NEITHER THIS WARRANT NOR THE WARRANT SHARES HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS. NEITHER THIS WARRANT
NOR THE WARRANT SHARES MAY BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED EXCEPT IN COMPLIANCE, AS EVIDENCED (UPON THE
COMPANY'S REASONABLE REQUEST) BY A LEGAL OPINION FROM SUCH
TRANSFEROR'S COUNSEL, WITH THE REQUIREMENTS OF SUCH ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT
to Purchase Common Stock
of
Variflex, Inc.,
a Delaware corporation
THIS IS TO CERTIFY THAT: Remy Capital Partners IV, L.P., a
Delaware limited partnership or registered transferees
(collectively, the "Holder") is entitled to purchase from
Variflex, Inc., a Delaware corporation (the "Company"), at any
time and from time to time on and after the date hereof an
aggregate of Four Hundred Thousand (400,000) shares of Common
Stock (defined below), exercisable in whole or in part, at a
purchase price of Five and 10/100 Dollars ($5.10) per share, all
on the terms and conditions and subject to the adjustments
provided herein.
Section I. Certain Definitions. The following
capitalized terms as used in this Warrant shall have the
following meanings:
"Additional Shares of Common Stock" means all shares
of Common Stock issued by the Company after the date hereof,
other than shares of Common Stock issued or issuable at any time
pursuant to a stock consolidation, subdivision, dividend,
acquisition, employee stock option plan or employee stock bonus
plan.
"Business Day" means any day on which commercial
banks are not authorized or required to close in Los Angeles,
California. "Common Stock" means
the Company's authorized Common Stock, par value $0.001 per
share, or any securities of any Person the Holder is entitled to
purchase as a result of adjustments under Section 3.3.
"Exercise Price" means a price per share of Common
Stock equal to Five and 10/100 Dollars ($5.10), as adjusted
pursuant to Section 3 hereof.
"Expiration Date" means the date which is seven years
from the date hereof.
"Market Price" means, if the Warrant Shares are
publicly traded, the closing price per share for the date in
question. The closing price will be the last sales price regular
way or, if no such sale takes place on such day, the average of
the closing bid and ask prices regular way on the principal
United States trading market on which the Warrant Shares are
listed or admitted to trading. If the Warrant Shares are not
listed or admitted to trading on a recognized United States
trading market, the Market Price will be the price per Warrant
Share implied from the Company's most recent issuances of Common
Stock for securities convertible into or exchangeable for Common
Stock, if any such issuance has occurred in the six (6) months
prior to the date in question. If no such issuance has occurred,
the Market Price will be the fair market value per Warrant Share,
on an enterprise theory of valuation, determined by the Company's
Board of Directors acting in good faith with advice from a
recognized valuation expert.
"Person" means a corporation, an association, a
trust, a partnership, a joint venture, a limited liability
company, an organization, a business, an individual, a government
or political subdivision thereof or a governmental body.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder, all as the same shall be in effect at the time.
"Warrant Shares" means the number of shares of Common
Stock that may be acquired upon exercise of this Warrant.
Section II. Exercise of Warrant.
A. Exercise of Warrant. The Holder may, at any
time on and after the date hereof, but not later than the
Expiration Date, exercise this Warrant in whole or in part.
B. Method of Exercise.
1. Cash/Exchange of Shares. The Holder may
exercise this Warrant for cash by delivering to the Company prior
to the Expiration Date (a) this Warrant, (b) a Subscription Form
in the form of Exhibit A and (c) the Exercise Price for the
Warrant Shares so acquired, which may be paid in cash or by the
delivery of shares of Common Stock with a Market Price equal to
the aggregate Exercise Price for the Warrant Shares so acquired.
2. Cashless Exercise. This Warrant can also be
exercised, in whole or in part, in a "cashless" exercise, upon
delivery to the Company of (a) this Warrant and (b) a Cashless
Exercise Form in the form of Exhibit B. In a cashless exercise,
the right to purchase each Warrant Share may be exchanged for
that number of Shares of Common Stock determined by multiplying
the number one (1) by a fraction, the numerator of which will be
the excess of (y) the then current Market Price over (z) the
Exercise Price, and the denominator of which will be the then
current Market Price.
C. Issuance of Warrant Shares. Upon the Holder's
exercise of the Warrant, the Company shall, within five (5)
Business Days, issue the Warrant Shares so purchased to the
Holder.
Section III. Adjustment of Warrant Shares;
Anti-Dilution Provisions.
