STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered
into as of November 18, 1997, among Remy Capital Partners IV,
L.P., a Delaware limited partnership ("Buyer"), The RHL Limited
Partnership, a California limited partnership ("RHL"), EML
Enterprises, L.P., a California limited partnership ("EML") and
The BL 1995 Limited Partnership, a California limited partnership
("BL"). RHL, EML and BL are collectively referred to herein as
the "Sellers" and each individually as a "Seller".
WHEREAS, each Seller owns and desires to sell the
number of shares of Common Stock, par value $0.001 per share of
Variflex, Inc., a Delaware corporation (the "Company") as set
forth on Exhibit A attached hereto, and collectively, the Sellers
desire to sell One Million Six Hundred Sixty-Six Thousand Six
Hundred Sixty-Seven (1,666,667) of the outstanding shares of
Common Stock of the Company (the "Stock"), representing
approximately twenty-seven percent (27%) of the Company's
outstanding shares of Common Stock.
WHEREAS, Buyer desires to acquire all of the Stock.
NOW, THEREFORE, in consideration of the mutual
promises contained herein and intending to be legally bound, the
parties agree as follows:
Section I. Purchase and Sale of Stock; Warrants; Registration
Rights Agreement.
A. Subject to the terms and conditions of this
Agreement, on the date hereof and concurrently with the execution
of this Agreement, Buyer shall purchase the Stock from the
Sellers and the Sellers shall sell the Stock to Buyer (the
"Closing"). At the Closing, which will occur at the offices of
O'Melveny & Xxxxx, 1999 Avenue of the Stars, Xxxxx 000, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, the Sellers shall deliver the
certificates evidencing the Stock to Buyer, properly endorsed for
transfer to, or accompanied by a duly executed stock power in
favor of, Buyer or its nominee and otherwise in a form acceptable
for transfer on the books of the Company.
B. The total purchase price for the Stock (the "Purchase
Price") to be paid by Buyer at the Closing shall be Nine Million
One Hundred Sixty-Six Thousand Six Hundred Sixty-Eight and 50/100
Dollars ($9,166,668.50) in cash (Five and 50/100 Dollars ($5.50)
per share). The Purchase Price shall be paid by wire transfer or
other immediately available funds to such account as the Sellers
have designated prior to the date hereof.
C. In connection with the purchase and sale of the Stock
hereunder, Buyer is entering into a consulting agreement with the
Company (the "Remy Consulting Agreement") and acquiring a warrant
from the Company that will enable Buyer to purchase Four Hundred
Thousand (400,000) shares of Common Stock of the Company at a
price of Five and 10/100 Dollars ($5.10) per share and on such
additional terms as are contained in that certain warrant
agreement (the "Remy Warrant") of even date herewith.
D. In connection with the purchase and sale of the Stock
hereunder, (a) Xxxxxxx X. Xxxx ("Losi") is terminating his
employment agreement with the Company and entering into a
consulting agreement with the Company (the "Losi Consulting
Agreement"); (b) Xxxxxxx X. Xxxx, XX ("Xxx Xxxx") is amending his
employment agreement with the Company to restrict his ability to
terminate his employment with the Company on six (6) months'
notice (the "Xxx Xxxx Employment Agreement Amendment"); and (c)
the Company is issuing each of Losi and Xxx Xxxx a warrant to
purchase Two Hundred Thousand (200,000) shares and One Hundred
Thousand (100,000) shares, respectively, of Common Stock of the
Company at a price of Five and 10/100 Dollars ($5.10) per share
and on such additional terms as are contained in those certain
warrant agreements (the "Losi Warrants") of even date herewith.
E. In connection with the purchase and sale of the Stock
hereunder, the execution of the Remy Consulting Agreement and the
execution of the Xxx Xxxx Employment Agreement Amendment, the
Company has agreed to grant to each of Buyer and Xxx Xxxx certain
registration rights with respect to shares of the Company's
Common Stock as set forth in that certain registration rights
agreement (the "Registration Rights Agreement") of even date
herewith.
