-----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, LSmONFjx9ODYMXm3cPNUQyIo8Oa7u+Lf13RJ2h/HgW6ofq4aSk3PFx5DhFOsQYli Z9CmeQX1RYRdMKNRaJt6Aw== 0001012870-02-004057.txt : 20021016 0001012870-02-004057.hdr.sgml : 20021016 20021016153818 ACCESSION NUMBER: 0001012870-02-004057 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20021016 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VARI L CO INC CENTRAL INDEX KEY: 0000917173 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 060678347 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-44019 FILM NUMBER: 02790454 BUSINESS ADDRESS: STREET 1: 4895 PEORIA STREET CITY: DENVER STATE: CO ZIP: 80239 BUSINESS PHONE: 3033711560 MAIL ADDRESS: STREET 1: 11101 EAST 51ST AVENUE CITY: DENVER STATE: CO ZIP: 80239 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SIRENZA MICRODEVICES INC CENTRAL INDEX KEY: 0001103777 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 770073042 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 522 ALMANOR AVENUE CITY: SUNNYVALE STATE: CA ZIP: 94086 BUSINESS PHONE: 4086165400 MAIL ADDRESS: STREET 1: 522 ALMANOR AVENUE CITY: SUNNYVALE STATE: CA ZIP: 94086 FORMER COMPANY: FORMER CONFORMED NAME: STANFORD MICRODEVICES INC DATE OF NAME CHANGE: 20000119 SC 13D 1 dsc13d.htm SCHEDULE 13D Schedule 13D
 
Schedule 13D
  
Page 1 of 6
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 13D
 
Under the Securities Exchange Act of 1934
 
 
 
 
VARI-L COMPANY, INC.
(Name of Issuer)
 
 
Common Stock, par value $0.01 per share
(Title of Class of Securities)
 
 
922150-10-7
(CUSIP Number)
 
Thomas J. Scannell
Sirenza Microdevices, Inc.
522 Almanor Avenue
Sunnyvale, CA 94085
(408) 616-5400
 
COPY TO:
 
Steven V. Bernard
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
(650) 493-9300
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
 
 
October 7, 2002
(Date of Event which Requires Filing of this Statement)
 
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 3d-1(e), 13d-1(f) or 13d-1(g), check the following box ¨.

 
Schedule 13D
  
Page 2 of 6
 
CUSIP No.  922150-10-7
 
  1.

  
Names of Reporting Persons, I.R.S. Identification Nos. of above persons (entities only).
 
Sirenza Micordevices, Inc.
    
  2.
  
Check the Appropriate Box if a Member of a Group (See Instructions)
  
(a)  ¨
(b)  x
 
  3.

  
SEC Use Only
 
    
  4.

  
Source of Funds (See Instructions)
 
WC
    
  5.

  
Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)
 
  
¨
  6.

  
Citizenship or Place of Organization
 
Delaware
    
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
  
  7.    Sole Voting Power
 
        2,191,692(1)
  8.    Shared Voting Power
 
        0
  9.    Sole Dispositive Power
 
        2,191,692(1)
10.    Shared Dispositive Power
 
        0
11.

  
Aggregate Amount Beneficially Owned by Each Reporting Person
 
2,191,692(1)
    
12.

  
Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
 
  
¨
 
13.

  
Percent of Class Represented by Amount in Row (11)
 
23.2%
    
14.

  
Type of Reporting Person (See Instructions)
 
CO            
    
 
        ***(1) Sirenza holds a promissory note issued by Vari-L to evidence a loan in the principal amount of $1,353,861.80. Upon maturity (September 25, 2003), notice of Vari-L’s intended prepayment of the loan or a proposed acquisition of Vari-L by a third party, the note principal becomes convertible at Sirenza’s option into common stock representing 19.9% of Vari-L’s Common Stock on a fully diluted basis as of the conversion date. The 2,191,692 shares disclosed herein represent the number of shares into which the note would have been convertible as of October 8, 2002 if one of the conversion events described above had occurred, based on the number of shares of Vari-L Common Stock and common stock equivalents outstanding as disclosed in Vari-L’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 8, 2002. Sirenza disclaims beneficial ownership of the shares of Vari-L Common Stock disclosed herein, and this schedule shall not be construed an admission of such beneficial ownership for purposes of Sections 13(d) or 13(g) of the Securities Exchange Act or otherwise.
 
 

 
Schedule 13D
  
Page 3 of 6
 
 
Item 1.    Security and Issuer
 
This statement of beneficial ownership on Schedule 13D (this “Schedule 13D”) relates to the common stock, par value $0.01 per share (the “Vari-L Common Stock”), of Vari-L Company, Inc. (“Vari-L”), a Colorado corporation, and is being filed pursuant to Rule 13d-1 under the Securities Exchange Act of 1934. The address of the principal executive office of Vari-L is 4895 Peoria Street, Denver, Colorado 80239.
 
Item 2.    Identity and Background
 
This Schedule 13D is being filed on behalf of Sirenza Microdevices, Inc., a Delaware corporation (“Sirenza”). The address of the principal executive office of Sirenza is 522 Almanor Avenue, Sunnyvale, California 94085. Sirenza is a designer and supplier of high-performance radio frequency (RF) components for communications equipment manufacturers.
 
To the best of Sirenza’s knowledge as of the date hereof, the name, business address, present principal occupation or employment and citizenship of each executive officer and director of Sirenza, and the name, principal business address of any corporation or other organization in which such employment is conducted is set forth in Schedule I hereto. The information contained in Schedule I is incorporated herein by reference.
 
During the last five years, neither Sirenza nor, to the best of Sirenza’s knowledge, any of the executive officers or directors of Sirenza listed in Schedule I hereto has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
 
Item 3.    Source and Amount of funds or Other Consideration
 
The source of funds used to purchase the promissory note which in certain instances may become convertible into the shares of Vari-L Common Stock reported herein was the general working capital of Sirenza.
 
Item 4.    Purpose of Transaction
 
The purchase by Sirenza of the promissory note which in certain instances may become convertible into the securities of Vari-L covered hereby was effected for the purpose of evidencing the loan described below.
 
On October 7, 2002, Vari-L entered into a bridge loan facility with Sirenza, wherein Sirenza agreed to provide Vari-L with up to $5.3 million to support general working capital requirements. Pursuant to the Security Agreement that Vari-L and Sirenza entered into in connection therewith, the loan is secured by all of the assets of Vari-L. Vari-L made an initial draw of approximately $1.4 million to pay off an existing lender concurrently with entering into the Sirenza facility. The loan facility allows for $1,353,861.80 of the loan principal amount to be converted at Sirenza’s option into 19.9% of Vari-L Common Stock on a fully diluted basis upon maturity (September 25, 2003), notice of Vari-L’s intended prepayment of the loan or a proposed acquisition of Vari-L by a third party. The loan facility also provides for a prepayment penalty of $1 million in the event that Vari-L undertakes a change of control transaction with a third party. Concurrently with their entry into the loan facility, Vari-L and Sirenza entered into an Exclusivity and Right of First Refusal Agreement whereby Vari-L agreed to negotiate exclusively with Sirenza regarding a proposed acquisition of Vari-L through March 2003, subject to limited exceptions, and granted Sirenza a right of first refusal on competing acquisition offers. In addition, Vari-L and Sirenza entered into a Resale Registration Rights Agreement whereby Vari-L agreed to register for resale the Vari-L Common Stock issuable to Sirenza upon its conversion of $1,353,861.80 of the loan principal amount.

 
Schedule 13D
  
Page 4 of 6
 
Sirenza is currently in discussions with Vari-L regarding a potential business combination transaction. Sirenza reserves the right, consistent with applicable law, to acquire additional securities of Vari-L (whether through open market purchases, block trades, private acquisitions, tender or exchange offers or otherwise), to acquire all or substantially all of the assets of Vari-L, to seek to influence the management or policies of Vari-L, to dispose of securities of Vari-L, to modify its current plan or formulate other purposes, plans or proposals regarding Vari-L or any of its securities, in each case in light of Vari-L’s response to its current plans, Sirenza’s continued evaluation of Vari-L, market conditions or other factors. Such actions could result in one or more of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D.
 
Item
 
5.    Interest in Securities of the Issuer
 
The information set forth or incorporated by reference in Items 2, 3 and 4 is hereby incorporated herein by reference.
 
Sirenza holds a promissory note issued by Vari-L to evidence a loan in the principal amount of $1,353,861.80. Upon maturity (September 25, 2003), notice of Vari-L’s intended prepayment of the loan or a proposed acquisition of Vari-L by a third party, the note principal becomes convertible at Sirenza’s option into common stock representing 19.9% of Vari-L’s Common Stock on a fully diluted basis as of the conversion date. The 2,191,692 shares disclosed herein represent the number of shares into which the note would have been convertible as of October 8, 2002 if one of the conversion events described above had occurred, based on the number of shares of Vari-L Common Stock and common stock equivalents outstanding as disclosed in Vari-L’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 8, 2002. Sirenza disclaims beneficial ownership of the shares of Vari-L Common Stock disclosed herein, and this schedule shall not be construed an admission of such beneficial ownership for purposes of Sections 13(d) or 13(g) of the Securities Exchange Act or otherwise.
 
To the knowledge of Sirenza, none of the directors and executive officers of Sirenza beneficially own shares of Vari-L Common Stock.
 
Item
 
6.    Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
 
Except as discussed in Item 4 hereof, there are no contracts, arrangements, understandings or relationships between Sirenza and any other person with respect to any securities of Vari-L.
 
Item
 
7.    Material to Be Filed as Exhibits
 
Exhibit
   
Description
1.
   
Press Release dated October 8, 2002.
2.
   
Loan Agreement with Vari-L dated October 7, 2002.
3.
   
Security Agreement with Vari-L dated October 7, 2002.
4.
   
Exclusivity and Right of First Refusal Agreement with Vari-L dated October 7, 2002.
5.
   
Resale Registration Rights Agreement with Vari-L dated October 7, 2002.

 
Schedule 13D
     
Page 5 of 6
 
SIGNATURE
 
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
 
/s/    THOMAS J. SCANNELL      
Thomas J. Scannell,
Chief Financial Officer,
Vice President of Finance and Administration
 
Date: October 14, 2002

 
Schedule 13D
  
Page 6 of 6
 
 
SCHEDULE I
 
DIRECTORS AND EXECUTIVE OFFICERS OF SIRENZA MICRODEVICES, INC.
 
The following table sets forth the name, business address and present principal occupation or employment of each director and executive officer of Sirenza Microdevices, Inc. Except as indicated below, each such person is a U.S. citizen, and the business address of each such person is 522 Almanor Avenue, Sunnyvale, CA 94085.
 
Board of Directors Name and Title
   
Present Principal Occupation
Peter Chung, Director
   
General Partner, Summit Partners, L.P.
499 Hamilton Avenue, Suite 200
Palo Alto, CA 94301
      
John Bumgarner, Jr., Director
   
Retired
      
Casimir Skrzpczak, Director
   
General Partner, Global Asset Capital
2460 Sand Hill Road
Menlo Park, CA 94025
      
John Ocampo, Director
   
Director, Sirenza Microdevices, Inc.
      
Robert Van Buskirk, Director
   
President and Chief Executive Officer,
Sirenza Microdevices, Inc.
 
Executive officers who are not directors:
 
