FORM OF
WARRANT FOR PURCHASE OF SHARES OF
COMMON STOCK OF
LSC, INCORPORATED
JULY 15, 1998
For value received, ____________________________, or its registered
assigns (the "Holder"), is entitled to purchase from LSC, Incorporated, a
Minnesota corporation (the "Company"), at any time on or before July 14, 2003,
______________________________ (________) fully paid and nonassessable shares of
the Company's Common Stock, $.01 par value (such class of stock being
hereinafter referred to as the "Common Stock" and such Common Stock as may be
acquired upon exercise hereof being hereinafter referred to as the "Warrant
Stock"), at the price of $3.20 per share ("Warrant Exercise Price").
This Warrant is described in, and is subject to the terms and
provisions of, the Bridge Loan Agreement, dated as of September 11, 1997, among
the Company and the investors named therein (the "Agreement"). The provisions of
the Agreement are incorporated herein by reference with the same force and
effect as if fully set forth herein.
This Warrant is subject to the following provisions, terms and
conditions:
1. The rights represented by this Warrant may be exercised by the
Holder, in whole or in part (but not as to a fractional share of Common Stock),
by written notice of exercise delivered to the Company accompanied by the
surrender of this Warrant (properly endorsed if required) at the principal
office of the Company and upon payment to it, by cash, certified check or bank
draft, of the warrant exercise price for such shares. In addition, the Holder
may elect to pay the full purchase price by receiving a number of shares of
Common Stock computed using the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Common Stock to be issued to the
Holder.
Y = the number of shares of Common Stock as to which this
Warrant is being exercised.
A = the Fair Market Value of one share of Common Stock.
B = Warrant Exercise Price.
"Fair Market Value" means, with respect to the Company's Common Stock,
as of any date:
(a) if the Common Stock is listed or admitted to unlisted
trading privileges on any national securities exchange or is not so
listed or admitted but transactions in the Common Stock are reported on
the Nasdaq National Market, the reported closing price of the Common
Stock on such exchange or by the Nasdaq National Market as of such date
(or, if no shares were traded on such day, as of the next preceding day
on which there was such a trade); or
(b) if the Common Stock is not so listed or admitted to
unlisted trading privileges or reported on the Nasdaq National Market,
and bid and asked prices therefor in the over-the-counter market are
reported by Nasdaq or National Quotation Bureau, Inc. (or any
comparable reporting service), the mean of the closing bid and asked
prices as of such date, as so reported by Nasdaq or, if not so reported
thereon, as reported by National Quotation Bureau, Inc. (or such
comparable reporting service); or
(c) if the Common Stock is not so listed or admitted to
unlisted trading privileges, or reported on the Nasdaq National Market,
and such bid and asked prices are not so reported by Nasdaq or National
Quotation Bureau, Inc. (or any comparable reporting service), such
price as the Company's Board of Directors determines in good faith in
the exercise of its reasonable discretion.
The Company agrees that the Warrant Stock so purchased shall be and are
deemed to be issued as of the close of business on the date on which this
Warrant shall have been surrendered and payment made for such Warrant Stock as
aforesaid. Certificates for the shares of Warrant Stock so purchased shall be
delivered to the Holder within 15 days after the rights represented by this
Warrant shall have been so exercised, and, unless this Warrant has expired, a
new Warrant representing the number of Warrant Stock, if any, with respect to
which this Warrant has not been exercised shall also be delivered to the Holder
within such time. Notwithstanding the foregoing, however, the Company shall not
be required to deliver any certificates for the Warrant Stock, except in
accordance with the provisions and subject to the limitations of Section 5
below.
