SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File No. 0-23866
June 30, 1996
VARI-L COMPANY, INC.
(Exact name of Registrant as specified in its charter.)
Colorado 06-0679347
(State of Incorporation) (I.R.S. Employer identification No.)
11101 E. 51st Avenue
Denver, Colorado 80239
(Address of principal executive offices)
(303) 371-1560
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes----X---- No--------
The number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1996:
Class of Securities Outstanding Securities
$0.01 par value 3,692,543 shares
Common shares
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VARI-L COMPANY, INC.
BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
6/30/96 12/31/95
ASSETS (UNAUDITED) (AUDITED)
- - ------ ----------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $2,735,713 $5,868,210
Receivables:
Trade, less $10,000 allowance
for doubtful accounts 2,236,276 2,292,168
Lease acquisition costs advanced 569,254 0
Inventories 8,536,459 5,580,984
Prepaid expenses and other 1,284,442 737,083
---------- ----------
Total Current Assets 15,362,144 14,478,445
---------- ----------
Property and Equipment:
Machinery and equipment 9,189,976 7,053,052
Furniture and fixtures 992,030 857,644
Leasehold improvements 2,082,805 1,366,977
---------- ----------
12,264,811 9,277,673
Less accumulated depreciation
and amortization 2,422,181 2,229,593
---------- ----------
Net Property and Equipment 9,842,630 7,048,080
---------- ----------
Other Assets:
Long-term inventories 307,000 307,000
Covenant not to compete 63,736 114,656
Other 530,517 292,253
---------- ----------
Total Other Assets 901,253 713,909
---------- ----------
TOTAL ASSETS $26,106,027 $22,240,434
- - ------------ =========== ===========
</TABLE>
(Continued)
See Accompanying Notes to Financial Statements.
<PAGE>
VARI-L COMPANY, INC.
BALANCE SHEETS, CONTINUED
JUNE 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
6/30/96 12/31/95
LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED) (AUDITED)
- - ------------------------------------ ----------- ---------
<S> <C> <C>
Current Liabilities:
Bank line of credit $ 1,010,499 $1,847,302
Current installments of:
Long-term debt 553,864 480,253
Obligations under capital leases 20,193 20,193
Subordinated debentures 0 112,500
Financed insurance premiums 97,203 0
Trade accounts payable 1,883,593 1,212,942
Accrued expenses 416,479 389,129
Income taxes payable 322,634 0
---------- ----------
Total Current Liabilities 4,304,465 4,062,319
Long-term debt 4,450,710 1,730,275
Obligations under capital leases 7,253 22,563
Deferred income taxes 183,823 183,823
---------- ----------
Total Liabilities 8,946,251 5,998,980
---------- ----------
Stockholders' Equity:
Common stock, $.01 par value,
50,000,000 and 10,000,000 shares
authorized; 3,692,543 and 3,624,977
shares outstanding, respectively 39,155 38,479
Paid-in capital 12,317,431 11,845,327
Retained earnings 4,821,890 4,376,348
Less:
Loans for purchase of stock (18,700)
(18,700)
---------- ----------
Total Stockholders' Equity 17,159,776 16,241,454
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $26,106,027 $22,240,434
- - ---------------------- =========== ===========
</TABLE>
See Accompanying Notes To Financial Statements.
<PAGE>
VARI-L COMPANY, INC.
STATEMENTS OF INCOME
FOR THE THREE MONTH PERIODS ENDED
JUNE 30, 1996 AND JUNE 30, 1995
AND
FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1996 AND JUNE 30, 1995
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
6/30/96 6/30/95 6/30/96 6/30/95
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $2,563,370 $2,012,796 $5,181,466 $4,247,420
Cost of
products sold 1,305,677 980,881 2,588,254 2,067,882
---------- ---------- ---------- ----------
Gross profit 1,257,693 1,031,915 2,593,212 2,179,538
---------- ---------- ---------- ----------
Other costs and
expenses:
General and
administrative 290,299 233,318 584,299 511,200
Engineering 157,981 120,623 321,291 261,557
Selling 326,703 291,655 694,445 589,086
Interest expense 108,808 72,947 208,341 137,712
Interest income (35,960) (17,334) (98,868)
(41,907)
Other 59,059 68,416 115,528 135,831
---------- ---------- ---------- ----------
906,890 769,625 1,825,036 1,593,479
---------- ---------- ---------- ----------
Income before taxes 350,803 262,290 768,176 586,059
Income taxes 147,337 110,162 322,634 246,145
---------- ---------- ---------- ----------
NET INCOME $ 203,466 $ 152,128 $ 445,542 $ 339,914
- - ---------- ========== ========== ========== ==========
Primary and fully-
diluted earnings
per common share
and common share
equivalents $ 0.05 $ 0.05 $ .11 $ $ 0.12
========== ========== ========== =========
Weighted average
shares outstanding 3,900,436 2,921,539 3,924,015 2,794,230
========== ========== ========= =========
</TABLE>
See Accompanying Notes to Financial Statements.
<PAGE>
VARI-L COMPANY, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1996 AND JUNE 30, 1995
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
6/30/96 6/30/95
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Net cash used in
operating activities (Note 6) $(1,975,521) $(1,045,621)
----------- -----------
Cash flows from investing activities:
Net purchases of property and equipment (2,987,138) (874,409)
----------- -----------
Net cash used in investing
activities (2,987,138) (874,409)
----------- -----------
Cash flows from financing activities:
Lease acquisition costs advanced (569,254) 0
Net increase in long-term debt 2,794,046 979,074
Net repayments of
capital lease obligations (15,310) (216,326)
Repayments of subordinated debentures (112,500) (12,500)
Net borrowings (repayments) under
bank line of credit (836,803) 145,148
Net proceeds under
insurance financing 97,203 91,270
Proceeds from stock issuances,
net of income tax benefit and
offering costs. 472,780 2,493,985
----------- -----------
Net cash provided by
financing activities 1,830,162 3,480,651
----------- -----------
Net (decrease) increase
in cash (3,132,497) 1,560,621
Beginning cash 5,868,210 1,459,208
----------- ----------
ENDING CASH $ 2,735,713 $3,019,829
=========== ==========
Supplemental disclosure of cash flows
information:
Cash paid for interest $ 190,270 $ 145,341
=========== ==========
Cash paid for income taxes $ 0 $ 0
=========== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
<PAGE>
VARI-L COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
Vari-L Company, Inc. (the Company), was founded in 1953 and is a
manufacturer of electronic components used in commercial and military
communications systems where electrical processing of radio frequency
signals is required.
NOTE 1 - FINANCIAL PRESENTATION
These financial statements should be read in conjunction with the audited
financial statements for the year ended December 31, 1995 and notes
thereto.