Name
   
Title and Present Principal Occupation
Thomas Scannell
   
Chief Financial Officer, Vice President of Finance and Administration
      
Joseph Johnson
   
Chief Technology Officer
      
Gerald Quinnell
   
Executive Vice President, Business Development
      
Walter G. Baker
   
Vice President, Engineering
      
Richard Clark
   
Vice President, Integrated Power Products
      
Gerald Hatley
   
Vice President, Controller and Chief Accounting Officer
      
Norm Hilgendorf
   
Vice President, Sales & Marketing
      
Rodney Hsing
   
Vice President, Strategic Accounts
      
Guy Krevet
   
Vice President, Manufacturing
      
John Pelose
   
Vice President, Wireless Products
      
Robert M. Pinato
   
Vice President, Subscriber/PLA Products
EX-1 3 dex1.txt PRESS RELEASE DATED OCTOBER 8, 2002 EXHIBIT 1 to SCHEDULE 13D Press Release dated October 8, 2002 SUNNYVALE, Calif.--(BUSINESS WIRE)--Oct. 8, 2002--Sirenza Microdevices, Inc. (Nasdaq:SMDI - News), a leading designer and supplier of high-performance radio frequency (RF) components for communications equipment manufacturers, today announced that it is in discussions to acquire Vari-L Company, Inc. (OTCBB:VARL - - News). Concurrently, Sirenza has agreed to provide Vari-L with a secured bridge loan facility of up to $5.3 million. Vari-L designs, manufactures and markets complementary RF components using technologies common to existing and planned Sirenza products. Sirenza's proposed acquisition of Vari-L is subject to the completion of due diligence, the finalization of terms and structure, and other pre-signing considerations. In connection with the loan agreement, Vari-L has agreed to negotiate a potential acquisition exclusively with Sirenza through March 2003, subject to limited exceptions, and has granted Sirenza the right of first refusal on competing acquisition offers. Under the terms of the secured bridge loan facility, Vari-L plans to draw $1.3 million to retire a current loan facility. Vari-L may draw additional funds from time to time to support its general working capital requirements. The Sirenza loan facility provides for a portion of the principal amounts to be convertible into approximately 19.9% of Vari-L's fully diluted common stock under certain conditions. Vari-L plans to disclose the loan agreement and its acquisition negotiations with Sirenza in its Annual Report on Form 10-K for fiscal year 2002, to be filed on October 8 with the Securities and Exchange Commission. "We envision a number of market, channel, technological, and product synergies with Vari-L, which we believe will benefit the customers and stockholders of both companies," said Robert Van Buskirk, president and chief executive officer of Sirenza. "Vari-L's VCO (voltage-controlled oscillator) components, PLL (phase-locked loop) modules and signal processing components are commonly deployed beside our products in wireless communications infrastructure equipment. Also, Vari-L's sales channels are highly complementary to our channels and global end-customer base. We look forward to reaching a definitive acquisition agreement in the fourth quarter." Vari-L Company, Inc. Headquartered in Denver, Vari-L designs, manufactures and markets wireless communications components that generate or process radio frequency (RF) and microwave frequency signals. Vari-L's patented products are used in commercial infrastructure equipment, consumer subscriber products and military/aerospace platforms. Vari-L serves a diverse customer base of the world's leading technology companies, including Agilent Technologies, Ericsson, Harris, Hughes Network Systems, Lockheed Martin, Lucent Technologies, Microwave Data Systems, Marconi, Motorola, Netro, Nokia, Raytheon, Textron, Siemens, and Solectron. Sirenza Microdevices, Inc. Sirenza Microdevices, Inc., an ISO 9001:2000-certified manufacturer headquartered in Sunnyvale, California, with design centers throughout the U.S. and Canada, is a leading supplier of high-performance RF components for the wireless and wireline telecommunications markets. The company's product lines include amplifiers, power amplifiers, discrete devices, RF signal processing components, fiber optic components, and high-performance multicomponent modules (MCMs) for transmit and receive applications. Product information may be found on Sirenza's website at www.sirenza.com. This news release contains forward-looking statements regarding future events or results, including the proposed acquisition of Vari-L by Sirenza; the timing and execution of any definitive acquisition agreement between Sirenza and Vari-L; the timing, amounts and planned use of proceeds of proposed loans from Sirenza to Vari-L; and the synergies with Vari-L and related benefits envisioned by Sirenza. Sirenza cautions readers that such statements are, in fact, predictions and that actual events or results may differ materially. The discussions of Sirenza's proposed acquisition of Vari-L are at an early stage, and either Sirenza or Vari-L may decide not to proceed with such a transaction. There is no assurance that the loans made under the secured bridge loan facility will benefit Vari-L, or that the envisioned synergies of a business combination will benefit the customers and stockholders of both companies. Other factors that could cause actual events or results to differ materially from those in the forward-looking statements are included in Sirenza's and Vari-L's respective filings with the Securities and Exchange Commission, specifically Sirenza's Form 10-K filed in March 2002 and Form 10-Q filed in August 2002, and Vari-L's Form 10-K filed in October 2002. Sirenza undertakes no obligation to update its forward-looking statements at any time or for any reason. -2- EX-2 4 dex2.txt LOAN AGREEMENT WITH VARI-L DATED OCTOBER 7, 2002 EXHIBIT 2 to SCHEDULE 13D LOAN AGREEMENT BETWEEN SIRENZA MICRODEVICES, INC. AND VARI-L COMPANY, INC. October 7, 2002 TABLE OF CONTENTS
Page ---- ARTICLE 1. INTERPRETATION .......................................... 1 1.1 Definitions ............................................. 1 1.2 GAAP .................................................... 1 1.3 Governing Law ........................................... 1 1.4 Construction ............................................ 1 1.5 Entire Agreement ........................................ 1 1.6 Calculation of Interest and Fees ........................ 1 ARTICLE 2. LOANS ................................................... 2 2.1 Tranche A Loan .......................................... 2 2.2 Tranche B Loans ......................................... 2 2.3 Interest ................................................ 2 2.4 Maturity ................................................ 2 2.5 Prepayments ............................................. 2 2.6 Application to Acquisition Consideration ................ 3 2.7 Other Payment Terms ..................................... 4 2.8 Notes ................................................... 4 2.9 Security; Further Assurances ............................ 4 ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BORROWER .............. 5 3.1 Due Incorporation, Qualification, etc ................... 5 3.2 Authority ............................................... 5 3.3 Enforceability .......................................... 5 3.4 Non-Contravention ....................................... 5 3.5 Approvals ............................................... 5 3.6 No Violation or Default ................................. 5 3.7 Title ................................................... 6 3.8 No Agreements to Sell Assets ............................ 6 3.9 Other Regulations ....................................... 6 3.10 Governmental Charges and Other Indebtedness ............. 6 3.11 Solvency, Etc ........................................... 6 3.12 No Material Adverse Effect .............................. 6 3.13 Accuracy of Information Furnished ....................... 6 ARTICLE 4. CONDITIONS PRECEDENT .................................... 7 4.1 Closing ................................................. 7 4.2 Conditions to Lender's Obligation to Make Each Loan ..... 8 4.3 Covenant to Deliver ..................................... 8 ARTICLE 5. COVENANTS OF BORROWER ................................... 9 5.1 Affirmative Covenants ................................... 9 5.2 Negative Covenants ...................................... 10 5.3 Financial Covenants ..................................... 12
-i- TABLE OF CONTENTS (continued)
Page ---- ARTICLE 6. EVENTS OF DEFAULT ....................................... 12 6.1 Events of Default ....................................... 12 6.2 Rights of Lender upon Default ........................... 13 ARTICLE 7. MISCELLANEOUS ........................................... 14 7.1 Notices ................................................. 14 7.2 Expenses ................................................ 15 7.3 Indemnification ......................................... 15 7.4 Waivers; Amendments ..................................... 15 7.5 Successors and Assigns .................................. 15 7.6 Set-off ................................................. 16 7.7 No Third Party Rights ................................... 16 7.8 Partial Invalidity ...................................... 16 7.9 Jury Trial .............................................. 16 7.10 Governing Law ........................................... 16 7.11 Integration ............................................. 16 7.12 Counterparts ............................................ 16
-ii- LOAN AGREEMENT This LOAN AGREEMENT (this "Loan Agreement"), dated as of October 7, 2002 is entered into by and between SIRENZA MICRODEVICES, INC., a Delaware corporation ("Lender") and VARI-L COMPANY, INC., a Colorado corporation ("Borrower"). AGREEMENT NOW, THEREFORE, in consideration of the foregoing and of the covenants, conditions and agreements set forth herein, the parties agree as follows: ARTICLE 1. INTERPRETATION. 1.1 Definitions. Unless otherwise indicated in this Loan Agreement, each term set forth in Schedule I, when used in this Loan Agreement, shall have the respective meaning given to that term in Schedule I or in the provision of this Loan Agreement referenced in Schedule I. 1.2 GAAP. Unless otherwise indicated in this Loan Agreement, all accounting terms used in this Loan Agreement shall be construed, and all accounting and financial computations hereunder or thereunder shall be computed, in accordance with GAAP. The term "GAAP" shall mean generally accepted accounting principles and practices as in effect in the United States of America from time to time, consistently applied. 1.3 Governing Law. This Loan Agreement and each of the other Loan Documents shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of law rules. 1.4 Construction. Each of this Loan Agreement and the other Loan Documents is the result of negotiations among, and has been reviewed by, Borrower, Lender and their respective counsel. Accordingly, this Loan Agreement and the other Loan Documents shall be deemed to be the product of all parties hereto, and no ambiguity shall be construed in favor of or against Borrower or Lender. 1.5 Entire Agreement. This Loan Agreement and each of the other Loan Documents, taken together, constitute and contain the entire agreement of Borrower and Lender and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof. 1.6 Calculation of Interest and Fees. All calculations of interest and fees under this Loan Agreement and the other Loan Documents for any period shall include the first day of such period and exclude the last day of such period. ARTICLE 2. LOANS 2.1 Tranche A Loan. Subject to the terms and conditions of this Loan Agreement, Lender agrees to advance to Borrower a term loan (the "Tranche A Loan") in an aggregate principal amount not to exceed $1,353,861.80 to be used to payoff existing Indebtedness to Wells Fargo Business Credit Inc. Borrower may not reborrow the principal amount of the Tranche A Loan after repayment or prepayment thereof. 2.2 Tranche B Loans. Subject to the terms and conditions of this Loan Agreement, Lender agrees to advance to Borrower, from time to time, term loans (each, a "Tranche B Loan" and together with the Tranche A Loan, the "Loans", and each a "Loan") according to Schedule II attached hereto (the "Funding Schedule"), in an aggregate principal amount not to exceed $3,946,138.20 (the "Tranche B Commitment"). Each month Borrower may request a Tranche B Loan in a principal amount up to the sum of (i) the principal amount of Tranche B Loans permitted to be advanced to the date of requested advance pursuant to the Funding Schedule plus (ii) any Excess Amount. The term "Excess Amount" shall mean the aggregate principal amount of Tranche B Loans permitted to be advanced to the date of requested advance pursuant to the Funding Schedule minus the aggregate amount of Tranche B Loans actually advanced to the date of requested advance. In no event shall the aggregate principal amount of Tranche B Loans advanced pursuant to this Loan Agreement exceed the Tranche B Commitment. No more than one Tranche B Loan shall be advanced per calendar month (except that Borrower may make two advances in the month of October 2002, provided that in no event shall the aggregate principal amount of Loans advanced in such month exceed $1,200,000) and each Tranche B Loan shall be made on a date at least three (3) Business Days after the delivery to Lender in the manner specified in Section 7.1 of a notice of borrowing in the form of Schedule III hereto (the "Notice of Borrowing"). Borrower may not reborrow the principal amount of any Tranche B Loan after repayment or prepayment thereof. 2.3 Interest. Borrower shall pay interest at Maturity on the unpaid principal amount of the Loans from the date of each such Loan until paid in full, at a rate per annum equal to twenty five percent (25%). All computations of such interest shall be based on a year of twelve thirty (30) day months. 2.4 Maturity. Unless earlier prepaid or accelerated, all outstanding principal and accrued interest under the Loans are due and payable in full on September 25, 2003. 2.5 Prepayments. (a) Optional Prepayment (1) Tranche A Loan. Provided that there are no outstanding Tranche B Loans, at its option, Borrower may, upon five (5) Business Days' written notice to Lender, prepay all, but not less than all of the Tranche A Loan, provided that such prepayment shall include, all outstanding principal on the Tranche A Loan, all accrued interest to the date of prepayment thereon and all other fees and expenses due to Lender under the Loan Documents. (2) Tranche B Loans. At its option, Borrower may, upon five (5) Business Days' written notice to Lender, prepay all or part of any Tranche B Loan, provided that such prepayment shall include, all outstanding principal on the Tranche B Loan, all accrued interest to the date of prepayment and all other fees and expenses due to Lender under the Loan Documents. -2- (3) Prepayment Fee. In the event that (i) a Change of Control shall occur within 180 days following a date of prepayment pursuant to this Section 2.5(a) upon which all outstanding Loans have been paid in full or (ii) Borrower shall enter into a definitive acquisition agreement with a Person other than Lender within 180 days following a date of prepayment upon which all outstanding Loans have been paid in full that would result in a Change of Control, then in either case, Borrower expressly agrees to pay (whether or not any Obligations remain outstanding and whether or not Lender has any commitment to make Loans hereunder) to Lender the Prepayment Fee upon the occurrence of either event referenced in subsection (i) or (ii) of this sentence. Borrower's express agreement to pay the Prepayment Fee pursuant to the terms set forth in the previous sentence shall survive the termination of this Loan Agreement. (b) Mandatory Prepayment of Loans. Upon the earlier of (i) the fifth Business Day following the date of execution of a definitive agreement with a Person other than Lender that would result in a Change of Control, or (ii) the occurrence of a Change of Control, then in either case: (1) Borrower shall, at Lender's option, either (A) prepay in full all outstanding principal amounts due under the Tranche A Loan, all accrued interest to the date of prepayment and all other fees and expenses due under the Loan Documents, or (B) convert all outstanding principal amounts due under the Tranche A Loan into Borrower's Equity Securities pursuant to the conversion provisions contained in the Tranche A Note and pay to Lender all accrued interest to the date of conversion and all other fees and expenses due under the Loan Documents; (2) Borrower shall prepay in full all outstanding principal amounts due under the Tranche B Loans, all accrued interest to the date of prepayment, and all other fees and expenses due under the Loan Documents; and (3) Borrower shall pay to Lender the Prepayment Fee. (c) Application of Prepayments. All prepayments hereunder shall be applied first to unpaid fees, costs and expenses then due and payable under this Loan Agreement or the other Loan Documents, second to accrued interest then due and payable under this Loan Agreement or the other Loan Documents, third to the Prepayment Fee, if any, and finally to reduce the principal amount of outstanding Loans. (d) Conversion. At Lender's option, the principal amount of the Tranche A Loan may be converted into Borrower's Equity Securities pursuant to the conversion provisions contained in the Tranche A Note. 2.6 Application to Acquisition Consideration. In the event that Lender and Borrower enter into a definitive acquisition agreement that would result in Lender acquiring Borrower, or all or substantially all of the assets of Borrower, then all outstanding principal and accrued and unpaid interest under the Tranche B Loans and all accrued and unpaid interest under the Tranche A Loan to the date of the closing of such acquisition shall be applied to reduce the purchase price paid by Lender pursuant to such acquisition agreement at a rate of $1.00 for every $1.00 of such outstanding principal and accrued and unpaid interest under the Tranche B Loans and all accrued and unpaid interest under the Tranche A Loan. Each $1.00 applied in the previous sentence to reduce the purchase price paid by Lender shall be deemed a $1.00 repayment of the Obligations and such Obligations shall be deemed cancelled to the extent of such repayment. -3- 2.7 Other Payment Terms (a) Place and Manner. Borrower shall make all payments due to Lender hereunder at the address specified in Section 7.1, in lawful money of the United States and in same day or immediately available funds. (b) Date. Whenever any payment due hereunder shall fall due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest or fees, as the case may be. (c) Default Rate. From and after the occurrence of an Event of Default and during the continuance thereof, Borrower shall pay interest on the aggregate, outstanding balance of the Loans, and on interest (compounded annually) and other amounts not paid when due hereunder or under the other Loan Documents, from the date due thereof until those amounts are paid in full at a per annum rate (the "Default Rate") equal to the lesser of (i) a rate equal to five percentage points in excess of the rate otherwise applicable to the Loans at such time or (ii) the maximum rate permitted by law, such rate to change from time to time as the rate otherwise applicable to the Loans shall change. All computations of such interest shall be based on a year of twelve thirty (30) day months for the actual number of days elapsed. 