfer or sell their Class B Units to the Company (an
“Exchange”, and each such date an Exchange occurs, an “Exchange Date”) in connection with the initial public offering of Class A common stock, par value $.01 per share, of the Company (“Class A
Shares”) or pursuant to the Exchange Agreement (as defined below) in exchange in either case for cash or for Class A Shares; 
 WHEREAS, Silvercrest LP and its direct and indirect subsidiaries that are treated as partnerships or as disregarded entities for U.S. federal income tax purposes (Silvercrest LP and each such subsidiary,
each a “Partnership Subsidiary”) have or will have in effect an election under Section 754 of the Internal Revenue Code of 1986, as amended (the “Code”), for each Taxable Year (as defined below) in which an
Exchange occurs, which election is expected to result in an adjustment to the Tax basis of the assets owned by Silvercrest LP and such subsidiaries, solely with respect to the Company; and 

WHEREAS, the parties to this Agreement desire to make certain arrangements to treat a portion of any tax benefits realized by the Company
as a result of any Exchange as additional consideration for the Exchange; 
 NOW, THEREFORE, in consideration of the foregoing
and the respective covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

 ARTICLE 1 

DEFINITIONS 
 1.1 Definitions. As used in this Agreement, the terms set forth in this Article 1 shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined): 

 “Advisory Firm” means an independent law or accounting firm that is
nationally recognized as being expert in Tax matters. 
 “Affiliate” means, (i) as to any Person who is an
individual, the Immediate Family of such Person and trusts, limited partnerships or other entities for the exclusive benefit of such Person or such Immediate Family and any entity (other than the Company or its Affiliates) that, directly or
indirectly, through one or more intermediaries is controlled by or is under common control with such Person, the Immediate Family of such Person, or trusts, limited partnerships or other entities for the exclusive benefit of such Person or such
Immediate Family, and (ii) as to any Person which is not an individual, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such Person. For the avoidance
of doubt, the Company’s Affiliates shall include its Control Affiliates. As used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. 

“Agreed Rate” means LIBOR plus 100 basis points. 

“Agreement” is defined in the preamble of this Agreement. 

“Amended Schedule” is defined in Section 2.4(b). 

“Applicable Limited Partner” means in respect of that portion of any Tax Benefit Payment that arises from an Exchange or
a deemed Exchange pursuant to clause (v) of the definition of “Valuation Assumptions”, the Exchanging Limited Partner or Limited Partner deemed to Exchange, as applicable. 

“Basis Adjustment” means the adjustment (which can be positive or negative) to the Tax basis of an Exchange Asset as a
result of an Exchange and the payments made pursuant to this Agreement, as calculated under Section 2.1, under Section 732(b) of the Code (in a situation where, as a result of one or more Exchanges, Silvercrest LP becomes an entity that is
disregarded as separate from its owner for Tax purposes), Section 1012, or Sections 743(b) and 754 of the Code (in situations where, following an Exchange, Silvercrest LP remains in existence as an entity for Tax purposes) or otherwise, as
applicable, and, in each case, comparable sections of state, local and foreign Tax laws. Notwithstanding any other provision of this Agreement, the amount of any Basis Adjustment resulting from an Exchange of one or more Class B Units shall be
determined without regard to any Pre-Exchange Transfer of such Class B Units and as if any such Pre-Exchange Transfer had not occurred. 
 “Beneficial Owner” in respect of a security means a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares:
(i) voting power, which includes the power to vote, or to direct the voting of, such security and/or (ii) investment power, which includes the power to dispose of, or to direct the disposition of, such security. The terms
“Beneficially Own” and “Beneficial Ownership” shall have correlative meanings. 
 “Board”
means the board of directors of the Company. 

  
 2 

 “Business Day” means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of America or the State of New York shall not be regarded as a Business Day. 
 “Cause” shall have the meaning assigned to it in the LP Agreement. 
 “Change of Control” means the occurrence of any of the following events: 
 (i) any “person” or “group” (as such terms are defined in Sections 13(d) and 14(d) of the Exchange Act, or any successor provisions thereto) other than the Limited
Partners, their Affiliates and their Permitted Transferees: 
 (A) is or becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of 50% or more of the voting stock of the Company; 
 (B) in the context of a consolidation, merger or other corporate reorganization in which the Company is not the surviving entity, has 50% or more of the voting stock generally entitled to elect directors
of such surviving entity (or in the case of a triangular merger, of the parent entity of such surviving entity), calculated on a fully diluted basis; or 
 (C) has obtained the power (whether or not exercised) to elect a majority of the directors of the Company or its successors; 
 (ii) the Company or its successors, together with the Limited Partners and their respective Permitted Transferees, cease to own 50% or more of the equity interests of General Partner; or 

(iii) the sale of all or substantially all the assets of the Company or of General Partner. 

“Class A Shares” is defined in the recitals of this Agreement. 

“Class B Units” is defined in the recitals of this Agreement. 

“Code” is defined in the recitals of this Agreement. 

“Company” is defined in the preamble of this Agreement. 

“Company Return” means the U.S. federal, state, local and/or foreign Tax Return, as applicable, of the Company filed
with respect to Taxes for any Taxable Year. 
 “Cumulative Realized Tax Benefit” for a Taxable Year means the
cumulative amount of Realized Tax Benefits for all Taxable Years of the Company, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments for the same period. The Realized Tax Benefit and Realized Tax Detriment
for each Taxable Year shall be determined based on the most recent Tax Benefit Schedule or Amended Schedule, if any, in existence at the time of such determination. 

  
 3 

 “Default Rate” means LIBOR plus 300 basis points. 

“Deferrable Portion” is defined in Section 3.1(a). 

“Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of
state, local and foreign Tax law, as applicable, or any other event (including the execution of a Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax. A Determination shall include the expiration of all periods
of limitations relating to the assessment of Tax for a Taxable Year. 
 “Dispute” is defined in
Section 7.8(a). 
 “Early Termination Conditions” means, with respect to an Early Termination Payment,
following: (i) an Early Termination Schedule becoming final and binding, and (ii) either (A) no Payment Condition is applicable or (B) a Payment Condition has been satisfied. 

“Early Termination Date” means the date of an Early Termination Notice for purposes of determining the Early Termination
Payment. 
 “Early Termination Notice” is defined in Section 4.2. 

“Early Termination Schedule” is defined in Section 4.2. 

“Early Termination Payment” is defined in Section 4.3(b). 

“Early Termination Rate” means LIBOR in effect on the applicable date plus 100 basis points. 

“Exchange” is defined in the recitals of this Agreement; “Exchanged” and “Exchanging” shall have
correlative meanings. 
 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 

“Exchange Agreement” means the exchange agreement by and among the Company, Silvercrest LP and the Limited Partners
dated as of the date hereof, as the same may be amended from time to time in accordance with the terms thereof. 

“Exchange Assets” means each asset that is held by Silvercrest LP or by any Partnership Subsidiary at the time of an
Exchange. 
 “Exchange Basis Schedule” is defined in Section 2.2. 

“Exchange Date” is defined in the recitals of this Agreement. 

“Exchange Payment” is defined in Section 5.1. 

  
 4 

 “Expert” is defined in Section 7.9. 

“Hypothetical Tax Liability” means, with respect to any Taxable Year, the liability for Taxes of the Company (or
Silvercrest LP or any of its Partnership Subsidiaries, but only with respect to income realized by Silvercrest LP or such Partnership Subsidiary the Tax liability for which is allocable to the Company for such Taxable Year using the same methods,
elections, conventions and similar practices used on the relevant Company Return) but using the Non-Stepped Up Tax Basis instead of the Tax basis of the Exchange Assets and excluding any deduction attributable to Imputed Interest. 

“Immediate Family” shall have the meaning assigned to it in the LP Agreement. 

“Imputed Interest” shall mean any interest imputed under Section 1272, 1274 or 483 or other provision of the Code
and any similar provision of state, local and foreign Tax law with respect to the Company’s payment obligations under this Agreement. 
 “Initiating Party” is defined in Section 7.8(a). 

“Interest Amount” is defined in Section 3.1(b). 

“LIBOR” means for each month (or portion thereof) during any period, an interest rate per annum equal to the rate per
annum reported, on the date two days prior to the first day of such month, as published by Reuters (or other commercially available source providing quotations of LIBOR) for London interbank offered rates for U.S. dollar deposits for such month (or
portion thereof). 
 “Limited Partner” means any holder of Class B Units of Silvercrest LP and any person who
becomes a Limited Partner pursuant to the provisions of the LP Agreement. 
 “LP Agreement” means, with respect
to Silvercrest LP, the Second Amended and Restated Limited Partnership Agreement dated as of November 13, 2012, among the Company and the Limited Partners, as the same may be amended from time to time in accordance with the terms thereof.

 “Market Value” means, with respect to the Class A Shares, on any given date: (i) if the
Class A Shares are listed for trading on the Nasdaq Stock Market, the closing sale price per share of the Class A Shares on the Nasdaq Stock Market on that date (or, if no closing sale price is reported, the last reported sale price),
(ii) if the Class A Shares are not listed for trading on the Nasdaq Stock Market, the closing sale price (or, if no closing sale price is reported, the last reported sale price) as reported on that date in composite transactions for the
principal national securities exchange registered pursuant to Section 6(g) of the Exchange Act, on which the Class A Shares are listed, (iii) if the Class A Shares are not so listed on a national securities exchange, the last
quoted bid price for the Class A Shares on that date in the over-the-counter market as reported by Pink Sheets LLC or a similar organization, or (iv) if the Class A Shares are not so quoted by Pink Sheets LLC or a similar organization
such value as the Board, in its sole discretion, shall determine in good faith. 
 “Material Objection Notice”
has the meaning set forth in Section 4.2. 

  
 5 

 “Non-Stepped Up Tax Basis” means, with respect to any asset at any time,
the Tax basis that such asset would have had at such time if no Basis Adjustment had been made. 
 “Notice” is
defined in Section 7.1. 
 “Objection Notice” is defined in Section 2.4(a). 

“Opt Out Notice” is defined in Section 3.4(a). 

“Panel” is defined in Section 7.8(a). 
 “Partnership Subsidiary” is defined in the Recitals of this Agreement. 
 “Payment Conditions” is defined in Section 3.1(c). 

“Payment Date” means any date on which a payment is required to be made pursuant to this Agreement. 

“Permitted Transferee” shall mean any of the Specified Permitted Transferees (as defined in the LP Agreement).

 “Person” means any individual, corporation, firm, partnership, joint venture, limited liability company,
estate, trust, business association, organization, governmental entity or other entity. 
 “Pre-Exchange
Transfer” means any transfer (including upon the death of a Limited Partner) of one or more Class B Units (i) that occurs prior to an Exchange of such Class B Units and (ii) to which Section 743(b) of the Code applies.

 “Realized Tax Benefit” means, for a Taxable Year and for all Taxes collectively, the net excess, if any, of
the Hypothetical Tax Liability over the actual liability for Taxes of the Company (or a Partnership Subsidiary, but only with respect to income realized by the Partnership Subsidiary the Tax liability for which is allocable to the Company for such
Taxable Year using the same methods, elections, conventions and similar practices used on the relevant Company Return), determined, for the avoidance of doubt, using the “with or without” methodology. If all or a portion of the actual tax
liability of the Company (or a Partnership Subsidiary, but only with respect to income realized by the Partnership Subsidiary the Tax liability for which is allocable to the Company for such Taxable Year using the same methods, elections,
conventions and similar practices used on the relevant Company Return) for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless
and until there has been a Determination. If there is a Determination with respect to the Taxable Year to which such assertion relates or any subsequent taxable year, for all purposes under this Agreement, the Net Tax Benefit for such years shall be
recalculated to properly reflect the difference, if any, between the amount of liability fixed by such Determination and liability taken into account in calculating the Realized Tax Benefit for the year. For the avoidance of doubt, if such
recalculation results in an increased Net Tax Benefit for any year, the Interest Amount of any corresponding Tax Benefit Payment shall accrue from date specified in Section 3.01(b) for such Tax Benefit Payment. 

  
 6 

 “Realized Tax Detriment” means, for a Taxable Year and for all Taxes
collectively, the net excess, if any, of the actual liability for Taxes of the Company (or a Partnership Subsidiary, but only with respect to income realized by the Partnership Subsidiary the Tax liability for which is allocable to the Company for
such Taxable Year using the same methods, elections, conventions and similar practices used on the relevant Company Return) over the Hypothetical Tax Liability for such Taxable Year determined, for the avoidance of doubt, using the “with or
without” methodology. If all or a portion of the actual tax liability of the Company (or a Partnership Subsidiary, but only with respect to income realized by the Partnership Subsidiary the Tax liability for which is allocable to the Company
for such Taxable Year using the same methods, elections, conventions and similar practices used on the relevant Company Return) for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not
be included in determining the Realized Tax Detriment unless and until there has been a Determination. If there is a Determination with respect to the Taxable Year to which such assertion relates or any subsequent taxable year, for all purposes
under this Agreement, the Net Tax Detriment for such years shall be recalculated to properly reflect the difference, if any, between the amount of liability fixed by such Determination and liability taken into account in calculating the Realized Tax
Detriment for the year. For the avoidance of doubt, if such recalculation results in an increased Net Tax Benefit for any year, the Interest Amount of any corresponding Tax Benefit Payment shall accrue from date specified in Section 3.1(b) for
such Tax Benefit Payment. 
 “Reconciliation Dispute” has the meaning set forth in Section 7.9.

 “Reconciliation Procedures” means those procedures set forth in Section 7.9. 

“Responding Party” is defined in Section 7.8(a). 

“Retires” shall have the meaning assigned to it in the LP Agreement. 

“Schedule” means any Exchange Basis Schedule or Tax Benefit Schedule and the Early Termination Schedule. 

“Scheduled Termination Date” is defined in Section 4.4. 

“Senior Obligations” is defined in Section 5.1. 

“Subsidiaries” means, with respect to any Person, as of any date of determination, any other Person as to which such
Person, owns, directly or indirectly, or otherwise controls more than 50% of the voting shares or other similar interests or the sole general partner interest or managing member or similar interest of such Person. 

“Tax or Taxes” means any and all U.S. federal, state, local and foreign tax, assessments or similar charges that are
based on or measured with respect to net income or profits, whether as an exclusive or on an alternative basis, and any interest or penalties related to such tax. 
 “Tax Benefit Payment” is defined in Section 3.1(b). 

“Tax Benefit Schedule” is defined in Section 2.3. 

  
 7 

 “Tax Return” means any return, declaration, report or similar statement
required to be filed with respect to Taxes (including any attached schedules), including any information return, claim for refund, amended return and declaration of estimated Tax. 

“Tax Ruling” means a binding ruling by a Taxing Authority with respect to Taxes. 

“Taxable Year” means a Taxable year of the Company as defined in Section 441(b) of the Code or comparable section
of state, local or foreign Tax law, as applicable (and, therefore, for the avoidance of doubt, may include a period of less than 12 months for which a Tax Return is prepared), in which there is a Basis Adjustment or increased depreciation,
amortization or interest deductions attributable to an Exchange. 
 “Taxing Authority” means any domestic,
foreign, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any Taxing authority or any other authority exercising Tax
regulatory authority. 
 “Treasury Regulations” means the final, temporary and proposed regulations under the
Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant Taxable period. 
 “Valuation Assumptions” means, as of an Early Termination Date, or following a Change of Control, as applicable, the assumptions that (i) in each Taxable Year ending on or after such
Early Termination Date, the Company will have sufficient Taxable income to fully offset the deductions and losses in such Taxable Year attributable to any Basis Adjustment, increased depreciation or amortization deductions attributable to an
Exchange, and Imputed Interest, (ii) the U.S. federal income Tax rates and state, local and foreign income Tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other law
as in effect on the Early Termination Date, (iii) any loss carryovers generated by any Basis Adjustment or Imputed Interest and available as of the date of the Early Termination Schedule will be used by the Company on a pro rata basis from the
date of the Early Termination Schedule through the scheduled expiration date of such loss carryovers, (iv) any non-amortizable assets will be disposed of on the fifteenth anniversary of the Early Termination Date, provided,
however, that, in the event of a Change of Control, non-amortizable assets shall be deemed disposed of at the earlier of (A) the time of sale of the relevant asset or (B) as generally provided in this Valuation Assumption (iv), and
(v) if, at the Early Termination Date, there are Class B Units that have not been Exchanged, then each such Unit shall be deemed to be Exchanged for the Market Value of the Class A Shares and the amount of cash that would be transferred if
the Exchange occurred on the Early Termination Date. 
 1.2 Other Definitional and
Interpretative Provisions. The words “hereof’, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement.

  
 8 

 
Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable
terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in
accordance with the terms thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.

 ARTICLE 2 

DETERMINATION OF CUMULATIVE REALIZED TAX BENEFIT 
 2.1 Basis Adjustment. 
 (a)
Exchange Assets. For purposes of this Agreement, as a result of an Exchange, the Company will be entitled to a Basis Adjustment with respect to each Exchange Asset held by Silvercrest LP (and each direct and indirect Subsidiary of Silvercrest
LP that is treated as a partnership for U.S. federal income tax purposes), the amount of which Basis Adjustment will generally be determined as the excess (whether positive or negative) of (i) the sum of (x) the Market Value of the
Class A Shares, cash or the amount of any other consideration transferred to the Applicable Limited Partner pursuant to the Exchange as payment for the exchanged Class B Units, to the extent attributable to such Exchange Assets, (y) the
amount of the payments to be made pursuant to this Agreement with respect to such Exchange, to the extent attributable to such Exchange Assets, and (z) the amount of debt and other liabilities allocated to the Class B Units acquired pursuant to
such Exchange, to the extent attributable to such Exchange Assets; over (ii) the Company’s share of Silvercrest LP’s (or such subsidiary partnership’s) basis in such Exchange Assets immediately after the Exchange, attributable to
the Class B Units exchanged, determined as if (x) Silvercrest LP (or such subsidiary partnership) remained in existence as an entity for Tax purposes and (y) Silvercrest LP (or such subsidiary partnership) had not made the election
provided by Section 754 of the Code. 
 (b) Imputed Interest. For the avoidance of doubt, payments made under this
Agreement shall not be treated as resulting in a Basis Adjustment to the extent such payments are treated as Imputed Interest. 