In the opinion of management, the accompanying interim, unaudited
financial statements contain all the adjustments necessary to present
fairly the financial position of the Company as of June 30, 1996, the
results of its operations for the three-month and six-month periods ended
June 30, 1996 and June 30, 1995 and its cash flows for the six-month
periods ended June 30, 1996 and June 30, 1995. All adjustments made are
of a normal recurring nature.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
6/30/96 12/31/95
(Unaudited) (Audited)
------------ ----------
<S> <C> <C>
Finished goods $ 1,668,131 $ 963,556
Work in process 3,332,911 2,397,774
Raw materials 3,332,005 2,016,600
Gold bullion 203,412 203,054
------------ -----------
$ 8,536,459 $ 5,580,984
============ ===========
Long-term inventories $ 307,000 $ 307,000
============ ===========
</TABLE>
NOTE 3 - INCOME TAXES
Income tax expense reflects effective tax rates of 42%.
NOTE 4 - COMMON STOCK
Stock Grant Plan
In their annual meeting held on June 26, 1996, the stockholders approved
and ratified the Stock Grant Plan that was adopted by the Company in June
1995. Pursuant to the plan, selected persons will receive awards of
shares of the Company's common stock. The plan is administered by the
Company's Compensation Committee ("the Committee") and a maximum of
100,000 shares may be issued under the plan. Each Committee member is
entitled to receive an automatic grant of 50 shares per month on the
first day of each month. Pursuant to the plan, 1,200 shares of stock were
retroactively owed and subsequently issued to the Committee members.
Authorized Number of Shares
In their annual meeting held on June 26, 1996, the stockholders approved
an amendment to the Company's Articles of Incorporation increasing the
authorized number of the Company's $.01 par value Common Stock to 50
million shares.
VARI-L COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
NOTE 5 - CREDIT FACILITY
The Company has a new Term Loan and Credit Agreement (The "Credit
Agreement") with a bank (the "Bank") consisting of a line of credit and a
term loan.
The new Agreement is dated May 17, 1996 and increases the total credit
facility to $8,500,000 from $5,000,000. The line of credit now provides
for borrowings up to $3,500,000, up from $2.5 million, and interest is
payable monthly, calculated at prime. The line matures April 30, 1997.
At June 30, 1996 the balance due to the Bank under the line of credit was
$1,010,499. The term loan portion of the facility was increased to
$5,000,000 from approximately $2,029,000, the combined balance of the
former two term loans. Interest accrues on the outstanding principal
balance at 8.75% and monthly principal and interest payments of $79,812
are required. The term loan matures on May 17, 1999. Proceeds from the
term loan were used to pay down the former line of credit and two term
loans and to purchase $1,069,000 in U.S. Government securities. At June
30, 1996, the balance due to the Bank under the term loan was $5,000,000.
NOTE 6 - RECONCILIATION OF NET INCOME TO NET CASH
USED IN OPERATING ACTIVITIES
The reconciliation of net income to net cash used in operating activities
for the six-month periods ended June 30, 1996 and June 30, 1995 is as
follows:
<PAGE>
VARI-L COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
NOTE 6 - RECONCILIATION OF NET INCOME TO NET CASH
USED IN OPERATING ACTIVITIES, CONTINUED
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
6/30/96 6/30/95
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Net Income $ 445,542 $ 339,914
----------- ----------
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization 192,588 76,707
Amortization of covenant
not to compete 50,920 50,920
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable 55,892 (420,435)
Increase in inventories (2,955,475) (714,474)
Increase in prepaid expenses
and other (547,359) (304,401)
(Increase) decrease in
other assets (238,264) 9,089
Increase (decrease) in accounts
payable 670,651 (243,648)
Increase (decrease) in accrued
expenses 27,350 (85,438)
Increase in income
taxes payable 322,634 246,145
----------- -----------
Total adjustments (2,421,063) (1,385,535)
----------- -----------
NET CASH USED IN
OPERATING ACTIVITIES $(1,975,521) $(1,045,621)
=========== ===========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
The following discussion should be read in conjunction with the Company's
financial statements and notes thereto included herein.
The business of the Company is the design, manufacture and marketing of a
wide range of signal processing components and devices which are used in
communications equipment and systems such as cellular telephones and base
stations, local area computer networks, and satellite communications
equipment, as well as military and aerospace applications, such as
advanced radar systems, missile guidance systems, and navigational
systems. The Company sells its products primarily to original equipment
manufacturers of communications systems.
Over the last several years, the Company has focused on manufacturing and
marketing its products for the commercial marketplace, rather than
manufacturing primarily for the military and defense-related markets.
This effort has included the introduction of new products, the redesign of
existing products, implementation of various cost containment measures and
increased advertising and marketing efforts.
The Company's first product line is a line of Discrete components which
are microwave signal processing components primarily used in military and
space applications. Among these products are power dividers and combiners
used for directing radio frequency ("RF") and microwave signals, solid
state switches used to change the direction or timing of RF and microwave
signals, transformers used to convert high-power signals to lower-powered
signals, mixers, phase detectors which are used to convert RF and
microwave signals into usable information, and data and frequency doublers
and synthesizers used as sources for RF and microwave signals. This line
currently accounts for approximately 17% of the Company's revenues.
One of the Company's major product lines is based on the patented design
of its voltage controlled oscillator ("VCO") and other components built
with VCOs by the Company. VCOs are components which provide a precise
signal source within a frequency range. They are widely used in
transmitting and receiving equipment. The Company's patented technology
enables its VCOs to operate with approximately 20% of the input power
requirements of its competitors. This unique feature, combined with the
VCO's high quality performance, allows the Company's VCOs to be utilized
in battery operated and other low-power applications with better
performance than competing products. The Company's "wide-band" VCO line
currently accounts for approximately 34% of its revenues.
The Company introduced its newest product, the low-cost VCO, in February
1994. This product is a very narrow band VCO which is priced at
approximately 75% less than the Company's wide-band VCOs. These VCOs are
designed to perform at high levels of efficiency while being competitively
priced. The narrow-band VCO line currently accounts for approximately 38%
of the Company's revenues.
The Company introduced its phase locked loop synthesizer ("PLL") line in
1993. The PLL is a device made up of several components, including the
Company's patented VCO and an integrated circuit. PLLs are utilized in
both transmitting and receiving equipment. The PLL's function is to lock
onto stable reference signals and convert them into stable frequencies
which may be detected and utilized by communications equipment. This line
currently accounts for approximately 6% of the Company's revenues.
The PLL and the narrow-band VCO product lines, which comprise the
Company's principal commercial products, have common raw materials,
assembly and production techniques and are designed to take advantage of
the economies of high volume, high speed, automated assembly.
RESULTS OF OPERATIONS
Three months ended
June 30, 1996 and June 30, 1995
and the Six Months ended
June 30, 1996 and June 30, 1995
TOTAL REVENUES
Sales revenues increased approximately $551,000 (27%) in the three months
ended June 30, 1996 as compared with the three months ended June 30 1995,
from $2,012,796 to $2,563,370. Sales revenues increased approximately
$934,000 (22%) in the six months ended June 30, 1996 as compared with the
six months ended June 30, 1995, from $4,247,420 to $5,181,466. The growth
in sales revenues reflects the Company's ongoing success in selling into
the commercial marketplace with its narrow-band VCOs and PLLs while
maintaining its existing markets in military products.
