As filed with the Securities and Exchange Commission on April 14, 1997
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------------------
Vari-L Company, Inc.
(Exact name of registrant as specified in its charter)
Colorado 06-0679347
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11101 East 51st Avenue
Denver, Colorado 80239
(303) 371-1560
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
JOSEPH H. KISER
Chairman of the Board
Vari-L Company, Inc.
11101 East 51st Avenue
Denver, Colorado 80239
(303)371-1560
(Address, including zip code, and telephone number,
including area code, of registrant's agent for service)
---------------------
With copies to:
S. LEE TERRY, JR., Esq.
Gorsuch Kirgis L.L.C.
1401 17th Street, Suite 1100
Denver, Colorado 80202
(303) 299-8900
---------------------
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective when
warranted by market conditions and other factors.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check
the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box.
[X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Title of Each Maximum Proposed
Class of Offering Maximum
Securities Amount Price Aggregate Amount of
to be to be per Offering Registration
Registered Registered Share(1) Price(11) Fee
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value
per share 1,943,900 $8.50 $16,523,150 $5,007.02
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee. The price of $8.50 per share is the last sale
price reported by The Nasdaq Stock Market on April 10, 1997.
The Registrant hereby amends this Registration Statement on such
dates or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED APRIL 14, 1997
[LOGO TO BE
VARI-L COMPANY, INC. INSERTED]
1,943,900 Shares
Common Stock
$0.01 Par Value
This Prospectus relates to the offer and sale of 1,943,900 shares of
common stock, par value $0.01 per share (the "Shares") of Vari-L Company,
Inc. (the "Company") by certain debenture holders, warrant holders and
shareholders of the Company (the "Selling Shareholders"). The Shares may
be sold from time to time by the Selling Shareholders, through ordinary
brokerage transactions in negotiated transactions or otherwise, at fixed
prices which may be changed, at market prices prevailing at the time of
sale or at negotiated prices. See - "Selling Shareholders" and "Plan of
Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares. The Company has agreed to bear certain expenses in connection
with the registration of the Shares being offered and sold by the Selling
Shareholders.
The Company's Common Stock, $0.01 par value per share (the "Common
Stock") is traded on The Nasdaq Stock Market -- National Market System
under the symbol "VARL." On April 10, 1997, the last reported sale price
of the Company's Common Stock was $8.50.
THESE ARE SPECULATIVE SECURITIES.
SUCH SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representation other than those contained in the Prospectus in connection
with the offering made hereby, and if given or made, such information or
representation must not be relied upon as having been authorized by the
Company or by the Selling Shareholders. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information herein is correct as of any
time subsequent to the date hereof.
---------------------------------
The date of this Prospectus is April 14, 1997.
AVAILABLE INFORMATION
Vari-L Company, Inc. (the "Company") has filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement on
Form S-3 (the "Registration Statement" ) under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Common Stock
offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules thereto or
incorporated by reference therein. Such information, including exhibits
and schedules to the Registration Statement incorporated by reference
therein, can be inspected and copied at the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C 20549. Statements
made in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information
with the Commission. All such information may be inspected and copied at
the public reference facilities maintained by the Commission at its
principal office at 450 Fifth Street, N.W., Room 1024, Judiciary Plaza,
Washington, D.C. 20549, and at the following regional offices of the
Commission: 1801 California Street, Suite 4800, Denver, Colorado 80202-
2648; Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can also be obtained from
the Public Reference Section of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a site on the World Wide Web at
http://www.sec.gov/edgarhp.htm that contains reports, proxy and
information statements and other information concerning registrants that
file electronically with the Commission. The Common Stock is traded on
the National Association of Securities Dealers, Inc., Automated Quotation
System ("Nasdaq"). Information filed by the Company with Nasdaq may be
inspected at the offices of Nasdaq at 1735 K Street, N.W., Washington,
D.C. 20006.
This Prospectus incorporates by reference documents which are not
presented herein or delivered herewith. Copies of these documents (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference) are available to any person, including any
beneficial owner, to whom this Prospectus is delivered, on written or oral
request, without charge, directed to David G. Sherman, President, Vari-L
Company, Inc., 11101 East 51st Avenue, Denver, Colorado 80239, telephone
number 303/371-1560.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference
(Commission File No. 0-23866):
1. Annual Report on Form 10-KSB for the year ended December 31,
1996, filed March 31, 1997;
2. Form 8-A (Commission File No. 0-23866) filed April 20, 1994;
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the termination of the offering
shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of filing of such reports and documents. Any
statement contained in a document incorporated or deemed to be
incorporated by reference herein prior to the date hereof shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any statement so modified
or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
A copy of the documents incorporated by reference other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference in the information contained in this Prospectus), may be
obtained upon request without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered
upon the written or oral request of such person. Requests for such copies
should be made to David G. Sherman, President, Vari-L Company, Inc., 11101
East 51st Avenue, Denver, Colorado 80239, telephone number 303/371-1560.
In addition, such materials filed electronically by the Company with the
Commission are available at the Commission's World Wide Web site at
http://www.sec.gov/edgarhp.htm.
The Company
Vari-L Company, Inc. (the "Company") designs, manufactures and
markets 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.
The Company was founded in 1953 in Stamford, Connecticut, relocated
to Denver, Colorado in 1969, and reincorporated under Colorado law in
1985. The Company's manufacturing and corporate facilities are located at
11101 East 51st Avenue, Denver, Colorado 80239, and its telephone number
is 303/371-1560.
The Company's products are used in wireless communications equipment.
Wireless communication is the transmission of voice and data signals
through the air, without a physical connection, such as a metal wire or
fiber-optic cable. Wireless communications systems currently in use
include cellular telephones and base stations, wireless cable (LMDS),
satellite communications, global positioning systems, local area networks,
as well as radar systems, missile guidance systems and navigational
systems. Communications systems currently in the development stage
include personal communications systems and direct broadcast satellites.
The Company's products are designed for use in all of these applications.
RISK FACTORS
AN INVESTMENT IN THE COMPANY INVOLVES A HIGH DEGREE OF RISK. IN
ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
WHEN EVALUATING AN INVESTMENT IN THE COMPANY.
PRODUCT OBSOLESCENCE. The industry in which the Company competes,
and the technologies for which the Company's products are designed, are
subject to rapid technological changes. These rapid changes may result in
product obsolescence or declining prices. Accordingly, the ability of the
Company to remain competitive will depend in a large part upon its ability
to innovate and generally keep abreast of technological changes, of which
there can be no assurance.
COMPETITION. The Company faces competition in the sale of virtually
all of its products, including competition from major corporations with
greater financial, technical, marketing and other resources than the
Company. There can be no assurance that the Company will be able to
remain competitive in the future.
DEFENSE INDUSTRY DOWNSIZING: HISTORICAL DEPENDENCE ON GOVERNMENT
CONTRACTS. World events have resulted in a decreased demand for defense-
related products and a general downsizing of the American defense
industry. This factor, along with federal budget constraints, is likely
to have an adverse impact on the Company's ability to continue to attract
and retain orders from defense contractors which, as a group, still
account for a significant portion of the Company's business. While the
Company has mitigated this risk by the addition of commercial business,
there is no assurance that it will always to be able to do so.
DEPENDENCE ON SUPPLIERS. The success of the business of the Company
may depend in part upon the reliability of the Company's suppliers of
subcomponents and raw materials. The Company is subject to the risks of
shortages and delays in delivery of subcomponents and such materials.
There can be no assurance that the Company will continue to be able to
locate reliable secondary sources of these subcomponents and materials.
DEPENDENCE ON KEY MANAGEMENT AND EMPLOYEES. The Company is highly
dependent upon the efforts of its management for its success. The loss of
the services of one or more of its key officers, particularly Joseph H.
Kiser, Chairman of the Board and Chief Scientific Officer and David G.
Sherman, President and Chief Executive Officer, could have a material
adverse effect on the Company's business. The Company maintains "key man"
life insurance on the lives of Messrs. Kiser and Sherman, each of whom has
an employment agreement with the Company. The success of the Company also
depends upon the Company's ability to attract and retain other qualified
personnel, particularly technical personnel for research and development,
of which there can be no assurance.
PRICE STABILITY. Competition provides constant downward pressure on
the prices of the components sold by the Company in the commercial
marketplace. The Company's sales to defense-related contractors and
manufacturers have historically occurred in a relatively stable price
environment. Moreover, political pressures on defense spending may
adversely affect prices and profit margins in that market comparable to
those already present in the commercial market. While the Company
believes that its ongoing expansion into high volume, low-cost production
capabilities will permit it to respond successfully to these price
pressures, there can be no assurance that it will do so.
LIMITED PATENT PROTECTION. The Company's success is dependent upon
its proprietary technology. Currently, only some of the Company's
products are protected by patents. The Company relies on confidentiality
and non-disclosure agreements and on trade secret laws to protect its
unpatented technology. There can be no assurance that the steps taken by
the Company in this regard will be adequate to deter misappropriation of
its proprietary technology or that the protection afforded by trade secret
laws will adequately protect the Company. Although the Company believes
that its products and technology do not infringe on any existing
proprietary rights of others, there can be no assurance that third parties
will not assert infringement claims in the future.
RELIANCE ON KEY CUSTOMERS. While the Company sold its products to
over 450 separate companies or divisions of companies in 1996, the Company
relies on certain key customers, defense programs, and commercial programs
throughout periods of the year. No single customer represented more than
11% of total sales in 1996. Nevertheless, the loss of certain key
customers could materially and adversely affect the Company.
POSSIBLE PRICE VOLATILITY. The market price of the Common Stock may
be significantly affected by factors such as announcements of new products
by the Company or its competitors, as well as variations in the Company's
results of operations and market conditions in the electronic components
industry in general. Market prices may also be affected by movements in
prices of securities in general. Although the Common Stock is traded on
the Nasdaq Stock Market, there is no assurance that it will remain
eligible to be included on Nasdaq.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
of Common Stock by the Selling Shareholders. The Selling Shareholders
have agreed to pay all commissions and other compensation to any
securities broker-dealers through whom they sell any of the Shares.
SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
Selling Shareholders and the Shares offered by the Selling Shareholders
pursuant to this Prospectus. None of the Selling Shareholders within the
past three years has had any material relationship with the Company or any
of its affiliates except as described below.
<TABLE>
<CAPTION>
Shares to be
Beneficially
No. of No. of Owned on
Shares Shares Completion
Name of Beneficially Being of the
Selling Shareholder Owned Offered Offering
Number % of Class
<S> <C> <C> <C> <C>
Millenco LP(1)(2)(3) 369,780 369,780(4) 0 0
Newark Sales(1)(2)(3) 110,934 110,934(4) 0 0
Sales Link(1)(2)(3) 443,736 443,736(4) 0 0
Rita Folger(1)(2)(3) 36,978 36,978(4) 0 0
Carla Stuart(1)(2)(3) 36,978 36,978(4) 0 0
Ace Foundation(1)(2)(3) 110,934 110,934(4) 0 0
Julie Nordlicht(1)(2)(3) 369,780 369,780(4) 0 0
Mark Nordlicht(1)(2)(3) 147,912 147,912(4) 0 0
Broadway Partners(1)(2)(3) 110,934 110,934(4) 0 0
Robert Cohen(1)(2)(3) 55,467 55,467(4) 0 0
Ellen Cohen(1)(2)(3) 18,489 18,489(4) 0 0
Lenore Katz(1)(2)(3) 18,489 18,489(4) 0 0
Jeff Rubin(1)(2)(3) 18,489 18,489(4) 0 0
Eugene L. Neidiger 5,470 5,470(5) 0 0
Charles C. Bruner 10,470 5,470(5) 5,000 *
J. Henry Morgan 4,800 2,000(5) 2,800 *
Robert L. Parrish 17,944 2,250(5) 15,694 *
Anthony B. Petrelli 7,908 5,470(5) 2,438 *
John J. Turk, Jr. 2,110 610(5) 1,500 *
Regina L. Neidiger 1,690 1,690(5) 0 0
George L. McCaffrey 2,970 2,970(5) 0 0
Michael P. McCaffrey 2,970 2,970(5) 0 0
Joseph H. Kiser 739,688 50,000(6) 639,688 15.8%
Neidiger/Tucker/Bruner,
Inc. 16,100(8) 16,100(7) 0(8) 0(8)
</TABLE>
* Less than one percent
(1) The number of Shares beneficially owned consists of (i) Shares
issuable upon conversion of Debentures and exercise of Warrants
purchased from the Company pursuant to the Securities Purchase
Agreement (as defined below), and (ii) Shares issuable upon such
conversion and exercise upon the exercise of options to purchase
additional Debentures and Warrants in an amount up to 50% of the
amount of the Debentures and Warrants already purchased (the
"Options") for a period of 150 days from March 4, 1997.
(2) For the last 30 days of the 150 day option period, exercise of the
Options is subject to the prior sale by NTB of the Debentures and
Warrants issuable upon exercise of the Options.
(3) The Options are transferable among the holders of such Options.
(4) The Debentures are convertible into shares of Common Stock at the
lower of (i) $9.50 per share or (ii) 84% of the average closing bid
price of the Company's Common Stock on Nasdaq for the 10 trading days
preceding the conversion notice date. The number of shares
underlying the Debentures (including the Debentures to be received
upon exercise of the Options) that are being registered herein was
calculated using 84% of the closing bid price of a share of the
Company's Common Stock on April 7, 1997, or $6.825.
(5) Shares issuable upon exercise of Agent's Warrants (as defined below)
paid to NTB as part of its compensation for acting as placement agent
for the private offering and subsequently assigned by NTB to the
individuals named.
(6) Includes options to purchase 218,750 shares and 247,863 shares
beneficially owned by Mr. Kiser as the result of certain trust
arrangements.
(7) If all of the Options are exercised, NTB or its assigns will receive
an additional 16,100 Agent's Warrants.
(8) Excludes any shares that may be owned by NTB from time to time in its
capacity as a market maker for the Common Stock on Nasdaq.
- --------------------------
Joseph H. Kiser is the Chairman of the Board and the Chief Scientific
Officer of the Company. Neidiger, Tucker, Bruner, Inc. ("NTB"), a
registered broker-dealer, acted as the Company's underwriter in its
initial public offering in 1994 and recently acted as Selling Agent in a
private offering of securities of the Company which is described below.
Prior to the private offering and other than NTB and Joseph H. Kiser, the
Company has had no relationship with the Selling Shareholders.
On March 4, 1997, Millenco LP, Newark Sales, Sales Link, Rita Folger,
Carla Stuart, Ace Foundation, Julie Nordlicht, Mark Nordlicht, Broadway
Partners, Robert Cohen, Ellen Cohen, Lenore Katz and Jeff Rubin
(collectively, the "Purchasers") entered into a Securities Purchase
Agreement (the "Securities Purchase Agreement") with the Company which
provided for the sale by the Company to the Purchasers of up to $7,500,000
in subordinated debentures convertible into shares of Common Stock (the
"Debentures") and 750,000 warrants to purchase shares of the Common Stock
(the "Warrants"). To date, $5,000,000 of Debentures and 500,000 warrants
have been sold. The Purchasers have the option for a period of 150 days
from the date of the Agreement to purchase up to an additional 50% of the
amount of their original purchases of Debentures and Warrants (the
"Options"). For the last 30 days of the 150 day period, NTB may sell the
Debentures and Warrants underlying any unexercised portion of the Options
to third parties. Subject to the restrictions discussed below, the
Debentures are convertible into Common Stock at the option of the holder
at the lower of (i) $9.50 per share, or (ii) 84% of the average
closing bid price on Nasdaq for the ten trading days prior to the date
that the Company receives a notice of conversion. Debentures bear
interest at the rate of 7% per annum until the first to occur of four
years from the date of issuance or conversion. If the conversion price of
a Debenture for which conversion is requested is $8 per share or less on
the applicable conversion date, the Company has the option to decline to
convert the Debenture and instead redeem the Debenture by payment of 116%
of the principal amount plus accrued interest. Repayment of the principal
and interest of the Debentures is subordinated to the Company's secured
debt in favor of banks, savings and loan associations, institutions or
other asset-based lenders, in an amount up to $25,000,000, irrespective of
whether such debt is currently owed or is incurred in the future. Subject
to the restrictions described below, Warrants may be exercised by the
holders for three years at an exercise price of $9.50. Warrants may not
be redeemed by the Company.
