<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
VARIFLEX, INC.
(Name of Issuer)
VARIFLEX, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class of Securities)
922242102
(CUSIP Number of Class of Securities)
Raymond H. Losi, II
Variflex, Inc.
5152 North Commerce Avenue, Moorpark, California 93021
(805) 523-0322
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person(s) Filing Statement)
COPIES TO:
MICHAEL C. COHEN, ESQ.
VICTOR H. SIM, ESQ.
MELODY N. TORBATI, ESQ.
Morrison & Foerster LLP
555 West 5th Street, 35th Floor
Los Angeles, California 90013
(213) 892-5200
December 11, 1998
(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
Transaction Valuation/1/: Amount of Filing Fee:
$6,000,000 $1,200
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form or
schedule and the date of its filing.
<TABLE>
<CAPTION>
<S> <C>
Amount previously paid: N/A Filing Party: N/A
-------------- --------------
Form or Registration No.: N/A Date File: N/A
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</TABLE>
- ----------------------
/1/ Calculated as the aggregate estimated maximum purchase price to be paid for
up to 1,000,000 shares to be purchased in the Offer.
<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer (the "Issuer") and the address of the
principal executive office of the Issuer is:
Variflex, Inc.
5152 North Commerce Avenue
Moorpark, California 93021
(b) As of December 15, 1998, 6,025,397 shares of the Issuer's common
stock, $.001 par value per share (the "Shares"), were outstanding. The Issuer
seeks to purchase up to 1,000,000 Shares that are properly tendered at a price
not less than $5.00 and not more than $6.00 per share (the "Purchase Price"),
pursuant to a modified Dutch auction, as described in the Offer to Purchase
attached as Exhibit 9(a)(1) (the "Offer"). The Issuer may purchase less than
---------------
1,000,000 Shares if less than 1,000,000 Shares are properly tendered at or below
the Purchase Price selected by the Issuer. However, the Issuer will purchase at
least 200,000 Shares that are properly tendered (or such lesser amount as are
properly tendered) for the single lowest per Share Purchase Price that will
enable the Issuer to acquire those Shares. The Issuer has been informed that no
directors, executive officers or affiliates of the Issuer intend to tender
Shares pursuant to the Offer.
(c) The Shares are traded principally on Nasdaq under the symbol "VFLX."
The following table sets forth for the periods indicated the high and low
closing per Share sales prices on Nasdaq Composite Tape as reported in published
financial sources:
<TABLE>
<CAPTION>
Fiscal Year High Low
- ----------- ---- ---
<S> <C> <C>
1997
First Quarter (ended October 31, 1996) 6 7/8 5 3/8
Second Quarter (ended January 31, 1997) 6 1/4 4 3/8
Third Quarter (ended April 30, 1997) 6 4 5/8
Fourth Quarter (ended July 31, 1997) 5 5/8 4 1/2
1998
First Quarter (ended October 31, 1997) 5 3 3/4
Second Quarter (ended January 31, 1998) 6 13/16 3 7/8
Third Quarter (ended April 30, 1998) 6 1/4 4 13/16
Fourth Quarter (ended July 31, 1998) 6 4 3/4
1999
First Quarter (ended October 31, 1998) 5 1/8 4 1/8
(d) Not applicable.
</TABLE>
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The Issuer expects to pay an estimated maximum of $6,000,000 in cash
for the Shares, which the Issuer has available in cash and marketable
securities.
(b) The Issuer does not expect to borrow any portion of the consideration
to be paid for the Shares.
2
<PAGE>
ITEM 3. PURPOSE OF TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
(a) The Board of Directors believes that the Issuer's financial condition
and outlook and current market conditions, including recent prices of the
Shares, makes this an attractive time to repurchase a portion of the outstanding
Shares. In the view of the Board of Directors, the Offer represents a
significant acceleration of what would otherwise have been a continuing and
extended share repurchase program and an attractive investment and use of the
Issuer's cash and marketable securities. The Board of Directors believes that
the purchase of Shares at this time is consistent with the Issuer's long term
goal of increasing stockholder value. The Board of Directors also believes that
it is in the best interests of stockholders for the Issuer to provide liquidity
to stockholders without the transaction costs associated with market sale of
shares on the secondary market.
The Company is providing stockholders with liquidity that is not present in
the secondary market that exists for the Shares. The average daily volume
during the past six months of the Company's Shares has been approximately 7,500
Shares. The Offer provides stockholders with the opportunity to sell Shares in
quantities larger than the existing market has indicated it has capacity to
absorb without eroding per Share price levels.
The Issuer does not intend to (a) dispose of any of the Shares or any other
securities of the Issuer to any person (other than awarding stock options to
certain employees under the Issuer's stock option plans); (b) engage in any
extraordinary corporate transaction, such as a merger, reorganization or
liquidation; (c) sell or transfer a material amount of the assets of the Issuer
or any of its subsidiaries; (d) change in any way the present Board of Directors
or management of the Issuer; (e) make any material change in the present
dividend rate or policy or indebtedness or capitalization or the Issuer; (f)
make any other material change in the Issuer's corporate structure or business;
(g) change the Issuer's charter, bylaws or instruments corresponding thereto or
take other actions that might impede the acquisition of control of the Issuer by
any person; (h) cause the class of equity security of the Issuer to be delisted
from The Nasdaq National Market or from any national securities exchange or to
cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) cause a class of equity security
of the Issuer to become eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); or (j) suspend the Issuer's obligations to file reports
pursuant to Section 15(d) of the Exchange Act.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
Based upon the Issuer's records and upon information provided to the Issuer
by its directors, executive officers and affiliates, neither the Issuer nor any
of its subsidiaries nor, to the Issuer's knowledge, any of the directors,
executive officers or affiliates of the Issuer, nor any associates of the
foregoing, has effected any transaction in the Shares during the forty business
days prior to the date hereof.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
There are no contracts, arrangements, understandings or relationships
relating, directly or indirectly, to the Offer under Rule 13e-4 (whether or not
legally enforceable) between the Issuer (including any executive officer,
director or controlling shareholder of the Issuer or any subsidiary thereof) and
any other person with respect to any securities of the Issuer.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company will pay approximately $15,000 to American Stock Transfer &
Trust Company for soliciting Shares pursuant to the Offer. The Company will
also, on request, reimburse American Stock Transfer & Trust Company for
customary handling and mailing expenses incurred in forwarding materials in
respect of the Offer to the beneficial owners for which they act as nominees.
American Stock Transfer & Trust Company has been authorized to act as the
Company's agent for purposes of the Offer. No other person has been or is
expected to be employed, retained or compensated by the Issuer or by any other
person on behalf of the Issuer to make solicitations or recommendations in
connection with the Offer.
3
<PAGE>
ITEM 7. FINANCIAL INFORMATION.
(a) The following financial data of the Issuer are included within the
Offer to Purchase attached as Exhibit 9(a)(1):
---------------
1. Audited financial statements for the two fiscal years ended July 31,
1998 and July 31, 1997 are incorporated herein by reference to the
Form 10-K of the Issuer for the period ended July 31, 1998;
2. Unaudited balance sheets and comparative year-to-date statements of
operations and statements of cash flows and related earnings per share
amounts are incorporated by reference to the Issuer's most recent
quarterly report filed on the Form 10-Q for the quarter ended October
31, 1998;
3. The Company has concluded that the ratio of earnings to fixed charges
for the two most recent fiscal years and the interim periods set forth
above is not material and not applicable; and
4. The book value per share as of October 31, 1998 and 1997, and July 31,
1998 and 1997 is shown on the Summary Historical Financial Information
on page 11 of the Offer to Purchase attached as Exhibit 9(a)(1).
---------------
(b) The Offer to Purchase includes pro forma financial data to demonstrate
the effect of the tender offer on the financial information provided under Item
7(a) above, commencing on page 12 therein.
ITEM 8. ADDITIONAL INFORMATION.
(a) None.
(b) None.
(c) Not applicable.
(d) None.
(e) The Offer to Purchase attached hereto as Exhibit 9(a)(1) and the
---------------
exhibits thereto are incorporated herein by reference in their entirety.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS.
(a) The tender offer documents sent or given to security holders by the
Issuer are attached hereto as the following exhibits:
<TABLE>
<CAPTION>
Exhibit Number Description
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<S> <C>
99.1 Offer to Purchase, dated December 18, 1998.
99.2 Letter of Transmittal.
99.3 Notice of Guaranteed Delivery.
99.4 Instruction Letter for Brokers
</TABLE>
(b) There is no loan agreement pursuant to Item 2 of this Schedule.
(c) There are no contracts, arrangements, understandings or relationships
referred to in Items 5 or 8(a) of this Schedule.
4
<PAGE>
(d) No written opinion has been prepared by legal counsel at the request
of the Issuer pertaining to the tax consequences of the tender offer.
(e) No securities of the Issuer have been or are to be registered under
the Securities Act of 1933, as amended in connection with an exchange offer.
(f) One or more of the officers of the Issuer may orally solicit security
holders on behalf of the Issuer, but no written instruction, form or other
material has been furnished to such persons for their use, directly or
indirectly, in connection with the tender offer.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
VARIFLEX, INC.
By: /s/ Raymond H. Losi, II
----------------------------------------
Raymond H. Losi, II,
Chief Executive Officer
Dated: December 18, 1998
5
<PAGE>
EXHIBIT 99.1
VARIFLEX, INC.
OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 SHARES OF ITS COMMON STOCK, $.001 PAR VALUE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW
YORK TIME, ON JANUARY 20, 1999 UNLESS THE OFFER IS EXTENDED OR TERMINATED
EARLIER
Variflex, Inc., a Delaware corporation (the "Company"), offers to purchase
shares of its common stock, $.001 par value (the "Shares"), at a single price,
not greater than $6.00 or less than $5.00 per Share, specified by tendering
stockholders, upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer").
The Company will purchase up to 1,000,000 Shares that are properly tendered
at a single per Share price (not greater than $6.00 or less than $5.00 per
Share) selected by the Company (the "Purchase Price"), after taking into
account the number of Shares properly tendered and the prices specified by the
tendering stockholders. The Company will select the Purchase Price it is
willing to pay and then purchase all Shares properly tendered at or below that
Purchase Price and not withdrawn, net to the seller in cash, upon the terms
and subject to the conditions of the Offer, including the proration terms
hereof. The Company may purchase less than 1,000,000 Shares if less than
1,000,000 Shares are properly tendered at or below the Purchase Price selected
by the Company. However, the Company will purchase at least 200,000 Shares
that are properly tendered (or such lesser amount as are properly tendered)
for the single lowest per Share Purchase Price that will enable the Company to
acquire those Shares.
Stockholders are not obligated to tender or sell any Shares pursuant to the
Offer. If more than 1,000,000 Shares are validly tendered at the Purchase
Price, the Company will purchase the Shares on a pro rata basis, except that
qualifying Odd Lot Owners (as defined in Section 2) will be given priority as
described in Section 2 below.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER
OF SHARES BEING TENDERED.
The Shares are listed and principally traded on The Nasdaq National Market
("Nasdaq") under the symbol "VFLX." On December 10, 1998, the last trading day
before the Company announced its intention to make the Offer, the closing sale
price as reported on Nasdaq was $5.00 per Share. The Company urges
stockholders to obtain current market quotations for the Shares.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS IS RECOMMENDING THAT ANY
STOCKHOLDER TENDER OR REFRAIN FROM TENDERING ANY SHARES. EACH STOCKHOLDER MUST
MAKE HIS OR HER OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY
SHARES TO TENDER AND AT WHAT PRICE. AS OF THE DATE OF THE OFFER, NONE OF THE
COMPANY'S DIRECTORS OR EXECUTIVE OFFICERS INTENDS TO TENDER SHARES PURSUANT TO
THE OFFER.
TO TENDER SHARES PROPERLY, STOCKHOLDERS MUST COMPLETE THE SECTION OF THE
LETTER OF TRANSMITTAL RELATING TO THE PRICE AT WHICH THEY ARE TENDERING
SHARES.
<PAGE>
IMPORTANT
To accept the Offer, stockholders must strictly comply with the instructions
contained in the Letter of Transmittal. Any stockholder tendering Shares
should either (1) complete and sign the Letter of Transmittal (or a facsimile
copy thereof) and mail or deliver it, together with stock certificates
representing the tendered Shares and any other required documents, to the
American Stock Transfer & Trust Company at the address set forth below, or, if
no stock certificates are being sent, follow the procedure for book-entry
delivery set forth in Section 3; or (2) request his or her broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
him or her. A stockholder having Shares registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact that
broker, dealer, commercial bank, trust company or other nominee, if the
stockholder desires to tender those Shares. Stockholders who desire to tender
Shares and whose certificates for such Shares are not immediately available
should tender those Shares by following the procedures for guaranteed delivery
set forth in Section 3.