In the first six months of 1996, the composition of sales revenues was 17%
Discrete, 34% wide-band VCOs, 5% "Combination" sales of wide-band VCO and
Discrete products, 38% narrow-band VCO's and 6% PLL. In the first six
months of 1995, the composition of sales revenues was 28% Discrete, 47%
wide-band VCOs, 0% "Combination" sales of wide-band VCO and Discrete
products, 22% narrow-band VCOs and 3% PLLs,
COST OF GOODS SOLD
Cost of goods sold, as a percent of sales revenues, was 51% in the three
months ended June 30, 1996 and 49% in the three months ended June 30,
1995. Cost of goods sold, as a percent of sales revenues, was 50% in the
six months ended June 30, 1996 and 49% in the six months ended June 30,
1995. The increases in the 3- month and 6-month periods ended June 30,
1996 reflect increased depreciation expense on the significant capital
equipment purchases and leasehold improvements made during the prior
twelve-month period.
SELLING AND ENGINEERING EXPENSE
Selling expenses increased approximately $35,000, or 12%, for the three
months ended June 30, 1996 as compared to the three months ended June 30,
1995. Selling expenses increased approximately $105,000, or 18%, for the
six months ended June 30, 1996 as compared to the six months ended June
30, 1995. Increased selling expenses primarily reflect increased sales
personnel. Since March 31, 1995, the Company has added an International
Sales Manager, a Military/Aerospace Sales Manager, and two staff positions
in the Sales Department.
Engineering expenses increased approximately $37,000, or 31%, for the
three months ended June 30, 1996 as compared to the three months ended
June 30, 1995. Engineering expenses increased approximately $60,000, or
23%, for the six months ended June 30, 1996 as compared to the six months
ended June 30, 1995. These increases reflect ongoing additions to the
engineering staff, and related equipment costs and expenses, to support
continued development of the narrow-band VCOs and PLLs for high-volume
commercial sales, and new development in the military/aerospace product
lines.
GENERAL AND ADMINISTRATIVE AND OTHER EXPENSES
General and administrative expenses increased approximately $57,000, or
24% for the three months ended June 30, 1996 as compared to the three
months ended June 30, 1995. General and administrative expenses increased
approximately $73,000, or 14%, in the six months ended June 30, 1996 as
compared with the six months ended June 30, 1995. Increases to G&A
primarily reflect increased staffing in the personnel and accounting
departments, in line with the growth of the Company.
Other expenses decreased approximately $9,400 (14%) in the three months
ended June 30, 1996 as compared with the three months ended June 30, 1995.
Other expenses decreased approximately $20,000 (15%) in the six months
ended June 30, 1996 as compared with the six months ended June 30, 1995
due to full amortization in 1995 of costs related to the Company's
December 1993 private offering.
INTEREST INCOME AND EXPENSE
The Company manages its credit facility and mutual fund investments in
tandem.
Interest income is earned on the Company's short-term investments in a
U.S. government securities mutual fund purchased with proceeds from the
Company's April 1994 public offering and the 1995 and 1996 warrant
exercises. A portion of the proceeds from its new credit facility were
also invested in this fund. Interest income was approximately $36,000 for
the three months ended June 30, 1996 as compared to approximately $17,000
for the three months ended June 30, 1995. Interest income was
approximately $99,000 for the six months ended June 30, 1996 as compared
to approximately $42,000 for the six months ended June 30, 1995. Interest
expense increased approximately $36,000 (49%) for the three months ended
June 30, 1996 as compared with the three months ended June 30, 1995.
Interest expense increased approximately $71,000 (51%) for the six months
ended June 30, 1996 as compared with the six months ended June 30, 1995.
Changes in the amounts of interest income and expense reflect the
underlying amounts of the mutual fund investment and debt outstanding
under the credit facility.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased approximately $116,000 (151%) for
the six months ended June 30, 1996 as compared with the six months ended
June 30, 1995, reflecting depreciation on approximately $5.6 million in
property and equipment acquired by the Company since June 30, 1995.
FINANCIAL CONDITION
LIQUIDITY
At June 30, 1996, the Company's working capital was $11.1 million compared
to $10.4 million at December 31, 1995. The Company's current ratio was
3.6 to 1 at both June 30, 1996 and December 31, 1995.
CAPITAL RESOURCES
The Company has a new Term Loan and Credit Agreement (the "Agreement")
with a bank (the "Bank") consisting of a line of credit and a term loan.
The Company and the Bank entered into a new loan agreement on May 17,
1996, increasing the size of the total credit facility to $8,500,000. The
line of credit now provides for borrowings up to $3.5 million, and
interest is payable monthly, calculated at prime. The line of credit
matures on April 30, 1997. At June 30, 1996, the balance due to the Bank
under the line of credit was $1,010,499. The term loan portion of the
credit facility was increased to $5,000,000 from a balance of
approximately $2,000,000. The term loan had a balance as of June 30, 1996
of $5,000,000. Interest accrues on the outstanding principal balance at
8.75%, and monthly principal and interest payments of $79,812 are
required. This term loan matures on May 17, 1999. Proceeds from the term
loan were used to pay down the former line of credit and the two term
loans, and to purchase $1,069,000 of a U.S. government securities mutual
fund.
During 1993, the Company financed the acquisition of capital equipment
through capital leases having maturity dates through 1998. At June 30,
1996, the balance due under these leases was $27,446. The lease payments
are calculated using interest rates with an average of approximately 11%.
The Company finances certain of its annual insurance premiums through a
financing company. The amounts due under these loans totaled $97,203 as
of June 30, 1996 and are paid in monthly installments of $16,732 at
interest rates of 7.5% and 8.81%.
The Company believes that it has sufficient financial resources available
to meet its short-term working capital needs through cash flows generated
by operating activities and through the management of its sources of
financing. The Company also believes that it has sufficient financial
resources available to execute its growth plans by virtue of the funding
provided by its April 1994 public offering and the 1995 and 1996 warrant
exercises.
BACKLOG
The Company's total backlog of unfilled firm customer orders ("backlog")
at June 30, 1996 was $13.6 million compared with $10.2 million at June 30,
1995. Backlog at December 31, 1995 was $14.1 million.
Levels of bookings of new customer orders are lower in the first six
months of 1996, as compared to the first six months of 1995, due to
industry-wide delays in the rollout of the domestic personal
communications services (PCS) market. However, orders are expected to
accelerate during the second half of 1996.
VARI-L COMPANY, INC.
PART II--OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES
In their annual meeting held on June 26, 1996, the stockholders
approved an amendment to the Company's Articles of Incorporation
increasing the authorized number of the Company's $.01 Common
Stock to 50 million shares.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of shareholders was held on June 26,
1996. At the meeting Joseph H. Kiser, David G. Sherman, Alwin E.
Branson, William P. O'Connor Jr., Sarah L. Booher and David A.
