Exhibit 10.3


 


THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION
IS AVAILABLE.


 


Right to Purchase


232,007 Shares


of Series C Convertible Preferred


Stock of ClearStory Systems, Inc.


 


August 25, 2005


 


No. C-1


 


CLEARSTORY SYSTEMS, INC.


 


SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE
WARRANT


 


ClearStory Systems, Inc., a Delaware
corporation (the “Company”), hereby certifies that, for value received,
SCP Private Equity Partners II, L.P. (the “Holder”), or its successors
or registered assigns, is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time before 5:00 p.m.,
Boston time, on the Expiration Date (as hereinafter defined),
232,007 fully paid and nonassessable shares of Series C Convertible
Preferred Stock, par value $0.01 per share (the “Series C Preferred
Stock”), of the Company, at a purchase price per share of $1.9396 (the “Purchase
Price”).  The number of such shares
of Series C Preferred Stock and the Purchase Price are subject to
adjustment as provided in this Warrant.  


 


1.             Certain Definitions.  As used herein the following terms have the
following respective meanings:


 


(a)           The
term “Change of Control” means (i)  any reorganization,
consolidation, merger or similar transaction or series of related transactions
(each, a “combination transaction”)
in which the Company is a constituent corporation or is a party if, as a result
of such combination transaction, the voting securities of the Company that are
outstanding immediately prior to the consummation of such combination
transaction (other  than any such securities that are held by an Acquiring
Stockholder (as defined below)) do
not represent, or are not converted into, securities of the surviving
corporation of such combination transaction (or such surviving corporation’s
parent corporation if the surviving corporation is owned by the parent
corporation) that, immediately after the consummation of such combination
transaction, together possess at least a majority of the total voting power of
all securities of such surviving corporation (or its parent corporation, if
applicable) that are outstanding immediately after the consummation of such
combination transaction; or (ii) a sale of all or
substantially all of the assets of the Company. 
For purposes of this definition, an “Acquiring Stockholder” means a
stockholder or stockholders of the Company that (A) merges or combines
with the Company in


 





















 


such combination transaction or (B) owns
or controls a majority of another corporation that merges or combines with
the Company in such combination transaction.


 


(b)           The
term “Expiration Date” means (i) August 25, 2015 or (ii) immediately
prior to the consummation of a Change of Control.


 


2.             Exercise of Warrant.


 


(a)           This Warrant may be exercised in full
or in part at any time or from time to time until the Expiration Date by the
holder hereof by surrender of this Warrant and the exercise notice annexed
hereto (duly executed) by such holder, to the Company at its principal office,
accompanied by payment, in cash or by check payable to the order of the Company
in the amount obtained by multiplying (a) the number of shares of Series C
Preferred Stock designated by the holder in the notice of exercise by (b) the
Purchase Price then in effect (or by net exercise in accordance with the
provisions of Section 3 below).  On
any partial exercise, the Company at its expense will forthwith issue and
deliver to or upon the order of the holder hereof a new Warrant or Warrants of
like tenor, in the name of the holder hereof or as such holder (upon payment by
such holder of any applicable transfer taxes and subject to applicable securities
laws) may request, providing in the aggregate on the face or faces thereof for
the number of shares of Series C Preferred Stock for which such Warrant or
Warrants may still be exercised. 


 


(b)           Automatic Exercise Prior to
Expiration.  If not earlier exercised, this Warrant shall
be deemed to have been exercised on a net basis pursuant to Section 3(a) below
immediately prior to the expiration hereof, and upon such deemed exercise, and
without any further act or deed of the Holder or any other person or entity,
the Company shall issue to the Holder the number of fully paid and
non-assessable shares of Series C Preferred Stock to which such Holder
would be entitled hereunder.


 


3.             Net Exercise.  


 


(a)           In
lieu of exercising this Warrant pursuant to Section 2, the Holder may
elect to receive, without the payment by the Holder of any additional
consideration, shares of Series C Preferred Stock equal to the value of
this Warrant or any portion hereof by the surrender of this Warrant or such
portion to the Company, with the exercise notice annexed hereto duly executed
(and by indicating thereon that the Holder is exercising this Warrant pursuant
to the net exercise provisions of this Section 3), at the office of the
Company.  Thereupon, the Company shall
issue to the Holder such number of fully paid and nonassessable shares of Series C
Preferred Stock as is computed using the following formula:


 


X = Y (A-B)


   A 


 


Where   X
=                        the number of shares to be issued to the Holder pursuant to this Section 3.


 


Y =                              the
number of shares covered by this Warrant in respect of which the net issue
election is made pursuant to this Section 3.