2.8 Notes. The obligation of Borrower to repay the Tranche A Loan and to pay interest thereon at the rates provided herein shall be evidenced by a convertible promissory note in the form of Exhibit A (the "Tranche A Note"). The obligation of Borrower to repay the Tranche B Loans and to pay interest thereon at the rates provided herein shall be evidenced by a promissory note in the form of Exhibit B (the "Tranche B Note" and together with the Tranche A Note, the "Notes" and each a "Note"). With respect to Tranche B Loans, Borrower irrevocably authorizes Lender to make or cause to be made, an appropriate notation on Lender's Record reflecting the making of such Tranche B Loan or (as the case may be) the receipt of a payment or prepayment of such Tranche B Loan. The outstanding amount of the Tranche B Loans set forth on such Lender's Record shall be prima facie evidence (absent manifest error) of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender's Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under the Tranche B Note to make payments of principal of or interest on the Tranche B Note when due. 2.9 Security; Further Assurances (a) Security. The Obligations shall be secured by a Security Agreement in the form of Exhibit C (the "Security Agreement"). (b) Further Assurances. Borrower shall deliver to Lender the Security Agreement and such other instruments, agreements, certificates and documents as Lender may reasonably request to create, perfect, evidence and maintain (i) a first priority security interest of Lender in all of the assets of Borrower as further set forth in the Security Agreement, subject only to Permitted Liens and (ii) the rights of Lender under this Loan Agreement and the other Loan Documents. Borrower shall fully cooperate with Lender and perform all additional acts reasonably requested by Lender to effect the purposes of the foregoing and the rights granted to Lender hereunder. -4- ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BORROWER. To induce Lender to enter into this Loan Agreement and to make Loans hereunder, Borrower represents and warrants to Lender that, except as set forth on the disclosure schedule attached hereto as Schedule IV (the "Disclosure Schedule"): 3.1 Due Incorporation, Qualification, etc. Each of Borrower and its Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation; (ii) has the power and authority to own, lease and operate its properties and carry on its business as now conducted; and (iii) is duly qualified, licensed to do business and in good standing as a foreign corporation in each jurisdiction where the failure to be so qualified or licensed could reasonably be expected to have a Material Adverse Effect. 3.2 Authority. The execution, delivery and performance by Borrower of each Loan Document to be executed by Borrower and the consummation of the transactions contemplated thereby (i) are within the power of Borrower and (ii) have been duly authorized by all necessary actions on the part of Borrower. 3.3 Enforceability. Each Loan Document executed, or to be executed, by Borrower has been, or will be, duly executed and delivered by Borrower and constitutes, or will constitute, a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors' rights generally and general principles of equity. 3.4 Non-Contravention. The execution and delivery by Borrower of the Loan Documents executed by Borrower and the performance and consummation of the transactions contemplated thereby do not and will not (i) violate any material Requirement of Law applicable to Borrower; (ii) violate any provision of, or result in the breach or the acceleration of, or entitle any other Person to accelerate (whether after the giving of notice or lapse of time or both), any material Contractual Obligation of Borrower; or (iii) result in the creation or imposition of any Lien upon any property, asset or revenue of Borrower (except such Liens as may be created in favor of Lender pursuant to this Loan Agreement or the other Loan Documents). 3.5 Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority or other Person (including, without limitation, the shareholders of any Person) is required in connection with the execution and delivery of the Loan Documents executed by Borrower and the performance and consummation of the transactions contemplated thereby, other than filings that may be required under applicable federal and state securities laws and filings necessary to perfect the Lender's security interest in the Collateral (as defined in the Security Agreement). 3.6 No Violation or Default. None of Borrower or Borrower's Subsidiaries is in violation of or in default with respect to (i) any material Requirement of Law; (ii) any material Contractual Obligation (nor is there any waiver in effect which, if not in effect, would result in such a violation or default), where, in each case, such violation or default, individually, or together with all such violations or defaults, could reasonably be expected to have a Material Adverse Effect. Without limiting the generality of the foregoing, to the best knowledge of Borrower, none of Borrower or Borrower's Subsidiaries (A) has violated any Environmental Laws, (B) has any liability under any Environmental Laws or (C) has received notice or other communication of an investigation or is under investigation by any Governmental Authority having authority to enforce Environmental Laws, where such violation, liability or investigation could reasonably be expected to have a Material Adverse Effect. No Event of Default or Default has occurred and is continuing. Except as set forth -5- (with estimates of the dollar amounts involved) in the Disclosure Schedule, no actions (including, without limitation, derivative actions), suits, proceedings or investigations are pending or, to the knowledge of Borrower, threatened against Borrower at law or in equity in any court or before any other governmental authority or (ii) seeks to enjoin, either directly or indirectly, the execution, delivery or performance by Borrower of the Loan Documents or the transactions contemplated thereby. The executed Memorandum of Understanding (the "MOU") dated October 3, 2002, regarding a settlement of the certain outstanding shareholder class action litigation involving Borrower referred to therein, though it remains subject to court approval, has been entered into by Borrower and all other necessary parties and is in full force and effect in accordance with its terms. 3.7 Title. Borrower and Borrower's Subsidiaries own and have good and marketable title in fee simple absolute to, or a valid leasehold interest in, all their respective real properties and good title to their other respective assets and properties as reflected in the most recent Financial Statements delivered to Lender (except those assets and properties disposed of in the ordinary course of business since the date of such Financial Statements) and all respective assets and properties acquired by Borrower and Borrower's Subsidiaries since such date (except those disposed of in the ordinary course of business). Such assets and properties are subject to no Lien, except for Permitted Liens. 3.8 No Agreements to Sell Assets. None of Borrower or Borrower's Subsidiaries has any legal obligation, absolute or contingent, to any Person to sell a material portion of the assets of Borrower or Borrower's Subsidiaries (other than sales in the ordinary course of business), or to effect any merger, consolidation or other reorganization of Borrower or to enter into any agreement with respect thereto, except those transactions contemplated with Lender. 3.9 Other Regulations. None of Borrower or its Subsidiaries is subject to regulation under the Investment Company Act of 1940, the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code or to any federal or state statute or regulation limiting its ability to incur Indebtedness. 3.10 Governmental Charges and Other Indebtedness. Each of Borrower and its Subsidiaries has filed or caused to be filed all tax returns (including extensions thereof) which are required to be filed by it. Borrower and Borrower's Subsidiaries have paid, or made provision for the payment of, all taxes and other Governmental Charges which have or may have become due pursuant to said returns or otherwise and all other Indebtedness, except such Governmental Charges or Indebtedness, if any, which are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided or which could not reasonably be expected to have a Material Adverse Effect if unpaid. 3.11 Solvency, Etc. As of the Closing Date, Borrower is Solvent and, after the execution and delivery of the Loan Documents and the consummation of the transactions contemplated thereby will be Solvent. 3.12 No Material Adverse Effect. As of the Closing Date, since June 30, 2002, no event has occurred and no condition exists which could reasonably be expected to have a Material Adverse Effect, except as disclosed in Borrower's Draft No. 8 of its Annual Report on Form 10-K for its fiscal year ended June 30, 2002, a copy of which, dated October 4, 2002, has been previously provided to Lender. 3.13 Accuracy of Information Furnished. No representation or warranty or other statement of Borrower in any written certificates, statements or information furnished to Lender by or on behalf of -6- Borrower or Borrower's Subsidiaries in connection with the Loan Documents or the transactions contemplated thereby contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading (it being recognized by Lender that the projections and forecasts provided by Borrower have been prepared in good faith, are based upon reasonable assumptions, are not to be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results). ARTICLE 4. CONDITIONS PRECEDENT. 4.1 Closing. At the time of execution and delivery of this Loan Agreement, Borrower shall have duly executed and/or delivered to Lender (unless the Lender has agreed in writing to waive such condition or document): (a) The Security Agreement, together with completed schedules; (b) Account Control Agreements in form and substance reasonably satisfactory to Lender, duly executed by all applicable parties, to perfect Lender's security interest in Borrower's deposit and investment accounts; (c) UCC-1 Financing Statement to be filed with the Secretary of State of the State of Colorado and Borrower shall have taken such actions and delivered such documents, if any, as Lender shall reasonably determine are necessary or desirable to perfect and protect its security interest in the Collateral; (d) Patent and Trademark Office filings and U.S. Copyright Office filings, if applicable; (e) Copies, certified by the Secretary, Assistant Secretary or Chief Financial Officer of Borrower as of the Closing Date, of Borrower's charter documents and bylaws and of all documents evidencing corporate action taken by Borrower authorizing the execution, delivery and performance of the Loan Documents to which Borrower is a party, in form and substance satisfactory to Lender and its counsel; (f) Good standing certificate from Borrower's state of incorporation and the state in which Borrower's principal place of business is located, together with certificates of the applicable governmental authorities that Borrower is in compliance with the franchise tax laws of each such state, each dated as of a recent date; (g) Evidence of the insurance coverage required by Section 5.1(c) of this Loan Agreement; (h) Evidence satisfactory to Lender (i) that Borrower's loan facility with Wells Fargo Business Credit Inc. has been terminated, (ii) that all obligations of Borrower under such loan facility have been paid in full and (iii) that all security interests in favor of Wells Fargo Business Credit, Inc. have been terminated; (i) All necessary consents of shareholders and other third parties with respect to the execution, delivery and performance of this Agreement, and the other Loan Documents; (j) Exclusivity And Right of First Refusal Agreement; -7- (k) Registration Rights Agreement; and (l) A favorable opinion of counsel for Borrower, dated as of the closing date, in the form attached hereto as Exhibit D; 4.2 Conditions to Lender's Obligation to Make Each Loan. The making of each Loan is subject to the further condition that on the date such Loan is made and after giving effect thereto, the following shall be true and correct: (a) Borrower shall have delivered to Lender the Notice of Borrowing; (b) Borrower shall have duly executed and delivered to Lender the applicable Note; (c) The funding date shall not be later than September 25, 2003; (d) Borrower shall have provided to Lender such documents, instruments and agreements as Lender shall reasonably request to evidence the perfection and priority of the security interests granted to Lender pursuant to the Security Agreement; (e) The representations and warranties set forth in this Loan Agreement and the other Loan Documents shall be true and correct in all material respects as if made on such date, except to the extent such representations and warranties address matters as of a particular date (which representations and warranties shall remain true and correct as of such date); (f) No Default or Event of Default has occurred and is continuing or will result from the making of the Loan; and (g) Each of the Loan Documents remains in full force and effect; The submission by Borrower to Lender of the Notice of Borrowing with respect to the Loan shall be deemed to be a representation and warranty by Borrower as of the date thereof as to the above. 4.3 Covenant to Deliver. Borrower agrees (not as a condition but as a covenant) to deliver to Lender each item required to be delivered to Lender as a condition to closing under this Article 4. Borrower expressly agrees that the occurrence of the Closing Date prior to the receipt by Lender of any such item shall not constitute a waiver by Lender of Borrower's obligation to deliver such item. (a) Borrower agrees to file or cause to file all necessary instruments or documents to terminate and release certain filed UCC-1 financing statements in favor of Bank One, Colorado, NA and Tokai Financial Services within 10 Business Days of the date of this Loan Agreement. (b) Within 10 Business Days of the date of this Loan Agreement, Borrower agrees to file or cause to be filed all necessary assignments with the U.S. Patent and Trademark Office necessary to evidence the assignment from Asvan Technology, LLC, Ganesh Basawapatna and Varalakshmi Basawapatna to Borrower of patent application 09/997,468 filed on November 29, 2001 (Ferrite Crystal Resonator Coupling Structure). (c) Borrower agrees not to maintain any bank accounts or investment accounts, except (i) accounts listed on Section 13 of Schedule B of the Security Agreement in which Lender has perfected its -8- security interest in such accounts and (ii) accounts in which Lender has taken such action as it deems necessary to obtain a perfected security interest in such accounts and Borrower agrees to deliver and execute all necessary documents to effect the intent of the foregoing, including account control agreements. ARTICLE 5. COVENANTS OF BORROWER. 