2.2 Exchange Basis Schedule. Within 60 calendar days after the filing of the U.S. federal
income Tax return of the Company for each Taxable Year, the Company shall deliver to each Limited Partner a schedule (the “Exchange Basis Schedule”) that shows, in reasonable detail, for purposes of federal income Taxes,
(a) the actual unadjusted Tax basis of the Exchange Assets as of each applicable Exchange Date, (b) the Basis Adjustment with respect to the Exchange Assets as a result of the Exchanges effected in such Taxable Year, calculated in the
aggregate, (c) the period or periods, if any, over which the Exchange Assets are amortizable and/or depreciable, (d) the period or periods, if any, over which each Basis Adjustment is amortizable and/or depreciable, and (e) the amount
of the payments to be made pursuant to this Agreement with respect to the Exchanges in such Taxable Year, determined in the Company’s reasonable discretion. 

  
 9 

 2.3 Tax Benefit Schedule. Within 60 calendar
days after the filing of the U.S. federal income Tax return of the Company for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment, the Company shall provide to each Limited Partner a schedule showing, in reasonable
detail, the calculation of the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year (a “Tax Benefit Schedule”). The Tax Benefit Schedule will become final as provided in Section 2.4(a) and may be amended as
provided in Section 2.4(b) (subject to the procedures set forth in Section 2.4(b)). 

2.4 Procedures, Amendments. 

(a) Procedure. Every time the Company delivers to the Applicable Limited Partner an applicable Schedule under this Agreement,
including any Amended Schedule delivered pursuant to Section 2.4(b), but excluding any Early Termination Schedule or amended Early Termination Schedule, the Company shall also (i) deliver to the Applicable Limited Partner schedules and
work papers providing reasonable detail regarding the preparation of such Schedule and (ii) allow the Applicable Limited Partner reasonable access, at no cost to the Applicable Limited Partner, to the appropriate representatives at the Company
and the Advisory Firm in connection with a review of such Schedule. The applicable Schedule shall become final and binding on all parties unless the Applicable Limited Partner, within 30 calendar days after receiving an Exchange Basis Schedule or
amendment thereto or a Tax Benefit Schedule or amendment thereto, provides the Company with notice of a material objection to such Schedule (“Objection Notice”) made in good faith. If the parties, for any reason, are unable to
successfully resolve the issues raised in such notice within 30 calendar days of receipt by the Company of an Objection Notice with respect to such Exchange Basis Schedule or Tax Benefit Schedule, the Company and the Applicable Limited Partner shall
employ the reconciliation procedures as described in Section 7.9 (the “Reconciliation Procedures”). 
 (b)
Amended Schedule. The applicable Schedule for any Taxable Year may be amended from time to time by the Company (i) in connection with a Determination affecting such Schedule, (ii) to correct material inaccuracies in the Schedule
identified as a result of the receipt of additional factual information relating to a Taxable Year after the date the Schedule was provided to the Applicable Limited Partner, (iii) to comply with the Expert’s determination under the
Reconciliation Procedures, (iv) to reflect a material change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to a carryback or carry forward of a loss or other Tax item to such Taxable Year, (v) to
reflect a material change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year, or (vi) to adjust the Exchange Basis Schedule to take into account payments
made pursuant to this Agreement (such Schedule, an “Amended Schedule”). 

  
 10 

 ARTICLE 3 

TAX BENEFIT PAYMENTS 
 3.1 Payments. 
 (a) Within ten
business days of a Tax Benefit Schedule that was delivered to an Applicable Limited Partner becoming final in accordance with Section 2.4(a), the Company shall pay to the Applicable Limited Partner for such Taxable Year the portion, if any, of
the Tax Benefit Payment with respect thereto determined pursuant to Section 3.1(b) with respect to which the Payment Conditions have been satisfied. Each such Tax Benefit Payment shall be made by wire transfer of immediately available funds to
a bank account of the Applicable Limited Partner previously designated by such Limited Partner to the Company. For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated Tax payments, including U.S. federal income Tax
payments. Notwithstanding anything to the contrary herein, the Company shall not be obligated to pay any portion of a Tax Benefit Payment, and the payment of such amount shall not be considered due for any purpose under this Agreement, unless and
until the Payment Conditions have been satisfied with respect to such portion (any portion with respect to which the Payment Conditions have not been satisfied, a “Deferrable Portion”). 

(b) A “Tax Benefit Payment” means an amount, not less than zero, equal to 85% of the sum of the Net Tax Benefit and the
Interest Amount. The “Net Tax Benefit” for each Taxable Year shall be an amount equal to the excess, if any, of the Cumulative Realized Tax Benefit as of the end of such Taxable Year over the total amount of payments previously made
under this Section 3.1, excluding payments attributable to the Interest Amount; provided, however, that for the avoidance of doubt, no Limited Partner shall be required to return any portion of any previously received Tax Benefit Payment under
any circumstances. The “Interest Amount” for a given Taxable Year shall equal the interest on the Net Tax Benefit for such Taxable Year calculated at the Agreed Rate from the due date (without regard to extensions) for filing the
Company Return with respect to Taxes for the most recently ended Taxable Year until the Payment Date of the portion of the Net Tax Benefit to which such Interest Amount relates. For the avoidance of doubt, and without duplication, the Interest
Amount with respect to a Deferrable Portion of a Tax Benefit Payment shall accrue from the due date of the relevant Tax Return until such Deferrable Portion is paid to the Applicable Limited Partner. The Net Tax Benefit and the Interest Amount shall
be determined separately with respect to each separate Exchange. Notwithstanding the foregoing, for each Taxable Year ending on or after the date of a Change of Control, all Tax Benefit Payments, whether paid with respect to Class B Units that were
Exchanged (i) prior to the date of such Change of Control or (ii) on or after the date of such Change of Control, shall be calculated by utilizing the assumptions in clauses (i), (iii) and (iv) of the definition of Valuation
Assumptions, substituting in each case the terms “the closing date of a Change of Control” for an “Early Termination Date.” 
 (c) The “Payment Conditions” shall be satisfied with respect to any portion of a Tax Benefit Payment upon the earliest to occur of: 

  
 11 

 (i) the receipt by the Company of a Tax Ruling that, in the reasonable judgment of the
Company, after consultation with the Advisory Firm and the Company’s auditors, confirms that the Realized Tax Benefit to which the portion of such Tax Benefit Payment relates is available for the applicable Taxable Year; 

(ii) the receipt by the Company of (a) a written opinion issued by the Advisory Firm identifying any Exchange Assets that are
amortizable without regard to the anti-churning rules of Section 1.197-2(h) of the Treasury Regulations, together with (if the opinion relates to less than all of the Exchange Assets) (b) a valuation report prepared by a nationally
recognized appraiser or valuation expert setting forth the fair market value, as of the date of the relevant Exchange, of the Exchange Assets identified in such opinion, but only if the opinion and report are satisfactory in form and substance to
the Company’s auditors and/or tax preparers, as applicable, to conclude that the Realized Tax Benefit to which the portion of such Tax Benefit Payment relates is available for the applicable Taxable Year without the filing of a Schedule UTP
(with respect to such Realized Tax Benefit) with the Company’s Tax Returns and without taking any tax reserve for financial statement purposes (with respect to such Realized Tax Benefit); or 

(iii) a final Determination with respect to the Company’s liability for Taxes for the relevant Taxable Year that conclusively
determines the amount of Realized Tax Benefit. 
 Notwithstanding anything to the contrary contained herein, Exchange Assets that are not, in
the reasonable judgment of the Company, after consultation with the Advisory Firm and the Company’s auditors, section 197 intangibles within the meaning of section 197(d)(1) of the Code, shall be treated as satisfying the requirement of
Section 3.01(c)(ii)(a). The Company shall make reasonable efforts to determine whether the Payment Conditions are satisfied with respect to an amount of any Tax Benefit Payment before delivering the Tax Benefit Schedule for a Taxable Year, and
in any event as soon as reasonably practicable thereafter. 
 3.2 No Duplicative
Payments. It is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement. It is also intended that the provisions of this Agreement will result in
85% of the Company’s Cumulative Realized Tax Benefit, and the Interest Amount thereon, being paid to the Limited Partners pursuant to this Agreement upon and subject to the satisfaction of the Payment Conditions. 

3.3 Pro Rata Payments. For the avoidance of doubt, to the extent that (i) the
Company’s deductions with respect to any Basis Adjustment are limited in a particular Taxable Year or (ii) the Company lacks sufficient funds to satisfy or is prevented under any credit agreement or other arrangement from satisfying its
obligations to make all Tax Benefit Payments due in a particular Taxable Year, the limitation on the deduction, or the Tax Benefit Payments that may be made, as the case may be, shall be taken into account or made for the Applicable Limited Partner
in the same proportion as Tax Benefit Payments would have been made absent the limitations in clauses (i) and (ii) of this Section 3.3, as applicable. 
 3.4 Termination of Payments under Certain Circumstances. Notwithstanding anything to the contrary set forth in this Agreement, to the extent that a Limited
Partner (i) breaches the restrictive covenants applicable to such Limited Partner as set forth in Section 5.5 of the LP Agreement, (ii) breaches the restrictive covenants applicable to such Limited Partner as set forth in
Section 11.7 

  
 12 

 
of the LP Agreement, (iii) is terminated for Cause by the Company, Silvercrest LP or its Affiliates, or (iv) voluntarily resigns or Retires from the Company, Silvercrest LP or its
Affiliates and directly or indirectly, owns, manages, operates, controls, is employed by, advised or in any manner participates or engages in any business that is competitive with any business in which Silvercrest LP, the Company or their respective
Affiliates are engaged or have been engaged at any time during the twelve (12) months following such Limited Partner’s termination of employment, then all Tax Benefit Payments to such Limited Partner shall cease and the Company shall have
no obligations under this Agreement, including the obligation to make Tax Benefit Payments, to such Limited Partner. 
 
ARTICLE 4 
 TERMINATION 
 4.1 Early Termination and Breach of Agreement. 
 (a) The Company may terminate this Agreement with respect to all of the Class B Units held (or previously held and Exchanged) by all Limited Partners at any time by paying to the Limited Partners the
Early Termination Payment; provided, however, that this Agreement shall terminate only upon the receipt of the Early Termination Payment by all Limited Partners, and provided, further, that the Company may withdraw any notice to execute its
termination rights under this Section 4.1(a) prior to the time at which any Early Termination Payment has been paid. Upon payment of the Early Termination Payments by the Company, neither the Limited Partners nor the Company shall have any
further payment obligations under this Agreement, other than for any (i) Tax Benefit Payment agreed by the Company acting in good faith and the Applicable Limited Partner to be due and payable but unpaid as of the Early Termination Notice and
(ii) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (ii) is included in the Early Termination Payment). For the
avoidance of doubt, if an Exchange occurs after the Company makes the Early Termination Payments with respect to all Limited Partners, the Company shall have no obligations under this Agreement with respect to such Exchange, and its only obligations
under this Agreement in such case shall be its obligations to all Limited Partners under Section 4.3(a). 
 (b) In the
event that the Company breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due, failure to honor any other material obligation required hereunder or by operation of law as a result
of the rejection of this Agreement in a case commenced under the Bankruptcy Code, Title 11, U.S.C., or otherwise, then all obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been
delivered on the date of such breach and shall include, but shall not be limited to, (i) the Early Termination Payment calculated as if an Early Termination Notice had been delivered on the date of a breach, (ii) any Tax Benefit Payment
agreed by the Company acting in good faith and any Applicable Limited Partner to be due and payable but unpaid as of the date of a breach, and (iii) any Tax Benefit Payment due for the Taxable Year ending with or including the date of a breach.
Notwithstanding the foregoing, in the event that 

  
 13 

 
the Company breaches this Agreement, the Limited Partners shall be entitled to elect to receive the amounts set forth in clauses (i), (ii) and (iii) above or to seek specific
performance of the terms hereof. The parties agree that the failure to make any payment due pursuant to this Agreement within three months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement
for all purposes of this Agreement, and that it shall not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three months of the date such payment is due. 

(c) The Company, Silvercrest LP and each of the Limited Partners hereby acknowledge that, as of the date of this Agreement, the aggregate
value of the Tax Benefit Payments cannot reasonably be ascertained for U.S. federal income Tax or other applicable Tax purposes. 
 4.2 Early Termination Notice. If the Company chooses to exercise its right of early termination under Section 4.1 above, the Company shall deliver to
each present or former Limited Partner a notice of such intention to exercise such right (“Early Termination Notice”) and a schedule (the “Early Termination Schedule”) specifying the Company’s intention to
exercise such right and showing in reasonable detail the calculation of the Early Termination Payment including that portion of the Early Termination Payment that has satisfied the Payment Conditions and that portion of the Early Termination Payment
that has not, as of the Early Termination Date, satisfied a Payment Condition. The Early Termination Schedule shall become final and binding on all parties unless an Applicable Limited Partner, within 30 calendar days after receiving the Early
Termination Schedule, provides the Company with notice of a material objection to such Schedule made in good faith (“Material Objection Notice”). If the parties, for any reason, are unable to successfully resolve the issues raised
in such notice within 30 calendar days after receipt by the Company of the Material Objection Notice, the Company and the relevant Limited Partner shall employ the Reconciliation Procedures as described in Section 7.9 of this Agreement.

 4.3 Payment upon Early Termination. 

(a) Within 30 calendar days of the Early Termination Conditions being satisfied with respect to an Early Termination Payment (or a
portion thereof), the Company shall pay to each Applicable Limited Partner an amount equal to the Early Termination Payment (or the portion thereof for which the Early Termination Conditions have been satisfied), plus interest calculated at the
Agreed Rate from the Early Termination Date until the Payment Date of such Early Termination Payment. Such payment shall be made by wire transfer of immediately available funds to a bank account designated by the Applicable Limited Partner. For the
avoidance of doubt, after the initial Early Termination Payment, the Company will be required to make additional payments to the Limited Partner with respect to the Deferrable Portion of the Early Termination Payment if and when a Payment Conditions
has been satisfied with respect to such Deferrable Portion. In addition, the Company shall pay the Limited Partner an amount equal to the Realized Tax Benefit resulting from the sale of a non-amortizable asset. Such payment shall be due 30 calendar
days after such sale has closed. 
 (b) The “Early Termination Payment” as of the date of the delivery of an
Early Termination Schedule shall equal with respect to the Applicable Limited Partner the present value, discounted at the Early Termination Rate as of such date, of all Tax Benefit Payments that would be required to be paid by the Company to the
Applicable Limited Partner beginning from the Early Termination Date and assuming that the Valuation Assumptions are applied. 

  
 14 

 4.4 Scheduled Termination. No Tax Benefit
Payment shall accrue, or shall become due or payable with respect to any Exchange after the sixtieth anniversary (the “Scheduled Termination Date”) of the effective date of such Exchange. For avoidance of doubt, this Agreement shall
continue to be in effect in periods after the Scheduled Termination Date with respect to Tax Benefit Payments that arise on or before such date, or any adjustment thereto, and shall terminate upon such time as when all Tax Benefit Payment due and
payable hereunder have been paid and the Determinations have been made with respect to all such payments. 
 
ARTICLE 5 
 SUBORDINATION AND LATE PAYMENTS 

5.1 Subordination. Notwithstanding any other provision of this Agreement to the contrary,
any Tax Benefit Payment or Early Termination Payment required to be made by the Company to the Limited Partners under this Agreement (an “Exchange Payment”) shall rank subordinate and junior in right of payment to any principal,
interest or other amounts due and payable in respect of any obligations in respect of indebtedness for borrowed money of the Company and its Subsidiaries (“Senior Obligations”) and shall rank pari passu with all current or future
unsecured obligations of the Company that are not Senior Obligations. 
 5.2 Late
Payments by the Company. The amount of all or any portion of any Exchange Payment not made to any Limited Partner when due (without regard to Section 5.1) under the terms of this Agreement shall be payable together with any interest
thereon, computed at the Default Rate and commencing from the date on which such Exchange Payment was due and payable. 
 
ARTICLE 6 
 NO DISPUTES; CONSISTENCY; COOPERATION 

6.1 Limited Partner Participation in the Company and Silvercrest LP’s Tax Matters.
Except as otherwise provided herein, the Company shall have full responsibility for, and sole discretion over, all Tax matters concerning the Company and Silvercrest LP, including the preparation, filing or amending of any Tax Return and defending,
contesting or settling any issue pertaining to Taxes. Notwithstanding the foregoing, the Company shall notify each relevant Limited Partner of, and keep such Limited Partner reasonably informed with respect to the portion of any audit of the Company
and Silvercrest LP by a Taxing Authority the outcome of which is reasonably expected to affect such Limited Partner’s rights and obligations under this Agreement, and shall provide to such Limited Partner reasonable opportunity to provide
information and other input to the Company, Silvercrest LP and their respective advisors concerning the conduct of any such portion of such audit; provided, however, that the Company and Silvercrest LP shall not be required to take any action that
is inconsistent with any provision of the LP Agreement. 

  
 15 

 6.2 Consistency. The Company and the
Applicable Limited Partner agree to report and cause to be reported for all purposes, including U.S. federal, state, local and foreign Tax purposes and financial reporting purposes, all Tax-related items (including the Basis Adjustment and each Tax
Benefit Payment) in a manner consistent with that specified by the Company in any Schedule required to be provided by or on behalf of the Company under this Agreement. In this regard, the Company and the Applicable Limited Partner agree to report
any gain of the Limited Partner resulting from an Exchange as capital gain unless the Company is advised otherwise by an Advisory Firm. Any Dispute concerning such advice shall be subject to the terms of Section 7.9. In the event that an
Advisory Firm is replaced, such replacement Advisory Firm shall be required to perform its services under this Agreement using procedures and methodologies consistent with the previous Advisory Firm, unless (a) otherwise required by law or
(b) 
the Company and the Applicable Limited Partner agree to the use of other procedures and methodologies. 
 
