-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ObxKloxnGCvlK/zs1zcB3gRwSbZG+d27plx33ckm8UsMWBh66Zcf2r3I4QNge6M4 fzFTs+2SI+ZaXcNqpzMGHw== 0000895755-96-000060.txt : 19960918 0000895755-96-000060.hdr.sgml : 19960918 ACCESSION NUMBER: 0000895755-96-000060 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARI L CO INC CENTRAL INDEX KEY: 0000917173 STANDARD INDUSTRIAL CLASSIFICATION: 3679 IRS NUMBER: 060678347 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-23866 FILM NUMBER: 96611592 BUSINESS ADDRESS: STREET 1: 11101 E 51ST AVE CITY: DENVER STATE: CO ZIP: 80239 BUSINESS PHONE: 3033711560 MAIL ADDRESS: STREET 1: 11101 EAST 51ST AVENUE CITY: DENVER STATE: CO ZIP: 80239 10QSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended Commission File No. 0-23866 June 30, 1996 VARI-L COMPANY, INC. (Exact name of Registrant as specified in its charter.) Colorado 06-0679347 (State of Incorporation) (I.R.S. Employer identification No.) 11101 E. 51st Avenue Denver, Colorado 80239 (Address of principal executive offices) (303) 371-1560 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes----X---- No-------- The number of shares outstanding of each of the issuer's classes of common stock, as of June 30, 1996: Class of Securities Outstanding Securities $0.01 par value 3,692,543 shares Common shares PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VARI-L COMPANY, INC. BALANCE SHEETS JUNE 30, 1996 AND DECEMBER 31, 1995
6/30/96 12/31/95 ASSETS (UNAUDITED) (AUDITED) - - ------ ----------- --------- Current Assets: Cash and cash equivalents $2,735,713 $5,868,210 Receivables: Trade, less $10,000 allowance for doubtful accounts 2,236,276 2,292,168 Lease acquisition costs advanced 569,254 0 Inventories 8,536,459 5,580,984 Prepaid expenses and other 1,284,442 737,083 ---------- ---------- Total Current Assets 15,362,144 14,478,445 ---------- ---------- Property and Equipment: Machinery and equipment 9,189,976 7,053,052 Furniture and fixtures 992,030 857,644 Leasehold improvements 2,082,805 1,366,977 ---------- ---------- 12,264,811 9,277,673 Less accumulated depreciation and amortization 2,422,181 2,229,593 ---------- ---------- Net Property and Equipment 9,842,630 7,048,080 ---------- ---------- Other Assets: Long-term inventories 307,000 307,000 Covenant not to compete 63,736 114,656 Other 530,517 292,253 ---------- ---------- Total Other Assets 901,253 713,909 ---------- ---------- TOTAL ASSETS $26,106,027 $22,240,434 - - ------------ =========== ===========
(Continued) See Accompanying Notes to Financial Statements. VARI-L COMPANY, INC. BALANCE SHEETS, CONTINUED JUNE 30, 1996 AND DECEMBER 31, 1995
6/30/96 12/31/95 LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED) (AUDITED) - - ------------------------------------ ----------- --------- Current Liabilities: Bank line of credit $ 1,010,499 $1,847,302 Current installments of: Long-term debt 553,864 480,253 Obligations under capital leases 20,193 20,193 Subordinated debentures 0 112,500 Financed insurance premiums 97,203 0 Trade accounts payable 1,883,593 1,212,942 Accrued expenses 416,479 389,129 Income taxes payable 322,634 0 ---------- ---------- Total Current Liabilities 4,304,465 4,062,319 Long-term debt 4,450,710 1,730,275 Obligations under capital leases 7,253 22,563 Deferred income taxes 183,823 183,823 ---------- ---------- Total Liabilities 8,946,251 5,998,980 ---------- ---------- Stockholders' Equity: Common stock, $.01 par value, 50,000,000 and 10,000,000 shares authorized; 3,692,543 and 3,624,977 shares outstanding, respectively 39,155 38,479 Paid-in capital 12,317,431 11,845,327 Retained earnings 4,821,890 4,376,348 Less: Loans for purchase of stock (18,700) (18,700) ---------- ---------- Total Stockholders' Equity 17,159,776 16,241,454 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,106,027 $22,240,434 - - ---------------------- =========== ===========
See Accompanying Notes To Financial Statements. VARI-L COMPANY, INC. STATEMENTS OF INCOME FOR THE THREE MONTH PERIODS ENDED JUNE 30, 1996 AND JUNE 30, 1995 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND JUNE 30, 1995
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS 6/30/96 6/30/95 6/30/96 6/30/95 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) ---------- ---------- ---------- ---------- Net sales $2,563,370 $2,012,796 $5,181,466 $4,247,420 Cost of products sold 1,305,677 980,881 2,588,254 2,067,882 ---------- ---------- ---------- ---------- Gross profit 1,257,693 1,031,915 2,593,212 2,179,538 ---------- ---------- ---------- ---------- Other costs and expenses: General and administrative 290,299 233,318 584,299 511,200 Engineering 157,981 120,623 321,291 261,557 Selling 326,703 291,655 694,445 589,086 Interest expense 108,808 72,947 208,341 137,712 Interest income (35,960) (17,334) (98,868) (41,907) Other 59,059 68,416 115,528 135,831 ---------- ---------- ---------- ---------- 906,890 769,625 1,825,036 1,593,479 ---------- ---------- ---------- ---------- Income before taxes 350,803 262,290 768,176 586,059 Income taxes 147,337 110,162 322,634 246,145 ---------- ---------- ---------- ---------- NET INCOME $ 203,466 $ 152,128 $ 445,542 $ 339,914 - - ---------- ========== ========== ========== ========== Primary and fully- diluted earnings per common share and common share equivalents $ 0.05 $ 0.05 $ .11 $ $ 0.12 ========== ========== ========== ========= Weighted average shares outstanding 3,900,436 2,921,539 3,924,015 2,794,230 ========== ========== ========= =========
See Accompanying Notes to Financial Statements. VARI-L COMPANY, INC. STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND JUNE 30, 1995
SIX MONTHS SIX MONTHS ENDED ENDED 6/30/96 6/30/95 (UNAUDITED) (UNAUDITED) ----------- ----------- Net cash used in operating activities (Note 6) $(1,975,521) $(1,045,621) ----------- ----------- Cash flows from investing activities: Net purchases of property and equipment (2,987,138) (874,409) ----------- ----------- Net cash used in investing activities (2,987,138) (874,409) ----------- ----------- Cash flows from financing activities: Lease acquisition costs advanced (569,254) 0 Net increase in long-term debt 2,794,046 979,074 Net repayments of capital lease obligations (15,310) (216,326) Repayments of subordinated debentures (112,500) (12,500) Net borrowings (repayments) under bank line of credit (836,803) 145,148 Net proceeds under insurance financing 97,203 91,270 Proceeds from stock issuances, net of income tax benefit and offering costs. 472,780 2,493,985 ----------- ----------- Net cash provided by financing activities 1,830,162 3,480,651 ----------- ----------- Net (decrease) increase in cash (3,132,497) 1,560,621 Beginning cash 5,868,210 1,459,208 ----------- ---------- ENDING CASH $ 2,735,713 $3,019,829 =========== ========== Supplemental disclosure of cash flows information: Cash paid for interest $ 190,270 $ 145,341 =========== ========== Cash paid for income taxes $ 0 $ 0 =========== ==========
See Accompanying Notes to Financial Statements. VARI-L COMPANY, INC. NOTES TO FINANCIAL STATEMENTS Vari-L Company, Inc. (the Company), was founded in 1953 and is a manufacturer of electronic components used in commercial and military communications systems where electrical processing of radio frequency signals is required. NOTE 1 - FINANCIAL PRESENTATION These financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 1995 and notes thereto. In the opinion of management, the accompanying interim, unaudited financial statements contain all the adjustments necessary to present fairly the financial position of the Company as of June 30, 1996, the results of its operations for the three-month and six-month periods ended June 30, 1996 and June 30, 1995 and its cash flows for the six-month periods ended June 30, 1996 and June 30, 1995. All adjustments made are of a normal recurring nature. NOTE 2 - INVENTORIES Inventories consist of the following:
6/30/96 12/31/95 (Unaudited) (Audited) ------------ ---------- Finished goods $ 1,668,131 $ 963,556 Work in process 3,332,911 2,397,774 Raw materials 3,332,005 2,016,600 Gold bullion 203,412 203,054 ------------ ----------- $ 8,536,459 $ 5,580,984 ============ =========== Long-term inventories $ 307,000 $ 307,000 ============ ===========
NOTE 3 - INCOME TAXES Income tax expense reflects effective tax rates of 42%. NOTE 4 - COMMON STOCK Stock Grant Plan In their annual meeting held on June 26, 1996, the stockholders approved and ratified the Stock Grant Plan that was adopted by the Company in June 1995. Pursuant to the plan, selected persons will receive awards of shares of the Company's common stock. The plan is administered by the Company's Compensation Committee ("the Committee") and a maximum of 100,000 shares may be issued under the plan. Each Committee member is entitled to receive an automatic grant of 50 shares per month on the first day of each month. Pursuant to the plan, 1,200 shares of stock were retroactively owed and subsequently issued to the Committee members. Authorized Number of Shares In their annual meeting held on June 26, 1996, the stockholders approved an amendment to the Company's Articles of Incorporation increasing the authorized number of the Company's $.01 par value Common Stock to 50 million shares. VARI-L COMPANY, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED NOTE 5 - CREDIT FACILITY The Company has a new Term Loan and Credit Agreement (The "Credit Agreement") with a bank (the "Bank") consisting of a line of credit and a term loan. The new Agreement is dated May 17, 1996 and increases the total credit facility to $8,500,000 from $5,000,000. The line of credit now provides for borrowings up to $3,500,000, up from $2.5 million, and interest is payable monthly, calculated at prime. The line matures April 30, 1997. At June 30, 1996 the balance due to the Bank under the line of credit was $1,010,499. The term loan portion of the facility was increased to $5,000,000 from approximately $2,029,000, the combined balance of the former two term loans. Interest accrues on the outstanding principal balance at 8.75% and monthly principal and interest payments of $79,812 are required. The term loan matures on May 17, 1999. Proceeds from the term loan were used to pay down the former line of credit and two term loans and to purchase $1,069,000 in U.S. Government securities. At June 30, 1996, the balance due to the Bank under the term loan was $5,000,000. NOTE 6 - RECONCILIATION OF NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES The reconciliation of net income to net cash used in operating activities for the six-month periods ended June 30, 1996 and June 30, 1995 is as follows: VARI-L COMPANY, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED NOTE 6 - RECONCILIATION OF NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES, CONTINUED
SIX MONTHS SIX MONTHS ENDED ENDED 6/30/96 6/30/95 (UNAUDITED) (UNAUDITED) ----------- ----------- Net Income $ 445,542 $ 339,914 ----------- ---------- Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 192,588 76,707 Amortization of covenant not to compete 50,920 50,920 Changes in assets and liabilities: Decrease (increase) in accounts receivable 55,892 (420,435) Increase in inventories (2,955,475) (714,474) Increase in prepaid expenses and other (547,359) (304,401) (Increase) decrease in other assets (238,264) 9,089 Increase (decrease) in accounts payable 670,651 (243,648) Increase (decrease) in accrued expenses 27,350 (85,438) Increase in income taxes payable 322,634 246,145 ----------- ----------- Total adjustments (2,421,063) (1,385,535) ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES $(1,975,521) $(1,045,621) =========== ===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW The following discussion should be read in conjunction with the Company's financial statements and notes thereto included herein. The business of the Company is the design, manufacture and marketing of a wide range of signal processing components and devices which are used in communications equipment and systems such as cellular telephones and base stations, local area computer networks, and satellite communications equipment, as well as military and aerospace applications, such as advanced radar systems, missile guidance systems, and navigational systems. The Company sells its products primarily to original equipment manufacturers of communications systems. Over the last several years, the Company has focused on manufacturing and marketing its products for the commercial marketplace, rather than manufacturing primarily for the military and defense-related markets. This effort has included the introduction of new products, the redesign of existing products, implementation of various cost containment measures and increased advertising and marketing efforts. The Company's first product line is a line of Discrete components which are microwave signal processing components primarily used in military and space applications. Among these products are power dividers and combiners used for directing radio frequency ("RF") and microwave signals, solid state switches used to change the direction or timing of RF and microwave signals, transformers used to convert high-power signals to lower-powered signals, mixers, phase detectors which are used to convert RF and microwave signals into usable information, and data and frequency doublers and synthesizers used as sources for RF and microwave signals. This line currently accounts for approximately 17% of the Company's revenues. One of the Company's major product lines is based on the patented design of its voltage controlled oscillator ("VCO") and other components built with VCOs by the Company. VCOs are components which provide a precise signal source within a frequency range. They are widely used in transmitting and receiving equipment. The Company's patented technology enables its VCOs to operate with approximately 20% of the input power requirements of its competitors. This unique feature, combined with the VCO's high quality performance, allows the Company's VCOs to be utilized in battery operated and other low-power applications with better performance than competing products. The Company's "wide-band" VCO line currently accounts for approximately 34% of its revenues. The Company introduced its newest product, the low-cost VCO, in February 1994. This product is a very narrow band VCO which is priced at approximately 75% less than the Company's wide-band VCOs. These VCOs are designed to perform at high levels of efficiency while being competitively priced. The narrow-band VCO line currently accounts for approximately 38% of the Company's revenues. The Company introduced its phase locked loop synthesizer ("PLL") line in 1993. The PLL is a device made up of several components, including the Company's patented VCO and an integrated circuit. PLLs are utilized in both transmitting and receiving equipment. The PLL's function is to lock onto stable reference signals and convert them into stable frequencies which may be detected and utilized by communications equipment. This line currently accounts for approximately 6% of the Company's revenues. The PLL and the narrow-band VCO product lines, which comprise the Company's principal commercial products, have common raw materials, assembly and production techniques and are designed to take advantage of the economies of high volume, high speed, automated assembly. RESULTS OF OPERATIONS Three months ended June 30, 1996 and June 30, 1995 and the Six Months ended June 30, 1996 and June 30, 1995 TOTAL REVENUES Sales revenues increased approximately $551,000 (27%) in the three months ended June 30, 1996 as compared