5.1 Affirmative Covenants. Until the termination of the commitment to make Loans under this Loan Agreement and the satisfaction in full by Borrower of all Obligations, Borrower shall comply, and shall cause compliance, with the following affirmative covenants unless Lender shall otherwise consent in writing: (a) Financial Statements, Reports, etc. Borrower shall furnish to Lender the following, each in such form and such detail as Lender shall reasonably request: (i) Within ten (10) Business Days after the end of each fiscal month of Borrower, unaudited Financial Statements of Borrower as of the last day of such fiscal month, certified by the chief financial officer or controller of Borrower to present fairly in all material respects the financial condition, results of operations and other information presented therein and to have been prepared in accordance with GAAP consistently applied, subject to normal year end adjustments and except that no footnotes need be included with such Financial Statements; (ii) Contemporaneously with the monthly financial statements required by the foregoing clause (i), a certificate of the president or chief financial officer of Borrower showing compliance with the financial covenants set forth in Section 5.3 and stating that no Event of Default and no Default has occurred, or, if any such Event of Default or Default has occurred, a statement as to the nature thereof and what action Borrower proposes to take with respect thereto; (iii) As soon as possible and in no event later than five (5) Business Days after a Responsible Officer becoming aware of the occurrence or existence of: (A) any Reportable Event under any Employee Benefit Plan or Multiemployer Plan; (B) any actual or overtly threatened litigation, suits, claims or disputes against Borrower or its Subsidiaries involving potential monetary damages payable by Borrower or its Subsidiaries of One Hundred Thousand Dollars ($100,000) or more (alone or in the aggregate); (C) any other event or condition which could reasonably be expected to have a Material Adverse Effect; or (D) any Event of Default or Default; the statement of the president or chief financial officer of Borrower setting forth details of such event, condition, Event of Default or Default and the action which Borrower has taken or proposes to take with respect thereto; and (v) Such other instruments, agreements, certificates, statements, documents and information relating to the operations or condition (financial or otherwise) of Borrower or its Subsidiaries, and compliance by Borrower with the terms of this Loan Agreement and the other Loan Documents as Lender may from time to time reasonably request. (b) Books and Records. Borrower and its Subsidiaries shall at all times keep proper books of record and account in which full, true and correct entries will be made of their transactions in accordance with GAAP. (c) Insurance. Borrower and its Subsidiaries shall (i) carry and maintain insurance at its expense of the types and in the amounts customarily carried from time to time during the term of this Loan Agreement by others engaged in substantially the same business as such Person and operating in the same -9- geographic area as such Person, including, but not limited to, fire, property damage and worker's compensation, such insurance to be in such form as is carried with companies and in amounts satisfactory to Lender, and (ii) deliver to Lender from time to time, as Lender may request, schedules or insurance certificates setting forth all insurance then in effect. All property policies shall name Lender as loss payee with respect to the Collateral and all liability policies shall name Lender as an additional insured in the full amount of Borrower's or its Subsidiaries' liability coverage limits. (d) Governmental Charges and Other Indebtedness. Borrower and its Subsidiaries shall (i) promptly pay and discharge when due all taxes and other Governmental Charges prior to the date upon which penalties accrue thereon, (ii) promptly pay and discharge when due all Indebtedness which, if unpaid, could become a Lien upon the property of Borrower or its Subsidiaries and (iii) promptly pay and discharge when due all other Indebtedness and (iv) promptly pay and discharge all trade credit and accounts payable in a manner consistent with Borrower's current practices and but in no event longer than sixty (60) days (unless Borrower has specifically negotiated different terms with the obligors of such trade credit and accounts payable), except for such trade credit or accounts payable for which Borrower or its Subsidiaries is contesting in good faith and for which adequate reserves are maintained in accordance with GAAP. (e) Intentionally omitted. (f) General Business Operations. Each of Borrower and its Subsidiaries shall (i) preserve and maintain its corporate existence and all of its rights, privileges and franchises reasonably necessary to the conduct of its business, (ii) conduct its business activities in compliance with all Requirements of Law and Contractual Obligations applicable to such Person, the violation of which could reasonably be expected to have a Material Adverse Effect, (iii) keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted, and (iv) maintain its chief executive office and principal place of business at the address specified in Section 7.1 unless it shall have given Lender thirty (30) days' prior written notice of its intent to change the location thereof. (g) Notices. Without limiting Borrower's obligations to Lender in any other Loan Document or any other agreement between Borrower and Lender, Borrower shall provide Lender with written notice upon: (i) the date of execution by Borrower of a definitive acquisition agreement with a Person other than Lender that would result in a Change of Control and (ii) the date of commencement of a tender offer to purchase the outstanding Equity Securities of Borrower for cash or other assets, including, but not limited to securities of the acquiring Person. 5.2 Negative Covenants. Until the termination of the commitment to make Loans under this Loan Agreement and the satisfaction in full by Borrower of all Obligations, Borrower shall comply, and shall cause compliance, with the following negative covenants unless Lender shall otherwise consent in writing: (a) Indebtedness. Neither Borrower nor any of its Subsidiaries shall create, incur, assume or permit to exist any Indebtedness except for Permitted Indebtedness. (b) Liens. Neither Borrower nor any of its Subsidiaries shall create, incur, assume or permit to exist any Lien on or with respect to any of its assets or property of any character, whether now owned or hereafter acquired, except for Permitted Liens. (c) Asset Dispositions. Except pursuant to an acquisition agreement with Lender, neither Borrower nor any of its Subsidiaries shall sell, lease, transfer, license or otherwise dispose of (collectively, a -10- "Transfer") any of its assets or property, whether now owned or hereafter acquired, except (i) Transfers of worn-out or obsolete equipment, (ii) Transfers of inventory in the ordinary course of business, (iii) Transfers of non-exclusive licenses for the use of Borrower's property in the ordinary course of business, or (iv) other Transfers in an aggregate amount not to exceed $100,000, provided that such Transfers are made upon terms at least as favorable to Borrower or such Subsidiary as an arms-length transaction with a non-Affiliate. (d) Mergers, Acquisitions, Etc. Except pursuant to an acquisition agreement with Lender, neither Borrower nor any of its Subsidiaries shall consolidate with or merge into any other Person or permit any other Person to merge into it, or acquire all or substantially all of the assets or capital stock of any other Person; provided that any wholly-owned Subsidiary of Borrower may merge into Borrower or any other wholly-owned Subsidiary of Borrower. (e) Investments. Neither Borrower nor any of its Subsidiaries shall make any Investment except for Permitted Investments. (f) Dividends, Redemptions, Etc. Neither Borrower nor any of its Subsidiaries shall (i) pay any dividends or make any distributions on its Equity Securities; (ii) purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Securities (other than repurchases pursuant to the terms of employee stock purchase plans, employee restricted stock agreements or similar arrangements existing as of the date of this Loan Agreement in an aggregate amount not to exceed One Hundred Thousand Dollars ($100,000)); (iii) return any capital to any holder of its Equity Securities as such; (iv) make any distribution of assets, Equity Securities, obligations or securities to any holder of its Equity Securities as such; or (v) set apart any sum for any such purpose. (g) Capital Expenditures. Borrower and its Subsidiaries shall not pay or incur Capital Expenditures which exceed an aggregate amount greater than Five Hundred Thousand Dollars ($500,000). (h) Change in Business. Neither Borrower nor any of its Subsidiaries shall engage, either directly or indirectly through Affiliates, in any business substantially different from its present business. (i) Indebtedness Payments. Neither Borrower nor any of its Subsidiaries shall (i) prepay, redeem, purchase, defease or otherwise satisfy in any manner prior to the scheduled repayment thereof any Indebtedness for borrowed money (other than the Obligations) or lease obligations, (ii) amend, modify or otherwise change the terms of any Indebtedness for borrowed money (other than the Obligations) or lease obligations so as to accelerate the scheduled repayment thereof or (iii) repay any notes to officers, directors or shareholders (other than the Obligations). (j) Transactions With Affiliates. Neither Borrower nor any of its Subsidiaries shall enter into any Contractual Obligation with any Affiliate or engage in any other transaction with any Affiliate except upon terms at least as favorable to Borrower or such Subsidiary as an arms-length transaction with unaffiliated Persons. Borrower shall not breach any covenants or agreements contained in the MOU and no request for preliminary or final approval of the settlement described in the MOU shall have been denied by a court having competent jurisdiction over such matter, and no more than ten percent (10%) of the shareholders of Borrower included in the class of shareholders potentially subject to the binding effect of such settlement as finally approved shall have opted out of such settlement. (k) Employees' Salaries. Borrower may not increase the salaries of any employees of Borrower. -11- 5.3 Financial Covenants. Borrower shall maintain: (a) Net Operating Loss. As of the last day of each month, Net Operating Loss for the three (3) month period ending as of the last day of such month in an amount not greater than the amount of Net Operating Loss for such period that is set forth on Schedule V attached hereto. The term "Net Operating Loss" shall mean for such period net operating income (or loss) determined in accordance with GAAP (excluding restructuring, severance, extraordinary non-cash charges, and legal and accounting fees incurred in connection with the transactions contemplated by this Loan Agreement). (b) Cash Used in Operations. As of the last day of each month, Cash Used In Operations for the three (3) month period ending as of the last day of such month in an amount not greater than the amount of Cash Used in Operations for such period that is set forth on Schedule V attached hereto. The term "Cash Used in Operations" shall mean for such period cash used in operations as determined in accordance with GAAP and set forth in Borrower's statement of cash flows (excluding cash used in connection with restructuring, severance, and legal and accounting fees incurred in connection with the transactions contemplated by this Loan Agreement). ARTICLE 6. EVENTS OF DEFAULT. 6.1 Events of Default. The occurrence of any of the following shall constitute an "Event of Default" under this Loan Agreement and the Notes: (a) Failure to Pay. Borrower shall fail to pay (i) when due any principal or interest payment on the due date hereunder and such payment shall not have been made within five (5) days of such due date or (ii) any other payment required under the terms of this Loan Agreement or any other Loan Document on the date due and such payment shall not have been made within five (5) days of Borrower's receipt of Lender's written notice to Borrower of such failure to pay; or (b) Breaches of Certain Covenants. Borrower or any of its Subsidiaries shall fail to observe or perform any covenant, obligation, condition or agreement set forth in Section 4.3(b), Section 4.3(c), Section 4.3(d), Section 5.1(a), Section 5.1(c), Section 5.1(g), Section 5.2 or Section 5.3; or (c) Breaches of Other Covenants. Borrower or any of its Subsidiaries shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Loan Agreement or the other Loan Documents (other than those specified in Sections 6.1(a) and 6.1(b)) and such failure shall continue for thirty (30) days; or (d) Representations and Warranties. Any representation, warranty, certificate, or other statement (financial or otherwise) made or furnished by or on behalf of Borrower to Lender in writing in connection with this Loan Agreement or any of the other Loan Documents, or as an inducement to Lender to enter into this Loan Agreement, shall be false, incorrect or misleading in any material respect when made or furnished in light of the circumstances when made or deemed made; or (e) Other Payment Obligations. Borrower or any of its Subsidiaries shall (A)(i) fail to make any payment when due under the terms of any bond, debenture, note or other evidence of Indebtedness to be paid by such Person (excluding this Loan Agreement and the other Loan Documents but including any other evidence of Indebtedness of Borrower or any of its Subsidiaries to Lender) and such failure shall continue beyond any period of grace provided with respect thereto, or (ii) default in the observance or -12- performance of any other agreement, term or condition contained in any such bond, debenture, note or other evidence of Indebtedness, and (B) the effect of such failure or default is to cause, or permit the holder or holders thereof to cause Indebtedness in an aggregate amount of One Hundred Thousand Dollars ($100,000) or more to become due prior to its stated date of maturity; or (f) Voluntary Bankruptcy or Insolvency Proceedings. Borrower or any of its Subsidiaries shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi) take any action for the purpose of effecting any of the foregoing; or (g) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Borrower or any of its Subsidiaries or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Borrower or any of its Subsidiaries or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within sixty (60) days of commencement; or (h) Judgments. A final judgment or order for the payment of money in excess of One Hundred Thousand Dollars ($100,000) (exclusive of amounts covered by insurance issued by an insurer not an Affiliate of Borrower) shall be rendered against Borrower or any of its Subsidiaries and the same shall remain undischarged for a period of thirty (30) days during which execution shall not be effectively stayed, or any judgment, writ, assessment, warrant of attachment, or execution or similar process shall be issued or levied against a substantial part of the property of Borrower or any of its Subsidiaries and such judgment, writ, or similar process shall not be released, stayed, vacated or otherwise dismissed within thirty (30) days after issue or levy; or (i) Loan Documents. Any Loan Document or any material term thereof shall cease to be, or be asserted by Borrower not to be, a legal, valid and binding obligation of Borrower enforceable in accordance with its terms or if the Liens of Lender in any of the assets of Borrower or its Subsidiaries shall cease to be or shall not be valid, first priority perfected Liens, subject only to Permitted Liens, or Borrower or any Subsidiary shall assert that such Liens are not valid, first priority and perfected Liens, subject only to Permitted Liens; or (j) ERISA. Any Reportable Event occurs which constitutes grounds for the termination of any Employee Benefit Plan by the PBGC or for the appointment of a trustee to administer any Employee Benefit Plan, or any Employee Benefit Plan shall be terminated within the meaning of Title IV of ERISA or a trustee shall be appointed to administer any Employee Benefit Plan; or (k) Change in Control. A Change of Control shall occur. 6.2 Rights of Lender upon Default. Upon the occurrence or existence of any Event of Default (other than an Event of Default referred to in Sections 6.1(f) and 6.1(g)) and at any time thereafter during the continuance of such Event of Default, Lender may, by written notice to Borrower, declare all outstanding -13- Obligations payable by Borrower hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Notes to the contrary notwithstanding. Upon the occurrence or existence of any Event of Default described in Sections 6.1(f) and 6.1(g), immediately and without notice, all outstanding Obligations payable by Borrower hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Notes to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Lender may exercise any other right, power or remedy granted to it by the Loan Documents or otherwise permitted to it by law, either by suit in equity or by action at law, or both. In the event that (i) a Change of Control shall occur within 180 days following the date of acceleration of the Loans or the exercise of Lender's remedies pursuant to the Loan Documents or (ii) Borrower shall enter into a definitive acquisition agreement within 180 days following the date of acceleration of the Loans or the exercise of Lender's remedies pursuant to the Loan Documents with a Person other than Lender that could result in a Change of Control, then in either case, Borrower expressly agrees to pay (whether or not any Obligations remain outstanding and whether or not Lender has any commitment to make Loans hereunder) to Lender the Prepayment Fee upon the occurrence of either event referenced in subsection (i) or (ii) of this sentence. Borrower's express agreement to pay the Prepayment Fee pursuant to the terms set forth in the previous sentence shall survive the termination of this Loan Agreement. ARTICLE 7. MISCELLANEOUS. 