Section II. Representations and Warranties of the Sellers.
Sellers jointly and severally represent and warrant to Buyer as
follows:
A. Each Seller is a limited partnership duly organized,
validly existing and in good standing under the laws of the State
of California with all necessary partnership power and authority
to execute, deliver and perform this Agreement. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware with all necessary
corporate power and authority to own its properties and assets
and to carry on its businesses as now conducted.
B. (a) The execution, delivery and performance of this
Agreement have been duly and validly authorized by all necessary
partnership actions on the part of each Seller.
(b) Each Seller has duly executed and delivered
this Agreement. This Agreement constitutes the legally valid and
binding obligation of each Seller, enforceable against such
Seller in accordance with its terms except as such enforceability
may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles
relating to or limit- ing creditors' rights generally.
(c) The execution, delivery and performance of this
Agreement by each Seller will not violate or constitute a breach
or default (whether upon lapse of time or the occurrence of any
act or event or otherwise) under (i) the partnership agreement of
such Seller; or (ii) any material law to which such Seller is
subject.
(d) Except as set forth in clauses (ii), (iii),
(iv) and (v) of Section 4.2 hereof and assuming the accuracy of
the matters set forth in Section 3.3 hereof, the execution,
delivery and performance of this Agreement by each Seller will
not require filing or registration with, or the issuance of any
permit by, or receipt of any approval or other consent from, any
other person or entity.
(e) The execution, delivery and performance of this
Agreement will not cause the acceleration of any payment or
trigger any other right under any agreement, arrangement,
commitment or understanding to which the Company is a party or by
which the Company is bound.
C. Since June 17, 1994, the Company has filed with the
Securities and Exchange Commission all Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, proxy materials and registration statements required to be
filed by it pursuant to the federal securities laws and has made
all other filings required to be made by it with the Securities
and Exchange Commission (collectively, the "SEC Filings"). The
SEC Filings did not (as of the respective filing dates, mailing
dates or effective dates, as the case may be) contain any untrue
statements of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under
which they were made, not misleading.
D. Exhibit A is a true and complete statement of the
number of shares of Common Stock of the Company owned by each
Seller. The Sellers own all of the shares of Stock beneficially
and of record. The Stock is free and clear of any claim, charge,
encumbrance, security interest, lien, option, pledge, right of
others, or restriction (whether on voting, sale, transfer,
disposition or other- wise), whether imposed by agreement,
understanding, law, equity or otherwise, except for any
restrictions on transfer by affiliates arising under the federal
securities laws. The Stock is duly authorized, validly issued
and outstanding and fully paid and nonassessable. Except as set
forth in the SEC Filings, there are no outstanding contracts or
other rights to subscribe for or purchase, or contracts or other
obligations to issue or grant any rights to acquire, any capital
stock of the Company, or to restructure or recapitalize the
Company, and there are no outstanding contracts of any Seller or
the Company to repurchase, redeem, or otherwise acquire any
capital stock of the Company.
E. Exhibit B is a true and complete list of all
agreements, arrangements, commitments or understandings between
the Company and its management employees, true, correct and
complete copies of which have been delivered to Buyer by the
Sellers prior to the date hereof.
F. The Board of Directors of the Company has approved
the sale of the Stock to Buyer in accordance with Section
203(a)(1) of the Delaware General Corporation Law.
G. Since July 31, 1997, there has not been (a) any
change in the assets, liabilities, condition, financial or
otherwise, earnings or operations of the Company (other than
changes in the ordinary course of business and the changes listed
on Exhibit C attached hereto) which individually or in the
aggregate has had or is expected to have a material adverse
effect on such assets, liabilities, condition, financial or
otherwise, earnings or operations of the Company; (b) any change,
except in the ordinary course of business or as disclosed on
Exhibit C attached hereto, in the contingent obligations of the
Company by way of guaranty, endorsement, indemnity, warranty, or
otherwise, none of which individually or in the aggregate has had
or is expected to have a material adverse effect on the assets,
liabilities, condition, financial or otherwise, earnings or
operations of the Company; (c) any declaration or payment of any
dividend or other distribution by the Company; or (d) any direct
or indirect loans made by the Company to any shareholder,
employee, officer, or director of the Company, other than
advances made in the ordinary course of business.