with the three months ended June 30 1995, from $2,012,796 to $2,563,370. Sales revenues increased approximately $934,000 (22%) in the six months ended June 30, 1996 as compared with the six months ended June 30, 1995, from $4,247,420 to $5,181,466. The growth in sales revenues reflects the Company's ongoing success in selling into the commercial marketplace with its narrow-band VCOs and PLLs while maintaining its existing markets in military products. In the first six months of 1996, the composition of sales revenues was 17% Discrete, 34% wide-band VCOs, 5% "Combination" sales of wide-band VCO and Discrete products, 38% narrow-band VCO's and 6% PLL. In the first six months of 1995, the composition of sales revenues was 28% Discrete, 47% wide-band VCOs, 0% "Combination" sales of wide-band VCO and Discrete products, 22% narrow-band VCOs and 3% PLLs, COST OF GOODS SOLD Cost of goods sold, as a percent of sales revenues, was 51% in the three months ended June 30, 1996 and 49% in the three months ended June 30, 1995. Cost of goods sold, as a percent of sales revenues, was 50% in the six months ended June 30, 1996 and 49% in the six months ended June 30, 1995. The increases in the 3- month and 6-month periods ended June 30, 1996 reflect increased depreciation expense on the significant capital equipment purchases and leasehold improvements made during the prior twelve-month period. SELLING AND ENGINEERING EXPENSE Selling expenses increased approximately $35,000, or 12%, for the three months ended June 30, 1996 as compared to the three months ended June 30, 1995. Selling expenses increased approximately $105,000, or 18%, for the six months ended June 30, 1996 as compared to the six months ended June 30, 1995. Increased selling expenses primarily reflect increased sales personnel. Since March 31, 1995, the Company has added an International Sales Manager, a Military/Aerospace Sales Manager, and two staff positions in the Sales Department. Engineering expenses increased approximately $37,000, or 31%, for the three months ended June 30, 1996 as compared to the three months ended June 30, 1995. Engineering expenses increased approximately $60,000, or 23%, for the six months ended June 30, 1996 as compared to the six months ended June 30, 1995. These increases reflect ongoing additions to the engineering staff, and related equipment costs and expenses, to support continued development of the narrow-band VCOs and PLLs for high-volume commercial sales, and new development in the military/aerospace product lines. GENERAL AND ADMINISTRATIVE AND OTHER EXPENSES General and administrative expenses increased approximately $57,000, or 24% for the three months ended June 30, 1996 as compared to the three months ended June 30, 1995. General and administrative expenses increased approximately $73,000, or 14%, in the six months ended June 30, 1996 as compared with the six months ended June 30, 1995. Increases to G&A primarily reflect increased staffing in the personnel and accounting departments, in line with the growth of the Company. Other expenses decreased approximately $9,400 (14%) in the three months ended June 30, 1996 as compared with the three months ended June 30, 1995. Other expenses decreased approximately $20,000 (15%) in the six months ended June 30, 1996 as compared with the six months ended June 30, 1995 due to full amortization in 1995 of costs related to the Company's December 1993 private offering. INTEREST INCOME AND EXPENSE The Company manages its credit facility and mutual fund investments in tandem. Interest income is earned on the Company's short-term investments in a U.S. government securities mutual fund purchased with proceeds from the Company's April 1994 public offering and the 1995 and 1996 warrant exercises. A portion of the proceeds from its new credit facility were also invested in this fund. Interest income was approximately $36,000 for the three months ended June 30, 1996 as compared to approximately $17,000 for the three months ended June 30, 1995. Interest income was approximately $99,000 for the six months ended June 30, 1996 as compared to approximately $42,000 for the six months ended June 30, 1995. Interest expense increased approximately $36,000 (49%) for the three months ended June 30, 1996 as compared with the three months ended June 30, 1995. Interest expense increased approximately $71,000 (51%) for the six months ended June 30, 1996 as compared with the six months ended June 30, 1995. Changes in the amounts of interest income and expense reflect the underlying amounts of the mutual fund investment and debt outstanding under the credit facility. DEPRECIATION AND AMORTIZATION Depreciation and amortization increased approximately $116,000 (151%) for the six months ended June 30, 1996 as compared with the six months ended June 30, 1995, reflecting depreciation on approximately $5.6 million in property and equipment acquired by the Company since June 30, 1995. FINANCIAL CONDITION LIQUIDITY At June 30, 1996, the Company's working capital was $11.1 million compared to $10.4 million at December 31, 1995. The Company's current ratio was 3.6 to 1 at both June 30, 1996 and December 31, 1995. CAPITAL RESOURCES The Company has a new Term Loan and Credit Agreement (the "Agreement") with a bank (the "Bank") consisting of a line of credit and a term loan. The Company and the Bank entered into a new loan agreement on May 17, 1996, increasing the size of the total credit facility to $8,500,000. The line of credit now provides for borrowings up to $3.5 million, and interest is payable monthly, calculated at prime. The line of credit matures on April 30, 1997. At June 30, 1996, the balance due to the Bank under the line of credit was $1,010,499. The term loan portion of the credit facility was increased to $5,000,000 from a balance of approximately $2,000,000. The term loan had a balance as of June 30, 1996 of $5,000,000. Interest accrues on the outstanding principal balance at 8.75%, and monthly principal and interest payments of $79,812 are required. This term loan matures on May 17, 1999. Proceeds from the term loan were used to pay down the former line of credit and the two term loans, and to purchase $1,069,000 of a U.S. government securities mutual fund. During 1993, the Company financed the acquisition of capital equipment through capital leases having maturity dates through 1998. At June 30, 1996, the balance due under these leases was $27,446. The lease payments are calculated using interest rates with an average of approximately 11%. The Company finances certain of its annual insurance premiums through a financing company. The amounts due under these loans totaled $97,203 as of June 30, 1996 and are paid in monthly installments of $16,732 at interest rates of 7.5% and 8.81%. The Company believes that it has sufficient financial resources available to meet its short-term working capital needs through cash flows generated by operating activities and through the management of its sources of financing. The Company also believes that it has sufficient financial resources available to execute its growth plans by virtue of the funding provided by its April 1994 public offering and the 1995 and 1996 warrant exercises. BACKLOG The Company's total backlog of unfilled firm customer orders ("backlog") at June 30, 1996 was $13.6 million compared with $10.2 million at June 30, 1995. Backlog at December 31, 1995 was $14.1 million. Levels of bookings of new customer orders are lower in the first six months of 1996, as compared to the first six months of 1995, due to industry-wide delays in the rollout of the domestic personal communications services (PCS) market. However, orders are expected to accelerate during the second half of 1996. VARI-L COMPANY, INC. PART II--OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS None ITEM 2 CHANGES IN SECURITIES In their annual meeting held on June 26, 1996, the stockholders approved an amendment to the Company's Articles of Incorporation increasing the authorized number of the Company's $.01 Common Stock to 50 million shares. ITEM 3 DEFAULTS UPON SENIOR SECURITIES None ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's annual meeting of shareholders was held on June 26, 1996. At the meeting Joseph H. Kiser, David G. Sherman, Alwin E. Branson, William P. O'Connor Jr., Sarah L. Booher and David A. Lisowski were elected as directors. The shareholders also ratified the appointment of Haugen, Springer & Co. as the Company's independent public accountants for the year ending December 31, 1996. In addition, the shareholders approved an amendment to the Company's Articles of Incorporation increasing the authorized number of shares of the Company's $.01 par value Common Stock to 50 million shares and an amendment to the Company's Tandem Stock Option and Stock Appreciation Rights Plan to, among other matters, increase the number of shares authorized under the Plan to 3 million shares. The shareholders also approved and ratified the Company's Stock Grant Plan. The shareholders did not approve the proposal for an amendment to the Company's Articles of Incorporation authorizing the issuance of up to 5 million shares of a new class of Preferred Stock. The number of votes cast for, withheld or broker nonvotes for each director nominee was as follows:
Nominee For Against Broker Nonvotes Joseph H. Kiser 3,171,579 62,764 0 David G. Sherman 3,167,436 66,907 0 Alwin E. Branson 3,171,686 62,657 0 William P. O'Connor, Jr. 3,165,795 68,548 0 Sarah L. Booher 3,156,846 77,497 0 David A. Lisowski 3,156,901 77,442 0
The number of votes cast for, against, abstentions and broker nonvotes for ratification of the auditors was as follows: For Against Abstain Broker Nonvotes 3,211,740 9,349 13,254 0 The number of votes cast for, against, abstentions and broker nonvotes for the amendment to the Articles of Incorporation to increase the number of authorized shares of Common Stock was as follows: For Against Abstain Broker Nonvotes 3,007,103 202,109 19,556 5,575 The number of votes cast for, against, abstentions and broker nonvotes for the amendment to the Articles of Incorporation to add a class of Preferred Stock was as follows: For Against Abstain Broker Nonvotes 1,738,216 229,796 61,845 1,204,486 The number of votes cast for, against, abstentions and broker nonvotes for the amendments to the Company's Tandem Plan was as follows: For Against Abstain Broker Nonvotes 1,933,371 158,040 39,050 1,103,882 The number of votes cast for, against, abstentions and broker nonvotes for the Stock Grant Plan was as follows: For Against Abstain Broker Nonvotes 2,036,394 158,522 34,226 1,005,201 Because the election of directors, ratification of auditors, increase in the authorized number of shares of Common Stock and approval and ratification of the Stock Grant Plan were considered routine under applicable stock exchange rules, all proxy shares held in the names of brokers as nominees which were not voted at the meeting by the shareholders were voted by the brokers at their discretion. The proposals to add a class of Preferred Stock and to amend the Tandem Plan were considered nonroutine, and therefore, the brokers did not have the discretion to vote on those proposals. ITEM 5 OTHER INFORMATION None ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.1 Term Loan and Credit Agreement between the Company and Norwest Bank Colorado, National Association, dated May 17, 1996 27 Financial Data Schedule (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VARI-L COMPANY, INC. Date: August 9, 1996 By:/s/ Jon L. Clark Jon L. Clark, V.P. Finance and Principal Financial and Accounting Officer EXHIBIT INDEX
EXHIBIT METHOD OF FILING - - ------- ---------------- 10.1 Term Loan and Credit Agreement between the Company and Norwest Bank Colorado, National Association, dated May 17, 1996 Filed herewith electronically 27 Financial Data Schedule Filed herewith electronically
EX-10.1 2 TERM LOAN AND CREDIT AGREEMENT THIS TERM LOAN AND CREDIT AGREEMENT (the "Agreement") is dated as of May 17, 1996, and is by and between Vari-L Company, Inc., a Colorado Corporation of 11101 East 51st Avenue, Denver, CO 80239 (the "Borrower") and Norwest Bank Colorado, National Association, a national banking association of 1740 Broadway, Denver, CO 80274 (the "Bank"). RECITALS: WHEREAS, the Borrower and the Bank previously entered into Term Loan and Credit Agreements, pursuant to which the Bank loaned to the Borrower the sum of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($1,500,000.00) on a term loan basis ("Existing Term Loan #1") and ONE MILLION ONE HUNDRED FORTY THOUSAND SIX HUNDRED SEVENTY-THREE AND NO/100 DOLLARS ($1,140,673.00) on a term loan basis ("Existing Term Loan #2"); and made available to Borrower a revolving credit line in the principal amount of TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00) (the "Credit") in order to provide funds for its corporate purposes; and WHEREAS, the Borrower now desires the Bank to lend to Borrower a sum of FIVE MILLION AND 00/100 DOLLARS ($5,000,000.00) on a term loan basis (the "New Term Loan") to refinance Existing Term Loan #1 and Existing Term Loan #2 and provide additional permanent working capital, and to renew the Credit and increase the amount thereof to THREE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($3,500,000.00); and WHEREAS, the Bank is willing to renew and increase the Credit and make the New Term Loan to Borrower upon the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the premises herein contained, and each intending to be legally bound hereby, the parties agree as follows: 1. Definitions As used herein: 1.1 "Acceptable Accounts Receivable" shall mean accounts receivable which are: (i) less than 90 days old from the invoice date; (ii) due from foreign entities and insured by the Export-Import Bank of the United States under a Multi-Buyer Export Credit Insurance Policy; (iii) not subject to offset or dispute; (iv) not due from any government entity; (v) not due from affiliates of Subsidiaries of the Borrower; (vi) not representing booked but unfilled orders; (vii) not contra accounts, (viii) not credit balances over 90 days; and (ix) not of doubtful collectability as determined by the Bank. 1.2 "Accounts," "Chattel Paper," "Contracts," "Contract Rights," "Documents," Equipment, "Fixtures," "General Intangibles," "Goods," "Instruments" and "Inventory" shall have the same respective meanings as are given to those terms in the Uniform Commercial Code of the State of Colorado. 1.3 "Agreement" shall mean this Term Loan and Credit Agreement and all amendments and supplements hereto which may from time to time become effective hereafter in accordance without the terms of this Agreement. 1.4 "Banking Day" shall mean a day on which banks are open for business in Denver, Colorado. 1.5 "Borrowed Money" shall mean funds obtained by incurring contractual indebtedness and shall not include trade accounts payable. 1.6 "Borrowing Base" shall mean 80 percent of Acceptable Accounts Receivable, plus the lesser of $1,250,000.00 or the sum of 35 percent of Borrower's raw materials inventory and 45 percent of Borrower's finished goods inventory, excluding work-in-progress, obsolescence reserves and long-term inventory. 1.7 "Collateral Documents" means all those certain documents specified in Sections 4.1 through 4.5 of this Agreement. 1.8 "Credit" shall mean the revolving credit line established hereby, which shall not in any event exceed the aggregate principal amount of THREE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($3,500,000.00). 