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EXHIBIT 10.14
THIS WARRANT AND THE SHARES OF COMMON STOCK REPRESENTED HEREBY HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
Warrant No. 1 December 28, 1995
COMMON STOCK PURCHASE WARRANT
This certifies that, for value received, _________________________
__________ and permitted assigns (the "Holder"), is entitled to purchase on the
terms and conditions contained herein from Financial Pacific Insurance Group,
Inc., a Delaware corporation (the "Corporation"), ______ shares (subject to
adjustment as set forth in sections 4 and 5 below, the "Warrant Shares") of the
Corporation's Common Stock, $.001 par value per share (the "Common Stock"), at
the Warrant Purchase Price (subject to adjustment as set forth in Section 4
below) at any time on or after the date hereof, subject to Section 1.2, and
prior to January 1, 2004 (the "Exercise Period"), on surrender to the
Corporation at its principal office at 0000 Xxxxx Xxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxxxxx 00000 (or at such other location as the Corporation may
advise Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and upon payment in cash
or by certified or cashier's check of the Warrant Purchase Price for the
appropriate number of Warrant Shares for which this Warrant is being exercised,
as determined in accordance with the provisions hereof. In lieu of paying cash
upon exercise of this Warrant, the Holder may elect to either (i) make a
cashless exercise, in which event the Holder will be entitled to receive the
Warrant Shares minus the number of shares of Common Stock valued based on the
Current Market Value (as defined below) equal to the Warrant Purchase Price, or
(ii) cancel indebtedness of the Corporation to the Holder in an equivalent face
amount.
The "Warrant Purchase Price" shall equal 1.4 times the per share
book value of the Corporation's Common Stock as set forth on the audited
financial statements of the Corporation dated December 31, 1995, prepared in
accordance with GAAP, consistently applied. The Warrant Purchase Price is
subject to adjustment pursuant to Section 4 hereof.
This Warrant is subject to the following terms and conditions:
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1. Exercise; Issuance of Certificates; Payment; Definition.
1.1 Optional Exercise. Subject to Section 1.2 hereof and
to the limitations on exercise set forth in Section 2 hereof, this Warrant is
exercisable at the option of the Holder, from time to time during the Exercise
Period, for all or any part of the Warrant Shares. The Corporation agrees that
the Warrant Shares purchased under this Warrant shall be and are deemed to be
issued to the Holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such shares. Subject to the provisions of Section 2,
certificates for shares of Common Stock so purchased shall be delivered to the
Holder within a reasonable time after this Warrant has been exercised, and, in
case of a purchase of less than all the Warrant Shares, the Corporation shall
cancel this Warrant and, within a reasonable period of time, shall execute and
deliver to the Holder a new Warrant of like tenor for the balance of the
Warrant Shares. Each stock certificate so delivered shall be registered in the
name of the Holder or such other name as shall be designated thereby, subject to
the limitations contained in Section 2.
1.2 Mandatory Exercise. Notwithstanding any provision
herein to the contrary, this Warrant must be exercised by the Holder, if at all,
upon the effective date of a registration statement filed pursuant to the
Securities Act of 1933, as amended (other than a registration relating solely to
a transaction under Rule 145 under such Act or any successor thereto, or an
employee benefit plan of the Corporation), in connection with the sale of the
Corporation's Common Stock in a firm commitment, underwritten public offering
with gross proceeds to be received by the Corporation which equal or exceed
$10,000,000 and a public offering price of the Common Stock of not less than
$5,000 per share (as adjusted for stock splits, dividends or other
recapitalization transactions) (an "Initial Public Offering"). The Corporation
shall give the Holder not less than 15 days notice of the expected date of the
effectiveness of such registration statement. Not later than the effective date,
the Holder shall give the Corporation notice to the effect that (i) the Holder
does not elect to exercise this Warrant, (ii) the Holder elects to make a cash
exercise of this Warrant (which notice shall be accompanied by the payment of
the Warrant Purchase Price) or (iii) the Holder elects to make a cashless
exercise of this Warrant as provided in the first paragraph hereof. If the
Holder does not give any notice to the Corporation, the Holder shall be deemed
to have elected to make a cashless exercise of this Warrant.