Questions and requests for assistance concerning this Offer to Purchase, the
Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to
Ms. Kim Page of the Company at the address and telephone number set forth
below.
VARIFLEX, INC.
5152 North Commerce Avenue
Moorpark, California 93021
Telephone: (805) 523-0322
Facsimile: (805) 523-7384
For additional copies of this Offer to Purchase, the Letter of Transmittal
or the Notice of Guaranteed Delivery, requests may be directed to
Reorganization Department at American Stock Transfer & Trust Company at the
address and telephone number set forth below.
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 Wall Street
46th Floor
New York, New York 10005
Telephone: (718) 921-8200
Facsimile: (718) 234-5001
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES &
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF THIS TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION
WITH THE OFFER ON BEHALF OF THE COMPANY OTHER THAN THOSE CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL. DO NOT RELY ON ANY SUCH
RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATIONS, IF GIVEN OR MADE,
AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THE DATE OF THIS OFFER TO PURCHASE IS DECEMBER 18, 1998.
<PAGE>
VARIFLEX, INC.
OFFER TO PURCHASE
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
1. NUMBER OF SHARES; PRORATION......................................... 2
2. TENDERS BY OWNERS OF FEWER THAN 100 SHARES.......................... 3
3. PROCEDURE FOR TENDERING SHARES...................................... 3
4. WITHDRAWAL RIGHT.................................................... 5
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE.................... 6
6. CERTAIN CONDITIONS OF THE OFFER..................................... 6
7. PRICE RANGE OF SHARES............................................... 8
8. BACKGROUND AND PURPOSE OF THE OFFER................................. 8
9. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE SHARES................................. 9
10. SOURCE AND AMOUNT OF FUNDS.......................................... 9
11. CERTAIN INFORMATION ABOUT THE COMPANY............................... 10
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER
THE EXCHANGE ACT................................................... 16
13. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS............. 16
14. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES........................ 16
15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS..................... 18
16. FEES AND EXPENSES................................................... 18
17. MISCELLANEOUS....................................................... 18
</TABLE>
<PAGE>
To the Holders of Common Stock of Variflex, Inc.
INTRODUCTION
Variflex, Inc., a Delaware corporation (the "Company"), hereby offers to
purchase from its stockholders all validly tendered shares of the Company's
common stock, up to 1,000,000 shares of common stock, $.001 par value (the
"Shares") at a single purchase price per Share, not greater than $6.00 or less
than $5.00, upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer"). However, the Company will purchase at least 200,000
Shares that are properly tendered (or such lesser amount as are properly
tendered) for the single lowest per Share Purchase Price that will enable the
Company to acquire those Shares.
The Company believes that the purchase of Shares at this time is consistent
with the Company's long-term goal of increasing stockholder value. The Company
also believes that it is in the best interests of stockholders for the Company
to provide liquidity to stockholders without the transaction costs associated
with market sale of shares on the secondary market.
The Company will select a single per Share price (not greater than $6.00 or
less than $5.00 per Share) that it will pay for Shares properly tendered
pursuant to the Offer (the "Purchase Price"), after taking into account the
number of Shares so tendered and the prices specified by the tendering
stockholders. The Company will purchase all Shares that are properly tendered
at or below the Purchase Price and not withdrawn (up to 1,000,000 Shares) net
to the seller in cash, upon the terms and subject to the conditions of the
Offer, including the proration terms described below. However, the Company
will purchase at least 200,000 Shares that are properly tendered (or such
lesser amount as are properly tendered) for the single lowest per Share
Purchase Price that will enable the Company to acquire those Shares.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
If, before the Expiration Time (as defined in Section 1), more than
1,000,000 Shares are properly tendered at or below the Purchase Price and not
withdrawn, the Company will buy Shares first from all Odd Lot Owners (as
defined in Section 2) who properly tender all their Shares at or below the
Purchase Price and then on a pro rata basis from all other stockholders who
properly tender Shares at or below the Purchase Price. See "Section 1. Number
of Shares; Proration" and "Section 2. Tenders by Owners of Fewer than 100
Shares." The Company will return all Shares not purchased under the Offer,
including Shares tendered and not withdrawn at prices greater than the
Purchase Price and Shares not purchased because of proration. Tendering
stockholders will not be obligated to pay brokerage commissions, solicitation
fees or, subject to Instruction 8 of the Letter of Transmittal, stock transfer
taxes on the Company's purchase of Shares. The Company will pay all fees and
expenses in connection with the Offer. See "Section 16. Fees and Expenses."
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. EACH
STOCKHOLDER MUST MAKE HIS OR HER OWN DECISION WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. NONE OF THE COMPANY'S
DIRECTORS OR EXECUTIVE OFFICERS INTENDS TO TENDER SHARES PURSUANT TO THE
OFFER.
The 1,000,000 Shares that the Company is offering to purchase represent
approximately 16.6% of the Company's 6,025,397 Shares outstanding as of
December 15, 1998.
<PAGE>
The Shares are listed and traded principally on The Nasdaq National Market
("Nasdaq") under the symbol "VFLX." The Company announced its intention to
make the Offer prior to the opening of trading on December 11, 1998. The
closing per Share sales price as reported on Nasdaq on December 10, 1998 was
$5.00. The Company urges stockholders to obtain current market quotations for
the Shares.
THIS OFFER TO PURCHASE AND RELATED TRANSMITTAL CONTAIN IMPORTANT INFORMATION
AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT
TO THE OFFER.
1. NUMBER OF SHARES; PRORATION.
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment (and thereby purchase) up to 1,000,000 Shares that are
properly tendered on or before the Expiration Time (and not withdrawn in
accordance with Section 4) at a price (selected by the Company in the manner
set forth below) not greater than $6.00 or less than $5.00 per Share. However,
the Company will purchase at least 200,000 Shares that are properly tendered
(or such lesser amount as are properly tendered) for the single lowest per
Share Purchase Price that will enable the Company to acquire those Shares. The
term "Expiration Time" means 5:00 p.m., New York time, on January 20, 1999,
unless the Company extends the period of time during which the Offer is open,
in which event the term "Expiration Time" shall mean the latest time and date
at which the Company shall accept Shares. See Section 15 for a description of
the Company's right to extend the time during which the Offer is open and to
delay, terminate or amend the Offer. See also Section 6. Subject to Section 2,
if more than 1,000,000 Shares are tendered at or below the Purchase Price
selected by the Company prior to the Expiration Time, the Company will
purchase those Shares on a pro rata basis. The proration period also expires
on the Expiration Time.
For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through Midnight, New York time.
In accordance with Instruction 2 of the Letter of Transmittal, each
stockholder desiring to tender Shares must specify the price or prices (not
greater than $6.00 or less than $5.00 per Share) at which that stockholder is
willing to have the Company purchase his or her Shares. As promptly as
practicable following the Expiration Time, the Company will select a single
Purchase Price (not greater than $6.00 or less than $5.00 per Share) that it
will pay for Shares properly tendered pursuant to the Offer, after taking into
account the number of Shares tendered and the prices specified by tendering
stockholders. All Shares purchased pursuant to the Offer will be purchased at
the Purchase Price. All Shares not purchased pursuant to the Offer, including
Shares tendered at prices greater than the Purchase Price and Shares not
purchased because of proration, will be returned to the tendering stockholders
at the Company's expense as promptly as practicable following the Expiration
Time.
If the number of Shares properly tendered prior to the Expiration Time at or
below the Purchase Price is less than or equal to 1,000,000 Shares, the
Company will, upon the terms and subject to the conditions of the Offer,
purchase at the Purchase Price all Shares so tendered.
Upon the terms and subject to the conditions of the Offer, in the event that
prior to the Expiration Time a greater number of Shares is properly tendered
at or below the Purchase Price than the Company will accept for purchase, the
Company will accept Shares for purchase in the following order of priority:
(a) first, all Shares properly tendered at or below the Purchase Price
prior to the Expiration Time by any Odd Lot Owner who:
(1) tenders all Shares beneficially owned by such Odd Lot Owner at or
below the Purchase Price (partial tenders will not qualify for this
preference); and
(2) completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery;
and
2
<PAGE>
(b) then, after purchase of all of the foregoing Shares, all of the
Shares properly tendered at or below the Purchase Price prior to the
Expiration Time on a pro rata basis (with adjustments to avoid purchases of
fractional Shares).
In the event that proration of tendered Shares is required, the Company will
determine the final proration factor as promptly as practicable after the
Expiration Time. Although the Company does not expect to be able to announce
the final results of such proration until approximately seven Nasdaq trading
days after the Expiration Time, it will announce preliminary results of
proration by press release as promptly as practicable after the Expiration
Time. Stockholders may obtain such preliminary information from the Company
and may be able to obtain such information from their brokers.
2. TENDERS BY OWNERS OF FEWER THAN 100 SHARES.
The Company will accept for purchase, without proration, all Shares properly
tendered before the Expiration Time at or below the Purchase Price by or on
behalf of stockholders who beneficially held, as of the close of business on
December 18, 1998, an aggregate of fewer than 100 Shares ("Odd Lot Owners")
and who continue to own beneficially all of such Shares as of the Expiration
Time. See Section 1. An Odd Lot Owner must properly tender all Shares that
such Odd Lot Owner beneficially owns; partial tenders will not qualify for
this preference. This preference is not available to owners of 100 or more
Shares, even if such owners have separate stock certificates for fewer than
100 Shares. Any Odd Lot Owner wishing to tender all Shares beneficially owned
by him or her pursuant to this Offer must complete the box captioned "Odd
Lots" on the Letter of Transmittal and, if applicable, on the Notice of
Guaranteed Delivery. See Section 3.
3. PROCEDURE FOR TENDERING SHARES.
Proper Tender of Shares. For Shares to be properly tendered pursuant to the
Offer:
(a) the certificates for the Shares (or confirmation of receipt of the
Shares pursuant to the procedures for book-entry transfer set forth below),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) with any required signature guarantees, and any
other documents required by the Letter of Transmittal, must be received on
or before the Expiration Time by American Stock Transfer & Trust Company at
its address set forth on the back cover of this Offer to Purchase; or
(b) the tendering stockholder must comply with the guaranteed delivery
procedure set forth below.
As specified in Instruction 2 of the Letter of Transmittal, each stockholder
desiring to tender Shares pursuant to the Offer must properly indicate in the
section captioned "Price (In Dollars) Per Share At Which Shares Are Being
Tendered" on the Letter of Transmittal the price (in multiples of $0.25) at
which his or her Shares are being tendered. Stockholders desiring to tender
Shares at more than one price must complete separate Letters of Transmittal
for each price at which Shares are being tendered, except that the same Shares
cannot be tendered (unless properly withdrawn previously in accordance with
the terms of the Offer) at more than one price. In order to properly tender
Shares, one and only one price box must be checked in the appropriate section
on each Letter of Transmittal.
It is a violation of Section 10(b) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Rule 10b-4 promulgated thereunder, for a
person to tender Shares for such person's own account unless the person so
tendering:
(a) owns those Shares; or
(b) owns other securities convertible into or exchangeable for the Shares
or owns an option, warrant or right to purchase the Shares and intends to
acquire Shares for tender by conversion, exchange or exercise of such
option, warrant or right.
Section 10(b) and Rule 10b-4 provide a similar restriction applicable to the
tender or guarantee of a tender on behalf of another person.
3
<PAGE>
The Company's acceptance of Shares will constitute a binding agreement
between the tendering stockholder and the Company upon the terms and subject
to the conditions of the Offer. The tendering stockholder represents that (i)
such stockholder owns the Shares being tendered within the meaning of Rule
10b-4 promulgated under the Exchange Act and (ii) the tender of those Shares
complies with Rule 10b-4.