Lisowski were elected as directors. The shareholders also
ratified the appointment of Haugen, Springer & Co. as the
Company's independent public accountants for the year ending
December 31, 1996. In addition, the shareholders approved an
amendment to the Company's Articles of Incorporation increasing
the authorized number of shares of the Company's $.01 par value
Common Stock to 50 million shares and an amendment to the
Company's Tandem Stock Option and Stock Appreciation Rights Plan
to, among other matters, increase the number of shares authorized
under the Plan to 3 million shares. The shareholders also
approved and ratified the Company's Stock Grant Plan. The
shareholders did not approve the proposal for an amendment to the
Company's Articles of Incorporation authorizing the issuance of
up to 5 million shares of a new class of Preferred Stock.
The number of votes cast for, withheld or broker nonvotes for
each director nominee was as follows:
<TABLE>
<CAPTION>
Nominee For Against Broker
Nonvotes
<S> <C> <C> <C>
Joseph H. Kiser 3,171,579 62,764 0
David G. Sherman 3,167,436 66,907 0
Alwin E. Branson 3,171,686 62,657 0
William P. O'Connor, Jr. 3,165,795 68,548 0
Sarah L. Booher 3,156,846 77,497 0
David A. Lisowski 3,156,901 77,442 0
</TABLE>
The number of votes cast for, against, abstentions and broker
nonvotes for ratification of the auditors was as follows:
For Against Abstain Broker Nonvotes
3,211,740 9,349 13,254 0
The number of votes cast for, against, abstentions and broker
nonvotes for the amendment to the Articles of Incorporation to
increase the number of authorized shares of Common Stock was as
follows:
For Against Abstain Broker Nonvotes
3,007,103 202,109 19,556 5,575
The number of votes cast for, against, abstentions and broker
nonvotes for the amendment to the Articles of Incorporation to
add a class of Preferred Stock was as follows:
For Against Abstain Broker Nonvotes
1,738,216 229,796 61,845 1,204,486
The number of votes cast for, against, abstentions and broker
nonvotes for the amendments to the Company's Tandem Plan was as
follows:
For Against Abstain Broker Nonvotes
1,933,371 158,040 39,050 1,103,882
The number of votes cast for, against, abstentions and broker
nonvotes for the Stock Grant Plan was as follows:
For Against Abstain Broker Nonvotes
2,036,394 158,522 34,226 1,005,201
Because the election of directors, ratification of auditors,
increase in the authorized number of shares of Common Stock and
approval and ratification of the Stock Grant Plan were considered
routine under applicable stock exchange rules, all proxy shares
held in the names of brokers as nominees which were not voted at
the meeting by the shareholders were voted by the brokers at
their discretion. The proposals to add a class of Preferred
Stock and to amend the Tandem Plan were considered nonroutine,
and therefore, the brokers did not have the discretion to vote on
those proposals.
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Term Loan and Credit Agreement between the Company and
Norwest Bank Colorado, National Association, dated May 17,
1996
27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VARI-L COMPANY, INC.
Date: August 9, 1996 By:/s/ Jon L. Clark
Jon L. Clark, V.P. Finance and
Principal Financial and
Accounting Officer
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT METHOD OF FILING
- - ------- ----------------
<S> <C> <C>
10.1 Term Loan and Credit Agreement
between the Company and
Norwest Bank Colorado,
National Association,
dated May 17, 1996 Filed herewith electronically
27 Financial Data Schedule Filed herewith electronically
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TERM LOAN AND CREDIT AGREEMENT
THIS TERM LOAN AND CREDIT AGREEMENT (the "Agreement") is dated as of
May 17, 1996, and is by and between Vari-L Company, Inc., a Colorado Corporation
of 11101 East 51st Avenue, Denver, CO 80239 (the "Borrower") and Norwest Bank
Colorado, National Association, a national banking association of 1740 Broadway,
Denver, CO 80274 (the "Bank").
RECITALS:
WHEREAS, the Borrower and the Bank previously entered into Term Loan and
Credit Agreements, pursuant to which the Bank loaned to the Borrower the sum of
ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($1,500,000.00) on a term
loan basis ("Existing Term Loan #1") and ONE MILLION ONE HUNDRED FORTY THOUSAND
SIX HUNDRED SEVENTY-THREE AND NO/100 DOLLARS ($1,140,673.00) on a term loan
basis ("Existing Term Loan #2"); and made available to Borrower a revolving
credit line in the principal amount of TWO MILLION FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($2,500,000.00) (the "Credit") in order to provide funds for its
corporate purposes; and
WHEREAS, the Borrower now desires the Bank to lend to Borrower a sum of
FIVE MILLION AND 00/100 DOLLARS ($5,000,000.00) on a term loan basis (the "New
Term Loan") to refinance Existing Term Loan #1 and Existing Term Loan #2 and
provide additional permanent working capital, and to renew the Credit and
increase the amount thereof to THREE MILLION FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($3,500,000.00); and
WHEREAS, the Bank is willing to renew and increase the Credit and make the
New Term Loan to Borrower upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises herein contained, and each
intending to be legally bound hereby, the parties agree as follows:
1. Definitions
As used herein:
1.1 "Acceptable Accounts Receivable" shall mean accounts receivable which
are: (i) less than 90 days old from the invoice date; (ii) due from
foreign entities and insured by the Export-Import Bank of the United
States under a Multi-Buyer Export Credit Insurance Policy; (iii) not
subject to offset or dispute; (iv) not due from any government entity;
(v) not due from affiliates of Subsidiaries of the Borrower; (vi) not
representing booked but unfilled orders; (vii) not contra accounts,
(viii) not credit balances over 90 days; and (ix) not of doubtful
collectability as determined by the Bank.
1.2 "Accounts," "Chattel Paper," "Contracts," "Contract Rights,"
"Documents," Equipment, "Fixtures," "General Intangibles," "Goods,"
"Instruments" and "Inventory" shall have the same respective meanings
as are given to those terms in the Uniform Commercial Code of the
State of Colorado.
1.3 "Agreement" shall mean this Term Loan and Credit Agreement and all
amendments and supplements hereto which may from time to time become
effective hereafter in accordance without the terms of this Agreement.
1.4 "Banking Day" shall mean a day on which banks are open for business in
Denver, Colorado.
1.5 "Borrowed Money" shall mean funds obtained by incurring contractual
indebtedness and shall not include trade accounts payable.
1.6 "Borrowing Base" shall mean 80 percent of Acceptable Accounts
Receivable, plus the lesser of $1,250,000.00 or the sum of 35 percent
of Borrower's raw materials inventory and 45 percent of Borrower's
finished goods inventory, excluding work-in-progress, obsolescence
reserves and long-term inventory.