1.9 "Current Assets" and "Current Liabilities" shall mean, at any time, all assets or liabilities, respectively, that, in accordance with Generally Accepted Accounting Principles consistently applied, should be classified as Current Assets or Current Liabilities, respectively, on a balance sheet of the Borrower. 1.10 "Current Note" shall mean the promissory note of the Borrower executed in connection with borrowings under Section 2.1 hereof. 1.11 "Default" shall mean an Event of Default as referred to in Section 8 hereof, or an event which with notice or lapse of time or both would become an Event of Default. 1.12 "Generally Accepted Accounting Principles" or "GAAP" shall mean Generally Accepted Accounting Principles applied on a basis consistent with those reflected in the financial statements referred to in Sections 5.8 and 6.3.1 hereof. 1.13 "Indebtedness" shall mean, as to the Borrower, all items of indebtedness, obligation or liability, whether matured or unmatured, liquidated or unliquidated, direct or contingent, joint or several. 1.14 "New Term Note" shall mean the promissory note of the Borrower executed in connection with borrowings under Section 2.2 hereof. 1.15 "Notes" shall mean collectively, the Current Note and the New Term Note. 1.16 "Prime Rate" shall mean the rate of interest established by the Bank from time to time as its "prime" or "base" rate of interest. 1.17 "Raw Materials" shall mean readily marketable materials including, without limitation, gold, wire and metal with no obsolescence or spoilage. 1.18 "Stockholders' Equity" shall mean, at any time the sum of the following accounts set forth in a balance sheet of the Borrower, prepared in accordance with Generally Accepted Accounting Principles consistently applied: (i) the par or stated value of all outstanding capital stock; (ii) capital surplus; and (iii) retained earnings. 1.19 "Tangible Net Worth" shall mean the sum of the par or stated value of all outstanding capital stock, surplus and undivided profits of the Borrower, less any amounts attributable to treasury stock, good will, patents, copyrights, mailing lists, catalogues, trademarks, bond discount and underwriting expenses, organization expenses and other like intangibles, all as determined in accordance with Generally Accepted Accounting Principles. 2. Borrowings and Conditions of Lending 2.1 The Bank agrees to lend to the Borrower from time to time from the effective date hereof until April 30, 1997, sums not to exceed the lesser of the Borrowing Base or THREE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($3,500,000.00) in the aggregate principal amount at any one time outstanding. Each borrowing under this Section 2.1 will be evidenced by a notation on the Bank's records, which shall be conclusive evidence of such borrowing. Within the limits of the Credit and subject to the terms and conditions hereof, prior to April 30, 1997, the Borrower may borrow, prepay and reborrow pursuant to this Section 2.1. At the time of the closing of the Credit, the Borrower will execute and deliver the Current Note to the Bank. 2.2 On the effective date hereof, the Bank will lend to the Borrower the principal sum of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) on a term loan basis (the "New Term Loan"). 2.3 The Bank will disburse the proceeds of the New Term Loan to pay off approximately $1,055,513 of existing indebtedness under Existing Term Loan #1, to pay off approximately $973,385 of existing indebtedness under Existing Term Loan #2, to pay the interest due on the Credit, and to credit the Borrower's operating checking account at Bank. 2.4 Interest on the Current Note shall be calculated at an annual rate equal to the Prime Rate in effect from time to time on the basis of the actual number of days elapsed in a year of 360 days. Interest on the New Term Note shall be calculated at an annual rate of EIGHT AND THREE-QUARTERS percent (8.75%) on the basis of the actual number of days elapsed in a year of 360 days. 2.5 In addition, Borrower shall pay to the Bank at closing a commitment fee in an amount equal to the sum of $17,500 on the Credit and $5,619 on the New Term Loan. 2.6 Interest on the Current Note shall be payable monthly, commencing June 16, 1996, and continuing on the 16th day of each succeeding month until April 30, 1997, at which time the entire remaining balance of principal and interest shall be immediately due and payable. 2.7 The New Term Loan will be repaid in 36 equal consecutive monthly installments of principal and interest in an amount of $79,812.47 each, commencing June 16, 1996, and continuing on the 16th day of each succeeding month, then a final payment on May 17, 1999, at which time the entire remaining balance of principal and interest shall be immediately due and payable. 2.8 All sums payable to the Bank hereunder shall be paid directly to the Bank in immediately available funds. The Bank shall send the Borrower statements of all amounts due hereunder, which statements shall be considered correct and conclusively binding on the Borrower unless the Borrower notifies the Bank to the contrary within 30 days of its receipt of any statement which it deems to be incorrect. Alternatively, at its sole discretion, the Bank may charge against any deposit account of the Borrower all or any part of any amount due hereunder. 2.9 The Borrower may at any time, prepay the Current Note or New Term Note in whole or from time to time in part without premium or penalty. Partial prepayments on the New Term Note shall be applied to scheduled installments in the inverse order of their maturity. 2.10 The Borrower shall be required to make prepayments of amounts due under the Current Note at any time outstanding are found to exceed the Borrowing Base. Such required prepayments shall be in amounts equal to the difference between the aggregate outstanding balances and the Borrowing Base. Said prepayments shall be required unless cash collateral is provided by Borrower or the Bank, in writing, waives said prepayment. 3. Conditions Precedent The obligation of the Bank to make any advance hereunder is subject to the following conditions precedent: 3.1 The Borrower shall have delivered to the Bank, prior to the disbursement of the New Term Loan and Credit (the "Closing") the following: 3.1.1 The Notes; 3.1.2 A Security Agreement, granting a security interest in the Collateral described in Section 4 of this Agreement; 3.1.3 The financing statements and landlord and mortgage waivers required by Section 4.1 of this Agreement; 3.1.4 A certified copy of resolutions of the Borrower's board of directors authorizing the execution, delivery and performance of this Agreement, the Notes, the Collateral Documents, and each other document to be delivered pursuant hereto; 3.1.5 A certificate of the Borrower's corporate secretary as to the incumbency and signatures of the officers of the Borrower signing this Agreement, the Notes, the Collateral Documents, and each other document to be delivered pursuant hereto; 3.1.6 A copy, certified as of the most recent date practicable, by the Secretary of State of Colorado, of the Borrower's certificate of incorporation, together with a certificate of the Borrower's corporate secretary to the effect that such certificate of incorporation has not been amended since the date of the aforesaid certification; and, 3.1.7 Certificates, as of the most recent dates practicable, of the aforesaid secretary of state, the secretary of state of each state in which the Borrower is qualified as a foreign corporation and the department of revenue or taxation of each of the foregoing states as to the good standing of Borrower. 