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EXHIBIT 10.3
PROMISSORY NOTE
____________, 1997
$_____________ San Diego, California
1. Obligation. For value received, C2i Solutions, Inc., a Delaware
corporation ("Payor") promises to pay to the order of _______________, an
individual ("Holder"), the principal sum equal to ____________________ Dollars
($___________), plus accrued interest. Interest will accrue at an annual rate
equal to ten percent (10%). Interest shall commence with the date hereof and
shall continue on the outstanding principal until paid in full. Payment of
principal and interest shall be due on the earlier of (i) the closing of an
underwritten initial public offering by Payor of its equity securities or (ii)
September 30, 1999.
2. Prepayment. This Note may be prepaid by Payor, in whole or in
part, at any time without penalty or premium.
3. Waiver. Presentment, demand, protest, notices of protest,
dishonor and non-payment of this Note and all notices of every kind are hereby
waived. No single or partial exercise of, or forbearance from exercising, any
power hereunder shall preclude other or further exercises thereof or the
exercise of any other power. No delay or omission on the part of Holder in
exercising any right hereunder shall operate as a waiver of such right or of any
other right under this Note.
4. Maximum Rate. All agreements which either are now or which shall
become agreements between Payor and Holder are expressly limited so that in no
contingency or event whatever, whether by reason of deferment or advancement of
the indebtedness represented by this Note, acceleration of the maturity date of
this Note, or otherwise, shall the amount paid or agreed to be paid to Holder
for the use, forbearance or detention of the indebtedness evidenced hereby
exceed the maximum amount of interest permissible under applicable law. If at
any time, from any circumstance whatsoever, fulfillment of any provision of this
Note or any other agreement between Payor and Holder, shall result in or involve
payments or performance which would exceed the maximum legal interest rate,
then, ipso facto, the obligation to be fulfilled shall be reduced so as not to
exceed said maximum legal interest rate.
5. Governing Law. Principal and interest are payable in lawful money
of the United States. This Note shall be governed by and construed in accordance
with the laws of the State of California. In any action brought under or arising
out of this Note, Holder hereby consents to the jurisdiction of any competent
court within the State of California and consents to service of process by any
means authorized by California law.
C2i SOLUTIONS, INC.
By:
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Xxxx X. Xxxxxx, Xx.
President and Chief Executive Officer
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Common Stock Warrant
Number ___
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
Void after September 30, 1999
C2i SOLUTIONS, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, __________________ is
entitled to purchase _________________ (______) shares of Common Stock ("Warrant
Shares") of C2i SOLUTIONS, INC., a Delaware corporation (the "Company"), at a
price per share equal to four dollars ($4.00) per share ("Warrant Price"),
subject to adjustments and all other terms and conditions set forth in this
Warrant, provided, however, that in the event the Company completes an
underwritten initial public offering of the equity securities of the Company
(the "IPO") prior to September 30, 1998, the Warrant Price shall be equal to
two/thirds (2/3's) of the price to the public of the securities offered in the
IPO, as set forth on the cover page of the final prospectus for that offering.
1. Definitions. As used herein, the following terms, unless the
context otherwise requires, shall have the following meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(b) "Commission" shall mean the Securities and Exchange
Commission, or any other Federal agency at the time administering the Act.
(c) "Common Stock" shall mean shares of the Company's presently
or subsequently authorized Common Stock, and any stock into which such Common
Stock may hereafter be exchanged.
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(d) "Company" shall mean C2i SOLUTIONS, INC., a Delaware
corporation, and any corporation which shall succeed to or assume the
obligations of C2i SOLUTIONS, INC., under this Warrant.
(e) "Date of Grant" shall mean October 22, 1997.
(f) "Exercise Date" shall mean the effective date of the delivery
of the Notice of Exercise pursuant to Sections 4 and 11 below.
(g) "Holder" shall mean any person who shall at the time be the
registered holder of this Warrant.
(h) "Notes" shall mean the Promissory Notes of the Company dated
October 22,1997, in the aggregate principal amount of up to $1,000,000, issued
to the initial Holder and other security holders of the Company concurrently
with the issuance of this Warrant.
(i) "Shares" shall mean shares of the Company's Common Stock, as
described in the Company's Certificate of Incorporation.
2. Issuance of Warrant and Consideration Therefor. This Warrant is
issued in consideration of the Holder's loan to the Company as described in the
Notes issued concurrently with this Warrant.