Signature Guarantees and Method of Delivery. Except with respect to book-
entry transfer through The Depository Trust Company, all signatures must be
guaranteed on all Letters of Transmittal and all other documents required for
the transfer of Shares. No signature guarantee is required on the Letter of
Transmittal if the Letter of Transmittal is signed by The Depository Trust
Company, as the registered owner of the Shares (the "Book-Entry Transfer
Facility"), where payment is to be made directly to such registered owner, or
if Shares are tendered for the account of a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an
office, branch or agency in the United States (each such entity being
hereinafter referred to as an "Eligible Institution"). In all other cases, all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5 of the Letter of Transmittal. If a certificate
representing Shares is registered in the name of a person other than the
signer of a Letter of Transmittal, or if payment is to be made or Shares not
purchased or tendered are to be issued to a person other than the registered
owner, then the certificate must be endorsed or accompanied by an appropriate
stock power, in either case signed exactly as the name of the registered owner
appears on the certificate, with the signature on the certificate or stock
power guaranteed by an Eligible Institution. In all cases, payment of Shares
tendered and accepted for payment pursuant to the Offer will be made only
after timely receipt by the American Stock Transfer & Trust Company of
certificates for such Shares (or a timely confirmation of a book-entry
transfer of such Shares into the Company's account at the Book-Entry Transfer
Facility), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by the Letter of
Transmittal. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING STOCK
CERTIFICATES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS
AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
Federal Income Tax Withholding. To prevent backup federal income tax
withholding equal to 31% of the gross payments made pursuant to the Offer,
each stockholder who does not otherwise establish an exemption from such
withholding must notify the Company of such stockholder's correct taxpayer
identification number (or certify that such taxpayer is awaiting a taxpayer
identification number) and provide certain other information by completing the
Substitute Form W-9 included in the Letter of Transmittal. Foreign
stockholders must submit Form W-8 in order to avoid backup withholding. For
this purpose, a foreign stockholder is a stockholder that is not (i) a citizen
or resident of the United States; (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof; or (iii) any estate or trust the income of
which is subject to United States federal income taxation regardless of the
source of such income.
For a discussion of certain other federal income tax consequences to
tendering stockholders, see Section 14.
Book-Entry Delivery. American Stock Transfer & Trust Company will establish
an account for the benefit of the Company with The Depository Trust Company
with respect to the Shares at the Book-Entry Transfer Facility for purposes of
the Offer within two business days after the date of this Offer to Purchase.
Any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Shares by causing such
facility to transfer such Shares into the Company's account in accordance with
such facility's procedure for such transfer. Even though delivery of Shares
may be effected through book-entry transfer into the Company's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees and
other required documents must, in any case, be transmitted to and received by
American Stock Transfer & Trust Company at its address set forth on the back
cover of this Offer to Purchase prior to the Expiration Time, or the
guaranteed delivery procedure set forth below must be followed. Delivery of
the Letter of Transmittal and any other required documents to the Book-Entry
Transfer Facility does not constitute delivery to American Stock Transfer &
Trust Company.
4
<PAGE>
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates are not immediately available
(or the procedures for book-entry transfer cannot be completed on a timely
basis) or time will not permit all required documents to reach the American
Stock Transfer & Trust Company before the Expiration Time, such Shares may
nevertheless be tendered provided that all of the following conditions are
satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the American Stock Transfer & Trust Company receives (by hand, mail,
telegram or facsimile transmission), on or prior to the Expiration Time, a
properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form the Company has provided with this Offer to
Purchase (indicating the price at which the Shares are being tendered); and
(c) the certificates for all tendered Shares in proper form for transfer
(or confirmation of book-entry transfer of such Shares into the Company's
account at the Book-Entry Transfer Facility), together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof)
and any other documents required by the Letter of Transmittal, are received
by the Company within three Nasdaq trading days after the date the American
Stock Transfer & Trust Company receives such Notice of Guaranteed Delivery.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. The Company's decision as to the number
of Shares to be accepted, the price to be paid therefor and the validity,
form, eligibility (including time of receipt) and acceptance for payment of
any tender of Shares will be in the Company's sole discretion and shall be
final and binding on all parties. The Company reserves the absolute right to
reject any or all tenders it determines not to be in proper form or if
acceptance of or payment for such Shares may, in the opinion of the Company's
counsel, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Shares. All defects and irregularities must be cured
or waived before any tender of Shares will be deemed to be proper. Neither the
Company nor any other person is or will be obligated to give notice of any
defects or irregularities in tenders, and none of them will incur any
liability for failure to give any such notice.
4. WITHDRAWAL RIGHT.
Except as otherwise provided in this Section 4, Shares tendered pursuant to
the Offer are irrevocable. Any stockholder desiring to withdraw Shares
tendered pursuant to the Offer must notify the American Stock Transfer & Trust
Company as set forth below at any time before the Expiration Time or, if not
previously accepted for payment by the Company, at any time after 5:00 p.m.,
New York time, on that date which is twenty business days following Expiration
Time.
For a withdrawal to be effective, the American Stock Transfer & Trust
Company must timely receive (at its address set forth on the back cover of
this Offer to Purchase) a written, telegraphic, telex or facsimile
transmission notice of withdrawal. Such notice of withdrawal must specify the
name of the person who deposited the Shares to be withdrawn, the number of
Shares to be withdrawn and the name of the registered owner, if different from
that of the person who tendered such Shares. If the certificates have been
delivered or otherwise identified to the American Stock Transfer & Trust
Company, then prior to the release of such certificates, the tendering
stockholder must also submit the serial numbers shown on the particular
certificates evidencing the Shares and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution (except in the case
of Shares tendered by an Eligible Institution). If Shares have been tendered
pursuant to the procedure for book-entry transfer set forth in Section 3, the
notice of withdrawal must specify the name and the number of the account at
the Book-Entry Transfer Facility to be credited with the withdrawn Shares and
otherwise comply with the procedures of such facility. The Company, in its
sole discretion, will determine the proper form and validity (including time
of receipt) of notices of withdrawal, and such decisions shall be final and
binding on all parties. Neither the Company nor any other person is or will be
obligated to give any notice of any defects or irregularities in any notice of
withdrawal, and no such person will incur any liability for failure to give
any such notice. Any Shares properly withdrawn will thereafter be deemed not
tendered for purposes of the Offer. Withdrawn Shares may, however, be
retendered before the Expiration Time by again following any of the procedures
described in Section 3.
5
<PAGE>
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer, the Company will
select the Purchase Price it will pay for up to 1,000,000 Shares that are
properly tendered, after taking into account the number of Shares tendered and
the prices specified by tendering the stockholders. The Company will purchase
and pay that Purchase Price for up to 1,000,000 Shares (subject to decrease as
provided in Section 1 and Section 15) properly tendered at or below that
Purchase Price and not withdrawn as permitted in Section 4, as soon as
practicable after the Expiration Time. However, the Company will purchase at
least 200,000 Shares that are properly tendered (or such lesser amount as are
properly tendered) for the single lowest per Share Purchase Price that will
enable the Company to acquire those Shares.
The Company will pay for Shares purchased pursuant to the Offer by
depositing the aggregate Purchase Price therefor with the Book-Entry Transfer
Facility, as agent for stockholders tendering by book-entry or by transmitting
payment to the tendering stockholders. In the event of proration, the Company
will determine the proration factor and pay for those tendered Shares accepted
for payment as soon as practicable after the Expiration Time. However, the
Company does not expect to be able to announce the final results of any such
proration until approximately seven Nasdaq trading days after the Expiration
Time. Certificates for all Shares not purchased, including all Shares tendered
at prices greater than the Purchase Price and Shares not purchased due to
proration, will be returned (or, in the case of Shares tendered by book-entry
transfer, such Shares will be credited to the account maintained with the
Book-Entry Transfer Facility by the participant therein who delivered the
Shares) as soon as practicable after the Expiration Time without expense to
the tendering stockholder. Under no circumstances will the Company pay
interest on the Purchase Price.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer; provided, however,
if payment of the Purchase Price is to be made to any person other than the
registered owner, or (in the circumstances permitted by the Offer) if
unpurchased Shares are to be registered in the name of any person other than
the registered owner, or if tendered certificates are registered in the name
of, any person other than the person signing the Letter of Transmittal, the
amount of all stock transfer taxes, if any (whether imposed on the registered
owner or such other person), payable on account of the transfer to such person
will be deducted from the Purchase Price unless satisfactory evidence of the
payment of such taxes or exemption therefrom is submitted. See Instruction 8
of the Letter of Transmittal.
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND
SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL (OR, IN THE
CASE OF A FOREIGN INDIVIDUAL, FORM W-8 OBTAINABLE FROM THE COMPANY) MAY BE
SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS
PROCEEDS PAID TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE
SECTION 3.
6. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment, to purchase or to pay for any Shares tendered
and may terminate or amend the Offer or may postpone the acceptance for
payment of, the purchase of and the payment for, Shares tendered, if at any
time on or after December 18, 1998 and at or before the time of purchase of
any such Shares, any of the following events shall have occurred (or shall
have been determined by the Company to have occurred) which, in the Company's
sole judgment in any such case and regardless of the circumstances (including
any action or omission to act by the Company), makes it inadvisable to proceed
with the Offer or with such purchase or payment:
(a) there shall have been threatened, instituted or pending any action or
proceeding by any government, or by any governmental, regulatory or
administrative agency, authority or tribunal, or by any other person,
domestic or foreign, which:
(1) challenges the making of the Offer, the acquisition of Shares
pursuant to the Offer or otherwise relates in any manner to the Offer;
or
6
<PAGE>
(2) in the Company's sole judgment, could materially affect the
business, condition (financial or other), income, operations or
prospects of the Company and its subsidiaries, taken as a whole, or
otherwise could materially impair in any way the contemplated future
conduct of the business of the Company or any of its subsidiaries or
materially impair the Offer's contemplated benefits to the Company; or
(b) there shall have been any statute, rule, regulation, judgment, order
or injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, which, in the Company's sole judgment, would or
might directly or indirectly:
(1) make the acceptance for payment of, or payment for, some or all
of the Shares illegal or otherwise restrict or prohibit consummation of
the Offer;
(2) delay or restrict the ability of the Company, or render the
Company unable, to accept for payment or pay for some or all of the
Shares;
(3) materially impair the contemplated benefits of the Offer to the
Company; or
(4) materially affect the business, condition (financial or other),
income, operations or prospects of the Company and its subsidiaries,
taken as a whole, or otherwise materially impair in any way the
contemplated future conduct of the business of the Company or any of
its subsidiaries; or
(c) there shall have occurred:
(1) the declaration of any banking moratorium or suspension of
payments in respect of banks in the United States;
(2) any general suspension of trading in, or limitation on prices
for, securities on any United States national securities exchange or in
the over-the-counter market;
(3) the commencement of a war, armed hostilities or any other
national or international crisis directly or indirectly involving the
United States;
(4) any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or any event
which, in the Company's sole judgment, might affect, the extension of
credit by banks or other lending institutions in the United States;
(5) any significant decrease in the market price of the Shares or in
the general level of market prices of equity securities in the United
States or abroad, or any change in the general political, market,
economic or financial conditions in the United States or abroad that
could have a material adverse effect on the Company's business,
operations or prospects or on the trading in the Shares; or
(6) in the case of any of the foregoing existing at the time of the
commencement of the Offer, in the Company's sole judgment, a material
acceleration or worsening thereof; or
(d) any change shall occur or be threatened in the business, condition
(financial or other), income, operations, Share ownership or prospects of
the Company and its subsidiaries, taken as a whole, which, in the Company's
sole judgment, is or may be material to the Company; or
(e) a tender or exchange offer for any or all of the Shares (other than
the Offer), or any merger, business combination or other similar
transaction with or involving the Company or any subsidiary, shall have
been proposed, announced or made by any person.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition (including any action or inaction by the Company) or may be
waived by the Company in whole or in part. The Company's failure at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
7
<PAGE>
The Company's determination concerning the events described in this Section
6 shall be final and conclusive, and shall be binding on all parties.
7. PRICE RANGE OF SHARES.
The Shares are traded principally on Nasdaq under the symbol "VFLX." The
following table sets forth for the periods indicated the high and low closing
per Share sale prices on Nasdaq as reported in published financial sources:
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
----------- ------- -------
<S> <C> <C>
1997
First Quarter (ended October 31, 1996)...................... 6 7/8 5 3/8
Second Quarter (ended January 31, 1997)..................... 6 1/4 4 3/8
Third Quarter (ended April 30, 1997)........................ 6 4 5/8
Fourth Quarter (ended July 31, 1997)........................ 5 5/8 4 1/2
1998
First Quarter (ended October 31, 1997)...................... 5 3 3/4
Second Quarter (ended January 31, 1998)..................... 6 13/16 3 7/8
Third Quarter (ended April 30, 1998)........................ 6 1/4 4 13/16
Fourth Quarter (ended July 31, 1998)........................ 6 4 3/4
1999
First Quarter (ended October 31, 1998)...................... 5 1/8 4 1/8
</TABLE>
The Company announced its intention to make the Offer after the close of
trading on December 10, 1998. The closing per Share sales price as reported on
Nasdaq on that day was $5.00. The Company urges stockholders to obtain current
quotations of the market price of the Shares.