If any of the following events occurs at any time
hereafter prior to the full exercise of this Warrant, then the
Exercise Price and/or the number of remaining Warrant Shares to
be purchased hereunder immediately prior to such event shall be
adjusted as described below:
A. Stock Subdivisions or Stock Consolidations. If
at any time the outstanding shares of Common Stock are subdivided
into a greater number of shares, whether by stock split, stock
dividend or otherwise, then the number of Warrant Shares
remaining to be purchased hereunder will be increased
proportionately and the Exercise Price will be reduced
proportionately. Conversely, if at any time the outstanding
shares of Common Stock are consolidated into a smaller number of
shares, then the number of Warrant Shares remaining to be
purchased hereunder will be reduced proportionately and the
Exercise Price will be increased proportionately. Each
adjustment to the Exercise Price and the number of Warrant Shares
shall be effective on the record date, or if there is no record
date, the effective date for such subdivision or consolidation.
B. Dividends. Following the date hereof, if the
Company proposes to declare a dividend on or make a distribution
of any kind (other than in Common Stock) with respect to the
Common Stock, the Company will deliver written notice of such
proposed event, in reasonable detail, to the Holder not less than
ten (10) Business Days prior to the record date, to enable the
Holder to decide whether to exercise this Warrant prior to the
record date.
C. Reclassification or Reorganization. If the
Company engages in a reorganization, a reclassification of its
Common Stock, or in a merger or other combination with another
Person in which the other Person survives, upon exercise of this
Warrant, the Holder will be entitled to receive the number of
shares, securities or property the Holder would have been
entitled to receive if this Warrant had been exercised
immediately prior to the record date for such event. The
aggregate exercise price applicable to such new shares,
securities or property will be the aggregate exercise price of
all Warrant Shares remaining to be purchased hereunder. If
necessary, the rights and interests of the Holder will be
appropriately adjusted so as to be applicable, as nearly as
reasonably possible, to any such shares, securities or property
thereafter deliverable upon exercise of this Warrant.
D. Issuance of Additional Shares of Common Stock.
In the event that the Company shall issue Additional Shares of
Common Stock without consideration or for a consideration per
share less than the Exercise Price in effect on the date of and
immediately prior to such issue, then and in each such event,
such Exercise Price shall be reduced concurrently with such issue
of shares to a price equal to the consideration per share for
which the Additional Shares of Common Stock are issued.
E. Computations and Adjustments. Upon each
computation of an adjustment under this Section 3, the Exercise
Price shall be computed to the nearest 1/1000 cent and the number
of Warrant Shares shall be calculated to the nearest whole share
(i.e., fractions of less than one-half shall be disregarded and
fractions of one-half or greater shall be treated as being the
next greater integer). However, the fractional amount shall be
used in calculating any future adjustments.
F. Notices. When any adjustments are required to
be made under this Section 3, the Company shall as promptly as
practicable (i) determine such adjustments, (ii) prepare a
statement describing in reasonable detail the method used in
arriving at the adjustment and setting forth the calculation
thereof; and (iii) cause a copy of such statement to be given to
the Holder in accordance with Section 8.10.
Section IV. Securities Laws. The Holder of this
Warrant, by acceptance hereof, acknowledges that this Warrant has
not been and the Warrant Shares that may be issued pursuant
hereto have not been and may not be registered under the
Securities Act or applicable state securities laws. The Holder
of this Warrant, by acceptance hereof, represents that it is
fully informed as to the applicable limitations upon any
distribution or resale of this Warrant and any Warrant Shares
under the Securities Act and any applicable state securities laws
and agrees not to distribute or sell this Warrant or any Warrant
Shares if such distribution or resale would constitute a
violation of the Securities Act or any applicable state
securities laws or would cause the issuance of this Warrant or
the Warrant Shares, in the opinion of counsel, to be in violation
of the Securities Act or any applicable state securities laws.
The Holder of this Warrant agrees that it will not transfer or
sell this Warrant or the Warrant Shares unless and until the
Holder provides the Company with an opinion of its counsel that
such transfer or sale can be made without violation of the
Securities Act or any applicable state securities laws. Any
exercise hereof by the Holder shall constitute a representation
by the Holder that the Warrant Shares are not being acquired with
the view to, or for resale in connection with, any distribution
or public offering thereof in violation of the Securities Act or
applicable state securities laws.
Section V. Reservation of Warrant Shares. The
Company will cause to be kept available, out of the authorized
and unissued shares of Common Stock, the full number of shares
sufficient to provide for the exercise of the rights of purchase
represented by this Warrant. Upon issuance and delivery against
payment pursuant to the terms of this Warrant, all Warrant Shares
will be validly issued, fully paid and nonassessable.
Section VI. Loss, Destruction of Warrant. Upon
receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of the Warrant and, in the
case of any such loss, theft or destruction, upon receipt of an
indemnity satisfactory to the Company or, in the case of any such
mutilation, upon surrender and cancellation of such Warrant, the
Company will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and
representing the right to purchase the same aggregate number of
Warrant Shares.
Section VII. Assignment. This Warrant and the
rights hereunder are not assignable by the Holder to any
transferee until February 1, 1998. Thereafter, any Holder may
assign this Warrant and the rights hereunder to a transferee, and
upon such assignment, such transferee will become the "Holder"
under this Warrant.