Under the Securities Purchase Agreement, the Purchasers were entitled
to demand registration of the Common Stock issuable upon conversion of the
Debentures and exercise of the Warrants under the Securities Purchase
Agreement and have exercised their rights for the Shares being registered
herein. The Company will seek such shareholder approval at the next
annual meeting of the Company's shareholders scheduled for June 20, 1997.
Until shareholder approval of the Securities Purchase Agreement and the
transactions thereunder is obtained (i) the Debentures are convertible
into a maximum aggregate of 765,367 shares of Common Stock on a first-
converted basis, and (ii) the Warrants are not exercisable. If
shareholder approval of the transaction has not been obtained by March 4,
1998, or if this Registration Statement is not declared effective by that
time, any Debentures or portions thereof which have not been converted to
Common Stock shall be redeemed by the Company for cash equal to 115% of
the principal amount of the Debenture plus accrued interest.
Mr. Kiser is registering for sale 50,000 of the 104,095 Shares he
acquired upon his exercise of certain nonqualified stock options on July
24, 1996. Mr. Kiser plans to sell all or a portion of the registered
Shares to recover the exercise price and the taxes paid upon exercise of
these stock options. The Company has agreed to let Mr. Kiser "piggyback"
his Shares on the registration of the shares underlying the Debentures and
the Warrants because he was unable to sell enough shares in the market in
1996 to pay these costs of exercise.
For acting as the Selling Agent for the placement of the Debentures
and the Warrants pursuant to the Securities Purchase Agreement, NTB
received a commission of 5% of the amount sold in the offering and 28,900
Agent's Warrants as additional compensation. NTB will receive an
additional 16,200 Agent's Warrants if the Options are exercised. The
Agent's Warrants have the same terms as the Warrants except that (i) the
exercise price is the same as the conversion price of the Debentures
(rather than the exercise price of the Warrants), (ii) the Agent's
Warrants have a term of five years (rather than the three-year term of the
Warrants), and (iii) the Agent's Warrants carry unlimited piggyback
registration rights (rather than the demand registration rights of the
Warrants and the Debentures). The Shares underlying the Agent's Warrants
(including any additional Agent's Warrants issuable upon exercise of
Options) are being registered hereunder pursuant to the exercise of such
piggyback registration rights.
PLAN OF DISTRIBUTION
All of the Shares offered hereby are being sold by the Selling
Shareholders. The Shares will be offered by the Selling Shareholders
from time to time (i) at market prices prevailing on the Nasdaq National
Market System at the time of offer and sale, at prices related to such
prevailing market prices, (ii) in negotiated transactions, or (iii) a
combination of such methods of sale. The Selling Shareholders may effect
such transactions by offering and selling the Shares directly to or
through securities broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions, or commissions from
the Selling Shareholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agent or to whom the Selling Shareholders may
sell as principal, or both (which compensation as to a particular broker-
dealer might be in excess of customary commissions).
The Selling Shareholders and any broker-dealers who act in connection
with the sale of the Shares hereunder may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933 (the
"Securities Act") and any commissions received by them and profit on any
resale of the Shares as principal might be deemed to be underwriting
discounts and commissions under the Securities Act. The Company has
agreed to indemnify the Selling Shareholders against certain liabilities,
including liabilities under the Securities Act as underwriters or
otherwise.
The Company has advised the Selling Shareholders that they and any
securities broker-dealers or others who may be deemed to be statutory
underwriters will be subject to the Prospectus delivery requirements under
the Securities Act. The Company has also advised the Selling Shareholders
that, in the event of a "distribution" of the Shares, the Selling
Shareholders, any "affiliated purchasers," and any broker-dealer or other
person who participates in such distribution may be subject to Rule 10b-6
under the Securities Exchange Act of 1934 (the "Exchange Act") until his
or its participation in that distribution is completed. A "distribution"
is defined in Rule 10b-6(c)(5) as an offering of securities "that is
distinguished from ordinary trading transactions by the magnitude of the
offering and the presence of special selling efforts and selling methods."
Rule 10b-6 makes it unlawful for any person who is participating in a
distribution to bid for or purchase stock of the same class as is the
subject of the distribution. The Company has also advised the Selling
Shareholders that Rule 10b-7 under the Exchange Act prohibits any
"stabilizing bid" or "stabilizing purchase" for the purposes of pegging,
fixing or stabilizing the price of the Company's Common Stock in
connection with this offering.
While Mr. Kiser received the 50,000 Shares offered by him in this
offering in a transaction registered under the Securities Act, in the
absence of this registration statement he, like all executive officers,
Directors and other "affiliates" of the Company, would be able to sell his
Shares only subject to the limitations of Rule 144, promulgated under the
Securities Act ("Rule 144"). In general, under Rule 144 as currently in
effect, an "affiliate" of the Company or a person who has beneficially
owned shares which are "restricted securities" as defined in Rule 144 for
at least one year, is entitled to sell within any three-month period a
number of shares that does not exceed the greater of: (i) one percent (1%)
of the then outstanding shares of Common Stock of the Company, or (ii) the
average weekly trading volume of the Common Stock during the four calendar
weeks preceding a sale by such person. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. Under Rule
144, however, a person who is not, and for the three months prior to the
sale of such shares has not been, an affiliate of the Company is free to
sell shares which are not "restricted securities," or "restricted
securities" which have been held for at least two years, without regard to
the limitations contained in Rule 144. Mr. Kiser's sales of the 50,000
Shares registered hereunder will not be subject to the foregoing
restrictions.
Under Section 16 of the Securities Exchange Act of 1934, Mr. Kiser
and any other executive officer, Directors, and 10% or greater
shareholders of the Company will be liable to the Company for any profit
realized from any purchase and sale (or any sale and purchase) of Common
Stock within a period of less than six months.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the shares of Common Stock is
American Securities Transfer & Trust, Inc., 1825 Lawrence Street, #444,
Denver, Colorado, 80202.
LEGAL MATTERS
The validity of the securities to be offered hereby will be passed
upon for the Company by Gorsuch Kirgis L.L.C., Denver, Colorado, counsel
for the Company.
EXPERTS
The financial statements of Vari-L Company, Inc. as of December 31,
1996 and 1995 and for the years then ended have been incorporated by
reference herein and in the registration statement in reliance upon the
report of Haugen, Springer & Co., independent certified public
accountants, incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing.
INDEMNIFICATION OF DIRECTORS
The Securities Purchase Agreement provides that the Company and
its officers, Directors, and controlling shareholders are indemnified
against losses arising out of any untrue statement of a material fact or
any omission to state a material fact necessary to make the statements in
the registration statement or prospectus, in light of the circumstances
under which they were made, not misleading, to the extent that such untrue
statement or omission is contained in any information or affidavit a
Selling Shareholder furnished to the Company.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the small business issuer pursuant to
the foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimates of fees and expenses incurred or to be incurred in
connection with the issuance and distribution of securities being
registered are as follows:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission Filing Fee $ 5,007
State Securities Laws (Blue Sky) Fees and
Expenses 200
Printing and Mailing Costs and Fees 1,000
Legal Fees and Costs 25,00
Accounting Fees and Costs 2,500
Miscellaneous 1,293
-------
TOTAL $35,000
</TABLE>
All fees and expenses are estimated except for the filing fee paid to the
Commission.
The Selling Shareholders have agreed to pay all commissions and other
compensation to any securities broker-dealers through whom they sell any
of the Shares.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, bylaw, contract or arrangement under which any
controlling person, director or officer of the Company is insured or
indemnified in any matter against liability which he may incur in his
capacity as such, is as follows:
Paragraph 2 of Article X of the Restated Articles of Incorporation
with Amendments of the Company includes the following provision:
The Board of Directors of the Corporation shall have every power
and duty of indemnification of directors, officers, employees and
agents, without limitation, provided by the laws of the State of
Colorado.
Section 7-109-101 of the Colorado Business Corporation Act provides
that each corporation shall have the following powers using the following
definitions:
"As used in this article:
(a) "Corporation" includes any domestic or foreign entity that is a
predecessor of a corporation by reason of a merger or other transaction in
which the predecessor's existence ceased upon consummation of the
transaction.
(b) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation, is or
was serving at the corporation's request as a director, officer, partner,
trustee, employee, fiduciary, or agent of another domestic or foreign
corporation or other person or of an employee benefit plan. A director is
considered to be serving an employee benefit plan at the corporation's
request if his or her duties of the corporation also impose duties on, or
otherwise involve services by, the director to the plan or to participants
in or beneficiaries of the plan. "Director" includes, unless the context
requires otherwise, the estate or personal representative of a director.
(c) "Expenses" includes counsel fees.
(d) "Liability" means the obligation incurred with respect to a
proceeding to pay a judgment, settlement, penalty, fine, including an
excise tax assessed with respect to an employee benefit plan, or
reasonable expenses.
(e) "Official capacity" means, when used with respect to a director,
the office of director in a corporation and, when used with respect to a
person other than a director as contemplated in section 7-109-107, the
office in a corporation held by the officer or the employment, fiduciary,
or agency relationship undertaken by the employee, fiduciary, or agent on
behalf of the corporation. "Official capacity" does not include service
for any other domestic or foreign corporation or other person or employee
benefit plan.
(f) "Party" includes a person who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
7-109-102. AUTHORITY TO INDEMNIFY DIRECTORS.
(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to a proceeding because
the person is or was a director against liability incurred in the
proceeding if:
(a) The person conducted himself or herself in good faith; and
(b) The person reasonably believed:
(I) In the case of conduct in an official capacity with
the corporation, that his or her conduct was in the corporation's best
interests; and
(II) In all other cases, that his
or her conduct was at least not opposed to the corporation's best
interests; and
(c) In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit plan
for a purpose the director reasonably believed of be in the interests of
the participants in or beneficiaries of the plan is conduct that satisfies
the requirement of subparagraph (II) of paragraph (b) of subsection (1) of
this section. A director's conduct with respect to an employee benefit
plan for a purpose that the director did not reasonably believe to be in
the interests of the participants in or beneficiaries of the plan shall be
deemed not to satisfy the requirements of paragraph (a) of subsection (1)
of this section.
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of
conduct described in this section.
(4) A corporation may not indemnify a director under this section.
(a) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation;
or
(b) In connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not involving
action in an official capacity, in which proceeding the director was
adjudged liable on the basis that he or she derived an improper personal
benefit.
(5) Indemnification permitted under this section in connection with
a proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with the proceeding.
7-109-103. MANDATORY INDEMNIFICATION OF DIRECTORS. Unless limited
by its articles of incorporation, a corporation shall indemnify a person
who was wholly successful, on the merits or otherwise, in the defense of
any proceeding to which the person was a party because the person is or
was a director, against reasonable expenses incurred by him or her in
connection with the proceeding.
7-109-104. ADVANCE OF EXPENSES TO DIRECTORS.
(1) A corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of final
disposition of the proceeding if:
(a) The director furnishes to the corporation a written
affirmation of the director's good faith belief that he or she has met the
standard of conduct described in section 7-109-102;
(b) The director furnishes to the corporation a written
undertaking, executed personally or on the director's behalf, to repay the
advance if it is ultimately determined that he or she did not meet the
standard of conduct; and
(c) A determination is made that the facts then known to those
making the determination would not preclude indemnification under this
article.
(2) The undertaking required by paragraph (b) of subsection (1) of
this section shall be an unlimited general obligation of the director but
need not be secured and may be accepted without reference to financial
ability to make repayment.
(3) Determinations and authorizations of payments under this section
shall be made in the manner specified in section 7-109-106.
7-109-105. COURT-ORDERED INDEMNIFICATION OF DIRECTORS.
(1) Unless otherwise provided in the articles of incorporation, a
director who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another court
of competent jurisdiction. On receipt of an application, the court, after
giving any notice the court considers necessary, may order indemnification
in the following manner:
(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the corporation
to pay the director's reasonable expenses incurred to obtain court-ordered
indemnification.
(b) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances,
whether or not the director met the standard of conduct set forth in
section 7-109102(1) or was adjudged liable in the circumstances described
in section 7-109-102(4), the court may order such indemnification as the
court deems proper; except that the indemnification with respect to any
proceeding in which liability shall have been adjudged in the
circumstances described in section 7-109-102(4) is limited to reasonable
expenses incurred in connection with the proceeding and reasonable
expenses incurred to obtain court-ordered indemnification.
7-109-106. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION OF
DIRECTOR.
(1) A corporation may not indemnify a director under Section
7-109-102 unless authorized in the specific case after a determination has
been made that indemnification of the director is permissible in the
circumstances because the director has met the standard of conduct set
forth in section 7-109-102. A corporation shall not advance expenses to a
director under section 7-109-104 unless authorized in the specific case
after the written affirmation and undertaking required by section
7-109-104(1)(a) and (1)(b) are received and the determination required by
section 7-109104(1)(c) has been made.
(2) The determinations required by subsection (1) of this section
shall be made:
(a) By the board of directors by a majority vote of those
present at a meeting at which a quorum is present, and only those
directors not parties to the proceeding shall be counted in satisfying the
quorum; or
(b) If a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated by the board of directors,
which committee shall consist of two or more directors not parties to the
proceeding; except that the directors who are parties to the proceeding
may participate in the designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph (a)
of this subsection (2) of this section, and a committee cannot be
established under paragraph (b) of subsection (2) of this section, or,
even if a quorum is obtained or a committee is designated, if a majority
of the directors constituting such quorum or such committee so directs,
the determination required to be made by subsection (1) of this section
shall be made:
(a) By independent legal counsel selected by a vote of the
board of directors or the committee in the manner specified in paragraph
(a) or (b) of subsection (2) of this section or, if a quorum of the full
board cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full board of
directors; or
(b) By the shareholders.
(4) Authorization of indemnification and advance of expenses shall
be made in the same manner as the determination that indemnification or
advance of expenses is permissible; except that, if the determination that
indemnification or advance of expenses is permissible is made by
independent legal counsel, authorization of indemnification and advance of
expenses shall be made by the body that selected such counsel.
7-109-107. INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND
AGENTS.
(1) Unless otherwise provided in the articles of incorporation;
(a) An officer is entitled to mandatory indemnification under
section 7-109-103, and is entitled to apply for court-ordered
indemnification under section 7-109-105, in each case to the same extent
as a director;
(b) A corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a greater
extent, if not inconsistent with public policy, and if provided for by its
bylaws, general or specific action of its board of directors or
shareholders, or contract.
7-109-108. INSURANCE. A corporation may purchase and maintain
insurance on behalf of a person who is or was a director, officer,
employee, fiduciary, or agent of the corporation, or who, while a
director, officer, employee, fiduciary, or agent of the corporation, is or
was servicing at the request of the corporation as a director, officer,
partner, trustee, employee, fiduciary, or agent of another domestic or
foreign corporation or other person or of an employee benefit plan,
against liability asserted against or incurred by the person in that
capacity or arising from his or her status as a director, officer,
employee, fiduciary, or agent, whether or not the corporation would have
power to indemnify the person against the same liability under section
7-109-102, 7-109-103, or 7-109-107. Any such insurance may be procured
from any insurance company designated by the board of directors, whether
such insurance company is formed under the laws of this state or any other
jurisdiction of the United States or elsewhere, including any insurance
company in which the corporation has an equity or any other interest
through stock ownership or otherwise.