3. Term. The purchase right represented by this Warrant is
exercisable only during the period commencing one year from the closing of the
IPO and ending on the date two years from the closing of the IPO.
4. Method of Exercise and Payment.
(a) Method of Exercise. Subject to Section 3 hereof and
compliance with all applicable Federal and state securities laws, the purchase
right represented by this Warrant may be exercised, in whole or in part and from
time to time, by the Holder by (i) surrender of this Warrant and delivery of the
Notice of Exercise (the form of which is attached hereto as Exhibit A), duly
executed, at the principal office of the Company and (ii) payment to the Company
of an amount equal to the product of the then applicable Warrant Price
multiplied by the number of Shares then being purchased pursuant to one of the
payment methods permitted under Section 4(b) below.
(b) Method of Payment. Payment shall be made either (1) by check
drawn on a United States bank and for United States funds made payable to the
Company, or (2) by wire transfer of United States funds for the account of the
Company.
(c) Net Issue Exercise. Notwithstanding any provisions herein to
the contrary, 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 canceled) by surrender
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of this Warrant at the principal office of the Company together with a properly
endorsed notice of exercise and notice of such election in which event the
Company shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
Y (A-B)
X =
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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 canceled (at
the date of such calculation),
A = the fair market value of one share of the Company's
Common Stock (at the date of such calculation), and
B = the Warrant Price (as adjusted to the date of such
calculation).
For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined by the Company's Board of Directors in good faith;
provided, however, that where there exists a public market for the Company's
Common Stock at the time of such exercise, fair market value shall mean the
average over the preceding ten (10) trading days (or such fewer number of days
as such public market has existed) of the mean of the closing bid and asked
prices on the over-the-counter market as reported by Nasdaq, or if the Common
Stock is then traded on a national securities exchange or the Nasdaq National
Market, the average over the preceding ten trading days (or such fewer number of
days as the Common Stock has been so traded) of the closing sale prices on the
principal national securities exchange or the National Market on which it is so
traded.
(d) Delivery of Certificate. In the event of any exercise of
the purchase right represented by this Warrant, certificates for the Shares so
purchased shall be delivered to the Holder within thirty days of delivery of the
Notice of Exercise and, unless this Warrant has been fully exercised or has
expired, a new warrant representing the portion of the Shares with respect to
which this Warrant shall not then have been exercised shall also be issued to
the Holder within such thirty day period.
(e) No Fractional Shares. No fractional shares shall be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the fair
market value per Share as of the date of exercise.
(f) Company's Representations.
(i) All Shares which may be issued upon the exercise of
the purchase right represented by this Warrant shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer
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provided for herein or under applicable federal and state securities laws.
During the period within which the purchase right represented by this Warrant
may be exercised, the Company shall at all times have authorized, and reserved
for the purpose of issuance upon exercise of the purchase right represented by
this Warrant, a sufficient number of Shares to provide for the exercise of the
purchase right represented by this Warrant;
(ii) This Warrant has been duly authorized and executed
by the Company and is a valid and binding obligation of the Company enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting the
enforcement of creditors' rights;
(iii) The execution and delivery of this Warrant are not,
and the issuance of the Shares upon exercise of this Warrant in accordance with
the terms hereof will not be inconsistent with the Company's Certificate of
Incorporation or Bylaws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not and
will not conflict with or contravene any provision of, or constitute a material
default under, any material indenture, mortgage, contract or other instrument of
which the Company is a party or by which it is bound or, assuming the accuracy
of the initial Holder's representations and warranties in the Subscription
Agreement and Investor Questionnaire executed by the initial Holder, require the
consent or approval of, the giving of notice to, the registration or filing with
or the taking of any action in respect of or by, any federal, state or local
government authority or agency (other than such consents, approvals, notices,
actions, filings, etc., as have already been obtained or made, as the case may
be).
5. Adjustment of Warrant Price and Number of Shares. The number of
securities issuable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) Adjustment for Dividends in Stock. In case at any time or
from time to time on or after the date hereof the holders of the Common Stock of
the Company (or any shares of stock or other securities at the time receivable
upon the exercise of this Warrant) shall have received or, on or after the
record date fixed for the determination of eligible stockholders, shall have
become entitled to receive, without payment therefor, other or additional stock
of the Company by way of dividend then, and in each case, the Holder of this
Warrant shall, upon the exercise hereof, be entitled to receive, in addition to
the number of shares of Common Stock receivable thereupon, and without payment
of any additional consideration therefor, the amount of such other or additional
stock of the Company which such Holder would hold on the date of such exercise
had it been the holder of record of such Common Stock on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock receivable
by it as aforesaid during such period, giving effect to all adjustments called
for during such period by subsections (b) and (c) of this Section 5.