 


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A =                            the Fair Market Value (as hereinafter defined) of one share of Series C
Preferred Stock, as at the time the net issue election is made pursuant to this
Section 3. 


 


B =                              the Purchase Price in effect under this Warrant at the time the net
issue election is made pursuant to this Section 3.


 


The Board shall promptly respond in writing to an
inquiry by the Holder as to the Fair Market Value of one share of Series C
Preferred Stock.


 


 


 


(b)           The
“Fair Market Value” of a share of Series C Preferred Stock as of a
particular date (the “Determination Date”) shall mean the fair market
value of such share as determined in good faith by the Board of Directors upon
review of all relevant factors; provided, however, that, if the
Determination Date is the date of a liquidation, dissolution or winding up of
the Company (including a Change of Control), then the “Fair Market Value”
of a share of Series C Preferred Stock shall mean the aggregate of all
amounts paid, payable (or otherwise distributed or distributable) to the
holders of the Series C Preferred Stock pursuant to the Company’s
Certificate of Incorporation, as amended to date (the “Charter”) upon
such liquidation, dissolution or winding up (assuming, for this purpose, that: (i) this
Warrant was exercised immediately prior to, and the underlying shares of Series C
Preferred Stock issued thereon were issued and outstanding as of, such
liquidation, dissolution or winding up; and (ii) the exercise price
payable in respect of such deemed exercise of this Warrant is included in the
assets available for distribution to the holders of the Company’s capital stock
under the Charter in connection with such liquidation, dissolution or winding
up).


 


4.             Delivery of Stock Certificates,
etc., on Exercise.  As soon as
practicable after the exercise of this Warrant, and in any event within
10 business days thereafter, the Company at its expense (including the
payment by it of any applicable issue or stamp taxes) will cause to be issued
in the name of and delivered to the holder hereof, or as such holder (upon
payment by such holder of any applicable transfer taxes and subject to
applicable securities laws) may direct, a certificate or certificates for the
number of fully paid and nonassessable shares of Series C Preferred Stock
to which such holder shall be entitled on such exercise, in such denominations
as may be requested by such holder, plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current Fair Market Value (as determined in Section 3(b) above)
of one full share of Series C Preferred Stock, 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 2 or
3 hereof, or otherwise.


 


5.             Covenants as to Series C
Preferred Stock and Common Stock.  The Company covenants and agrees that all
shares of Series C Preferred Stock which may be issued upon the exercise
of this Warrant, and all shares of Common Stock, $.10 par value per share (the “Common
Stock”), of the Company, which may be issued upon the conversion of the Series C
Preferred Stock, will, upon issuance, be validly issued, fully paid and
non-assessable and free


 


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from all
taxes, liens and charges with respect to the issue thereof.  Without limiting the generality of the
foregoing, the Company covenants that it will from time to time take all such
actions as may be required to assure that the stated or par value per share of Series C
Preferred Stock is at all times equal to or less than the then effective
Purchase Price per share of Series C Preferred Stock issuable upon
exercise of this Warrant.  The Company
further covenants and agrees that the Company will at all times have authorized
and reserved, free from preemptive rights, a sufficient number of shares of its
Series C Preferred Stock to provide for the exercise of this Warrant and
shares of Common Stock to provide for the conversion of the Series C
Preferred Stock. If and so long as the Series C Preferred Stock issuable upon
the exercise of this Warrant or the Common Stock issuable upon conversion of
the Series C Preferred Stock is listed on any national securities
exchange, the Company will, if permitted by the rules of such exchange,
list and keep listed on such exchange, upon official notice of issuance, all
such shares of capital stock that are so listed.


 


6.             No Stockholder Rights .  This Warrant shall not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Company.


 


7.             Restrictions on Transfer;
Registration Rights.   The holder of
this Warrant by acceptance hereof agrees that the transfer of this Warrant, the
shares of Series C Preferred Stock issuable upon the exercise of all or
any portion of this Warrant and the shares of Common Stock issuable upon
conversion of such shares of Series C Preferred Stock are subject to the
provisions of the Charter, including, without limitation, the rights,
privileges and preferences of the Series C Preferred Stock set forth in
the Certificate of Designation for the Series C Preferred Stock contained
in the Charter. This Warrant, and the shares of Series C Preferred Stock
issuable upon exercise of all or any portion of this Warrant and the shares of
Common Stock issuable upon conversion of such shares of Series C Preferred
Stock shall be entitled to all rights and benefits accorded thereto in the
Charter, and the applicable provisions of the Charter are hereby incorporated
herein by reference.  Without limiting
the generality of the foregoing, the shares of Series C Preferred Stock
issuable upon exercise of this Warrant (and, as applicable, any securities
issuable upon conversion of such shares), shall be entitled to the same
registration rights applicable to the “Registrable Securities” in that certain Amended
and Restated Registration Rights Agreement, dated as of September 2, 2003,
by and among the Company, the Holder, Selway Partners, LLC, Selway Management, Inc.
and CIP Capital L.P.


