VOTING AGREEMENT
THIS VOTING AGREEMENT (this "AGREEMENT") is entered into as of
November 18, 1997, among Raymond H. Losi ("RAY"), Raymond H. Losi, II ("JAY"),
Raymond H. Losi, as Trustee of the 1989 Raymond H. Losi Revocable Trust under
Declaration of Trust dated January 23, 1989 (the "RAY TRUST"), Losi Enterprises
Limited Partnership, a California limited partnership ("ENTERPRISES"), Raymond
H. Losi, II and Kathy Losi, as Co-Trustees of the Jay and Kathy Losi Revocable
Trust dated January 1, 1989 (the "JAY TRUST"), EML Enterprises, L.P., a
California limited partnership ("EML"), Eileen Losi, as Trustee of the Eileen
Losi Revocable Trust under Declaration of Trust dated October 13, 1993 (the
"EILEEN TRUST"), Barbara Losi, as Trustee of the 1989 Barbara Losi Revocable
Trust under Declaration of Trust dated January 31, 1989 (the "BARBARA TRUST"),
The BL 1995 Limited Partnership, a California limited partnership ("BL"),
Raymond H. Losi, as Trustee of the Diane K. Losi Voting Trust (the "DIANE
TRUST") and Remy Capital Partners IV, L.P., a Delaware limited partnership
("REMY"). Ray, Jay, the Ray Trust, Enterprises, the Jay Trust, EML, the Eileen
Trust, the Barbara Trust, BL and the Diane Trust are sometimes collectively
referred to herein as the "LOSI ENTITIES" and individually as a "LOSI ENTITY".
B A C K G R O U N D
A. Pursuant to that certain Stock Purchase Agreement, dated as
of the date hereof (the "PURCHASE AGREEMENT"), among Remy, The RHL Limited
Partnership, a California limited partnership, EML and BL (collectively, the
"SELLERS"), Remy has agreed to purchase from the Sellers One Million Six Hundred
Sixty-Six Thousand Six Hundred Sixty-Seven (1,666,667) shares of Common Stock of
Variflex, Inc., a Delaware corporation (the "COMPANY"), which shares represent
approximately twenty-seven percent (27%) of the outstanding shares of Common
Stock of the Company.
B. As of the Effective Date (defined below), each Losi Entity
owns the number of shares of Common Stock of the Company as set forth on EXHIBIT
A attached hereto, and collectively, the Losi Entities own One Million Seven
Hundred Ninety Thousand Seven Hundred Twenty-Nine (1,790,729) shares of Common
Stock of the Company, which shares represent approximately twenty-nine percent
(29%) of the outstanding shares of the Company.
C. In order to induce Remy to purchase the shares of Common
Stock from the Sellers under the Purchase Agreement, the parties hereto have
agreed to enter into this Agreement upon the terms and conditions set forth
below.
A G R E E M E N T
In consideration of the mutual promises contained herein and
intending to be legally bound, the parties agree as follows:
I. ELECTION OF DIRECTORS. Each of the parties agrees to vote all
of the Company's stock owned by it or which it has a right to vote (the "STOCK")
and to take all such other action as may be necessary so that each of the
following occurs and remains in effect from the first stockholders' meeting of
the Company held after the date hereof throughout the term of this Agreement:
(a) The Company's Board of Directors shall have no more than six
(6) members.
(b) Subject to subsections (c) and (d), two (2) of such
directors shall be individuals selected by Remy, two (2) of such
directors shall be individuals selected by a "majority vote" of the Losi
Entities and two (2) of such directors shall be "independent directors"
approved by each of the Losi Entities and by Remy.
(c) If at any time during the term hereof either Remy, on the
one hand, or the Losi Entities, collectively, on the other hand, owns
more than thirty-three and one-third percent (33 1/3%) but less than or
equal to sixty-six and two-thirds percent (66 2/3%) of the number of
shares of Common Stock of the Company owned by it on the Effective Date
(as defined below) (for purposes of this subsection only, such party
shall be referred to as the "ONE-THIRD SELLING PARTY"), such One-Third
Selling Party shall only be entitled to select one (1) director to the
Company's Board of Directors such that the Board of Directors will
consist of one (1) individual selected by the One-Third Selling Party
(or by a "majority vote" of the One-Third Selling Party if the One-Third
Selling Party is the Losi Entities), three (3) individuals selected by
Remy or a "majority vote" of the Losi Entities (whichever is not the
One-Third Selling Party) and two (2) individuals selected to be the
"independent directors" approved by each of the Losi Entities and by
Remy.