H. No agent, broker, investment or commercial banker,
person or firm acting on behalf of the Sellers or the Company or
under the authority of any of them is or will be entitled to any
broker's or finder's fee or any other commission or similar fee
directly or indirectly in connection with any of the transactions
contemplated by this Agreement.
Section III. Representations and Warranties of Buyer. Buyer
represents and warrants to the Sellers as follows:
A. Buyer is a limited partnership duly formed, validly
existing and in good standing under the laws of the State of
Delaware and has all necessary partnership power and authority to
execute, deliver and perform this Agreement.
B. (a) The execution, delivery and performance of this
Agreement by Buyer have been duly and validly authorized by all
necessary partnership actions on the part of Buyer.
(b) Buyer has duly executed and delivered this
Agreement. This Agreement constitutes the legally valid and
binding obligation of Buyer, enforceable against Buyer in
accordance with its terms except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws and equitable principles relating to or
limiting creditors' rights generally.
(c) The execution, delivery and performance of this
Agreement by Buyer will not violate or constitute a breach or
default (whether upon lapse of time or the occurrence of any act
or event or otherwise) under (i) the partnership agreement of
Buyer, or (ii) any material law to which Buyer is subject.
(d) The execution, delivery and performance of this
Agreement by Buyer will not require filing or registration with,
or the issuance of any permit by, or receipt of any approval or
other consent from, any other person or entity.
C. The Stock is being purchased by Buyer as principal
solely for its own account, for investment purposes only and not
with a view to the distribution thereof in violation of the
Securities Act of 1933, as amended (the "Securities Act"), or any
applicable state securities law, and Buyer has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment represented by
its purchase of the Stock. Buyer acknowledges that the Stock has
not been registered under the Securities Act or any other
securities law and may not be sold, and Buyer hereby covenants
that the Stock will not be sold, in whole or in part, in the
United States of America except pursuant to a registration
statement effective under the Securities Act or pursuant to an
exemption from registration under the Securities Act, and in
compliance with all other applicable securities laws.
D. No agent, broker, investment or commercial banker,
person or firm acting on behalf of Buyer or under its authority
is or will be entitled to any broker's or finder's fee or any
other commission or similar fee directly or indirectly in
connection with any of the transactions contemplated by this
Agreement.
Section IV. Conditions of Purchase.
A. The obligation of the Sellers to effect the Closing
shall be subject to the following conditions: (i) the
representations and warranties of Buyer made herein are true in
all material respects as of the Closing; (ii) Xxx Xxxx shall have
been appointed as Chief Executive Officer of the Company; (iii)
receipt by Losi and Xxx Xxxx of the Losi Warrants executed by the
Company as described in Section 1.4; (iv) receipt by Losi of the
Losi Consulting Agreement executed by the Company as described in
Section 1.4; and (v) receipt by Xxx Xxxx of the Registration
Rights Agreement executed by the Company as described in Section
1.5.
B. The obligations of Buyer to effect the Closing shall
be subject to the following conditions: (i) the representations
and warranties of each Seller made herein are true in all
material respects as of the Closing; (ii) two of the directors
nominated by Buyer shall have been elected to the Company's Board
of Directors; (iii) Losi shall have resigned as Chairman of the
Company's Board of Directors and Buyer shall have received
satisfactory evidence of the termination of Losi's employment
agreement with the Company; (iv) receipt by the Company of the
executed Losi Consulting Agreement as described in Section 1.4;
(v) receipt by the Company of the executed Xxx Xxxx Employment
Agreement Amendment as described in Section 1.4; (vi) Xxxx Xxxxxx
shall have been elected to the position of Chairman of the
Company's Board of Directors; (vii) receipt of a certified copy
of the resolutions adopted by the Company's Board of Directors
approving the sale of the Stock to Buyer in accordance with
Section 203(a)(1) of the Delaware General Corporation Law; (viii)
receipt by Buyer of the Remy Consulting Agreement and the Remy
Warrant executed by the Company as described in Section 1.3; and
(ix) receipt by Buyer of the Registration Rights Agreement
executed by the Company as described in Section 1.5.