1.7 "Collateral Documents" means all those certain documents specified in
Sections 4.1 through 4.5 of this Agreement.
1.8 "Credit" shall mean the revolving credit line established hereby,
which shall not in any event exceed the aggregate principal amount of
THREE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($3,500,000.00).
1.9 "Current Assets" and "Current Liabilities" shall mean, at any time,
all assets or liabilities, respectively, that, in accordance with
Generally Accepted Accounting Principles consistently applied, should
be classified as Current Assets or Current Liabilities, respectively,
on a balance sheet of the Borrower.
1.10 "Current Note" shall mean the promissory note of the Borrower executed
in connection with borrowings under Section 2.1 hereof.
1.11 "Default" shall mean an Event of Default as referred to in Section 8
hereof, or an event which with notice or lapse of time or both would
become an Event of Default.
1.12 "Generally Accepted Accounting Principles" or "GAAP" shall mean
Generally Accepted Accounting Principles applied on a basis consistent
with those reflected in the financial statements referred to in
Sections 5.8 and 6.3.1 hereof.
1.13 "Indebtedness" shall mean, as to the Borrower, all items of
indebtedness, obligation or liability, whether matured or unmatured,
liquidated or unliquidated, direct or contingent, joint or several.
1.14 "New Term Note" shall mean the promissory note of the Borrower
executed in connection with borrowings under Section 2.2 hereof.
1.15 "Notes" shall mean collectively, the Current Note and the New Term
Note.
1.16 "Prime Rate" shall mean the rate of interest established by the Bank
from time to time as its "prime" or "base" rate of interest.
1.17 "Raw Materials" shall mean readily marketable materials including,
without limitation, gold, wire and metal with no obsolescence or
spoilage.
1.18 "Stockholders' Equity" shall mean, at any time the sum of the
following accounts set forth in a balance sheet of the Borrower,
prepared in accordance with Generally Accepted Accounting Principles
consistently applied: (i) the par or stated value of all outstanding
capital stock; (ii) capital surplus; and (iii) retained earnings.
1.19 "Tangible Net Worth" shall mean the sum of the par or stated value of
all outstanding capital stock, surplus and undivided profits of the
Borrower, less any amounts attributable to treasury stock, good will,
patents, copyrights, mailing lists, catalogues, trademarks, bond
discount and underwriting expenses, organization expenses and other
like intangibles, all as determined in accordance with Generally
Accepted Accounting Principles.
2. Borrowings and Conditions of Lending
2.1 The Bank agrees to lend to the Borrower from time to time from the
effective date hereof until April 30, 1997, sums not to exceed the
lesser of the Borrowing Base or THREE MILLION FIVE HUNDRED THOUSAND
AND NO/100 DOLLARS ($3,500,000.00) in the aggregate principal amount
at any one time outstanding. Each borrowing under this Section 2.1
will be evidenced by a notation on the Bank's records, which shall be
conclusive evidence of such borrowing. Within the limits of the
Credit and subject to the terms and conditions hereof, prior to April
30, 1997, the Borrower may borrow, prepay and reborrow pursuant to
this Section 2.1. At the time of the closing of the Credit, the
Borrower will execute and deliver the Current Note to the Bank.
2.2 On the effective date hereof, the Bank will lend to the Borrower the
principal sum of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) on a
term loan basis (the "New Term Loan").
2.3 The Bank will disburse the proceeds of the New Term Loan to pay off
approximately $1,055,513 of existing indebtedness under Existing Term
Loan #1, to pay off approximately $973,385 of existing indebtedness
under Existing Term Loan #2, to pay the interest due on the Credit,
and to credit the Borrower's operating checking account at Bank.
2.4 Interest on the Current Note shall be calculated at an annual rate
equal to the Prime Rate in effect from time to time on the basis of
the actual number of days elapsed in a year of 360 days. Interest on
the New Term Note shall be calculated at an annual rate of EIGHT AND
THREE-QUARTERS percent (8.75%) on the basis of the actual number of
days elapsed in a year of 360 days.
2.5 In addition, Borrower shall pay to the Bank at closing a commitment
fee in an amount equal to the sum of $17,500 on the Credit and $5,619
on the New Term Loan.
2.6 Interest on the Current Note shall be payable monthly, commencing June
16, 1996, and continuing on the 16th day of each succeeding month
until April 30, 1997, at which time the entire remaining balance of
principal and interest shall be immediately due and payable.
2.7 The New Term Loan will be repaid in 36 equal consecutive monthly
installments of principal and interest in an amount of $79,812.47
each, commencing June 16, 1996, and continuing on the 16th day of each
succeeding month, then a final payment on May 17, 1999, at which time
the entire remaining balance of principal and interest shall be
immediately due and payable.
2.8 All sums payable to the Bank hereunder shall be paid directly to the
Bank in immediately available funds. The Bank shall send the Borrower
statements of all amounts due hereunder, which statements shall be
considered correct and conclusively binding on the Borrower unless the
Borrower notifies the Bank to the contrary within 30 days of its
receipt of any statement which it deems to be incorrect.
Alternatively, at its sole discretion, the Bank may charge against any
deposit account of the Borrower all or any part of any amount due
hereunder.
2.9 The Borrower may at any time, prepay the Current Note or New Term Note
in whole or from time to time in part without premium or penalty.
Partial prepayments on the New Term Note shall be applied to scheduled
installments in the inverse order of their maturity.
2.10 The Borrower shall be required to make prepayments of amounts due
under the Current Note at any time outstanding are found to exceed the
Borrowing Base. Such required prepayments shall be in amounts equal
to the difference between the aggregate outstanding balances and the
Borrowing Base. Said prepayments shall be required unless cash
collateral is provided by Borrower or the Bank, in writing, waives
said prepayment.
3. Conditions Precedent
The obligation of the Bank to make any advance hereunder is subject to the
following conditions precedent:
3.1 The Borrower shall have delivered to the Bank, prior to the
disbursement of the New Term Loan and Credit (the "Closing") the
following:
3.1.1 The Notes;
3.1.2 A Security Agreement, granting a security interest in the
Collateral described in Section 4 of this Agreement;
3.1.3 The financing statements and landlord and mortgage waivers
required by Section 4.1 of this Agreement;
3.1.4 A certified copy of resolutions of the Borrower's board of
directors authorizing the execution, delivery and
performance of this Agreement, the Notes, the Collateral
Documents, and each other document to be delivered pursuant
hereto;
3.1.5 A certificate of the Borrower's corporate secretary as to
the incumbency and signatures of the officers of the
Borrower signing this Agreement, the Notes, the Collateral
Documents, and each other document to be delivered pursuant
hereto;
3.1.6 A copy, certified as of the most recent date practicable, by
the Secretary of State of Colorado, of the Borrower's
certificate of incorporation, together with a certificate of
the Borrower's corporate secretary to the effect that such
certificate of incorporation has not been amended since the
date of the aforesaid certification; and,
3.1.7 Certificates, as of the most recent dates practicable, of
the aforesaid secretary of state, the secretary of state of
each state in which the Borrower is qualified as a foreign
corporation and the department of revenue or taxation of
each of the foregoing states as to the good standing of
Borrower.