8. BACKGROUND AND PURPOSE OF THE OFFER.
The Company has decided to make the Offer because the trading market for the
Shares is not active and, in the absence of the Offer, stockholders may not be
able to sell their Shares on a timely basis at a reasonable price, and may not
be able to sell a substantial number of Shares of the Company's common stock.
Furthermore the Company believes that the purchase of Shares at this time is
consistent with the Company's long-term goal of increasing stockholder value.
Following the repurchase, every remaining stockholder will own a higher
percentage of the total Company. For stockholders who sell at a gain, the
repurchase may result in more favorable capital gain tax treatment than would
be the case with a special dividend of the same aggregate amount. See Section
14. The Company is able to make the Offer because the Board of Directors
believes that the remaining balance of cash and marketable securities along
with the Company's borrowing capacity will be sufficient to meet the cash
needs of the Company for the foreseeable future.
In addition, the Offer provides stockholders who are considering a sale of
all or a portion of their Shares the opportunity to determine the price or
prices (not greater than $6.00 or less than $5.00 per Share) at which they are
willing to sell their Shares and, if any such Shares are purchased pursuant to
the Offer, to sell those Shares for cash without the usual transaction costs
associated with open-market sales. Any stockholder owning less than 100 Shares
whose Shares are purchased pursuant to the Offer not only will avoid the
payment of brokerage commissions, but also will avoid any applicable Odd Lot
discounts payable on sales of Odd Lots on Nasdaq and the other exchanges on
which Shares are traded. Stockholders whose Shares are not purchased in the
Offer will obtain a proportionate increase in their ownership interest in the
Company and thus in the Company's future earnings and assets.
8
<PAGE>
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL
OF SUCH STOCKHOLDER'S SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY
SUCH RECOMMENDATION. STOCKHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL
INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND
MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES
TO TENDER AND AT WHAT PRICE OR PRICES.
Although the Company has no current plans to acquire additional Shares, the
Company may in the future purchase additional Shares on the open market, in
private transactions, through tender offers or otherwise. Shares that the
Company acquires pursuant to the Offer will be deemed treasury stock.
9. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE SHARES.
As of December 15, 1998, the Company's directors and executive officers as a
group beneficially owned an aggregate of 4,011,015 Shares (approximately
58.91%) of the outstanding Shares (including 783,058 Shares which may be
acquired by exercise of options or warrants exercisable within 60 days). The
Company has been advised that no directors and no executive officers of the
Company intend to tender any Shares pursuant to the Offer. If the Company
purchases 1,000,000 Shares (or 16.60% of the Company's 6,025,397 Shares
outstanding as of December 15, 1998) pursuant to the Offer, then after the
purchase of Shares pursuant to the Offer, the Company's executive officers and
directors as a group would beneficially own approximately 69.05% of the
outstanding Shares (including 783,058 Shares which may be acquired by exercise
of options or warrants exercisable within 60 days).
Based upon the Company's records and upon information provided to the
Company by its directors, executive officers and affiliates, neither the
Company nor any of its subsidiaries nor, to the Company's knowledge, any of
the directors, executive officers or affiliates of the Company, nor any
associates of any of the foregoing, has effected any transactions in the
Shares during the forty business days prior to the date hereof.
Except as set forth in this Offer to Purchase, neither the Company nor, to
the best of the Company's knowledge, any of its affiliates, directors or
executive officers, or any of the executive officers or directors of its
subsidiaries, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
Offer with respect to any securities of the Company (including, but not
limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any such securities, joint ventures,
loan or option arrangements, puts or calls, guaranties of loans, guaranties
against loss or the giving or withholding of proxies, consents or
authorizations).
10. SOURCE AND AMOUNT OF FUNDS.
Assuming the Company purchases all 1,000,000 Shares pursuant to the Offer at
a Purchase Price of $6.00 per Share, the Company expects the maximum aggregate
cost, including all fees and expenses applicable to the Offer, to be
approximately $6,100,000. It is anticipated that all funds so required will be
obtained from the Company's available cash and marketable securities.
9
<PAGE>
11. CERTAIN INFORMATION ABOUT THE COMPANY.
General Development of Business. The Company is a leading distributor and
wholesaler in the United States of in-line skates, skateboards, recreational
safety helmets, athletic protective equipment (such as wrist guards, elbow
pads and knee pads used by skaters and skateboarders), snowboards and related
accessories and portable instant canopies. The Company also plans to introduce
a springless trampoline in 1999. The Company designs and develops these
products which are then manufactured to the Company's detailed specifications
by independent contractors. The Company distributes its products throughout
the United States and to foreign countries.
There are several risks and uncertainties that may affect the future
operating results, business and financial condition of the Company, including,
without limitation: (1) the risk of reduction in consumer demand for the
product categories in which the Company does business or the Company's
products in particular; (2) the risk of loss of one or more of the Company's
major customers; (3) the risks inherent in the design and development of new
products and product enhancements, including those associated with patent
issues and marketability; (4) the risk that the Company may not be able to
continue to provide its products at prices which are competitive or that it
can continue to design and market products that appeal to consumers even if
price-competitive; (5) the risk that the Company may not be able to obtain its
products and supplies on substantially similar terms, including cost, in order
to sustain its operating margins; and (6) the risks inherent in legal
proceedings. Readers are also encouraged to refer to the Company's most recent
annual report on Form 10-K and the most recent quarterly report on Form 10-Q
for a further discussion of the Company's business and the risks and
opportunities attendant thereto.
Summary Historical Financial Information. The table set forth on page 11
presents certain summary consolidated historical financial information of the
Company and its subsidiaries. The historical financial information at and for
the years ended July 31, 1998 and 1997 has been summarized from the Company's
audited consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended July 31, 1998. The historical financial
information at and for the three months ended October 31, 1998 and 1997 has
been summarized from the Company's unaudited consolidated financial statements
as set forth in the Company's Quarterly Report on Form 10-Q for the three
months ended October 31, 1998. The following summary historical financial
information should be read in conjunction with, and is qualified in its
entirety by reference to, such audited and unaudited consolidated financial
statements and their related notes.
Pro Forma Financial Information. The tables set forth on pages 12 and 14
present certain unaudited pro forma consolidated financial information based
on historical information which has been adjusted:
(a) assuming the repurchase of 200,000 Shares and 1,000,000 Shares at a
$5.00 Purchase Price and at a $6.00 Purchase Price; and
(b) as if the transaction had taken place (i) at the beginning of the
periods presented for statement of operations purposes and (ii) at the end
of the periods presented for balance sheet purposes but, in each case, such
information does not purport to be indicative of the results which would
actually have been achieved if the Offer had been completed as of the
periods indicated or which may be achieved in the future.
The pro forma financial information should be read in conjunction with the
notes set forth on pages 13 and 15 and with the audited and unaudited
financial statements and related notes set forth in the Company's Form 10-K
and Form 10-Q.
10
<PAGE>
VARIFLEX, INC.
SUMMARY HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS
ENDED OCTOBER YEAR ENDED JULY
31, 31,
---------------- ----------------
1998 1997 1998 1997
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
Net sales................................. $ 8,876 $13,659 $43,148 $51,661
Cost of goods sold........................ 7,222 11,498 36,531 44,944
------- ------- ------- -------
Gross profit............................ 1,654 2,161 6,617 6,717
------- ------- ------- -------
Operating expenses:
Selling and marketing................... 956 1,462 4,880 6,344
General and adminstrative............... 1,092 1,099 4,905 4,255
Impairment write-off.................... -- -- 995 --
------- ------- ------- -------
Total operating expenses.................. 2,048 2,561 10,780 10,599
------- ------- ------- -------
Loss from operations...................... (394) (400) (4,163) (3,882)
------- ------- ------- -------
Other income (expense):
Interest expense........................ -- -- -- (39)
Interest income and other............... 502 256 1,459 838
------- ------- ------- -------
Total other income (expense).............. 502 256 1,459 799
------- ------- ------- -------
Income (loss) before income taxes......... 108 (144) (2,704) (3,083)
(Benefit from) provision for income
taxes.................................... -- (123) 784 (1,278)
------- ------- ------- -------
Net income (loss)......................... $ 108 $ (21) $(3,488) $(1,805)
======= ======= ======= =======
Net income (loss) per share of common
stock:
Basic................................... $ 0.02 $ (0.00) $ (0.58) $ (0.30)
Diluted................................. $ 0.02 $ (0.00) $ (0.58) $ (0.30)
Weighted average shares outstanding:
Basic................................... 6,025 6,025 6,025 6,025
Diluted................................. 6,047 6,025 6,025 6,025
CONSOLIDATED BALANCE SHEET DATA
Total current assets...................... $44,464 $47,522 $44,166 $45,003
Total current liabilities................. 6,976 7,184 4,883 4,793
Working capital........................... 37,488 40,338 39,283 40,210
Total assets.............................. 45,027 50,286 44,755 47,893
Total liabilities......................... 6,976 7,184 4,883 4,793
Total stockholders' equity................ 38,051 43,102 39,872 43,100
Net book value per share.................. $ 6.32 $ 7.15 $ 6.62 $ 7.15
</TABLE>
11
<PAGE>
VARIFLEX, INC.
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION AND NOTES
TABLE ONE
<TABLE>
<CAPTION>
QUARTER ENDED OCTOBER 31, 1998 YEAR ENDED JULY 31, 1998
------------------------------ ------------------------------
PRO FORMA PRO FORMA
------------------- -------------------
200,000 SHARES 200,000 SHARES
TENDERED TENDERED
------------------- -------------------
AT $5.00 AT $6.00 AT $5.00 AT $6.00
HISTORICAL PER SHARE PER SHARE HISTORICAL PER SHARE PER SHARE
---------- --------- --------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA
Net sales............... $ 8,876 $ 8,876 $ 8,876 $43,148 $43,148 $43,148
Cost of goods sold...... 7,222 7,222 7,222 36,531 36,531 36,531
------- ------- ------- ------- ------- -------
Gross profit.......... 1,654 1,654 1,654 6,617 6,617 6,617
------- ------- ------- ------- ------- -------
Operating expenses:
Selling and
marketing............ 956 956 956 4,880 4,880 4,880
General and
administrative....... 1,092 1,092 1,092 4,905 4,905 4,905
Impairment write-off.. -- -- -- 995 995 995
------- ------- ------- ------- ------- -------
Total operating
expenses............... 2,048 2,048 2,048 10,780 10,780 10,780
------- ------- ------- ------- ------- -------
Loss from operations.... (394) (394) (394) (4,163) (4,163) (4,163)
------- ------- ------- ------- ------- -------
Other income (expense):
Interest income and
other................ 502 480 476 1,459 1,392 1,380
------- ------- ------- ------- ------- -------
Total other income
(expense).............. 502 480 476 1,459 1,392 1,380
------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... 108 86 82 (2,704) (2,771) (2,783)
Provision for income
taxes.................. -- -- -- 784 784 784
------- ------- ------- ------- ------- -------
Net income (loss)....... $ 108 $ 86 $ 82 $(3,488) $(3,555) $(3,567)
======= ======= ======= ======= ======= =======
Net income (loss) per
share of common stock:
Basic................. $ 0.02 $ 0.01 $ 0.01 $ (0.58) $ (0.61) $ (0.61)
Diluted............... $ 0.02 $ 0.01 $ 0.01 $ (0.58) $ (0.61) $ (0.61)
Weighted average shares
outstanding:
Basic................. 6,025 5,825 5,825 6,025 5,825 5,825
Diluted............... 6,047 5,847 5,847 6,025 5,825 5,825
CONSOLIDATED BALANCE
SHEET DATA
Total current assets.... $44,464 $43,364 $43,164 $44,166 $43,066 $42,866
Total current
liabilities............ 6,976 6,976 6,976 4,883 4,883 4,883
Working capital......... 37,488 36,388 36,188 39,283 38,183 37,983
Total assets............ 45,027 43,927 43,727 44,755 43,655 43,455
Total liabilities....... 6,976 6,976 6,976 4,883 4,883 4,883
Total stockholders'
equity................. 38,051 36,951 36,751 39,872 38,772 38,572
Net book value per
share................... $ 6.32 $ 6.34 $ 6.31 $ 6.62 $ 6.66 $ 6.62
</TABLE>
12
<PAGE>
NOTES TO SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
Pro Forma Financial Information. Table One above sets forth certain
unaudited pro forma consolidated financial information based on historical
information which has been adjusted:
(a) to reflect the repurchase of 200,000 shares at a $5.00 purchase price
and at a $6.00 purchase price and the estimated cost of the offering of
approximately $100,000; and
(b) as if the transaction had taken place (i) at the beginning of the
periods presented for statement of operations purposes and (ii) at the end
of the periods presented for balance sheet purposes but, in each case, such
information does not purport to be indicative of the results which would
actually have been achieved if the Offer had been completed as of the
periods indicated or which may be achieved in the future; and
(c) assuming the repurchase is financed from funds available from the
disposition of marketable securities consisting principally of bond mutual
funds. Interest and other income has been reduced by the amount of interest
earned during the period on the amount required to finance the repurchase
based on the weighted average interest rate on the Company's marketable
securities portfolio of 7.98% and 6.07% for the quarter ended October 31,
1998 and the year ended July 31, 1998, respectively; and
(d) net book value per share is calculated as total stockholders' equity
divided by the number of Shares outstanding at the end of the period.