7-109-109. LIMITATION OF INDEMNIFICATION OF DIRECTORS.
(1) A provision treating a corporation's indemnification of, or
advance of expenses to, directors that is contained in its articles of
incorporation or bylaws, in a resolution of its shareholders or board of
directors, or in a contract, except an insurance policy, or otherwise, is
valid only to the extent the provision is not inconsistent with sections
7-109-101 to 7-109-108. If the articles of incorporation limit
indemnification or advance of expenses, indemnification and advance of
expenses are valid only to the extent not inconsistent with the articles
of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's
power to pay or reimburse expenses incurred by a director in connection
with an appearance as a witness in a proceeding at a time when he or she
has not been made a named defendant or respondent in the proceeding.
7-109-110. NOTICE TO SHAREHOLDERS OF INDEMNIFICATION OF DIRECTOR.
If a corporation indemnifies or advances expenses to a director under this
article in connection with a proceeding by or in the right of the
corporation, the corporation shall give written notice of the
indemnification or advance to the shareholders with or before the notice
of the next shareholders' meeting. If the next shareholder action is
taken without a meeting at the instigation of the board of directors, such
notice shall be given to the shareholders at or before the time the first
shareholder signs a writing consenting to such action.
Section 7-108-402(2) of the Colorado Revised Statutes states as
follows:
No officer or director shall be personally liable for any
injury to person or property arising out of a tort committed by
an employee unless such officer or director was personally
involved in the situation giving rise to the litigation or
unless such officer or director committed a criminal offense.
The protection afforded in this section shall not restrict
other common law protections and rights that an officer or
director may have. This section shall not restrict the
corporation's right to eliminate or limit the personal
liability of a director to the corporation or to its
shareholders for monetary damages for breach of fiduciary duty
as a director.
Paragraph 3 of Article X of the Restated Articles of Incorporation
with Amendments of the Company includes the following provision:
The personal liability of any of the Corporation's
directors to the Corporation or to its shareholders for
monetary damages for breach of a fiduciary duty as a director
is eliminated, except that this provision shall not eliminate
the liability of the director to the Corporation or to its
shareholders for monetary damages (a) for any breach of the
director's duty of loyalty to the Corporation or its
shareholders; (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law; (c) for acts specified in Section 7-5-114 of the Colorado
Corporation Code; or (d) for any transaction from which the
director derived an improper personal benefit.
The Securities Purchase Agreement provides that the Company and
its officers, directors, and controlling shareholders are indemnified
against losses arising out of any untrue statement of a material fact or
any omission to state a material fact necessary to make the statements in
the registration statement or prospectus, in light of the circumstances
under which they were made, not misleading, to the extent that such untrue
statement or omission is contained in any information or affidavit a
Selling Shareholder furnished to the Company.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling the Company pursuant to the foregoing provisions, the Company
has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in
the Securities Act of 1933 and is therefore unenforceable.
ITEM 16. EXHIBITS.
Exhibit No. Description
3.1a Restated Articles of Incorporation, as Amended, filed as
Exhibit 4.1 to the Registrant's Form S-8 Registration
Statement (No. 33-88666) and incorporated herein by
reference
3.1b Articles of Amendment to the Articles of Incorporation
filed as Exhibit 3.1b to Registrant's Form 10-KSB for the
year ended December 31, 1996 and incorporated herein by
reference
3.2 Restated Bylaws of the Company as adopted by its Board of
Directors on November 4, 1992 filed as Exhibit 3.2 to the
Registrant's Form SB-2 Registration Statement (No.
33-74704-D) and incorporated herein by reference
4.1 Specimen Certificate for $.01 par value Common Stock of the
Company filed as Exhibit 4.3 to the Registrant's Form SB-2
Registration Statement (No. 33-74704-D) and incorporated
herein by reference
4.2 Specimen Certificate for Warrant to Purchase Common Stock
of the Company filed as Exhibit 4.4 to the Registrant's
Form SB-2 Registration Statement (No. 33-74704-D) and
incorporated herein by reference
4.3 Rights Agreement with American Securities Transfer, Inc.
dated March 15, 1996 filed as Exhibit 4.2 to Registrant's
Form 8-A/A Registration Statement (No. 0-23866) and
incorporated herein by reference
4.4 Specimen Certificate for Right to Purchase $.01 par value
Common Stock of the Company filed as Exhibit 4.3 to
Registrant's Form 8-A/A Registration Statement (No. 0-
23866) and incorporated herein by reference
4.5 Securities Purchase Agreement between the Registrant and
certain purchasers dated March 4, 1997
4.6 Form of Convertible Subordinated Debenture issued to the
Purchasers under the Securities Purchase Agreement dated
March 4, 1997
4.7 Form of Warrant to Purchase Common Stock issued to the
Purchasers under the Securities Purchase Agreement dated
March 4, 1997
4.8 Form of Warrant to Purchase Common Stock issued to
Neidiger, Tucker, Bruner, Inc. pursuant to the Securities
Purchase Agreement dated March 4, 1997
5 Opinion of Gorsuch Kirgis L.L.C.
23.1 Consent of Haugen, Springer & Co.
23.2 Consent of Gorsuch Kirgis L.L.C. contained in its opinion
filed as Exhibit 5
ITEM 17. UNDERTAKINGS.
The undersigned Company hereby undertakes with respect to the
securities being offered and sold in this offering:
(1) File, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(a) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(c) Include any additional or changed material information on
the plan of distribution;
provided, however, that small business issuers do not need to give the
statements in paragraphs (1)(a) and (1)(b) if the registration statement
is on Form S-3 or Form S-8, and the information required in a post-
effective amendment is incorporated by reference from the periodic reports
filed by the small business issuer pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
SIGNATURES
In accordance with the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, State of Colorado, on
April 11, 1997.
VARI-L COMPANY, INC.
By: /s/ DAVID G. SHERMAN
David G. Sherman, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
/s/ JOSEPH H. KISER Date: April 11, 1997
Joseph H. Kiser, Chairman of the Board,
Principal Executive Officer,
Chief Scientific Officer
/s/ DAVID G. SHERMAN Date: April 11, 1997
David G. Sherman, President,
Chief Executive Officer,
Chief Financial Officer, Principal
Financial and Accounting Officer and
Director
/s/JON L. CLARK Date: April 11, 1997
Jon L. Clark, Vice President of Finance and
Principal Accounting Officer
/s/ SARAH L. BOOHER Date: April 11, 1997
Sarah L. Booher, Director
/s/ DAVID A. LISOWSKI Date: April 11, 1997
David A. Lisowski, Director
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
<S> <C> <C>
4.5 Securities Purchase Agreement
between the Registrant and
certain purchasers dated
March 4, 1997 Filed herewith electronically
4.6 Form of Convertible Subordinated
Debenture issued to the Purchasers
under the Securities Purchase
Agreement dated
March 4, 1997 Filed herewith electronically
4.7 Form of Warrant to Purchase Common
Stock issued to the Purchasers under
the Securities Purchase Agreement
dated March 4, 1997 Filed herewith electronically
4.8 Form of Warrant to Purchase Common
Stock issued to Neidiger/Tucker/Bruner,
Inc. pursuant to the Securities
Purchase Agreement dated
March 4, 1997 Filed herewith electronically
5 Opinion of Gorsuch Kirgis L.L.C.
Filed herewith electronically
23.1 Consent of Haugen, Springer & Co.
Filed herewith electronically
23.2 Consent of Gorsuch Kirgis L.L.C.
contained in its opinion
filed as Exhibit 5
</TABLE>
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement") dated as of March 4,
1997, by and among VARI-L COMPANY, INC., a Colorado corporation (the
"Company"), and the entities and individuals listed on Schedule 1 hereto
(the "Purchasers").
WHEREAS, the Company is in need of working capital; and
WHEREAS, pursuant to this Agreement, the Purchasers wish to provide
such capital by purchasing convertible subordinated debentures (the
"Debentures") and three-year, non-redeemable warrants (the "Warrants") to
purchase the Company's $.01 par value common stock (the "Common Stock") to
be issued by the Company in Units, each consisting of a $100,000 Debenture
and 10,000 Warrants (the "Units"); and
WHEREAS, the Company will sell a total of up to 75 Units, consisting
of an aggregate of $7,500,000 in Debentures and 750,000 Warrants; and
WHEREAS, because all of the Purchasers are "accredited investors" as
defined by Rule 501(a) of Regulation D under the Securities Act of 1933,
as amended (the "Act"), the transaction will be exempt from registration
under the Act.
NOW, THEREFORE, in consideration of the aforesaid and the mutual
promises hereinafter made, the parties hereto agree as follows:
1. PURCHASE OF SECURITIES
1.01 SALE OF UNITS.
a. Subject to the terms and conditions hereof, on the First
Closing Date (as hereinafter defined) the Company agrees to issue and
sell, and each Purchaser set forth on Schedule 1 to this Agreement agrees
to purchase, the number of Units set forth opposite such Purchaser's name
on Schedule 1. A total of 50 Units will be purchased on the First Closing
Date, consisting of an aggregate of $5,000,000 in Debentures and 500,000
Warrants. For a period of one hundred twenty (120) days after the First
Closing Date or sixty (60) days after the date of the shareholder approval
referred to in Sections 1.02b. and c. is obtained, whichever is later (the
"Exclusive Option Period"), each Purchaser has an exclusive option to
purchase (an "Option") that number of additional Units equal to 50% of the
number of Units purchased by that Purchaser on the First Closing Date.
For a period of thirty (30) days after the end of the Exclusive Option
Period (the "Nonexclusive Option Period"), the Options shall remain in
force but shall be subject to the Company's prior sale of any or all of
the additional Units. Prior to such shareholder approval, the Company
may, in its discretion, decline to permit the exercise of any Options. If
sales of Units by the Company occur in the Nonexclusive Option Period,
each Purchaser's Option shall be for that Purchaser's pro rata share of
the number of additional Units that remain, provided, however, that
nothing herein shall be construed to limit or prohibit the transfer of
Options by or among Purchasers during the Exclusive Option Period or the
Nonexclusive Option Period subject only to compliance with applicable
securities laws.
b. The Company and the Purchasers agree that, unless the
Company obtains assurances from Nasdaq Stock Market, Inc. satisfactory to
counsel for the Company and the Purchasers, respectively, that this
Agreement comports with Nasdaq Rule 4460(i)(1)(D) (the "Rule")
notwithstanding the failure to obtain prior shareholder approval, the
Company shall submit the sale of the Units pursuant to the terms described
herein (the "Transaction") to its shareholders for approval (or the
portions of the Transaction requiring such approval) at the Company's next
annual shareholders' meeting and will use its best efforts to obtain
shareholder approval at such meeting. Within ten (10) days after the date
hereof, the Company will provide written assurances to Purchasers that the
shares of the Common Stock beneficially owned by David G. Sherman, Joseph
H. Kiser, and Sarah Booher, who own of record, or control, not less than
634,251 shares, will be voted in favor of such shareholder approval.
c. Until shareholder approval of the Transaction (or the
portion thereof requiring approval) has been obtained, the Debentures
issued hereunder will be convertible into a maximum aggregate of 765,367
shares of Common Stock on a first-converted basis. If shareholder
approval of the Transaction (or the portion thereof requiring approval)
has not been obtained by one year after the date hereof, or (at
Purchaser's option) if the Registration Statement referred to in Section 6
below is not declared effective by the Securities and Exchange Commission
by the first anniversary date of the date hereof, any Debentures, or
portions thereof, which have not then been converted, shall be redeemed by
the Company three (3) business days after such one-year anniversary for
cash equal to 115% of the principal amount plus accrued interest (the
"Non-approval Redemption Amount").
d. The Warrants issued hereunder shall not be exercisable
until (i) there has been obtained evidence or assurances satisfactory to
counsel for the Company and the Purchasers, respectively, that, if such
Warrants are immediately exercisable in accordance with their terms, this
Agreement comports with the Rule notwithstanding the failure to obtain
prior shareholder approval, or (ii) shareholder approval of the
Transaction is obtained.
1.02 CLOSING DATE; DELIVERY. The closing of the issuance and sale of
the initial 50 Units hereunder will be held at the offices of Gorsuch
Kirgis, L.L.C. on March 4, 1997 or at such other time and place as to
which the Company and the Purchasers may agree (the "First Closing Date").
On the First Closing Date, the Purchasers will deliver by wire transfer in
immediately available funds the purchase price and the Company will issue
and deliver the Debentures and Warrants to the Purchasers as set forth in
Schedule 1. The closing of the issuance and sale of Units upon the
exercise of each Option will be held at the offices of Gorsuch Kirgis,
L.L.C. no later than three (3) business days after such exercise.
1.03 PAYMENT OF COMMISSION. The Company has agreed, pursuant to a
letter agreement dated November 27, 1996, as amended on March 4, 1997, to
pay to Neidiger, Tucker, Bruner, Inc. ("NTB") a commission for the sale of
all Units sold hereunder in the amount of five percent (5%) of the
principal amount of the Debentures sold hereunder. The Company has also
agreed to pay a three percent (3%) finder's fee to Mueller Trading Company
on the initial $5,000,000 of Debentures to be purchased on the First
Closing Date and on additional Units purchased pursuant to the exercise of
Options. No finder's fee shall be paid for the sale of additional Units
by the Company or NTB which are not made pursuant to the exercise of
Options or for the exercise of Warrants. Neither the Company nor the
Purchasers have agreed to pay, or to cause the other to pay, any
commissions, finders fee or compensation on account of the Transaction
other than as recited herein.
1.04 DESCRIPTION OF DEBENTURES. Subject to the provisions of Section
1.01, all or any portion of the principal and accrued interest of each
Debenture is convertible into Common Stock at the election of the holder
thereof into the number of shares of Common Stock equal to the lower of
(i) the unpaid principal amount of the Debenture plus accrued interest
divided by $9.50 per share, or (ii) 84% of the average closing bid price
of the Company's Common Stock on the Nasdaq National Market (or such other
stock exchange, quotation service or over the counter market on which the
Company's Common Stock may be traded) for the ten (10) trading days prior
to the date that a written request to convert is received by the Company
at its principal offices or by its transfer agent (the "Conversion Date").
Each Debenture shall bear interest at the rate of 7% per annum until the
first to occur of four years from the date of the Debenture (the "Maturity
Date") or until the Conversion Date, provided, however, that if the Common
Stock into which the Debentures are convertible is not registered with the
Commission pursuant to Section 6.01 hereof within 120 days of the First
Closing Date, the Debenture will bear interest at the rate of 15% from the
120th day until the first to occur of the Maturity Date or the Conversion
Date. If the price per share at which any Debenture is to be converted on
the applicable Conversion Date is less than $8 per share, the Company has
the right to decline to permit such conversion and instead redeem the
Debenture by payment of 116% of the principal amount of such Debenture,
together with accrued interest (the "116% Redemption Amount"). Repayment
of the principal of and interest on the Debentures is expressly
subordinated to the Company's secured debt in favor of banks, savings and
loan associations, institutions or other asset-based lenders, in an amount
up to $25,000,000, irrespective of whether such debt is currently owed or
is incurred in the future. Holders of Debentures have registration rights
with respect to the Common Stock issuable upon conversion of the
Debentures as set forth in Section 6.01. The form of Debenture is
attached hereto as Exhibit A. Notwithstanding the failure of any
Debenture to recite any of the terms of this Agreement applicable to such
Debenture, all of such terms shall be binding upon and inure to the
benefit of all Holders of Debentures.