(d) If at any time during the term hereof either Remy, on the
one hand, or the Losi Entities, collectively, on the other hand, owns
less than or equal to thirty-three and one-third percent (33 1/3%) of
the number of shares of Common Stock of the Company owned by it on the
Effective Date (as defined below) (for purposes of this subsection only,
such party shall be referred to as the "TWO-THIRDS SELLING PARTY"), such
Two-Thirds Selling Party shall not be entitled to select a director to
the Company's Board of Directors such that the Board of Directors will
consist of four (4) individuals selected by Remy or a "majority vote" of
the Losi Entities (whichever is not the Two-Thirds Selling Party) and
two (2) individuals selected to be the "independent directors" approved
by each of the Losi Entities and by Remy.
Each of the parties hereto agrees that it shall use its best efforts to
reach an agreement as to the selection of the individuals who will serve as
independent directors. Beginning in 1998, if, despite these best efforts, the
parties cannot agree on the selection of both individuals who will serve as
independent directors on or before July 31 in any year during the term of this
Agreement, Remy shall submit a list to the Losi Entities of not less than five
(5) and not more than ten (10) individuals who constitute Remy's nominees for
the position of independent director, from which list, the Losi Entities shall,
by majority vote, be entitled to select one (1) individual to serve as an
independent director. Similarly, the Losi Entities shall submit a list to Remy
of the names of not less than five (5) and not more than ten (10) individuals
who constitute the Losi Entities' nominees for the position of independent
director, from which list, Remy shall be entitled to select one (1) individual
to serve as an independent director. Beginning in 1998, if on or before July 31
in any year during the term of this Agreement, the parties hereto have agreed on
the selection of one (1) individual to serve as an independent director (the
"AGREED NOMINEE") and cannot agree on the selection of a second individual, then
either Remy or the Losi Entities, collectively (whichever party originally
nominated or suggested the Agreed Nominee), shall be entitled to select the
second independent director from a list of not less than five (5) and not more
than ten (10) individuals chosen by either Remy or the Losi Entities (whichever
party did not originally nominate or suggest the Agreed Nominee). In the event
that an individual selected under this paragraph to serve as an independent
director declines to serve on the Company's Board of Directors, then the party
who selected said individual from the list of nominees provided to it by the
other party shall be entitled to select another individual from the same list of
nominees.
For purposes hereof, the term "independent directors" shall mean (i)
such individuals who have not been employed by, or consulted with, any of the
Losi Entities or Remy for the past five (5) years; and (ii) such individuals who
will be considered independent for purposes of NASDAQ and/or the American Stock
Exchange. The term "majority vote" shall mean a vote by the Losi Entities in
which a majority of the number of shares of Common Stock owned by all of the
Losi Entities are voted in favor of an individual or individuals to serve as a
director of the Company's Board of Directors.
Notwithstanding the foregoing, for purposes of paragraphs 1(c) and 1(d)
above, the term "Remy" and the term "Losi Entities" shall be expanded to include
any Permitted Transferees of either Remy or any of the Losi Entities who agree
to be bound by the provisions hereof. For purposes of this Agreement, the term
"Permitted Transferee" shall mean (i) a transferor's spouse and lineal
descendants; (ii) a transferor's successors, personal representatives and heirs;
(iii) any trustee of any trust created primarily for the benefit of any or all
of such spouse and lineal descendants (but that may include beneficiaries that
are charities) or of any revocable trust created by a transferor; (iv) following
the death of a transferor, all beneficiaries under any such trust; (v) the
transferor, in the case of a transfer from any Permitted Transferee back to its
transferor; (vi) any entity all of the equity of which is directly or indirectly
owned by the transferor or any of the foregoing; and (vii) in the case of Remy,
Remy's partners.
2. STOCK SPLITS, STOCK DIVIDENDS, ETC. In the event of any stock
split, stock dividend, recapitalization, reorganization, or the like, any
securities issued with respect to the Stock shall become Stock for purposes of
this Agreement.
3. TERMINATION. This Agreement and the obligations of the
parties hereunder shall become effective upon consummation of Remy's acquisition
of shares under the Purchase Agreement (the "EFFECTIVE DATE") and shall
terminate on the earlier to occur of December 31, 2007, or the date on which
Remy transfers all of the Stock owned by it to its partners; provided, however,
that in no event shall Remy transfer all of the Stock owned by it to its
partners until the earlier to occur of: (a) five (5) years from the Effective
Date; or (b) the date on which Remy ceases to exist as a partnership.
4. RIGHT OF FIRST OFFER. Each of the Losi Entities and Remy
agree that beginning with the Effective Date and continuing until termination:
(a) If any of the Losi Entities (for purposes of this Section
4(a), the "OFFEROR") desires to sell or transfer any of its Stock to anyone
other than a Permitted Transferee, the Offeror shall follow the procedures set
forth below:
(i) The Offeror shall deliver a written notice (a "FIRST OFFER
NOTICE") to Remy, which notice shall set forth all material terms and
conditions, including, but not limited to, the number of shares offered (the
"OFFERED SHARES") and the purchase price on which the Offeror desires to sell
the Offered Shares.