 


8.             Transfer of Warrant.  Subject to applicable securities laws, this
Warrant and all rights hereunder are transferable, in whole or in part, at the
agency or office of the Company referred to in Section 2, by the holder
hereof in person or by duly authorized attorney, upon surrender of this Warrant
properly endorsed.  Subject to applicable
securities laws, each taker and holder of this Warrant, by taking or holding
the same, consents and agrees that this Warrant, when endorsed, in blank, shall
be deemed negotiable, and, when so endorsed the holder hereof may be treated by
the Company and all other persons dealing with this Warrant as the absolute
owner hereof for any purposes and as the person entitled to exercise the rights
represented by this Warrant, or to the transfer hereof on the books of the
Company, any notice to the contrary


 


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notwithstanding;
but until each transfer on such books, the Company may treat the registered
holder hereof as the owner hereof for all purposes.


 


9.                                       Adjustment of Number of Shares; Purchase Price; Nature of Securities
Issuable Upon Exercise of Warrants..


 


(a)           Purchase Price; Adjustment of
Number of Shares.  The Purchase Price set forth above
and the number of shares purchasable hereunder shall be subject to adjustment
from time to time as hereinafter provided.


 


(i)            Reclassification,
etc.  If the Company, at any time
while this Warrant, or any portion thereof, remains outstanding and unexpired,
shall, by the reclassification or exchange of securities or otherwise, change
any of the securities as to which purchase rights under this Warrant exist into
the same or a different number of securities of any other class or classes,
this Warrant shall thereafter represent the right to acquire such number and
kind of securities as would have been issuable as the result of such change
with respect to the securities that were subject to the purchase rights under
this Warrant immediately prior to such reclassification, exchange, or other
change and the Purchase Price therefor shall be appropriately adjusted, all
subject to further adjustment as provided in this Section 9.


 


(ii)           Stock
Splits, Stock Dividends and Reverse Stock Splits.  In case at any time the Company shall split
or subdivide the outstanding shares of Series C Preferred Stock into a
greater number of shares, or shall declare and pay any stock dividend with
respect to its outstanding stock that has the effect of increasing the number
of outstanding shares of Series C Preferred Stock, the Purchase Price in
effect immediately prior to such subdivision or stock dividend shall be
proportionately reduced and the number of shares of Series C Preferred
Stock purchasable pursuant to this Warrant immediately prior to such
subdivision or stock dividend shall be proportionately increased, and
conversely, in case at any time the Company shall combine its outstanding
shares of Series C Preferred Stock into a smaller number of shares, the
Purchase Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares of Series C Preferred
Stock purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced.


 


(iii)          Adjustments
for Dividends in Stock or Other Securities of Property.  If while this Warrant, or any portion hereof,
remains outstanding and unexpired the holders of shares of Series C
Preferred Stock 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 or other
securities or property (other than cash) of the Company by way of dividend,
then and in each case, this Warrant shall represent the right to acquire, in
addition to the number of shares of the security receivable upon exercise of
this Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property of the
Company that such holder would hold on the date of such exercise had it been
the holder of record of the security receivable upon exercise of this Warrant
on the date hereof and had thereafter, during the period from the date


 


5





















 


hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such period, giving effect
to all adjustments called for during such period by the provisions of this Section 9.


 


(b)           Timing of Purchase Price
Adjustment.  No adjustment of the Purchase Price shall be
made unless such adjustment would require an increase or decrease of at least
$0.0001 in such price; provided that any adjustments which by reason of this Section 9(b) are
not required to be made shall be carried forward and shall be made at the time
of and together with the next subsequent adjustment which, together with any
adjustment(s) so carried forward, shall require an increase or decrease of at
least $0.0001 in the Purchase Price then in effect hereunder.


 


10.           Certificate of Adjustment.
Whenever the Purchase Price (or the number of shares of Series C Preferred
Stock issuable on the exercise of this Warrant) is adjusted, as herein
provided, the Company shall promptly deliver to the Holder a certificate of the
Company’s chief financial officer setting forth the Purchase Price (and the
number of shares of Series C Preferred Stock issuable on the exercise of
this Warrant) after such adjustment and setting forth a brief statement of the
facts requiring such adjustment.


