THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO LMIC, INC.THAT SUCH REGISTRATION IS NOT
REQUIRED.
Right to Purchase Shares of Common Stock
of LMIC, Inc. (subject to adjustment as
provided herein)
COMMON STOCK PURCHASE WARRANT
No. 2003-1 Issue Date: November 20, 2003
LMIC, Inc., a corporation organized under the laws of the State of
Delaware (the "Company"), hereby certifies that, for value received, LAURUS
MASTER FUND, LTD., or assigns (the "Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company from and after the Issue Date of
this Warrant and at any time or from time to time before 5:00 p.m., New York
time, through seven (7) years after such date (the "Expiration Date"), up to
that number of fully paid and nonassessable shares of Common Stock (as
hereinafter defined), $.001 par value, of the Company equal to $200,000 divided
by the initial Exercise Price (as defined below), at a price per share equal to
the Exercise Price. The number and character of such shares of Common Stock and
the Exercise Price are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include LMIC, Inc. and any corporation
which shall succeed or assume the obligations of LMIC, Inc. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
par value $.001 per share, and (b) any other securities into which or for which
any of the securities described in (a) may be converted or exchanged pursuant to
a plan of recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person (corporate
or otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
(d) The term "Exercise Price" shall be equal to 125% of the Fixed
Conversion Price
1. Exercise of Warrant.
1.1 Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled
to receive, upon exercise of this Warrant in whole or in part, by delivery of an
original or fax copy of the exercise notice attached hereto as Exhibit A (the
"Exercise Notice"), shares of Common Stock of the Company, subject to adjustment
pursuant to Section 4.
1.2 For every dollar ($1) in principal of the Note (as defined in
Section 9 below) converted into Common Stock, the Company shall issue to the
Holder additional seven-year warrants to purchase a number of shares equal to 5%
of principal being converted divided by 125% of the Fixed Conversion Price on
the date of such conversion of the Note (the "Additional Warrant Exercise
Price") at an exercise price equal to the Additional Warrant Exercise Price (the
"Additional Warrants"). No more than an aggregate of 100,000 shares of the
Company's Common Stock may be purchased by the Holder pursuant to the Additional
Warrants. By way of example, in the event that the Holder has converted
$1,000,000 of the Note principal into shares of Common Stock, then the Holder
will be permitted to exercise the Additional Warrants in an amount equal to
$50,000 divided by the Additional Warrant Exercise Price.
1.3 Fair Market Value. Fair Market Value of a share of Common Stock
as of a particular date (the "Determination Date") shall mean:
(a) If the Company's Common Stock is traded on an exchange or
is quoted on the National or SmallCap Market of The Nasdaq Stock Market,
Inc.("Nasdaq"), then the closing or last sale price, respectively, reported for
the last business day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an exchange
or on the Nasdaq but is traded on the NASD OTC Bulletin Board or BBX Exchange,
then the closing bid price reported for the last business day immediately
preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then by the Board of Directors of the
Company acting in good faith with a view towards preserving the overall economic
terms and conditions contained in the Ancillary Agreements
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.
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2. Procedure for Exercise.
2.1 Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment received by the Company for such shares as aforesaid. As
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within three (3) business days thereafter, the Company at its
expense (including the payment by it of any applicable issue taxes) will cause
to be issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, at the option of the Company, in lieu of any fractional
share to which such holder would otherwise be entitled, (i) cash equal to such
fraction multiplied by the then Fair Market Value of one full share, together
with any other stock or other securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise pursuant to
Section 1 or otherwise or (ii) one additional share.
2.2 Exercise.
(a) Payment may be made either in (i) cash or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate Exercise Price, (ii) by delivery of the Warrant, Common Stock and/or
Common Stock receivable upon exercise of the Warrant in accordance with Section
(b) below, or (iii) by a combination of any of the foregoing methods, for the
number of shares of Common Stock specified in such form (as such exercise number
shall be adjusted to reflect any adjustment in the total number of shares of
Common Stock issuable to the holder per the terms of this Warrant) and the
Holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.
