FORM OF
WARRANT FOR PURCHASE OF SHARES OF
COMMON STOCK OF
LSC, INCORPORATED
March 15, 1999
For value received, ____________________, or his registered assigns
(the "Holder"), is entitled to purchase from LSC, Incorporated, a Minnesota
corporation (the "Company"), at any time on or before March 15, 2004,
______________________________ (_____) 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 an exercise price equal to the lesser of (a) $3.20 per share or (b)
80% of the per share price of the Company's next equity financing that raises
gross proceeds of at least two hundred fifty thousand dollars ($250,000), if
such financing occurs on or before December 31, 2000.
This Warrant is subject to the terms and provisions of, the
Contribution and Security Agreement, dated as of May 15, 1998, among the Company
and the other parties thereto (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.
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(b) In case the Company shall at any time subdivide the
outstanding Common Stock into a greater number of shares or declare a
dividend payable in Common Stock, the Warrant exercise price in effect
immediately prior to such subdivision shall be proportionately reduced,
and conversely, in case the outstanding Common Stock shall be combined
into a smaller number of shares, the Warrant exercise price in effect
immediately prior to such combination shall be proportionately
increased.
(c) 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 ("substituted property") with respect to or in
exchange for such Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, the
Holder shall have the right to purchase and receive upon the basis and
upon the terms and conditions specified in this Warrant and in lieu of
the Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby, such
substituted property as would have been issued or delivered to the
Holder if it had exercised this Warrant and had received upon exercise
of this Warrant the Common Stock prior to such reorganization,
reclassification, consolidation, merger or sale. 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 at the last address of the Holder 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 purchase.
(d) Upon any adjustment of the Warrant exercise price, the
Company shall give written notice thereof, by first-class mail, postage
prepaid, addressed to the Holder at the address of the Holder as shown
on the books of the Company, which notice shall state the Warrant
exercise price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable 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.
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
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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:
---------------------------------------
X. X. Xxxxxx
Its: President and Chief Executive Officer
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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