2. The Company covenants and agrees that all shares of Warrant Stock
that may be issued upon the exercise of this Warrant will, upon issuance, be
duly authorized and issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof. The Company
further covenants and agrees that until expiration of this Warrant, the Company
will at all times have authorized, and reserved for the purpose of issuance or
transfer upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
3. The foregoing provisions are, however, subject to the following:
(a) The Warrant Exercise Price shall be subject to adjustment
from time to time as hereinafter provided. Upon each adjustment of the
Warrant Exercise Price, the holder of this Warrant shall thereafter be
entitled to purchase, at the Warrant Exercise Price resulting from such
adjustment, the number of shares obtained by multiplying the Warrant
Exercise Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Warrant Exercise
Price resulting from such adjustment.
(b) Except as provided in this Section 3, if and whenever the
Company shall issue or sell any shares of its Common Stock for a
consideration per share less than the
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Warrant Exercise Price in effect at the time of such issuance or sale,
then, forthwith upon such issue or sale, the Warrant Exercise Price
shall be reduced to such lesser price.
(c) Notwithstanding any other provision of this Section 3,
the Warrant Exercise Price shall not be adjusted in the case of
issuance by the Company of (i) shares of Common Stock issued upon
exercise or conversion of any warrants, options, convertible securities
or other rights to acquire shares of Common Stock outstanding on the
date hereof, (ii) options to purchase shares of Common Stock (including
shares of Common Stock issued upon the exercise thereof) granted or to
be granted pursuant to the Company's existing stock option plan, as
such plan is in effect on the date hereof or as may be amended by the
Board of Directors, (iii) shares of Common Stock or options or other
rights to purchase shares of Common Stock (including shares of Common
Stock issued upon the exercise thereof) issued under employee benefit
plans that the Company may adopt in the future including, but not
limited to, stock purchase plans, profit sharing plans, stock option
plans and stock incentive plans, (iv) shares of Common Stock issued
upon exercise of warrants issued under the Agreement, or (v) shares of
Common Stock issued upon conversion of convertible promissory notes
issued under the Agreement.
(d) No adjustment of the Warrant Exercise Price, however,
shall be made in an amount less than 1.0% of the Warrant Exercise Price
in effect on the date of such adjustment, but any such lesser
adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which, together with any
such adjustment so carried forward, shall be an amount equal to or
greater than 1.0% of the Warrant Exercise Price then in effect.
(e) For the purposes of this Section 3, the following
provisions (i) to (iv), inclusive, shall also be applicable:
(i) In case at any time the Company shall grant
(whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase, or any options for
the purchase of, (a) Common Stock or (b) any obligations or
any shares of stock or other securities of the Company which
are convertible into, or exchangeable for, Common Stock (any
of such obligations or shares of stock or other securities
being hereinafter called "Convertible Securities") whether or
not such rights or options or the right to convert or exchange
any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable
upon the exercise of such rights or options or upon conversion
or exchange of such Convertible Securities (determined by
dividing (x) the total amount, if any, received or receivable
by the Company as consideration for the granting of such
rights or options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the
exercise of such rights or options, plus, in the case of such
Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue of
such Convertible Securities and upon the conversion or
exchange thereof, by (y) the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or
options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such
rights or
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options) shall be less than the Warrant Exercise Price in
effect immediately prior to the time of the granting of such
rights or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or
options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the
exercise of such rights or options shall (as of the date of
granting of such rights or options) be deemed to have been
issued for such price per share. Except as provided in Section
3(h) below, no further adjustments of the Warrant Exercise
Price shall be made upon the actual issue of such Common Stock
or of such Convertible Securities upon exercise of such rights
or options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
(ii) In case the Company shall issue or sell
(whether directly or by assumption in a merger or otherwise)
any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (x)
the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less
than the Warrant Exercise Price in effect immediately prior to
the time of such issue or sale, then the total maximum number
of shares of Common Stock issuable upon conversion or exchange
of all such Convertible Securities shall (as of the date of
the issue or sale of such Convertible Securities) be deemed to
be outstanding and to have been issued for such price per
share, provided that (a) except as provided in Section 3(h)
below, no further adjustments of the Warrant Exercise Price
shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities, and (b)
if any such issue or sale of such Convertible Securities is
made upon exercise of any rights to subscribe for or to
purchase or any option to purchase any such Convertible
Securities for which adjustments of the Warrant Exercise Price
have been or are to be made pursuant to other provisions of
this Section 3, no further adjustment of the Warrant Exercise
Price shall be made by reason of such issue or sale.