3.2 At the time of Closing and of any subsequent request for an advance: 3.2.1 No Event of Default shall have occurred and be continuing, and no event shall have occurred and be continuing that, with the giving of notice or passage of time or both, would be an Event of Default; 3.2.2 No material adverse change shall have occurred in the financial condition of Borrower or any Subsidiary since the date of this Agreement or the Closing, as applicable; and 3.2.3 All of the Collateral Documents shall have remained in full force and effect. 3.3 At the time of the Closing and each subsequent disbursement, all legal matters incidental thereto shall be satisfactory to the Bank's legal counsel. 4. Security 4.1 To secure the Notes and the performance of its additional obligations as set forth hereunder, prior to or simultaneous with the first borrowing hereunder, the Borrower shall execute and deliver to the Bank security agreements, financing statements and landlord-mortgage waivers, in form and substance satisfactory to the Bank, granting to the Bank a first security interest in all Borrower's present and after-acquired Accounts, General Intangibles, Inventory and Equipment, wherever located, and an assignment of insurance on the life of Joseph H. Kiser in an amount of not less than $750,000.00. No forbearance nor extension of time granted any subsequent owner of the Collateral shall release Borrower from liability. 4.2 Any of Borrower's other property in which the Bank has a security interest to secure payment of any other debt, whether actual, contingent, direct or indirect, including its guaranties of the debts of others, shall also secure payment of the Notes. 4.3 The property in which a security interest is granted pursuant to the provisions of Sections 4.1 and 4.2 is herein collectively called the "Collateral." The Collateral, together with all of the Borrower's other property of any kind held by the Bank, shall stand as one general, continuing collateral security for all Indebtedness to the Bank and may be retained by the Bank until all Indebtedness has been paid in full. 4.4 As security for the prompt payment of all Indebtedness to the Bank, the Borrower hereby assigns, transfers and sets over to the Bank all of its right, title and interest in and to, and grants the Bank a lien on and a security interest in, all amounts that may be owing from time to time by the Bank to the Borrower in any capacity, including, but without limitation, any balance or share belonging to the Borrower, of any deposit or other account with the Bank, which lien and security interest shall be independent of any right of set-off which the Bank may have. 4.5 At any time requested by the Bank, the Borrower shall execute and deliver or cause to be executed and delivered to the Bank such additional documents as the Bank may consider to be necessary or desirable to evidence or perfect the security interests referred to in Sections 4.1 through 4.4 hereof. 4.6 The foregoing liens shall be first and prior liens. 5. Representations and Warranties To induce the Bank to enter into this Agreement, the Borrower represents and warrants to the Bank as follows: 5.1 The Borrower is a corporation duly organized, existing and in good standing under the laws of the State of Colorado. 5.2 The Borrower is duly qualified to do business and is in good standing in any additional jurisdictions where, on advice of legal counsel, registration was deemed necessary. 5.3 The execution, delivery and performance of this Agreement, and the issuance of the Notes by the Borrower are within its corporate powers, have been duly authorized, and are not in contravention of law, or the terms of Borrower's Articles of Incorporation or Bylaws or of any undertaking to which the Borrower is a party or by which it is bound. 5.4 This Agreement is, and the Notes when issued will be, valid and binding in accordance with their terms. 5.5 No consent, approval or authorization of or declaration or filing with any governmental authority on the part of the Borrower is required in connection with the execution and delivery of this Agreement or the borrowings by the Borrower hereunder or on the part of the Borrower in connection with the consummation of any transaction contemplated hereby. 5.6 The properties of the Borrower are not subject to any lien except liens permitted hereunder. 5.7 No litigation or governmental proceeding is pending, or, to the knowledge of the officers of the Borrower, threatened against the Borrower which could have a material adverse effect on the Borrower's financial condition or business. 5.8 The financial statements of the Borrower for the fiscal year ending December 31, 1995, prepared by certified public accountants, copies of which financial statements have been furnished to the Bank, are complete and accurate in all respects and present fairly the financial condition of the Borrower as of such dates, and the results of their operations for the periods covered thereby in accordance with Generally Accepted Accounting Principles. There has been no material adverse change in the condition of the Borrower, financial or otherwise, since December 31, 1995. 5.9 The Borrower is not in default with respect to any of its existing Indebtedness. 5.10 The Borrower is in compliance with all provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), including, but not limited to, the provisions relating to minimum funding requirements for any employee pension or other benefit plan ("Plan") maintained by Borrower which is covered by ERISA. Borrower has not incurred any material liability to the Pension Benefit Guaranty Corporation established under ERISA with respect to any Plan subject to Title IV of ERISA and maintained for employees of Borrower or any of its subsidiaries or any member of a controlled group of corporations, as that term is defined in Section 1563 of the Internal Revenue Code of 1954, as amended (the "Code"), of which the Borrower is a part. Borrower's Plan is qualified under Section 401(a) of the Code. 5.11 Borrower has filed all returns and reports required of it, has paid all taxes which are due and payable, and has provided adequate reserves for the payment of any tax which is being contested by Borrower. The charges, accruals and reserves on the books of Borrower with respect to taxes for all fiscal periods are accurate. There are no questions or disputes between Borrower and any governmental authority with respect to any taxes except as disclosed in the financial statements or otherwise previously disclosed by Borrower to Bank in writing. 6. Affirmative Covenants The Borrower covenants and agrees that so long as any indebtedness remains outstanding hereunder, unless the Bank shall otherwise consent in writing, it will: 6.1 Pay, when due, all taxes assessed against it or its property except to the extent and so long as contested in good faith. 6.2 Maintain its corporate existence and comply with all laws and regulations applicable thereto. 