7.1 Notices. Except as otherwise provided herein, all notices, requests, demands, consents, instructions or other communications to or upon Lender or Borrower under this Agreement or the other Loan Documents shall be in writing and telecopied, mailed or delivered to each party at its telecopier number or address set forth below (or to such other telecopier number or address for any party as indicated in any notice given by that party to the other party). All such notices and communications shall be effective (a) when sent by Federal Express or other overnight service of recognized standing, on the Business Day following the deposit with such service; (b) when mailed by registered or certified mail, first class postage prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d) when telecopied, upon confirmation of receipt; provided, however, that any notice delivered to Lender under Article 2 shall not be effective until received by Lender. Lender: SIRENZA MICRODEVICES, INC. 522 Almanor Avenue Sunnyvale, CA 94085 Attn: Chief Financial Officer Telephone: (408) 616-5400 Telecopier: (408) 739-0970 with a copy to: Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, CA 94304 Attention: Steven V. Bernard Telephone No.: 650-493-9300 Facsimile No.: 650-493-6811 -14- Borrower: VARI-L COMPANY, INC. 4895 Peoria St. Denver, CO 80239 Attn: Chief Financial Officer Telephone: (303) 371-1560 Telecopier: (303) 373-3868 with a copy to: Cooley Godward LLP 380 Interlocken Crescent, Suite 900 Broomfield, CO 80021 Attention: James Linfield Telephone No.: 720-566-4000 Facsimile No.: 720-566-4099 7.2 Expenses. Borrower shall pay on demand all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Lender with respect to the enforcement or attempted enforcement of any of the Obligations or in preserving any of Lender's rights and remedies (including, without limitation, all such fees and expenses incurred in connection with any bankruptcy or similar proceeding involving Borrower or any of its Subsidiaries). 7.3 Indemnification. Borrower shall indemnify, defend, and hold harmless Lender and each of Lender's Subsidiaries, Affiliates, directors, officers, employees and agents (collectively, the "Indemnified Persons"), and reimburse the Indemnified Persons for, from, and against all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, costs and expenses, including, without limitation, interest, penalties and reasonable attorneys' fees, disbursements and expenses, arising out of or in connection with (i) any breach by Borrower of any of the representations and warranties contained in this Loan Agreement or the other Loan Documents, (ii) any failure by Borrower to perform any covenant, undertaking or obligation hereunder or under any Loan Document, or (iii) any matter arising out of any use by Borrower of any proceeds of the Loans, except to the extent such liability arises from the gross negligence or willful misconduct of the Indemnified Person seeking indemnity hereunder. 7.4 Waivers; Amendments. Any term, covenant, agreement or condition of this Agreement or any other Loan Document may be amended or waived if such amendment or waiver is in writing and is signed by Borrower and Lender. No failure or delay by Lender in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. A waiver or consent given hereunder shall be effective only if in writing and in the specific instance and for the specific purpose for which given. 7.5 Successors and Assigns. This Agreement and the other Loan Documents shall be binding upon and inure to the benefit of Borrower, Lender, all future holders of the Notes and their respective successors and permitted assigns, except that neither Borrower nor Lender may assign or transfer any of their respective rights or obligations under any Loan Document (other than the Common Stock of Borrower issuable upon conversion of the Tranche A Note) without the prior written consent of the non-assigning party, except that Lender may, without the prior written consent of Borrower, assign or transfer its respective rights and obligations under the Loan Documents in connection with the merger or consolidation of Lender with or into another Person. All references in this Agreement to any Person shall be deemed to include all successors and assigns of such Person. -15- 7.6 Set-off. In addition to any rights and remedies of Lender provided by law, Lender shall have the right, without prior notice to Borrower, any such notice being expressly waived by Borrower to the extent permitted by applicable law, upon the occurrence and during the continuance of an Event of Default, to set-off and apply against any Obligations, whether matured or unmatured, of Borrower to Lender (including, without limitation, the Obligations), any amount owing from Lender to Borrower. Lender agrees promptly to notify Borrower after any such set-off and application made by Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. 7.7 No Third Party Rights. Nothing expressed in or to be implied from this Agreement or any other Loan Document is intended to give, or shall be construed to give, any Person, other than the parties hereto and thereto and their permitted successors and assigns, any benefit or legal or equitable right, remedy or claim under or by virtue of this Agreement or any other Loan Document. 7.8 Partial Invalidity. If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 7.9 Jury Trial. EACH OF BORROWER AND LENDER, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING TO ANY LOAN DOCUMENT IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT. 7.10 Governing Law. THIS LOAN AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND THERETO SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. ANY ACTION TO ENFORCE THIS AGREEMENT AGAINST BORROWER MAY BE BROUGHT IN CALIFORNIA OR, WITH REGARD TO COLLATERAL, MAY ALSO BE BROUGHT WHEREVER SUCH COLLATERAL IS LOCATED. 7.11 Integration. This Loan Agreement and the Loan Documents constitute the entire agreement between the Lender, on the one hand, and the Borrower, on the other, and supercede any prior written or oral agreements or understandings of the parties. Borrower acknowledges that it is not relying on any representation or agreement made by any Lender or any employee, agent or attorney of any Lender, other than the specific agreements set forth in this Loan Agreement and the Loan Documents. 7.12 Counterparts. This Agreement may be executed in any number of identical counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a complete, executed original for all purposes. -16- IN WITNESS WHEREOF, the parties have executed this Loan Agreement as of the date first set forth above. SIRENZA MICRODEVICES, INC. VARI-L COMPANY, INC., a Delaware corporation a Colorado corporation By: /s/ GERALD L. QUINNELL By: /s/ CHARLES R. BLAND -------------------------------- ------------------------------- Name: Gerald L. Quinnell Name: Charles R. Bland ------------------------------ ----------------------------- Title: EVP Business Development Title: C.E.O. ----------------------------- ---------------------------- [Signature Page to Loan Agreement] SCHEDULE I DEFINITIONS "Affiliate" shall mean, with respect to any Person, (a) each Person that, directly or indirectly, owns or controls, whether beneficially or as a trustee, guardian or other fiduciary, five percent (5%) or more of any class of Equity Securities of such Person, (b) each Person that controls, is controlled by or is under common control with such Person or any Affiliate of such Person or (c) each of such Person's officers, directors, joint venturers and partners; provided, however, that in no case shall Lender be deemed to be an Affiliate of Borrower or any of its Subsidiaries for purposes of this Loan Agreement. For the purpose of this definition, "control" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "Borrower" shall have the meaning given to that term in the introductory paragraph hereof. "Business Day" shall mean any day other than a Saturday, Sunday or public holiday under the laws of the State of California or any other day on which commercial banks are authorized or required to close in the State of California. "Capital Asset" shall mean, with respect to any Person, tangible property owned or leased (in the case of a Capitalized Lease Obligation) by such Person, or any expense incurred by any Person that is required by GAAP to be reported as an asset on such Person's balance sheet. "Capital Expenditures" shall mean, with respect to any Person and any period, all amounts expended and Indebtedness incurred or assumed by such Person during such period for the acquisition of real property and other Capital Assets (including amounts expended and Indebtedness incurred or assumed in connection with Capitalized Lease Obligations). "Capitalized Lease Obligations" shall mean any and all obligations under leases of property (whether real, personal or mixed) that, in accordance with GAAP, are required to be reported as a capital lease on the balance sheet of a lessee. "Change of Control" shall mean the occurrence of either of the following: (a) the acquisition by any Person (other than Lender or its Affiliates) of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of capital stock of Borrower entitling such Person to exercise 20% or more of the total voting power of all shares of capital stock of Borrower entitled to vote generally in the elections of directors (any shares of voting stock of which such Person is the beneficial owner that are not then outstanding being deemed outstanding for purposes of calculating such percentage) other than any such acquisition by Borrower or any employee benefit plan of Borrower; or (b) any consolidation or merger of Borrower with or into, any other Person (other than Lender or its Affiliates), any merger of another Person with or into Borrower, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of the assets of Borrower to another Person (other than (a) any such transaction pursuant to which holders of Common Stock immediately prior to such transaction have the entitlement to exercise, directly or indirectly, 80% or more of the total voting power of I-1 DEFINITIONS all shares of capital stock entitled to vote generally in the election of directors of the continuing or surviving Person immediately after such transaction. "Charter Documents" shall mean, with respect to any Person, the Articles or Certificate of Incorporation and Bylaws or any other organizational or governing documents of such Person, in each case as amended to date. "Closing Date" shall mean the date on which each of the conditions set forth in Articles 4.1 shall have been satisfied or waived in writing and the initial Loan is made. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Common Stock" shall mean the common stock of Borrower. "Contractual Obligation" of any Person shall mean, any indenture, note, security, deed of trust, mortgage, security agreement, lease, guaranty, instrument, contract, agreement or other form of obligation or undertaking to which such Person is a party or by which such Person or any of its property is bound. "Default" shall mean any event or circumstance not yet constituting an Event of Default but which, with the giving of any notice or the lapse of any period of time or both, would become an Event of Default. "Default Rate" shall have the meaning given to such term in Section 2.7(c). "Dollars" and "$" shall mean the lawful currency of the United States of America and, in relation to any payment under this Loan Agreement, same day or immediately available funds. "Employee Benefit Plan" shall mean any employee benefit plan within the meaning of section 3(3) of ERISA maintained or contributed to by Borrower or any ERISA Affiliate, other than a Multiemployer Plan. "Environmental Laws" means all Requirements of Law relating to the protection of human health or the environment, including, without limitation, all Requirements of Law, pertaining to reporting, licensing, permitting, investigation, and remediation of emissions, discharges, releases, or threatened releases of hazardous materials, chemical substances, pollutants, contaminants, or hazardous or toxic substances, materials or wastes whether solid, liquid, or gaseous in nature, into the air, surface water, groundwater, or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of chemical substances, pollutants, contaminants, or hazardous or toxic substances, materials, or wastes, whether solid, liquid, or gaseous in nature. "Equity Securities" of any Person shall mean (a) all common stock, preferred stock, participations, shares, partnership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any of the foregoing. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may from time to time be amended or supplemented, including any rules or regulations issued in connection therewith. "ERISA Affiliate" shall mean any Person which is treated as a single employer with Borrower under section 414 of the Code. I-2 DEFINITIONS "Event of Default" shall have the meaning given to that term in Section 6.1. "Exclusivity and Right of First Refusal Agreement" shall mean the Exclusivity and Right of First Refusal Agreement, dated as of the date hereof, by and between Lender and Borrower. "Financial Statements" shall mean, with respect to any accounting period for any Person, statements of income and of cash flow of such Person for such period, and balance sheets of such Person as of the end of such period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year if such period is less than a full fiscal year or, if such period is a full fiscal year, corresponding figures from the preceding fiscal year, all prepared in reasonable detail and in accordance with GAAP. Unless otherwise indicated, each reference to Financial Statements of any Person shall be deemed to refer to Financial Statements prepared on a consolidated basis. "GAAP" shall have the meaning given to such term in Section 1.2. "Governmental Authority" shall mean any domestic or foreign national, state or local government, any political subdivision thereof, any department, agency, authority or bureau of any of the foregoing, or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Governmental Charges" shall mean all taxes, levies, assessments, fees, claims or other charges imposed by any Governmental Authority upon or relating to (i) Borrower or its Subsidiaries, (ii) the Loans, (iii) employees, payroll, income or gross receipts of Borrower or its Subsidiaries, (iv) the ownership or use of any of its assets by Borrower or its Subsidiaries or (v) any other aspect of the business of Borrower or its Subsidiaries. "Governmental Rule" shall mean any law, rule, regulation, ordinance, order, code interpretation, judgment, decree, directive, guidelines, policy or similar form of decision of any Governmental Authority. "Guaranty Obligations" shall mean, with respect to any Person, any direct or indirect liability of that Person with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person, whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, or (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, or (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof. Notwithstanding the foregoing, the term "Guaranteed Obligations" shall not include any indemnification or expense advancement obligations, direct or indirect, arising under or in connection with Borrower's articles of incorporation, bylaws, Colorado law, or any agreements providing for indemnification or expense advancement between Borrower and its current or former officers, directors, employees or agents. "Indebtedness" of any Person shall mean and include the aggregate amount of, without duplication (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person to pay the deferred purchase I-3 DEFINITIONS price of property or services (other than accounts payable incurred in the ordinary course of business determined in accordance with GAAP), (d) all Capitalized Lease Obligations of such Person, (e) all obligations or liabilities of others secured by a lien on any asset of such Person, whether or not such obligation or liability is assumed, (f) all Guaranty Obligations of such Person; (g) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement upon an event of default are limited to repossession or sale of such property), (h) net exposure under interest rate interest rate swap, currency swap, currency swap, forward, cap, floor or other similar contract that is not entered to in connection with a bona fide hedging operation that provides offsetting benefits to such Person, which agreements shall be marked to market on a current basis, (i) all reimbursement and other payment obligations, contingent or otherwise, in respect of letters of credit. Unless otherwise indicated, the term "Indebtedness" shall include all Indebtedness of Borrower and its Subsidiaries. "Indemnified Persons" has the meaning given in Section 7.3. "Investment" of any Person shall mean any loan or advance of funds by such Person to any other Person (other than advances to employees of such Person for moving and travel expense, drawing accounts and similar expenditures in the ordinary course of business), any purchase or other acquisition of any Equity Securities or Indebtedness of any other Person, any capital contribution by such Person to or any other investment by such Person in any other Person (including, without limitation, any Indebtedness incurred by such Person of the type described in clauses (b) and (c) of the definition of "Indebtedness" on behalf of any other Person); provided, however, that Investments shall not include accounts receivable or other indebtedness owed by customers of such Person which are current assets and arose from sales in the ordinary course of such Person's business. "Lender" shall have the meaning given in the introductory paragraph hereof. "Lien" shall mean, with respect to any property, any security interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, Capitalized Lease Obligation or other title retention agreement, and the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction. "Loan" shall have the meaning given in Section 2.1. "Loan Agreement" shall mean this Loan Agreement. "Loan Documents" shall mean and include this Loan Agreement, the Notes, the Security Agreement, the Exclusivity And Right of First Refusal Agreement, the Letter Agreement regarding mutual non-disclosure, dated as of October 3, 2002, between Lender and Borrower, the Registration Rights Agreement and all other documents, instruments and agreements delivered to Lender in connection with this Loan Agreement, including, without limitation, any account control agreements or grant of security interests in patents, trademarks or copyrights. "Loans" shall have the meaning given in Section 2.1. "Material Adverse Effect" shall mean a material adverse effect on (a) the business, assets, operations, financial or other condition of Borrower and its Subsidiaries, taken as a whole (except for continuing losses as I-4 DEFINITIONS contemplated