3.2 At the time of Closing and of any subsequent request for an advance:
3.2.1 No Event of Default shall have occurred and be continuing,
and no event shall have occurred and be continuing that,
with the giving of notice or passage of time or both, would
be an Event of Default;
3.2.2 No material adverse change shall have occurred in the
financial condition of Borrower or any Subsidiary since the
date of this Agreement or the Closing, as applicable; and
3.2.3 All of the Collateral Documents shall have remained in full
force and effect.
3.3 At the time of the Closing and each subsequent disbursement, all
legal matters incidental thereto shall be satisfactory to the
Bank's legal counsel.
4. Security
4.1 To secure the Notes and the performance of its additional obligations
as set forth hereunder, prior to or simultaneous with the first
borrowing hereunder, the Borrower shall execute and deliver to the
Bank security agreements, financing statements and landlord-mortgage
waivers, in form and substance satisfactory to the Bank, granting to
the Bank a first security interest in all Borrower's present and
after-acquired Accounts, General Intangibles, Inventory and Equipment,
wherever located, and an assignment of insurance on the life of Joseph
H. Kiser in an amount of not less than $750,000.00. No forbearance
nor extension of time granted any subsequent owner of the Collateral
shall release Borrower from liability.
4.2 Any of Borrower's other property in which the Bank has a security
interest to secure payment of any other debt, whether actual,
contingent, direct or indirect, including its guaranties of the debts
of others, shall also secure payment of the Notes.
4.3 The property in which a security interest is granted pursuant to the
provisions of Sections 4.1 and 4.2 is herein collectively called the
"Collateral." The Collateral, together with all of the Borrower's
other property of any kind held by the Bank, shall stand as one
general, continuing collateral security for all Indebtedness to the
Bank and may be retained by the Bank until all Indebtedness has been
paid in full.
4.4 As security for the prompt payment of all Indebtedness to the Bank,
the Borrower hereby assigns, transfers and sets over to the Bank all
of its right, title and interest in and to, and grants the Bank a lien
on and a security interest in, all amounts that may be owing from time
to time by the Bank to the Borrower in any capacity, including, but
without limitation, any balance or share belonging to the Borrower, of
any deposit or other account with the Bank, which lien and security
interest shall be independent of any right of set-off which the Bank
may have.
4.5 At any time requested by the Bank, the Borrower shall execute and
deliver or cause to be executed and delivered to the Bank such
additional documents as the Bank may consider to be necessary or
desirable to evidence or perfect the security interests referred to in
Sections 4.1 through 4.4 hereof.
4.6 The foregoing liens shall be first and prior liens.
5. Representations and Warranties
To induce the Bank to enter into this Agreement, the Borrower
represents and warrants to the Bank as follows:
5.1 The Borrower is a corporation duly organized, existing and in good
standing under the laws of the State of Colorado.
5.2 The Borrower is duly qualified to do business and is in good standing
in any additional jurisdictions where, on advice of legal counsel,
registration was deemed necessary.
5.3 The execution, delivery and performance of this Agreement, and the
issuance of the Notes by the Borrower are within its corporate powers,
have been duly authorized, and are not in contravention of law, or the
terms of Borrower's Articles of Incorporation or Bylaws or of any
undertaking to which the Borrower is a party or by which it is bound.
5.4 This Agreement is, and the Notes when issued will be, valid and
binding in accordance with their terms.
5.5 No consent, approval or authorization of or declaration or filing with
any governmental authority on the part of the Borrower is required in
connection with the execution and delivery of this Agreement or the
borrowings by the Borrower hereunder or on the part of the Borrower in
connection with the consummation of any transaction contemplated
hereby.
5.6 The properties of the Borrower are not subject to any lien except
liens permitted hereunder.
5.7 No litigation or governmental proceeding is pending, or, to the
knowledge of the officers of the Borrower, threatened against the
Borrower which could have a material adverse effect on the Borrower's
financial condition or business.
5.8 The financial statements of the Borrower for the fiscal year ending
December 31, 1995, prepared by certified public accountants, copies of
which financial statements have been furnished to the Bank, are
complete and accurate in all respects and present fairly the financial
condition of the Borrower as of such dates, and the results of their
operations for the periods covered thereby in accordance with
Generally Accepted Accounting Principles. There has been no material
adverse change in the condition of the Borrower, financial or
otherwise, since December 31, 1995.
5.9 The Borrower is not in default with respect to any of its existing
Indebtedness.
5.10 The Borrower is in compliance with all provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
including, but not limited to, the provisions relating to minimum
funding requirements for any employee pension or other benefit plan
("Plan") maintained by Borrower which is covered by ERISA. Borrower
has not incurred any material liability to the Pension Benefit
Guaranty Corporation established under ERISA with respect to any Plan
subject to Title IV of ERISA and maintained for employees of Borrower
or any of its subsidiaries or any member of a controlled group of
corporations, as that term is defined in Section 1563 of the Internal
Revenue Code of 1954, as amended (the "Code"), of which the Borrower
is a part. Borrower's Plan is qualified under Section 401(a) of the
Code.
5.11 Borrower has filed all returns and reports required of it, has paid
all taxes which are due and payable, and has provided adequate
reserves for the payment of any tax which is being contested by
Borrower. The charges, accruals and reserves on the books of Borrower
with respect to taxes for all fiscal periods are accurate. There are
no questions or disputes between Borrower and any governmental
authority with respect to any taxes except as disclosed in the
financial statements or otherwise previously disclosed by Borrower to
Bank in writing.
6. Affirmative Covenants
The Borrower covenants and agrees that so long as any indebtedness
remains outstanding hereunder, unless the Bank shall otherwise consent in
writing, it will:
6.1 Pay, when due, all taxes assessed against it or its property except to
the extent and so long as contested in good faith.
6.2 Maintain its corporate existence and comply with all laws and
regulations applicable thereto.