6.3 Furnish to the bank: 6.3.1 Within 90 days after the end of each fiscal year of the Borrower (i) a detailed report of audit of the Borrower for such fiscal year including the balance sheet of the Borrower as of the end of such fiscal year and the statements of profit and loss and surplus of the Borrower for the fiscal year then ended, prepared by independent certified public accountants satisfactory to the Bank, and (ii) a certificate of such accountants stating whether, in making their audit, they have become aware of any event of default set forth in Section 8 hereof, or of any event which might become such an event of default after the lapse of time or the giving of notice and the lapse of time, which has occurred and is then continuing and, if any such event has occurred and is continuing, specifying the nature and period of existence thereof; 6.3.2 Within 30 days after the end of each production cycle of Borrower, the balance sheet of the Borrower as of the end of such period and the statement of profit and loss and surplus of the Borrower from the beginning of such fiscal year to the end of such period, unaudited, but certified as correct (subject to year end adjustments) by an appropriate officer of the Borrower; 6.3.3 Within 30 days of the end of each production cycle of Borrower, an aged listing of the Borrower's accounts receivable in form acceptable to the Bank certified as accurate by an appropriate officer of the Borrower; 6.3.4 Within 30 days after the last day of each production cycle and at such other times as the Bank may reasonably request, a Collateral Certification as of the last day of such production cycle, certified by Borrower's principal financial officer to be true and correct and that as of that date, the aggregate principal amount of the Credit does not exceed the Borrowing Base; 6.3.5 Annually, a copy of a policy of insurance, showing the Bank as Loss Payee, covering all machinery, Equipment, Inventory and real estate of the Borrower, and its subsidiaries and affiliates, if any, in such amounts and covering such risks as is usually carried by corporations of established reputation and comparable size, all reasonably satisfactory to the Bank, and with the Bank named as loss payee; 6.3.6 Within 90 days after the end of each fiscal year of Borrower, projections for the succeeding year broken out by quarter, including Borrower's projected balance sheet, income statement and cash flow statement; 6.3.7 Promptly upon knowledge thereof, notice of the Bank in writing of the occurrence of any event which has or might, after the lapse of time or the giving of notice and the lapse of time, become an event of default under Section 8 of this Agreement; and, 6.3.8 Promptly, such other information as the Bank may reasonably request. 6.4 Maintain present executive management of Borrower. 6.4.1 Use proceeds from sales of Borrower's assets to repay borrowings hereunder. 6.4.2 Maintain its Inventory, Equipment, real estate and other properties in good condition and repair (normal wear and tear excepted), and pay and discharge or cause to be paid and discharged when due, the cost of repairs to or maintenance of the same, and pay or cause to be paid all rental or mortgage payments due on such real estate. 6.4.3 Maintain a ratio of Debt to Tangible Net Worth of not more than 1.0 to 1.0. The ratio shall be calculated by dividing the sum of all of Borrower's liabilities by Borrower's Tangible Net Worth. 6.4.4 Maintain a ratio of Current Assets to Current Liabilities of not less than 1.5 to 1.0. The ratio shall be calculated by dividing Borrower's Current Assets, less officer and employee receivables and prepaid expenses, by Borrower's Current Liabilities. 6.4.5 Maintain a Quick Ratio of not less than 0.5 to 1.0. "Quick Ratio" means Borrower's Current Assets, less inventory, officer and employee receivables and prepaid expenses, divided by Borrower's Current Liabilities. 6.4.6 Maintain Tangible Net Worth of not less than $16,000,000.00 6.4.7 Maintain at fiscal year end a ratio of cashflow to current maturities of long term debt of not less than 1.25 to 1.0, with cashflow coverage herein defined as net income of the Borrower after taxes plus non-cash expenses, divided by current maturities of long-term debt. 6.4.8 Maintain, at all times, a level of Credit borrowings which does not exceed the Borrowing Base. 6.4.9 Maintain all primary deposit accounts at the Bank. Deposit accounts shall at a minimum include the general operating account and the payroll account of Borrower. 6.4.10 When requested so to do, make available for inspection by duly authorized representatives of the Bank any of Borrower's books and records, and furnish to the Bank any information regarding its business affairs and financial condition within a reasonable time after written request therefor. 6.4.11 Permit the Bank, at Borrower's expense, to conduct collateral audits of Borrower's Accounts and Inventory in such detail as the Bank in its sole discretion may require. Borrower shall promptly pay to the Bank all costs and expenses which the Bank or any designated affiliate, subsidiary or parent company of the Bank may incur in connection with such audits. 7. Negative Covenants Without the Bank's written consent, so long as any indebtedness remains outstanding hereunder, the Borrower will not: 7.1 Permit any lien including, without limitation, any pledge, assignment, mortgage, title retaining contract or other type of security interest to exist on its property, real or personal, except: 7.1.1 Liens for taxes not delinquent or being contested in good faith; 7.1.2 Liens created in connection with workmen's compensation, unemployment insurance, or social security obligations, or to secure the performance of bids, tenders, or contracts (other than for the repayment of Borrowed Money), leases, statutory obligations, surety and appeal bonds, and other obligations of like nature made in the ordinary course of its business; 7.1.3 Existing liens known to the Bank; and 7.1.4. Liens pursuant to Section 4 hereof. 7.2 Create, incur, assume or suffer to exist, contingently or otherwise, other than in the ordinary course of business for conducting its present business operation, indebtedness for Borrowed Money, except: (I) indebtedness arising under this Agreement, and (ii) indebtedness disclosed to the Bank in writing as existing at the time of execution of this Agreement. 7.3 Declare or pay any dividends on any shares of stock of any class of the Borrower, now or hereafter outstanding. 7.4 Enter into any transaction of merger or consolidation, or transfer, sell, assign, lease or otherwise dispose of all or a substantial part of its properties or assets, or any of its notes or accounts receivable, or any stock or indebtedness of any Subsidiary, or any assets or properties necessary or desirable for the proper conduct of its business, or change the nature of its business, or wind up, liquidate or dissolve, or agree to do any of the foregoing, or permit any Subsidiary to do so. 7.5 Purchase or otherwise acquire all or substantially all of the assets of any person, firm, corporation or association unless after the consummation of such transaction, and after giving effect thereto and to any concurrent transactions, no event of default specified in Section 8 hereof, and no event which with notice or lapse of time or both would become such an event of default, would exist. 7.6 Except for existing indebtedness of certain principals of Borrower to Carol Kiser, become or remain a guarantor or surety, or pledge its credit or become liable in any manner (except by endorsement for deposit in the ordinary course of business) on undertakings of another. 7.7 Make any loan or advance to any partner, officer, shareholder, director or employee of the Borrower or any Subsidiary, except for temporary advances in the ordinary course of business. 7.8 Purchase or otherwise invest in or hold securities, non-operating real estate or other non-operating assets, except: (i) direct obligations of the United States of America or the top two tiers of short-term investment grade, interest-bearing securities as noted by Moody's and Standard and Poor's; (ii) the present investment in any such assets; (iii) gold bullion; and (iv) operating assets that hereafter become non-operating assets. 7.9 Make a material change in its accounting processes, whether for tax purposes or otherwise. 