(iii) In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase
any such Common Stock or Convertible Securities shall be
issued or sold for cash, the consideration received therefor
shall be deemed to be the amount received by the Company
therefor, without deducting therefrom any expenses incurred or
any underwriting commissions or concessions paid or allowed by
the Company in connection therewith. In case any shares of
Common Stock or Convertible Securities or any rights or
options to purchase any such Common Stock or Convertible
Securities shall be issued or sold for a consideration other
than cash, the amount of the consideration other than cash
received by the Company shall be deemed to be the fair value
of such consideration as determined by the Board of Directors
of the Company, without
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deducting therefrom any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase
such Common Stock or Convertible Securities shall be issued in
connection with any merger or consolidation in which the
Company is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value as
determined by the Board of Directors of the Company of such
portion of the assets and business of the non-surviving
corporation or corporations as such Board shall determine to
be attributable to such Common Stock, Convertible Securities,
rights or options, as the case may be. In the event of any
consolidation or merger of the Company in which the Company is
not the surviving corporation or in the event of any sale of
all or substantially all of the assets of the Company for
stock or other securities of any other corporation, the
Company shall be deemed to have issued a number of shares of
its Common Stock for stock or securities of the other
corporation computed on the basis of the actual exchange ratio
on which the transaction was predicated and for a
consideration equal to the fair market value on the date of
such transaction of such stock or securities of the other
corporation, and if any such calculation results in adjustment
of the Warrant Exercise Price, the determination of the number
of shares of Common Stock issuable upon conversion immediately
prior to such merger, conversion or sale, for purposes of
Section 3(i) below, shall be made after giving effect to such
adjustment of the Warrant Exercise Price.
(iv) In case the Company shall take a record of
the holders of its Common Stock for the purpose of entitling
them (a) to receive a dividend or other distribution payable
in Common Stock or in Convertible Securities, or in any rights
or options to purchase any Common Stock or Convertible
Securities, or (b) to subscribe for or purchase Common Stock
or Convertible Securities, then the date of such record shall
be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other
distribution or the date of the granting of such rights of
subscription or purchase, as the case may be.
(f) In case the Company shall (i) declare a dividend upon
the Common Stock payable in Common Stock (other than a dividend
declared to effect a subdivision of the outstanding shares of Common
Stock, as described in Section 3(g) below) or Convertible Securities,
or in any rights or options to purchase any Common Stock or Convertible
Securities, or (ii) declare any other dividend or make any other
distribution upon the Common Stock payable otherwise than out of
earnings or earned surplus, then thereafter the Holder upon the
conversion hereof will be entitled to receive the number of shares of
Common Stock issuable upon exercise of this Warrant, and, in addition
and without payment therefor, each dividend described in clause (i)
above and each dividend or distribution described in clause (ii) above
which such holder would have received by way of dividends or
distributions if continuously since the Holder became the record holder
of this Warrant the Holder (x) had been the record holder of the number
of shares of Common Stock then received, and (y) had retained all
dividends or distributions in stock or securities (including Common
Stock or Convertible Securities, or in any rights or
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options to purchase any Common Stock or Convertible Securities) payable
in respect of such Common Stock or in respect of any stock or
securities paid as dividends or distributions and originating directly
or indirectly from such Common Stock. For the purposes of the foregoing
a dividend or distribution other than in cash shall be considered
payable out of earnings or earned surplus only to the extent that such
earnings or surplus are charged an amount equal to the fair value of
such dividend or distribution as determined by the Board of Directors
of the Company.
(g) In case the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares, the
Warrant Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined
into a smaller number of shares, the Warrant Exercise Price in effect
immediately prior to such combination shall be proportionately
increased.