(ii) During the fifteen (15) day period after a First Offer
Notice is duly given (the "REMY OFFER PERIOD"), Remy shall have an option to
purchase all of the Offered Shares on the terms contained in the First Offer
Notice. If Remy exercises said option, Remy shall deliver a written notice to
the Offeror indicating said exercise and the number of shares it desires to
purchase (the "ACCEPTANCE"). Payment with respect to the Offered Shares so
purchased shall be due within five (5) business days of delivery of the
Acceptance.
(iii) If Remy has not exercised its option to purchase all of
the Offered Shares on the terms contained in the First Offer Notice by the end
of the Remy Offer Period, the Offeror shall be free during the thirty (30) day
period thereafter to dispose of the Offered Shares to any other Losi Entity or
to any third party pursuant to terms and conditions no more favorable
(including, but not limited to, price and payment terms) to the Offeror than as
set forth in the First Offer Notice. If the Offeror has not disposed of all of
the Offered Shares within this thirty (30) day period, the remaining Offered
Shares will again be subject to this Section 4(a).
(b) If Remy desires to sell or transfer any of its Stock to
anyone other than a Permitted Transferee, Remy shall follow the procedures set
forth below:
(i) Remy shall deliver a First Offer Notice to each of the Losi
Entities, which notice shall set forth all material terms and conditions,
including, but not limited to, the Offered Shares and the purchase price on
which Remy desires to sell the Offered Shares.
(ii) During the fifteen (15) day period after a First Offer
Notice is duly given (the "LOSI OFFER PERIOD"), each of the Losi Entities shall
have an option to purchase at least that portion of the Offered Shares equal to
a fraction, the numerator of which shall be the percentage interest in the
Company then owned by such Losi Entity and the denominator of which shall be the
total percentage interest in the Company then owned by all other Losi Entities
(the "PERCENTAGE INTEREST"), or more than its Percentage Interest, if available,
on the terms contained in the First Offer Notice. Each Losi Entity desiring to
exercise such option shall deliver an Acceptance to Remy, which Acceptance shall
indicate the number of shares such party desires to purchase. If each Losi
Entity delivers an Acceptance to Remy indicating that it would like to purchase
its Percentage Interest of the Offered Shares, then each Losi Entity shall be
entitled to purchase Offered Shares based on its Percentage Interest. If one
(1), or more than one (1), Losi Entity desires to purchase more than its
Percentage Interest of the Offered Shares and there are not a sufficient number
of Offered Shares to satisfy all Acceptances, each Losi Entity that has
delivered an Acceptance shall first be entitled to purchase Offered Shares based
on its Percentage Interest, and the remainder of the Offered Shares shall be
allocated among those Losi Entities desiring to purchase in excess of their
Percentage Interest pro-rata in proportion to such Losi Entities' respective
interests. If Remy does not receive Acceptances for all of the Offered Shares by
the end of the Losi Offer Period, none of the Acceptances received shall be
given effect and Remy shall be free to proceed under paragraph (iii), below.
Payment with respect to the Offered Shares shall be due within five (5) business
days of delivery of the Acceptance.
(iii) If Remy does not receive Acceptances for all of the
Offered Shares by the end of the Losi Offer Period, Remy shall be free during
the thirty (30) day period thereafter to dispose of the Offered Shares to any
third party pursuant to terms and conditions no more favorable (including, but
not limited to, price and payment terms) to Remy than as set forth in the First
Offer Notice. If Remy has not disposed of all of the Offered Shares within this
thirty (30) day period, the remaining Offered Shares will again be subject to
this Section 4(b).
5. STOCK OWNERSHIP. Each of the Losi Entities represents and
warrants to Buyer that as of the Effective Date, EXHIBIT A is a true and
complete statement of the number of shares of Common Stock owned by it and that
no other members of the Losi family, nor any entities owned or controlled by
them, own any additional shares of Common Stock of the Company.
6. AMENDMENTS; WAIVERS. 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.
7. INTEGRATION. 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.
8. INTERPRETATION; GOVERNING LAW. 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.
9. HEADINGS. Headings of Sections and subsections are for
convenience only and are not a part of this Agreement.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which constitute one agreement.
11. SUCCESSORS AND ASSIGNS. 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.
12. EXPENSES. Each party will pay its own expenses in the
negotiation, preparation and performance of this Agreement.
13. REPRESENTATION BY COUNSEL; INTERPRETATION. 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.
14. SEVERABILITY. 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.
15. SPECIFIC PERFORMANCE. In view of the uniqueness of the
matters contemplated by this Agreement, the parties hereto would not have an
adequate remedy at law for money damages if this Agreement 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.
