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EXHIBIT 10.3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
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Warrant No.: 1 Number of Shares: 75,000
Date of Issuance: September 7, 2000 (subject to adjustment)
US SEARCH.COM INC.
Warrant
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US SEARCH.com Inc., a Delaware corporation (the "Company"), for value
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received, hereby certifies that Pequot Private Equity Fund II, L.P., or its
registered assigns (the "Registered Holder"), is entitled, subject to the terms
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set forth below, to purchase from the Company, at any time after the date hereof
and on or before the Expiration Date (as defined in Section 6 below), up to
75,000 shares of Series A Convertible Preferred Stock, par value $.001 per
share, of the Company ("Series A Preferred"), at a purchase price of $100.00 per
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share. The shares purchasable upon exercise of this Warrant and the purchase
price per share, as adjusted from time to time pursuant to the provisions of
this Warrant, are hereinafter referred to as the "Warrant Stock" and the
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"Purchase Price," respectively.
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1. Exercise.
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(a) Manner of Exercise. This Warrant may be exercised by the Registered
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Holder, in whole or in part, at any time after the date hereof and on or before
the Expiration Date by surrendering this Warrant, with the purchase form
appended hereto as Exhibit A-1 (the "Purchase Form") duly executed by such
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Registered Holder or by such Registered Holder's duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full of the aggregate Purchase
Price payable in respect of the number of shares of Warrant Stock specified in
such Purchase Form. The Purchase Price may be paid by cash or certified or
official bank check payable to the Company, wire transfer or by the surrender of
promissory notes or other instruments representing indebtedness of the Company
to the Registered Holder.
(b) Effective time of Exercise. Each exercise of this Warrant shall be
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deemed to have been effected immediately prior to the close of business on the
day on which this Warrant, the accompanying Purchase Form and the aggregate
Purchase Price shall have been surrendered to the Company as provided in Section
1(a) above. At such time, the person or persons in whose name or names any
certificates for Warrant Stock shall be issuable upon such exercise shall be
deemed for the purposes hereof to have become the holder or holders of record
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of the Warrant Stock represented by such certificates issuable upon such
exercise, notwithstanding that the stock transfer records of the Company may be
closed or that certificates representing the Warrant Stock shall not then be
actually delivered to the Registered Holder.
(c) Net Issue Exercise.
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(i) In lieu of exercising this Warrant in the manner provided
above in Section 1(a), the Registered Holder may elect to receive shares equal
to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
notice of such election in which event the Company shall issue to such
Registered Holder a number of shares of Warrant Stock computed using the
following formula:
X = Y (A - B)
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A
Where X = The number of shares of Warrant Stock to be issued to the
Registered Holder.
Y = The number of shares of Warrant Stock purchasable under this
Warrant (at the date of such calculation).
A = The Fair Market Value of one share of Warrant Stock (at the date
of such calculation).
B = The Purchase Price (as adjusted to the date of such calculation).
(ii) For purposes of this Section 1(c), the "Fair Market Value"
of one share of Warrant Stock on the date of calculation shall be at the highest
price per share which the Company could obtain on the date of calculation from a
willing buyer (not a current employee or director) for shares of Warrant Stock
sold by the Company, from authorized but unissued shares, as determined in good
faith by the Board of Directors, unless the Company is at such time subject to
an acquisition as described in Section 7(b) below, in which case the Fair Market
Value of one share of Warrant Stock shall be deemed to be the value received by
the holder of one share of Series A Preferred pursuant to such acquisition.
(d) Delivery to Registered Holder. As soon as practicable after the
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exercise of this Warrant, in whole or in part, pursuant to Section 1(a) or 1(c)
hereof, and in any event within ten (10) days thereafter, the Company at its
expense will cause to be issued in the name of, and delivered to, the Registered
Holder, or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct:
(i) a certificate or certificates representing the number of
shares of Warrant Stock to which such Registered Holder shall be entitled and
cash in lieu of fractional shares issuable upon exercise, and
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(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Warrant Stock equal (without
giving effect to any adjustment therein) to the number of such shares called for
on the face of this Warrant minus the number of such shares purchased by the
Registered Holder upon such exercise as provided in Section 1(a) or 1(c) above.
