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: Xxxxxxx X. Xxxx 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 Two Hundred Thousand
(200,000) 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 1. 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 2. EXERCISE OF WARRANT.
2.1 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.
2.2 METHOD OF EXERCISE.
2.2.1 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.
2.2.2 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.
2.3 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 3. 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:
3.1 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.
3.2 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.
3.3 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.
3.4 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.
3.5 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.
3.6 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 4. 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 5. 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 6. 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 7. 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 8. MISCELLANEOUS PROVISIONS.
8.1 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.
8.2 GOVERNING LAW. This Warrant 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.
8.3 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.
8.4 HEADINGS. Headings of Sections and
subsections are for convenience only and are not a part of
this Warrant.
8.5 COUNTERPARTS. This Warrant may be executed in
one or more counterparts, all of which constitute one
agreement.
8.6 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.
8.7 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.
8.8 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.
8.9 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.
8.10 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
_______________________________
XXXXXXX X. XXXX
Address: _____________________________
_____________________________
_____________________________
Facsimile: _________________
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.
(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: ________________________________
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)
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: _______________