6.3 Cooperation. The Applicable Limited Partner shall (a) furnish to the Company in a timely manner such information, documents and other materials, or make such representations, as the Company may reasonably request for
purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to
the Company and its representatives to provide explanations of documents and materials and such other information as the Company or its representatives may reasonably request in connection with any of the matters described in clause (a) above,
and (c) reasonably cooperate in connection with any such matter described in clause (a) above. The Company shall reimburse the Applicable Limited Partner for any reasonable third-party costs and expenses incurred pursuant to this
Section 6.03. 
 ARTICLE 7 

MISCELLANEOUS 
 7.1 Notices. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written
instrument delivered in person or sent by facsimile (provided a copy is thereafter promptly delivered as provided in this Section 7.1) or nationally recognized overnight courier, addressed to such party at the address or facsimile number set
forth below or such other address or facsimile number as may hereafter be designated in writing by such party to the other parties: 
 If to the Company, to: 
 Silvercrest Asset Management Group Inc. 

1330 Avenue of the Americas 
 38th Floor

 New York, NY 10019 
 (T) (212) 649-0600 
 (F) (212) 212-649-0625

Attention: General Counsel 
 with a copy to: 

  
 16 

 Bingham McCutchen LLP 

399 Park Avenue 

New York, New York 10022 
 (T) (212) 705-7000 
 (F) (212) 752-5378 

Attention: Floyd I. Wittlin, Esq. 
 if to Silvercrest LP, to: 
 Silvercrest L.P. 

1330 Avenue of the Americas 
 38th Floor

 New York, NY 10019 
 (T) (212) 649-0600 
 (F) (212) 212-649-0625

Attention: General Counsel 
 with a copy to: 
 Bingham McCutchen LLP 

399 Park Avenue 

New York, New York 10022 
 (T) (212) 705-7000 
 (F) (212) 752-5378 

Attention: Floyd I. Wittlin, Esq. 
 If to Limited Partners: 
 the address and facsimile number set forth in the
records of Silvercrest LP. 
 7.2 Counterparts. This Agreement may be executed in
any number of counterparts, including electronic counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute but one and the same instrument, it being understood that both parties need not sign the
same counterpart. 
 7.3 Entire Agreement; No Third-Party Beneficiaries. This
Agreement constitutes the entire agreement among the parties hereto and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, Nothing in this Agreement, express
or implied, is intended to or shall confer upon any Person other than the parties hereto and their respective heirs, successors, legal representatives and permitted assigns, any rights or remedies hereunder. 

7.4 Governing Law. This Agreement shall be governed by, construed and enforced in
accordance with, the laws of the State of New York, without regard to the conflict of laws principles thereof that would mandate the application of the laws of another jurisdiction. 

7.5 Severability. If the final determination of a court of competent jurisdiction
declares, after the expiration of the time within which judicial review (if permitted) of such determination may be perfected, that any term or provision hereof is invalid or unenforceable, (a) the remaining terms and provisions hereof shall be
unimpaired and (b) the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or
provision. 

  
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 7.6 Successors; Assignment; Amendments; and
Waivers. 
 (a) No Limited Partner may assign this Agreement to any person without the prior written consent of the
Company; provided, however, that (i) to the extent Class B Units are transferred in accordance with the terms of the LP Agreement, the transferring Limited Partner shall have the option to assign to the transferee of such Class B Units the
transferring Limited Partner’s rights under this Agreement with respect to such transferred Class B Units, as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this
Agreement, in form and substance substantially similar to Exhibit A to this Agreement, agreeing to become a “Limited Partner” for all purposes of this Agreement, except as otherwise provided in such joinder, and (ii) once an Exchange
has occurred, any and all payments that may become payable to a Limited Partner pursuant to this Agreement with respect to the Exchanged Class B Units may be assigned to any Person or Persons as long as any such Person has executed and delivered,
or, in connection with such assignment, executes and delivers, a joinder to this Agreement, in form and substance substantially similar to Exhibit A to this Agreement, agreeing to be bound by Section 7.12 and acknowledging specifically the
terms of Section 7.6(b). For the avoidance of doubt, if a Limited Partner transfers Class B Units but does not assign to the transferee of such Class B Units such Limited Partner’s rights under this Agreement with respect to such
transferred Class B Units, such Limited Partner shall continue to be entitled to receive the Tax Benefit Payments arising in respect of a subsequent Exchange of such Class B Units. 

(b) No provision of this Agreement may be amended unless such amendment is approved in writing by each of the Company and Silvercrest LP
and by Limited Partners who would be entitled to receive at least fifty one percent (51%) of the Early Termination Payments payable to all Limited Partners hereunder if the Company had exercised its right of early termination on the date of the
most recent Exchange prior to such amendment (excluding, for purposes of this sentence, all payments made to any Limited pursuant to this Agreement since the date of such most recent Exchange); provided, however, that no such amendment shall be
effective if such amendment would have a disproportionate effect on the payments certain Limited Partners will or may receive under this Agreement unless all such Limited Partners disproportionately affected consent in writing to such amendment. No
provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective. 
 (c) Except as otherwise specifically provided herein, all of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto
and their respective successors, permitted assigns, heirs, executors, administrators and legal representatives. The Company shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession
had taken place. 

  
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 7.7 Interpretation. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “included”, “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limitation. 
 7.8 Resolution
of Disputes. 
 (a) Any and all claims, disputes and other disagreements arising hereunder (each, a
“Dispute”) which are not governed by Section 7.9, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-
performance of this Agreement (including the validity, scope and enforceability of this Section 7.8 and Section 7.9) shall be governed by this Section 7.8. The parties hereto shall attempt in good faith to resolve all Disputes by
negotiation. If a Dispute between the parties hereto cannot be resolved in such manner, such Dispute shall, at the request of any party, after providing written notice to the other party or parties to the Dispute, be submitted to arbitration in New
York in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The proceeding shall be confidential. The party initially asserting the Dispute (the “Initiating Party”) shall notify
the other party (the “Responding Party”) of the name and address of the arbitrator chosen by the Initiating Party and shall specifically describe the Dispute in issue to be submitted to arbitration. Within 30 days of receipt of such
notification, the Responding Party shall notify the Initiating Party of its answer to the Dispute, any counterclaim which it wishes to assert in the arbitration and the name and address of the arbitrator chosen by the Responding Party. If the
Responding Party does not appoint an arbitrator during such 30-day period, appointment of the second arbitrator shall be made by the American Arbitration Association upon request of the Initiating Party. The two arbitrators so chosen or appointed
shall choose a third arbitrator, who shall serve as president of the panel of arbitrators (the “Panel”) thus composed. If the two arbitrators so chosen or appointed fail to agree upon the choice of a third arbitrator within 30 days
from the appointment of the second arbitrator, the third arbitrator will be appointed by the American Arbitration Association upon the request of the arbitrators or either of the parties. In all cases, the arbitrators must be persons who have
substantial experience in tax matters. The arbitrators will act by majority decisions. Any decision of the arbitrators shall (i) be rendered in writing and shall bear the signatures of at least two arbitrators, and (ii) identify the
members of the Panel, and the time and place of the award granted. Absent fraud or manifest error, any such decision of the Panel shall be final, conclusive and binding on the parties to the arbitration and enforceable by a court of competent
jurisdiction. The expenses of the arbitration shall be borne equally by the parties to the arbitration; provided, however, that each party shall pay for and bear the costs of its own experts, evidence and legal counsel, unless the arbitrator rules
otherwise in the arbitration. The parties shall complete all discovery within 30 days after the Panel is composed, shall complete the presentation of evidence to the Panel within 15 days after the completion of discovery, and a final decision with
respect to the matter submitted to arbitration shall be rendered within 15 days after the completion of presentation of evidence. The parties hereto shall cause to be kept a record of the proceedings of any matter submitted to arbitration hereunder.
Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings. In addition to monetary damages, the arbitrator shall be empowered to award equitable relief, including an injunction and specific performance
of any obligation under this Agreement. 

  
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The arbitrator is not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any right to recover punitive, exemplary or similar damages with
respect to any Dispute. The award shall be the sole and exclusive remedy between the parties regarding any claims, counterclaims, issues, or accounting presented to the arbitral tribunal. Judgment upon any award may be entered and enforced in any
court having jurisdiction over a party or any of its assets. 
 (b) Notwithstanding the provisions of Section 7.8(a), the
Company may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration
award and, for the purposes of this Section 7.8(b), each Limited Partner (i) expressly consents to the application of Section 7.8(c) to any such action or proceeding, (ii) agrees that proof shall not be required that monetary
damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints the Company as such Limited Partner’s agent for service of process in
connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise such Limited Partner in writing of any such service of process, shall be deemed in every respect effective service of process
upon the Limited Partner in any such action or proceeding. 
 (c) The parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby that is brought in accordance with Section 7.8(b) shall be brought and maintained
exclusively in the United States District Court for the Southern District of New York or the Supreme Court of the State of New York located in the County of New York. Each of the parties irrevocably consents to submit to the personal jurisdiction of
such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding. Process in any such suit, action or proceeding in such courts may be served, and shall be effective, on any party anywhere in the world, whether
within or without the jurisdiction of any such court, by any of the methods specified for the giving of Notices pursuant to Section 7.01. Each of the parties irrevocably waives, to the fullest extent permitted by law, any objection or defense
that it may now or hereafter have based on venue, inconvenience of forum, the lack of personal jurisdiction and the adequacy of service of process (as long as the party was provided Notice in accordance with the methods specified in
Section 7.01) in any suit action or proceeding brought in such courts. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING SEEKING TO ENFORCE ANY PROVISION OF, OR BASED ON
ANY MATTER ARISING OUT OF OR IN CONNECTION WITH, THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 
 
7.9 Reconciliation. In the event that the Company and the relevant Limited Partner are unable to resolve a disagreement with respect to the matters governed by Sections 2.4, 4.2 and 6.2 within the relevant period designated in this
Agreement (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to
both parties. The Expert shall be a partner in a nationally recognized accounting firm or a law firm (other than the Advisory Firm), and the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with either
the Company or the relevant Limited Partner or other actual or potential conflict of interest. 

  
 20 

 
If the parties are unable to agree on an Expert within 15 days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the International
Chamber of Commerce Centre for Expertise. The Expert shall resolve any matter relating to the Exchange Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within 30 calendar days and shall resolve any
matter relating to a Tax Benefit Schedule or an amendment thereto within 15 calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution. Notwithstanding the
preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of a disagreement is due, the undisputed amount
shall be paid on such date and such Tax Return may be filed as prepared by the Company, subject to adjustment or amendment upon resolution. In the event that this reconciliation provision is utilized, the fees of the Expert shall be paid in
proportion to the manner in which the dispute is resolved, such that, for example, if the entire dispute is resolved in favor of the Company, the relevant Limited Partner shall pay all of the fees, or if the items in dispute are resolved 50% in
favor of the Company and 50% in favor of the relevant Limited Partner, each of the Company and the relevant Limited Partner shall pay 50% of the fees of the Expert. Any Dispute as to whether a Dispute is a Reconciliation Dispute within the meaning
of this Section 7.9 shall be decided by the Expert. The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.9 shall be binding on the Company and the relevant Limited
Partner and may be entered and enforced in any court having jurisdiction. 
 7.10
Withholding. The Company shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as the Company is required to deduct and withhold with respect to the making of such payment under the
Code or any provision of state, local or foreign Tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by the Company, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the Applicable Limited Partner. 
 7.11 Admission of the Company into
a Consolidated Group; Transfers of Corporate Assets. 
 (a) If the Company becomes a member of an affiliated or
consolidated group of corporations that files a consolidated income Tax return pursuant to Sections 1501, et seq. of the Code or any corresponding provisions of state, local or foreign law, then: (i) the provisions of this Agreement shall be
applied with respect to the group as a whole; and (ii) Tax Benefit Payments, Early Termination Payments and other applicable items hereunder shall be computed with reference to the consolidated Taxable income of the group as a whole.

 (b) If any entity that is obligated to make an Exchange Payment hereunder transfers one or more assets to a corporation with
which such entity does not file a consolidated Tax return pursuant to Section 1501 of the Code, such entity, for purposes of calculating the amount of any Exchange Payment (e.g., calculating the gross income of the entity and determining the
Realized Tax Benefit of such entity) due hereunder, shall be treated as having disposed of such asset in a fully Taxable transaction on the date of such contribution. The consideration deemed to be received by such entity shall be equal to the fair
market value of the contributed asset, plus (i) the amount of debt to which such asset is subject, in the case of a contribution of an encumbered asset or (ii) the amount of debt allocated to such asset, in the case of a contribution of a
partnership interest. 

  
 21 

 7.12 Confidentiality. 

(a) Each Limited Partner and assignee acknowledges and agrees that the information of the Company and of its Affiliates is confidential
and, except in the course of performing any duties as necessary for the Company and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, such person shall keep and retain in the strictest confidence and not
disclose to any Person any confidential matters, acquired pursuant to this Agreement, of the Company and its Affiliates and successors, concerning Silvercrest LP and its Affiliates and successors or the other Limited Partners, learned by the Limited
Partner heretofore or hereafter. This Section 7.12(a) shall not apply to (i) any information that has been made publicly available by the Company or any of its Affiliates, becomes public knowledge (except as a result of an act of such
Limited Partner in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for a Limited Partner to prepare and file his or her Tax returns, to respond to any
inquiries regarding the same from any Taxing authority or to prosecute or defend any action, proceeding or audit by any Taxing authority with respect to such returns. Notwithstanding anything to the contrary herein, each Limited Partner and assignee
(and each employee, representative or other agent of such Limited Partner or assignee, as applicable) may disclose to any and all Persons, without limitation of any kind, the Tax treatment and Tax structure of the Company, Silvercrest LP, the
Limited Partners and their Affiliates, and any of their transactions, and all materials of any kind (including opinions or other Tax analyses) that are provided to the Limited Partners relating to such Tax treatment and Tax structure. 

(b) If a Limited Partner or assignee commits a breach, or threatens to commit a breach, of any of the provisions of Section 7.12(a),
the Company shall have the right and remedy to have the provisions of Section 7.12(a) specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being
acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Company or any of its Subsidiaries or the other Limited Partners and the accounts and funds managed by the Company and that money damages alone
shall not provide an adequate remedy to such Persons. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity. 

7.13 No Joint Venture. Parties hereto intend that the relationships created hereunder and
under the Exchange Agreement be solely that of transferor and transferee of the Class B Units as determined herein. Nothing herein or therein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship
between or among the parties nor to grant the exchanging Limited Partners any interest in the exchanged Class B Units other than that of a transferor. 

  
 22 

 7.14 Partnerships. The Company hereby agrees
that, to the extent it acquires a general partnership interest, managing member interest or similar interest in any Person after the date hereof, it shall cause such Person to execute and deliver a joinder to this Agreement and such Person shall be
treated as a “Partnership Subsidiary” for all purposes of this Agreement. 
 7.15
Construction. This Agreement shall be decided by a court of law and shall not be construed in favor of the drafters of this Agreement. 
 7.16 Further Assurances. Each party shall execute, deliver, acknowledge and file such other documents and take such further actions as may be reasonably
requested from time to time by the other party hereto to give effect to and carry out the transactions contemplated herein. 

[Signature page follows.] 

  
 23 

 IN WITNESS WHEREOF, the Company, Silvercrest LP and each Limited Partner have duly executed
this Agreement as of the date first written above. 
  

			
	Silvercrest Asset Management Group Inc.
		
	 By:
	 	  

	 Name:
	 	G. Moffett Cochran
	 Title:
	 	Chairman, Chief Executive Officer
	
	Silvercrest L.P.
		
	 By:
	 	Silvercrest Asset Management Group Inc.
	 Title:
	 	General Partner of Silvercrest L.P.
		
	 By:
	 	  

	 Name:
	 	G. Moffett Cochran
	 Title:
	 	Chairman, Chief Executive Officer

 Signature Page to Tax Receivable Agreement 

 
			
	CLASS B PARTNERS:
	
	  

	Jeffrey C. Allen
	
	  

	Edward F. Appel
	
	  

	Matthew Arpano
	
	  

	Patrick A. Bittner
	 James J. Bleakley, Jr. Revocable Trust dated
 May 15, 2002

		
	By:	 	  

	 Name:
	 	James J. Bleakley, Jr.
	 Title:
	 	Trustee
	
	  

	Jeremiah M. Bogert
	  
 The Margot C. Bogert and

Jeremiah M. Bogert Family Trust

		
	 By:
	 	  

	 Name:
	 	Jeremiah M. Bogert
	 Title:
	 	Trustee
	
	  

	Ben Brewster

 Signature Page to Tax Receivable Agreement 

 
			
	 Brewster 1966 Trust

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	
	
	  

	 Russell Brown

	
	  

	 David J. Campbell

	
	  

	 Kim Campione

	
	  

	 G. Moffett Cochran

	
	 The Moffett Cochran GRAT 2010

		
	 By:
	 	  

	 Name:
	 	G. Moffett Cochran
	 Title:
	 	Trustee
	
	 The Peyton Cochran Trust

		
	 By:
	 	  

	 Name:
	 	G. Moffett Cochran
	 Title:
	 	Trustee
	
	 The Lee Cochran Trust

		
	 By:
	 	  

	 Name:
	 	G. Moffett Cochran
	 Title:
	 	Trustee
	
	  

	 Anthony Fiore

	
	  

	 Scott A. Gerard

 Signature Page to Tax Receivable Agreement 

 
			
	  

	J. Allen Gray
	
	Hamar Capital Limited
	
	  

	G. David Hamar, Jr.
	
	George David Hamar Trust DDD 2/3/2006 for Katherine Anne Phelps Hamar
		
	By:	 	  

	Name:	 	G. David Hamar, Jr.
	Title:	 	Trustee
	
	  

	G. David Hamar, Jr.
	
	  

	Burnett Hansen
	
	The Linda M. Hartley Revocable Lifetime Trust
		
	By:	 	  

	Name:	 	Linda M. Hartley
	Title:	 	Trustee
	
	  

	Robert F. Hill
	
	  

	Richard R. Hough
	
	Investor Records Holdings, LLC
		
	By:	 	  

	Name:	 	Benjamin Brewster
	Title:	 	
	
	  

	Martin Jaffe

 Signature Page to Tax Receivable Agreement 

			
	
	  

	Cathy A. Jameson
	
	  

	Bart A. Johnston
	
	  

	Todd Kanter
	
	Kanter Marathon Holding LLC
		
	 By:
	 	  

	 Name:
	 	Todd Kanter
	 Title:
	 	Member
	
	 Lanark Holdings LLC

		
	 By:
	 	  

	 Name:
	 	Benjamin Brewster
	 Title:
	 	Member
	
	  

	Allen J. Laufer
	
	  

	David B. MacNeil
	
	  

	Paul McCrann
	
	  

	Sally Megear
	
	  

	Albert S. Messina

 Signature Page to Tax Receivable Agreement 

	
	
	  

	Jeremiah Milbank
	
	  

	Stanley H. Reese
	
	  

	Ian W. Smith
	
	  

	Douglas M. Stevenson
	
	  

	John B. Stevenson
	
	  

	David Taylor
	
	  

	Peter Tobeason
	
	  

	Roger W. Vogel
	
	  

	Carter Whisnand
	
	  

	Robert Teeter

 Signature Page to Tax Receivable Agreement 

 EXHIBIT A 
 JOINDER 
 This JOINDER (this “Joinder”) to the Tax
Receivable Agreement (as defined below), dated as of [                    ] by and among Silvercrest Asset Management Group, Inc., a Delaware
corporation (the “Company”), Silvercrest L.P., a Delaware limited partnership (“Silvercrest LP”),
                    (the “Transferor”), and
[                    ] (“Permitted Transferee”). 
 WHEREAS, on [                    ] the Permitted Transferee acquired (the “Acquisition”) Class
B Units in Silvercrest LP and, together with all other Class B Units hereinafter acquired by the Permitted Transferee from Transferor and its Permitted Transferees (as defined in the Tax Receivable Agreement dated as of
[                    ] 2013 (as the same may be amended from time to time, the “Tax Receivable Agreement”), among the Company,
Silvercrest LP and the other parties thereto), the “Acquired Interests”) from Transferor and 
 WHEREAS,
Transferor, in connection with the Acquisition, has required Permitted Transferee to execute and deliver this Joinder pursuant to Section 7.6 of the Tax Receivable Agreement; 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, Permitted Transferee hereby agrees as follows: 
 1.1 Definitions. To the extent capitalized words used in this Joinder are not defined in this Joinder, such words shall have the respective meanings set forth in the Tax Receivable Agreement.

