CONTRIBUTION AND SECURITY AGREEMENT
THIS CONTRIBUTION AND SECURITY AGREEMENT ("AGREEMENT") is made and
entered into effective as of May 15, 1998, by and among LSC, Incorporated, a
Minnesota corporation ("LSC"), Xxxx Xxxx ("XXXX"), Xxxx X. Xxxxxx ("Xxxxxx"),
Xxxxxxx X. Xxxxxxx ("RWP"), Xxxxxxx X. Xxxxxxx Revocable Trust (individually,
the "TRUST" and collectively with RWP, "XXXXXXX") and Xxxxxx X. Xxxxxxxxxx
("XXXXXXXXXX") (Xxxx, Xxxxxx, Xxxxxxx and Xxxxxxxxxx, individually, a
"CO-OBLIGEE" and collectively, the "CO-OBLIGEES").
A. LSC, Xxxxxx, RWP, Trust and Xxxxxxxxxx have executed in favor
of Bank Windsor (the "LENDER") that certain Commercial/Agricultural Revolving or
Draw Note - Variable Rate, dated February 1, 1998 (the "NOTE"), a copy of which
is attached hereto as EXHIBIT A.
B. LSC may make draws under the Note up to a maximum amount of
Five Hundred Thousand Dollars ($500,000) (the "LOAN").
C. Each of the Co-Obligees has promised to repay the Loan in
full.
D. The Co-Obligees desire to enter into this Agreement to
allocate the benefits of the Loan among themselves and to provide a fair and
equitable arrangement to make contributions in the event that any of the
Co-Obligees is required to make any payments to the Lender under the Note.
E. In consideration of the Co-Obligees' promise to repay the
Loan, and for other valuable consideration, the receipt and sufficiency of which
are acknowledged, LSC desires to grant each of the Co-Obligees (1) a security
interest in certain assets of LSC and (2) a warrant to purchase shares of LSC's
common stock, par value $.01 per share (the "COMMON STOCK").
ACCORDINGLY, the parties hereby agree as follows:
1. REPAYMENT OF NOTE. If any of the Co-Obligees makes any payment under
the Note on behalf of LSC to the Lender, LSC shall within thirty (30)
days of written demand repay such Co-Obligee the amounts paid by such
Co-Obligee.
2. CONTRIBUTION. In order to provide for just and equitable contribution
among the Co-Obligees in the event any payment or distribution is made
by a Co-Obligee (a "FUNDING CO-OBLIGEE") under the Note, that Funding
Co-Obligee shall be entitled to a contribution from the other
Co-Obligees (including any such Co-Obligee which itself is a Funding
Co-Obligee) for all payments, damages and expenses incurred by that
Funding Co-Obligee in discharging (a) LSC's obligations with respect to
the Note or (b) any other Funding Co-Obligee's obligations with respect
to the Note, in an amount equal to twenty-five percent (25%) of the
amount of the payment or distribution made by such Funding Co-Obligee.
Any amount payable as contribution under this Agreement shall be
determined as of the date on which the related payment or distribution
is made by a Funding Co-Obligee. The parties agree that Xxxxxxx shall
be treated as one Co-Obligee, with RWP and the Trust jointly and
severally liable for the contribution of Xxxxxxx to any Funding
Co-Obligee.
3. ALLOCATION. In the event there exists at any time more than one Funding
Co-Obligee with respect to the Note, the payment from the other
Co-Obligees pursuant to this Agreement shall be allocated among such
Funding Co-Obligees in proportion to the total amount of money paid for
or on account of the Company by each such Funding Co-Obligee.
4. SECURITY INTEREST.
4.1. "SOFTWARE" means LSC's SAM-FS storage management software
program, including all properties and rights with respect
thereto, both tangible and intangible, whether presently owned
or existing or hereafter acquired or arising or in which LSC
now has or at any time in the future obtains an interest and
wheresoever located, including, without limiting the
generality of the foregoing, the source code, object code and
documentation relating to the such software and all
intellectual property rights relating thereto, including
without limitation, all patents, patent applications,
trademarks, trademark applications, trade names, service
marks, copyrights, copyright applications, mask works, service
marks, know-how, trade secrets, proprietary processes and
technology; all the proceeds or products of any of the
foregoing and the proceeds of any such asset; and all right,
title and interest of LSC in or to all instruments and
documents covering or relating thereto or relating thereto.