(b) Adjustment for Reclassification or Reorganization. In case of
any reclassification or change of the outstanding securities of the Company or
of any reorganization of the Company on or after the date hereof, then and in
each such case the Holder of this Warrant,
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upon the exercise hereof at any time after the consummation of such
reclassification, change, or reorganization, shall be entitled to receive, in
lieu of or in addition to the stock or other securities and property receivable
upon the exercise hereof prior to such consummation, the stock or other
securities to which such Holder would have been entitled upon such consummation
if such Holder had exercised this Warrant immediately prior thereto, all subject
to further adjustment as provided in subsections (a) and (c); in each such case,
the terms of this Section 5 shall be applicable to the shares of stock or other
securities property receivable upon the exercise of this Warrant after such
consummation.
(c) Stock Splits and Reverse Stock Splits. If, at any time on or
after the date hereof, the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall thereby be proportionately reduced
and the number of shares receivable upon exercise of this Warrant shall thereby
be proportionately increased; and, conversely, if at any time on or after the
date hereof the outstanding number of shares of Common Stock shall be combined
into a smaller number of shares, the Warrant Price in effect immediately prior
to such combination shall thereby be proportionately increased and the number of
shares receivable upon exercise of the Warrant shall be proportionately
decreased.
6. Notices of Record Date, Etc. In the event of (a) any taking by
the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution (the "Distribution"), (b) any capital
reorganization or reclassification of the stated capital of the Company or any
consolidation or merger of the Company with any other corporation or
corporations (other than a wholly-owned subsidiary), or the sale or distribution
of all or substantially all of the Company's property and assets (the
"Reorganization Event"), or (c) any proposed filing of a registration statement
under the Act in connection with a primary public offering of the Company's
Common Stock (the "Registration Event"), the Company will mail or cause to be
mailed to the Holder a notice specifying (i) the date of any such Distribution
stating the amount and character of such Distribution, (ii) the date on which
any such Reorganization Event or Registration Event is expected to become
effective, and (iii) the time, if any, that is to be fixed as to when the
holders of record of the Company's securities shall be entitled to exchange
their shares of the Company's securities for securities or other property
deliverable upon such Reorganization Event. Such notice shall be mailed at least
thirty (30) days prior to the date therein specified.
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7. Compliance with Act; Transferability and Negotiability of
Warrant; Disposition of Shares.
(a) Compliance with Act. The Holder, by acceptance hereof, agrees
that this Warrant and the Shares to be issued upon the exercise hereof are being
acquired solely for its own account (or a trust account if the Holder is a
trust) and not as a nominee for any other party and not with a view toward the
resale or distribution thereof and that it will not offer, sell or otherwise
dispose of this Warrant or any Shares to be issued upon the exercise hereof
except under circumstances which will not result in a violation of the Act. Upon
the exercise of this Warrant, the Holder shall confirm in writing, in a form
satisfactory to the Company, that the Shares so issued are being acquired solely
for its own account (or a trust account if the Holder is a trust) and not as a
nominee for any other party and not with a view toward resale or distribution
thereof. This Warrant and the Shares to be issued upon the exercise hereof
(unless registered under the Act) shall be imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH
SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
In addition, this Warrant and the Shares to be issued upon the
exercise hereof shall bear any legends required by the securities laws of any
applicable states.
(b) Transferability and Negotiability of Warrant. This Warrant
may not be transferred or assigned in whole or in part without compliance with
all applicable federal and state securities laws by the transferor and the
transferee (including the delivery of investment representation letters and
legal opinions satisfactory to the Company, if requested by the Company and the
transfer is to a person other than a general partner of the initial Holder).
Subject to the provisions of this Warrant with respect to compliance with the
Act, title to this Warrant may be transferred by endorsement and delivery in the
same manner as a negotiable instrument transferable by endorsement and delivery;
provided, however, that neither this Warrant nor the Shares purchasable with
this Warrant may be transferred to any entity or person which the Company
reasonably determines to be an actual or potential competitor of the Company.