 1.2 Joinder. Permitted Transferee hereby acknowledges and agrees to become a “Limited Partner” (as defined
in the Tax Receivable Agreement) for all purposes of the Tax Receivable Agreement, including but not limited to, being bound by Sections 2.4, 4.2, 6.1, 6.2 and 7.12 of the Tax Receivable Agreement, with respect to the Acquired Interests, and any
other Acquired Interests Permitted Transferee acquires hereafter. Permitted Transferee hereby acknowledges the terms of Section 7.6(b) of the Tax Receivable Agreement. 
 1.3 Notice. Any notice, request, consent, claim, demand, approval, waiver or other communication hereunder to Permitted Transferee shall be delivered or sent to Permitted Transferee at the address
set forth on the signature page hereto in accordance with Section 7.01 of the Tax Receivable Agreement. 
 1.4 Governing
Law. THIS JOINDER SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD MANDATE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION. 
 [Signature page follows.] 

  
 A-1

 IN WITNESS WHEREOF, this Joinder has been duly executed and delivered by Permitted
Transferee as of the date first above written. 
  

	
	[PERMITTED TRANSFEREE]
	
	  

	Name:
	Address:
	
	Address for Notices:

  
 A-2EX-10.1

 Exhibit 10.1 
 FOR SETTLEMENT DISCUSSIONS ONLY 
 EXECUTION VERSION 

Subject to Delaware Evidence Code 408 
 STRICTLY CONFIDENTIAL 
 INVESTORS SETTLEMENT AGREEMENT

 This INVESTORS SETTLEMENT AGREEMENT is made and entered into as of May 21, 2013 (the “Agreement”)
by and among LRAD Corporation, a Delaware corporation (the “Company”), and each of the other parties listed on the signature page hereto (each, an “Investor” and collectively, the “Investors”). The
Company and the Investors are referred to herein as the “Parties.” 
 WHEREAS, the Investors beneficially own
the number of shares of the Company’s common stock, par value $0.00001 per share (the “Common Stock”) listed on Exhibit A hereto; 
 WHEREAS, on July 23, 2012, Iroquois Master Fund, Ltd. (“Iroquois”) filed a derivative action in the Court of Chancery of the State of Delaware against certain officers and directors
of the Company and the Company as a nominal defendant (the “Delaware Litigation”); 
 WHEREAS, on
January 17, 2013, Iroquois, on behalf of the Investors, delivered a letter to the Company expressing an intention to nominate director candidates (the “Nomination Letter”) for election to the Company’s Board of Directors
(the “Board”) at the Company’s 2013 annual meeting of stockholders (including any adjournment thereof, the “2013 Annual Meeting”); 
 WHEREAS, the Company and the Investors have reached an agreement with respect to the settlement of the Delaware Litigation, certain matters related to the 2013 Annual Meeting, including the Nomination
Letter, and certain other matters, as provided in this Agreement; 
 NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows: 

Section 1. Board of Directors Matters. 
 (a) The Investors and the Company hereby acknowledge and agree that: 
 (i) The
Nominating and Corporate Governance Committee (or a duly constituted subcommittee thereof) (the “Nominating Committee”) of the Board will recommend for nomination and the Board will nominate Thomas R. Brown and Laura M. Clague (the
“Continuing Directors”), General John G. Coburn and Dennis J. Wend (the “Investor Directors”) and Richard H. Osgood III (collectively, the “2013 Nominees”) for election at the 2013 Annual Meeting
and will recommend a vote for the 2013 Nominees and solicit proxies from the Company’s stockholders for the election of the 2013 Nominees at the 2013 Annual Meeting. The Company agrees that it shall hold the 2013 Annual Meeting no later than
July 31, 2013. If for any reason any of the Investor Directors or Mr. Osgood shall die or withdraw as a nominee 

 
prior to election, a replacement nominee proposed by the Investors and reasonably acceptable to the Company shall be substituted consistent with the provisions of clause (ii) hereof.

 (ii) To the extent an Investor Director resigns for any reason other than pursuant to Section 5 or is otherwise
unable to serve as a director or is removed as a director by the stockholders of the Company, in each case, during the Standstill Period, the Investors shall be entitled to designate, for consideration by the Nominating Committee as a replacement
for such Investor Director, an individual who (A) qualifies as “independent” under the Nasdaq corporate governance standards, (B) has relevant business and financial experience, and (C) is qualified to serve as a director
under the Delaware General Corporation Law (the “DGCL”). The Nominating Committee, consistent with its fiduciary duties, shall consider such candidate within ten (10) business days after a completed customary director and
officer questionnaire has been received by the Nominating Committee, and the Board shall appoint such candidate if approved by the Nominating Committee (whose approval and appointment shall not be unreasonably withheld) within five (5) business
days (any such replacement director appointed in accordance with the provisions of this Section 1(a)(iii) shall be referred to as an “Investor Director” for the purposes of this Agreement). In the event the Nominating Committee
shall decline to recommend any candidate designated by the Investors, the Investors may propose one or more replacement designees, subject to the above criteria. 
 (b) Upon execution of this Agreement, the Investors hereby irrevocably withdraw the Nomination Letter. Upon execution of this Agreement, the Company will promptly pay to the Investors their legal and
advisory fees in connection with the Nomination Letter and this Agreement, invoices for which have been previously provided to the Company. For the avoidance of doubt, such legal and advisory fees shall not exceed $301,496. 

Section 2. Voting Agreement. 
 (a) At the 2013 Annual Meeting, the Investors agree to appear in person or by proxy and vote all shares of Common Stock beneficially owned by each Investor and its Affiliates in favor of (i) the
election of the 2013 Nominees and (ii) the following other matters recommended for stockholder approval by the Board: (A) ratification of the appointment of the Company’s independent registered public accounting firm and (B) an
advisory vote on the compensation of the Company’s named executive officers. 
 (b) At any subsequent annual or special
meeting of stockholders of the Company (or adjournments thereof) during the Standstill Period (as defined below), the Investors agree to vote all shares of Common Stock beneficially owned by each Investor and its Affiliates in favor of the election
to the Board of those director nominees nominated for election by the Nominating Committee or the Board and against the removal of any directors whose removal is not recommended by the Board. 

(c) Each Investor agrees to, within ten (10) business days after receipt, execute and deliver to the Company, or cause to be
executed and delivered to the Company, the proxy card sent to the Investors by the Company in connection with the 2013 Annual Meeting and any subsequent annual or special meeting of stockholders of the Company (or adjournments thereof) during the
Standstill Period (and any other legal proxies delivered to the Investors 

  
 2 

 
required to vote any shares held in “street name”) directing that the shares of Common Stock beneficially owned by such Investor, as of the applicable record date, be voted in
accordance with Section 2(a) and Section 2(b). 
 Section 3. Standstill. 

(a) Each Investor agrees that, from the date of this Agreement until the expiration of the Standstill Period, neither it nor any of its
Affiliates or Associates will, and it will cause each of its Affiliates and Associates not to, directly or indirectly, in any manner, acting alone or in concert with others: 
 (i) submit any stockholder proposal (pursuant to Rule 14a-8 promulgated by the Securities and Exchange Commission (the “SEC”) under the Exchange Act or otherwise) or any notice of
nomination or other business for consideration, or nominate any candidate for election to the Board (including by way of Rule 14a-11 of Regulation 14A), other than as expressly permitted by this Agreement; 

(ii) engage in, directly or indirectly, any “solicitation” (as defined in Rule 14a-1 of Regulation 14A) of proxies (or written
consents) or otherwise become a “participant in a solicitation” (as such term is defined in Instruction 3 of Schedule 14A of Regulation 14A under the Exchange Act) in opposition to the recommendation or proposal of the Board, or recommend
or request or induce or attempt to induce any other person to take any such actions, or seek to advise, encourage or influence any other person with respect to the voting of the Common Stock or grant a proxy with respect to the voting of the Common
Stock or other voting securities to any person other than to the Board or persons appointed as proxies by the Board; 
 (iii)
seek to call, or to request the call of, a special meeting of the Company’s stockholders, or make a request for a list of the Company’s stockholders or for any books and records of the Company; 

(iv) vote for any nominee or nominees for election to the Board, other than those nominated or supported by the Board; 

(v) except as specifically provided in Section 1 and Section 2 of this Agreement, seek to place a representative
or other Affiliate, Associate or nominee on the Board or seek the removal of any member of the Board or a change in the size or composition of the Board; 
 (vi) disclose publicly, or privately in a manner that could reasonably be expected to become public, any intention, plan or arrangement inconsistent with the foregoing; 

(vii) take any action challenging the validity or enforceability of any provisions of this Section 3(a); 

(viii) publicly request that the Company amend or waive any provision of this Section 3(a); or 

  
 3 

 (ix) enter into any agreement, arrangement or understanding concerning any of the foregoing
(other than this Agreement) or encourage or solicit any person to undertake any of the foregoing activities; 
 provided,
however, that nothing in this Section 3(a) or elsewhere in this Agreement shall prohibit (A) an Investor Director, acting in his or her fiduciary capacity as a director of the Company, from (1) taking any action or
making any statement at any meeting of the Board or of any committee thereof, or (2) making any statement to the Chief Executive Officer, the Chief Financial Officer or any other director of the Company; (B) an Investor Director, acting in
his or her fiduciary capacity as a director of the Company, from making any statement or disclosure determined (on advice of outside legal counsel) to be required under the federal securities laws or other applicable laws; (C) any Investor from
privately making any statement or expressing or disclosing such Investor’s views in private to the Chief Executive Officer, the Chief Financial Officer or another other officer or director of the Company; or (D) any Investor, Affiliate or
Associate from voting in such manner as it deems appropriate on any matter unrelated to the election of directors of the Company and the other matters referenced in Section 2(a). 

(b) As used in this Agreement: 
 (i) the term “Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified with
respect to the specific action at issue hereunder; the term “Associate” means any corporation or organization controlled by the person specified, any trust or other estate in which such person has a substantial beneficial interest or as to
which such person serves as a trustee or in a similar fiduciary capacity, and any relative or spouse of such person, or any relative of such spouse, who has the same home as such person, in each case, with respect to the specific action at issue
hereunder; the term “control” shall have the meaning set forth in Rule 12b-2 promulgated by the SEC under the Exchange Act; the terms “beneficial owner” and “beneficial ownership” shall have the same meanings as set
forth in Rule 13d-3 promulgated by the SEC under the Exchange Act; and the terms “person” or “persons” shall mean any individual, corporation (including not-for-profit), general or limited partnership, limited liability company,
joint venture, estate, trust, association, organization or other entity of any kind or nature; and 
 (ii) the term
“Standstill Period” shall mean the period commencing upon the date of this Agreement, and ending on the earlier of (A) ten (10) business days prior to the deadline for submission of stockholder nominations for the Company’s
2014 annual meeting of stockholders pursuant to the Company’s Restated Bylaws, as in effect from time to time (any amendment to which during the Standstill Period the Company shall give the Investors contemporaneous written notice) and
(B) such date, if any, as the Company has breached in any material respect any of its representations, warranties, commitments or obligations set forth in this Agreement and such breach has not been cured within fifteen (15) days following
written notice of such breach. 
 Section 4. Settlement of Delaware Litigation. Simultaneously with the execution of
this Agreement, the Company and Plaintiff Iroquois shall execute the Stipulation of Settlement 

  
 4 

 
set forth as Exhibit B hereto (the “Stipulation of Settlement”) and cooperate in the prompt submission of the Stipulation of Settlement for approval by the Court of
Chancery of the State of Delaware. In the event that the Stipulation of Settlement does not receive approval, the Parties agree to work collaboratively to obtain approval of the settlement of the Delaware Litigation. 

Section 5. Resignation Letter. As a condition to commencement of a term on the Board (or nomination therefor), each Investor
Director shall provide to the Company an irrevocable letter of resignation which shall become effective fifteen (15) days after written notice of a material breach by any Investor of this Agreement is provided to the breaching Investor by the
Company (unless such breach is cured within such fifteen (15) day period); provided, that if such alleged breaching Investor disputes such breach, the resignation of such Investor Director shall not become effective until (i) the
Investor agrees not to dispute such breach in writing or (ii) a court of competent jurisdiction in a final judgment on the merits (whether or not subject to appeal) has confirmed or determined the existence of such breach. 

Section 6. Release. The Investors, on behalf of themselves and their respective Affiliates, partners, members and
shareholders, hereby release Helen C. Adams, Raymond C. Smith and George W. VanDeWeghe, Jr., directors of the Company as of the date hereof, from any claims, demands, rights, liabilities, damages, actions, losses, obligations, judgments, suits,
fees, expenses, costs, any other relief of any nature whatsoever, matters, issues and causes of action of any and every kind, nature or description whatsoever, whether known or unknown, under state, federal, local, common, foreign or statutory law
or any other law, rule or regulation, contingent or absolute, suspected or unsuspected, disclosed or undisclosed, concealed or hidden, or matured or unmatured that, in each case, were or could have been asserted against them in connection with
(i) the Delaware Litigation, (ii) the Nomination Letter or (iii) the Schedule 13D regarding the Company filed by Iroquois with the SEC on January 17, 2013, as amended. For the avoidance of doubt, nothing in this Section 6
shall have the effect of releasing the claims Iroquois asserted derivatively on behalf of LRAD in the Delaware Litigation. In the event that the Court in the Derivative Litigation finds that the release by Iroquois or the other Investors contained
in this Section 6 would, if effective, preclude Iroquois’ ability to serve as a derivative plaintiff, the release given by Iroquois and/or the other Investors shall be deemed void to the extent the Court so finds, without affecting
the validity of the remainder of this Agreement and any part of the release not affected by the Court’s determination. 

Section 7. Representations and Warranties of the Company. The Company represents and warrants to the Investors that
(a) the Company has the corporate power and authority to execute the Agreement and to bind it thereto, (b) this Agreement has been duly and validly authorized, executed and delivered by the Company, constitutes a valid and binding
obligation and agreement of the Company, and is enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws generally affecting the rights of creditors and subject to general equity principles and (c) the execution, delivery and performance of this Agreement by the Company does not and will not violate or conflict with (i) any law,
rule, regulation, order, judgment or decree applicable to it, or (ii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could become a default) under or pursuant to, or result
in the loss of a material benefit under, or give any right of termination, amendment, acceleration or cancellation 

  
 5 

 
of, any organizational document, or any material agreement, contract, commitment, understanding or arrangement to which the Company is a party or by which it is bound. 