(b) Notwithstanding any provisions herein to the contrary, if the
Fair Market Value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), in lieu of exercising
this Warrant for cash, the Holder may elect to receive shares equal to the value
(as determined below) of this Warrant (or the portion thereof being exercised)
by surrender of this Warrant at the principal office of the Company together
with the properly endorsed Exercise Notice in which event the Company shall
issue to the Holder 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 purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at the
date of such calculation)
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A= the Fair Market Value of one share of the Company's Common
Stock (at the date of such calculation)
B= Exercise Price (as adjusted to the date of such calculation)
(c) Notwithstanding anything herein to the contrary, if (i) a
registration statement covering the resale of the shares underlying this Warrant
has been declared effective by the Securities and Exchange Commission and (ii)
the closing bid price of the Common Stock is equal to or greater than 300% of
the initial Exercise Price for ten consecutive trading days, then the Company
shall have the right to cause the Holder to exercise this Warrant within five
days (the "Put Date") of delivering notice of (i) and (ii) above to such Holder.
If the Holder does not exercise this Warrant on or prior to 5:30 p.m. (New York
Time) on the Put Date, the Company shall have the right to cancel all or a
portion of this Warrant.
3. Effect of Reorganization, etc.; Adjustment of Exercise Price.
3.1 Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the Holder of the Warrant after the effective date of
such dissolution pursuant to Section 3.1 to the Holder of the Warrant.
3.3 Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the
consummation of the
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transactions described in this Section 3, then only in such event will the
Company's securities and property (including cash, where applicable) receivable
by the holders of the Warrant.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the then applicable Exercise Price shall, simultaneously with the
happening of such event, be adjusted by multiplying the then Exercise Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Exercise Price then
in effect. The Exercise Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this Section 4. The number of shares of Common Stock that the holder of this
Warrant shall thereafter, on the exercise hereof as provided in Section 1, be
entitled to receive shall be increased to a number determined by multiplying the
number of shares of Common Stock that would otherwise (but for the provisions of
this Section 4) be issuable on such exercise by a fraction of which (a) the
numerator is the Exercise Price that would otherwise (but for the provisions of
this Section 4) be in effect, and (b) the denominator is the Exercise Price in
effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 11 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, shares of Common Stock (or Other Securities)
from time to time issuable on the exercise of the Warrant.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") with respect to any
or all of the Shares. On the surrender for exchange of this Warrant, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
"Transferor Endorsement Form") and together with evidence reasonably
5
satisfactory to the Company demonstrating compliance with applicable securities
laws, which shall include, without limitation, a legal opinion from the
Transferor's counsel in form and substance reasonably satisfactory to the
Company that such transfer is exempt from the registration requirements of
applicable securities laws, the Company at it's expense, (including the payment
by the Transferor of any applicable transfer taxes), will issue and deliver to
or on the order of the Transferor thereof a new Warrant of like tenor, in the
name of the Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a "Transferee"), calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in a Registration Rights Agreement entered into by the Company and
Purchaser of the Company's Convertible Note (the "Note") at or prior to the
issue date of this Warrant.
10. Maximum Exercise. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this proviso is being made on
an exercise date, which would result in beneficial ownership by the Holder and
its affiliates of more than 4.99% of the outstanding shares of Common Stock of
the Company on such date. For the purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to
aggregate exercises which would result in the issuance of more than 4.99%. The
restriction described in this paragraph may be revoked upon 75 days prior notice
from the Holder to the Company and is automatically deemed null and void upon an
Event of Default under the Note that has occurred and is continuing beyond any
applicable cure period.
11. Warrant Agent. The Company may, by written notice to the each holder
of the Warrant, appoint an agent for the purpose of issuing Common Stock (or
Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
12. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
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13. Notices, etc. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
14. Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be governed by and construed in accordance with
the laws of State of Delaware without regard to principles of conflicts of laws.
The prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Warrant is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Warrant. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision. The Company acknowledges
that legal counsel participated in the preparation of this Warrant and,
therefore, stipulates that the rule of construction that ambiguities are to be
resolved against the drafting party shall not be applied in the interpretation
of this Warrant to favor any party against the other party. This Warrant shall
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company.
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as of
the date first written above.
LMIC, INC.
By: /s/ Xxxx X. Xxxxxxx
--------------------------------
Name: Xxxx X. Xxxxxxx
Title: President & CEO
Witness:
/s/ Xxxxx Xxxxx
----------------------------------
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