1.05 DESCRIPTION OF WARRANTS. Subject to the provisions of Section
1.01d. requiring shareholder or Nasdaq approval prior to exercise thereof,
Warrants may be exercised by the registered holders thereof for a period
of three years from the date hereof at an exercise price of $9.50 per
share. Warrants may not be redeemed by the Company. Holders of Warrants
have registration rights with respect to the Common Stock issuable upon
exercise of the Warrant as set forth in Section 6.01. The form of warrant
is attached hereto as Exhibit B. Notwithstanding the failure of any
Warrant to recite any of the terms of this Agreement applicable to such
Warrants, all of such terms shall be binding upon and inure to the benefit
of all Holders of Warrants.
1.06 ANTIDILUTION PROVISIONS. The Debentures and the Warrants are
subject to customary antidilution provisions as set forth in such
instruments.
2. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser
hereby represents and warrants as to himself, herself or itself as
follows:
2.01 Purchaser is acquiring the Debentures and Warrants for
investment only and not with a view to or for resale or distribution of
any part thereof, and with no present intention of selling, granting
participation in, or otherwise distributing the same except pursuant to
the registration rights granted by Section 6 hereof.
2.02 Purchaser is an "accredited investor" as defined in Rule 501(a)
of Regulation D of the Securities Act of 1933, as amended (the "Act") and
has executed an Accredited Investor Statement in the form attached hereto
as Exhibit C. Purchaser has such knowledge and experience in business and
financial matters as to be capable of evaluating the risks and merits of
an investment in the Debentures and Warrants and has sufficient financial
resources to bear the economic risks thereof (including possible complete
loss of such investment) for an indefinite period of time. Purchaser has
full and free access to the Company's books, financial statements,
records, contracts, documents and other information concerning the Company
and has been afforded an opportunity to ask questions of the Company's
officers, employees, agents, accountants and representatives concerning
the Company's business, operations, financial condition, assets,
liabilities and other relevant matters, and has been given all such
information as has been requested, in order to evaluate the merits and
risks of the investment in the Debentures and Warrants. Upon request,
Purchaser will provide the Company with access to Purchaser's tax,
financial and other records as are reasonably necessary under the
circumstances to confirm that Purchaser is an accredited investor within
the meaning of Rule 501(a) of Regulation D of the Act.
2.03 a. The Debentures and Warrants are "restricted securities"
within the meaning of Rule 144 under the Act;
b. The Debentures and Warrants are not being registered with
the Securities and Exchange Commission at this time and therefore must be
held until they are subsequently registered under the Act and any
applicable state or foreign securities laws (pursuant to Section 6 hereof
or otherwise) unless an exemption from registration is available;
provided, however, that Purchasers have the registration rights set forth
in Section 6 for the shares of Common Stock issuable upon conversion of
the Debentures and exercise of the Warrants.
c. the exemption from registration under Rule 144 will not be
available for two years from the date of acquisition of the Debentures and
Warrants (unless it is amended, as has been previously proposed, to
shorten such period to one year), and even then may not be available
unless (A) a public trading market still exists for the Common Stock at
that time, (B) adequate information concerning the Company is then
publicly available, and (C) the sale complies with the other terms and
conditions of Rule 144.
2.04 Each Purchaser acknowledges and agrees that it shall have no
right to convert any Debentures or exercise any Warrants to purchase the
Common Stock of the Company so long as and to the extent that at the time
of such conversion or exercise, such conversion or exercise would cause
the Purchaser then to be the "beneficial owner" of five percent (5%) or
more of the Company's then outstanding common stock. For the purpose
hereof, the term "beneficial owner" shall have the meaning ascribed to it
in Section 13(d) of the Securities Exchange Act of 1934. The legal
opinion of counsel to each Purchaser, in form and substance satisfactory
to the Company, shall prevail in all matters relating to the amount of
such Purchaser's beneficial ownership.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01 ORGANIZATION AND GOOD STANDING. The Company is a corporation,
duly organized, validly existing, and in good standing under the laws of
the State of Colorado and has all requisite corporate power and authority
to own and lease its properties and conduct its business as it is now
being conducted. The Company is not required to be qualified to do
business as a foreign corporation in any jurisdiction in which it is not
qualified and where a failure to be qualified would have a material
adverse effect on the Company.
3.02 CAPITALIZATION STRUCTURE.
a. As of the date of this Agreement, the Company's authorized
capital stock consists of 50,000,000 shares of Common Stock, $.01 par
value, of which 3,826,840 shares are issued and outstanding. The rights,
preferences and privileges of the capital stock are as set forth in the
Articles of Incorporation and Bylaws of the Company. As of the date of
this Agreement, all issued and outstanding shares of Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of
preemptive rights and there is no outstanding subscription, option,
warrant, call, right, agreement, commitment, understanding, or arrangement
relating to the issuance, sale, delivery, transfer or redemption of the
Company's capital stock other than, in the case of Common Stock, in each
case as of March 4, 1997, up to 800,000 shares issuable to employees of
the Company pursuant to the Company's Employee Stock Purchase Plan, and
3,000,000 shares issuable upon the exercise of stock options granted
pursuant to the Company's Tandem Stock Option and Stock Appreciation
Rights Plan and 100,000 issuable pursuant to the Company's Stock Grant
Plan.
b. The Company has reserved 765,367 shares of authorized but
unissued Common Stock for the conversion of Debentures and the exercise of
Warrants hereunder and, upon shareholder approval of the Transaction, will
reserve such additional shares of authorized but unissued Shares of Common
Stock as are necessary to effect the conversion and exercise of all
Debentures and Warrants, respectively, issued hereunder. All of the
shares of the Company's Common Stock issuable upon conversion of the
Debentures and exercise of the Warrants have been duly authorized by all
necessary corporate action and will be when issued in accordance with the
terms of the Debentures and Warrants, validly issued, fully paid and
nonassessable and free of preemptive rights, other than those restrictions
imposed by the Company's Articles of Incorporation and Bylaws.
3.03 AUTHORITY; NO CONFLICT; REQUIRED FILINGS.
a. The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
the Company. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms.
b. The execution and delivery of this Agreement by the Company
and the consummation of the transactions contemplated by this Agreement
will not (i) conflict with or result in any violation or breach of any
provision of the Articles of Incorporation or Bylaws of the Company; (ii)
result in any violation or breach of, or constitute a default or give rise
to a right of termination, cancellation or acceleration of any obligation
or loss of any benefit under any of the terms, conditions or provisions of
any note, bond, mortgage,indenture, lease contract or other agreement,
instrument or obligation to which the Company is a party or by which it or
any of its properties or assets may be bound; or (iii) conflict with or
violate any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its properties or assets, except in the case of (ii) and
(iii) for any such violation, breaches, defaults, termination,
cancellation, accelerations, or conflicts which would not, in the
aggregate, have or result in a material adverse effect on the Company or
impair the ability of the Company to consummate the transactions
contemplated by this Agreement and except for the Nasdaq National Market
Listing Agreement between the Company and Nasdaq to the extent that such
agreement requires shareholder approval of all or a portion of this
Transaction.
c. Other than Nasdaq approval, no consent, approval, order or
authorization of, or registration, declaration or filing with, any
governmental entity, is required by or with respect to the Company in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
3.04 SEC FILINGS; FINANCIAL STATEMENTS.
a. The Company has timely filed and made available to
Purchasers all forms, reports and documents required to be filed by the
Company with the Commission since December 31, 1995, (collectively, the
"Vari-L SEC Reports"). The Vari-L SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and (ii) did not
at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in such Vari-L SEC Reports or necessary in order to
make the statements in such Vari-L SEC Reports, in the light of the
circumstances under which they were made, not misleading.
b. Each of the financial statements (including, in each case,
any related notes) contained in the Vari-L SEC Reports, including any
Vari-L SEC Reports filed after the date of this Agreement until the First
and Second Closing Dates, complied or will comply, as of their respective
dates, in all material respects with all applicable accounting
requirements and the published rules and regulations of the Commission
with respect thereto, was or will be prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout
the periods involved and fairly presented or will present the consolidated
financial position of the Company as at the respective dates and the
results of its operations and cash flows for the periods indicated, except
that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not
expected to be material in amount.
3.05 LITIGATION. Except as described in the Vari-L SEC Reports,
there is no action, suit or proceeding, claim, arbitration or
investigation pending or, to the best of the Company's knowledge,
threatened against the Company which would, in the aggregate, have a
material adverse effect on the Company or impair the ability of the
Company to consummate the transactions contemplated by this Agreement.
3.06 BROKERS AND FINDERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated hereby based upon
arrangements made by or an behalf of the Company except for the
commissions described in Section 1.03.
3.07 AVAILABILITY OF S-3 REGISTRATION STATEMENT. The Company is
eligible to use an S-3 Registration Statement to effect the registration
rights granted pursuant to Section 6.
4. [This Section intentionally omitted.]
5. COVENANTS OF THE COMPANY
5.01 The Company covenants and agrees that, so long as any Debentures
or Warrants shall be outstanding:
a. Maintenance of Office. The Company will maintain an office
or agency in such place in the United States of America as the Company may
designate in writing to the registered holders of Debentures and Warrants,
where the Debentures and Warrants may be presented for registration or
transfer and for exchange as their terms may provide, where notices and
demands to or upon the Company in respect of the Debentures and Warrants
may be served.
b. Corporate Existence. The Company will do or cause to be
done all things necessary and lawful to preserve and keep in full force
and effect its corporate existence, rights and franchises.
c. Maintenance of Property. The Company will at all times
maintain and keep, or cause to be maintained and kept, in good repair,
working order and condition all significant properties of the Company used
in the conduct of the business of the Company.
d. Notice of Default. If any one or more events which
constitute a default under either the Debentures or Warrants in accordance
with their terms, or if the holder of any Debentures or Warrants shall
demand payment or take any other action permitted upon the occurrence of
any such default, the Company shall, immediately after it becomes aware
that any such event has occurred or that such demand has been made or that
any such action has been taken, give notice to all holders of the
Debentures and Warrants, specifying the nature of such event or of such
demand or action, as the case may be.
5.02 ADDITIONAL REGULATION D OR REGULATION S OFFERINGS. The Company
agrees that it shall not, without the approval of all of the holders of
Debentures and Warrants issued hereunder, (a) make an unregistered
offering of shares of its Common Stock or of securities convertible into
such Common Stock, pursuant to Regulation D under the Act or otherwise,
pursuant to which registration rights are granted to the purchasers in
such an offering, or (b) make an offering of securities pursuant to
Regulation S under the Act, in either case until the earlier of (i) two
years from the First Closing Date, or (ii) at such time as there are less
than an aggregate of $2,000,000 in Debentures or Common Stock issued upon
conversion of Debentures held by the Purchasers.
5.03 NOTICE OF CONVERSION OF DEBENTURES OR EXERCISE OF WARRANTS;
PAYMENT FOR LATE DELIVERY OF SHARES OR LATE REDEMPTIONS.
a. If the Holder of a Debenture or a Warrant delivers to the
principal office of the Company to the attention of Darce Hume, Controller
(a) a copy of the Conversion Notice or Notice of Exercise, respectively,
by telecopy (telecopy number 303/373-3870) and (b) within two business
days thereafter, the Debenture and original Conversion Notice or the
Warrant Price and the original Notice of Exercise, and the Company fails
to deliver to the Holder the Certificate representing the shares of Common
Stock due upon such conversion or exercise within ten (10) business days
(the "Ten-Day Period") after the Debenture and original Conversion Notice
are received by the Company, the Company will pay the Holder the late
payment described in Section 5.03d. below the amount of which payment
shall begin to accrue on the first day after the expiration of the Ten-Day
Period; or
b. in the alternative (but not in addition), if the Holder
delivers (a) a copy of the Conversion Notice or Notice of Exercise,
respectively, by separate telecopies to each of Darce Hume, Controller
(303/373-3870), David G. Sherman, President, and Jon L. Clark, Treasurer
at the Company (303/373-3868), and to Gorsuch Kirgis, L.L.C., attention:
S. Lee Terry, Jr. (303/298-0215), and (b) within two (2) business days
thereafter, the original Conversion Notice and the Debenture or the
original Notice of Exercise and the Warrant Price, and the Company fails
to deliver the Certificate within five (5) business days (the "Five-Day
Period") after receiving the original Conversion Notice and Debenture or
the Original Notice of Exercise and the Warrant Price, the Company will
pay the Holder the amount described in (d) below which amount shall begin
to accrue on the first day after the expiration of the Five-Day Period;
provided, however, that if the Company has given notice of redemption of a
Debenture, as provided in Section 1.03 of the Debentures, the Company
shall not be obligated to pay the amount for late delivery described in
these Sections 5.03a. or b.
c. If payment by the Company of any 116% Redemption Amount or
the Non-approval Redemption Amount is not made within the period provided
for such payment, the Company shall pay to the Holder the late payment set
forth in Section 5.03d. below which amount shall begin to accrue on the
first day after the expiration of such the period.
d. The late payment shall be $1,000 per day for each $100,000
in Debentures converted or redeemed or each 10,000 Warrants exercised
)proportionately adjusted for greater or lesser amounts) for the first of
five (5) days and $500 per day thereafter continuing until the stock
certificate or payment (as the case may be) is delivered to Holder.
e. The late payment provided by this Section 5.03 shall be in
addition to, and not in lieu of, the rights or remedies of the Purchasers
or the Holders under the Debentures, the Warrants or this Agreement or
which are otherwise available under law.
6. REGISTRATION RIGHTS
6.01 DEMAND REGISTRATION RIGHTS.
a. Right to Demand Registration. If, at any time beginning
thirty (30) days after the First Closing Date until the third anniversary
of the date hereof, any Purchaser holding Debentures or Warrants issued
hereunder makes a written request (the "Request Notice") to the Company
for registration under the Act of all or part of the Common Stock issuable
upon conversion of a Debenture or upon exercise of a Warrant which is
issued hereunder, (irrespective of whether such Common Stock is issued or
is issuable on the conversion of Debentures or the exercise of Warrants
sold on the First Closing Date or thereafter and irrespective of whether
the shareholder approval or Nasdaq approval required by Section 1.01
hereof has yet been obtained) (such Common Stock is hereinafter sometimes
referred to as "Registrable Securities"), the Company shall thereupon file
a registration statement covering all of the Registrable Securities with
the Commission within thirty (30) days after the Company receives the
Request Notice and shall use its best efforts have such registration
statement declared effective by the Commission (a "Registration") within
sixty (60) days after receipt of the Request Notice. Within ten (10) days
after receipt of such request, the Company will serve written notice (the
"Notice") of such registration request to all Purchasers who hold
Debentures or Warrants issued hereunder, and the Company will include in
such registration all Registrable Securities of such Purchasers except for
those for which the Company has received written requests not to be
included therein ("Nonregistration Notices"). If, by reason of a decline
in market price or otherwise, the shares covered by the Registration
Statement are at any time less than the Registrable Securities, the
Company agrees to subsequently file an additional registration statement
to cover all Registrable Securities not included in the first registration
statement except for those submitting Nonregistration Notices. All
Purchasers requesting nonregistration of their Registrable Securities
pursuant to this Section 6.01 will specify the aggregate number of
Registrable Securities not to be registered. All Purchasers permitting
the registration of any of their Registrable Securities (the "Selling
Holders") shall, prior to the filing of the Registration Statement,
deliver a notice to the Company confirming their desire for such
registration (the "Request Notice") which notice will also specify the
intended methods of disposition thereof. Each Purchaser shall be entitled
so to request or participate in a request for one Registration initiated
under this Section 6.01(a) filed with and declared effective by the
Commission, the expenses of which shall be borne by the Company in
accordance with this Agreement, provided, however, that if a Purchaser
elects not to participate in a Registration, such Purchaser shall have no
further rights to participate in or request a Registration.
b. Selection of Underwriter(s). The Purchaser(s) giving a
Request Notice with respect to a proposed Demand Registration pursuant to
this Section 6.01 shall have sole discretion to select the underwriter(s),
if any, to manage the sale of Registrable Securities pursuant to such
Registration under this Section 6.01.
c. Effective Registration Statement. A Registration requested
pursuant to this Section 6.01 will be deemed to have been effected as soon
as it has become effective; provided, however that if the offering of
Registrable Securities pursuant to such registration is interfered with by
any stop order, injunction or other order or requirement of the Commission
or other governmental agency or court within 135 days after it has become
effective, such Registration will be deemed not to have been effected;
provided, however, that the Company shall have a period of up to sixty
(60) days to cause the rescission of such stop order or injunction before
the higher interest rate called for by Section 1.04 hereof shall take
effect. If any such stop order or injunction is rescinded, the effective
periods required by this Agreement shall continue upon such rescission and
be extended by the number of days by which such stop order reduced the
effective period.