The pro forma financial information should be read in conjunction with the
notes set forth above and with the audited and unaudited financial statements
and related notes set forth in the 1998 Form 10-K and the October 31, 1998
Form 10-Q.
13
<PAGE>
VARIFLEX, INC.
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION AND NOTES
TABLE TWO
<TABLE>
<CAPTION>
QUARTER ENDED OCTOBER 31, 1998 YEAR ENDED JULY 31, 1998
------------------------------ ------------------------------
PRO FORMA PRO FORMA
------------------- -------------------
1,000,000 SHARES 1,000,000 SHARES
TENDERED TENDERED
------------------- -------------------
AT $5.00 AT $6.00 AT $5.00 AT $6.00
HISTORICAL PER SHARE PER SHARE HISTORICAL PER SHARE PER SHARE
---------- --------- --------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA
Net sales............... $ 8,876 $ 8,876 $ 8,876 $43,148 $43,148 $43,148
Cost of goods sold...... 7,222 7,222 7,222 36,531 36,531 36,531
------- ------- ------- ------- ------- -------
Gross profit.......... 1,654 1,654 1,654 6,617 6,617 6,617
------- ------- ------- ------- ------- -------
Operating expenses:
Selling and
marketing............ 956 956 956 4,880 4,880 4,880
General and
administrative....... 1,092 1,092 1,092 4,905 4,905 4,905
Impairment write-off.. -- -- -- 995 995 995
------- ------- ------- ------- ------- -------
Total operating
expenses............... 2,048 2,048 2,048 10,780 10,780 10,780
------- ------- ------- ------- ------- -------
Loss from operations.... (394) (394) (394) (4,163) (4,163) (4,163)
------- ------- ------- ------- ------- -------
Other income (expense):
Interest income and
other................ 502 401 381 1,459 1,149 1,089
------- ------- ------- ------- ------- -------
Total other income
(expense).............. 502 401 381 1,459 1,149 1,089
------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... 108 7 (13) (2,704) (3,014) (3,074)
Provision for income
taxes.................. -- -- -- 784 784 784
------- ------- ------- ------- ------- -------
Net income (loss)....... $ 108 $ 7 $ (13) $(3,488) $(3,798) $(3,858)
======= ======= ======= ======= ======= =======
Net income (loss) per
share of common stock:
Basic................. $ 0.02 $ 0.00 $ (0.00) $ (0.58) $ (0.76) $ (0.77)
Diluted............... $ 0.02 $ 0.00 $ (0.00) $ (0.58) $ (0.76) $ (0.77)
Weighted average shares
outstanding:
Basic................. 6,025 5,025 5,025 6,025 5,025 5,025
Diluted............... 6,047 5,047 5,047 6,025 5,025 5,025
CONSOLIDATED BALANCE
SHEET DATA
Total current assets.... $44,464 $39,364 $38,364 $44,166 $39,066 $38,066
Total current
liabilities............ 6,976 6,976 6,976 4,883 4,883 4,883
Working capital......... 37,488 32,388 31,388 39,283 34,183 33,183
Total assets............ 45,027 39,927 38,927 44,755 39,655 38,655
Total liabilities....... 6,976 6,976 6,976 4,883 4,883 4,883
Total stockholders'
equity................. 38,051 32,951 31,951 39,872 34,772 33,772
Net book value per
share................... $ 6.32 $ 6.56 $ 6.36 $ 6.62 $ 6.92 $ 6.72
</TABLE>
14
<PAGE>
NOTES TO SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
Pro Forma Financial Information. Table Two above sets forth certain
unaudited pro forma consolidated financial information based on historical
information which has been adjusted:
(a) to reflect the repurchase of 1,000,000 shares at a $5.00 purchase
price and at a $6.00 purchase price and the estimated cost of the offering
of approximately $100,000; and
(b) as if the transaction had taken place (i) at the beginning of the
periods presented for statement of operations purposes and (ii) at the end
of the periods presented for balance sheet purposes but, in each case, such
information does not purport to be indicative of the results which would
actually have been achieved if the Offer had been completed as of the
periods indicated or which may be achieved in the future; and
(c) assuming the repurchase is financed from funds available from the
disposition of marketable securities consisting principally of bond mutual
funds. Interest and other income has been reduced by the amount of interest
earned during the period on the amount required to finance the repurchase
based on the weighted average interest rate on the Company's marketable
securities portfolio of 7.98% and 6.07% for the quarter ended October 31,
1998 and the year ended July 31, 1998, respectively; and
(d) net book value per share is calculated as total stockholders' equity
divided by the number of Shares outstanding at the end of the period.
The pro forma financial information should be read in conjunction with the
notes set forth above and with the audited and unaudited financial statements
and related notes set forth in the 1998 Form 10-K and the October 31, 1998
Form 10-Q.
15
<PAGE>
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and is likely to reduce
the number of stockholders. Nonetheless, the Company anticipates that there
will still be a sufficient number of Shares outstanding and publicly traded
following the Offer to ensure a continued trading market in the Shares. Based
on the published guidelines of Nasdaq, the Company believes that its purchase
of Shares pursuant to the Offer will not cause its remaining Shares to be
delisted from that exchange.
The Shares are registered under the Exchange Act. The Company is required,
among other things, to furnish certain information to its stockholders and to
the Commission and comply with the Commission's proxy rules in connection with
meetings of the Company's stockholders. The Company has no present intention
to apply to the Commission to deregister the Shares under the Exchange Act and
intends to continue to file periodic reports thereunder.
13. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS.
The Company is not aware of any license or regulatory permit that appears to
be material to its business that might be adversely affected by its
acquisition of Shares as contemplated in the Offer or of any approval or other
action by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, that would be required for the
Company's acquisition or ownership of Shares as contemplated by the Offer.
Should any such approval or other action be required, the Company currently
contemplates that it will seek such approval or other action. The Company
cannot predict whether it may determine that it is required to delay the
acceptance for payment of, or payment for, Shares tendered pursuant to the
Offer pending the outcome of any such matter. There can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions, or that the failure to obtain any
such approval or other action might not result in adverse consequences to the
Company's business. The Company's obligations under the Offer to accept for
payment and pay for Shares is subject to certain conditions. See Section 6.
14. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.
The discussion set forth below of the federal income tax consequences of
participating in the Offer is for general information only and does not
purport to consider all aspects of federal income taxation that may be
relevant to stockholders. The consequences to any particular stockholder may
differ depending upon that stockholder's own circumstances and tax position.
In addition, certain types of stockholders (including corporations, financial
institutions, tax-exempt organizations, foreign persons and persons who
acquired their Shares upon the exercise of employee stock options or otherwise
as compensation) may be subject to special rules. The discussion does not
consider the effect of any applicable foreign, state or local tax laws. EACH
STOCKHOLDER IS URGED TO CONSULT A TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE OFFER TO SUCH STOCKHOLDER, INCLUDING THE APPLICATION OF
STATE, LOCAL AND FOREIGN TAX LAWS.
For purposes of this discussion, stockholders are assumed to hold their
Shares as capital assets (generally, property held for investment).
The sale of Shares pursuant to the Offer will be a taxable transaction, the
consequences of which will be determined under the stock redemption rules of
Section 302 of the Internal Revenue Code of 1986, as amended (the "Code").
Under those rules, the entire cash proceeds received by a stockholder for his
Shares pursuant to the Offer will be treated as a distribution taxable as a
dividend (to the extent of the Company's available "earnings and profits"),
without regard to gain or loss realized unless the particular stockholder
satisfies one of the three tests described below. If any of the tests is
satisfied, the stockholder will recognize capital gain or loss equal to the
difference between the cash proceeds received for the Shares pursuant to the
Offer and the tax basis of such Shares.
16
<PAGE>
Under Section 302, the entire proceeds received from the sale of Shares
pursuant to the Offer will be treated as a distribution unless the sale (a)
results in a "complete redemption" of the stockholder's stock in the Company,
(b) is "substantially disproportionate" with respect to the stockholder, or
(c) is "not essentially equivalent to a dividend" with respect to the
stockholder. In determining whether any of these tests is satisfied, a
stockholder must take into account both Shares actually owned by such
stockholder and any Shares considered to be owned by such stockholder by
reason of the constructive ownership rules set forth in Section 318 of the
Code. Under Section 318, a stockholder generally will be considered to own
Shares which such stockholder has the right to acquire (e.g., pursuant to
options) and Shares which are owned (and, in some cases, constructively owned)
by certain members of the stockholder's family and by certain entities (such
as corporations, partnerships, trusts and estates) in which such stockholder,
a member of such stockholder's family, or a related entity has an interest.
A sale of Shares pursuant to the Offer will result in a "complete
redemption" of a stockholder's stock in the Company if, pursuant to the Offer,
the Company purchases all of the Shares actually and constructively owned by
the stockholder. If the stockholder's sale of Shares pursuant to the Offer
includes all Shares actually owned by the stockholder but the stockholder
continues to constructively own Shares held by family members, such
stockholder may nevertheless qualify for "complete redemption" treatment if
certain tests are satisfied and if the stockholder properly follows filing and
notification procedures described in Treasury Regulations. Stockholders in
this position should consult their own tax advisors.
The sale of Shares pursuant to the Offer will be "substantially
disproportionate" with respect to a stockholder if, immediately after the
Offer, such stockholder's actual and constructive percentage ownership of
Shares is less than 80% of the stockholder's actual and constructive
percentage ownership of Shares immediately before the purchase of Shares
pursuant to the Offer.
In order for the sale of Shares by a stockholder pursuant to the Offer to
qualify as "not essentially equivalent to a dividend," the stockholder must
experience a "meaningful reduction" in his proportionate interest in the
Company as a result of such sale, after taking into account the constructive
ownership rules. The Internal Revenue Service has held in a published ruling
that, under the particular facts of that ruling, a very small reduction in the
stock ownership of a stockholder constituted a "meaningful reduction" when the
stockholder owned an insignificant percentage of the corporation's stock
before and after a redemption and did not exercise any control over corporate
affairs. Stockholders seeking to rely on this test should consult their own
tax advisors as to the application of this standard because each case will be
determined on the basis of its particular facts and circumstances.
Stockholders should be aware that their ability to satisfy any of the
foregoing tests may be affected by any proration pursuant to the Offer. In
addition, an acquisition or disposition of Shares (including market purchases
and sales) substantially contemporaneous with the Offer may be taken into
account in determining whether any of the tests described above is satisfied.
If none of the tests described above is satisfied with respect to a
stockholder, such stockholder's receipt of cash for Shares pursuant to the
Offer will be treated as a distribution, taxable as a dividend to the extent
of the Company's available "earnings and profits." Any cash received in excess
of such earnings and profits will be treated, first, as a non-taxable return
of capital to the extent of the stockholder's basis in his or her Shares, and,
thereafter, as a capital gain to the extent it exceeds the stockholder's
basis.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. EACH STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN
TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER
(INCLUDING THE APPLICABILITY AND EFFECT OF THE CONSTRUCTIVE OWNERSHIP RULES
AND FOREIGN, STATE AND LOCAL TAX LAWS) OF THE SALE OF SHARES PURSUANT TO THE
OFFER.
17
<PAGE>
15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS.