(h) If (i) the purchase price provided for in any right or
option referred to in clause (i) of Section 3(e), or (ii) the
additional consideration, if any, payable upon the conversion or
exchange of Convertible Securities referred to in clause (i) or clause
(ii) of Section 3(e), or (iii) the rate at which any Convertible
Securities referred to in clause (i) or clause (ii) of Section 3(e) are
convertible into or exchangeable for Common Stock, shall change at any
time (other than under or by reason of provisions designed to protect
against dilution), the Warrant Exercise Price then in effect hereunder
shall forthwith be increased or decreased to such Warrant Exercise
Price as would have obtained had the adjustments made upon the issuance
of such rights, options or Convertible Securities been made upon the
basis of (a) the issuance of the number of shares of Common Stock
theretofore actually delivered upon the exercise of such options or
rights or upon the conversion or exchange of such Convertible
Securities, and the total consideration received therefor, and (b) the
issuance at the time of such change of any such options, rights, or
Convertible Securities then still outstanding for the consideration, if
any, received by the Company therefor and to be received on the basis
of such changed price; and on the expiration of any such option or
right or the termination of any such right to convert or exchange such
Convertible Securities, the Warrant Exercise Price then in effect
hereunder shall forthwith be increased to such Warrant Exercise Price
as would have obtained had the adjustments made upon the issuance of
such rights or options or Convertible Securities been made upon the
basis of the issuance of the shares of Common Stock theretofore
actually delivered (and the total consideration received therefor) upon
the exercise of such rights or options or upon the conversion or
exchange of such Convertible Securities. If the purchase price provided
for in any right or option referred to in clause (i) of Section 3(e),
or the rate at which any Convertible Securities referred to in clause
(i) or clause (ii) of Section 3(e) are convertible into or exchangeable
for Common Stock, shall decrease at any time under or by reason of
provisions with respect thereto designed to protect against dilution,
then in case of the delivery of Common Stock upon the exercise of any
such right or option or upon conversion or exchange of any such
Convertible Security, the Warrant Exercise Price then in effect
hereunder shall forthwith be decreased to such Warrant Exercise Price
as would have obtained had the adjustments made upon the issuance of
such right, option or Convertible Security been made upon the
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basis of the issuance of (and the total consideration received for) the
shares of Common Stock delivered as aforesaid.
(i) If any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the
Company with another corporation, or the sale of all or substantially
all of its assets to another corporation shall be effected in such a
way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock,
then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provision shall be
made whereby the Holder of this Warrant shall thereafter have the right
to receive upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of the Common Stock of the Company
immediately theretofore receivable upon the exercise of this Warrant,
such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such stock
immediately theretofore receivable upon the exercise of this Warrant
had such reorganization, reclassification, consolidation, merger or
sale not taken place, plus all dividends unpaid and accumulated or
accrued thereon to the date of such reorganization, reclassification,
consolidation, merger or sale, and in any such case appropriate
provision shall be made with respect to the rights and interests of the
Holder of this Warrant to the end that the provisions hereof (including
without limitation provisions for adjustments of the Warrant Exercise
Price and of the number of shares receivable upon the exercise of the
this Warrant) shall thereafter be applicable, as nearly as may be in
relation to any shares of stock, securities or assets thereafter
receivable upon the exercise of this Warrant. The Company shall not
effect any such consolidation, merger or sale, unless prior to the
consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument executed and
mailed to the Holder of this Warrant, at the last addresses of such
holders appearing on the books of the Company, the obligation to
deliver to the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to
receive.
(j) Upon any adjustment of the Warrant Exercise Price, then
and in each case the Company shall give written notice thereof, by
first-class mail, postage prepaid, addressed to the Holder of this
Warrant, which shall state the Warrant Exercise Price resulting from
such adjustment and the increase or decrease, if any, in the number of
shares receivable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based, and which notice shall be
certified by a nationally recognized firm of independent auditors
(which may be the Company's independent auditors).