6.02 REGISTRATION PROCEDURES. It shall be a condition precedent to
the obligations of the Company and any underwriter(s) to take any action
pursuant to this Section 6 that the Selling Holders in any Registration
shall furnish to the Company such information regarding them, the
Registrable Securities held by them, the intended method of disposition of
such Registrable Securities, and such agreements regarding
indemnification, disposition of such securities and the other matters
referred to in this Section 6 as the Company shall reasonably request.
With respect to any Registration pursuant to this Section 6, the Company
shall, as expeditiously as practicable:
a. Prepare a Form S-3 registration statement, (or the Company
if is not eligible to use a Form S-3, then another appropriate form
prescribed by the Commission) and file it with the Commission within
thirty (30) days after the Company receives a Request Notice and any
necessary amendments thereto covering the Registrable Securities of the
Selling Holders and use its best efforts to cause such registration
statement to become effective within sixty (60) days after receipt of the
Request Notice;
b. Prepare and file with the Commission such amendments and
post-effective amendments to such registration statement and any documents
required to be incorporated by reference therein as may be necessary to
keep the registration statement effective for a period of three (3) years
(or such shorter period which will terminate when there are no longer any
Warrants outstanding hereunder or when all Registrable Securities covered
by such registration statement have been sold or withdrawn, but not prior
to the expiration of the time period referred to in Section 4(3) of the
Act and Rule 174 thereunder, if applicable) and cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act (or any successor rule);
c. Furnish to such Selling Holder, without charge, at least
one conformed copy of the registration statement and any post-effective
amendment thereto, upon request, and a reasonable number of copies of the
final prospectus and any preliminary prospectus(es) and any amendments or
supplements thereto, and any exhibits or documents incorporated therein by
reference;
d. Immediately notify such Selling Holder, at any time when a
prospectus relating thereto is required to be delivered under the Act,
when the Company becomes aware of any event which causes the prospectus to
contain any untrue statement of material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made not misleading and, as promptly
as practicable thereafter, prepare and file and furnish a supplement or
amendment to such prospectus correcting same;
e. Use its best efforts to cause all securities included in
such registration statement to be listed, by the date of the first sale of
securities pursuant to such registration statement, on the NASDAQ National
Market System;
f. Make generally available to Selling Holders an earnings
statement satisfying the provisions of Section 11(a) of the Act no later
than 90 days after the end of the 12-month period beginning with the first
month of the Company's first fiscal quarter commencing after the effective
date of the registration statement, which statement shall cover said 12-
month period;
g. Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at
the earliest possible moment;
h. As promptly as practicable after filing with the Commission
of any subsequently filed document which is incorporated by reference into
a registration statement (such as a Form 10-Q), deliver a reasonable
number of copies of such document to such Selling Holder;
i. Prior to the date on which the registration statement is
declared effective, use its best efforts to register or qualify the
securities covered by the registration statement for offer and sale under
the securities or blue sky laws of each state of the United States as such
Selling Holder or underwriter(s), may reasonably request and to keep each
such registration or qualification effective, including through new
filings, or amendments or renewals, during the period such registration
statement is required to be kept effective and to do any and all other
acts or things necessary or advisable to enable the disposition in all
such jurisdictions of the Registrable Securities covered by the applicable
registration statement;
j. Enter into such customary agreements (including an
underwriting agreement in customary form) and take such other actions
customarily taken by registrants as sellers of a majority of such
Registrable Securities or the underwriter(s), if any, reasonably request
in order to expedite or facilitate the disposition of such Registrable
Securities;
k. Obtain a "cold comfort" letter or letters from the
Company's independent public accountants in customary form as may
reasonably be requested;
l. Make available for inspection by any Selling Holder holding
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other agent
retained by any such Selling Holder or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of the Company, and supply all information reasonably requested by any
such Selling Holder, underwriter, attorney, accountant or agent in
connection with such registration statement;
m. Cooperate with such Selling Holder and the underwriter(s),
if any, to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legends) representing the Shares to be sold
under the registration statement, and enable such securities to be in such
denominations and registered in such names as the Selling Holder or the
underwriter(s), if any, may request; and
n. Use its best efforts to cause the Shares covered by the
registration statement to be registered with or approved by such other
governmental agencies or authorities within the United States, including,
without limitation, the National Association of Securities Dealers, Inc.,
as may be necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Registrable
Securities.
The Selling Holders, upon receipt of any notice from the Company
of any event of the kind described in paragraph (d) of this Section 6.02,
will forthwith discontinue disposition of the Shares until the Selling
Holders' receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (d) of this Section 6.02 or until they are
advised in writing (the "Advice") by the Company that the use of the
prospectus may be resumed, and have received copies of any additional or
supplemental filings which are incorporated by reference in the
prospectus. In the event the Company shall give any such notice, the time
periods mentioned in paragraph (b) of this Section 6.02 shall be extended
by the number of days during the period from and including any date of the
giving of such notice to and including the date when each seller of
securities covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by paragraph
(d) of this Section 6.02 hereof or the Advice.
6.03 BLACKOUT PERIODS. (i) At any time when a registration
statement effected pursuant to Section 6.01 relating to Registrable
Securities is effective, upon written notice from the Company to the
Selling Holders that either:
a. after the registration statement covering the Registrable
Securities has been effective for a period of at least one hundred twenty
(120 days), the Company has determined to engage in a publicly registered
offering of its Common Stock and has been advised in writing (with a copy
to the Selling Holders) by a nationally recognized independent investment
banking firm selected by the Company that, in such firm's opinion, the
Selling Holders' sale of Registrable Securities pursuant to the
registration statement would adversely affect such immediately planned
Company Offering (a "Transaction Blackout"), provided, however, that there
may not be more than one Transaction Blackout in any 365 day period; or
b. the Company determines in the good faith judgment of legal
counsel to the Company that the cessation of the Selling Holders' sale of
Registrable Securities pursuant to the registration statement is mandated
by law (an "Information Blackout"),
the Selling Holders shall suspend sales of Registrable Securities pursuant
to such registration statement until the earlier of:
a. in the case of a Transaction Blackout, the earliest of (A)
thirty (30) days after the beginning of such Transaction Blackout, (b) the
termination of any "blackout" period required by the underwriters to be
applicable to the Selling Holders, if any, in connection with such Company
offering, (C) promptly after abandonment of such Company offering or (D)
sixty (60) days after the date of the Company's written notice of a
Transaction Blackout, or (ii) in the case of an Information Blackout, the
earlier of (A) the date upon which the cessation of such sales would, in
the opinion of the Company's legal counsel, no longer be mandated by law,
or (iii) thirty (30) days after the beginning of such Information
Blackout; or
b. such time as the Company notifies the Selling Holders that
sales pursuant to such registration statement may be resumed (the number
of days from such suspension of sales of the Selling Holders until the day
when such sales may be resumed hereunder is hereinafter called a "Sales
Blackout Period);
provided that the Company may not impose a Transaction Blackout during (a)
any underwritten public offering, (b) the 120 day period immediately
following the date on which a registration statement effected pursuant to
Section 6.01 first became effective or (c) the 365 day period immediately
following the expiration of any Transaction Blackout.
(ii) if there is a Transaction Blackout or an Information
Blackout, the time periods set forth in Section 6.02(b) shall be extended
for a number of days equal to the number of days in the Sales Blackout
Period.
6.04 REGISTRATION EXPENSES. In the case of any Registration, the
Company shall bear all of the costs and expenses of such Registration
(including, without limitation, the expenses of preparing any registration
statement, Commission and state "blue sky" filing, registration and
qualification fees, the cost of providing any legal opinion or "cold
comfort" letters reasonably requested by the Selling Holders and printing
costs); provided, however, that the Company shall not be responsible for
legal fees or expense of counsel for any of the Selling Holders, or for
any underwriter's discounts or commissions that are attributable to the
Registrable Securities of a Selling Holder.
6.05 INDEMNIFICATION AND CONTRIBUTION.
a. Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Selling Holder, its officers, directors
and agents and each person who controls (within the meaning of the Act and
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) such
Selling Holder, including, without limitation, any general partner or
manager of any thereof, against all losses,claims, damages, liabilities
and expenses arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in any registration statement,
prospectus or preliminary prospectus in which such Selling Holder is
participating or in any document incorporated by reference therein or any
omission or alleged omission to state therein a material fact necessary to
make the statement therein (in the case of the prospectus or any
preliminary prospectus, in light of the circumstances under which they
were made) not misleading, except insofar as the same are caused by, based
upon or contained in any information with respect to such Selling Holder
furnished in writing to the Company by such Selling Holder expressly for
use therein; provided, however, that the foregoing indemnity agreement
with respect to any preliminary prospectus shall not inure to the benefit
of any Selling Holder from whom the person asserting such loss, claim,
damage or liability purchased the securities if it is determined that it
was the responsibility of such Selling Holder to provide such person with
a current copy of the prospectus and such current copy of the prospectus
would have cured such loss, claim, damage or liability. The Company will
also indemnify underwriters (as such term is defined in the Act), their
officers and directors and each person who controls such persons (within
the meaning of the Act) to the same extent as provided above with respect
to the indemnification of the Selling Holders.
b. Indemnification by the Selling Holders. In connection with
any Registration in which a Selling Holder is participating, such Selling
Holder will furnish to the Company in writing such information and
affidavits with respect to such Selling Holder as the Company reasonably
requests for use in connection with any registration statement or
prospectus and agrees to indemnify and hold harmless the Company, its
directors, officers and agents and each person who controls (within the
meaning of the Act and the Exchange Act) the Company against any losses,
claims, damages, liabilities and expenses arising out of or based upon any
untrue statement of a material fact or any omission to state a material
fact necessary to make the statements in the registration statement or
prospectus or preliminary prospectus (in the case of the prospectus or
preliminary prospectus, in light of the circumstances under which they
were made) not misleading, to the extent, but only to the extent, that
such untrue statement or omission is contained in any information or
affidavit such Selling Holder furnished in writing to the Company by such
Selling Holder expressly for use therein; provided, however, that the
amount recoverable by the Company from any Selling Holder under this
indemnification provision shall not exceed the amount of net proceeds
received by the Selling Holder from the sale of Registrable Securities
hereunder; and provided, further, that the indemnity agreement contained
in this Section 6.05 shall not apply to amounts paid in settlement of any
loss, claim, damage, liability or action arising pursuant to a
registration under Section 6 if such settlement is effected without the
consent of the Selling Holder (which consent shall not be unreasonably
withheld). Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any
of the prospective sellers, or any of their respective affiliates,
directors, officers or controlling persons and shall survive the transfer
of such securities by such seller.
c. Conduct of Indemnification Proceedings. Any person
entitled to indemnification hereunder will (i) give prompt written notice
to the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest may exist between such indemnified and
indemnifying party, permit the indemnifying party to assume the defense of
such claim, jointly with any other indemnifying party similarly notified
to the extent it may elect, with counsel reasonably satisfactory to the
indemnified party. The failure to so notify the indemnifying party shall
relieve the indemnifying party from any liability hereunder with respect
to the action to the extent that such failure materially prejudices the
indemnifying party; provided, however, that any such failure shall not
relieve the indemnifying party from any other liability which it may have
to any other party. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent
will not be unreasonably withheld). No indemnifying party will consent to
entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of
such claim or litigation. An indemnifying party who is not entitled to,
or elects not to, assume the defense of a claim will not be obligated to
pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless
in the reasonable judgment of any indemnified party a conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying party
shall be obligated to pay the reasonable fees and expenses of such
additional counsel or counsels.
d. Contribution. If for any reason the indemnification
provided for in the preceding paragraphs (a) and (b) of this Section 6.05
is unavailable to an indemnified party as contemplated by the preceding
paragraphs (a) and (b) of this Section 6.05 for any reason, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative
benefits received by the indemnified party and the indemnifying party, but
also the relative fault of the indemnified party and the indemnifying
party, as well as any other relevant equitable considerations.
Notwithstanding the foregoing, if the indemnifying party is a Selling
Holder, any contribution pursuant to this Section 6.05(d) shall be several
and not joint, and shall be limited to the amount of net proceeds received
by such Selling Holder from the sale of Registrable Securities hereunder.
e. Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 6.05 (with
appropriate modifications) shall be given by the Company and each seller
of Registrable Securities with respect to any required registration or
other qualification of securities under any federal or state law or
regulation or governmental authority other than the Act.
6.06 EXCHANGE ACT REPORTS. The Company agrees that at all times
after it has filed a registration statement pursuant to the requirements
of the Act relating to any class of equity securities of the Company, it
will use its best efforts to file in a timely manner all reports required
to be filed by it pursuant to the Exchange Act to the extent the Company
is required to file such reports. Upon request of a Selling Holder, the
Company will furnish the requesting Selling Holder with such information
as may be necessary to enable such Selling Holder to effect sales pursuant
to Rule 144A. Notwithstanding the foregoing, the Company may deregister
any class of its equity securities under Section 12 of the Exchange Act or
suspend its duty to file reports with respect to any class of its
securities pursuant to Section 15(d) of the Exchange Act if it is then
permitted to do so pursuant to the Exchange Act and rules and regulations
thereunder.
6.70 PARTICIPATION IN REGISTRATIONS. No Selling Holder may
participate in any Registration hereunder unless such Selling Holder (a)
agrees to sell the Selling Holder's securities on the basis provided in
any underwriting arrangements approved by the persons entitled hereunder
to approve such arrangements, and (b) completes and executes all
questionnaires, powers of attorney, underwriting agreements and other
documents customarily required under the terms of such underwriting
arrangements.
6.08 REMEDIES. Each Selling Holder shall have the right and remedy
to have the provisions of Section 6.01 specifically enforced by any court
having jurisdiction in the event that the Company breaches such
provisions, and the Company shall reimburse such Selling Holder for the
reasonable costs of the expenses for counsel for such Purchaser incurred
in connection with such proceeding.
7. MISCELLANEOUS
7.01 NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile or similar
writing) and shall be given to such party at its address or facsimile
number set forth on the signature pages hereof or such other address or
facsimile number as such party may hereafter specify in writing to the
Secretary of the Company for the purpose by notice to the party sending
such communication. Each such notice, request or other communication
shall be effective (i) if given by facsimile, when such message is
transmitted to the number set forth on such signature pages or such other
number as a party may specify in writing to the Secretary of the Company
or (ii) if given by any other means, the earlier of (x) when delivered by
hand to the address set forth on such signature pages or such other
address as a party may specify in writing to the Secretary of the Company
or (y) five business days after the mailing of such notice by certified
mail. If more than one Purchaser specified the same address for such
notices, then a single notice to such address shall be deemed to be notice
to all Purchasers at that address.