by Borrower's business plan and projections as previously delivered to Lender); (b) the rights and remedies of Lender under this Loan Agreement, the other Loan Documents or any related document, instrument or agreement. "Maturity" shall mean, with respect to any Loan, interest, fees or other amount payable by Borrower under this Loan Agreement or the other Loan Documents, the date on which such Loan, interest, fee or other amount becomes due, whether upon the stated maturity or due date, upon acceleration or otherwise. "Multiemployer Plan" shall mean any multiemployer plan within the meaning of section 3(37) of ERISA maintained or contributed to by Borrower or any ERISA Affiliate. "Notes" shall have the meaning given in Section 2.8. "Notice of Borrowing" shall have the meaning given in Section 2.2. "Obligations" shall have the meaning given in the Security Agreement. "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any successor thereto. "Permitted Indebtedness" shall mean and include: (a) Indebtedness of Borrower to Lender; (b) Indebtedness of Borrower existing as of the date hereof and as described on the Disclosure Schedule; (c) Indebtedness arising from the endorsement of instruments in the ordinary course of business; (d) Indebtedness of Borrower under Capitalized Lease Obligations and operating leases (including any such Indebtedness referenced in subsection (b) of this definition of Permitted Indebtedness) in an aggregate amount not to exceed Five Hundred Thousand Dollars ($500,000) at any time; and (e) Other Indebtedness in an aggregate amount not to exceed Fifty Thousand Dollars ($50,000) at any time. "Permitted Investments" shall mean and include: (a) Deposits with commercial banks organized under the laws of the United States or a state thereof to the extent such deposits are fully insured by the Federal Deposit Insurance Corporation; (b) Investments in marketable obligations issued or fully guaranteed by the United States and maturing not more than one (1) year from the date of issuance; and (c) Investments in open market commercial paper rated at least "A1" or "P1" or higher by a national credit rating agency and maturing not more than one (1) year from the creation thereof. (d) Investments pursuant to or arising under currency agreements or interest rate agreements entered into in the ordinary course of business; I-5 DEFINITIONS (e) Investments of Borrower existing as of the date hereof and as described on the Disclosure Schedule; (f) Investments consisting of deposit accounts of Borrower in which Lender has a perfected security interest; and (g) Other Investment in an aggregate amount not to exceed Fifty Thousand Dollars ($50,000) at any time. "Permitted Liens" shall mean and include: (a) Liens for taxes or other Governmental Charges not at the time delinquent or thereafter payable without penalty or being contested in good faith, provided adequate reserves therefore are made in accordance with GAAP; (b) Liens of carriers, warehousemen, mechanics, materialmen, vendors, and landlords incurred in the ordinary course of business for sums not overdue or being contested in good faith, provided adequate reserves therefore are made in accordance with GAAP; (c) Deposits under workers' compensation, unemployment insurance and social security laws or to secure the performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or to secure statutory obligations of surety or appeal bonds or to secure indemnity, performance or other similar bonds in the ordinary course of business; (d) Liens arising out of a judgment or award in circumstances not constituting an Event of Default under Section 6.1(h); (e) Liens securing obligations under a Capitalized Lease Obligation if such lease is Permitted Indebtedness pursuant to clause (d) of the definition thereof and such Liens do not extend to property other than the property leased under such Capitalized Lease Obligation; and (f) Easements, reservations, rights of way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances affecting real property in a manner not materially or adversely affecting the value or use of such property; (g) Liens in favor of Lender; (h) Leases or subleases and licenses and sublicenses granted in the ordinary course of business for Borrower or its Subsidiaries; (i) Liens in favor of financial institutions arising in connection with Borrower's deposit accounts held at such institutions, provided that Lender has a first priority perfected security interest in the amounts held in such deposit accounts; (j) Bankers' liens, rights of setoff and similar Liens incurred on deposits made in the ordinary course of business, provided that with respect to deposit accounts and investment accounts Lender has a first priority perfected security interest in the amounts held in such accounts; and (k) Liens existing as of the date hereof and as described on the Disclosure Schedule. I-6 DEFINITIONS "Person" shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a Governmental Authority. "Prepayment Fee" means an amount equal to One Million Dollars ($1,000,000). "Record" The grid attached to a Tranche B Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Lender with respect to any Tranche B Loan referred to in such Tranche B Note. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date hereof, by and between Borrower and Lender. "Reportable Event" shall have the meaning given to that term in ERISA and applicable regulations thereunder. "Requirement of Law" applicable to any Person shall mean (a) the Charter Documents of such Person, (b) any Governmental Rule applicable to such Person, (c) any license, permit, approval or other authorization granted by any Governmental Authority to or for the benefit of such Person and (d) any judgment, decision or determination of any Governmental Authority or arbitrator, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer" shall mean, with respect to any Person, the chief executive officer, chief financial officer or treasurer of such Person or any other officer of such Person involved principally in its financial administration. "Securities Act" shall mean the Securities Act of 1933, as amended. "Security Agreement" shall have the meaning given in Section 2.10. "Solvent" shall mean, with respect to any Person on any date, that on such date (a) the fair value of the property of such Person is greater than the fair value of the liabilities (including, without limitation, contingent liabilities) of such Person, (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (d) such Person is not engaged in business or a transaction, and is not about in business or a transaction, for which such Person's property would constitute an unreasonably small capital. "Subsidiary" of any Person shall mean (a) any corporation of which more than 50% of the issued and outstanding Equity Securities having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries, (b) any partnership, joint venture, or other association of which more than 50% of the equity interest having the power to vote, direct or control the management of such partnership, joint venture or other association is at the time owned and controlled by such Person, by such Person and one or more of the other Subsidiaries or by one or more of such Person's other subsidiaries and (c) any other Person included in the Financial Statements of such Person on a consolidated basis. Any I-7 DEFINITIONS reference to a Subsidiary without designation of the ownership of such Subsidiary shall be deemed to refer to a Subsidiary of Borrower. I-8 DEFINITIONS SCHEDULE II Funding Schedule - --------------------------------------------------- Tranche B Loans available Amount Available ------------------------- ---------------- on or after:/1/ --------------- - --------------------------------------------------- October 7, 2002 $ 1,200,000 - --------------------------------------------------- November 15, 2002 $ 600,000 - --------------------------------------------------- December 15, 2002 $ 300,000 - --------------------------------------------------- January 15, 2003 $ 600,000 - --------------------------------------------------- February 15, 2003 $ 150,000 - --------------------------------------------------- March 15, 2003 $ 200,000 - --------------------------------------------------- April 15, 2003 $ 400,000 - --------------------------------------------------- May 15, 2003 $ 300,000 - --------------------------------------------------- June 15, 2003 $ 50,000 - --------------------------------------------------- July 15, 2003 $ 50,000 - --------------------------------------------------- August 15, 2003 $ 50,000 - --------------------------------------------------- September 15, 2003 $ 48,000 - --------------------------------------------------- Total Loans $3,948,000.00 - --------------------------------------------------- - ------------------- /1/ To the extent that a date does not fall on a Business Day, then such Tranche B Loan shall be available on or after the first Business Day following the date specified above. II-1 FUNDING SCHEDULE SCHEDULE III NOTICE OF BORROWING _____________________, 200__ SIRENZA MICRODEVICES, INC. 522 Almanor Avenue Sunnyvale, CA 94085 Attn: Chief Financial Officer 1. Reference is made to that certain Loan Agreement, dated as of October __, 2002 of (the "Loan Agreement"), between VARI-L COMPANY, INC. ("Borrower") and SIRENZA MICRODEVICES, INC. ("Lender"). Unless otherwise indicated, all terms defined in the Loan Agreement have the same respective meanings when used herein. 2. Pursuant to Section 2.1 and 2.2 of the Loan Agreement, Borrower hereby requests a Loan upon the following terms: a. The type of Loan shall be a [Tranche A Loan][Tranche B Loan]. b. The principal amount of the requested Loan is to be $__________; c. The date of the requested Loan is to be __________, 200__. 3. Borrower hereby certifies to Lender that, on the date of such borrowing and after giving effect to the requested borrowing: a. The representations and warranties set forth in Article 3 of the Loan Agreement will be true and correct in all material respects as if made on such date, except to the extent such representations and warranties address matters as of a particular date (which representations and warranties shall remain true and correct as of such date). b. No Event of Default or Default has occurred and is continuing. c. Each of the Loan Documents remains in full force and effect. 4. Please disburse the proceeds of the requested Loan to _________________. III-1 NOTICE OF BORROWING IN WITNESS WHEREOF, Borrower has executed this Notice of Borrowing on the date set forth above. VARI-L COMPANY, INC. By:___________________________________ Name:_________________________________ Title:________________________________ III-2 NOTICE OF BORROWING SCHEDULE IV Disclosure Schedule Litigation Existing Indebtedness Existing Investments Existing Liens IV-1 DISCLOSURE SCHEDULE SCHEDULE V Financial Covenants
- --------------------------------------------------------------------------------------------------------------------------- Calendar Month Net Operating Loss/2/ Cash Used in Operations/3/ - --------------------------------------------------------------------------------------------------------------------------- As of the last day of October 2002 ($2,454) ($2,174) - --------------------------------------------------------------------------------------------------------------------------- As of the last day of November ($1,994) ($1,987) 2002 - --------------------------------------------------------------------------------------------------------------------------- As of the last day of December ($1,585) ($2,532) 2002 - --------------------------------------------------------------------------------------------------------------------------- As of the last day of January 2003 ($1,529) ($1,734) - --------------------------------------------------------------------------------------------------------------------------- As of the last day of February ($1,568) ($1,174) 2003 - --------------------------------------------------------------------------------------------------------------------------- As of the last day of March 2003 ($1,489) ($1,114) - --------------------------------------------------------------------------------------------------------------------------- As of the last day of April 2003 ($1,294) ($749) - --------------------------------------------------------------------------------------------------------------------------- As of the last day of May 2003 ($700) ($1,382) - --------------------------------------------------------------------------------------------------------------------------- As of the last day of June 2003 ($274) ($1,019) - --------------------------------------------------------------------------------------------------------------------------- As of the last day of July 2003 ($246) ($1,078) - --------------------------------------------------------------------------------------------------------------------------- As of the last day of August 2003 ($376) ($671) - ---------------------------------------------------------------------------------------------------------------------------
- -------------------- /2/ The figures in this column represent the aggregate Net Operating Loss for the three month period ending on the last day of the calendar month set forth in the corresponding row above. /3/ The figures in this column represent the aggregate Cash Used in Operations for the three month period ending on the last day of the calendar month set forth in the corresponding row above. V-1 FINANCIAL COVENANTS EXHIBIT A Form of Tranche A Convertible Note THIS NOTE AND THE COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. VARI-L COMPANY, INC. TRANCHE A CONVERTIBLE NOTE October 7, 2002 $1,353,861.80 Vari-L Company, Inc., a Colorado corporation (the "Borrower"), for value received, hereby promises to pay to Sirenza Microdevices, Inc., the principal sum of One Million Three Hundred Fifty Three Thousand Eight Hundred Sixty One Dollars and 80/100 Cents ($1,353,861.80) on September 25, 2003 (the "Maturity Date") and to pay interest thereon, at the rate of 25% per annum until the principal hereof is paid in full, and at the Default Rate after the occurrence and during the continuance of an Event of Default. Borrower shall make all payments hereunder to Lender as indicated in the Loan Agreement, in lawful money of the United States and in same day or immediately available funds. Capitalized terms used and not otherwise defined herein, shall have the respective meanings given to those terms in the Loan Agreement, dated as of October 7, 2002 (as amended from time to time, the "Loan Agreement"), by and between Vari-L Company, Inc. and Sirenza Microdevices, Inc. This Note is the Tranche A Note referred to in the Loan Agreement. This Note is subject to the terms of the Loan Agreement, including the rights of prepayment and the rights of acceleration of maturity. 1. Payments. All outstanding principal and all accrued interest thereon shall be due and payable on the Maturity Date. 2. Prepayments. This Note shall be subject to the prepayment provisions (both optional prepayment and mandatory prepayment) set forth in Section 2.5 of the Loan Agreement. 3. Security. THE OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A SECURITY AGREEMENT DATED AS OF THE DATE HEREOF AND EXECUTED BY BORROWER IN FAVOR OF LENDER. ADDITIONAL RIGHTS OF Lender ARE SET FORTH IN SUCH security AGREEMENT. 