6.3 Furnish to the bank:
6.3.1 Within 90 days after the end of each fiscal year of the
Borrower (i) a detailed report of audit of the Borrower for
such fiscal year including the balance sheet of the Borrower
as of the end of such fiscal year and the statements of
profit and loss and surplus of the Borrower for the fiscal
year then ended, prepared by independent certified public
accountants satisfactory to the Bank, and (ii) a certificate
of such accountants stating whether, in making their audit,
they have become aware of any event of default set forth in
Section 8 hereof, or of any event which might become such an
event of default after the lapse of time or the giving of
notice and the lapse of time, which has occurred and is then
continuing and, if any such event has occurred and is
continuing, specifying the nature and period of existence
thereof;
6.3.2 Within 30 days after the end of each production cycle of
Borrower, the balance sheet of the Borrower as of the end of
such period and the statement of profit and loss and surplus
of the Borrower from the beginning of such fiscal year to
the end of such period, unaudited, but certified as correct
(subject to year end adjustments) by an appropriate officer
of the Borrower;
6.3.3 Within 30 days of the end of each production cycle of
Borrower, an aged listing of the Borrower's accounts
receivable in form acceptable to the Bank certified as
accurate by an appropriate officer of the Borrower;
6.3.4 Within 30 days after the last day of each production cycle
and at such other times as the Bank may reasonably request,
a Collateral Certification as of the last day of such
production cycle, certified by Borrower's principal
financial officer to be true and correct and that as of that
date, the aggregate principal amount of the Credit does not
exceed the Borrowing Base;
6.3.5 Annually, a copy of a policy of insurance, showing the Bank
as Loss Payee, covering all machinery, Equipment, Inventory
and real estate of the Borrower, and its subsidiaries and
affiliates, if any, in such amounts and covering such risks
as is usually carried by corporations of established
reputation and comparable size, all reasonably satisfactory
to the Bank, and with the Bank named as loss payee;
6.3.6 Within 90 days after the end of each fiscal year of
Borrower, projections for the succeeding year broken out by
quarter, including Borrower's projected balance sheet,
income statement and cash flow statement;
6.3.7 Promptly upon knowledge thereof, notice of the Bank in
writing of the occurrence of any event which has or might,
after the lapse of time or the giving of notice and the
lapse of time, become an event of default under Section 8 of
this Agreement; and,
6.3.8 Promptly, such other information as the Bank may reasonably
request.
6.4 Maintain present executive management of Borrower.
6.4.1 Use proceeds from sales of Borrower's assets to repay
borrowings hereunder.
6.4.2 Maintain its Inventory, Equipment, real estate and other
properties in good condition and repair (normal wear and
tear excepted), and pay and discharge or cause to be paid
and discharged when due, the cost of repairs to or
maintenance of the same, and pay or cause to be paid all
rental or mortgage payments due on such real estate.
6.4.3 Maintain a ratio of Debt to Tangible Net Worth of not more
than 1.0 to 1.0. The ratio shall be calculated by dividing
the sum of all of Borrower's liabilities by Borrower's
Tangible Net Worth.
6.4.4 Maintain a ratio of Current Assets to Current Liabilities of
not less than 1.5 to 1.0. The ratio shall be calculated by
dividing Borrower's Current Assets, less officer and
employee receivables and prepaid expenses, by Borrower's
Current Liabilities.
6.4.5 Maintain a Quick Ratio of not less than 0.5 to 1.0. "Quick
Ratio" means Borrower's Current Assets, less inventory,
officer and employee receivables and prepaid expenses,
divided by Borrower's Current Liabilities.
6.4.6 Maintain Tangible Net Worth of not less than $16,000,000.00
6.4.7 Maintain at fiscal year end a ratio of cashflow to current
maturities of long term debt of not less than 1.25 to 1.0,
with cashflow coverage herein defined as net income of the
Borrower after taxes plus non-cash expenses, divided by
current maturities of long-term debt.
6.4.8 Maintain, at all times, a level of Credit borrowings which
does not exceed the Borrowing Base.
6.4.9 Maintain all primary deposit accounts at the Bank. Deposit
accounts shall at a minimum include the general operating
account and the payroll account of Borrower.
6.4.10 When requested so to do, make available for inspection by
duly authorized representatives of the Bank any of
Borrower's books and records, and furnish to the Bank any
information regarding its business affairs and financial
condition within a reasonable time after written request
therefor.
6.4.11 Permit the Bank, at Borrower's expense, to conduct
collateral audits of Borrower's Accounts and Inventory in
such detail as the Bank in its sole discretion may require.
Borrower shall promptly pay to the Bank all costs and
expenses which the Bank or any designated affiliate,
subsidiary or parent company of the Bank may incur in
connection with such audits.
7. Negative Covenants
Without the Bank's written consent, so long as any indebtedness
remains outstanding hereunder, the Borrower will not:
7.1 Permit any lien including, without limitation, any pledge, assignment,
mortgage, title retaining contract or other type of security interest
to exist on its property, real or personal, except:
7.1.1 Liens for taxes not delinquent or being contested in good
faith;
7.1.2 Liens created in connection with workmen's compensation,
unemployment insurance, or social security obligations, or
to secure the performance of bids, tenders, or contracts
(other than for the repayment of Borrowed Money), leases,
statutory obligations, surety and appeal bonds, and other
obligations of like nature made in the ordinary course of
its business;
7.1.3 Existing liens known to the Bank; and
7.1.4. Liens pursuant to Section 4 hereof.
7.2 Create, incur, assume or suffer to exist, contingently or otherwise,
other than in the ordinary course of business for conducting its
present business operation, indebtedness for Borrowed Money, except:
(I) indebtedness arising under this Agreement, and (ii) indebtedness
disclosed to the Bank in writing as existing at the time of execution
of this Agreement.
7.3 Declare or pay any dividends on any shares of stock of any class of
the Borrower, now or hereafter outstanding.
7.4 Enter into any transaction of merger or consolidation, or transfer,
sell, assign, lease or otherwise dispose of all or a substantial part
of its properties or assets, or any of its notes or accounts
receivable, or any stock or indebtedness of any Subsidiary, or any
assets or properties necessary or desirable for the proper conduct of
its business, or change the nature of its business, or wind up,
liquidate or dissolve, or agree to do any of the foregoing, or permit
any Subsidiary to do so.
7.5 Purchase or otherwise acquire all or substantially all of the assets
of any person, firm, corporation or association unless after the
consummation of such transaction, and after giving effect thereto and
to any concurrent transactions, no event of default specified in
Section 8 hereof, and no event which with notice or lapse of time or
both would become such an event of default, would exist.
7.6 Except for existing indebtedness of certain principals of Borrower to
Carol Kiser, become or remain a guarantor or surety, or pledge its
credit or become liable in any manner (except by endorsement for
deposit in the ordinary course of business) on undertakings of
another.
7.7 Make any loan or advance to any partner, officer, shareholder,
director or employee of the Borrower or any Subsidiary, except for
temporary advances in the ordinary course of business.
7.8 Purchase or otherwise invest in or hold securities, non-operating real
estate or other non-operating assets, except: (i) direct obligations
of the United States of America or the top two tiers of short-term
investment grade, interest-bearing securities as noted by Moody's and
Standard and Poor's; (ii) the present investment in any such assets;
(iii) gold bullion; and (iv) operating assets that hereafter become
non-operating assets.
7.9 Make a material change in its accounting processes, whether for tax
purposes or otherwise.