7.02 BINDING EFFECT; BENEFITS. This Agreement shall be binding upon
and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended or shall be construed to give any person
other than the parties to this Agreement or their respective successors or
assigns any legal or equitable right, remedy or claim under or in respect
of any agreement or any provision contained herein provided, however, that
nothing herein shall be construed to preclude the assignment by Purchasers
hereunder of their respective Options or, in connection with their resale
of Warrants, Debentures or Units purchased hereunder, of the rights
attendant thereto, including but not limited to the registration rights
for Registrable Securities, subject only to compliance with applicable
securities laws. This Agreement constitutes the entire agreement and
understanding, and supersedes and terminates all prior agreements and
understandings, both oral and written, between the parties hereto relating
to the subject matter hereof.
7.03 WAIVER. Any party hereto may, without binding any other party,
by written notice to another party (a) extend the time for the performance
of any of the obligations or other actions of such other party under this
Agreement; (b) waive compliance with any of the conditions or covenants of
such other party contained in this Agreement; and (c) waive or modify
performance of any of the obligations of such other party under this
Agreement. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute
a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained herein.
Neither the waiver by any party hereto of a breach of any provision hereof
or any preceding or succeeding breach nor the failure by any party to
exercise any right or privilege hereunder shall be deemed a waiver of such
party's rights or privileges hereunder nor shall it be deemed a waiver of
such party's rights to exercise the same at any subsequent time or times
hereunder.
7.04 AMENDMENT. This Agreement may be amended, modified or
supplemented only by a written instrument executed by all of the parties
hereto (including Transferees of Purchasers).
7.05 ASSIGNABILITY. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by either the Company or any Purchaser except as otherwise
contemplated hereunder and except that the rights of Purchasers may be
assigned as provided herein.
7.06 TERMINATION. The right of any Purchaser to Demand Registration
hereunder will terminate at such time as there are no longer Registerable
Securities held by that Purchaser.
7.07 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF COLORADO WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS.
7.08 PRONOUNS. Whenever the context may require any pronoun used
herein shall include the corresponding masculine, feminine or neuter
forms.
7.09 ATTORNEYS FEES. In the event of a dispute concerning the
provisions of this Agreement which results in litigation, arbitration or
other dispute resolution proceedings, the parties agree that the legal
fees and other expenses of the prevailing party shall be borne by the
other, non-prevailing parties to the dispute.
7.10 SECTION AND OTHER HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
7.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts or separate number of counterparts, each of which shall be
deemed to be an original and all of which together shall be deemed to be
one and the same instrument.
7.12 NO JOINT AND SEVERAL LIABILITY AMONG PURCHASERS. The
obligations, representations and warranties of the Purchasers hereunder
are made by each Purchaser as to himself, herself or itself only. There
shall be no joint and several liability among the Purchasers.
IN WITNESS WHEREOF, the Company and each Purchaser has executed this
Agreement as of the day and year first above written.
ATTEST: VARI-L COMPANY, INC.
/s/Jon L. Clark By:/s/David G. Sherman
Jon L. Clark, Vice President David G. Sherman, President
of Finance and Treasurer
Notices: 11101 East 51st Ave.
Denver, CO 80239
Facsimile: 303/371-0845
PURCHASERS:
Millenco LP
Newark Sales
Sales Link
Rita Folger
Carla Stuart
Ace Foundation
Julie Nordlicht
Mark Nordlicht
Broadway Partners
Robert Cohen
Ellen Cohen
Lenore Katz
Jeff Rubin
LIST OF SCHEDULES AND EXHIBITS
Schedule 1 Purchasers - First Closing Date
Exhibit A Form of Convertible Subordinated Debenture
Exhibit B Form of Warrant
Exhibit C Form of Accredited Investor Statement
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW. THESE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION THEREFROM.
VARI-L COMPANY, INC.
CONVERTIBLE SUBORDINATED DEBENTURE
Debenture No.
March 4, 1997
FOR VALUE RECEIVED, the undersigned, Vari-L Company, Inc., a Colorado
corporation (the "Company"), does hereby promise to pay to the order of
("Holder"), at the Company's principal
business office, or at such other place as Holder may hereafter designate
in writing, the principal sum of $ (the "Principal") and
interest thereon at the rate of 7% per annum from the date hereof until
the first to occur of (i) the date on which the Principal and accrued
interest of this Debenture is converted into shares of the Company's $.01
par value common stock ("Common Stock") as provided in Section 1 below
(the "Conversion Date"), or (ii) four years from the date hereof (the
"Maturity Date") at which time the Principal and all accrued interest
thereon shall be due and payable; provided, however, that if the Common
Stock into which this Debenture is convertible is not registered with the
Securities and Exchange Commission (pursuant to the Securities Purchase
Agreement dated March 4, 1997 between the Company and certain purchasers
(the "Securities Purchase Agreement")) on or before 120 days from the date
hereof, interest shall accrue from the 120th day of the date hereof at the
rate of 15% per annum until the first to occur of (i) such registration
being effective, (ii) the Conversion Date, or (iii) the Maturity Date.
Accrued interest shall be due on the Conversion Date or the Maturity Date,
whichever occurs first.
1. CONVERSION.
1.01 CONVERSION BY HOLDER.
a. Subject to the limitations provided in the Securities
Purchase Agreement, all or any portion of the Principal and accrued and
unpaid interest thereon may be converted (a "Conversion") at any time, at
the election of the Holder, into the number of shares of the Company's
$.01 par value common stock ("Common Stock") equal to the Principal, plus
any interest then accrued, divided by the lower of (i) $9.50 per share, or
(ii) 84% of the average closing bid price of the Company's Common Stock on
the Nasdaq National Market (or such other stock exchange, quotation
service or over the counter market on which the Common Stock may be
traded) for the ten (10) trading days prior to the Conversion (the
"Conversion Price").
b. To effect a Conversion of this Debenture into shares of
Common Stock, the Holder shall deliver by telecopy or otherwise, a written
request to convert this Debenture into Common Stock ("Conversion Notice")
in the form attached hereto as Exhibit A to the Company at its principal
office to the attention of Darce Hume, Controller, and Holder shall
deliver to Darce Hume at the Company as soon as practicable thereafter,
the original Conversion Notice and this Debenture. At its expense, the
Company shall within three (3) business days of its receipt of the
original Conversion Notice and this Debenture, issue and deliver to Holder
at the Company's principal office, or at such other place designated by
the Holder, a certificate ("Certificate") evidencing the issuance of such
Common Stock to which the Holder is entitled upon such Conversion,
together with any cash amounts payable in lieu of the issuance of a
fraction of a share of Common Stock as described in Section 1.02 of this
Debenture.
c. Provided that Holder delivers the original Conversion
Notice and this Debenture within two (2) business days of the initial
delivery of the Conversion Notice to the Company by telecopy or otherwise,
as provided in d above, Conversion shall be deemed to be effective on the
date of such initial delivery of the Conversion Notice. Otherwise,
Conversion shall be deemed to be effective on the date the Company
receives the original Conversion Notice and this Debenture. Thereafter,
the Holder shall be treated for all purposes as the record holder of such
securities as of the date of conversion. Under certain circumstances, the
Company shall be obligated to make a late payment to Holder as set forth
in Section 5.03 of the Securities Purchase Agreement.
1.02 FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any Conversion hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefore in an
amount determined in such reasonable manner as may be prescribed by the
Board of Directors of the Company.
1.03 REDEMPTION BY THE COMPANY.
a. If the Company receives a request to convert all or any
portion of this Debenture and the Conversion Price is less than $8 per
share (the "116% Redemption Trigger Price"), the Company shall have the
right to decline to convert some or all of the Debenture or portion of a
Debenture for which Conversion is attempted and instead redeem such
portion by payment of 116% of the principal plus accrued and unpaid
interest thereon (the "Redemption Amount"). In addition, if the Company
has not obtained the shareholder or other approval required by Section
1.01 of the Securities Purchase Agreement, or (at Purchaser's option) if
the registration statement referred to above has not been declared
effective by the Securities and Exchange Commission by the first
anniversary of the date of issuance, then the Company shall be required to
redeem this Debenture or any unconverted portion thereof on the first
anniversary of the date of issuance hereof for cash equal to 115% of the
principal amount hereof plus accrued interest (the "Non-approval
Redemption Amount") and payment of such amount shall be made within three
(3) business days after first anniversary date of the date of issuance
hereof.
b. In order for the Company to effect redemption of this
Debenture into shares of Common Stock under the first sentence of Section
1.03(a), the Company shall notify the Holder, no later than three (3)
business days after the attempted Conversion, of the Company's intent to
effect such redemption. At its expense, the Company shall, no later than
thirty (30) days thereafter, issue and deliver to the Holder at the
Company's principal office or at such other place designated by the
Holder, the 116% Redemption Amount by a bank draft for immediately
available funds or a check drawn on the Company's account. Interest shall
continue to accrue during such thirty (30) day period. Under certain
circumstances, the Company shall be obligated to make a late delivery
payment to Holder as set forth in Section 5.03 of the Securities Purchase
Agreement.
2. SUBORDINATION. As used herein, "Senior Debt" is any secured
indebtedness of the Company, whether presently owed or incurred at any
time in the future, in favor of one or more banks, savings and loan
associations, institutions or other asset-based lenders in an aggregate
amount, up to $25,000,000. Upon receipt by the Company of notice from a
lender of Senior Debt that the Company is in default under any Senior Debt
and continuing during the period of such default (unless such lender has
waived the default or has agreed not to enforce any remedies with respect
to such default), the indebtedness evidenced by this Debenture shall be
subordinated and subject in right of payment to the prior payment in full
of the Senior Debt and no payment of Principal or interest on this
Debenture shall be made by the Company. Failure to make such payment
while any Senior Debt is in default shall not be deemed an Event of
Default under this Debenture until the Maturity Date; provided, however,
that notwithstanding the occurrence of any such Event of Default on the
Maturity Date, payment of Principal and accrued interest hereon shall not
be paid so long as any Senior Debt remains in default and this Debenture
shall remain subordinated and subject in right of payment to all Senior
Debt. If this Debenture remains unpaid after the Maturity Date because it
has been subordinated as provided herein, Holder shall continue to have
the right to convert pursuant to Section 1 hereof until this Debenture is
paid in full. The Holder of this Debenture, by the purchase and
acceptance hereof, does hereby agree to and shall be bound by all the
provisions contained herein relating to such subordination.
3. EVENTS OF DEFAULT. Subject to the limitation on defaults while
Senior Debt is in arrears as described in Section 2 of this Debenture, if
any of the following events shall occur (referred to herein as an "Event
of Default") and shall be continuing:
a. Default in the payment of Principal or accrued interest of
the Debenture on the Maturity Date; or
b. Default in the due observance or performance of any other
covenant, condition or agreement on the part of the Company to be observed
or performed pursuant to the terms hereof or of the covenants set forth in
Section 5, 6.01 or 6.02 of the Securities Purchase Agreement and such
default continues for 20 days after written notice thereof (specifying
such default and making the request that the same be remedied in
accordance with this Section 3), has been received by the Company and was
sent by the Holder or Holders of at least 33-1/3% of the principal amount
of the Debentures then outstanding (the Company to give forthwith to all
other holders of Debentures at the time outstanding written notice of the
receipt of such notice specifying the default referred to therein); or
c. The entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company as bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company under federal bankruptcy laws or any other applicable federal
estate law, or appointing a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company or of any
substantial part of its property or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order unstayed
and in effect for a period of 60 consecutive days; or
d. The institution by the Company of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it or the
filing by it of a petition or answer or consent seeking reorganization or
release under federal bankruptcy laws or any other applicable federal or
state law, or the consent by it to the filing of any such petition or to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or of any substantial part of
its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due or the taking of corporate action by
the Company in furtherance of any such action;
then, the Holder or Holders of at least 33-1/3% in aggregate principal
amount of the Debentures at the time outstanding may, at its or their
option, by notice to the Company, declare all the Debentures to be, and
all the Debentures shall upon the Company's receipt of such notice be and
become, forthwith due and payable together with interest accrued thereon
without presentment, demand, protest or further notice of any kind, all of
which are expressly waived by the Company to the extent permitted by law.
4. STOCK FULLY PAID; RESERVATION OF SHARES. All shares of Common
Stock which may be issued upon the exercise of the rights represented by
this Debenture will, upon issuance, be fully paid and nonassessable, and
free from all taxes, liens and charges with respect to the issue thereof.
During the period within which the rights represented by this Debenture
may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the conversion
rights evidenced by this Debenture, a sufficient number of shares of its
Common Stock to provide for the exercise of the rights represented by this
Debenture.
5. ADJUSTMENT OF CONVERSION PRICE AND REDEMPTION TRIGGER PRICE.
The number and kind of securities issuable upon conversion of this
Debenture and the Conversion Price (as well as the Redemption Trigger
Price) shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
5.01 RECLASSIFICATION OR MERGER. In case of any reclassification or
change of outstanding securities of the shares of the Company's Common
Stock issuable upon conversion of this Debenture (other than a change in
par value, or from par value to no par value, or from no par value to par
value) or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the
Company is a continuing corporation and which does not result in any
reclassification or change of outstanding securities issuable upon
conversion of this Debenture), or in case of any sale of all or
substantially all of the assets of the Company, the Company shall, as
condition precedent to such transaction, execute a new Debenture or cause
such successor or purchasing corporation, as the case may be, to execute a
new Debenture, providing that the holder of this Debenture shall have the
right to convert such new Debenture and upon such conversion to receive,
in lieu of each share of Common Stock theretofore issuable upon exercise
of this Debenture, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification,
change or merger by the holder of one share of Common Stock. Such new
Debenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
section 5. The provisions of this section 5 shall similarly apply to
successive reclassifications, changes, mergers and sales of assets.
5.02 SUBDIVISION OR COMBINATION OF SHARES. If the Company at any
time while this Debenture remains outstanding shall subdivide or combine
its Common Stock, the Conversion Price and the Redemption Trigger Price
shall be proportionately decreased in the case of a subdivision or
increased in the case of a combination.
5.03 STOCK DIVIDENDS. If the Company at any time while this
Debenture is outstanding shall pay a dividend with respect to Common Stock
payable in, or make any other distribution with respect to Common Stock
(except any distribution specifically provided for in the foregoing
Sections 5.01 and 5.02) of, Common Stock, then the Conversion Price and
the Redemption Trigger Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Conversion Price
or the Redemption Trigger Price, as the case may be, in effect immediately
prior to such date of determination by a fraction (a) the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to such dividend or distribution, and (b) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
6. NOTICE OF ADJUSTMENT. Whenever the Conversion Price and the
Redemption Trigger Price shall be adjusted pursuant to Section 5 hereof,
the Company shall make a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the Conversion Price and Redemption Trigger Price after
giving effect to such adjustment, and shall cause copies of such
certificate to be mailed by first class mail, postage prepaid, to the
Holder.
7. NOTICE OF CERTAIN ACTIONS. In the event that the Company shall
propose at any time:
a. to declare any dividend or distribution upon any class or
series of its stock, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of earnings
or earned surplus;
b. to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class
or series or other rights;
c. to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or
d. to merge or consolidate with or into any other corporation,
or sell, lease or convey all or substantially all its assets or property,
or to liquidate, dissolve or wind up, whether voluntary or involuntary;
then in connection with each such event, this Company shall send to the
Holder:
e. at least 10 days prior written notice of the date on which
a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shall
be entitled thereto) or for determining rights to vote in respect of the
matters referred to in paragraphs a. and b. above;
f. in the case of the matters referred to in paragraphs c. and
d. above, at least ten (10) days prior written notice of the date for the
determination of shareholders entitled to vote thereon (and specifying the
date on which the holders of Common Stock shares shall be entitled to
exchange their Common Stock for securities or other property deliverable
upon the occurrence of such event); and
g. prompt notice of any material change in the terms of the
transaction described in a. through d. above.
8. COMPLIANCE WITH SECURITIES ACT; NON-TRANSFERABILITY OF
DEBENTURE; DISPOSITION OF SHARES OF COMMON STOCK.
8.01 COMPLIANCE WITH SECURITIES ACT. By acceptance hereof, Holder
agrees that this Debenture and the shares of Common Stock to be issued
upon conversion hereof are being acquired for investment and that
it/he/she will not offer, sell or otherwise dispose of this Debenture or
any shares of Common Stock to be issued upon conversion hereof except
under circumstances which will not result in a violation of the Securities
Act of 1933, as amended (the "Act"). In the absence of registration of
the shares of Common Stock issuable upon conversion of this Debenture
(including but not limited to registration pursuant to the February 28,
1997 Securities Purchase Agreement under which the Debenture was purchased
from the Company), upon conversion of this Debenture, Holder shall confirm
in writing, in a form attached hereto as Exhibit B, that the shares of
Common Stock are being acquired for investment and not with a view toward
distribution or resale. In addition, Holder shall provide such additional
information regarding Holder's financial and investment background as the
Company may reasonably request, to confirm that Holder qualifies as an
"accredited investor" under the Act. All shares of Common Stock issued
upon exercise of this Debenture (unless registered under the Act) shall be
stamped or imprinted with a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT"). NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMPANY AND WITHOUT REGISTRATION UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS, IF ANY, OR PURSUANT TO
EXEMPTIONS THEREFROM."
9. RIGHTS OF SHAREHOLDERS. No Holder shall be entitled to vote or
receive dividends or be deemed the record owner of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock,
change of par value or change of stock to no par value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until the Debenture
or Debentures shall have been exercised and the shares purchasable upon
the exercise hereof shall have become deliverable, as provided herein.
10. REGISTRATION RIGHTS. The Common Stock obtained upon conversion
of this Debenture shall have the registration rights, obligations and
restrictions set forth in the Securities Purchase Agreement. The term
"Registrable Securities" in such Securities Purchase Agreement shall
include all Common Stock obtained upon exercise of this Debenture.
11. MISCELLANEOUS. The headings in this Debenture are for purposes
of convenience and reference only, and shall not be deemed to constitute a
part hereof. Neither this Debenture nor any term hereof may be changed,
waived, discharged or terminated orally but only by an instrument in
writing signed by the Company and Holder. All notices, requests and other
communications to any party hereunder shall be in writing (including
telecopy or similar writing) and shall be given to such party at its
address or telecopy number contained in the Company's records or such
other address or telecopy number as such party may hereafter specify in
writing to the Secretary of the Company for that purpose, or, if to the
Company, to 11101 E. 51st Ave., Denver, CO 80239, telecopy number 303/373-
3870, attention Darce Hume, Controller. Each such notice, request or
other communication shall be effective (i) if given by telecopy, when such
message is transmitted to the telecopy number contained in the Company's
records or such other number as a party may specify in writing to the
Company at such address, or (ii) if given by any other means, the earlier
of (x) when delivered by hand to the address contained in the Company's
record or such other address as a party may specify in writing to the
Company at such address, or (y) five business days after the mailing of
such notice by certified mail.
IN WITNESS WHEREOF, the Company has caused this Debenture to be
executed in its name by the signature or facsimile signature of its
President, or by one of its Vice Presidents, and has caused its corporate
seal to be hereto affixed and attested by the signature or facsimile
signature of its Treasurer and this Debenture to be dated March 4, 1997.
VARI-L COMPANY, INC.
ATTEST:
- ------------------------------ By:------------------------------
Jon L. Clark, Vice President David G. Sherman, President
of Finance and Treasurer
[SEAL]
EXHIBIT A
NOTICE OF CONVERSION
TO: VARI-L COMPANY, INC.
1. The undersigned hereby elects to convert $ , plus
accrued interest thereon, of this Debenture into the number of Shares of
Common Stock of Vari-L Company, Inc. into which the Debenture tendered
herewith is convertible pursuant to its terms.
2. Please issue a certificate of certificates in the name of the
undersigned or in such other names as is specified below
---------------------------------------------
(Name)
---------------------------------------------
---------------------------------------------
(Address)
3. [For use only in the absence of an effective registration
statement covering the Shares] The undersigned represents that the
aforesaid shares of Common Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale in
connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares. In support
thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Exhibit B.
----------------------------
(Signature)
- ---------------
(Date)
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
COMPANY : VARI-L COMPANY, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed securities (the
"Securities"), I, the Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. I
am purchasing these Securities for my own account for investment purposes
only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933
("Securities Act").
(b) I understand that the Securities have not been registered under
the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand
that, in the view of the Securities and Exchange Commission ("SEC"), the
statutory basis for such exemption may be unavailable if my representation
was predicated solely upon a present intention to hold these Securities
for the minimum capital gains period specified under tax statutes, for a
deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in
the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or
unless an exemption from registration is otherwise available. Moreover, I
understand that the Company is under no obligation to register the
Securities except as set forth in the Securities Purchase Agreement. In
addition, I understand that the certificate evidencing the Securities will
be imprinted with a legend which prohibits the transfer of the Securities
unless they are registered or such registration is not required in the
opinion of counsel for the Company.
(d) I am aware of the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions.
(e) I further understand that at the time I wish to sell the
Securities there may be no public market upon which to make such a sale.
(f) I further understand that in the event all of the requirements
of Rule 144 are not satisfied, registration under the Securities Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not
exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is
available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own
risk.
Signature of Purchaser:
------------------------------
Date: ------------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE
SECURITIES LAW. THESE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION THEREFROM.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE
COMPANY AND LEGAL COUNSEL FOR THE COMPANY.
Void after 5:00 P.M., Right to Purchase Shares of
Denver, Colorado Time, the Common Stock of Vari-L
on March 4, 2001. Company, Inc.
Warrant No.
VARI-L COMPANY, INC.
STOCK PURCHASE WARRANT
VARI-L COMPANY, INC., a Colorado corporation (the "Company"), hereby
certifies that for value received, , or
assigns ("Holder"), is entitled to purchase, subject to the terms and
conditions hereinafter set forth, an aggregate of fully paid
and nonassessable shares ("Shares") of the Common Stock of the Company
("Common Stock"), at a price of $9.50 per share. The number of Shares to
be received upon the exercise of this Warrant and the price to be paid for
a Share may be adjusted from time to time as hereinafter set forth. The
exercise price of a Share in effect at any time and as adjusted from time
to time is hereinafter referred to as the "Warrant Price."
1. TERM. Subject to the limitations provided in the Securities
Purchase Agreement dated March 4, 1997 by and among the Company and
certain purchasers (the "Securities Purchase Agreement"), the purchase
right represented by this Warrant is exercisable, in whole or in part, at
any time and from time to time from the date hereof through March 4, 2001.
The Company shall have no obligation to furnish any further notice of the
expiration date of this Warrant to Holder before expiration date.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
(a) Subject to paragraph 1 hereof, Holder may exercise the
purchase right represented by this Warrant, in whole or in part, by
delivering to the principal office of the Company to the attention of
Darce Hume, Controller, by telecopy or otherwise, a notice of exercise
("Exercise Notice") in the form attached hereto as Exhibit A, duly
executed, and within a reasonable time after such delivery, by delivering
to Darce Hume at the Company the original Exercise Notice, this Warrant,
and payment to the Company, by check, of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Shares then
being purchased. At its expense, the Company shall within three (3)
business days after its receipt of the original Exercise Notice, this
Warrant and payment, issue and deliver to the Holder at the Company's
principal office, or at such other place designated by Holder, a
certificate evidencing the issuance of those Shares to which Holder is
entitled pursuant to the terms hereunder. If this Warrant is not fully
exercised, a new Warrant representing the portion of the Shares with
respect to which this Warrant shall not have been exercised shall be
issued to Holder within thirty (30) days.
(b) Provided that Holder delivers the original Conversion
Notice, this Warrant and payment within two (2) business days of the
initial delivery of the Exercise Notice to the Company by telecopy or
otherwise, exercise shall be deemed to be effective on the date the
Exercise Notice is first received by the Company by telecopy or otherwise,
as described in (a) above. Otherwise, exercise shall be effective on the
date the Company receives the original Exercise Notice, this Warrant and
payments. Upon the effective date of exercise, the Holder shall be deemed
to be the holder of record of the Shares, notwithstanding that the
certificate representing the Shares shall not then be actually delivered
to such Holder or that such Shares are not then set forth on the stock
transfer books of the Company. The Company shall be obligated to make
late payment to Holder under the circumstances set forth in Section 5.03
of the Securities Purchase Agreement.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares which may
be issued upon the exercise of the rights represented by this Warrant
will, upon issuance, be fully paid and nonassessable, and free from all
taxes, liens and charges with respect to the issue thereof. During the
period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, and reserved for
the purpose of the issue upon exercise of the purchase rights evidenced by
this Warrant, a sufficient number of shares of its Common Stock to provide
for the exercise of the rights represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number
and kind of securities purchasable upon the exercise of this Warrant and
the Warrant Price shall be subject to adjustment from time to time upon
the occurrence of certain events, as follows:
(a) Reclassification or Merger. In case of any
reclassification or change of outstanding securities of the class issuable
upon exercise of this Warrant (other than a change in par value, or from
par value to no par value, or from no par value to par value, or in case
of any merger of the Company with or into another corporation (other than
a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case
of any sale of all or substantially all of the assets of the Company, the
Company shall, as condition precedent to such transaction, execute a new
Warrant or cause such successor or purchasing corporation, as the case may
be, to execute a new Warrant, providing that Holder shall have the right
to exercise such new Warrant and upon such exercise to receive, in lieu of
each share of the Company's Common Stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification,
change or merger by the holder of one share of the Company's Common Stock.
Such new Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
paragraph 4. The provisions of this subparagraph (a) shall similarly
apply to successive reclassifications, changes, mergers and sales of
assets.
(b) Subdivision or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall
subdivide or combine its Common Stock, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the
case of a combination.
(c) Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in, or make any other distribution with respect to
Common Stock (except any distribution specifically provided for in the
foregoing subparagraphs (a) and (b)) of, Common Stock, then the Warrant
Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that
price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (a) the numerator of
which shall be the total number of shares of Common outstanding
immediately prior to such dividend or distribution, and (b) the
denominator of which shall be the total number of shares of Common
outstanding immediately after such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in
the Warrant Price, the number of Shares of Common Stock purchasable
hereunder shall be adjusted, to the nearest whole share, to the product
obtained by multiplying the number of Shares purchasable immediately prior
to such adjustment in the Warrant Price by a fraction, the numerator of
which shall be the Warrant Price immediately prior to such adjustment and
the denominator of which shall be the Warrant Price immediately
thereafter.
5. NOTICE OF ADJUSTMENTS. Whenever any Warrant Price shall be
adjusted pursuant to paragraph 4 hereof, the Company shall make a
certificate signed by its chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
Warrant Price or Prices after giving effect to such adjustment, and shall
cause copies of such certificate to be mailed by first class mail, postage
prepaid, to Holder.
6. NOTICE OF CERTAIN ACTIONS. In the event that the Company shall
propose at any time:
(i) to declare any dividend or distribution upon any class or
series of its stock, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of earnings
or earned surplus;
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class
or series or other rights;
(iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or
(iv) to merge or consolidate with or into any other corporation,
or sell, lease or convey all or substantially all its assets or property,
or to liquidate, dissolve or wind up, whether voluntary or involuntary;
then in connection with each such event, the Company shall send to Holder:
(1) at least 10 days prior written notice of the date on
which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of
Common Stock shall be entitled thereto) or for determining rights to vote
in respect of the matters referred to in (i) and (ii) above;
(2) in the case of the matters referred to in (iii) and
(iv) above, at least 10 days prior written notice of the date for the
determination of shareholders entitled to vote thereon (and specifying the
date on which the holders of Common Stock shares shall be entitled to
exchange their Common Stock for securities or other property deliverable
upon the occurrence of such event); and
(3) prompt notice of any material change in the terms of
the transaction described in (i) through (iv) above.
7. FRACTIONAL SHARES. No fractional shares of Common will be
issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefore in an
amount determined in such reasonable manner as may be prescribed by the
board of directors of the Company.
8. COMPLIANCE WITH SECURITIES ACT; NON-TRANSFERABILITY OF WARRANT;
DISPOSITION OF SHARES OF COMMON.
(a) Compliance with Securities Act. By acceptance hereof,
Holder agrees that this Warrant and the shares of Common Stock to be
issued upon exercise hereof are being acquired for investment and that he
will not offer, sell or otherwise dispose of this Warrant or the Shares
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act"). In the absence of
registration of the Shares (including but not limited to registration
pursuant to the Securities Purchase Agreement under which the Warrant was
purchased from the Company), upon exercise of this Warrant, Holder shall
confirm in writing, in the form attached hereto as Exhibit B, that the
shares of Common Stock so purchased are being acquired for investment and
not with a view toward distribution or resale. In addition, Holder shall
provide such additional information regarding Holder's financial and
investment background as the Company may reasonably request. All shares
of Common Stock issued upon exercise of this Warrant (unless registered
under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT"). NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMPANY AND WITHOUT REGISTRATION UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS, IF ANY, OR PURSUANT TO
EXEMPTIONS THEREFROM."
9. RIGHTS OF SHAREHOLDERS. Holder shall not be entitled to vote or
receive dividends and shall not be deemed the holder of Common Stock or
any other securities of the Company which may at any time be issuable on
the exercise hereof for any purpose. Nothing contained herein shall be
construed to confer upon Holder, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock,
change of par value or change of stock to no par value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until the Warrant
shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein.
10. REGISTRATION RIGHTS. The Shares obtained upon exercise of this
Warrant shall have the registration rights, obligations and restrictions
set forth in the Securities Purchase Agreement. The term "Registrable
Securities" in such Securities Purchase Agreement shall include the Common
Stock obtained upon exercise of this Warrant.
11. GOVERNING LAW. The terms and conditions of this Warrant shall
be governed by and construed in accordance with Colorado law.
12. MISCELLANEOUS. The headings in this Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a
part hereof. Neither this Warrant nor any term hereof may be changed,
waived, discharged or terminated orally but only by an instrument in
writing signed by the Company and the registered holder hereof. All
notices, requests and other communications to any party hereunder shall be
in writing (including telecopy or similar writing) and shall be given to
such party at its address or telecopy number contained in the Company's
records or such other address or telecopy number as such party may
hereafter specify in writing to the Company at such address for that
purpose, or, if to the Company, to 11101 E. 51st Ave., Denver, CO 80239,
telecopy number 303/373-3870, attention Darce Hume, Controller. Each such
notice, request or other communication shall be effective (i) if given by
telecopy, when such message is transmitted to the telecopy number
contained in the Company's records or such other number as a party may
specify in writing to the Company at such address, or (ii) if given by any
other means, the earlier of (x) when delivered by hand to the address
contained in the Company's record or such other address as a party may
specify in writing to the Company at such address or (y) five business
days after the mailing of such notice by certified mail.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed in its name by the signature or facsimile signature of its
President, or by one of its Vice Presidents, and has caused its corporate
seal to be hereto affixed and attested by the signature or facsimile
signature of its Treasurer and this Warrant to be dated March 4, 1997.
VARI-L COMPANY, INC.
ATTEST:
- ------------------------------ By:------------------------------
Jon L. Clark, Vice President David G. Sherman, President
of Finance and Treasurer
[SEAL]
EXHIBIT A
NOTICE OF EXERCISE
TO: VARI-L COMPANY, INC.