Section 8. Representations and Warranties of the Investors. Each Investor, on behalf of itself, represents and warrants to
the Company that (a) as of the date hereof, such Investor beneficially owns only the number of shares of Common Stock as described opposite its name on Exhibit A and Exhibit A includes all Affiliates of any Investors that own any
securities of the Company beneficially or of record, (b) this Agreement has been duly and validly authorized, executed and delivered by such Investor, and constitutes a valid and binding obligation and agreement of such Investor, enforceable
against such Investor in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors and
subject to general equity principles, (c) such Investor has the authority to execute the Agreement, and to bind such Investor to the terms hereof and (d) the execution, delivery and performance of this Agreement by such Investor does not
and will not violate or conflict with (i) any law, rule, regulation, order, judgment or decree applicable to it, or (ii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both
could become a default) under or pursuant to, or result in the loss of a material benefit under, or give any right of termination, amendment, acceleration or cancellation of, any organizational document, agreement, contract, commitment,
understanding or arrangement to which such member is a party or by which it is bound. 
 Section 9. Mutual
Non-Disparagement. 
 (a) Each Investor agrees that, during the Standstill Period, neither it nor any of its Affiliates or
Associates will, and it will cause each of its Affiliates and Associates not to, directly or indirectly, in any capacity or manner, make, express, transmit speak, write, verbalize or otherwise communicate in any way (or cause, further, assist,
solicit, encourage, support or participate in any of the foregoing), any remark, comment, message, information, declaration, communication or other statement of any kind, whether verbal, in writing, electronically transferred or otherwise, that
might reasonably be construed to be derogatory toward, the Company or any of its directors, officers, Affiliates, subsidiaries, employees, agents or representatives (collectively, the “Company Representatives”), or that reveals,
discloses, incorporates, is based upon, discusses, includes or otherwise involves any confidential or proprietary information of the Company or its subsidiaries or Affiliates, or derogatorily to malign, harm, disparage, defame or damage the
reputation or good name of the Company, its business or any of the Company Representatives. 
 (b) The Company hereby agrees
that, during the Standstill Period, neither it nor any of its Affiliates will, and it will cause each of its Affiliates not to, directly or indirectly, in any capacity or manner, make, express, transmit, speak, write, verbalize or otherwise
communicate in any way (or cause, further, assist, solicit, encourage, support or participate in any of the foregoing), any remark, comment, message, information, declaration, communication or other statement of any kind, whether verbal, in writing,
electronically transferred or otherwise, that might reasonably be construed to be derogatory toward, any Investor or any of its agents or representatives (collectively, the “Investor Representatives”), or that reveals, discloses,
incorporates, is based upon, discusses, includes or otherwise involves any confidential or 

  
 6 

 
proprietary information of any Investor or its subsidiaries or Affiliates, or derogatively to malign, harm, disparage, defame or damage the reputation or good name of any Investor or Investor
Representative. 
 (c) Notwithstanding the foregoing, nothing in this Section 9 or elsewhere in this Agreement shall
prohibit any Party from making any statement or disclosure required under the federal securities laws or other applicable laws; provided, that such Party must provide written notice to the other Parties at least two (2) business days
prior to making any such statement or disclosure required under the federal securities laws or other applicable laws that would otherwise be prohibited by the provisions of this Section 9, and reasonably consider any comments of such
other Parties. 
 Section 10. Public Announcements. Promptly following the execution of this Agreement, the Company
and the Investors shall jointly issue a mutually agreeable press release (the “Mutual Press Release”) announcing the terms of this Agreement, substantially in the form attached hereto as Exhibit C. Prior to the issuance of
the Mutual Press Release, neither the Company nor the Investors shall issue any press release or public announcement regarding this Agreement or take any action that would require public disclosure thereof without the prior written consent of the
other Party. No Party or any of its Affiliates shall make any public statement (including, without limitation, in any filing required under Regulation 13D under the Exchange Act) concerning the subject matter of this Agreement inconsistent with the
Mutual Press Release. 
 Section 11. Specific Performance. Each of the Investors, on the one hand, and the Company,
on the other hand, acknowledges and agrees that irreparable injury to the other Party hereto may occur in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached and that
such injury would not be adequately compensable in monetary damages. It is accordingly agreed that the Investors or any Investor, on the one hand, and the Company, on the other hand (the “Moving Party”), shall each be entitled to
specific enforcement of, and injunctive or other equitable relief to prevent any violation of, the terms hereof, and the other party hereto will not take action, directly or indirectly, in opposition to the Moving Party seeking such relief on the
grounds that any other remedy or relief is available. 
 Section 12. Notice. Any notices, consents, determinations,
waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (a) upon receipt, when delivered personally; (b) upon receipt, when sent by
electronic transmission (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (c) one (1) business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: 
 If to the Company, addressed to: 
 LRAD Corporation 

16990 Goldentop Rd., Ste. A 

  
 7 

 San Diego, California 92127 

Attention: Katherine H. McDermott 
 Tel: (858) 676-1112 
 Fax: (858) 676-1080 

Email: KathyMcDermott@lradx.com 
 with a copy to (for information purposes only): 
 Durham Jones & Pinegar,
P.C. 
 192 E. 200 N., Third Floor 
 St. George, UT 84770 
 Attention: Joshua E. Little, Esq. 

Tel: (435) 674-0400 
 Fax: (435) 628-1610 
 Email: jlittle@djplaw.com 

and 

Latham & Watkins LLP 
 12636 High Bluff Drive, Suite 400 
 San Diego, California 92130 

Attention: Craig M. Garner, Esq. 
 Tel: (858) 523-5400 
 Fax: (858) 523-5450 

Email: craig.garner@lw.com 
 If to the Investors, addressed to: 
 Iroquois Capital Management LLC 

641 Lexington Avenue, 26th Floor 
 New York, New York 10022 
 Attention: Joshua Silverman 

Tel: (212) 974-3070 
 Fax: (212) 207-3452 
 Email: jsilverman@icfund.com 

with a copy to (for information purposes only): 
 Akin Gump Strauss Hauer & Feld LLP 
 One Bryant Park 

New York, NY 10036 
 Attention: Patrick J. Dooley, Esq. 
 Tel: (212) 872-1080 

Fax: (212) 872-1002 
 Email: pdooley@akingump.com 

  
 8 

 Section 13. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the Law of the State of Delaware, without regard to conflict of law principles thereof.
 Section 14.
Exclusive Jurisdiction. Each Party to this Agreement (i) irrevocably and unconditionally submits to the personal jurisdiction of the state courts of the State of Delaware and the federal courts of the United States of America located in
the State of Delaware, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that any actions or proceedings arising in connection with this
Agreement or the transactions contemplated by this Agreement shall be brought, tried and determined only in the Court of Chancery of the State of Delaware (or, only if said Court of Chancery declines to accept jurisdiction over a particular matter,
any state or federal court within the State of Delaware), (iv) waives any claim of improper venue or any claim that those courts are an inconvenient forum and (v) agrees that it will not bring any action relating to this Agreement or the
transactions contemplated hereunder in any court other than as specified in clause (iii) of this Section 14. The Parties to this Agreement agree that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 12 or in such other manner as may be permitted by applicable Law, shall be valid and sufficient service thereof. 
 Section 15. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND,
THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A
LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED AND UNDERSTANDS THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15. 
 Section 16. Entire Agreement. This Agreement and the
Stipulation of Settlement constitute the full and entire understanding and agreement among the Parties with regard to the subject matter hereof, and supersedes all prior agreements with respect to the subject matter hereof. 

Section 17. Receipt of Adequate Information; No Reliance; Representation by Counsel. Each Party acknowledges that it has
received adequate information to enter into this Agreement, that is has not relied on any promise, representation or warranty, express or implied not contained in this Agreement and that it has been represented by counsel in connection with this
Agreement. Accordingly, any rule of law or any legal decision that would provide any party with a defense to the enforcement of the terms of this Agreement against such party shall have 

  
 9 

 
no application and is expressly waived. The provisions of the Agreement shall be interpreted in a reasonable manner to effect the intent of the Parties. 

Section 18. Amendment. This Agreement may be modified, amended or otherwise changed only in a writing signed by all of the
Parties. 
 Section 19. Successors and Assigns. This Agreement shall bind the successors and permitted assigns of
the Parties, and inure to the benefit of any successor or permitted assign of any of the parties; provided, however, that no party may assign this Agreement without the prior written consent of the other Parties. 

Section 20. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each Party shall have received a counterpart hereof signed by all of the other Parties. Until and unless each
party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other
communication). The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission in .PDF format or by facsimile shall be sufficient to bind the parties to the terms and conditions of this Agreement. 

Section 21. Attorneys’ Fees. In the event any Party shall fail to perform any of its material obligations under this
Agreement and another Party hereto shall bring suit, and establish, in a court of proper jurisdiction under Section 14 (after all appeals) that the actions of such alleged breaching Party giving rise to such breach were undertaken with the
actual intent and actual purpose of materially breaching this Agreement, then all reasonable third party out-of pocket fees and expenses, including, without limitation, reasonable attorneys’ fees and expenses, that may be incurred by the
prevailing Party in enforcing this Agreement as relates to such material breach shall be paid by the materially breaching Party; provided that prior to initiating such suit, the claiming Party shall give the other Parties written notice of the
claimed breach and ten (10) days from receipt of such notice to cure any claimed breach. 
 [Signature page follows]

  
 10 

 IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered this Agreement as of
the date first above written. 
  

			
	LRAD CORPORATION
		
	By:	 	 /S/ THOMAS R. BROWN

	Name:	 	Thomas R. Brown
	Title:	 	President & CEO
	
	INVESTORS:
	
	IROQUOIS CAPITAL MANAGEMENT L.L.C.
		
	By:	 	 /S/ JOSHUA SILVERMAN

	Name:	 	Joshua Silverman
	Title:	 	Authorized Signatory
	
	IROQUOIS MASTER FUND LTD
		
	By:	 	 /S/ JOSHUA SILVERMAN

	Name:	 	Joshua Silverman
	Title:	 	Authorized Signatory
		
	By:	 	 /S/ JOSHUA SILVERMAN

		 	Joshua Silverman
		
	By:	 	 /S/ RICHARD ABBE

		 	Richard Abbe

 EXHIBIT A 

 

					
	 Investor
	  	Shares of Common 
Stock
Beneficially Owned*	 
		
	 Iroquois Capital Management L.L.C.
	  	 	2,006,935	  
	 Joshua Silverman
	  	 	21,167	  
	 Richard Abbe
	  	 	285,034	  
		
	 Total: 2,313,136
	  			

  

	*	See Schedule 13D/A filed with the SEC by Investors on March 4, 2013 for more detailed information. 

 EXHIBIT B 

Stipulation of Settlement 

 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE 

 

					
	  
	 		 	
		 	:	 	
	IROQUOIS MASTER FUND, LTD.,	 	:	 	
		 	:	 	
	 Plaintiff,
	 	:	 	
		 	:	 	
	 v.
	 	:	 	 C.A. No. 7704-VCP

		 	:	 	
	RAYMOND C. SMITH, LAURA M. CLAGUE,	 	:	 	
	HELEN C. ADAMS, THOMAS R. BROWN	 	:	 	
	and KATHERINE McDERMOTT,	 	:	 	
		 	:	 	
		 	:	 	
	 Defendants,
	 	:	 	
		 	:	 	
	 and
	 	:	 	
		 	:	 	
	LRAD CORPORATION,	 	:	 	
		 	:	 	
	 Nominal Defendant.
	 	:	 	
	  
	 	:	 	

 STIPULATION OF SETTLEMENT 

This Stipulation of Compromise and Settlement (“Stipulation of Settlement” or “Stipulation”) is dated as of
May 22, 2013, and is entered into, by and among the parties to the above-captioned stockholder derivative action (the “Action”): a) Iroquois Master Fund, Ltd. (“Iroquois”) suing on behalf of Nominal Defendant LRAD
Corporation (“LRAD” or the “Company”); b) LRAD; and c) the individual defendants, Raymond C. Smith, Laura M. Clague, Helen C. Adams, Thomas R. Brown, and Katherine McDermott, (collectively the “Individual Defendants”),
by and through their respective counsel. All capitalized terms in this Stipulation have the meanings as defined in paragraphs 1.1-1.26 herein. 

 FACTUAL BACKGROUND LEADING TO THE SETTLEMENT 

The Action is brought on behalf of Nominal Defendant LRAD, a Delaware corporation headquartered in San Diego, California. LRAD develops
and delivers innovative directed acoustic products that beam, focus, and control sound over short and long distances, primarily for use by government, military, law enforcement and security entities. 

On May 10, 2012, the Compensation Committee of the Board granted 975,000 nonqualified stock options to the Company’s Officers
and Directors with strike prices set at the stock’s closing price on the NASDAQ stock market on May 10, 2012 of $1.33 per share (the “Stock Option Grants”), pursuant to the Equity Incentive Plan. Specifically, the Compensation
Committee awarded 750,000 options to LRAD’s CEO, Mr. Thomas Brown; 100,000 options to LRAD’s CFO, Ms. Katherine McDermott; 50,000 options to each of Compensation Committee members and Directors, Laura M. Clague and Admiral
Raymond Smith; and 25,000 options to Compensation Committee member and Director Helen C. Adams. 
 On July 23, 2012,
Iroquois filed a complaint against the Individual Defendants, on behalf of Nominal Defendant LRAD in the Delaware Court of Chancery: Iroquois Master Fund, Ltd. v. Smith, et. al., Civil Action No. 7704-VCP. After LRAD and the Individual
Defendants moved to dismiss the Complaint on August 28, 2012, Iroquois filed an amended complaint on November 19, 2012 (the “Amended Complaint”). 
 In the Amended Complaint, Iroquois alleged that the stock options granted on May 10, 2012 were undervalued and timed to coincide with negative earnings announcements, and to precede positive
announcements concerning future sales contracts. The Amended Complaint alleged claims for breach of fiduciary duty, unjust enrichment, and waste. 

  
 2 

 On December 17, 2012, LRAD and the Individual Defendants moved to dismiss the Amended
Complaint. A hearing was held on Defendants’ motion to dismiss before Vice Chancellor Donald F. Parsons on March 4, 2013. That motion is under submission. 
 On January 17, 2013, Iroquois, on behalf of the Investors, delivered a letter to the Company expressing an intention to nominate director candidates (the “Nomination Letter”) for election
to the Board at the Company’s Annual Meeting. 
 In or about February, 2013, the Parties entered into settlement
negotiations. 
 INVESTIGATION AND RESEARCH CONDUCTED BY PLAINTIFF’S COUNSEL 

Plaintiff’s Counsel represent that they have conducted an investigation during the development and prosecution of the Action
sufficient to comply with their obligations under Court of Chancery Rule 11. 
 DENIAL OF WRONGDOING AND LIABILITY 

The Individual Defendants have denied and continue to deny any wrongdoing alleged or that could have been alleged, by Plaintiff with
respect to each and all claims, events, and transactions complained of in the Action. The Individual Defendants assert that at all relevant times, they acted in good faith and in a manner they reasonably believed to be in the best interests of LRAD
and its stockholders. The Individual Defendants deny the allegations that LRAD or the Plaintiff or LRAD’s other stockholders have suffered damages, were harmed in any way by the conduct alleged in the Action or that they are entitled to any
equitable or other relief. LRAD asserts that Iroquois was required to make a demand upon its Board, prior to commencing the Action to request the desired action and failed to do so. Iroquois asserts that demand was excused as futile. Nonetheless,
LRAD and the Individual Defendants have agreed to settle the Action on the terms in this Stipulation. Without conceding the merit of any of 

  
 3 

 
Iroquois’s allegations, or lack of merit of any of the Individual Defendants’ defenses, and in order to avoid the potentially protracted time, expense, and uncertainty associated with
continued litigation, LRAD and the Individual Defendants have concluded that it is desirable that the Action be fully and finally settled in the manner and upon the terms and conditions set forth in this Stipulation. 

CLAIMS OF THE PLAINTIFF AND BENEFITS OF SETTLEMENT 
 Iroquois and Iroquois’s Counsel believe that the claims asserted in the Action have merit and that their investigation supports the claims asserted. Without conceding the merit of any of the
Individual Defendants’ defenses or the lack of merit of any of their allegations, and in order to avoid the potentially protracted time, expense, and uncertainty associated with continued litigation, including potential trial and appeals,
Iroquois has concluded that it is desirable that the Action be fully and finally settled in the manner and upon the terms and conditions set forth in this Stipulation. Based on these considerations, among others, Iroquois believes that the
Settlement has conferred or will confer substantial benefits upon and is in the best interests of LRAD and Current LRAD Stockholders. 
 THE
INVESTORS’ SETTLEMENT AGREEMENT 
 LRAD is simultaneously entering into an agreement with certain Investors, including
Iroquois (the “Investors Settlement Agreement”), attached hereto as Exhibit A. 
 NOW, THEREFORE, IT IS HEREBY
STIPULATED AND AGREED by and among Iroquois, on behalf of itself and derivatively on behalf of LRAD, LRAD, and the Individual Defendants, by and through their respective counsel, subject to the approval of the Court pursuant to Court of Chancery
Rule 23.1(c), that all Released Claims shall be finally and 

  
 4 

 
fully compromised, settled, discontinued, and released, and the Action shall be dismissed with prejudice, as to all Released Parties, upon the following terms and conditions: 

1. Definitions 
 As used herein, the following terms have the meanings specified below: 
 1.1.
“Action” means the following litigation pending in this Court, entitled: Iroquois Master Fund, Ltd. v. Smith, et. al., Civil Action No. 7704-VCP. 
 1.2. “Annual Meeting” means the Company’s 2013 annual meeting of stockholders, including any adjournment thereof. 
 1.3. “Affiliate” and “Associate” shall have the respective meanings set forth in Rule 12b-2 promulgated by the SEC under the Exchange Act. 

1.4. “Amended Complaint” means the complaint filed in this Action on November 19, 2012. 

1.5. “Beneficial Owner” and “Beneficial Ownership” shall have the same meanings as set forth in Rule 13d-3
promulgated by the SEC under the Exchange Act. 
 1.6. “Board” means the current directors serving on the LRAD Board
of Directors. 
 1.7. “Company” or “LRAD” means LRAD Corporation and its predecessors, successors,
Affiliates, divisions and assigns. 
 1.8. “Court” means the Delaware Court of Chancery, New Castle County.

 1.9. “Current LRAD Stockholder” or “Current LRAD Stockholders” means any record or Beneficial Owner of
LRAD common stock as of May 21, 2013, and their successors in interest, who continue to hold their LRAD shares as of the date of the Judgment (as defined in ¶1.15). 

  
 5 

 1.10. “Defense Counsel” means counsel of record who represent LRAD and the
Individual Defendants in the Action: DLA Piper LLP (US). 
 1.11. “Effective Date” means the first date by which all
of the events and conditions specified in ¶6.1 have been met and have occurred. 
 1.12. “Final” means that with
respect to any court order, including but not limited to the Judgment (the form of which is attached hereto as Exhibit B), such order represents a final and binding determination of all issues within its scope and is not subject to further review on
appeal or otherwise. An order becomes “Final” when: (a) the date as of which the time to appeal the Court’s order has expired without any appeal having been sought or taken; or (b) if an appeal is filed, sought or taken, the
date as of which the Delaware Supreme Court has affirmed the Court’s original order without any material change thereto. For purposes of this definition, an “appeal” includes, among others, appeals as of right, discretionary appeals,
interlocutory appeals, mandamus, or prohibition, and any other proceedings of like kind. Notwithstanding the foregoing, any appeal or other proceeding pertaining to any order issued with respect to Plaintiff’s Counsel’s application for
attorneys’ fees and/or expenses, shall not in any way delay or preclude the Judgment from becoming Final as defined herein. 
 1.13. “Individual Defendants” means Raymond C. Smith, Laura M. Clague, Helen C. Adams, Thomas R. Brown, and Katherine McDermott. 