16. NOTICES. 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.
17. LEGENDS. A legend in substantially the following form (or
containing substantially the same information as set forth in the following
form) shall be inscribed on all the certificates representing shares of stock
subject to this Agreement:
"The shares represented by this certificate are subject to a
Voting Agreement, dated as of November 18, 1997, among certain
of the stockholders of the Company. The Company will furnish a
copy of such Agreement to any person without charge upon written
request to the Company at its principal office."
Notwithstanding the foregoing, the parties hereto agree to
cooperate with the Company in the removal of such restrictive legend if required
pursuant to the terms of that certain Registration Rights Agreement of even date
herewith between the Company and Remy.
18. FURTHER ACTIONS. Subject to the terms and conditions of this
Agreement, each of the parties agrees to use all commercially reasonable efforts
to take, or cause to be taken, all action necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
19. ARBITRATION. (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 19(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 16. 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 16.
(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 19, 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
--------------------------------
RAYMOND H. LOSI
Address: -------------------------
-------------------------
-------------------------
Facsimile: -------------------------
--------------------------------
RAYMOND H. LOSI, II
Address: c/o Variflex, Inc.
5152 North Commerce Ave.
Moorpark, California 93021
Facsimile: (805) 523-7384
--------------------------------
RAYMOND H. LOSI, as Trustee of the
1989 Raymond H. Losi Revocable Trust
under Declaration of Trust dated
January 23, 1989
Address: -------------------------
-------------------------
-------------------------
Facsimile: -------------------------
--------------------------------
RAYMOND H. LOSI, as Trustee of the
Diane K. Losi Voting Trust
Address: -------------------------
-------------------------
-------------------------
Facsimile: -------------------------
LOSI ENTERPRISES LIMITED PARTNERSHIP,
a California limited partnership
By: LOSI PROPERTIES, INC., a California
corporation
Its: General Partner
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Address: -------------------------
-------------------------
-------------------------
Facsimile: -------------------------
---------------------------------
RAYMOND H. LOSI, II, as Co-Trustee
of the Jay and Kathy Losi Revocable Trust
dated January 1, 1989
---------------------------------
KATHY LOSI, as Co-Trustee of the Jay and Kathy
Losi Revocable Trust dated January 1, 1989
Address: -------------------------
-------------------------
-------------------------
Facsimile: -------------------------
EML ENTERPRISES, L.P.,
a California limited partnership
By:
-------------------------------
RAYMOND H. LOSI, II, as Trustee
of the DKL Trust
Its: General Partner
By:
-------------------------------
DIANE K. LOSI COLETTI, as Trustee
of the RHL Trust
Its: General Partner
Address: -------------------------
-------------------------
-------------------------
Facsimile: -------------------------
--------------------------------
EILEEN LOSI, as Trustee of the Eileen Losi
Revocable Trust under Declaration of Trust dated
October 13, 1993
Address: -------------------------
-------------------------
-------------------------
Facsimile: -------------------------
--------------------------------
BARBARA LOSI, as Trustee of the 1989 Barbara
Losi Revocable Trust under Declaration of Trust
dated January 31, 1989
Address: -------------------------
-------------------------
-------------------------
Facsimile: -------------------------
THE BL 1995 LIMITED PARTNERSHIP,
a California limited partnership
By: BL HOLDINGS, INC., a California
corporation
Its: General Partner
By:
-------------------------------
Name: Barbara Losi
Title: President
By:
-------------------------------
LORI L. GRUNEWALD, f/k/a
LORI L. SHORT
Its: General Partner
By:
-------------------------------
JODI A. BATCHELLER
Its: General Partner
Address: -------------------------
-------------------------
-------------------------
Facsimile: -------------------------
REMY CAPITAL PARTNERS IV, L.P.,
a Delaware limited partnership
By: REMY INVESTORS, LLC, a Delaware
limited liability company
Its: General Partner
By:
-------------------------------
Name: Mark Siegel
Title: Managing Member
Address: 1801 Century Park East
Suite 1111
Los Angeles, California 90067
Facsimile: (310) 843-0010
EXHIBIT A
Number of Shares Owned
LOSI ENTITY AS OF THE EFFECTIVE DATE
Raymond H. Losi 0
Raymond H. Losi, II 0
Losi Enterprises Limited Partnership 807,507
The Jay and Kathy Losi Revocable Trust 120,000
EML Enterprises, L.P. 263,908
The 1989 Raymond H. Losi Revocable Trust 246,575
The Eileen Losi Revocable Trust 120,000
The 1989 Barbara Losi Revocable Trust 106,438
The BL 1995 Limited Partnership 100,000
Diane K. Losi Voting Trust 26,301
=========
TOTAL 1,790,729