Section V. Survival of Representation and Warranties;
Indemnification.
A. The representations, warranties and indemnities
contained in or made pursuant to this Agreement shall expire one
year after the Closing, except that the representations and
warranties set forth in Sections 2.2, 2.3, 2.4, 2.7 and 3.2 shall
continue indefinitely or until the earlier expiration of the
applicable statute of limitations. Any matter as to which a
claim for indemnification has been asserted by notice to the
other party that is pending or unresolved at the end of any
limitation period shall continue to be covered by this Section 5
until such matter is finally terminated or otherwise resolved by
the parties and settled under this Agreement and any amounts
payable hereunder are finally determined and paid.
B. The Sellers agree to indemnify and hold harmless
Buyer from and against any and all costs, damages, expenses,
liabilities or obligations of any kind or nature, including but
not limited to interest, penalties, reasonable legal and other
professional fees and expenses incurred in the investigation,
collection, prosecution, and defense of claims, and amounts paid
in settlement (collectively, "Losses"), of Buyer, directly or
indirectly, as a result of, or based upon or arising from any
inaccuracy in or breach or nonperformance of any of the
representations, warranties, covenants or agreements made by any
Seller in or pursuant to this Agreement.
C. Buyer agrees to indemnify and hold harmless the
Sellers from and against any and all Losses of the Sellers,
directly or indirectly, as a result of, or based upon or arising
from any inaccuracy in or breach or nonperformance of any of the
representations, warranties, covenants or agreements made by
Buyer in or pursuant to this Agreement.
Section VI. General.
A. Amendments, waivers, demands, consents and approvals
under this Agreement must be in writing and designated as such.
No failure or delay in exercising any right will be deemed a
waiver of such right.
B. This Agreement is the entire agreement between the
parties pertaining to its subject matter, and supersedes all
prior agreements and understandings of the parties in connection
with such subject matter.
C. This Agreement is to be construed as a whole and in
accordance with its fair meaning. This Agreement shall be
governed by, and construed and enforced in accordance with, the
laws of the State of California, without regard to conflicts of
laws principles.
D. Headings of Sections and subsections are for
convenience only and are not a part of this Agreement.
E. This Agreement may be executed in one or more
counterparts, all of which constitute one agreement.
F. This Agreement is binding upon and inures to the
benefit of each party and such party's respective heirs, personal
representatives, successors and assigns. Nothing in this
Agreement, express or implied, is intended to confer any rights
or remedies upon any other person.
G. Each party will pay its own expenses in the
negotiation, preparation and performance of this Agreement.
H. Each party acknowledges that it has been represented
by counsel in connection with this Agreement. Any rule of law,
including, but not limited to, Section 1654 of the California
Civil Code, or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement
against the party that drafted it, has no application and is
expressly waived.
I. The provisions of this Agreement are severable. The
invalidity, in whole or in part, of any provision of this
Agreement shall not affect the validity or enforceability of any
other of its provisions. If one or more provisions hereof shall
be so declared invalid or unenforceable, the remaining provisions
shall remain in full force and effect and shall be construed in
the broadest possible manner to effectuate the purposes hereof.
The parties further agree to replace such void or unenforceable
provisions of this Agreement with valid and enforceable
provisions which will achieve, to the extent possible, the
economic, business and other purposes of the void or
unenforceable provisions.