The Company expressly reserves the right, at any time and from time to time,
to extend the period of time during which the Offer is open by making a public
announcement of such extension. The Company also expressly reserves the right,
in its sole discretion, to terminate the Offer and not accept for payment or
pay for any Shares not previously accepted for payment or paid for or, subject
to applicable law, to postpone payment for Shares upon the occurrence of any
of the conditions specified in Section 6, in each case by making a public
announcement thereof. The Company's reservation of the right to delay payment
for Shares which it has accepted for payment is limited by Rule 13e-4(f)(5)
promulgated under the Exchange Act, which requires that the Company either pay
the consideration offered or return the Shares tendered promptly after
termination or withdrawal of a tender offer. Subject to compliance with
applicable law, the Company further reserves the right, in its sole
discretion, to amend the Offer in any respect. Amendments to the Offer may be
made at any time and from time to time effected by public announcement
thereof, such announcement, in the case of an extension, to be issued no later
than 9:00 a.m., New York time, on the next business day after the previously
scheduled Expiration Time. Any public announcement made pursuant to the Offer
will be disseminated promptly to stockholders in a manner reasonably designed
to inform stockholders of such change. Without limiting the manner in which
the Company may choose to make a public announcement, except as required by
applicable law, the Company shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by making a
release to the Dow Jones News Service.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) promulgated under the Exchange Act. These rules require that the
minimum period during which an offer must remain open following material
changes in the terms of the offer or information concerning the offer (other
than a change in price or a change in percentage of securities sought) will
depend on the facts and circumstances, including the relative materiality of
such terms or information. If (i) the Company increases or decreases the price
to be paid for Shares, or the Company decreases the number of Shares being
sought and (ii) the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including,
the date that notice of such increase or decrease is first published, sent or
given, then the Offer will be extended until the expiration of such period of
ten business days.
16. FEES AND EXPENSES.
The American Stock Transfer & Trust Company will act as a depositary of
certificate shares in connection with the Offer. The Company will pay all
expenses in connection with acting as a depositary, including reasonable
attorneys' fees.
The Company will pay approximately $15,000 to American Stock Transfer &
Trust Company for soliciting Shares pursuant to the Offer. The Company will
also, on request, reimburse American Stock Transfer & Trust Company for
customary handling and mailing expenses incurred in forwarding materials in
respect of the Offer to the beneficial owners for which they act as nominees.
American Stock Transfer & Trust Company has been authorized to act as the
Company's agent for purposes of the Offer.
The Company will pay (or cause to be paid) any stock transfer taxes on its
purchase of Shares, except as otherwise provided in Instruction 8 of the
Letter of Transmittal.
17. MISCELLANEOUS.
The Offer is not being made to, nor will the Company accept tenders from,
owners of Shares in any jurisdiction in which the Offer or its acceptance
would not comply with the securities or Blue Sky laws of such jurisdiction.
18
<PAGE>
ADDITIONAL INFORMATION.
Additional information about the Company is set out in its Annual Report on
Form 10-K; its Proxy Statement dated November 3, 1998; and its Quarterly
Report on Form 10-Q for the quarter ended October 31, 1998. The Company has
also filed an Issuer Tender Offer Statement on Schedule 13E-4 with the
Securities and Exchange Commission (the "Commission") which includes certain
additional information relating to the Offer. The Company regularly files
reports on Form 10-K and Form 10-Q as well as other periodic reports, proxy
statements, and other information (including information about its officers
and directors, their holdings of Shares, its principal stockholders, and any
material interest of such persons in transactions with the Company) with the
Commission.
Such material can be inspected and copied at the Commission, Room 1024, 450
Fifth Street N.W., Washington, D.C. 20549, and at its regional offices at Room
1029, Jacob K. Javits Federal Building, 26 Federal Plaza, New York, New York
10278; and Room 1242, Everett McKinley Dirksen Building, 219 South Dearborn
Street, Chicago, Illinois 60604. Copies may also be obtained by mail from the
Commission's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C.
20549. The Company's Schedule 13E-4 will not be available at the Commission's
regional offices. The Commission also maintains a web site at
http://www.sec.gov which contains reports, proxy statements and other
information regarding registrants that file electronically with the
Commission.
VARIFLEX, INC.
19
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for the Shares and any other required
documents should be sent or delivered by each stockholder or the stockholder's
broker, dealer, commercial bank, trust company or other nominee to the
American Stock Transfer & Trust Company at its address set forth below:
By Mail or By Hand:
American Stock Transfer & Trust Company
40 Wall Street
46th Floor
New York, New York 10005
Telephone: (718) 921-8200
Facsimile: (718) 234-5001
Attention: Reorganization Department
Any questions or requests for assistance concerning this Offer to Purchase,
the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed
to Ms. Kim Page at Variflex, Inc., 5152 North Commerce Avenue, Moorpark,
California 93021, (805) 523-0322. You may also contact your broker, dealer,
commercial bank or trust company for assistance concerning the Offer.
<PAGE>
EXHIBIT 99.2
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON JANUARY 20, 1998 UNLESS
TERMINATED EARLIER OR EXTENDED AS PROVIDED IN THE OFFER TO PURCHASE.
LETTER OF TRANSMITTAL
TENDERED PURSUANT TO THE OFFER TO PURCHASE COMMON SHARES
DATED: DECEMBER 18, 1998
TO
VARIFLEX, INC.
Deliver by Mail or by Hand to:
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 Wall Street
46th Floor
New York, New York 10005
Telephone: (718) 921-8200
Facsimile: (718) 234-5001
Attention: Reorganization Department
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THAT SHOWN ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
EACH TENDERING STOCKHOLDER MUST COMPLETE PAGES 1, 2 AND 5 OF THIS LETTER OF
TRANSMITTAL AND SIGN IT AT PAGE 5. SEE INSTRUCTIONS BEGINNING AT PAGE 7.
IN ORDER TO AVOID BACKUP WITHHOLDING, A TENDERING STOCKHOLDER MAY ALSO NEED
TO COMPLETE AND SIGN PAGE 11 OF THIS LETTER OF TRANSMITTAL. SEE INSTRUCTION 13
AND CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DESCRIPTION OF COMMON SHARES TENDERED
- -------------------------------------------------------------------------------------------------------
CERTIFICATE(S) TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- -------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
COMMON SHARES NUMBER OF
CERTIFICATE REPRESENTED COMMON SHARES
NUMBER(S)* BY CERTIFICATE(S) TENDERED**
<S> <C> <C> <C> <C>
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Please indicate in this column the certificate number(s) for each
certificate representing Common Shares you desire to tender. If nothing
is indicated in this column, the total number of Common Shares evidenced
by all certificates submitted with this Letter of Transmittal will be
deemed to have been tendered.
** Please indicate in this column the number of Common Shares you wish to
tender. If nothing is indicated in this column, the total number of
Common Shares evidenced by each certificate delivered with this Letter
of Transmittal will be deemed to have been tendered.
PLEASE READ CAREFULLY THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL
<PAGE>
DESIGNATION OF PRICE (IN DOLLARS) PER COMMON SHARE
AT WHICH COMMON SHARES ARE BEING TENDERED
BY CHECKING ONE OF THE BOXES BELOW, THE UNDERSIGNED HEREBY TENDERS THE
NUMBER OF COMMON SHARES INDICATED ON PAGE 1 AT A MINIMUM OF THE PRICE CHECKED
BELOW.
THE PRICE AT WHICH YOU TENDER COMMON SHARES MUST BE BETWEEN $5.00 AND $6.00,
INCLUSIVE, IN $0.25 INCREMENTS (E.G., $5.00, $5.25, $5.50, $5.75 AND $6.00).
IF COMMON SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, YOU MUST USE A
SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE SPECIFIED. (SEE INSTRUCTION 2).
CHECK ONLY ONE PRICE BOX IN THIS SECTION. IF MORE THAN ONE BOX IS CHECKED,
THERE IS NO VALID TENDER OF COMMON SHARES. FAILURE TO CHECK ANY BOX ON THIS
PAGE WILL BE DEEMED TO CONSTITUTE A TENDER AT THE MINIMUM PRICE OF $5.00 PER
COMMON SHARE.
IF YOU WANT TO MAXIMIZE THE PROBABILITY THAT THE CORPORATION WILL PURCHASE
ALL THE SHARES YOU TENDER (SUBJECT TO THE POSSIBILITY OF PRORATION), CHECK THE
BOX FOR--$5.00--AS THE PRICE AT WHICH YOU ARE TENDERING YOUR COMMON SHARES.
THIS ACTION WILL RESULT IN RECEIVING THE PRICE PER COMMON SHARE DETERMINED IN
ACCORDANCE WITH THE OFFER, WHICH MAY BE AS LOW AS $5.00 OR AS HIGH AS $6.00.
IF THE PRICE CHECKED EXCEEDS $5.00, THIS ACTION COULD RESULT IN NONE OF THE
COMMON SHARES BEING PURCHASED IF THE PURCHASE PRICE FOR COMMON SHARES
DETERMINED IN ACCORDANCE WITH THE OFFER IS LESS THAN THE PRICE CHECKED.
MINIMUM PRICE (IN U.S. DOLLARS) PER SHARE AT WHICH THE UNDERSIGNED TENDERS
THE NUMBER OF COMMON SHARES INDICATED ON PAGE 1 (PLEASE CHECK ONLY ONE PRICE
BOX BELOW):
[_] $5.00 [_] $5.25 [_] $5.50 [_] $5.75 [_] $6.00
2
<PAGE>
ODD LOTS
(SEE INSTRUCTION 4)
To be completed ONLY if Common Shares are being tendered by or on behalf of
a person who owned beneficially, as of the close of business on December 18,
1998, an aggregate of fewer than 100 Common Shares, and who continues to own
all of such Common Shares beneficially as of the Expiration Time.
The undersigned either (check one box):
[_] Was the beneficial owner, as of the close of business on December 18,
1998 of an aggregate of fewer than 100 Common Shares, all of which are
being tendered, or
[_] Is a broker, dealer, commercial bank, trust company or other nominee
which
(a) is tendering, for the beneficial owners thereof, Common Shares with
respect to which it is the record owner, and
(b) believes, based on representations made to it by such beneficial
owners, that each such person was the beneficial owner, as of the
close of business on December 18, 1998 of an aggregate of fewer than
100 Common Shares and is tendering all such Common Shares.
3
<PAGE>
Ladies and Gentlemen:
The undersigned holder(s) of the share certificates referred to on page 1
and transmitted herewith hereby tender(s) to Variflex, Inc., a Delaware
corporation (the "Corporation"), the number of shares of Common Stock of the
Corporation, $.001 par value ("Common Shares"), specified on page 1 and
represented by such certificates, pursuant to the Corporation's offer to
purchase common shares at a purchase price specified by tendering
stockholders, not greater than $6.00 or less than $5.00 per Common Share (the
"Purchase Price"), net to the seller in cash, set forth in the Offer to
Purchase dated December 18, 1998 and in this Letter of Transmittal
(collectively, the "Offer"). The undersigned hereby acknowledges receipt of
the Offer. Capitalized terms used in this Letter of Transmittal but not
defined herein have the meanings provided in the Offer to Purchase.
Each of the undersigned hereby represents and warrants that he or she has
full power and authority to tender, sell, assign, and transfer the Common
Shares tendered hereby, without restriction, and that the Corporation will
acquire good and unencumbered title thereto, free and clear of all liens,
claims, restrictions, charges and encumbrances, when the same are purchased by
the Corporation in accordance with the Offer. The undersigned will, upon
request, execute and deliver any additional documents deemed by the
Corporation to be necessary or desirable to complete the sale, assignment, and
transfer to the Corporation of the Common Shares tendered hereby.
The undersigned hereby deposits with the American Stock Transfer & Trust
Company the above certificates representing Common Shares. If certificate
numbers are not indicated above, the undersigned is nonetheless depositing all
certificates that accompany this Letter of Transmittal. The undersigned hereby
sells, assigns and transfers to, or upon the order of, the Corporation the
Common Shares tendered hereby that are accepted pursuant to the Offer and
hereby irrevocably constitutes and appoints the Secretary of the Corporation
the true and lawful attorney-in-fact of the undersigned with respect to such
Common Shares, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to: (a) deliver
certificates for such Common Shares together with all accompanying evidences
of transfer and authenticity to, or upon the order of, the Corporation against
payment of the Purchase Price pursuant to the Offer, (b) present such Common
Shares for transfer on the books of the Corporation, (c) receive all benefits
and otherwise exercise all rights of beneficial ownership of such Common
Shares, all in accordance with the terms of the Offer, and (d) make delivery
of certificates for Common Shares or make payment as provided under "Special
Delivery Instructions" on page 6 or "Special Payment and/or Registration
Instructions" on page 6 of this Letter of Transmittal.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and all obligations of the undersigned
hereunder shall be binding upon the heirs, personal representatives,
successors, and assigns of the undersigned. Except as stated in the Offer,
this tender is irrevocable.