1.3 Definitions. As used herein, the following terms shall
have the following meanings:
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"Current Market Value" per share of Common Stock means (i) if an
Initial Public Offering of the Common Stock has taken place, the price at the
close of the market on the first day of trading of such Common Stock following
the effectiveness of a registration statement for the Common Stock and (ii) if
no Initial Public Offering has taken place, the Fair Market Value of the Common
Stock based upon the Fair Market Value of 100% of the Corporation if sold as a
going concern and without regard to any discount for the lack of liquidity or on
the basis that the relevant shares of Common Stock do not constitute a majority
or controlling interest in the Corporation and assuming the exercise of all
warrants, convertible securities, options or other rights to subscribe for or
purchase any additional shares of Common Stock or securities convertible or
exchangeable into Common Stock.
"Fair Market Value" shall mean the value obtainable upon a sale in
an arm's length transaction to an unaffiliated third party under usual and
normal circumstances, with neither the buyer nor the seller under any compulsion
to act, with equity to both, as determined by the Board in good faith; provided,
however, that if the Holder shall dispute the Fair Market Value as determined by
the Board, the Holder may undertake to have the Holder and the Corporation
retain an Independent Expert. The determination of Fair Market Value by the
Independent Expert shall be final, binding and conclusive on the Corporation and
the Holder. All costs and expenses of the Independent Expert shall be borne by
the Holder, unless the determination of Fair Market Value by the Independent
Expert is more than 5% more favorable to the Corporation than the Fair Market
value determined by the Board, in which event the cost of the Independent Expert
shall be shared equally by the Holder and the Corporation, or more than 10% more
favorable to the Corporation than the Fair Market Value determined by the Board,
in which event the cost of the Independent Expert shall be borne solely by the
Corporation.
"Independent Expert" shall mean an investment banking firm
reasonably agreeable to the Corporation and the Holder who does not (and whose
affiliates do not) have a financial interest in the Corporation or any of its
stockholders.
2. Limitation on Transfer and Exercise. Notwithstanding the
provisions of Section 1, the Corporation shall not be required to deliver any
certificate for shares of Common Stock upon exercise of this Warrant except in
accordance with the provisions, and subject to the limitations, of Sections 8
and 9 hereof.
3. Due Authorization and Issuance; Reservation of Issuance. The
Corporation covenants and agrees that all shares of Common Stock which may be
issued upon the exercise of the rights represented by this W xxxxxx will, upon
issuance, be duly
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authorized, validly issued, fully paid and nonassessable shares of the Common
Stock of the Corporation, free from all preemptive rights of any stockholder and
free of all taxes, liens and charges with respect to the issue thereof. The
Corporation further covenants and agrees that during the period within which the
rights represented by this Warrant may be exercised, the Corporation will at all
times have authorized and reserved, for the purpose of issue or transfer upon
exercise of this Warrant, a sufficient number of authorized but unissued shares
of Common Stock, or other securities and property, when and as required to
provide for the exercise of this Warrant.
4. Adjustments to Warrant Purchase Price. The Warrant Purchase
Price shall be subject to adjustment from time to time as hereinafter provided
(such price, or the price as last adjusted, also being referred to herein as the
"Warrant Purchase Price"). Upon each adjustment of the Warrant Purchase Price,
the Holder shall thereafter be entitled to purchase, at the Warrant Purchase
Price resulting from such adjustment, the number of Warrant Shares obtained by
multiplying the Warrant Purchase Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment, and dividing the product thereof by the Warrant Purchase
Price resulting from such adjustment.
4.1 Subdivision or Combination of Stock. In case the Corporation
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares by way of stock split, stock dividend or similar event,
the Warrant Purchase Price in effect immediately prior to such subdivision shall
be proportionately reduced, and conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares by way of reverse
stock split or similar event, the Warrant Purchase Price in effect immediately
prior to such combination shall be proportionately increased.