(k) In case at any time:
(i) the Company shall declare any cash dividend on
its Common Stock;
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(ii) the Company shall pay any dividend payable in
stock upon its Common Stock or make any distribution (other
than regular cash dividends) to the holders of its Common
Stock;
(iii) the Company shall offer for subscription pro
rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(iv) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with, or sales of all
or substantially all of its assets to, another corporation; or
(v) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written
notice, by first-class mail, postage prepaid, addressed to the Holder
at the addresses of such holders as shown on the books of the Company,
of the date on which (a) the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription
rights, or (b) such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up shall take place,
as the case may be. Such notice shall also specify the date as of which
the holders of Common Stock of record shall participate in such
dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding up, as the case may
be. Such written notice shall be given at least twenty (20) days prior
to the action in question and not less than twenty (20) days prior to
the record date or the date on which the Company's transfer books are
closed in respect thereto.
(l) If any event occurs as to which in the opinion of the
Board of Directors of the Company the other provisions of this Section
3 are not strictly applicable or if strictly applicable would not
fairly protect the rights of the Holder in accordance with the
essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so
as to protect such rights as aforesaid.
(m) As used in this Section 3 the term "Common Stock" shall
mean and include the Company's presently authorized Common Stock and
shall also include any capital stock of any class of the Company
hereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Company; provided that the shares receivable pursuant to exercise of
this Warrant shall include shares designated as Common Stock of the
Company as of the date of issuance of this Warrant, or, in case of any
reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in Section 3(i) above.
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(n) No fractional shares of Common Stock shall be issued
upon conversion pursuant to this Section 3, but, instead of any
fraction of a share which would otherwise be issuable, the Company
shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the Fair Market Value, as defined in
Section 1, of one share of Common Stock as of the close of business on
the day of conversion.
4. This Warrant shall not entitle the Holder to any voting rights or
other rights as a shareholder of the Company.
5. The Holder, by acceptance hereof, represents and warrants that (a)
it is acquiring this Warrant for its own account for investment purposes only
and not with a view to its resale or distribution and (b) it has no present
intention to resell or otherwise dispose of all or any part of this Warrant.
Other than pursuant to registration under federal and state securities laws or
an exemption from such registration, the availability of which the Company shall
determine in its sole discretion, (y) the Company will not accept the exercise
of this Warrant or issue certificates for shares of Warrant Stock and (z)
neither this Warrant nor any shares of Warrant Stock may be sold, pledged,
assigned or otherwise disposed of (whether voluntarily or involuntarily). The
Company may condition such issuance or sale, pledge, assignment or other
disposition on the receipt from the party to whom this Warrant is to be so
transferred or to whom Warrant Stock is to be issued or so transferred of any
representations and agreements requested by the Company in order to permit such
issuance or transfer to be made pursuant to exemptions from registration under
federal and applicable state securities laws. Each certificate representing the
Warrant (or any part thereof) and any shares of Warrant Stock shall be stamped
with appropriate legends setting forth these restrictions on transferability.
The Holder, by acceptance hereof, agrees to give written notice to the Company
before exercising or transferring this Warrant or transferring any shares of
Warrant Stock of the Holder's intention to do so, describing briefly the manner
of any proposed exercise or transfer. Within thirty (30) days after receiving
such written notice, the Company shall notify the Holder as to whether such
exercise or transfer may be effected.
6. This Warrant shall be transferable only on the books of the Company
by the Holder in person, or by duly authorized attorney, on surrender of the
Warrant, properly assigned.
7. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and to be dated as of the date set forth above.
LSC, INCORPORATED
By
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Its
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THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, ASSIGNED
OR OTHERWISE DISPOSED OF, AND NO TRANSFER OF THE SECURITIES WILL BE MADE BY THE
COMPANY OR ITS TRANSFER AGENT, IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
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