The undersigned understands that the Corporation will select the Purchase
Price as a single price per Common Share (not greater than $6.00 or less than
$5.00 per Common Share) that it will pay for Common Shares validly tendered
pursuant to the Offer, after taking into account the number of Common Shares
so tendered and the minimum prices specified by tendering stockholders, in
accordance with the Offer. The undersigned understands that all Common Shares
validly tendered at prices at or below the Purchase Price will be purchased at
the Purchase Price, net to the seller in cash, upon the terms and subject to
the conditions of the Offer, including provisions applicable to Odd Lot Owners
and prorations, and that the Corporation will return all other Common Shares,
including Common Shares tendered at prices greater than the Purchase Price and
Common Shares not purchased because of proration.
The undersigned recognizes that, under certain circumstances set forth in
the Offer, the Corporation is only required to accept 200,000 Shares properly
tendered hereby.
This Letter of Transmittal is subject to the terms and conditions set forth
in the Offer to Purchase.
Unless otherwise indicated under Special Delivery Instructions at page 6,
please issue and mail the check for the Purchase Price for the Common Shares
tendered hereby and send any certificate(s) for unpurchased Common Shares (and
accompanying documents, as appropriate), to the stockholder named above at the
address shown on page 1. Similarly, unless otherwise indicated at page 6 under
Special Payment and/or Registration Instructions, please issue the check for
the Purchase Price and any certificate(s) for unpurchased Common Shares in the
name(s) of the stockholder(s) on page 1 and mail such check and any such
certificate(s) to the address(es) of such stockholder(s) shown on page 1. The
undersigned recognizes that the Corporation has no obligation to transfer any
certificate for Common Shares delivered herewith from the name of the
registered holder(s) thereof if the Corporation does not purchase any of the
Common Shares represented by such certificate.
4
<PAGE>
STOCKHOLDER(S) SIGN HERE
Must be signed by registered holder(s) exactly as name(s) appear(s) on share
certificate(s) or by person(s) authorized to become registered holder(s) by
certificates, stock powers and other documents transmitted herewith. If
signing is by trustee, executor, administrator, guardian, or other person
acting in a fiduciary or representative capacity, please set forth full title.
See Instruction 5. Signatures must be guaranteed.
X _____________________________________________________________________________
Print or type name(s): ________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Dated: ________________________________________________________________________
Area Code and Telephone Number: _______________________________________________
Tax Identification or Social Security Nos.: ___________________________________
Signature(s) Guaranteed: ______________________________________________________
(SEE INSTRUCTION 7)
IN ORDER TO AVOID BACKUP WITHHOLDING, A TENDERING STOCKHOLDER MAY ALSO NEED
TO COMPLETE AND SIGN PAGE 11 OF THIS LETTER OF TRANSMITTAL.
5
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS SPECIAL PAYMENT AND/OR
(SEE INSTRUCTION 6) REGISTRATION INSTRUCTIONS
(SEE INSTRUCTION 6)
To be completed ONLY if the
check for payment of Common To be completed ONLY if the
Shares purchased or certificates check for payment of Common
for unpurchased Common Shares are Shares purchased or certificates
to be mailed to an address other for unpurchased Common Shares are
than that shown on page 1. to be issued or registered in the
name of and mailed to someone
other than as shown on page 1.
Name _____________________________
(PLEASE PRINT)
Address __________________________ Name _____________________________
__________________________________ (PLEASE PRINT)
(INCLUDE ZIP CODE) Address __________________________
__________________________________
(INCLUDE ZIP CODE)
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER.
1. Delivery of Letter of Transmittal and Certificates for Common
Shares. This Letter of Transmittal or a facsimile hereof, properly completed
and duly executed (with signatures guaranteed), must be used in connection
with a tender of Common Shares and must be actually received by the American
Stock Transfer & Trust Company at the address set forth on page 1 on or before
the Expiration Time. If tendered Common Shares are registered in different
ways on different certificates, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal as there are different
registrations of such certificates.
THE METHOD OF DELIVERY OF CERTIFICATES FOR COMMON SHARES AND OTHER DOCUMENTS
IS AT THE ELECTION AND RISK OF THE HOLDER. THE CORPORATION RECOMMENDS THAT, IF
STOCK CERTIFICATES ARE SENT BY MAIL, DELIVERY BE BY REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED AND PROPER INSURANCE.
2. Designation of Price at Which Common Shares are Being Tendered. For
Common Shares to be properly tendered, the stockholder must check the box on
page 2 indicating the minimum price per Common Share at which he or she is
tendering Common Shares under "Designation of Price (in Dollars) Per Common
Share at Which Common Shares Are Being Tendered" on this Letter of
Transmittal. ONLY ONE BOX MAY BE CHECKED UNDER THAT CAPTION. IF MORE THAN ONE
BOX IS CHECKED, THERE IS NO VALID TENDER OF COMMON SHARES. FAILURE TO CHECK
ANY BOX WILL BE DEEMED TO CONSTITUTE A TENDER AT $5.00 PER COMMON SHARE. A
stockholder wishing to tender Common Shares at different prices must complete
a separate Letter of Transmittal for each price at which he or she wishes to
tender Common Shares. The same Common Shares cannot be tendered at more than
one price.
3. Partial Tenders. If you want to tender fewer than all of the Common
Shares evidenced by any certificate enclosed herewith, the number of Common
Shares that you want to tender represented by such certificate must be entered
on the appropriate line on page 1 under "Number of Common Shares Tendered"
opposite the appropriate certificate number. A new certificate for the
remainder of the Common Shares which were evidenced by such certificate(s)
delivered herewith will be sent to the registered holder, unless otherwise
provided in the Special Delivery Instructions on page 6, no later than 30 days
after the expiration of the Offer. All Common Shares represented by
certificates listed on page 1 are deemed to have been tendered unless
otherwise indicated.
4. Odd Lots. As described in Section 1 of the Offer to Purchase, if the
Corporation purchases less than all Common Shares tendered before the
Expiration Time because more than 1,000,000 Common Shares (or such larger
number as the Corporation may elect pursuant to the Offer) are tendered, the
Common Shares purchased first will consist of all Common Shares tendered by
any stockholder who owned beneficially, as of the close of business on
December 18, 1998 and continues to own beneficially as of the Expiration Time,
an aggregate of fewer than 100 Common Shares and who tenders all of his or her
Common Shares at a single minimum price at or below the Purchase Price. This
preference will not be available unless the box captioned "Odd Lots" on page 3
is completed.
5. Signatures, Stock Powers and Endorsements. If this Letter of Transmittal
is signed by the registered holder(s) of the certificates transmitted hereby,
such signatures must correspond exactly with the name(s) of such registered
holder(s) as they appear on the face of each such certificate, without any
alteration or change whatsoever. All signatures must be guaranteed by an
Eligible Institution (as defined in Instruction 7).
If any certificate transmitted hereby is registered in the names of two or
more holders, all such holders must sign this Letter of Transmittal.
When the Letter of Transmittal is properly signed by the registered
holder(s) of the certificate(s) transmitted thereby, no endorsements of such
certificate(s) or separate stock power(s) are required. If, however, the check
for the purchase price for Common Shares purchased is to be made payable and
sent to a person other than the registered holder(s), then endorsement
7
<PAGE>
of the transmitted certificates or a separate stock power signed by the
registered holder(s) of such certificate is required. Signatures on such
certificates or stock powers and on this Letter of Transmittal must be
guaranteed by an Eligible Institution (as defined in Instruction 7).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificates transmitted hereby, each such
certificate must be endorsed or accompanied by an appropriate stock power, in
either case signed exactly as the name(s) of the registered holder(s)
appear(s) on the face of such certificates, without any alteration or change
whatsoever. Signatures on such certificates or stock powers and on this Letter
of Transmittal must be guaranteed by an Eligible Institution (as defined in
Instruction 7).
If this Letter of Transmittal is signed by any trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, partner
of a partnership or any other person acting in a fiduciary or representative
capacity, each such person should so indicate when signing, and must deliver
to the Corporation proper evidence satisfactory to the Corporation of his or
her authority so to act.
6. Special Delivery or Payment Instructions. If the check for the Purchase
Price of the Common Shares purchased or the certificate for Common Shares not
accepted because of proration is to be sent to an address, or is to be issued
to a person and sent to an address, different from the registered holder and
the address as shown at page 1 of this Letter of Transmittal in the section
marked "Name(s) and Address(es) of Registered Holder(s)," then please complete
the "Special Delivery Instructions" or the "Special Payment and/or
Registration Instructions," as applicable, on page 6.
7. Guarantee of Signatures. All signatures on this Letter of Transmittal
must be guaranteed by a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or
a commercial bank, trust company, savings bank or savings association having
an office, branch or agency in the United States (each being herein referred
to as an "Eligible Institution") in accordance with applicable law and with
the Securities Transfer Agents Medallion Program (STAMP) operated by Keymark
Financial Services, Inc.
8. Stock Transfer Taxes. The Corporation will pay all stock transfer taxes,
if any, payable as a result of the transfer of purchased Common Shares to the
Corporation pursuant to the Offer. However, the Corporation will not pay stock
transfer taxes payable as a result of a transfer of Common Shares to any other
person or entity prior to or in connection with a tender of the Common Shares
to the Corporation. If payment is to be made to a person other than the
registered holder, or new share certificates are to be registered in the name
of any person other than the person signing this Letter of Transmittal, all
stock transfer tax stamps required (except as a result of the transfer of
purchased Common Shares to the Corporation), if any, must be affixed to the
certificates or evidence satisfactory to the Corporation of the payment of or
exemption from such tax must be submitted herewith. If such stamps are not
affixed, or such other evidence is not submitted to the Corporation with this
Letter of Transmittal, the amount of such stock transfer tax may be deducted
from the Purchase Price payable by the Corporation.
9. Inadequate Space. If the space provided on page 1 is inadequate,
additional share certificate number(s) and related number of Common Shares
tendered with this Letter of Transmittal should be listed on a separate,
signed schedule affixed hereto.
10. Irregularities. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of any tender of Common Shares
will be determined solely by the Corporation, which determinations shall be
final and binding. The Corporation reserves the absolute right to reject any
or all tenders determined by it not to be in appropriate form or the
acceptance of or payment for which would, in the opinion of the Corporation's
counsel, be unlawful. The Corporation also reserves the absolute right to
waive any of the conditions of the Offer or any defect in any tender with
respect to any particular Common Shares or any particular stockholder, and the
Corporation's interpretations of the terms and conditions of the Offer
(including these Instructions) shall be final and binding. Unless waived, any
defects or irregularities in connection with tenders must be cured within such
time as the Corporation shall determine. The Corporation shall not be
obligated to give notice of defects or irregularities in tenders, nor shall it
incur any liability for failure to give any such notice. Tenders will not be
deemed to have been made until all defects and irregularities have been cured
or waived.
8
<PAGE>
11. Additional Copies. Additional copies of the Offer to Purchase and this
Letter of Transmittal may be obtained from the American Stock Transfer & Trust
Company at the address and telephone number set forth below.
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 Wall Street
46th Floor
New York, New York 10005
Telephone: (718) 921-8200
Facsimile: (718) 234-5001
Attention: Reorganization Department
12. Questions. Any questions concerning the tender of Common Shares under
this Letter of Transmittal may be directed to Variflex, Inc. at the address
and telephone number set forth below.
VARIFLEX, INC.
5152 North Commerce Avenue
Moorpark, California 93021
Telephone: (805) 523-0322
Facsimile: (805) 523-7384
Attention: Ms. Kim Page
9
<PAGE>
IMPORTANT TAX INFORMATION
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
(a) Backup Withholding. In order to prevent the application of Federal
income tax backup withholding on payments that are made to a stockholder with
respect to Common Shares purchased pursuant to the Offer, each stockholder of
record (or each owner of Common Shares, if other than the stockholder of
record, hereinafter also referred to as "Stockholder") must, unless an
exemption applies, provide the Corporation with such Stockholder's taxpayer
identification number on the Substitute Form W-9 set forth on this Letter of
Transmittal and certify under penalties of perjury that such number is
correct. If the Stockholder is an individual, the taxpayer identification
number is his or her Social Security Number. If the Corporation is not
provided with the correct taxpayer identification number, the Stockholder may
be subject to penalties imposed by the Internal Revenue Service.