4.2 Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization or reclassification of the capital stock of
the Corporation, any consolidation or merger of the Corporation with another
entity, or the sale of all or substantially all of the Corporation's assets to
another entity shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the Holder shall thereafter have the right to purchase and
receive upon the basis and the terms and conditions specified in this Warrant
and in lieu of the shares of Common Stock immediately theretofore purchasable
and receivable upon the exercise of the rights represented hereby, such shares
of stock, securities or assets as
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may be issued or payable with respect to or in exchange for the number of shares
of Common Stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby had such reorganization,
reclassification, consolidation, merger or sale not taken place and in any such
case appropriate provision shall be made with respect to the rights and
interests of the holder of this Warrant to the end that the provisions hereof
(including without limitation provisions for adjustments of the Warrant Purchase
Price and of the number of shares of Common Stock purchasable and receivable
upon the exercise of this Warrant) shall thereafter be applicable, as nearly as
may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. The Corporation will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof the
successor corporation (if other than the Corporation) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument, executed and mailed or delivered to the Holder at the
last address thereof appearing on the books of the Corporation, the obligation
to deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase.
4.3 Issuance of Certain Additional Shares. If the Corporation shall
sell or issue to any person any shares of Common Stock or any securities,
options, warrants or rights entitling any person to subscribe for, purchase,
convert or exchange into shares of Common Stock (other than (i) sales or
issuances to officers or employees of, or consultants or advisors to, the
Corporation pursuant to any stock incentive plan or arrangement approved by the
Corporation's Board of Directors and (ii) shares issued upon the conversion of
shares of Series A Convertible Preferred Stock) at a price per share of Common
Stock, or having an exercise price per share of Common Stock, as the case may
be, that is less than the Current Market Value of Common Stock on the date of
issuance (such shares being referred to as the "Below Market Shares"), the
Warrant Purchase Price shall be adjusted on and after the date of such sale or
issuance by multiplying the Warrant Purchase Price by a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding on such date
plus the number of shares of Common Stock that the aggregate purchase price or
exercise price of such Below Market Shares would purchase at the Current Market
Value, and of which the denominator shall be the number of shares of Common
Stock outstanding on such date plus the number of Below Market Shares. The
adjustment to the Warrant Purchase Price set forth above shall be made
successively whenever a sale or issuance of Below Market Shares occurs;
provided, however, that, if any such options, warrants or rights expire without
the issuance of shares of Common Stock, then the Warrant Purchase
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Price shall again be adjusted to equal the Warrant Purchase Price in effect had
such issuance of Below Market Shares not occurred.
4.4 Notice of Adjustment. Upon any adjustment of the Warrant
Purchase Price and/or number of Warrant Shares, then and in each such case the
Corporation shall give written notice thereof, by first class mail, postage
prepaid, addressed to the Holder at the address thereof as shown on the books of
the Corporation. The notice shall state the Warrant Purchase Price and/or number
of Warrant Shares resulting from such adjustment, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
5. Issue Tax. The issuance of shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder for any
issue tax in respect thereof, provided that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any shares of Common Stock in a name other than
that of the then Holder of this Warrant.
6. Closing of Books. The Corporation will at no time close its
transfer books against the transfer of this Warrant or of any shares of Common
Stock issued or issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise hereof.
7. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder the
right to vote or to consent or to receive notice as a stockholder in respect of
meetings of stockholders for the election of Directors of the Corporation or any
other matter or any rights whatsoever as a stockholder of the Corporation. No
dividends or interest shall be payable or accrued in respect of this Warrant or
the shares of Common Stock purchasable hereunder until, and only to the extent
that, this Warrant shall have been exercised. No provisions hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of such Holder for the Warrant Purchase Price or as a
stockholder of the Corporation, whether such liability is asserted by the
Corporation or by its creditors.
8. Restrictions on Transferability of Securities; Compliance with
Securities Act.
8.1 Restrictions on Transferability. The Warrant and the Common
Stock issuable hereunder shall not be transferable except upon the conditions
specified in this Section 8, which conditions are intended to insure compliance
with the provisions of the Securities Act of 1933, as amended (the "Securities
Act").
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Each holder of this Warrant or the Common Stock issuable hereunder will cause
any proposed transferee of the Warrant or such Common Stock to agree to take and
hold such securities subject to the provisions and upon the conditions specified
in Section 8.