 


11.           Notices of Record Date, Etc.  In the event of:


 


(a)           any
taking by the Company of a record of the holders of the Series C Preferred
Stock or Common Stock for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;


 


(b)           any
reclassification of the capital stock of the Company, capital reorganization of
the Company, or Change of Control; or


 


(c)           any
voluntary or involuntary dissolution, liquidation or winding up of the Company;


 


then in each such event the Company will provide or
cause to be provided to the Holder a written notice thereof.  Such notice shall be provided at least ten (10) calendar
days prior to the date specified in such notice on which any such action is to
be taken.


 


12.           Exchange of Warrant.  This Warrant is exchangeable upon the
surrender hereof by the holders hereof at the office or agency of the Company
designated in Section 2 hereof, for new Warrants of like tenor
representing in the aggregate the rights to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder or holders hereof at the
time of such surrender.


 


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13.           Lost, Stolen, Mutilated or
Destroyed Warrant.  If this Warrant
is lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may in its reasonable discretion impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof),
issue a new Warrant of like denomination and tenor as the Warrant so lost,
stolen, mutilated or destroyed.  Any such
new Warrant shall constitute a contractual obligation of the Company, whether
or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at
any time enforceable by anyone.


 


14.           Notice Prior to Public Offering.  The Company shall give each Holder at least
thirty (30) days prior written notice of the effectiveness of any registration
statement filed with the Securities and Exchange Commission under the 1933 Act
covering any shares of capital stock of the Company.


 


15.           No Impairment.  The Company will not, by amendment of its
Charter or through any reclassification, capital reorganization, consolidation,
merger, sale or conveyance of assets, dissolution, liquidation, issue or sale
of securities or any other voluntary action, avoid or seek to avoid the
observance of performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder.


 


16.           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 General Corporation
Law of the State of Delaware as to matters within the scope thereof, and as to
all other matters shall be governed by and construed in accordance with the
internal laws of the Commonwealth of Massachusetts as applied to agreements
entered into among Massachusetts residents to be performed entirely within the
Commonwealth of Massachusetts, without regard to principles of conflicts of
law.  The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof.  This Warrant is being
executed as an instrument under seal. 
The invalidity or unenforceability of any provision hereof shall in no
way affect the validity or enforceability of any other provision.


 


[Remainder of Page Intentionally
Left Blank]


 


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IN
WITNESS WHEREOF, the undersigned have executed this Series C Convertible
Preferred Stock Purchase Warrant as a sealed instrument as of the day and year
first above written.


 


 


	
  Dated:  August 25,
  2005

  	
  CLEARSTORY SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Henry F. Nelson

  	
   

  
	
   

  	
  Name:

  	
  Henry F. Nelson

  
	
   

  	
  Title: 

  	
  President, CEO

  
					



 


	
  ACCEPTED AND AGREED TO BY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  SCP PRIVATE EQUITY PARTNERS II, L.P

  	
   

  	
   

  
	
   

  	
  General Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /S/ Thomas G. Rebar

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Thomas G. Rebar

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


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NOTICE OF EXERCISE


 


(To be signed only on exercise of Warrant)


 


TO:         CLEARSTORY
SYSTEMS, INC.


 


The undersigned hereby irrevocably elects to [check
applicable subsection]:


 


	
               
  (a)

  	
   

  	
  Purchase                      
  shares of Series C Preferred Stock of ClearStory Systems, Inc.
  pursuant to the terms of Section 2 of the attached Warrant.  Payment of the Purchase Price per share
  required under Section 2 of such Warrant accompanies this notice.

  
	
  OR

   

  	
   

  	
   

  
	
               
  (b)

  	
   

  	
  Exercise the attached Warrant for [all of the
  shares] [               of
  the shares] [cross out inapplicable phrase] purchasable under the Warrant
  pursuant to the net exercise provisions of Section 3 of such Warrant.

  



 


 


	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature must conform to name

  of holder as specified on the

  face of the Warrant)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  
	
   

  	
   

  	
   

  
								



 





















 


FORM OF ASSIGNMENT


 


(To be signed only on transfer of Warrant)


 


For value received, the undersigned hereby
sells, assigns, and transfers unto                                               
the right represented by the within Warrant to purchase                     
shares of Series C Convertible Preferred Stock of ClearStory Systems, Inc.
to which the within Warrant relates, and appoints                                        
as its Attorney to transfer such right on the books of ClearStory Systems, Inc.
with full power of substitution in the premises.


 


	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature must conform to name

  of holder as specified on the

  face of the Warrant)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signed in the presence of: