1
EXHIBIT 10.14
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER ANY STATE SECURITIES LAWS, AND MAY BE OFFERED AND SOLD ONLY
IF SO REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
HOLDER OF THIS WARRANT OR ANY SUCH SHARES MAY BE REQUIRED TO DELIVER
TO THE COMPANY, IF THE COMPANY SO REQUESTS, AN OPINION OF COUNSEL
(REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY) TO THE
EFFECT THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
(OR QUALIFICATION UNDER STATE SECURITIES LAWS) IS AVAILABLE WITH
RESPECT TO ANY TRANSFER OF THIS WARRANT OR THESE SHARES THAT HAS NOT
BEEN SO REGISTERED (OR QUALIFIED).
THIS WARRANT AND ANY SHARES OF THE COMPANY ACQUIRED UPON THE EXERCISE
OF THIS WARRANT ALSO ARE SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AND OBLIGATIONS, TO WHICH ANY TRANSFEREE AGREES BY HIS
ACCEPTANCE HEREOF, AS SET FORTH HEREIN AND IN THE STOCKHOLDERS
AGREEMENT OF THE COMPANY, DATED AS OF JUNE __, 1995, COPIES OF WHICH
MAY BE OBTAINED FROM THE COMPANY. NO TRANSFER OF THIS WARRANT OR SUCH
SHARES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY
EVIDENCE OF COMPLIANCE WITH THE TERMS HEREOF AND OF SUCH STOCKHOLDERS
AGREEMENT AND BY AN AGREEMENT OF THE TRANSFEREE TO BE BOUND BY THE
RESTRICTIONS SET FORTH HEREIN AND IN THE STOCKHOLDERS AGREEMENT.
FOOD 4 LESS HOLDINGS, INC.
Common Stock Purchase Warrant
No. W-1 8,000,000 shares
June __, 1995
FOOD 4 LESS HOLDINGS, INC., a Delaware corporation (together
with any corporation that shall succeed to or assume the obligations of the
Company hereunder in compliance with Section 4, the "Company"), for value
received, hereby certifies that THE YUCAIPA COMPANIES, a California general
partnership, or its registered permitted assigns (the "Holder"), is entitled to
purchase from the Company an aggregate of 8,000,000 shares of Common Stock (as
defined below), at the Exercise Price (as defined below) per share,
2
subject to the terms, conditions and adjustments set forth below, (i) in whole
or in part, at any time or from time to time from and after the occurrence of a
Qualified IPO (as defined below) and on or prior to 5:00 P.M., New York City
time, on the Expiration Date (as defined below) or (ii) in whole, concurrently
with any Qualified Sale Event occurring on or prior to the Expiration Date.
1. Definitions. Capitalized terms used herein and not
otherwise defined herein have the meanings ascribed to them in the Stockholders
Agreement (the "Stockholders Agreement"), dated as of June __, 1995, among the
Company, Ralphs Grocery Company, a Delaware corporation, and certain
stockholders of the Company. In addition, the following terms shall have the
meanings ascribed to them below:
"Common Stock" shall mean the Common Stock, par value $.01 per
share, of the Company and any stock into which such Common Stock shall have
been changed or any stock resulting from any reclassification of such Common
Stock.
"Enterprise Value" shall mean (without duplication) the sum of
(a) the aggregate value of the fully diluted common equity of the Company,
based on an assumed price per Share equal to the Exercise Price, net of the
exercise, exchange or conversion price, if any, with respect to any security
exercisable or exchangeable for or convertible into Common Stock, plus (b) the
aggregate principal amount of all Indebtedness of the Company and its
consolidated Subsidiaries and the aggregate liquidation preference of all
preferred stock of the Company (other than preferred stock convertible into
Common Stock included in clause (a) above), in each case as reflected on the
Company's most recent consolidated balance sheet that was (or was required to
be) provided pursuant to Section 4.4 of the Stockholders Agreement on or prior
to June __, 2000, less (c) all cash and cash equivalents of the Company and its
consolidated Subsidiaries as reflected on such balance sheet.
"Expiration Date" initially shall mean June __, 2000;
provided, that if, on such date, the product of (i) 6 times (ii) EBITDA for the
latest four fiscal quarters of the Company for which information was (or was
required to be) provided pursuant to Section 4.4 of the Stockholders Agreement
exceeds the Enterprise Value, then "Expiration Date" shall mean June __, 2002.
"Market Price" shall mean the average closing sale price of a
share of Common Stock, regular way, for the period of 20 consecutive trading
days
2
3
ending on the trading day immediately preceding the date of such exercise or,
in case no such sale takes place on any such day, the average of the reported
closing bid and asked prices, regular way, in each case on a Permitted Exchange
or, if not so available, as such Market Price may be determined by a nationally
recognized investment bank selected by a majority of the disinterested members
of the Board of Directors of the Company that are neither Affiliates of the
Holder nor designated or nominated by the Holder or any of its Affiliates (the
"Disinterested Directors"); provided, that if the Warrant is exercised (i) on
or prior to the 20th trading day following consummation of a Qualified IPO,
"Market Price" shall mean the price to the public in such Qualified IPO or (ii)
concurrently with a Qualified Sale Event, "Market Price" shall mean the price
per share of Common Stock paid in such Qualified Sale Event.
"Preferred Shares" shall mean shares of the Company's Series A
Preferred Stock and Series B Preferred Stock.
"Qualified Sale Event" shall mean a sale of all, but not less
than all, of the issued and outstanding shares of capital stock of the Company
to a Third Party in a bona fide transaction; provided, that from and after June
__, 2000, such term shall only include a Compelled Sale.
2. Exercise of Warrant.
2.1. Manner of Exercise. Subject to the foregoing, this
Warrant may be exercised by the Holder hereof, in whole or in part, during
normal business hours on any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the City of New York are authorized by
law to be closed (a "Business Day"), by surrender of this Warrant to the
Company at its office maintained pursuant to Section 9.2, accompanied by a
subscription in substantially the form attached to this Warrant (or a
reasonable facsimile thereof), duly executed by such Holder. Payment of the
aggregate Exercise Price of the number of shares of Common Stock designated in
such subscription shall be made by the Company withholding therefrom that
number of shares of Common Stock with an aggregate Market Price as of the date
of exercise equal to such aggregate Exercise Price.
2.2. When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of
business on the Business Day on which this Warrant and the accompanying
subscription shall have been duly surrendered to the Company as provided in
Section 2.1, and at
3
4
such time the Holder shall be deemed to have become the holder or holders of
record of a number of shares of Common Stock equal to the number of shares
designated in such subscription less the number of shares withheld by the
Company as payment therefor.
2.3. Delivery of Stock Certificates, etc. As soon as
practicable after each exercise of this Warrant, in whole or in part, in
accordance with the terms of Section 2.1, the Company will cause to be issued
in the name of, and delivered to the Holder hereof,
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of
Common Stock to which such Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash in an amount equal to the same fraction of
the Market Price per share on the date of such exercise, and
(b) in case such exercise is in part only, a new Warrant of
like tenor, calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock equal to the number of such
shares called for on the face of this Warrant (after giving effect to
any adjustment thereof after the date hereof) minus the number of such
shares designated by the Holder upon such exercise as provided in
Section 2.1.
3. Adjustments.
3.1. General. (a) The number of shares of Common Stock that
the Holder shall be entitled to receive upon each exercise hereof shall be
determined by multiplying the number of shares of Common Stock that would
otherwise (but for the provisions of this Section 3) be issuable upon such
exercise, by a fraction (i) the numerator of which is the Warrant Price (as
defined below) and (ii) the denominator of which is the Exercise Price, in each
case in effect on the date of such exercise.
Each of the "Exercise Price" and the "Warrant Price" shall
initially be $30.50 per share; provided, that the Exercise Price shall be
adjusted and readjusted from time to time as provided in Section 3 and the
Warrant Price shall be adjusted and readjusted from time to time as provided in
Sections 3.1(b) and (c).
(b) From and after June __, 2000, the Exercise Price
and the Warrant Price shall each be increased daily at a rate of 25% per annum,
compounded annually.
4
5
(c) Each of the Exercise Price and the Warrant Price
shall be adjusted from time to time after the date hereof by multiplying such
Exercise Price and Warrant Price by a fraction (i) the numerator of which shall
be 40,000,000 and (ii) the denominator of which shall be the sum of (x)
20,216,756 plus (y) the number of shares of Common Stock issued prior to such
adjustment upon conversion of Preferred Shares plus (z) the number of shares of
Common Stock then issuable upon conversion of all then outstanding Preferred
Shares. Whenever a particular number of shares of Common Stock is specified
herein, such number shall be adjusted to reflect stock dividends, stock-
splits, combinations or other reclassifications of stock or any similar
transactions.
3.2. Treatment of Stock Dividends. If, after the date
hereof, the Company shall declare or pay any dividend on the Common Stock
payable in Common Stock, then, and in each such case, the Exercise Price in
effect immediately after the close of business on the record date for the
determination of holders entitled to receive such dividend, shall be reduced by
multiplying such Exercise Price by a fraction (a) the numerator of which shall
be the number of shares of Common Stock outstanding at the close of business on
such record date and (b) the denominator of which shall be the sum of such
number of shares and the total number of shares constituting such dividend or
other distribution.
3.3. Adjustments for Stock-Splits, Combinations. If, after
the date hereof, the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock or combined into a smaller
number of shares of Common Stock by stock split, combination, reclassification
or otherwise, the Exercise Price in effect immediately prior to such
subdivision or combination shall, concurrently with the effectiveness of such
subdivision or combination, be proportionately reduced or increased.
3.4. Minimum Adjustment of Warrant Price. If the amount of
any adjustment of the Exercise Price required pursuant to Section 3.1(c), 3.2
or 3.3 would be less than one percent (1%) of the Exercise Price in effect at
the time such adjustment is otherwise so required to be made, such amount shall
be carried forward and adjustment with respect thereto made at the time of and
together with any subsequent adjustment which, together with such amount and
any other amount or amounts so carried forward, shall aggregate at least one
percent (1%) of such Exercise Price, provided, that all such adjustments
required pursuant to Sections 3.1(c), 3.2 and 3.3 and carried forward under
this Section 3.4 shall be made upon (and in connection with) any exercise of
the Warrant.
5
6
3.6 Form of Warrants. Irrespective of any adjustments in the
Exercise Price or the number of shares of Common Stock purchasable upon the
exercise of the Warrants, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the Warrant initially issued.
4. Consolidation, Merger, etc.
If, after the date hereof, the Company shall
(a) consolidate with or merge into any other Person
and shall not be the continuing or surviving corporation of such consolidation
or merger, or
(b) permit any other Person to consolidate with or
merge into the Company and the Company shall be the continuing or surviving
Person but, in connection with such consolidation or merger, the Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or cash or any other property, or
(c) effect a capital reorganization or
reclassification of the Common Stock
(other than (i) a Qualified Sale Event or (ii) in the cases for which an
adjustment has been or is to be made pursuant to Section 3), then proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the holder of this Warrant, upon the exercise hereof
after the consummation of such transaction, shall be entitled to receive, in
lieu of the Common Stock issuable upon such exercise, the kind and amount of
securities, cash or other property to which such holder would actually have
been entitled upon such consummation if such holder had exercised the rights
represented by this Warrant in full (giving effect to the payment of the
aggregate Exercise Price) immediately prior thereto.
5. Certain Covenants. The Company (a) will not permit the
par value of any shares of stock receivable upon the exercise of this Warrant
to exceed the amount payable therefor upon such exercise, (b) will take all
such reasonable action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
stock on the exercise of the Warrants from time to time outstanding.
6. Accountants' Report as to Adjustments. Upon the
occurrence of any event requiring adjustment or readjustment in the Exercise
Price (other than by operation of Section 3.1(b) or (c)) or the shares of
Common Stock issu-
6
7
able upon the exercise of this Warrant, the Company will promptly compute
such adjustment or readjustment in accordance with the terms of this Warrant
and cause independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company) selected by a
majority of the Disinterested Directors to verify such computation and prepare
a report setting forth such adjustment or readjustment and showing in
reasonable detail the method of calculation thereof and the facts upon which
such adjustment or readjustment is based. The Company will promptly mail a
copy of each such report to the Holder.
7. Restrictions on Transfer.
(a) Legends. Each Warrant shall be stamped or
otherwise imprinted with a legend in substantially the form set forth hereon.
Each certificate for shares Common Stock issued upon the exercise of any
Warrant, and each certificate issued upon the transfer of any such Common
Stock, shall be stamped or otherwise imprinted with a legend in substantially
the form set forth in Section 2.3 of the Stockholders Agreement.
(b) No Transfer. Neither this Warrant nor any
interest herein may be directly or indirectly transferred or assigned by the
Holder other than to Ronald W. Burkle or a Controlling Stockholder controlled
by Ronald W. Burkle and, the equity holders of which consist solely of Ronald
W. Burkle and Yucaipa Individuals.
8. Reservation of Stock, etc. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Common Stock from time to time issuable
upon exercise of this Warrant. All shares of Common Stock issuable upon
exercise of this Warrant shall be duly authorized and, when issued upon such
exercise in accordance with the terms hereof, shall be validly issued and fully
paid and nonassessable with no liability on the part of the holders thereof.
9. Ownership and Transfer.
9.1. Ownership of Warrants. The Company shall treat the
person in whose name any Warrant is registered on the register kept at the
office of the Company maintained pursuant to Section 9.2(a) as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary.
7
8
9.2. Office; Transfer and Exchange of Warrants.
(a) The Company will maintain an office at 1100 West
Artesia Boulevard, Compton, California 90220, until such time as the Company
shall notify the Holder of the Warrant of any change of location of such
office.
(b) Subject to Section 7, upon the surrender of any
Warrant, properly endorsed, for registration of transfer or for exchange at the
office of the Company maintained pursuant to Section 9.2(a), the Company will
execute and deliver to or upon the order of the Holder thereof a new Warrant or
Warrants of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, 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 or Warrants so
surrendered.
10. No Rights or Liabilities as Stockholder. Nothing
contained in this Warrant shall be construed as conferring upon the Holder any
rights as a stockholder of the Company or as imposing any obligation on such
holder to purchase any securities or as imposing any liabilities on such holder
as a stockholder of the Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
11. Notices. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder
or which are given with respect to this Warrant shall be in writing and shall
be personally served or delivered by a reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed (a) if to any holder of any Warrant, at the registered address of
such holder as set forth in the register kept at the principal office of the
Company, or (b) if to the Company, to the attention of its Chief Executive
Officer at its office maintained pursuant to Section 9.2(a), provided that the
exercise of any Warrant shall be effective only in the manner provided in
Section 2. Notice shall be deemed given on the date of service or confirmation
of receipt of transmission if personally served or transmitted by telegram,
telex or facsimile. Notice otherwise sent as provided herein shall be deemed
given on the next Business Day following delivery of such notice to a reputable
air courier service.
12. 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, INTERPRETED
UNDER, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW PROVISIONS
8
9
THEREOF. Titles and headings of sections of this Warrant are for convenience
only and shall not affect the construction of any provision of this Warrant.
13. Expiration. The right to exercise this Warrant shall
expire at 5:00 P.M., New York City time, on the Expiration Date.
FOOD 4 LESS HOLDINGS, INC.
By: ___________________________________
Name:
Title:
9
10
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To: FOOD 4 LESS HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, ______*
shares of Common Stock of FOOD 4 LESS HOLDINGS, INC. and requests that the
certificates for such shares be issued in the name of, and delivered to the
undersigned, whose address is set forth below. In payment therefor, the
Company may withhold therefrom, and the undersigned holder hereby surrenders
its right to, that number of shares of Common Stock with an aggregate Market
Price as of the date of exercise equal to the aggregate Exercise Price for the
shares designated for purchase in the preceding sentence.
Dated:
__________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of Warrant)
__________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
__________________________________
* Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as
to which the Warrant is being exercised), in either case after making
any adjustment for additional shares of Common Stock which, pursuant
to the adjustment provisions of this Warrant, may be delivered upon
exercise. In the case of a partial exercise, a new Warrant or
Warrants will be issued and delivered, representing the unexercised
portion of the Warrant, to the holder surrendering the Warrant.
10