2. Adjustments.
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(a) Stock Splits and Dividends. If outstanding shares of the
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Company's Series A Preferred shall be subdivided into a greater number of shares
or a dividend or other distribution in Series A Preferred shall be paid in
respect of Series A Preferred, the Purchase Price in effect immediately prior to
such subdivision or at the record date of such dividend shall simultaneously
with the effectiveness of such subdivision or immediately after the record date
of such dividend or other distribution be proportionately reduced. If
outstanding shares of Series A Preferred shall be combined into a smaller number
of shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.
(b) Reclassification, Etc. In case there occurs any reclassification
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or change of the outstanding securities of the Company or of any reorganization
of the Company (or any other corporation the stock or securities of which are at
the time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, but before the Expiration Date, then
and in each such case the Registered Holder, upon the exercise hereof at any
time after the consummation of such reclassification, change, or reorganization
shall be entitled to receive, in lieu of the stock or other securities and
property otherwise receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such Registered
Holder would have been entitled upon such consummation if such Registered Holder
had exercised this Warrant immediately prior thereto, all subject to further
adjustment pursuant to the provisions of this Section 2.
(c) Effect of Conversion of Warrant Stock. In the event that at any
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time on or after the date hereof, but before the Expiration Date, all of the
then outstanding shares of Series A Preferred are converted into shares of the
Company's common stock, par value $.001 ("Common Stock"), and this Warrant has
not been exercised as provided in Section 1 of this Warrant, this Warrant shall
no longer represent the right to purchase Series A Preferred and shall instead
thereupon represent the right to purchase for the Purchase Price, in respect of
each share (or portion thereof) of Series A Preferred covered hereby immediately
prior to such conversion, the number of shares (or portion thereof) of Common
Stock into which such shares of Series A Preferred were convertible immediately
prior to such conversion. The number of shares of Common Stock purchasable under
this Warrant, as determined by the foregoing sentence, shall
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be subject to adjustment pursuant to any subsequent stock split, combination,
dividend, recapitalization or similar event with respect to Common Stock. To the
extent that the Series A Preferred converts to Common Stock, such that there are
no outstanding shares of Series A Preferred, all references to Warrant Stock or
Series A Preferred herein shall be deemed to be a reference to Common Stock.
(d) Adjustment Certificate. When any adjustment is required to be
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made in the Warrant Stock or the Purchase Price pursuant to this Section 2, the
Company shall promptly mail to the Registered Holder a certificate setting forth
(i) a brief statement of the facts requiring such adjustment, (ii) the Purchase
Price after such adjustment and (iii) the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable after such
adjustment.
3. Transfers.
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(a) Unregistered Security. Each holder of this Warrant acknowledges
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that this Warrant, the Warrant Stock and the Common Stock issuable upon
conversion of the Warrant Stock have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and agrees not to sell, pledge,
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distribute, offer for sale, transfer or otherwise dispose of this Warrant, any
Warrant Stock issued upon exercise of this Warrant, or any Common Stock issued
upon conversion of the Warrant Stock in the absence of (i) an effective
registration statement under the Act as to this Warrant, such Warrant Stock or
such Common Stock and registration or qualification of this Warrant, such
Warrant Stock or such Common Stock under any applicable U.S. federal or state
securities law then in effect, or (ii) an opinion of counsel, satisfactory to
the Company, that such registration and qualification are not required. Each
certificate or other instrument for Warrant Stock or such other securities shall
bear a legend substantially to the foregoing effect.