1. The undersigned hereby elects to purchase shares
of Common Stock of Vari-L Company, Inc. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of
such shares in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other
names as is specified below:
---------------------------------------------
(Name)
---------------------------------------------
---------------------------------------------
(Address)
3. [For use only in the absence of an effective registration
statement covering the Shares] The undersigned represents that the
aforesaid shares of Common Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale in
connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares. In support
thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Exhibit B.
------------------------------
(Signature)
- ---------------
(Date)
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
COMPANY : VARI-L COMPANY, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed securities (the
"Securities"), I, the Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. I
am purchasing these Securities for my own account for investment purposes
only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933
("Securities Act").
(b) I understand that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
my investment intent as expressed herein. In this connection, I
understand that, in the view of the Securities and Exchange Commission
("SEC"), the statutory basis for such exemption may be unavailable if my
representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other
fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or
unless an exemption from registration is otherwise available. Moreover, I
understand that the Company is under no obligation to register the
Securities except as set forth in the Securities Purchase Agreement. In
addition, I understand that the certificate evidencing the Securities will
be imprinted with a legend which prohibits the transfer of the Securities
unless they are registered or such registration is not required in the
opinion of counsel for the Company.
(d) I am aware of the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions.
(e) I further understand that at the time I wish to sell the
Securities there may be no public market upon which to make such a sale.
(f) I further understand that in the event all of the
requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule
144 is not exclusive, the Staff of the SEC has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons
and their respective brokers who participate in such transactions do so at
their own risk.
(g) The exercise price of the Warrant is less than 10% of my
net worth excluding home, home furnishings and automobiles.
Signature of Purchaser:
------------------------------
Date: ------------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE
SECURITIES LAW. THESE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION THEREFROM.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE
COMPANY AND LEGAL COUNSEL FOR THE COMPANY.
Void after 5:00 P.M., Denver, Colorado Right to Purchase Shares
Time, on March 4, 2002. of the Common Stock
of Vari L Company, Inc.
Warrant No.
VARI-L COMPANY, INC.
AGENT'S STOCK PURCHASE WARRANT
VARI-L COMPANY, INC., a Colorado corporation (the "Company"), hereby
certifies that for value received, , or assigns ("Holder"),
is entitled to purchase, subject to the terms and conditions hereinafter
set forth, an aggregate of fully paid and nonassessable shares
("Shares") of the Common Stock of the Company ("Common Stock"), at the
lower of (i) $9.50 per share or (ii) 84% of the average closing bid price
of the Company's Common Stock on the Nasdaq National Market (or such other
stock exchange, quotation service or over the counter market on which the
Common Stock may be traded) for the ten (10) trading days prior to the
date of exercise. The number of Shares to be received upon the exercise
of this Warrant and the price to be paid for a Share may be adjusted from
time to time as hereinafter set forth. The exercise price of a Share in
effect at any time and as adjusted from time to time is hereinafter
referred to as the "Warrant Price."
1. TERM. Subject to the limitations provided in the Securities
Purchase Agreement dated March 4, 1997 by and among the Company and
certain purchasers (the "Securities Purchase Agreement"), the purchase
right represented by this Warrant is exercisable, in whole or in part, at
any time and from time to time from the date hereof through March 4, 2002.
The Company shall have no obligation to furnish any further notice of the
expiration date of this Warrant to Holder before expiration date.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
(a) Subject to paragraph 1 hereof, Holder may exercise the
purchase right represented by this Warrant, in whole or in part, by
delivering to the principal office of the Company to the attention of
Darce Hume, Controller, by telecopy or otherwise, a notice of exercise
("Exercise Notice") in the form attached hereto as Exhibit A, duly
executed, and within a reasonable time after such delivery, by delivering
to Darce Hume at the Company the original Exercise Notice, this Warrant,
and payment to the Company, by check, of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Shares then
being purchased. At its expense, the Company shall within three (3)
business days after its receipt of the original Exercise Notice, this
Warrant and payment, issue and deliver to the Holder at the Company's
principal office, or at such other place designated by Holder, a
certificate evidencing the issuance of those Shares to which Holder is
entitled pursuant to the terms hereunder. If this Warrant is not fully
exercised, a new Warrant representing the portion of the Shares with
respect to which this Warrant shall not have been exercised shall be
issued to Holder within thirty (30) days.
(b) Provided that Holder delivers the original Conversion
Notice, this Warrant and payment within two (2) business days of the
initial delivery of the Exercise Notice to the Company by telecopy or
otherwise, exercise shall be deemed to be effective on the date the
Exercise Notice is first received by the Company by telecopy or otherwise,
as described in (a) above. Otherwise, exercise shall be effective on the
date the Company receives the original Exercise Notice, this Warrant and
payments. Upon the effective date of exercise, the Holder shall be deemed
to be the holder of record of the Shares, notwithstanding that the
certificate representing the Shares shall not then be actually delivered
to such Holder or that such Shares are not then set forth on the stock
transfer books of the Company. The Company shall be obligated to make
late payment to Holder under the circumstances set forth in Section 5.03
of the Securities Purchase Agreement.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares which may
be issued upon the exercise of the rights represented by this Warrant
will, upon issuance, be fully paid and nonassessable, and free from all
taxes, liens and charges with respect to the issue thereof. During the
period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, and reserved for
the purpose of the issue upon exercise of the purchase rights evidenced by
this Warrant, a sufficient number of shares of its Common Stock to provide
for the exercise of the rights represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number
and kind of securities purchasable upon the exercise of this Warrant and
the Warrant Price shall be subject to adjustment from time to time upon
the occurrence of certain events, as follows:
(a) RECLASSIFICATION OR MERGER. In case of any
reclassification or change of outstanding securities of the class issuable
upon exercise of this Warrant (other than a change in par value, or from
par value to no par value, or from no par value to par value, or in case
of any merger of the Company with or into another corporation (other than
a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case
of any sale of all or substantially all of the assets of the Company, the
Company shall, as condition precedent to such transaction, execute a new
Warrant or cause such successor or purchasing corporation, as the case may
be, to execute a new Warrant, providing that Holder shall have the right
to exercise such new Warrant and upon such exercise to receive, in lieu of
each share of the Company's Common Stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification,
change or merger by the holder of one share of the Company's Common Stock.
Such new Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
paragraph 4. The provisions of this subparagraph (a) shall similarly
apply to successive reclassifications, changes, mergers and sales of
assets.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company at
any time while this Warrant remains outstanding and unexpired shall
subdivide or combine its Common Stock, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the
case of a combination.
(c) STOCK DIVIDENDS. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in, or make any other distribution with respect to
Common Stock (except any distribution specifically provided for in the
foregoing subparagraphs (a) and (b)) of, Common Stock, then the Warrant
Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that
price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (a) the numerator of
which shall be the total number of shares of Common outstanding
immediately prior to such dividend or distribution, and (b) the
denominator of which shall be the total number of shares of Common
outstanding immediately after such dividend or distribution.
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in
the Warrant Price, the number of Shares of Common Stock purchasable
hereunder shall be adjusted, to the nearest whole share, to the product
obtained by multiplying the number of Shares purchasable immediately prior
to such adjustment in the Warrant Price by a fraction, the numerator of
which shall be the Warrant Price immediately prior to such adjustment and
the denominator of which shall be the Warrant Price immediately
thereafter.
5. NOTICE OF ADJUSTMENTS. Whenever any Warrant Price shall be
adjusted pursuant to paragraph 4 hereof, the Company shall make a
certificate signed by its chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
Warrant Price or Prices after giving effect to such adjustment, and shall
cause copies of such certificate to be mailed by first class mail, postage
prepaid, to Holder.
6. NOTICE OF CERTAIN ACTIONS. In the event that the Company shall
propose at any time:
(i) to declare any dividend or distribution upon any class or
series of its stock, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of earnings
or earned surplus;
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class
or series or other rights;
(iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all its assets
or property, or to liquidate, dissolve or wind up, whether voluntary or
involuntary;
then in connection with each such event, the Company shall send to Holder:
(1) at least 10 days prior written notice of the date on
which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of
Common Stock shall be entitled thereto) or for determining rights to vote
in respect of the matters referred to in (i) and (ii) above;
(2) in the case of the matters referred to in (iii) and
(iv) above, at least 10 days prior written notice of the date for the
determination of shareholders entitled to vote thereon (and specifying the
date on which the holders of Common Stock shares shall be entitled to
exchange their Common Stock for securities or other property deliverable
upon the occurrence of such event); and
(3) prompt notice of any material change in the terms of
the transaction described in (i) through (iv) above.
7. FRACTIONAL SHARES. No fractional shares of Common will be
issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefore in an
amount determined in such reasonable manner as may be prescribed by the
board of directors of the Company.
8. COMPLIANCE WITH SECURITIES ACT; NONTRANSFERABILITY OF WARRANT;
DISPOSITION OF SHARES OF COMMON.
(a) COMPLIANCE WITH SECURITIES ACT. By acceptance hereof,
Holder agrees that this Warrant and the shares of Common Stock to be
issued upon exercise hereof are being acquired for investment and that he
will not offer, sell or otherwise dispose of this Warrant or the Shares
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act"). In the absence of
registration of the Shares, upon exercise of this Warrant, Holder shall
confirm in writing, in the form attached hereto as Exhibit B, that the
shares of Common Stock so purchased are being acquired for investment and
not with a view toward distribution or resale. In addition, Holder shall
provide such additional information regarding Holder's financial and
investment background as the Company may reasonably request. All shares
of Common Stock issued upon exercise of this Warrant (unless registered
under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT"). NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMPANY AND WITHOUT REGISTRATION UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS, IF ANY, OR PURSUANT TO
EXEMPTIONS THEREFROM."
9. RIGHTS OF SHAREHOLDERS. Holder shall not be entitled to vote or
receive dividends and shall not be deemed the holder of Common Stock or
any other securities of the Company which may at any time be issuable on
the exercise hereof for any purpose. Nothing contained herein shall be
construed to confer upon Holder, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock,
change of par value or change of stock to no par value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until the Warrant
shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein.
10. REGISTRATION RIGHTS. The Shares obtained upon exercise of this
Warrant have unlimited "piggyback" registration rights, including the
right to piggyback on the demand registration rights provided by the
Securities Purchase Agreement for purchasers of Debentures and Warrants
thereunder. The term "Registrable Securities" in such Securities Purchase
Agreement shall include the Common Stock obtained upon exercise of this
Warrant.
11. GOVERNING LAW. The terms and conditions of this Warrant shall
be governed by and construed in accordance with Colorado law.
12. MISCELLANEOUS. The headings in this Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a
part hereof. Neither this Warrant nor any term hereof may be changed,
waived, discharged or terminated orally but only by an instrument in
writing signed by the Company and the registered holder hereof. All
notices, requests and other communications to any party hereunder shall be
in writing (including telecopy or similar writing) and shall be given to
such party at its address or telecopy number contained in the Company's
records or such other address or telecopy number as such party may
hereafter specify in writing to the Company at such address for that
purpose, or, if to the Company, to 11101 E. 51st Ave., Denver, CO 80239,
telecopy number 303/373-3870, attention Darce Hume, Controller. Each such
notice, request or other communication shall be effective (i) if given by
telecopy, when such message is transmitted to the telecopy number
contained in the Company's records or such other number as a party may
specify in writing to the Company at such address, or (ii) if given by any
other means, the earlier of (x) when delivered by hand to the address
contained in the Company's record or such other address as a party may
specify in writing to the Company at such address or (y) five business
days after the mailing of such notice by certified mail.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed in its name by the signature or facsimile signature of its
President, or by one of its Vice Presidents, and has caused its corporate
seal to be hereto affixed and attested by the signature or facsimile
signature of its Treasurer and this Warrant to be dated March 4, 1997.
VARI-L COMPANY, INC.
ATTEST:
- --------------------------- By:------------------------------------
Jon L. Clark, Vice President David G. Sherman, President
of Finance and Treasurer
[SEAL]
EXHIBIT A
NOTICE OF EXERCISE
TO: VARI-L COMPANY, INC.
1. The undersigned hereby elects to purchase ---------- shares of
Common Stock of Vari-L Company, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares
in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other
names as is specified below:
------------------------------------------------------
(Name)
------------------------------------------------------
------------------------------------------------------
(Address)
3. [For use only in the absence of an effective registration
statement covering the Shares] The undersigned represents that the
aforesaid shares of Common Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale in
connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares. In support
thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Exhibit B.
-------------------------------------
(Signature)
- --------------------------
(Date)
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
COMPANY : VARI-L COMPANY, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed securities (the
"Securities"), I, the Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. I
am purchasing these Securities for my own account for investment purposes
only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933
("Securities Act").
(b) I understand that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
my investment intent as expressed herein. In this connection, I
understand that, in the view of the Securities and Exchange Commission
("SEC"), the statutory basis for such exemption may be unavailable if my
representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other
fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or
unless an exemption from registration is otherwise available. Moreover, I
understand that the Company is under no obligation to register the
Securities except as set forth in the Securities Purchase Agreement. In
addition, I understand that the certificate evidencing the Securities will
be imprinted with a legend which prohibits the transfer of the Securities
unless they are registered or such registration is not required in the
opinion of counsel for the Company.
(d) I am aware of the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions.
(e) I further understand that at the time I wish to sell the
Securities there may be no public market upon which to make such a sale.
(f) I further understand that in the event all of the
requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule
144 is not exclusive, the Staff of the SEC has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons
and their respective brokers who participate in such transactions do so at
their own risk.
(g) The exercise price of the Warrant is less than 10% of my
net worth excluding home, home furnishings and automobiles.
Signature of Purchaser:
----------------------------------------
Date: ----------------------------------
GORSUCH KIRGIS L.L.C.
Attorneys at Law
1401 Seventeenth Street, Suite 1100
Denver, Colorado 80202
Telephone (303) 299-8900
Fax (303) 298-0215
April 14, 1997
Vari-L Company, Inc.
11101 E. 51st Avenue
Denver, Colorado 80239
Re: Vari-L Company, Inc.
Registration Statement on Form S-3
Gentlemen:
We are counsel to Vari-L Company, Inc., a Colorado cor-
poration (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on April 14, 1997 (the "Registration
Statement"), relating to a proposed offering by the Selling
Shareholders to the public of a maximum of 1,943,900 shares of
the Company's Common Stock, $.01 par value (the "Common Stock").
In this connection, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such
corporate records, certificates and written and oral statements
of officers, legal counsel and accountants of the Company and of
public officials, and other documents that we have considered
necessary and appropriate for this opinion, and, based thereon,
we advise you that, in our opinion:
1. The Company is a corporation duly organized and validly
existing under the laws of the State of Colorado; and
2. The Common Stock, when sold pursuant to and in
accordance with the Registration Statement, will be validly
issued, fully paid and nonassessable.
We hereby consent to the use of our name beneath the caption
"Legal Matters" in the Prospectus forming a part of the
Registration Statement and to the filing of this opinion as
Exhibit 5 thereto.
Very truly yours,
GORSUCH KIRGIS L.L.C.
/s/Gorsuch Kirgis L.L.C.
EXHIBIT 23
HAUGEN, SPRINGER & CO.
Certified Public Accountants
9250 East Costilla Avenue Robert S. Haugen, C.P.A.
Suite 150 Charles K. Springer, C.P.A.
Englewood, Colorado 80012
(303) 799-6969
FAX (303) 799-6974
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Vari-L Company, Inc.
We consent to the use of our report dated February 5, 1997, relating to the
balance sheets of Vari-L Company, Inc. as of December 31, 1996 and 1995, and the
related statements of income, stockholders' equity, and cash flows for the years
then ended, which report appears in the December 31, 1996 Annual Report on Form
10-KSB of Vari-L Company, Inc., incorporated herein by reference.
/s/Haugen, Springer & Co.
HAUGEN, SPRINGER & CO.
April 9, 1997