1.14. “Investors Settlement Agreement” means Exhibit A to this Stipulation. 

1.15. “Judgment” means the Order and Judgment of Dismissal to be rendered by the Court, substantially in the form attached
hereto as Exhibit B. 

  
 6 

 1.16. “Notice of Settlement of the Action” or “Notice” means the notice
to stockholders of the Stipulation of Settlement and of the Settlement Hearing Date, approved by the Court. 
 1.17.
“Person” means an individual, corporation, limited liability company, professional corporation, joint venture, limited liability partnership, partnership, limited partnership, association, joint stock company, estate, legal representative,
trust, unincorporated association, government or any political subdivision or agency thereof, and any business or legal entity and their spouses, heirs, predecessors, successors, representatives, or assignees. 

1.18. “Plaintiff” means Iroquois Master Fund, Ltd. and its predecessors, successors, controlling shareholders, partners, joint
ventures, subsidiaries, Affiliates, Beneficial Owners, divisions and assigns. 
 1.19. “Plaintiff’s Counsel”
means counsel who represent the Plaintiff in the Action: the law firms of Rosenthal, Monhait & Goddess, P.A. and Abbey Spanier, LLP. 
 1.20. “Related Parties” means each of the Individual Defendants’ heirs, estates, executors, administrators, personal or legal representatives, beneficiaries, spouses, insurers, attorneys,
advisors , assigns, and any entity in which an Individual Defendant and/or member(s) of his or her family has an interest, any members of their immediate families, or any trust of which an Individual Defendant is the settlor or which is for the
benefit of any Individual Defendant and/or member(s) of his or her family. 
 1.21. “Released Claims” shall
collectively mean any and all claims (including “Unknown Claims” as defined in ¶1.26 hereof), debts, demands, rights, liabilities, damages, actions, losses, obligations, judgments, suits, fees, expenses, costs, any other relief of any
nature whatsoever, matters, issues and causes of action of any and every kind, nature or description 

  
 7 

 
whatsoever, whether known or unknown, under state, federal, local, common, foreign or statutory law or any other law, rule or regulation, contingent or absolute, suspected or unsuspected,
disclosed or undisclosed, concealed or hidden, or matured or unmatured, direct or derivative (collectively, “Claims”) that were or could have been asserted in the Action, derivatively or otherwise, in the right of, or on behalf of, LRAD)
or by Plaintiff as an investor against any of the Released Persons, which are based upon or relate in any manner to the allegations, matters, acts, facts, circumstances, transaction, events, occurrences, disclosures, statements, representations,
misrepresentations, omissions, acts or failures to act, alleged in, referred to or otherwise related, directly or indirectly, to (i) the Action or (ii) the subject matter or allegations of the Action, including, without limitation, claims
for breach of fiduciary duty, including without limitation the duties of care, loyalty and/or oversight, self-dealing, misrepresentation (whether intentional, negligent or innocent), omission (whether intentional, negligent or innocent), concealment
(whether intentional, negligent or innocent), mismanagement, gross mismanagement, abuse of control, waste, money damages, unjust enrichment, breach of contract, or violations of any federal, state, local or foreign law, or any other rule, law, or
regulation, or any other source of legal or equitable obligation of any kind or description in whatever forum or allegations that could have been made in the Action. 
 1.22. “Released Persons” means each and all of the Individual Defendants and their respective Related Parties. 
 1.23. “Settlement” means the proposed settlement and compromise of the Action as provided for herein. 
 1.24. “Settlement Hearing Date” means the hearing date set by the Court to consider approval of the Stipulation of Settlement. 

  
 8 

 1.25. “Settling Parties” means, collectively, LRAD, the Individual Defendants, and
the Plaintiff on behalf of itself as an investor and derivatively on behalf of LRAD. 
 1.26. “Unknown Claims” means
any of the Released Claims which Plaintiff or LRAD or Current LRAD Stockholders claiming through LRAD do not know or suspect to exist in his, her, its or their favor at the time of the release of the Released Persons, including claims which, if
known by him, her, it or them, might have affected his, her, its or their settlement with and release of the Released Persons, or might have affected his, her, its or their decision not to object to this Settlement. Plaintiff or LRAD or Current LRAD
Stockholders claiming through LRAD may hereafter discover facts in addition to or different from those which he, she, it or they now knows or believes to be true with respect to the subject matter of the Released Claims, but Plaintiff, LRAD, or
Current LRAD Stockholders claiming through LRAD shall expressly, upon the Effective Date, be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever settled and released any and all Released Claims, known or unknown,
suspected or unsuspected, contingent or non-contingent, whether or not concealed or hidden, which now exist, or heretofore have existed upon any theory of law or equity now existing or coming into existence in the future, including, but not limited
to, conduct which is negligent, intentional, with or without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or existence of such different or additional facts. With respect to any and all Released Claims,
Plaintiff and LRAD stipulate, and agree that, except as provided herein, upon the Effective Date, Plaintiff and LRAD expressly waive, and by operation of the Final Judgment and Order shall have expressly waived the provisions, rights and benefits of
Section 1542 of the California Civil Code, which provides that: 
 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER 

  
 9 

 
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. 

Upon the Effective Date, Plaintiff for itself and on behalf of LRAD, and LRAD, shall expressly waive, any and all provisions, rights and benefits
conferred by the law of any jurisdiction or any state or territory of the United States, or principle of common law, which are similar, comparable or equivalent to California Civil Code § 1542. 

2. The Settlement 
 2.1. Restatement of Stock Option Grant of Thomas R. Brown (“Brown”). Defendant Brown agrees to reprice the strike price of each and every of the 750,000 non-qualified stock options
granted to him on May 10, 2012 from $1.33 to $3.00. The repricing shall occur within three business days of the Effective Date, assuming that an Effective Date occurs. Defendant Brown agrees not to exercise any of the options that are the
subject of this paragraph of the Stipulation pending the Effective Date. If the Effective Date does not occur because the Court does not issue the Judgment approving the settlement and dismissing the case, or the Judgment does not become Final,
paragraph 6.2 shall govern. 
 3. Order Approving Notice to Stockholders and Setting Settlement Hearing Date 

3.1. Within five (5) days of the full execution of this Stipulation and the Investors Settlement Agreement, the Settling Parties
shall jointly submit this Stipulation together with its exhibits to the Court and shall apply for entry of the order, substantially in the form of Exhibit C attached hereto, providing for the scheduling of the Settlement Hearing Date, and approving
the mailing of a Notice of Settlement of the Action, substantially in the form of Exhibit D attached hereto or such other form of notice as approved by the Court (“Scheduling Order”). 

  
 10 

 3.2. No later than sixty (60) days prior to the Settlement Hearing Date, LRAD shall
provide Current LRAD Stockholders with notice of the Settlement by disseminating by First Class Mail (or by more expedient means) the Notice to all Current LRAD stockholders at their respective addresses currently set forth in LRAD’s stock
records, if known. If no address is known for beneficial owners, LRAD shall use reasonable efforts to give notice to all beneficial owners of LRAD common stock by providing additional copies of the Notice to any record owner requesting the Notice
for the purpose of distribution to such beneficial owners. 
 3.3. LRAD shall pay for the costs associated with disseminating
the Notice as provided in ¶3.2 or in the form approved by the Court. At least ten (10) court days prior to the Settlement Hearing Date, LRAD shall file with the Court an appropriate declaration with respect to the posting, filing and
publication of the Notice. 
 4. Releases 
 4.1. Upon the Effective Date, (i) Plaintiff and Plaintiff’s Counsel, on their own behalf and derivatively on behalf of LRAD (as nominal defendant); (ii) LRAD; and (iii) Current LRAD
Stockholders, to the extent claiming by, through, in the right of, derivatively, or on behalf of LRAD; shall be deemed to have, and by operation of the Judgment shall have, fully, finally and forever released, relinquished, extinguished and
discharged all Released Claims, including Unknown Claims, against each and all of the Released Persons and shall be permanently barred and enjoined from instituting, commencing or prosecuting or asserting any Released Claim against any of the
Released Persons. 
 4.2. Upon the Effective Date, each of the Released Persons shall be deemed to have, and by operation of the
Judgment shall have, fully, finally, and forever released, relinquished, extinguished and discharged (i) Plaintiff and Plaintiff’s Counsel; and (ii) LRAD, from all claims 

  
 11 

 
(including Unknown Claims as defined in ¶1.26) arising out of, relating to or in connection with the institution, prosecution, assertion, settlement or resolution of the Action or the
Released Claims. Nothing herein shall in any way impair or restrict the rights of LRAD or any Released Person to enforce the terms of this Stipulation. 
 4.3. Notwithstanding the above, nothing herein is intended to or does release the following claims (the “Reserved Claims”), which are reserved without agreement or acknowledgment as to the
merits or lack of those claims: 
 (a) Nothing herein is intended to affect any rights with respect to past or future
indemnification or advancement or payment of past or future legal fees and defense costs arising under and pursuant to any Released Person’s respective indemnification agreements with LRAD, LRAD’s certificate of incorporation or by-laws,
applicable law, equity or other contract, or any entitlement to insurance coverage or insurance proceeds; 
 (b) The Released
Persons and LRAD shall retain and reserve all rights to seek contribution or equitable indemnification from any Person (other than a Released Person) in connection with all actions, and any other litigation, matter, proceeding, or investigation
commenced after the date of this Stipulation; and 
 (c) Nothing provided for in Paragraphs 4.3(a) or 4.3(b) shall permit the
Released Persons to seek indemnification from LRAD for any settlement consideration provided for in Section 2.1 above. 

5. Plaintiff’s Counsel’s Attorneys’ Fees And Expenses 

5.1. Except as stated in this paragraph and in ¶ 3.3, each party shall bear its own attorneys’ fees and costs. Plaintiff and
Plaintiff’s counsel may, however, apply to the Court for 

  
 12 

 
an award of attorneys’ fees and expenses to be paid by LRAD (the “Fee Award”). The Individual Defendants shall have no obligations with respect to the Fee Award. 

5.2. LRAD shall cause the Fee Award to be sent by wire transfer to Abbey Spanier LLP (as receiving agent for all Plaintiff’s
Counsel) within five (5) business days after the Effective Date. LRAD and the Individual Defendants shall have no liability whatsoever with respect to the allocation of the Fee Award among Plaintiff’s Counsel. Any disapproval or
modification of the Fee Award by the Court shall not (i) affect the enforceability of this Settlement; or (ii) provide any of the Settling Parties with the right to terminate the Settlement as set forth in this Stipulation; or
(iii) prevent the Judgment from becoming Final. 
 6. Effective Dates; Conditions Of Settlement, Effect Of Non-Approval,
Cancellation Or Termination 
 6.1. The Effective Date shall be the date when of all of the following events have occurred:

 a) The Court has entered the Scheduling Order substantially similar in form to Exhibit C, attached hereto; 

b) The Court has approved the Settlement as described herein, following Notice to Current LRAD Stockholders as provided in ¶3.2
herein; 
 c) The Court has entered the Judgment substantially in the form of Exhibit B, attached hereto; and 

d) The Judgment has become Final, as defined in ¶1.12. 
 6.2. If all of the conditions specified in ¶6.1 and its subparagraphs are not met because the Court does not approve the Settlement, or the Judgment approving the Settlement is reversed or fails to
become Final, then the settlement shall become null and void with the exception of 

  
 13 

 
¶3.3. The Parties shall then meet and confer to evaluate whether to submit a modified Settlement for court approval. 
 7. Representations and Warranties 
 7.1. Each counsel or other Person
executing the Stipulation or any of its Exhibits on behalf of any party hereto hereby warrants that such Person has the full authority to do so. 
 8. Miscellaneous Provisions 
 8.1. Intent of the Parties: The
Settling Parties (a) acknowledge that it is their intent to consummate the agreements embodied in this Stipulation; and (b) agree to cooperate to the extent necessary to effectuate and implement all terms and conditions of the Stipulation
and to exercise their good faith best efforts to accomplish the foregoing terms and conditions of the Stipulation. 
 8.2.
Stay of Proceedings: Pending the Effective Date, (i) Plaintiff and Plaintiff’s counsel agrees to stay all proceedings in this Action and not to initiate any proceedings concerning the Released Claims other than those incident to the
Stipulation itself; and, (ii) if requested, to join on behalf of LRAD with the Individual Defendants to seek to prevent or stay any other action or claims brought seeking to assert any Released Claim. If any action that would be barred by the
releases contemplated by this Stipulation is commenced against any of the Released Persons prior to the Effective Date, and such action is not enjoined or dismissed prior to the Effective Date, then the Stipulation and the Stipulation shall be
canceled and terminated. 
 8.3. No Admission of Liability: Neither the Stipulation, including any exhibits attached
hereto nor any act performed or document executed pursuant to or in furtherance of the Stipulation, including any exhibits attached hereto: (a) is or may be deemed to be or may be 

  
 14 

 
used as an admission of, or evidence of, the validity or invalidity of any Released Claim, or of any wrongdoing or liability or lack thereof of the Individual Defendants or Released Persons; or
(b) is or may be deemed to be or may be used as an admission of, or evidence of, any fault or omission or lack thereof of any of the Individual Defendants or Released Persons in any proceeding of any kind or nature, including civil, criminal or
administrative proceeding in any court, administrative agency or other tribunal. LRAD, the Individual Defendants or Released Persons may file the Stipulation and/or the Judgment in any action that may be brought against them in order to support a
defense or counterclaim based on principles of res judicata, collateral estoppel, full faith and credit, release, standing, good faith Stipulation, judgment bar or reduction or any other theory of claim preclusion or issue preclusion or
similar defense or counterclaim. The Individual Defendants have denied and continue to deny each and all of the claims alleged in the Action. Plaintiff or LRAD may file the Stipulation in any proceeding brought to enforce any of its terms or
provisions. The Settling Parties and their counsel, and each of them, agree, to the extent permitted by law, that all agreements made and orders entered during the course of the Action relating to the confidentiality of information shall survive
this Stipulation. 
 8.4. Effect of Merger or Change of Control: The Settling Parties agree that this Stipulation will
run to their respective successors-in-interest, and they further agree that any planned, proposed or actual sale, merger or change in control of LRAD shall not void this Stipulation, and that in the event of a planned, proposed or actual sale,
merger or change-in-control of LRAD they will continue to seek final approval of this Stipulation expeditiously, including, but not limited to, adhering to the schedule set forth in the Scheduling Order. 

8.5. No Future Litigation: Plaintiff agrees not to institute, join in, or cooperate in any way in any threatened, pending, or
future litigation, lawsuit, claim or action against the Released 

  
 15 

 
Persons, or any of them, alleging, prosecuting, regarding, concerning, relating to, referring to or arising out of in any way the Released Claims. 

8.6. Representation of No Assignment: Plaintiff warrants and represents that it has not assigned or transferred or attempted to
assign or transfer to any person or entity any Released Claim or any portion thereof or interest therein. 
 8.7. Arm’s
Length Negotiation: This Stipulation has been negotiated by the Settling Parties at arm’s length and all are represented by counsel. No provision or ambiguity in this Stipulation shall be construed or interpreted against any of the Settling
Parties by virtue of his/her/its participation in the drafting of this Stipulation. The Stipulation shall in all cases be construed as a whole, according to its fair meaning and not strictly for or against any of the Settling Parties. 

8.8. Consideration: The covenants contained in this Stipulation provide good and sufficient consideration for every promise, duty,
release, obligation, agreement and right contained in this Stipulation. 
 8.9. Incorporation: All of the Exhibits to the
Stipulation are fully incorporated herein by reference. 
 8.10. Amendment: The Stipulation may be amended or modified
only by a written instrument signed by or on behalf of all Settling Parties or their respective successors-in-interest. 
 8.11.
Counterparts: This Stipulation may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 

8.12. Successors and Assigns: This Stipulation shall bind the successors and permitted assigns of the Settling Parties and
Released Persons, and inure to the benefit of any successor or 

  
 16 

 
permitted assign of any of the parties; provided, however, that no party may assign this Stipulation without the prior written consent of the other Settling Parties. 

8.13. Subject Matter Jurisdiction: The Court shall retain jurisdiction with respect to implementation and enforcement of the terms
of the Stipulation, and all parties hereto submit to the jurisdiction of the Court for purposes of implementing and enforcing the Stipulation embodied in the Stipulation and for any matters arising out of, concerning or relating thereto. 

8.14. Choice of Law: The Stipulation, and the Exhibits hereto shall be considered to have been negotiated, executed and delivered,
and to be wholly performed, in the State of Delaware, and the rights and obligations of the parties to the Stipulation shall be construed and enforced in accordance with, and governed by, the internal substantive laws of the State of Delaware
without giving effect to that State’s choice of law principles. 
 IN WITNESS WHEREOF, the parties hereto have caused the
Stipulation to be executed, by their duly authorized attorneys. 
  

					
		 		 	ROSENTHAL, MONHAIT & GODDESS, PA
			
		 		 	  

		 		 	Jessica Zeldin (DE Bar No. 3558)
	 OF COUNSEL:
  

ABBEY SPANIER, LLP
 212 E. 39th Street

New York, NY 10016
 (212)
889-3200
	 		 	919 N. Market Street, Suite 1401
	 		 	PO Box 1070
	 		 	Wilmington, DE 19899
	 		 	(302) 656-4433
	 		 	 Attorneys for Plaintiff Iroquois Master Fund Ltd.