8.2 Transfers Not Subject to Restrictions. Subject to Section 9
hereof, the Holder may sell, assign or transfer this Warrant to an affiliate, or
to his parents, the parents of his spouse, his spouse or issue or adopted
children, or to a trust established for the benefit of his parents, the parents
of his spouse, his spouse, issue, adopted children, or himself, or dispose of
them under his will.
8.3 Restrictive Legend. Each certificate representing (a) this
Warrant, (b) the shares of Common Stock or other securities issued upon exercise
of the Warrant and (c) any other securities issued in respect of such shares of
Common Stock upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event (collectively, the "Restricted Securities"),
shall (unless otherwise permitted by the provisions of Section 8.4 below or
unless such securities have been registered under the Securities Act) be
imprinted with the following legend, in addition to any legend required under
applicable state securities laws:
THIS WARRANT AND THE SHARES OF COMMON STOCK REPRESENTED HEREBY HAVE
BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
Upon request of a holder of such a certificate, the Corporation
shall remove the foregoing legend therefrom or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Corporation shall have received either the opinion referred to in Section 8.4(a)
or the "no-action" letter referred to in Section 8.4(b) to the effect that any
transfer by such holder of the securities evidenced by such certificate will be
exempt from the registration and/or qualification requirements of, and that such
legend is not required in order to establish compliance with, the Securities
Act, and if applicable, any state securities laws under which transfer
restrictions on such securities had been previously imposed.
8.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of
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this Section 8.4. Prior to any proposed transfer of any Restricted Securities,
the holder thereof shall give written notice to the Corporation of such holder's
intention to effect such transfer. Each such notice shall describe the manner
and circumstances of the proposed transfer in sufficient detail, and shall be
accompanied by either (a) an unqualified written legal opinion addressed to the
Corporation from counsel who shall be reasonably satisfactory to the
Corporation, which opinion shall be reasonably satisfactory in form and
substance to the Corporation's counsel, to the effect that the proposed transfer
of the Restricted Securities may be effected without registration under the
Securities Act and any applicable state securities laws, or (b) a "no-action"
letter from the Securities and Exchange Commission (and any necessary state
securities administrator) to the effect that the distribution of such securities
without registration will not result in a recommendation by the staff of the
Commission (or such administrators) that action be taken with respect thereto,
whereupon the holder of such Restricted Securities shall be entitled to transfer
such Restricted Securities in accordance with the terms of the notice delivered
by the holder to the Corporation. Each certificate evidencing. the Restricted
Securities transferred as above provided shall bear the appropriate restrictive
legend set forth in Section 8.4 above.
8.5 Required Approvals. Notwithstanding anything to the contrary
contained herein, if any exercise of this Warrant would result in a change in
"control" of the Corporation, as defined in Section 1215(b) of the, California
Insurance Code, then such exercise shall be delayed until such time as the
approval of the California Department of Insurance is obtained.
9. Transferability of Warrant. Each qualified transferee of this
Warrant must, prior to the acknowledgment and acceptance of such transfer by the
Corporation, agree to take and hold this Warrant subject to the provisions
specified herein. Any such permitted transfers may be made without charge to the
Holder (except for transfer taxes) , at the office or agency of the Corporation
referred to in the first paragraph of this Warrant, by the Holder or by its duly
authorized attorney, upon surrender of this Warrant properly endorsed.
10. Rights and Obligations Survive Exercise of Warrant. The rights
and obligations of the Corporation, of the Holder and of the holder of shares of
Common Stock issued upon exercise of this Warrant contained in Sections 8, 9 and
10 shall survive the exercise of this Warrant.
11. Modification and Waiver. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
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12. Notices. Any notice, request or other document required or
permitted to be given or delivered to the record Holder or the Corporation shall
be delivered, or shall be sent by certified or registered mail, postage prepaid,
to each such Holder at its address as shown on the books of the Corporation or
to the Corporation at the address indicated therefor in the first paragraph of
this Warrant.
13. Binding Effect on Successors. This Warrant shall be binding
upon any corporation succeeding the Corporation by merger, consolidation or
acquisition of all or substantially all of the Corporation's assets, and all of
the obligations of the Corporation relating to the Common Stock issuable upon
the exercise of this Warrant shall survive such merger, consolidation or
acquisition and all of the covenants and agreements of the Corporation shall
inure to the benefit of the permitted successors and assigns of the Holder.