4.2. GRANT OF SECURITY INTEREST. To secure the obligation of LSC to
repay each Co-Obligee all amounts that any Co-Obligee pays
under the Note on behalf of LSC, LSC hereby grants to the
Co-Obligees a continuing security interest, and lien upon all
of LSC's right, title and interest in and to the Software,
including all properties and rights with respect thereto, both
tangible and intangible, whether presently owned or existing
or hereafter acquired or arising or in which LSC now has or at
any time in the future obtains an interest and wheresoever
located
4.3. DEFAULT. If LSC breaches it obligations under Section 1 of
this Agreement and such breach shall not have been cured
within thirty (30) days of notice from a Co-Obligee, or a case
may be commenced by or against LSC under Title 11 of the
United States Code, unless and only except to the extent
prevented by law, the Co-Obligees may, at their option and
without demand or notice, in addition to the rights and
remedies granted hereby or under any instruments evidencing or
relating to any of the Co-Obligees, exercise all rights and
remedies of a secured party under the Uniform Commercial Code
or any other applicable law. If a disposition of the Software
by the Co-Obligees occurs, the proceeds of such disposition
shall be applied as set forth in Minn. Stat. ss. 336.9-504.
5. WARRANT. LSC shall grant to each of the Co-Obligees a warrant, in the
form attached hereto as EXHIBIT B (a "Warrant"), to purchase 17,500
shares of Common Stock, exercisable for a period of five years. Each
Warrant issued shall have an exercise price equal to 80% of the per
unit price of securities sold by LSC in its next round of equity
financing that raises gross proceeds of at least $1,000,000.
6. MISCELLANEOUS.
6.1. TERMINATION. This Agreement, as it may be modified or amended
from time to time, shall remain in effect, and shall not be
terminated until the Note has been discharged or otherwise
satisfied in accordance with its terms.
6.2. ASSIGNMENT; SUCCESSORS AND ASSIGNS. None of the parties shall
assign or otherwise transfer its rights and obligations under
this Agreement, except with the prior written consent of all
of the other parties. This Agreement shall be binding upon
each party hereto and their respective heirs and permitted
successors and assigns and shall inure to the benefit of the
parties hereto and their respective heirs and permitted
successors and assigns.
6.3. AMENDMENT. This Agreement may not be deemed or construed to be
modified or amended, in whole or part, other than by written
amendment signed by all of the parties hereto.
6.4. SEVERABILITY. In the event that any term or provision of this
Agreement is invalid or unenforceable, such term or provision
shall be deemed stricken from this Agreement. The invalidity
or unenforceability of any term or provision of this Agreement
shall not invalidate this Agreement, and the remaining terms
and provisions of this Agreement shall continue in full force
and effect.
6.5. WAIVER. No failure by any party to take any action or assert
any right hereunder shall be deemed to be a waiver of any
rights or remedies under this Agreement or at law.
6.6. GOVERNING LAW. This Agreement, and any instrument or agreement
required hereunder, shall be construed in accordance with and
governed by the laws of the State of Minnesota, without regard
to the conflicts of laws principles thereof.
6.7. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and
all of which shall constitute one and the same instrument.
(BALANCE OF PAGE INTENTIONALLY LEFT BLANK.)
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed as of the date first written above.
LSC INCORPORATED XXXXXXX X. XXXXXXX
By /s/ X. X. (XXXX) XXXXXX /s/ XXXXXXX X. XXXXXXX
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Xxxxxxx X. Xxxxxxx, Individually
Its PRESIDENT/CEO
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XXXX PHIL XXXXXXX X. XXXXXXX REVOCABLE TRUST
/s/ XXXX PHIL By: /s/ XXXXXXX X. XXXXXXX
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Xxxx Phil, Individually Xxxxxxx X. Xxxxxxx
Its: Trustee
XXXX X. XXXXXX XXXXXX X. XXXXXXXXXX
/s/ XXXX X. XXXXXX
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Xxxx X. Xxxxxx, Individually /s/ XXXXXX X. XXXXXXXXXX
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Xxxxxx X. Xxxxxxxxxx, Individually