J. All notices, demands and requests required by this
Agreement shall be in writing and shall be deemed to have been
given for all purposes (i) upon personal delivery, (ii) one (1)
business day after being sent, when sent by professional
overnight courier service for next business day delivery from and
to locations within the continental United States, (iii) five (5)
days after posting when sent by registered or certified mail, or
(iv) on the date of receipt by the sending party of confirmation
of the successful transmission of the facsimile, as printed by
the facsimile machine, when sent by facsimile. Any party hereto
may from time to time by notice in writing served upon the others
as provided herein, designate a different mailing address or a
different party to which such notices or demands are thereafter
to be addressed or delivered.
K. (a) Any and all disputes of any nature (whether
sounding in contract or in tort) arising out of or relating to
this Agreement shall be initiated, maintained and determined
exclusively by binding arbitration in the County of Los Angeles,
State of California, pursuant to Section 6.11(c). The parties
agree irrevocably to submit themselves, in any suit to confirm
the judgment or finding of such arbitrator, to the jurisdiction
of the United States District Court for the Central District of
California and the jurisdiction of any court of the State of
California located in Los Angeles County and waive any and all
objections to jurisdiction that they may have under the laws of
the State of California or the United States.
(b) In case of a dispute, any party may commence
the arbitration by giving written notice to the other pursuant to
Section 6.10. The Arbitrator will be a retired judge of the
United States District Court for the Central District of
California or of the Superior Court of the State of California in
and for the County of Los Angeles. The arbitration proceeding
will be conducted by means of a reference pursuant to California
Code of Civil Procedure Section 638(1). Within ten (10) business
days after receipt of the notice requesting arbitration, the
parties shall attempt in good faith to agree upon the Arbitrator
to whom the dispute will be referred and on a joint statement of
contentions. Unless agreement as to an Arbitrator is theretofore
reached, within ten (10) business days after receipt of the
notice requesting arbitration, each party shall submit the names
of three (3) retired judges who have served at least five (5)
years as trial judges in the Superior Court of the State of
California or in the United States District Court. Either party
may then file a petition seeking the appointment by the presiding
Judge of the Superior Court of one of the persons so named as
"referee" in accordance with said Code of Civil Procedure 638(1),
which petition shall recite in a clear and meaningful manner the
factual basis of the controversy between the parties and the
issues to be submitted to the referee for decision. Each party
hereby consents to the jurisdiction of the Superior Court in and
for the County of Los Angeles for such action and agrees that
service of process will be deemed completed when a notice
similarly sent would be deemed received under Section 6.10.
(c) The hearing before the Arbitrator shall be held
within thirty (30) days after the parties reach agreement as to
the identity of the Arbitrator (or within thirty (30) days after
the appointment by the court). Unless more extensive discovery
is expressly permitted by the Arbitrator, each party shall have
only the right to one document production request, shall serve
but one set of interrogatories and shall only be entitled to
depose those witnesses which the Arbitrator expressly permits, it
being the parties' intention to minimize discovery procedures and
to hold the hearing on an expedited basis. The Arbitrator shall
establish the discovery schedule promptly following submission of
the joint statement of intentions (or the filing of the answer to
the petition), which schedule shall be strictly adhered to. All
decisions of the Arbitrator shall be in writing and shall not be
subject to appeal. The Arbitrator shall make all substantive
rulings in accordance with California law and shall have
authority equal to that of a Superior Court Judge to grant
equitable relief in an action pending in Los Angeles Superior
Court in which all parties have appeared. The Arbitrator shall
use its best efforts to hear the dispute on consecutive days and
to render a decision and award within thirty (30) days. Unless
otherwise agreed to by the parties to the dispute being
arbitrated, a court reporter shall be present at and record the
proceedings of the hearing. All motions shall be heard at the
time of the hearing. The Arbitrator shall determine which rules
of evidence, and which procedural rules, shall apply. In the
absence of a determination thereof by the Arbitrator, the rules
of the American Arbitration Association, not inconsistent with
this Section 6.11, shall apply to the conduct of the proceeding.