(b) Transferability. This Warrant and the rights of the Registered
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Holder may not be sold, transferred or otherwise disposed of, in whole or in
part, except to any Permitted Transferee of the Registered Holder, subject to
compliance with Section 3(a) hereof provided, however, that this Warrant may
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may not be transferred in part. Any such transfer shall be effective upon
surrender of the Warrant with a properly executed assignment (in the form of
Exhibit B-1 hereto) and funds sufficient to pay any transfer tax, at the
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principal office of the Company. "Permitted Transferee" shall mean (i) the
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Company, (ii) any subsidiary of the Company and (iii) any Affiliate of the
Registered Holder. "Affiliate" shall mean (i) with respect to any individual,
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(A) a spouse or descendant of such individual, (B) any trust or family
partnership whose beneficiaries shall solely be such individual and/or such
individual's spouse and/or any person related by blood or adoption to such
individual or such individual's spouse, and (C) the estate of such individual,
(ii) with respect to any Person which is not an individual, any other Person
that, directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such Person and/or one or more
Affiliates thereof. For the purposes of this Section 3(b), the term "control"
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(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, includes, without
limitation, the possession, directly or indirectly, of the power to
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direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise.
"Person" shall mean and includes an individual, a corporation, a partnership, a
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limited liability company, a joint venture, a trust, an unincorporated
organization and a government or any department or agency thereof, or any entity
similar to any of the foregoing.
(c) Warrant Register. The Company will maintain a register containing
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the names and addresses of the Registered Holders of this Warrant. Until any
transfer of this Warrant is made in the warrant register, the Company may treat
the Registered Holder of this Warrant as the absolute owner hereof for all
purposes; provided, however, that if this Warrant is properly assigned in blank,
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the Company may (but shall not be required to) treat the bearer hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.
4. Representations, Warranties and Covenants of the Registered Holder.
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This Warrant has been issued by the company in reliance upon the following
representations, warranties and covenants of the Registered Holder:
(a) The Registered Holder is experienced in evaluating start-up
companies such as the Company, and has either individually or through its
current officers such knowledge and experience in financial and business matters
that the Registered Holder is capable of evaluating the merits and risks of the
Registered Holder's prospective investment in the Company, and has the ability
to bear the economic risks of the investment. The Registered Holder either (i)
has a preexisting personal or business relationship with the Company or its
principals or (ii) has substantial knowledge and experience in financial and
business matters, has specific experience making investment decisions of a
similar nature, and is capable, without the use of a financial advisor, of
utilizing and analyzing the information made available in connection with the
issuance of the Warrant and of evaluating the merits and risks of an investment
in the Warrant Shares and protecting the Registered Holder's own interests in
connection with this transaction. The Registered Holder is an "accredited
investor" within the meaning of Rule 501(a) of Regulation D promulgated under
the Securities Act.
(b) The Registered Holder is acquiring this Warrant, and upon
exercise of this Warrant, will acquire Warrant Stock, for investment for such
Registered Holder's own account and not with the view to, or for resale in
connection with, any distribution thereof in violation of law. The Registered
Holder understands that this Warrant (and the Warrant Stock issuable upon
exercise of this Warrant) have not been registered under the Securities Act by
reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent as expressed herein. The Registered Holder further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to any
third person with respect to any portion of this Warrant (or any Warrant Stock
issuable upon exercise of this Warrant). The Registered Holder understands and
acknowledges that this Warrant will not, and any issuance of Warrant Stock upon
exercise of this Warrant may not, be registered under the
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Securities Act on the ground that the issuance of securities hereunder is exempt
from the registration requirements of the Securities Act.
5. No Impairment. The Company will not, by amendment of its charter or
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through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or 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 of
this Warrant against impairment.
6. Termination. This Warrant (and the right to purchase shares of Series
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A Preferred upon exercise hereof) shall terminate on the earlier to occur of (a)
the date the Registered Holder purchases all of the Warrant Stock issuable upon
exercise of this Warrant and (b) at 5:00 p.m., Los Angeles time on September 7,
2005 (in each case, the "Expiration Date").
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7. Notices of Certain Transactions. In case:
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(a) the Company shall take a record of the holders of its Series A
Preferred (or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to subscribe
for or purchase any shares of stock of any class or any other securities, or to
receive any other right, to subscribe for or purchase any shares of stock of any
class or any other securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company, any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the surviving entity), or any transfer of all or substantially all of the
assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Series A Preferred (or such
other stock or securities at the time deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation,
winding-up, redemption or conversion) are to be determined. Such notice shall
be mailed at least ten (10) days prior to the record date or effective date for
the event specified in such notice.