Section VIII. Miscellaneous Provisions.
A. Amendments; Waivers. Amendments, waivers,
demands, consents and approvals under this Warrant 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. Governing Law. This Warrant shall be governed
by, and con- strued and enforced in accordance with, the laws of
the State of California, without regard to conflicts of laws
principles.
C. Jurisdiction; Venue; Service of Process. Each
of the parties irrevocably submits to the jurisdiction of any
California State or United States Federal court sitting in Los
Angeles County in any action or proceeding arising out of or
relating to this Warrant or the transactions contemplated hereby,
and irrevocably agrees that any such action or proceeding may be
heard and determined only in such California State or Federal
court. Each of the parties irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient
forum to the maintenance of any such action or proceeding.
D. Headings. Headings of Sections and subsections
are for convenience only and are not a part of this Warrant.
E. Counterparts. This Warrant may be executed in
one or more counterparts, all of which constitute one agreement.
F. Successors and Assigns. This Warrant 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 Warrant, express or implied, is
intended to confer any rights or remedies upon any other person.
G. Expenses; Legal Fees. Each party will pay its
own expenses in the negotiation, preparation and performance of
this Warrant. The prevailing party in any action relating to
this Warrant will be entitled to recover, in addition to other
appropriate relief, reasonable legal fees, costs and expenses
incurred in such action.
H. Representation by Counsel; Interpretation.
Each party acknowledges that it has been represented by counsel
in connection with this Warrant. 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 Warrant against the party that drafted it,
has no application and is expressly waived.
I. Specific Performance. In view of the
uniqueness of the matters contemplated by this Warrant, the
parties hereto would not have an adequate remedy at law for money
damages if this Warrant is not being performed in accordance with
its terms. The parties therefore agree that each party will be
entitled to specific enforcement of the terms hereof in addition
to any other remedy to which such party may be entitled.
J. Notices. All notices, demands and requests
required by this Warrant 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.
(remainder of page intentionally left blank)
IN WITNESS WHEREOF, the Company and the Holder have
caused this Warrant to be signed in its name by an officer or
authorized representative.
Dated: November 18, 1997
VARIFLEX, INC., a Delaware corporation
By:__________________________
Name: ________________
Title: ________________
Address: 0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
The foregoing is acknowledged
by and agreed to as of the
18th day of November, 1997
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
EXHIBIT A
SUBSCRIPTION FORM
To Be Executed
Upon Exercise of Warrant
The undersigned exercises the right to purchase
_________ Warrant Shares, evidenced by the enclosed Warrant, and
makes payment of the Purchase Price in cash
_________________________________________________________________
($_______) or by the exchange of _________ shares of Common
Stock. Certificate(s) for such shares are to be issued and
delivered as set forth below.
Date: (HOLDER)
By: ___________________________
Its: __________________________
Name to appear on
the stock certificate:
____________________________
(Please Print)
Address: ____________________________ Employer Identification
Number, Social
____________________________ Security Number or
other identifying
____________________________ number:
________________________________
If the foregoing exercise is not for all of the
Warrant Shares purchasable under this Warrant, please
register and deliver a new Warrant for the unexercised
portion as follows:
Name: __________________________________
(Please Print)
Address: ____________________________ Employer Identification
Number, Social
____________________________ Security Number or
other identifying
____________________________ number:
________________________________
EXHIBIT B
CASHLESS EXERCISE FORM
The undersigned Holder exercises the right to
purchase _________ Warrant Shares, evidenced by the enclosed
Warrant and requests that the Company exchange the Warrant
for Warrant Shares as provided in Section 2.2.2 of the
Warrant. Certificate(s) for such shares are to be issued and
delivered as set forth below.
Date:
(HOLDER)
By: ___________________________
Its: __________________________
Name to appear on
the stock certificate:
___________________________
(Please Print)
Name to appear on
the stock certificate:
____________________________
(Please Print)
Address: ____________________________ Employer Identification
Number, Social
____________________________ Security Number or
other identifying
____________________________ number:
________________________________
If the foregoing exercise is not for all of the
Warrant Shares purchasable under the Warrant, please register
and deliver a new Warrant for the unexercised portion as
follows:
Name: __________________________________
(Please Print)
Address: ____________________________ Employer Identification
Number, Social
____________________________ Security Number or
other identifying
____________________________ number:
________________________________
Calculation of Cashless Exercise:
A = Current Market Price: ________________________
B = Exercise Price: ______________________________
X = Number of Shares of Common Stock to be issued for each
right to purchase one Warrant Share exchanged:_____________
A - B (___________)
1 x __________________ = X (________________)
A (____________)
Total number of Warrant Shares issuable: ___________________
Total number of Warrant Shares to be issued: _______________
