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 1. PURCHASE AND SALE OF STOCK; WARRANTS; REGISTRATION RIGHTS AGREEMENT.
1.1 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.
1.2 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.
1.3 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.
1.4 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.
1.5 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 2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Sellers jointly and
severally represent and warrant to Buyer as follows:
2.1 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.
2.2 (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
limiting 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.
2.3 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.
2.4 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
otherwise), 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.
2.5 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.
2.6 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.
2.7 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.
2.8 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 3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to the Sellers as follows:
3.1 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.
3.2 (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.
3.3 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.
3.4 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 4. CONDITIONS OF PURCHASE.
4.1 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.
4.2 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 5. SURVIVAL OF REPRESENTATION AND WARRANTIES; INDEMNIFICATION.
5.1 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.
5.2 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.
5.3 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 6. GENERAL.
6.1 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.
6.2 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.
6.3 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.
6.4 Headings of Sections and subsections are for convenience only and
are not a part of this Agreement.
6.5 This Agreement may be executed in one or more counterparts, all of
which constitute one agreement.
6.6 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.
6.7 Each party will pay its own expenses in the negotiation, preparation
and performance of this Agreement.
6.8 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.
6.9 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.
6.10 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.
6.11 (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.
6.12 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