8. Events of Default 8.1 Upon the occurrence of any of the following events of default: 8.1.1 Default in any payment of interest or of principal on the Notes when due and continuance thereof for 15 days; or 8.1.2 Default in the observance or performance of any agreement of the Borrower herein set forth or in any other agreement between the Bank and the Borrower and continuance thereof for 20 days after written notice by Bank to Borrower; or 8.1.3 Default by the Borrower in the payment of any other indebtedness for Borrowed Money or in the observance or performance of any term, covenant or agreement of the Borrower in any agreement relating to any indebtedness of the Borrower, the effect of which default is to permit the holder of such indebtedness to declare the same due prior to the date fixed for its payment under the terms thereof and failure to cure such default within 30 days after written notice by Bank to Borrower; or 8.1.4 Any representation or warranty made by the Borrower herein or in any statement or certificate furnished by the Borrower hereunder, is untrue in any material respect; or 8.1.5 The occurrence of any litigation or governmental proceeding which is pending or threatened against the Borrower, which could have a material adverse effect on the Borrower's financial condition or business and which is not remedied within a reasonable period of time after notice thereof to the Borrower; or, 8.1.6 The occurrence of any extraordinary situation which gives the Bank reasonable grounds to believe that Borrower may not be able to perform under the Notes, the Agreement or any other documents executed in connection with the New Term Loan or the Credit; then or at any time thereafter, unless such event of default is remedied, the Bank or the holder of the Notes may, by notice in writing to the Borrower, declare the Credit to be terminated or the Notes to be due and payable or both, whereupon the Credit shall immediately terminate or the Notes shall immediately become due and payable or both, as the case may be. 8.2 Upon the occurrence of any of the following events of default: The Borrower becomes insolvent or bankrupt or makes any appointment for the benefit of creditors or consents to the appointment of a custodian, trustee or receiver for itself or for the greater part of its properties; or a custodian, trustee or receiver is appointed for the Borrower or for the greater part of its properties without its consent and is not discharged within 60 days; or bankruptcy, reorganization or liquidation proceedings are instituted by or against the Borrower and, if instituted against it, are consented to by it or remain undismissed for 60 days; then the Credit shall immediately terminate and the Notes shall automatically become immediately due and payable, without notice. 9. Miscellaneous 9.1 The provisions of this Agreement shall be in addition to those of any guaranty, pledge or security agreement, note or other evidence of liability held by the Bank, all of which shall be construed as complementary to each other. Nothing herein contained shall prevent the Bank from enforcing any or all other notes, guaranty, pledge or security agreements in accordance with their respective terms, provided, however, that if any terms of this Agreement conflict with any provision of the other Loan Documents, the terms of this Agreement shall control. 9.2 From time to time, the Borrower will execute and deliver to the Bank such additional documents and will provide such additional information as the Bank may reasonably require to carry out the terms of this Agreement and be informed of the Borrower's status and affairs. 9.3 The Bank shall have the right at all times to enforce the provisions of this Agreement and the Collateral Documents in strict accordance with the terms hereof and thereof, notwithstanding any conduct and custom on the part of the Bank in refraining from so doing at any time or times. The failure of the Bank at any time or times to enforce its rights under such provisions, strictly in accordance with the same, shall not be construed as having created a custom in any way or manner contrary to specific provisions of this Agreement or as having in any way or manner modified or waived the same. All rights and remedies of the Bank are cumulative and concurrent and the exercise of one right or remedy shall not be deemed a waiver or release of any other right or remedy. 9.4 The Borrower will pay all expenses, including the reasonable fees and expenses of legal counsel for the Bank, incurred in connection with the preparation, administration, amendment, modification or enforcement of this Agreement and the Collateral Documents and the collection or attempted collection of the Notes. 9.5 Any notices or consents required or permitted by this Agreement shall be in writing and shall be deemed delivered if delivered in person or if sent by certified mail, postage prepaid, return receipt requested or telegraph, as follows, unless such address is changed by written notice hereunder: 9.5.1. If to the Borrower: Vari-L Company, Inc. 11101 East 51st Avenue Denver, Colorado Attention: David G. Sherman, President With copy to: Gorsuch Kirgis LLC Suite 1100 1401 - 17th Street Denver, CO 80202 Attention: S. Lee Terry Jr. 9.5.2. If to the Bank: Norwest Bank Colorado, National Association 1740 Broadway Denver, CO 80274 Attention: Michael Jezier, Vice President 9.6 Notwithstanding any other provision of this Agreement, the Borrower understands that the Bank may enter into participation agreements with participating banks whereby the Bank will allocate certain percentages of its commitment to them. The Bank agrees to notify the Borrower before any such participation agreement will be executed. The Borrower acknowledges that, for the convenience of all parties, this Agreement is being entered into with the Bank only and that its obligations under this Agreement are undertaken for the benefit of and as an inducement to, each of any such participating banks as well as the Bank and the Borrower hereby grants to each such participating bank, to the extent of its participation in the loans, the right to set off deposit accounts maintained by the Borrower with such bank. 9.7 The substantive laws of the State of Colorado shall govern the construction of this Agreement and the rights and remedies of the parties hereto. 9.8 This Agreement shall inure to the benefit of and shall be binding upon, the respective successors and permitted assigns of the parties hereto. The Borrower has no right to assign any of its rights or obligations hereunder without the prior written consent of the Bank. This Agreement, and the documents executed and delivered pursuant hereto, constitute the entire agreement between the parties, and may be amended only be a writing signed on behalf of each party. 9.9 If any provision of this Agreement shall be held invalid under any applicable laws, such invalidity shall not affect any other provision of this Agreement that be given effect without the invalid provision and, to this end, the provisions hereof are severable. The provisions of this Agreement shall supersede those of any prior agreements between the Bank and the Borrower dealing with the same subject matter. 9.10 All representations, warranties, covenants and agreements of the Borrower hereunder shall survive the making of the New Term Loan and the Credit. 9.11 Whenever any installment of the interest on the Notes becomes due and payable on a day which is not a Banking Day, the maturity or due date thereof shall be extended to the next succeeding Banking Day and, in the case of principal of the Notes, interest shall be payable thereon at the rate per annum specified in the Notes during such extension. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. VARI-L COMPANY, INC. NORWEST BANK COLORADO, NATIONAL ASSOCIATION By:/s/ David G. Sherman By:/s/ Michael Jezier David G. Sherman, President, Michael Jezier, Vice President Treasurer, and CEO By:/s/ Alwin E. Branson Alwin E. Branson, Executive Vice President and COO EX-27 3
5 1000 6-MOS DEC-31-1996 JUN-30-1996 2736 0 2805 0 8536 15362 12265 2422 26106 4304 0 39 0 0 17121 26106 5181 5280 2588 2588 1716 0 208 768 323 445 0 0 0 445 .11 .11
-----END PRIVACY-ENHANCED MESSAGE-----