FORM OF
WARRANT FOR PURCHASE OF SHARES OF
COMMON STOCK OF
LSC, INCORPORATED
March 15, 1999
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 March 14, 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 the 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 ("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.
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(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 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
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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 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
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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 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
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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 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 therate 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
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made upon the issuance of such right, option or Convertible Security been
made upon the 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 purcasing 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
--------------------------------
Its
-------------------------------
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE
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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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