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8. Reservation of Stock. The Company will at all times reserve and keep
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available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
9. Exchange of Warrant. Subject to the terms hereof, upon the surrender
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by the Registered Holder of this Warrant, properly endorsed, to the Company at
the principal office of the Company, the Company will, subject to the provisions
of Section 3 hereof, issue and deliver to or upon the order of the Registered
Holder, at the Company's expense, a new Warrant of like tenor, in the name of
such Registered Holder or as such Registered Holder (upon payment by such
Registered Holder of any applicable transfer taxes) may direct, calling for the
number of shares of Series A Preferred called for on the face of this Warrant or
if partially exercised, such lesser number of shares that shall be issuable upon
exercise of the Warrant.
10. Replacement of Warrant. Upon receipt of evidence reasonably
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satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company to indemnify it against any claim that may be made
against it on account of the alleged loss, theft, destruction or the issuance of
a new Warrant, or (in the case of mutilation) upon surrender and cancellation of
this Warrant, the Company will issue, in lieu thereof, a new Warrant of like
tenor.
11. Mailing of Notices. Any notice required or permitted pursuant to this
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Warrant shall be in writing and shall be deemed sufficient upon receipt, when
delivered personally or sent by courier, overnight delivery service or confirmed
facsimile, or forty-eight (48) hours after being deposited in the regular mail,
as certified or registered mail (airmail if sent internationally), with postage
prepaid, addressed (a) if to the Registered Holder, to the address of the
Registered Holder most recently furnished in writing to the Company and (b) if
to the Company, to the address set forth below or subsequently modified by
written notice to the Registered Holder.
12. No Rights as Stockholder. Until the exercise of this Warrant, the
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Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company, either at law or in equity.
13. No Fractional Shares. No fractional shares of Series A Preferred will
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be issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the Fair Market Value of one share of
Series A Preferred on the date of exercise, as determined in good faith by the
Company's Board of Directors.
14. Amendment or Waiver. Any term of this Warrant may be amended or waived
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only by an instrument in writing signed by the party against which enforcement
of the amendment or waiver is sought.
15. Headings. The headings in this Warrant are for purposes of reference
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only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
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16. Governing Law. This Warrant shall be governed, construed and
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interpreted in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of law.
(Signature Page Follows)
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IN WITNESS WHEREOF, the undersigned has caused this Warrant to be duly
executed, all as of the day and year first above written.
US SEARCH.COM INC.
By: /s/ BRENT N. COHEN
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Name: Brent N. Cohen
Title: Chief Executive Officer
Address: 5401 Beethoven Street
Los Angeles, CA 90066
Fax Number: (310) 882-7898
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EXHIBIT A-1
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PURCHASE FORM
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To: US SEARCH.com Inc. Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant No. 1, hereby irrevocably elects to purchase _______ shares of the
Series A Convertible Preferred Stock covered by such Warrant and herewith makes
payment of $_________, representing the aggregate purchase price for such shares
at the price per share provided for in such Warrant.
The undersigned acknowledges that s/he has reviewed the representations and
warranties contained in Section 4 of the Warrant and by its signature below
hereby makes such representations and warranties to the Company as of the date
hereof.
Signature: _____________________________________
Name (print): __________________________________
Title (if applic.): ____________________________
Company (if applic.): __________________________
____ Check here if a filing is required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, or any similar state legislation.
EXHIBIT A-1
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EXHIBIT B-1
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ASSIGNMENT FORM
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FOR VALUE RECEIVED, _________________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant with respect to the number of shares of Series A Convertible Preferred
Stock, par value $.001 per share, of US SEARCH.com Inc., a Delaware corporation,
covered thereby set forth below, unto:
Name of Assignee Address/Fax Number No. of Shares
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Dated:_________________ Signature: _______________________________
_______________________________
Witness: ________________________________
EXHIBIT B-1