The Company shall act promptly to record transfers of this Warrant on its books,
but the Company may treat the registered holder of this Warrant as the absolute
owner of this Warrant for all purposes, notwithstanding any notice to the
contrary.
(c) Disposition of Shares. With respect to any offer, sale,
transfer or other disposition of any Shares acquired pursuant to the exercise of
this Warrant prior to registration of such Shares, except for any such offer,
sale, transfer or other disposition of Shares to a general
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partner of the initial Holder, the Holder and each subsequent holder of this
Warrant agrees to give written notice to the Company prior thereto, describing
briefly the manner thereof, together with a written opinion of legal counsel for
such holder, reasonably satisfactory to the Company and its legal counsel, if
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
or any other Federal or state securities laws) of such Shares and indicating
whether or not under the Act, certificates for such Shares to be sold or
otherwise disposed of require any restrictive legend as to the applicable
restrictions on transferability in order to insure compliance with the Act.
Promptly upon receiving such written notice and reasonably satisfactory opinion,
if so requested, the Company, as promptly as practicable, shall notify such
holder that such holder may sell or otherwise dispose of such Shares, all in
accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this subsection (c) that the opinion of
legal counsel for the holder is not reasonably satisfactory to the Company and
its legal counsel, the Company shall so notify the holder promptly after such
determination has been made. Notwithstanding the foregoing, such Shares may be
offered, sold or otherwise disposed of in accordance with Rule 144, provided
that the Company shall have been furnished with such information as the Company
may reasonably request to provide a reasonable assurance that the provisions of
Rule 144 have been satisfied. Each certificate representing the Shares thus
transferred (except a transfer pursuant to Rule 144(k)) shall bear a restrictive
legend as to the applicable restrictions on transferability in order to insure
compliance with the Act, unless in the aforesaid opinion of legal counsel for
the holder, such legend is not required in order to insure compliance with the
Act. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
8. Rights of Shareholders. No Holder shall be entitled to vote or
receive dividends or be deemed the holder of Shares or any other securities of
the Company which may at any time be issuable on the exercise of this Warrant
for any purpose, nor shall anything contained herein be construed to confer upon
the Holder, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, consolidation, merger, transfer of assets or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares issuable upon exercise hereof shall have become deliverable, as
provided herein.
9. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
10. Exchange of Warrant. Subject to the other provisions of this
Warrant, on surrender of this Warrant for exchange, properly endorsed and
subject to the provisions of this Warrant with respect to compliance with the
Act, the Company at its expense shall issue to or on the order of the Holder a
new warrant or warrants of like tenor, in the name of the Holder or as
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the Holder (on payment by the Holder of any applicable transfer taxes) may
direct, for the number of Shares issuable upon exercise thereof.
11. Notices. All notices and other communications from the Company
to the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
12. Waiver. 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.
13. Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of California, as such laws are applied
to agreements entered into in California and to be performed solely by
California residents.
14. Titles and Subtitles; Forms of Pronouns. The titles of the
Sections and Subsections of this Warrant are for convenience only and are not to
be considered in construing this Warrant. All pronouns used in this Warrant
shall be deemed to include masculine, feminine and neuter forms.
15. Expiration. Subject to earlier termination pursuant to Section 3
above, the right to exercise this Warrant shall expire at 5:00 P.M. California
time, on September 30, 1999.
Dated: October ___, 1997
C2I SOLUTIONS, INC.
By:
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Xxxx X. Xxxxxx, Xx.
Chief Executive Officer
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EXHIBIT A
NOTICE OF EXERCISE
TO: C2i SOLUTIONS, INC.
1. The undersigned Holder of the attached original, executed Common
Stock Purchase Warrant hereby elects to exercise its purchase right under such
Warrant with respect to ________________ Shares, as defined in the Warrant, of
C2i Solutions, Inc.
2. The undersigned Holder elects to pay the aggregate Warrant Price
for such Shares (the "Exercise Shares") in the following manner:
[ ] by the enclosed check drawn on a United States bank and
for United States funds made payable to the Company in the
amount of $_____________; or
[ ] by wire transfer of United States funds to the account
of the Company in the amount of $___________, which
transfer has been made before or simultaneously with the
delivery of this Notice pursuant to the instructions of
the Company.
[ ] pursuant to the Net Exercise provisions set forth in
Section 4(c) of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of Shares in the name of the undersigned or in such other
names as is specified below;
Name:
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Address:
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Tax Ident. No.:
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HOLDER:
By:
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Title:
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Date:
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