4. Conversion. (a) At Lender's sole option, Lender may convert the outstanding principal amount due under this Note into the number of shares of fully paid and nonassessable Common Stock as is determined pursuant to Section 4(b) below, at any time after the earliest to occur of the following: (i) the fifth Business Day prior to Maturity of this Note; -2- (ii) upon receipt of Borrower's written notice of Borrower's election to prepay this Note pursuant to Section 2.5(a) of the Loan Agreement; (iii) upon the date of the commencement of a tender offer by a Person (other than Lender) to purchase the Common Stock of Borrower for cash or other assets, including, but not limited to securities of the acquiring Person; and (iv) the date of execution of a definitive acquisition agreement with a Person other than Lender that will result in a Change of Control. (b) The outstanding principal amount due under this Note shall be convertible into the number of shares of fully paid and nonassessable Common Stock that constitutes 19.9% of the fully diluted outstanding Common Stock as of the date of conversion. For purposes of the preceding sentence, the "fully diluted outstanding Common Stock" shall be determined immediately prior to the conversion of this Note (except as noted in subsection (iv) below) and shall be deemed to include: (i) the number of shares of Common Stock actually outstanding; plus (ii) the number of shares of Common Stock deliverable upon exercise or conversion of options to purchase or rights to subscribe for Common Stock; plus (iii) the number of shares of Common Stock deliverable upon conversion of or in exchange for convertible or exchangeable securities (other than this Note), or upon exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof; plus (iv) the number of shares of Common Stock issuable pursuant to any memorandum of understanding, settlement agreement or court order regarding any shareholder class action litigation involving Borrower (giving full effect to any antidilution adjustments thereto, whether resulting from the conversion of this Note or otherwise). In the event that Borrower declares a record date for a distribution of Equity Securities to its shareholders prior to the date of conversion which distribution will occur after the date of conversion, then such Equity Securities shall be deemed outstanding and included on a Common Stock equivalent basis in the calculation of Borrower's "fully diluted outstanding Common Stock." (c) If Lender elects to convert the outstanding principal amount of this Note into Common Stock, then Lender shall: (i) deliver to Borrower at Borrower's address set forth in Section 7.1 of the Loan Agreement a Conversion Notice in the form attached hereto as Exhibit A; and (ii) surrender this Note to Borrower, duly endorsed or assigned to Borrower or in blank, at Borrower's address set forth in Section 7.1 of the Loan Agreement, on or prior to the close of business on the date of conversion; provided that any failure by Lender to surrender this Note as provided herein shall not invalidate the conversion or the effective date thereof. Borrower shall deliver to the Lender not more than three (3) Business Days' after delivery by Lender of this Note to Borrower the certificates representing shares of Common Stock issuable upon conversion of -3- this Note. No fractions of shares or scrip representing fractions of shares will be issued on conversion, but instead of any fractional interest, Borrower shall round down to the next higher whole share. Upon the date of conversion, Borrower shall pay to Lender all accrued interest to the date of conversion with respect to this Note. (d) Borrower shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of this Note, the full number of shares of Common Stock then issuable upon the conversion of this Note. (e) Except as provided in the next sentence, Borrower will pay any and all taxes and duties that may be payable in respect of the issue or delivery of Common Stock on conversion of this Note. Borrower shall not, however, be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue and delivery of Common Stock in a name other than that of the holder of this Note, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to Borrower the amount of any such tax or duty, or has established to the satisfaction of Borrower that such tax or duty has been paid. (f) Borrower agrees that all Common Stock which may be delivered upon conversion of this Note, upon such delivery, will have been duly authorized and validly issued and will be fully paid and nonassessable and free of preemptive rights (and shall be issued out of Borrower's authorized but unissued Common Stock) and, except as provided in Section 4(e), Borrower will pay all taxes, liens and charges with respect to the issue thereof. (g) Borrower (i) will effect all registrations with, and obtain all approvals by, all governmental authorities that may be necessary under any United States Federal or state law (including the Securities Act, the Exchange Act and state securities and Blue Sky laws) for the Common Stock issuable upon conversion of this Note to be lawfully issued and delivered as provided herein, and thereafter publicly traded (if permissible under the Securities Act) and qualified or listed as contemplated by clause (ii) (it being understood that Borrower shall not be required to register the offer, sale or resale of Common Stock issuable on conversion hereof under the Securities Act except pursuant to the Registration Rights Agreement between Borrower and Lender); and (ii) if required, will list the Common Stock required to be issued and delivered upon conversion of Securities, prior to such issuance or delivery, on each national securities exchange on which outstanding Common Stock is listed or quoted at the time of such delivery, or if the Common Stock is not then listed on any securities exchange, to qualify the Common Stock for quotation on the Nasdaq National Market or such other inter-dealer quotation system, if any, on which the Common Stock is then quoted. 5. Definitions. The following capitalized terms shall have the following respective meanings when used herein: "Common Stock" means the Common Stock, par value $0.01 per share, of Borrower authorized at the date of this Note as originally executed. Shares issuable on conversion of this Note shall include only Common Stock or shares of any class or classes of common stock resulting from any reclassification or reclassifications thereof; provided, however, that if at any time there shall be more than one such resulting class, the shares so issuable on conversion of this Note shall include shares of all such classes, and the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. -4- "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Trading Day" means (i) if the Common Stock is admitted to trading on the Nasdaq National Market or any other system of automated dissemination of quotations of securities prices, a day on which trades may be effected through such system; (ii) if the Common Stock is listed or admitted for trading on the New York Stock Exchange or any other national securities exchange, a day on which such exchange is open for business; or (iii) if the Common Stock is not admitted to trading on the Nasdaq National Market or listed or admitted for trading on any national securities exchange or any other system of automated dissemination of quotation of securities prices, a day on which the Common Stock is traded regular way in the over-the-counter market and for which a closing bid and a closing asked price for the Common Stock are available. 6. Miscellaneous. (a) No provision of this Note shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of and interest, if any, on this Note at the times, places and rate, and in the coin or currency, herein prescribed or to convert this Note as herein provided. (b) This Note and the Common Stock issuable upon conversion of this Note have not been registered under the Securities Act, or the securities laws of any state or other jurisdiction. Neither this Note nor the Common Stock issuable upon conversion of this Note nor any interest or participation herein may be reoffered, sold, assigned, transferred, or otherwise disposed of (a "Transfer") in the absence of such registration or unless such transaction is exempt from, or not subject to the registration requirements of the Securities Act. (c) Lender by acceptance of this Note, represents that it is an "accredited investor" within the meaning of Rule 501 of the Securities Act. Lender by acceptance of this Note, acknowledges that it has been advised that this Note has not been registered under the Securities Act, or any state securities laws and, therefore, cannot be resold unless it is registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available. Lender by acceptance of this Note, acknowledges that it is aware that Borrower is under no obligation to effect any such registration or to file for or comply with any exemption from registration (other than Borrower's obligations under the Registration Rights Agreement). Lender by acceptance of this Note, represents that it has not been formed solely for the purpose of making this investment and is acquiring this Note for its own account for investment, and not with a view to, or for resale in connection with, the distribution thereof. Lender by acceptance of this Note, acknowledges that it has such knowledge and experience in financial and business matters that Lender is capable of evaluating the merits and risks of such investment, is able to incur a complete loss of such investment and is able to bear the economic risk of such investment for an indefinite period of time. (d) Upon receipt by Borrower of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Note, and in the case of loss, theft or destruction, receipt of indemnity or Note reasonably satisfactory to Borrower, and upon reimbursement to Borrower of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Note, if mutilated, Borrower will deliver a new Note of like tenor and dated as of such cancellation, in lieu of such Note. (e) If Borrower shall have paid any interest on this Note in excess of that permitted by law, then it is the express intent of Borrower and Lender that all excess amounts previously collected by Borrower be applied to reduce the principal balance of this Note, and the provisions hereof immediately be deemed reformed and the amounts thereafter collectable as interest hereunder be reduced, without the -5- necessity of the execution of any new document, so as to comply with the then applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder. (f) Neither Borrower nor Lender shall Transfer this Note or delegate any of their respective obligations or rights hereunder without the prior written consent of the non-assigning party, except that Lender may assign or transfer, without Borrower's prior written consent, its respective rights and obligations under this Note in connection with the merger or consolidation of Lender with or into another Person. (g) Borrower hereby waives presentment, demand, notice of dishonor, protest, notice of protest and all other demands, protests and notices relative to the enforcement of this Note. (h) This Note shall be governed by and construed in accordance with the laws of the State of California. [Remainder of page intentionally left blank.] -6- IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the date first written above. VARI-L COMPANY, INC. By: /s/ CHARLES R. BLAND ------------------------------------- Name: Charles R. Bland ----------------------------------- Title: C.E.O. ---------------------------------- EXHIBIT A CONVERSION NOTICE The undersigned holder of this Note hereby: [_] elects to exercise the option to convert $[_________] of the principal amount of the Tranche A Note into Common Stock in accordance with the terms of the Tranche A Note, and directs that such shares, together with a check in payment for any fractional share, be delivered to and be registered in the name of the undersigned unless a different name has been indicated below. [_] elects, contingent upon and effective immediately prior to the closing of [insert reference to Change of Control transaction], to exercise the option to convert $[__________] of the principal amount of the Tranche A Note into Common Stock in accordance with the terms of the Tranche A Note, and directs that such shares, together with a check in payment for any fractional share, be delivered to and be registered in the name of the undersigned unless a different name has been indicated below. If Common Stock or Securities are to be registered in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. The undersigned directs Borrower to pay Lender all accrued interest to the date of conversion upon the date of conversion. Dated: _____________________ SIRENZA MICRODEVICES, INC. By:___________________________ Name: ________________________ Title: _________________________ If shares or Securities are to be registered in the name of a Person other than the holder, please print such Person's name and address: _________________________ Name _________________________ Address _________________________ Social Note or other Taxpayer Identification Number, if any EXHIBIT B Form of Tranche B Note TRANCHE B NOTE October 7, 2002 $3,946,138.20 VARI-L COMPANY, INC., a Colorado corporation (the "Borrower"), for value received, hereby promises to pay to SIRENZA MICRODEVICES, INC., the lesser of the principal sum of Three Million Nine Hundred Forty Six Thousand One Hundred Thirty Eight Dollars and 20/100 Cents ($3,946,138.20) or the principal amount outstanding under this Note on September 25, 2003 (the "Maturity Date") and to pay interest thereon, at the rate of 25% per annum until the principal hereof is paid in full, and at the Default Rate after the occurrence and during the continuance of an Event of Default. Borrower shall make all payments hereunder to Lender as indicated in the Loan Agreement, in lawful money of the United States and in same day or immediately available funds. Capitalized terms used and not otherwise defined herein, shall have the respective meanings given to those terms in the Loan Agreement, dated as of October 7, 2002 (as amended from time to time, the "Loan Agreement"), by and between VARI-L COMPANY, INC. and SIRENZA MICRODEVICES, INC. This Note is the Tranche B Note referred to in the Loan Agreement. This Note is subject to the terms of the Loan Agreement, including the rights of prepayment and the rights of acceleration of maturity. 1. Payments. All outstanding principal and all accrued interest thereon shall be due and payable on the Maturity Date. 2. Prepayments. This Note shall be subject to the prepayment provisions (both optional prepayment and mandatory prepayment) set forth in Section 2.5 of the Loan Agreement. 3. Security. THE OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A SECURITY AGREEMENT DATED AS OF THE DATE HEREOF AND EXECUTED BY BORROWER IN FAVOR OF LENDER. ADDITIONAL RIGHTS OF Lender ARE SET FORTH IN SUCH security AGREEMENT. 4. Miscellaneous. (a) Borrower irrevocably authorizes Lender to make or cause to be made, an appropriate notation on the grid attached to this Note, or the continuation of such grid, or any similar record, including computer records, reflecting the making of such Tranche B Loan or (as the case may be) the receipt of a payment or prepayment of such Tranche B Loan. The outstanding amount of the Tranche B Loans set forth on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, maintained by Lender with respect to any Tranche B Loan shall be prima facie evidence (absent manifest error) of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender's Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under the Loan Agreement to make payments of principal of or interest on this Note or the Tranche B Loans when due. (b) No provision of this Note shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of and interest, if any, on this Note at the times, places and rate, and in the coin or currency, herein prescribed or to convert this Note as herein provided. B-1 (c) Upon receipt by Borrower of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Note, and in the case of loss, theft or destruction, receipt of indemnity or Note reasonably satisfactory to Borrower, and upon reimbursement to Borrower of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Note, if mutilated, Borrower will deliver a new Note of like tenor and dated as of such cancellation, in lieu of such Note. (d) If Borrower shall have paid any interest on this Note in excess of that permitted by law, then it is the express intent of Borrower and Lender that all excess amounts previously collected by Borrower be applied to reduce the principal balance of this Note, and the provisions hereof immediately be deemed reformed and the amounts thereafter collectable as interest hereunder be reduced, without the necessity of the execution of any new document, so as to comply with the then applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder. (e) Borrower hereby waives presentment, demand, notice of dishonor, protest, notice of protest and all other demands, protests and notices relative to the enforcement of this Note (f) This Note shall be governed by and construed in accordance with the laws of the State of California. [Remainder of page intentionally left blank.] B-2 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the date first written above. VARI-L COMPANY, INC. By: /s/ CHARLES R. BLAND ------------------------------ Name: Charles R. Bland ----------------------------- Title: C.E.O. ---------------------------- B-3
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B-4 EXHIBIT C FORM OF SECURITY AGREEMENT C-1 EXHIBIT D FORM OF OPINION OF COUNSEL D-1 EX-3 5 dex3.txt SECURITY AGREEMENT WITH VARI-L EXHIBIT 3 to SCHEDULE 13D SECURITY AGREEMENT This Security Agreement (as amended, modified or otherwise supplemented from time to time, this "Security Agreement"), dated as of October 7, 2002, is executed by Vari-L Corporation, Inc., a Colorado corporation (together with its successors and assigns, "Debtor"), in favor of Sirenza Microdevices, Inc., a Delaware corporation as secured party (together with its successors and assigns, "Secured Party"). RECITALS A. Debtor and Secured Party have entered into a Loan Agreement, dated as of the date hereof, which provides up to $5.3 million in term loans (as amended, modified or otherwise supplemented from time to time, the "Loan Agreement"). B. In order to induce Secured Party to extend the credit evidenced by the Loan Agreement, Debtor has agreed to enter into this Security Agreement and to grant Secured Party the security interest in the Collateral described below. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Debtor hereby agrees with Secured Party as follows: 1. Definitions and Interpretation. When used in this Security Agreement, the following terms have the following respective meanings: "Collateral" has the meaning given to that term in Section 2 hereof. "Obligations" means all loans, advances, debts, liabilities and obligations, howsoever arising, owed by Debtor to the Secured Party of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), now existing or hereafter arising under or pursuant to the terms of the Loan Agreement, the Notes or any other Loan Document, including, all interest, fees, charges, expenses, attorneys' fees and costs and accountants' fees and costs chargeable to and payable by Debtor hereunder and thereunder, in each case, whether direct or indirect, absolute or contingent, due or to become due, and whether or not arising after the commencement of a proceeding under Title 11 of the United States Code (11 U.S.C. Section 101 et seq.), as amended from time to time (including post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding. "UCC" means the Uniform Commercial Code as in effect in the State of California from time to time (and each reference in this Security Agreement to an Article or Division thereof shall refer to that Article or Division as from time to time in effect); provided, however, in the event that, by reason of mandatory provisions of law, any or all of the perfection or priority of the Secured Party's security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of California, the term "UCC" shall mean the Uniform Commercial Code (including the Articles or Divisions thereof) as in effect at such time in such other jurisdiction for purposes of the provisions hereof relating to such perfection or priority and for purposes of definitions related to such provisions. All capitalized terms not otherwise defined herein shall have the respective meanings given in the Loan Agreement. Terms defined in the UCC and not otherwise defined herein shall have the respective meanings set forth in the UCC. 2. Grant of Security Interest. As security for the Obligations, Debtor hereby pledges to Secured Party and grants to Secured Party a security interest of first priority, subject only to Permitted Liens, in all right, title and interests of Debtor in and to the property described in Attachment 1 hereto, whether now existing or hereafter from time to time acquired (collectively, the "Collateral"). Notwithstanding the foregoing provisions of this Section 2, the pledge and grant of a security interest as provided herein shall not extend to, and the term "Collateral" shall not include: "intent-to-use" trademarks at all times prior to the first use thereof, whether by the actual use thereof in commerce, the recording of a statement of use with the United States Patent and Trademark Office or otherwise. 