  
 17 

 
	
	DLA PIPER LLP (US)
	
	  

	 John L. Reed (DE Bar No. 003023)
 919 N. Market Street, Suite 1500
 Wilmington, DE 19801

(302) 468-5635
  
 Shirli Fabbri Weiss (CA Bar No. 79225)
 401 B Street, Suite 1700

San Diego, CA 92101-4297

(619) 699-3650
  
 Attorneys for the Individual Defendants and Nominal Defendant LRAD Corporation

  
 18 

 Exhibit B 
 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE 
  

					
	  
	 		 	
	IROQUOIS MASTER FUND, LTD.,	 	:	 	
			
	 Plaintiff,
	 	:	 	
			
		 	:	 	
			
	 v.
	 	:	 	 C.A. No. 7704-VCP

			
		 	:	 	
	RAYMOND C. SMITH, LAURA M. CLAGUE,	 	:	 	
	HELEN C. ADAMS, THOMAS R. BROWN	 	:	 	
	and KATHERINE McDERMOTT,	 	:	 	
			
	 Defendants,
	 	:	 	
			
	 and
	 	:	 	
			
	LRAD CORPORATION,	 	:	 	
			
	 Nominal Defendant.
	 	:	 	
			
	  
	 	:	 	

 ORDER AND FINAL JUDGMENT 

WHEREAS, a hearing was held before this Court on             , 2013
pursuant to this Court’s Scheduling Order With Respect to Notice and Settlement Hearing, dated             , 2013 (the “Scheduling Order”), and upon a Stipulation of
Settlement dated May     , 2013 (the “Stipulation”) outlining a settlement of the above-captioned action (the “Action”), which is incorporated herein by reference. The parties appeared by their attorneys of
record. The Court heard and considered the submissions and evidence presented in support of the proposed settlement and the application for an award of attorneys’ fees and expenses. The opportunity to be heard was given to all other persons
requesting to be heard in accordance with the Scheduling Order. The Court considered, among other matters, the benefits of the proposed Stipulation and the risks, complexity, expense and probable duration of further litigation. The

 
proposed Stipulation and the application for an award of attorneys’ fees and expenses was heard and considered by the Court. 

This Order and Final Judgment (“Judgment”) incorporates by reference the definitions in the Stipulation and, unless otherwise
defined, all capitalized terms shall have the same meanings as set forth in the Stipulation. 
 IT IS ORDERED, ADJUDGED AND
DECREED, this      day of             , 2013 that: 
 1. The Court finds that Plaintiff and Plaintiff’s Counsel have adequately represented the interests of LRAD Corporation (“LRAD” or the “Company”) and Current LRAD Stockholders
with respect to the Action, the claims asserted therein, and all Released Claims. 
 2. The Court finds that the Stipulation is
fair, reasonable, adequate, and in the best interests of LRAD and Current LRAD Stockholders. 
 3. This Court approves the
Stipulation in all respects, and the parties are directed to consummate the settlement in accordance with the terms of the Stipulation. The Register in Chancery is directed to enter and docket this Judgment. 

4. The Notice of Pendency and Settlement of Action (the “Notice”) has been given to all Current LRAD Stockholders pursuant to
and in the manner directed by the Scheduling Order, proof of mailing, and other dissemination of the Notice was filed with the Court and full opportunity to be heard has been offered to all parties, current stockholders of the Company, and persons
in interest. The Court finds that the form and means of the Notice was the best notice practicable under the circumstances and was given in full compliance with the requirements of Court of Chancery Rule 23.1 and due process of law, and that all
Current LRAD Stockholders are bound by this Judgment. 

 5. This Court has jurisdiction over the subject matter of the Action, including all matters
necessary to effectuate the Stipulation and this Judgment and over all parties to the Action, including Plaintiff, Current LRAD Stockholders and all Defendants (including nominal defendant LRAD). 

6. The Action and all claims contained therein, as well as all of the Released Claims, are dismissed with prejudice. As between Plaintiff
and Defendants, the parties are to bear their own costs, except as otherwise provided in the Stipulation and in this Judgment. 

7. Except as otherwise provided in the Stipulation, Plaintiff (on its own behalf and derivatively on behalf of LRAD), Plaintiff’s
Counsel, LRAD, and each and every Current LRAD Stockholder claiming by, through, in the right of, derivatively, or on behalf of LRAD, by operation of this Judgment, fully, finally, and forever release, relinquish and discharge the Released Persons
from any and all of the Released Claims. 
 8. Except as otherwise provided in the Stipulation, each of Released Persons, by
operation of this Judgment, fully, finally, and forever release, relinquish and discharge Plaintiff, Plaintiff’s Counsel, LRAD, and each and every Current LRAD Stockholder claiming by, through, in the right of, derivatively, or on behalf of
LRAD from any and all claims arising from the institution or prosecution of the Actions. 
 9. Except as otherwise provided in
the Stipulation, the parties (including LRAD) are permanently and finally enjoined from instituting, commencing, prosecuting, continuing, or in any way participating in, whether directly or indirectly, representatively, individually, derivatively on
behalf of LRAD, or in any other capacity, any action or other proceeding asserting any Released Claims against any or all of the Released Persons or any party, or their respective attorneys. 

 10. Nothing in this Judgment shall in any way impair or restrict the rights of the
Defendants (including nominal defendant LRAD) or the rights of any party to enforce the terms of the Stipulation. 
 11.
Plaintiff’s Counsel are awarded attorneys’ fees and expenses in the sum of $         which the Court finds to be fair and reasonable, to be paid by LRAD in accordance with the terms of the
Stipulation. 
 12. Neither the Stipulation, this Judgment, nor any act performed or document executed pursuant to or in
furtherance of the Stipulation: (a) is or may be deemed or offered or received in evidence as a presumption, a concession, or an admission of any fault, liability, or wrongdoing, and except as required to enforce this Stipulation, shall not be
offered or received in evidence or otherwise used by any party in any action, whether civil, criminal, or administrative; or (b) shall be interpreted as an admission of liability or wrongdoing on the part of the Individual Defendants, nor an
admission on the part of Plaintiff of any lack of merit of the claims asserted in the Action. Notwithstanding the foregoing, LRAD and any of the Individual Defendants may file the Stipulation, or any judgment or order of the Court related hereto, in
any action that has been or may be brought against them, in order to support a claim or defense based on principles of res judicata, collateral estoppel, release, good faith settlement, judgment bar or reduction, or any other theory of claim
preclusion or issue preclusion or similar defense or counterclaim. 
 13. Without affecting the finality of this Judgment in any
way, the Court reserves jurisdiction over all matters and disputes relating to the Stipulation and this Judgment, and may enter additional orders as may from time to time be necessary to implement and enforce the

 
Stipulation and this Judgment. Nothing herein dismisses or releases any claim by or against any party to the Stipulation arising out of a breach of the Stipulation or violation of this Judgment.

  

	
	  

	Vice Chancellor

 EXHIBIT C 

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE 
  

					
	  
	 		 	
			
	IROQUOIS MASTER FUND, LTD.,	 	:	 	
			
	 Plaintiff,
	 	:	 	
			
		 	:	 	
			
	 v.
	 	:	 	 C.A. No. 7704-VCP

			
		 	:	 	
	RAYMOND C. SMITH, LAURA M. CLAGUE,	 	:	 	
	HELEN C. ADAMS, THOMAS R. BROWN	 	:	 	
	and KATHERINE McDERMOTT,	 	:	 	
			
	 Defendants,
	 	:	 	
			
	 and
	 	:	 	
			
	LRAD CORPORATION,	 	:	 	
			
	 Nominal Defendant.
	 	:	 	
			
	  
	 	:	 	

 SCHEDULING ORDER WITH RESPECT 

TO NOTICE AND SETTLEMENT HEARING 
 WHEREAS, the parties to the above-captioned action (the “Action”) have entered into a Stipulation of Settlement dated May     , 2013 (the
“Stipulation”), which sets forth the terms and conditions for the proposed settlement and dismissal with prejudice of the Action, subject to review and approval by this Court pursuant to Court of Chancery Rule 23.1 upon notice to the
current stockholders of nominal defendant LRAD Corporation (“LRAD”); 
 NOW, upon application of the parties,
after review and consideration of the Stipulation filed with the Court and the exhibits annexed thereto, 
 IT IS HEREBY
ORDERED this      day of             , 2013 as follows: 

 1. A hearing (the “Settlement Hearing”) shall be held on
            , 2013, at      .m. in the Court of Chancery, New Castle County Courthouse, 500 North King Street, Wilmington, Delaware 19801, to (a) determine whether
the proposed settlement, on the terms and conditions provided for in the Stipulation, is fair, reasonable, and adequate and in the best interests of LRAD and its current stockholders; (b) determine whether the Court should finally approve the
Stipulation and enter the Order and Final Judgment (the “Judgment”) as provided in the Stipulation, dismissing the Action with prejudice and extinguishing and releasing the Released Claims (as defined in the Stipulation); (c) hear and
determine any objections to the proposed settlement; (d) rule on plaintiff’s counsel’s Fee and Expense Application (as defined in the Stipulation); and (e) rule on such other matters as the Court may deem appropriate. 

2. The Settlement Hearing may be adjourned by the Court from time to time without further notice to anyone other than the parties to the
Action and any Objectors (as defined herein). 
 3. The Court reserves the right to approve the Stipulation at or after the
Settlement Hearing with such modifications as may be consented to by the parties to the Stipulation and without further notice. 

4. The Court approves, in form and content, the Notice of Pendency of Settlement of Action (the “Notice”) filed by the parties
with the Stipulation as Exhibit D and finds that the giving of notice substantially in the manner set forth herein meets the requirement of Court of Chancery Rule 23.1 and due process, and is the best notice practicable under the circumstances. No
less than sixty (60) calendar days prior to the Settlement Hearing, LRAD shall cause the Notice, substantially in the form annexed as Exhibit D to the Stipulation, to be distributed, by First-Class Mail (or by more expedient means), to all
Current LRAD Stockholders at their 

 
respective addresses currently set forth in LRAD’s stock records, if known. Additionally, LRAD shall use reasonable efforts to give notice to all beneficial owners of common stock of LRAD by
providing additional copies of the Notice to any record holder requesting the Notice for purposes of distribution to such beneficial owners. All of the expenses related to the distribution of the Notice shall be paid in accordance with the terms of
the Stipulation. 
 5. At least ten (10) court days prior to the Settlement Hearing, LRAD shall file an appropriate
affidavit attesting to provision of the Notice in accordance with this Order. 
 6. As set forth in the Notice, any record or
beneficial stockholder of LRAD who objects to the Stipulation, the proposed Judgment to be entered, and/or the Fee and Expense Application who wishes to be heard (“Objector”), may appear in person or by his, her, or its attorney at the
Settlement Hearing and present any evidence or argument that may be proper and relevant; provided, however, that no Objector shall be heard or entitled to contest the approval of the terms and conditions of the settlement, or, if
approved, the Judgment to be entered thereon, unless he, she, or it has, no later than ten (10) business days before the Settlement Hearing (unless the Court in its discretion shall thereafter otherwise direct, upon application of such person
and for good cause shown), filed with the Register in Chancery, Court of Chancery, New Castle County Courthouse, 500 North King Street, Wilmington, Delaware 19801, and served (electronically, by hand, or by overnight mail) on counsel, at the
addresses below, the following: (a) proof of current ownership of LRAD stock; (b) a written notice of the Objector’s intention to appear; (c) a detailed statement of the objections to any matter before the Court; and (d) a
detailed statement of all of the grounds thereon and the reasons for the Objector’s desire to appear and to be heard, as well as all documents or writings which the Objector desires the Court to consider. 

 Jessica Zeldin, Esq. 

Rosenthal Monhait & Goddess, P.A. 
 919 Market Street, Suite 1401 
 Citizens Bank Center 

P.O. Box 1070 

Wilmington, DE 19899 
 jzeldin@rmgglaw.com 
 Attorneys for Plaintiff Iroquois Master Fund, Ltd.

 John L. Reed, Esq. 
 DLA Piper LLP 
 919 N. Market Street, Suite 1500 

Wilmington, DE 19801 
 john.reed@dlapiper.com 
 Attorneys for Defendants Raymond C. Smith,

 Laura M. Clague, Helen C. Adams, Thomas R. Brown 

and Katherine McDermott and Nominal Defendant LRAD Corporation 

7. Any person or entity who fails to object in the manner prescribed above shall be deemed to have waived such objection (including the
right to appeal), unless the Court in its discretion allows such objection to be heard at the Settlement Hearing, and shall forever be barred from raising such objection in this Action or any other action or proceeding or otherwise contesting the
Stipulation, or the Fee and Expense Application, and will otherwise be bound by the Judgment to be entered and the releases to be given. 
 8. At least thirty (30) business days prior to the Settlement Hearing, plaintiff’s counsel shall file with the Court a brief in support of the settlement, and plaintiff’s counsel’s Fee
and Expense Application. Any objections to the Fee and Expense Application by defendants shall be filed and served no later than fifteen (15) business days prior to the Settlement Hearing. 

9. At least five (5) business days prior to the Settlement Hearing, the parties may file with the Court a response brief to any
objections made by an Objector pursuant to Paragraph 6, 

 
above, and plaintiff may file and serve a brief response to any objections to the Fee and Expense Application. 
 10. In the event that the Stipulation is not approved by the Court, the settlement and any actions taken in connection therewith shall become null and void for all purposes, and all negotiations,
transactions, and proceedings connected with it: (a) shall be without prejudice to the rights of any party thereto; (b) shall not be deemed to be construed as evidence of, or an admission by any party of any fact, matter, or thing; and
(c) shall not be admissible in evidence or be used for any purpose in any subsequent proceedings in the Action or any other action or proceeding. The parties shall be deemed to have reverted to their respective status in the Action as of the
date and time immediately prior to the execution of the Stipulation, and, except as otherwise expressly provided, the parties shall proceed in all respects as if the Stipulation and any related orders had not been entered. 

11. All discovery and other proceedings in this Action (except as may be necessary to carry out the terms and conditions of the proposed
settlement) are hereby stayed and suspended until further order of the Court. Except as provided in the Stipulation, pending final determination of whether the Stipulation should be approved, all parties to the Action are hereby enjoined against
instituting, commencing, prosecuting, continuing, or in any way participating in, whether directly, representatively, individually, derivatively on behalf of LRAD, or in any other capacity, any action or other proceeding asserting any Released
Claims. 
 12. The Court may, for good cause shown, extend any of the deadlines set forth in this Order without further notice
to anyone other than the parties to the Action and any Objectors. 
  

	
	  

	Vice Chancellor

 Exhibit D 
 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE 
  

					
	IROQUOIS MASTER FUND, LTD.,	 	:	 	
			
	 Plaintiff,
	 	:	 	
			
		 	:	 	
			
	 v.
	 	:	 	 C.A. No. 7704-VCP

			
		 	:	 	
	RAYMOND C. SMITH, LAURA M. CLAGUE,	 	:	 	
	HELEN C. ADAMS, THOMAS R. BROWN	 	:	 	
	and KATHERINE McDERMOTT,	 	:	 	
			
	 Defendants,
	 	:	 	
			
	 and
	 	:	 	
			
	LRAD CORPORATION,	 	:	 	
			
	 Nominal Defendant.
	 	:	 	

 NOTICE OF PENDENCY OF SETTLEMENT OF ACTION 

TO: ALL CURRENT STOCKHOLDERS OF LRAD CORPORATION 
 (TRADING SYMBOL: LRAD) 
 PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR
RIGHTS WILL BE AFFECTED BY THE LEGAL PROCEEDINGS IN THIS LITIGATION. IF THE COURT APPROVES THE PROPOSED SETTLEMENT, YOU WILL BE FOREVER BARRED FROM CONTESTING THE FAIRNESS, REASONABLENESS, AND ADEQUACY OF THE PROPOSED SETTLEMENT, OR PURSUING THE
CLAIMS DEFINED HEREIN. 
 IF YOU HOLD LRAD CORPORATION COMMON STOCK FOR THE BENEFIT OF ANOTHER, PLEASE PROMPTLY TRANSMIT THIS DOCUMENT TO
SUCH BENEFICIAL OWNER. 
 IF YOU DO NOT OBJECT TO THE PROPOSED SETTLEMENT OR THE ATTORNEYS’ FEE AND EXPENSE AWARD, DESCRIBED IN THIS
NOTICE, YOU ARE NOT OBLIGATED TO TAKE ANY ACTION. 

	I.	WHY ARE YOU RECEIVING THIS NOTICE? 

 The purpose of this Notice is to tell you about: (i) a lawsuit (the “Action”) in the Delaware Court of Chancery (the “Delaware Court”) brought on behalf of LRAD Corporation
(“LRAD” or the “Company”); (ii) a proposal to settle the Action as provided in a Stipulation of Settlement (the “Stipulation”); and (iii) your right, among other things, to attend and participate in a hearing
to be held on             , 2013 at     .m., in the Court of Chancery, New Castle County Courthouse, 500 North King Street, Wilmington, Delaware 19801 (the
“Settlement Hearing”). 
 This Notice describes the rights you may have under the Stipulation and what steps you may,
but are not required to, take concerning the proposed settlement. If the Court approves the Stipulation, the parties will ask the Delaware Court to approve an Order and Final Judgment that would end the Action. 

THE FOLLOWING DESCRIPTION DOES NOT CONSTITUTE FINDINGS OF ANY COURT. IT IS BASED ON STATEMENTS OF THE PARTIES AND SHOULD NOT BE
UNDERSTOOD AS AN EXPRESSION OF ANY OPINION OF ANY COURT AS TO THE MERITS OF ANY OF THE CLAIMS OR DEFENSES RAISED BY ANY OF THE PARTIES. 
  