14. Descriptive Headings; Governing Law. The descriptive headings
of the several paragraphs of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. This Warrant shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of Delaware without regard to conflicts of laws principles
thereof.
15. Lost Warrant or Certificates. The Corporation represents and
warrants to the Holder that upon receipt of evidence reasonably satisfactory to
the Corporation of the loss, theft, destruction or mutilation of this Warrant or
certificate evidencing shares of Common Stock issued on exercise hereof and, in
the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Corporation, or in the case of any such
mutilation upon surrender and cancellation of such Warrant or stock certificate,
the Corporation will make and deliver a new Warrant or stock certificate, of
like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock
certificate.
16. Expiration of Warrant. Subject to Section 1.2 hereof, this
warrant shall expire and shall no longer be exercisable on or after January 1,
2004.
17. Note and Warrant Purchase Agreement. This Warrant is one of the
Common Stock Purchase Warrants (the "Warrants", such term to include all
Warrants in substitution therefor) originally authorized for issuance pursuant
to the Note and Warrant Purchase Agreement (the "Note and Warrant Purchase
Agreement"), dated as of December 28, 1995, between the Corporation and certain
institutional investors, copies of which are on file at the principal office of
the Corporation in Sacramento, California. The holder of this Warrant is
entitled to the benefits of the
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Note and Warrant Purchase Agreement and may enforce the agreements of the
Corporation contained therein, all in accordance with the terms thereof. Certain
terms used in this Warrant not otherwise defined herein shall have the
respective meanings specified in the Note and Warrant Purchase Agreement.
18. Stockholders Agreement. All Common Stock or other securities
issuable upon exercise of this Warrant shall be subject to all of the provisions
of and shall be entitled to the benefits of the Stockholders Agreement dated as
of September 7, 1993 by and among the Corporation and the stockholders of the
Corporation as of such date (the "Stockholders Agreement"). Upon such exercise,
the holder of the Common Stock or other securities issuable hereunder shall
become a "Stockholder" under such Agreement, as the Stockholders Agreement may
have been modified, supplemented or amended prior to the date of such exercise.
The provisions of this Section 19 shall not apply if the Stockholders Agreement
has been terminated, either by agreement of the parties thereto or by its own
terms, prior to the date of such exercise.
19. Certain Events. In the event of the dissolution, liquidation or
winding up of the Corporation, the rights to purchase Warrant Shares evidenced
by this Warrant shall terminate and expire and the Holder of this Warrant shall
be entitled to receive from the Corporation, after payment of all debts,
obligations and liabilities of the Corporation and after payment of any
liquidation preference on any class of capital stock of the Corporation having a
preference as to such payments over the holders of Common Stock, payment in an
amount equal to the product of (a) the amount by which the liquidating payment
per share of Common Stock exceeds the Exercise Price, multiplied by (b) the
number of shares of Common Stock purchasable pursuant to this Warrant.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be
duly executed and issued by the officer or officers thereunto duly authorized as
of this 28th day of December, 1995.
FINANCIAL PACIFIC INSURANCE GROUP, INC.,
a Delaware Corporation
By: /s/
------------------------------------------
President
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FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To the Corporation:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder,
__________________________________________________________________ (___________)
of the number of shares of Common Stock purchasable under this warrant and
herewith makes payment of _____________________________________________________
Dollars ($_________) therefor, and requests that a certificate(s) for such
shares be issued in the name of, and delivered to, ____________________________
_______________________________________________________________________________
_________________________________, whose address is ___________________________
_______________________________________________________________________________
____________________________________________________________.
The undersigned represents that it is acquiring such shares of Common
Stock for its own account for investment purposes only and not with a view to or
for sale in connection with any distribution thereof.
DATED:________________
__________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
Address:
__________________________________________________
__________________________________________________
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ASSIGNMENT FORM
FOR VALUE RECEIVED, ____________________________________ hereby
sells, assigns and transfers unto:
Name:______________________________
Address:___________________________
___________________________
the right to purchase Common Stock represented by this Warrant to the extent of
__________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint ___________________________________________,
attorney, to transfer the same on the books of the Corporation with full power
of substitution in the premises.
Dated:___________________
________________________________________
(Signature)
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