(d) The fees and costs of the Arbitrator shall be
shared equally by all disputing parties. The Arbitrator shall
award legal fees, disbursements and other expenses to the
prevailing party or parties for such amounts as determined by the
Arbitrator to be appropriate. Judgment upon the Arbitrator's
award may be entered as if after trial in accordance with
California law. Should a party fail to pay fees as required, the
other party or parties may advance the same and shall be entitled
to a judgment from the Arbitrator in the amount of such fees plus
interest at the prime rate as determined by the Bank of America.
Any award issued by the Arbitrator shall bear interest at the
judgment rate in effect in the State of California from the date
determined by the Arbitrator.
L. To the extent permitted by law, all rights and
remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available under
applicable law.
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IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed by its duly authorized
officers as of the day and year first above written.
BUYER:
REMY CAPITAL PARTNERS IV, L.P.,
a Delaware limited partnership
By: REMY INVESTORS, LLC, a Delaware
limited liability company
Its: General Partner
By:__________________________
Name: Xxxx Xxxxxx
Title: Managing Member
Address: 0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx
00000
Facsimile: (000) 000-0000
SELLERS:
THE RHL LIMITED PARTNERSHIP,
a California limited partnership
By: RHL HOLDINGS, INC., a California
corporation
Its: General Partner
By:__________________________
Name: _________________
Title: _______________
By:__________________________
XXXXXXX X. XXXX, XX
Its: General Partner
Address: _________________________
_________________________
_________________________
Facsimile: _________________________
EML ENTERPRISES, L.P.,
a California limited partnership
By:__________________________
XXXXXXX X. XXXX, XX, as Trustee
of the DKL Trust
Its: General Partner
By:__________________________
XXXXX X. XXXX XXXXXXX, as Trustee
of the RHL Trust
Its: General Partner
Address: _________________________
_________________________
_________________________
Facsimile: _________________________
THE BL 1995 LIMITED PARTNERSHIP,
a California limited partnership
By: BL HOLDINGS, INC., a California
corporation
Its: General Partner
By:__________________________
Name: Xxxxxxx Xxxx
Title: President
By:__________________________
XXXX X. XXXXXXXXX, f/k/a
XXXX X. SHORT
Its: General Partner
By:__________________________
XXXX X. XXXXXXXXXX
Its: General Partner
Address: _________________________
_________________________
_________________________
Facsimile: _________________________
EXHIBIT A
Share Ownership
Shares to be
Name Shares Owned
Sold
The RHL Limited Partnership 804,000
804,000
EML Enterprises, L.P. 926,575
662,667
The BL 1995 Limited Partnership 300,000
200,000
EXHIBIT B
Agreements With Management Employees
1. Employment Agreements with each of the following
individuals:
Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxx, XX
Xxxxxxx X. Xxxxx
Xxxxxx X. Xxxx
Xxxxx Xxxxxxxx
Xxxxx Xxxxxxx (formerly Xxxxxx)
2. Indemnification Agreements with each of the following
individuals:
Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxx, XX
Xxxxxxx Xxxx
Xxxxxx X. Xxxxx
Xxxxx Xxxxxxxxxx
Xxxxxx X. Xxxxxx
3. Incentive Stock Option Agreements with each of the
following individuals:
Xxxxxxx X. Xxxx, XX
Xxxxxxx X. Xxxxx
Xxxxxx X. Xxxx
Xxxxx Xxxxxxxx
Xxxxx Xxxxxxx
Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxxxxxx
4. Non-Qualified Stock Option Plan dated April 16, 1993
between Variflex, Inc. and Xxxxxx Xxxx.
5. Consulting Agreement dated may 16, 1994 between
Variflex, Inc. and Xxxxxx Xxxxx.
6. Letter Agreement between Static Snowboards, Inc. and
Xxxxxxx Xxxxxxxx for an advance of $60,000 to Xxxxxxxx.
7. Condominium Lease dated July 1, 1993 between Xxxxxxx
X. Xxxx, XX (as Lessor) and Variflex, Inc. (as Lessee) for the
lease of a condominium in Snowmass Village, Colorado.
EXHIBIT C
Changes in Assets, Liabilities, Condition, etc.
Attached