8. Events of Default
8.1 Upon the occurrence of any of the following events of default:
8.1.1 Default in any payment of interest or of principal on the
Notes when due and continuance thereof for 15 days; or
8.1.2 Default in the observance or performance of any agreement of
the Borrower herein set forth or in any other agreement
between the Bank and the Borrower and continuance thereof
for 20 days after written notice by Bank to Borrower; or
8.1.3 Default by the Borrower in the payment of any other
indebtedness for Borrowed Money or in the observance or
performance of any term, covenant or agreement of the
Borrower in any agreement relating to any indebtedness of
the Borrower, the effect of which default is to permit the
holder of such indebtedness to declare the same due prior to
the date fixed for its payment under the terms thereof and
failure to cure such default within 30 days after written
notice by Bank to Borrower; or
8.1.4 Any representation or warranty made by the Borrower herein
or in any statement or certificate furnished by the Borrower
hereunder, is untrue in any material respect; or
8.1.5 The occurrence of any litigation or governmental proceeding
which is pending or threatened against the Borrower, which
could have a material adverse effect on the Borrower's
financial condition or business and which is not remedied
within a reasonable period of time after notice thereof to
the Borrower; or,
8.1.6 The occurrence of any extraordinary situation which gives
the Bank reasonable grounds to believe that Borrower may not
be able to perform under the Notes, the Agreement or any
other documents executed in connection with the New Term
Loan or the Credit;
then or at any time thereafter, unless such event of default is remedied,
the Bank or the holder of the Notes may, by notice in writing to the
Borrower, declare the Credit to be terminated or the Notes to be due and
payable or both, whereupon the Credit shall immediately terminate or the
Notes shall immediately become due and payable or both, as the case may be.
8.2 Upon the occurrence of any of the following events of default:
The Borrower becomes insolvent or bankrupt or makes any appointment
for the benefit of creditors or consents to the appointment of a
custodian, trustee or receiver for itself or for the greater part of
its properties; or a custodian, trustee or receiver is appointed for
the Borrower or for the greater part of its properties without its
consent and is not discharged within 60 days; or bankruptcy,
reorganization or liquidation proceedings are instituted by or against
the Borrower and, if instituted against it, are consented to by it or
remain undismissed for 60 days;
then the Credit shall immediately terminate and the Notes shall
automatically become immediately due and payable, without notice.
9. Miscellaneous
9.1 The provisions of this Agreement shall be in addition to those of any
guaranty, pledge or security agreement, note or other evidence of
liability held by the Bank, all of which shall be construed as
complementary to each other. Nothing herein contained shall prevent
the Bank from enforcing any or all other notes, guaranty, pledge or
security agreements in accordance with their respective terms,
provided, however, that if any terms of this Agreement conflict with
any provision of the other Loan Documents, the terms of this Agreement
shall control.
9.2 From time to time, the Borrower will execute and deliver to the Bank
such additional documents and will provide such additional information
as the Bank may reasonably require to carry out the terms of this
Agreement and be informed of the Borrower's status and affairs.
9.3 The Bank shall have the right at all times to enforce the provisions
of this Agreement and the Collateral Documents in strict accordance
with the terms hereof and thereof, notwithstanding any conduct and
custom on the part of the Bank in refraining from so doing at any time
or times. The failure of the Bank at any time or times to enforce its
rights under such provisions, strictly in accordance with the same,
shall not be construed as having created a custom in any way or manner
contrary to specific provisions of this Agreement or as having in any
way or manner modified or waived the same. All rights and remedies of
the Bank are cumulative and concurrent and the exercise of one right
or remedy shall not be deemed a waiver or release of any other right
or remedy.
9.4 The Borrower will pay all expenses, including the reasonable fees and
expenses of legal counsel for the Bank, incurred in connection with
the preparation, administration, amendment, modification or
enforcement of this Agreement and the Collateral Documents and the
collection or attempted collection of the Notes.
9.5 Any notices or consents required or permitted by this Agreement shall
be in writing and shall be deemed delivered if delivered in person or
if sent by certified mail, postage prepaid, return receipt requested
or telegraph, as follows, unless such address is changed by written
notice hereunder:
9.5.1. If to the Borrower: Vari-L Company, Inc.
11101 East 51st Avenue
Denver, Colorado
Attention: David G. Sherman, President
With copy to: Gorsuch Kirgis LLC
Suite 1100
1401 - 17th Street
Denver, CO 80202
Attention: S. Lee Terry Jr.
9.5.2. If to the Bank: Norwest Bank Colorado, National
Association
1740 Broadway
Denver, CO 80274
Attention: Michael Jezier, Vice
President
9.6 Notwithstanding any other provision of this Agreement, the Borrower
understands that the Bank may enter into participation agreements with
participating banks whereby the Bank will allocate certain percentages
of its commitment to them. The Bank agrees to notify the Borrower
before any such participation agreement will be executed. The
Borrower acknowledges that, for the convenience of all parties, this
Agreement is being entered into with the Bank only and that its
obligations under this Agreement are undertaken for the benefit of and
as an inducement to, each of any such participating banks as well as
the Bank and the Borrower hereby grants to each such participating
bank, to the extent of its participation in the loans, the right to
set off deposit accounts maintained by the Borrower with such bank.
9.7 The substantive laws of the State of Colorado shall govern the
construction of this Agreement and the rights and remedies of the
parties hereto.
9.8 This Agreement shall inure to the benefit of and shall be binding
upon, the respective successors and permitted assigns of the parties
hereto. The Borrower has no right to assign any of its rights or
obligations hereunder without the prior written consent of the Bank.
This Agreement, and the documents executed and delivered pursuant
hereto, constitute the entire agreement between the parties, and may
be amended only be a writing signed on behalf of each party.
9.9 If any provision of this Agreement shall be held invalid under any
applicable laws, such invalidity shall not affect any other provision
of this Agreement that be given effect without the invalid provision
and, to this end, the provisions hereof are severable. The provisions
of this Agreement shall supersede those of any prior agreements
between the Bank and the Borrower dealing with the same subject
matter.
9.10 All representations, warranties, covenants and agreements of the
Borrower hereunder shall survive the making of the New Term Loan and
the Credit.
9.11 Whenever any installment of the interest on the Notes becomes due and
payable on a day which is not a Banking Day, the maturity or due date
thereof shall be extended to the next succeeding Banking Day and, in
the case of principal of the Notes, interest shall be payable thereon
at the rate per annum specified in the Notes during such extension.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
VARI-L COMPANY, INC. NORWEST BANK COLORADO, NATIONAL ASSOCIATION
By:/s/ David G. Sherman By:/s/ Michael Jezier
David G. Sherman, President, Michael Jezier, Vice President
Treasurer, and CEO
By:/s/ Alwin E. Branson
Alwin E. Branson, Executive
Vice President and COO
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2736
<SECURITIES> 0
<RECEIVABLES> 2805
<ALLOWANCES> 0
<INVENTORY> 8536
<CURRENT-ASSETS> 15362
<PP&E> 12265
<DEPRECIATION> 2422
<TOTAL-ASSETS> 26106
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0
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<OTHER-SE> 17121
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<SALES> 5181
<TOTAL-REVENUES> 5280
<CGS> 2588
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