	II.	BACKGROUND: WHAT IS THE ACTION ABOUT? 

 Plaintiff Iroquois Master Fund, Ltd., (“Iroquois” or “Plaintiff”) is a current LRAD stockholder. Plaintiff is represented by Rosenthal, Monhait & Goddess, P.A., and Abbey
Spanier, LLP (collectively, “Plaintiff’s Counsel”). 
 Nominal defendant LRAD is a Delaware corporation with its
principal place of business in San Diego, California. Defendants Raymond C. Smith, Laura M. Clague, Helen C. Adams, Thomas R. Brown and Katherine McDermott (collectively, the “Individual Defendants”) are present or former officers and/or
directors of LRAD. Defendants Smith, Clague and Adams comprised the Compensation Committee of the LRAD Board of Directors. LRAD develops and delivers innovative directed acoustic products that beam, focus, and control sound over short and long
distances, primarily for use by government, military, law enforcement and security entities. 
 On May 10, 2012, the
Compensation Committee granted 975,000 nonqualified stock options to the Company’s Officers and Directors with strike prices set at the stock’s closing price on the NASDAQ stock market on May 10, 2012 of $1.33 per share (the
“Stock Option Grants”), pursuant to the Equity Incentive Plan. Specifically, the Compensation Committee awarded 750,000 options to LRAD’s CEO, Brown; 100,000 options to LRAD’s CFO, McDermott; 50,000 options to each of
Compensation Committee members, Clague and Smith; and 25,000 options to Compensation Committee member Adams. 
 On July 23,
2012, Iroquois filed the Action in the Delaware Court derivatively on behalf of LRAD against the Individual Defendants, claiming that the Individual Defendants breached 

  
 2 

 
their fiduciary duties of loyalty in connection with the issuance of the Stock Option Grants. Defendants moved to dismiss the complaint. 

On November 19, 2012, Plaintiff filed its Verified Amended Shareholder Derivative Complaint (the “Amended Complaint”),
asserting claims for breach of fiduciary duty arising out of the Stock Option Grants. In the Amended Complaint, Iroquois alleged that the stock options granted on May 10, 2012 were undervalued and timed to coincide with negative earnings
announcements, and to precede positive announcements concerning future sales contracts. The Amended Complaint alleged claims for breach of fiduciary duty, unjust enrichment, and waste. Defendants filed a motion to dismiss the Amended Complaint on
December 17, 2012. The motion to dismiss was fully briefed and argued on March 4, 2013 and has not been decided by the Court. The Individual Defendants have denied and continue to deny that they have committed any act or omission giving
rise to any breach of fiduciary duty, liability, and/or violation of law. 
 On January 17, 2013, Iroquois, on behalf of
itself and other investors in LRAD, delivered a letter to the Company expressing an intention to nominate director candidates (the “Nomination Letter”) for election to the Board at the Company’s 2013 Annual Meeting. 

In or about February, 2013, the Parties entered into settlement negotiations concerning the Action and the Nomination Letter. 

In or about May, 2013, the Parties reached resolutions of the Action and of certain matters related to the 2013 Annual Meeting, including
the Nomination Letter. The documents embodying those resolutions consist of the Stipulation settling the Action and a settlement agreement resolving the matters related to the 2013 Annual Meeting (the “Investors Settlement Agreement”),
which were executed simultaneously with each other. 
 In settlement of the Action and in consideration of releases described
below and in the Stipulation, defendants have agreed to amend Defendant Brown’s Stock Option Grants to reprice from $1.33 to $3.00 the strike price of each of the 750,000 non-qualified stock options granted to him on May 10, 2012. The
settlement of the Action and the application by Plaintiff’s Counsel for an award of attorneys’ fees and expenses are subject to the approval of the Delaware Court. 
 In resolution of the matters related to the 2013 Annual Meeting, including the Nomination Letter, the parties have agreed that LRAD’s Nominating and Corporate Governance Committee will recommend the
nomination of defendants Brown and Clague, as “Continuing Directors,” and of General John G. Coburn, Dennis J. Wend and Richard H. Osgood III as new directors for election at the 2013 Annual Meeting, which meeting shall be held no later
than June 30 2013. In addition the parties have agreed to a voting agreement, a standstill agreement and releases of any claims. LRAD has also agreed to reimburse Iroquois and the other investors for the legal and advisory fees (including the
proxy solicitor’s fees) incurred in connection with the Nomination Letter and the Investors Settlement Agreement. Said fees and expenses in the amount of $301,496 have now been paid by LRAD. As set forth below, none of the foregoing fees have
been incurred by or paid to Plaintiff’s Counsel in the Action. The Company reserves the right to argue that legal and advisory fees paid in connection with the Nomination Letter and 

  
 3 

 
Investors Settlement Agreement should reduce the amount awarded in connection with the settlement of the derivative action. 

The foregoing is a summary of the resolution of the matters related to the 2013 Annual Meeting. The Investors Settlement Agreement dated
as of May 21, 2013 is annexed as Exhibit A to the Stipulation filed in the Delaware Court. 
 The Investors Settlement
Agreement provides that execution of the settlement embodied in the Stipulation and the parties’ cooperation in the submission of the Stipulation to the Delaware Court were conditions to the Investors Settlement Agreement. The Investors
Settlement Agreement, which is final and binding upon its execution and thus not subject to the Delaware Court’s approval, is not conditioned on the Delaware Court’s approval of the settlement embodied in the Stipulation. 

 

	III.	HOW WAS THE SETTLEMENT REACHED? 

 In February 2013, the parties commenced settlement negotiations. The Stipulation was later signed by all parties on May 21, 2013. 

THE COURT HAS NOT FINALLY DETERMINED THE MERITS OF PLAINTIFF’S CLAIMS OR THE DEFENSES THERETO. THIS NOTICE DOES NOT IMPLY THAT
THERE HAS BEEN OR WOULD BE ANY FINDING OF VIOLATION OF THE LAW BY THE INDIVIDUAL DEFENDANTS OR THAT RECOVERY COULD BE HAD IN ANY AMOUNT IF THE ACTION WAS NOT SETTLED. 

 

	IV.	WHAT ARE THE TERMS OF THE SETTLEMENT? 

 Under the Stipulation, Defendant Brown has agreed to reprice the strike price of each and every of the 750,000 non-qualified stock options granted to him on May 10, 2012 from $1.33 to $3.00. The
repricing shall occur within three business days of the Effective Date of the settlement, assuming that an Effective Date occurs. Defendant Brown has agreed not to exercise any of the 750,000 options that are the subject of the settlement pending
the Effective Date. 
 Because the Action was brought for the benefit of LRAD, any recovery in the Action (whether from this or
any settlement or through a judgment in favor of the Plaintiff) would go to LRAD. LRAD stockholders will not receive any direct payment as a result of the Stipulation and will not need to fill out any kind of claims form as a result of the
settlement. 
  

	V.	WHAT CLAIMS WILL THE SETTLEMENT RELEASE? 

 Under the Stipulation, the following releases will occur, except as noted below: 
 Plaintiff (on its own behalf and derivatively on behalf of LRAD), Plaintiff’s Counsel, LRAD, and each and every current LRAD stockholder claiming by, through, in the right of, derivatively, or on
behalf of LRAD, shall fully, finally, and forever release, relinquish, and 

  
 4 

 
discharge the Released Persons (as defined below) from any and all of the Released Claims (as defined below). 
 Each of the Released Persons (as defined below) shall fully, finally, and forever release, relinquish, and discharge Plaintiff, Plaintiff’s Counsel and LRAD from any and all claims arising out of,
relating to or in connection with the institution, prosecution, assertion, settlement or resolution of the Action or the Released Claims. 
 The “Released Persons” include: the Individual Defendants and their heirs, estates, executors, administrators, personal or legal representatives, beneficiaries, spouses, insurers, attorneys,
advisors or assigns and any entity in which an Individual Defendant and/or member of his or her family has an interest, or any trust of which an Individual Defendant is the settlor or which is for the benefit of any Individual Defendant and/or
member of his or her family. 
 The “Released Claims” include: any and all claims (including Unknown Claims) for
relief of any nature whatsoever or causes of action, debts, demands, rights, liabilities, damages, actions, losses, obligations, judgments, suits, fees, expenses, costs, matters, issues and causes of action, known or unknown, contingent or absolute,
suspected or unsuspected, disclosed or undisclosed, concealed or hidden, or matured or unmatured, direct or derivative, that were or could have been asserted in the Action derivatively or otherwise, or by Plaintiff against LRAD or the Released
Persons, based on or relating to the facts, transactions, events, occurrences, acts, disclosures, statements, or omissions that were alleged or could have been alleged in the Action or the subject matter or allegations of the Action. 

 

	VI.	WHAT ARE THE REASONS FOR SETTLING THE ACTION? 

 Plaintiff and Plaintiff’s Counsel believe that the claims asserted in the Action have merit and that Plaintiff’s Counsel’s investigation supports the claims asserted, but also believe that
the settlement set forth above provides substantial and immediate benefits for LRAD and its current stockholders. Plaintiff and its counsel have taken into account the uncertain outcome and the risk of any litigation, especially in complex
stockholder litigation such as the Action, as well as the difficulties and delays inherent in such litigation. Plaintiff and Plaintiff’s Counsel also are mindful of inherent problems of proof associated with, and possible defenses to, the
violations asserted in the Action. In addition, Plaintiff and Plaintiff’s Counsel recognize and acknowledge the expense and length of continued proceedings necessary to prosecute the Action against the Individual Defendants through trial and
appeals. Based upon these considerations, among others, Plaintiff and Plaintiff’s Counsel have concluded that the terms and conditions of the Stipulation confer substantial benefits upon and are in the best interests of LRAD and its
stockholders. 
 The Individual Defendants deny that they have committed or intended to commit any wrongdoing or violations of
law arising out of any of the conduct, statements, acts, or omissions alleged in the Action, and maintain that their conduct was at all times proper and in compliance with applicable law. The Individual Defendants also deny that LRAD was harmed by
any conduct of the Individual Defendants alleged in the Action or that could have been alleged therein. Each of the Individual Defendants asserts that, at all relevant times, he or she acted in

  
 5 

 
good faith and in a manner he or she reasonably believed to be in the best interests of LRAD and its shareholders. 
 The Individual Defendants, however, recognize the uncertainty and the risk inherent in any litigation, and the difficulties and substantial burdens, expense, and length of time that may be necessary to
defend this proceeding through the conclusion of discovery, summary judgment motions, trial, post-trial motions, and appeals. Individual Defendants wish to eliminate the uncertainty, risk, burden and expense of further litigation, and to permit the
operation of LRAD without further distraction and diversion of its directors and executive personnel with respect to the Action. Individual Defendants have therefore determined to settle the Action on the terms and conditions set forth in this
Stipulation and to put the Released Claims to rest finally and forever, without in any way acknowledging any wrongdoing, fault, liability, or damages. 
 LRAD has considered the merits of Plaintiff’s allegations, the Individual Defendants’ defense, and the legal fees and costs it has incurred and will continue to incur as a result of this Action.
LRAD agreed to settle the Action pursuant to the terms described herein because it believes that it is desirable for LRAD to avoid incurring additional legal fees and to avoid the distractions associated with litigation. 

 

	VII.	HOW WILL THE ATTORNEYS GET PAID? 

 To date, Plaintiff’s Counsel in the Action have not received any payments for their efforts on behalf of LRAD and its stockholders. If the Delaware Court approves the Stipulation, Plaintiff’s
Counsel shall apply to the Delaware Court for an award of attorneys’ fees and expenses (the “Fee and Expense Application”) of no more than $340,000, which amount represents less than the amount that would have billed on this matter at
Plaintiff’s Counsel’s typical hourly rates with no contingency multiplier. LRAD has agreed to pay any award of attorneys’ fees and expenses awarded by the Delaware Court after all rights to an appeal have been exhausted, and
Defendants have reserved all rights to oppose the Fee and Expense Application. 
 Court approval of the Stipulation is not in
any way conditioned on the Delaware Court approving the Fee and Expense Application. Disallowance by the Delaware Court of the Fee and Expense Application, or any portion thereof, any appeal from any order relating thereto, and any modification or
reversal on appeal of any such order, will not operate to terminate or cancel the Stipulation or affect its other terms, including the releases, or affect or delay the finality of the Judgment approving the Stipulation. 

All of Defendants’ own legal fees, costs, and expenses incurred in the Action will be borne by Defendant LRAD. 

  
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	VIII.	WHEN WILL THE SETTLEMENT HEARING TAKE PLACE? 

 The Delaware Court has scheduled a Settlement Hearing to be held on             , 2013 at     .m., in the Court of Chancery,
New Castle County Courthouse, 500 North King Street, Wilmington, Delaware 19801. 
 The purpose of the Settlement Hearing is to:
(i) determine whether the proposed Stipulation is fair, reasonable, and adequate and in the best interests of LRAD and its stockholders and should be approved by the Court; (ii) determine whether an Order and Final Judgment should be
entered dismissing the Delaware case with prejudice and extinguishing and releasing all of the claims raised in the Action against the Released Persons; (iii) determine whether the Delaware Court should approve Plaintiff’s Counsel’s
Fee and Expense Application; (iv) hear and determine any objections to the proposed settlement; and (v) rule on such other matters as the Delaware Court may deem appropriate. 

The Court may adjourn the Settlement Hearing from time to time without further notice to anyone other than the parties to the Action and
any Objectors (as defined below). The Delaware Court reserves the right to approve the Stipulation at or after the Settlement Hearing with such modifications as may be consented to by the parties to the Stipulation and without further notice.

  

	IX.	DO I HAVE A RIGHT TO APPEAR AND OBJECT? 

 Any record or beneficial stockholder of LRAD who objects to the settlement, the judgment proposed to be entered, and/or Plaintiff’s Counsel’s Fee and Expense Application, or who otherwise wishes
to be heard (an “Objector”), may appear in person or by his, her, or its attorney at the Settlement Hearing and present any evidence or argument that may be proper and relevant; provided, however, that no Objector shall be
heard or entitled to contest the approval of the terms and conditions of the Stipulation, or, if approved, the judgment to be entered thereon, unless he, she, or it has, no later than ten (10) business days before the Settlement Hearing (unless
the Delaware Court in its discretion shall thereafter otherwise direct, upon application of such person and for good cause shown), filed with the Register in Chancery, Court of Chancery, New Castle County Courthouse, 500 North King Street,
Wilmington, Delaware 19801, and served (electronically, by hand, or overnight mail) on plaintiff’s and defendants’ counsel, at the addresses below, the following: (i) proof of current ownership of LRAD stock; (ii) a written
notice of the Objector’s intention to appear; (iii) a detailed statement of the objections to any matter before the Delaware Court; and (iv) a detailed statement of all of the grounds thereon and the reasons for the Objector’s
desire to appear and to be heard, as well as all documents or writings which the Objector desires the Court to consider. 

  
 7 

 Jessica Zeldin, Esq. 

Rosenthal Monhait & Goddess, P.A. 
 919 Market Street, Suite 1401 
 Citizens Bank Center 

P.O. Box 1070 

Wilmington, DE 19899 
 jzeldin@rmgglaw.com 
 Attorneys for Plaintiff Iroquois Master Fund Ltd.

 John L. Reed, Esq. 
 DLA Piper LLP 
 919 N. Market Street, Suite 1500 

Wilmington, DE 19801 
 john.reed@dlapiper.com 
 Attorneys for Defendants Raymond C. Smith,

 Laura M. Clague, Helen C. Adams, Thomas R. Brown 

and Katherine McDermott and Nominal Defendant LRAD Corporation 

Any person or entity who fails to object in the manner prescribed above shall be deemed to have waived such objection (including the
right to appeal), unless the Delaware Court in its discretion allows such objection to be heard at the Settlement Hearing, and shall forever be barred from raising such objection in the Action or any other action or proceeding or otherwise
contesting the Stipulation or the Fee and Expense Application, and will otherwise be bound by the Judgment to be entered and the releases to be given. You are not required to appear in person at the Settlement Hearing in order to have your timely
and properly filed objection considered. 
  

	X.	WHAT ARE THE TERMS OF THE PROPOSED ORDER AND FINAL JUDGMENT? 

 If the Court determines that the Stipulation is fair, reasonable, adequate, and in the best interests of LRAD and its stockholders, the parties shall jointly request that the Delaware Court enter an Order
and Final Judgment, which will, among other things: 
 1. Approve the Stipulation and adjudge the terms thereof to be fair,
reasonable, adequate, and in the best interests of LRAD and its stockholders, pursuant to Court of Chancery Rule 23.1; 
 2.
Determine that appropriate notice of the Action, the Stipulation, the Settlement Hearing, and the right to appear was provided pursuant to Court of Chancery Rule 23.1. 
 3. Authorize and direct the parties to consummate the settlement in accordance with the terms and conditions of the Stipulation and reserve jurisdiction to supervise the consummation of the Stipulation
provided therein; 

  
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 4. Dismiss the Action with prejudice in accordance with the terms of the Stipulation and
grant the releases described more fully above and in accordance with the terms and conditions of the Stipulation; 
 5. Grant
Plaintiff’s Counsel’s Fee and Expense Application, as the Delaware Court deems appropriate; 
  

	XI.	WHAT SHOULD I DO IF I AM A BENEFICIAL OWNER? 

 Brokerage firms, banks and/or other persons or entities who hold shares of LRAD common stock for the benefit of others are requested to promptly send this Notice to all of their respective beneficial
owners. If additional copies of the Notice are needed for forwarding to such beneficial owners, any requests for such information may be made to: 
 Katherine H. McDermott 
 Chief Financial Officer 

LRAD Corporation 

16990 Goldentop Road 
 San Diego, California 92127 
 Telephone: (858) 676-0515 

kmcdermott@lradx.com 
  

	XII.	HOW DO I GET ADDITIONAL INFORMATION ABOUT THE SETTLEMENT? 

 This Notice is not all-inclusive. The references in this Notice to the pleadings in the Action, the Stipulation and other papers and proceedings are only summaries and do not purport to be comprehensive.
For the full details of the Action, claims that have been asserted by the parties, and the terms and conditions of the settlement, including a complete copy of the Stipulation, stockholders of LRAD are referred to the Court files in the Action. You
or your attorney may examine the Delaware Court files during regular business hours of each business day at the office of the Register in Chancery, Court of Chancery, New Castle County Courthouse, 500 North King Street, Wilmington, Delaware 19801.
Questions about the settlement or about this Notice in general may be addressed to Plaintiff’s Counsel: 
 Judith L.
Spanier, Esq. 
 Abbey Spanier, LLP 
 212 East 39th
Street 
 New York, New York 10016 
 Telephone: (212) 889-3700 
 jspanier@abbeyspanier.com 

PLEASE DO NOT WRITE OR CALL THE COURT 

  
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		 		 	BY ORDER OF THE COURT OF CHANCERY FOR THE STATE OF DELAWARE
			
	Dated:             , 2013	 		 	  

  
 10 

 EXHIBIT C 

Mutual Press Release

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