If backup withholding applies, the Corporation is required to withhold 31%
of any payments made to the Stockholder. Backup withholding is not an
additional tax. Rather, the amount withheld is applied to the taxpayer's
Federal income tax liability. If backup withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
Certain Stockholders (including, among others, corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. To qualify as an exempt recipient on the basis of foreign
status, a foreign Stockholder must submit to the Corporation a statement,
signed under penalty of perjury, attesting to that individual's exempt status.
Such statements can be obtained from the Corporation. A Stockholder should
consult his or her tax advisor as to his or her qualification for exemption
from the backup withholding and reporting requirements and the procedure for
obtaining an exemption.
(b) Withholding of Tax on Certain Foreign Persons. Under Federal income tax
law, the Corporation is required to withhold a tax on certain types of
payments made to a nonresident alien individual, foreign partnership or
foreign corporation. In certain situations, a Stockholder may be exempt from
withholding. A Stockholder should consult his or her tax advisor as to his or
her qualification for exemption from these withholding requirements and the
procedure for obtaining an exemption.
10
<PAGE>
PAYER'S NAME: VARIFLEX, INC.
PART I--Taxpayer
Identification Number--For ----------------------
all accounts, enter your Social Security Number
TIN in the box at right. OR
(For most individuals, this
is your social security
number. If you do not have
a TIN, see Obtaining a
Number in the enclosed
(Guidelines.). Certify by
signing and dating below.
Note: If the account is in
more than one name, see the
chart in the enclosed
Guidelines to determine
which number to give the
payer.
SUBSTITUTE
FORM W-9
DEPARTMENT OF
THE TREASURY ----------------------
INTERNAL Employer Identification
REVENUE Number
SERVICE
(If awaiting TIN write
"Applied For")
PAYER'S REQUEST
FOR TAXPAYER --------------------------------------------------------
PART II--For Payees Exempt From Backup Withholding,
IDENTIFICATION see the enclosed Guidelines and complete as
NUMBER (TIN) instructed therein.
--------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify
that:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me), and
(2) I am not subject to backup withholding either
because (a) I am exempt from backup withholding,
(b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of failure to
report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to
backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2)
above if you have been notified by the IRS that you
are subject to backup withholding because of
underreporting interest or dividends on your tax
return. However, if after being notified by the IRS
that you were subject to backup withholding you
received another notification from the IRS that you
are no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the
enclosed Guidelines.)
--------------------------------------------------------
SIGNATURE _______________________ DATE ______________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9.
IMPORTANT: This Letter of Transmittal must be RECEIVED by the American Stock
Transfer & Trust Company on or prior to the Expiration Time.
11
<PAGE>
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY
TO
TENDER SHARES OF COMMON STOCK
OF
VARIFLEX, INC.
AS SET FORTH IN SECTION 3 OF THE OFFER TO PURCHASE, THIS FORM OR A FACSIMILE
OF IT MUST BE USED TO ACCEPT THE OFFER (AS DEFINED BELOW) IF:
(a) certificates for Common Stock, $.001 par value (the "Shares") of
Variflex, Inc., a Delaware corporation (the "Company"), are not immediately
available; or
(b) the procedure for book-entry transfer cannot be completed on a timely
basis; or
(c) time will not permit the Letter of Transmittal or other required
documents to reach the American Stock Transfer & Trust Company referred to
below before the Expiration Time (as defined in Section 1 of the Offer to
Purchase referred to below).
This form or a facsimile of it, signed and properly completed may be
delivered by hand or transmitted by telegram, facsimile transmission or mail,
to the American Stock Transfer & Trust Company by the Expiration Time (as
defined in the Offer to Purchase). See Section 3 of the Offer to Purchase.
TO: AMERICAN STOCK TRANSFER & TRUST COMPANY
40 Wall Street
46th Floor
New York, NY 10005
Telephone: (718) 921-8200
Facsimile: (718) 234-5001
Attention: Reorganization Department
DELIVERY OF THIS FORM TO AN ADDRESS OTHER THAN THE ONE SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE DOES NOT CONSTITUTE VALID DELIVERY. THIS FORM IS NOT TO BE USED TO
GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO
BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO,
SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Variflex, Inc., a Delaware corporation, at
the price per Share indicated below, net to the seller in cash, upon the terms
and subject to conditions set forth in the Company's Offer to Purchase, dated
December 18, 1998 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer"), receipt of which is
hereby acknowledged, Shares pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase.
PRICE (IN DOLLARS) PER SHARE OF COMMON STOCK AT
WHICH SHARES OF COMMON STOCK ARE BEING TENDERED
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE,
USE A SEPARATE NOTICE OF GUARANTEED DELIVERY FOR
EACH PRICE SPECIFIED
CHECK ONLY ONE BOX BELOW.
IF MORE THAN ONE BOX IS CHECKED,
THERE IS NO VALID TENDER OF SHARES OF COMMON STOCK
FAILURE TO CHECK ANY BOX BELOW WILL BE DEEMED
TO CONSTITUTE A TENDER AT THE MINIMUM
PRICE OF $5.00 PER COMMON SHARE
SHARES TENDERED AT PRICE
DETERMINED BY STOCKHOLDER
[_] $5.00 [_] $5.25 [_] $5.50 [_] $5.75 [_] $6.00
2
<PAGE>
ODD LOTS
(SEE INSTRUCTION 4 OF THE LETTER OF TRANSMITTAL)
To be completed ONLY if Shares are being tendered by or on behalf of a
Person owning beneficially, as of December 18, 1998, an aggregate of fewer
than 100 Shares, and will continue to be the beneficial owner of such Shares
at the Expiration Time.
THE UNDERSIGNED EITHER (CHECK ONE BOX):
[_] was the beneficial owner as of December 18, 1998 of an aggregate of
fewer than 100 Shares, and will continue to be the beneficial owner of
such Shares at the Expiration Time, all of which are being tendered; or
[_] is a broker, dealer, commercial bank, trust company or other nominee
that:
(a) is tendering, for the beneficial owners thereof, Shares with
respect to which it is the record owner, and
(b) believes, based upon representations made to it by such beneficial
owners, that each such Person was the beneficial owner as of
December 18, 1998 of an aggregate of fewer than 100 Shares, and is
tendering all of such Shares.
In addition, the undersigned is tendering Shares either (check one box):
[_] at the Purchase Price (as defined in the Offer), as the same shall be
selected by the Company in accordance with the terms of the Offer
(person checking this box need not indicate the price per Share above);
or
[_] at the price per share of Common Stock indicated above under "Price (in
Dollars) Per Share of Common Stock at Which Shares of Common Stock Are
Being Tendered" on this Notice of Guaranteed Delivery.
Number of Shares: _____________________________________________________________
Certificate Nos. (if available): ______________________________________________
If Shares will be delivered by book-entry transfer: ___________________________
Name of Tendering Institution: ________________________________________________
Account No. ___________________________________________________________________
3
<PAGE>
At the Depository Trust Company
___________________________________ ___________________________________
(Signatures(s)) (Name(s)) (Please Print)
___________________________________ ___________________________________
(Signatures(s)) (Name(s)) (Please Print)
___________________________________ ___________________________________
(Address) (Area Code and Telephone No.)
___________________________________ ___________________________________
(Address) (Zip Code)
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the Stock Transfer Association's approved
medallion program (such as STAMP, SEMP, or MSP) or which is a commercial
bank or trust company having an office, branch or agency in the United
States, guarantees (i) that the above-named persons(s) own(s) the Shares
tendered hereby within the meaning of Rule 13e-4 under the Securities
Exchange Act of 1934, as amended, (ii) that such tender of Shares complies
with Rule 13e-4, and (iii) to deliver to the American Stock Transfer &
Trust Company, at its address set forth above, Share certificates
evidencing the Shares tendered hereby, in proper form for transfer, or
confirmation of book-entry transfer of such Shares into the Company's
account at The Depository Trust Company; in each case with delivery of a
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed and any other required documents, all within three The Nasdaq
National Market trading days of the date hereof.
Name of Firm: _____________________________________________________________
Authorized Signature: _____________________________________________________
Name: _____________________________________________________________________
Title: ____________________________________________________________________
Address: __________________________________________________________________
(ZIP CODE)
Area Code and Telephone No.: ______________________________________________
Dated: __________________
4
<PAGE>
EXHIBIT 99.4
INSTRUCTION FORM WITH RESPECT TO THE
VARIFLEX, INC.
OFFER TO PURCHASE FOR CASH UP TO 1,000,000 SHARES
OF ITS COMMON STOCK AT A PURCHASE PRICE NOT
GREATER THAN $6.00 OR LESS THAN $5.00 PER SHARE
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated December 18, 1998, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the Offer of
Variflex, Inc., a Delaware corporation (the "Company"), to purchase up to
1,000,000 Shares of its Common Stock, $.001 par value (the "Shares" or the
"Common Stock"), by the Company at a price, not greater than $6.00 or less
than $5.00 per Share, upon the terms and subject to the conditions of the
Offer. However, the Company will purchase at least 200,000 Shares that are
properly tendered (or such lesser amount as are properly tendered) for the
single lowest per Share Purchase Price that will enable the Company to acquire
those Shares.
The undersigned understands that the Company will, upon the terms and
subject to the conditions of the Offer, select a single price per Share, not
greater than $6.00 or less than $5.00 per Share, net to the seller in cash
(the "Purchase Price"), that it will pay for the Shares properly tendered and
not withdrawn pursuant to the Offer, after taking into account the number of
Shares so tendered and the prices specified by stockholders tendering Shares.
Up to 1,000,000 Shares properly tendered at prices at or below that Purchase
Price and not withdrawn will be purchased at that Purchase Price, upon the
terms and subject to the conditions of the Offer, including the proration
terms and Odd Lot tender provisions described in the Offer to Purchase. The
Company will return all other Shares, including Shares tendered at prices
greater than the Purchase Price and Shares not purchased because of proration.
See Section 1 of the Offer to Purchase.
The undersigned hereby instruct(s) you to tender to the Company the number
of Shares indicated below held by you for the account of the undersigned, upon
the terms and subject to the conditions set forth in the Offer to Purchase and
the related Letter of Transmittal.
[_]By checking this box, all Shares held by us for your account, including
fractional Shares, will be tendered.
If fewer than all Shares are to be tendered, please indicate the aggregate
number of Shares to be tendered by us.
Shares*
- --------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE>
ODD LOTS
(SEE INSTRUCTION 4 OF THE LETTER OF TRANSMITTAL)
[_]By checking this box, the undersigned represents that the undersigned was
the beneficial record owner on the Expiration Time (as defined in Section 1
of the Offer to Purchase), of an aggregate of fewer than 100 Shares and is
instructing the holder to tender all such Shares.
In addition, the undersigned is tendering Shares either (check one box):
[_]at the Purchase Price, as the same shall be selected by the Company in
accordance with the terms of the Offer (persons checking this box need not
indicate the price per Share below); or
[_]at the price per Share indicated below under Price (in Dollars) per Share
of Common Stock at which Shares of Common Stock Are Being Tendered on this
Instruction Form.
PRICE (IN DOLLARS) PER SHARE OF COMMON STOCK AT
WHICH SHARES OF COMMON STOCK ARE BEING TENDERED
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE,
USE A SEPARATE INSTRUCTION FORM FOR
EACH PRICE SPECIFIED
CHECK ONLY ONE BOX BELOW.
IF MORE THAN ONE BOX IS CHECKED,
THERE IS NO VALID TENDER OF SHARES OF COMMON STOCK
FAILURE TO CHECK ANY BOX BELOW WILL BE DEEMED
TO CONSTITUTE A TENDER AT THE MINIMUM
PRICE OF $5.00 PER COMMON SHARE.
SHARES TENDERED AT PRICE
DETERMINED BY STOCKHOLDER
[_] $5.00 [_] $5.25 [_] 5.50 [_] 5.75 [_] 6.00
SIGNATURE BOX
Signature(s): _____________________________________________________________
Dated: ____________________________________________________________________
(PLEASE PRINT)
Account Number: ___________________________________________________________
Area Code and Telephone No.: ______________________________________________
Taxpayer Identification or Social Security Number: ________________________
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