3. Representations and Warranties. Debtor represents and warrants to Secured Party that: (a) Collateral. (i) Except as set forth in Article 3.7 of the Disclosure Schedule (as defined in and attached to the Loan Agreement) (the "Disclosure Schedule") the Debtor is the owner of the Collateral (or, in the case of after-acquired Collateral, at the time Debtor acquires rights in the Collateral, will be the owner thereof) and that no other Person has (or, in the case of after-acquired Collateral, at the time Debtor acquires rights therein, will have) any right, title, claim or interest (by way of Lien or otherwise) in, against or to the Collateral, other than Permitted Liens; (ii) upon the filing of UCC-1 financing statements in the appropriate filing offices, Secured Party has (or in the case of after-acquired Collateral, at the time Debtor acquires rights therein, will have) a first priority perfected security interest in the Collateral to the extent that a security interest in the Collateral can be perfected by such filing, except for Permitted Liens; (iii) all inventory has been (or, in the case of hereafter produced inventory, will be) produced in compliance with the Fair Labor Standards Act and all other material applicable laws; (iv) all accounts receivable and payment intangibles are bona fide and existing obligations; (v) the originals of all documents evidencing all accounts receivable and payment intangibles of Debtor and the only original books of account and records of Debtor relating thereto are, and will continue to be, kept at the chief executive office of Debtor set forth on Schedule B or at such other locations as Debtor may establish in accordance with Section 4(d), and (f) all information set forth in Schedules A and B hereto is true and correct. (b) Intellectual Property. (i) Debtor does not own any patents, trademarks, copyrights or mask works registered in, or the subject of pending applications in, the Patent and Trademark Office or the Copyright Office or any similar offices or agencies in any other country or any political subdivision thereof, other than those described on Schedule A hereto; (ii) Debtor has, except for Permitted Liens, the sole, full and unencumbered right, title and interest in and to the trademarks shown on Schedule A and the goods and services covered by the registrations thereof and, such trademarks are valid and enforceable and in full force and effect; (iii) except as set forth in Article 3.7 of the Disclosure Schedule, Debtor has, except for Permitted Liens, the sole, full and unencumbered right, title and interest in and to each of the patents shown on Schedule A, such patents are valid and enforceable and in full force and effect; (iv) Debtor has, except for Permitted Liens, the sole, full and unencumbered right, title and interest in and to each of the copyrights shown on Schedule A, such copyrights are valid and enforceable and in full force and effect; (v) Debtor has, except for Permitted Liens, the sole, full and encumbered right, title and interest in and to the mask works shown on Schedule A such mask works are valid and enforceable and in full force and effect; (vi) except as set forth in Article 3.6 of the Disclosure Schedule, there is no claim by any third party that any such patents, trademarks, copyrights or mask works are invalid and unenforceable or do or may violate the rights of any Person; (vii) all licenses (other than non-exclusive licenses to end-users) of patents, trademarks, copyrights, mask works and trade secrets which Debtor has granted to any Person are set forth in Schedule A hereto; (viii) all licenses of patents, trademarks, copyrights, mask works and trade secrets which any Person has granted to -2- Debtor are set forth on Schedule A hereto, other than those licenses of patents, trademarks, copyrights, mask works and trade secrets consisting of "off the shelf" software or standard products; (ix) except as set forth in Article 3.7 of the Disclosure Schedule, Debtor has obtained from each employee who may be considered the inventor of patentable inventions (invented within the scope of such employee's employment) an assignment to Debtor of all rights to such inventions, including patents; and (x) Debtor has taken all reasonable steps necessary to protect the secrecy and the validity under applicable law of all material trade secrets. 4. Covenants Relating to Collateral. Debtor hereby agrees, except as otherwise permitted by the terms hereof or the terms of the Loan Agreement (a) to perform all acts that may be necessary to maintain, preserve, protect and perfect the Collateral, the Lien granted to Secured Party therein and the perfection and priority of such Lien, except for Permitted Liens; (b) not to use or permit any Collateral to be used (i) in violation in any material respect of any applicable law, rule or regulation of any Governmental Authority, or (ii) in violation of any policy of insurance covering the Collateral; (c) to pay promptly when due all taxes and other Governmental Charges, unless contested in good faith and for which adequate reserves therefor are made in accordance with GAAP, all Liens and all other charges now or hereafter imposed upon or affecting any Collateral, other than Permitted Liens; (d) without 30 days' written notice to Secured Party, (i) not to change Debtor's name or place of business (or, if Debtor has more than one place of business, its chief executive office), or the office in which Debtor's records relating to accounts receivable and payment intangibles are kept, (ii) not to change Debtor's state of incorporation, (iii) not to keep Collateral consisting of chattel paper at any location other than its chief executive office set forth in item 1 of Schedule B hereto, and (iv) not to keep Collateral consisting of equipment or inventory at any location other than the locations set forth in item 6 of Schedule B hereto, (f) to procure, execute and deliver from time to time any endorsements, assignments, financing statements and other writings reasonably deemed necessary or appropriate by Secured Party to perfect, maintain and protect its Lien hereunder and the priority thereof and to deliver promptly to Secured Party all originals of Collateral consisting of instruments; (g) to appear in and defend any action or proceeding which may adversely affect its title to or Secured Party's interest in the Collateral; (h) if Secured Party gives value to enable Debtor to acquire rights in or the use of any Collateral, to use such value for such purpose; (i) to keep separate, accurate and complete records of the Collateral and to provide Secured Party with such records and such other reports and information relating to the Collateral as Secured Party may reasonably request from time to time; (j) not to surrender or lose possession of (other than to Secured Party), sell, encumber, lease, rent, or otherwise dispose of or transfer any Collateral or right or interest therein except as otherwise permitted in the Loan Agreement, and to keep the Collateral free of all Liens except Permitted Liens; (k) if requested by Secured Party, to type, print or stamp conspicuously on the face of all original copies of all Collateral consisting of chattel paper a legend satisfactory to Secured Party indicating that such chattel paper is subject to the security interest granted hereby; (l) to collect, enforce and receive delivery of the accounts receivable and payment intangibles in accordance with past practice until otherwise notified by Secured Party; (m) to comply with all material Requirements of Law relating to the production, possession, operation, maintenance and control of the Collateral (including the Fair Labor Standards Act); and (n) to permit Secured Party and its representatives the right, at any time during normal business hours, upon reasonable prior notice, to visit and inspect the properties of Debtor and its corporate, financial and operating records, and make abstracts therefrom, and to discuss Debtor's affairs, finances and accounts with its directors, officers and independent public accountants. 5. Covenants Regarding Intellectual Property. Debtor hereby agrees: (a) Debtor will perform all acts and execute all documents, including notices of security interest for each relevant type of intellectual property in forms suitable for filing with the Patent and Trademark Office or the Copyright Office, that may be necessary or desirable to record, maintain, preserve, protect and perfect Secured Party's interest in the Collateral, the Lien granted to Secured Party in the Collateral and the first priority of such Lien; -3- (b) Except to the extent that Secured Party gives its prior written consent: (i) Debtor (either itself or through licensees) will continue to use its material trademarks in connection with each and every trademark class of goods or services applicable to its current line of products or services as reflected in its current catalogs, brochures, price lists or similar materials in order to maintain such trademarks in full force and effect free from any claim of abandonment for nonuse, and Debtor will not (and will not permit any licensee thereof to) do any act or knowingly omit to do any act whereby any material trademark may become invalidated; (ii) Debtor will not do any act or omit to do any act whereby any material patent registrations may become abandoned or dedicated to the public domain or the remedies available against potential infringers weakened and shall notify Secured Party immediately if it knows of any reason or has reason to know that any material patent registration may become abandoned or dedicated; and (iii) Debtor will not do any act or omit to do any act whereby any material registered copyrights or mask works may become abandoned or dedicated to the public domain or the remedies available against potential infringers weakened and shall notify Secured Party immediately if it knows of any reason or has reason to know that any material copyright or mask work may become abandoned or dedicated to the public domain. (c) Debtor will promptly (and in any event within 5 Business Days) notify Secured Party upon the filing, either by Debtor or through any agent, employee, licensee or designee, of (i) an application for the registration of any patent, trademark, copyright or mask work with the Patent and Trademark Office or the Copyright Office or any similar office or agency in any other country or any political subdivision thereof, (ii) any assignment of any patent or trademark, which Debtor may acquire from a third party, with the Patent and Trademark Office or any similar office or agency in any other country or any political subdivision thereof, or (iii) any assignment of any copyright or mask work, which Debtor may acquire from a third party, with the Copyright Office or any similar office or agency in any other country or any political subdivision thereof. Debtor will promptly (and in any event within 5 Business Days) notify Secured Party of the registration of any patent, trademark, copyright or mask work with the Patent and Trademark Office or the Copyright office or any similar office or agency in any other country or any political subdivision thereof. Upon the request of Secured Party, Debtor shall execute and deliver any and all assignments, agreements, instruments, documents and papers as Secured Party may request to evidence Secured Party's security interest in such patent, trademark (and the goodwill and general intangibles of Debtor relating thereto or represented thereby), copyright or mask work, and Debtor authorizes Secured Party to amend an original counterpart of the applicable notice of security interest executed pursuant to Section 6(a) of this Security Agreement without first obtaining Debtor's approval of or signature to such amendment and to record such document with the Patent and Trademark Office or Copyright Office, as applicable. (d) Debtor will take all necessary steps in any proceeding before the Patent and Trademark Office, the Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to diligently prosecute or maintain, as applicable, each material application and registration of the patents, trademarks, copyrights and mask works, including filing of renewals, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings (except to the extent that dedication, abandonment or invalidation is permitted hereunder); (e) While any Obligations are outstanding, Debtor shall (i) make application to the Patent and Trademark Office to register any material unpatented but patentable inventions developed by Debtor or its employees (within the scope of their employment), unless Debtor, in the exercise of its reasonable business judgment, deems any such patent not to have any significant commercial value or determines that its rights -4- thereunder are better preserved as a trade secret; (ii) make application to the Patent and Trademark Office to register any registerable but unregistered material trademarks used by Debtor in connection with its products or services; and (iii) upon Secured Party's written request, make application to the Copyright Office to register any material unregistered copyright or mask work to which Debtor has rights; (f) Debtor shall (i) use proper statutory notice in connection with its use of the material patents, trademarks, copyrights and mask works, (ii) maintain consistent standards of quality in its manufacture of products sold under the trademarks or provision of services in connection with the trademarks, and (iii) take all steps necessary to protect the secrecy and the validity under applicable law of all material trade secrets; (g) Debtor agrees that if it learns of any use by any Person of any term or design likely to cause confusion with any material trademark, Debtor shall promptly notify Secured Party of such use and of all steps taken and to be taken to remedy any infringement of any material trademark; and (h) Debtor shall maintain with each employee who may have access to the trade secrets of Debtor an agreement by which such employee agrees not to disclose such trade secrets and with each employee who may be the inventor of patentable inventions (invented within the scope of such employee's employment) an invention assignment agreement requiring such employee to assign all rights to such inventions, including patents and patent applications, to Debtor and further requiring such employee to cooperate fully with Debtor, its successors in interest, including Secured Party, and their counsel, in the prosecution of any patent application or in any litigation involving the invention, whether such cooperation is required during such employee's employment with Debtor or after the termination of such employment. 6. Authorized Action by Secured Party. Debtor hereby irrevocably appoints Secured Party as its attorney-in-fact (which appointment is coupled with an interest) and agrees that Secured Party may perform (but Secured Party shall not be obligated to and shall incur no liability to Debtor or any third party for failure so to do) any act which Debtor is obligated by this Security Agreement to perform, and to exercise such rights and powers as Debtor might exercise with respect to the Collateral, including the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) make any compromise or settlement, and take any action it deems advisable, with respect to the Collateral; (d) insure, process and preserve the Collateral; (e) pay any indebtedness of Debtor relating to the Collateral; and (f) execute UCC financing statements and other documents, instruments and agreements required hereunder; provided, however, that Secured Party shall not exercise any such powers granted pursuant to subsections (a) through (c) prior to the occurrence of an Event of Default and shall only exercise such powers during the continuance of an Event of Default. Debtor agrees to reimburse Secured Party upon demand for any reasonable costs and expenses, including attorneys' fees, Secured Party may incur while acting as Debtor's attorney-in-fact hereunder, all of which costs and expenses are included in the Obligations. It is further agreed and understood between the parties hereto that such care as Secured Party gives to the safekeeping of its own property of like kind shall constitute reasonable care of the Collateral when in Secured Party's possession; provided, however, that Secured Party shall not be required to make any presentment, demand or protest, or give any notice and need not take any action to preserve any rights against any prior party or any other person in connection with the Obligations or with respect to the Collateral. 7. Litigation and Other Proceedings. Upon the occurrence and during the continuation of an Event of Default, Secured Party shall have the right but not the obligation to bring suit or institute proceedings in the name of Debtor or Secured Party to enforce any rights in the Collateral, including any license thereunder, in -5- which event Debtor shall at the request of Secured Party do any and all lawful acts and execute any and all documents reasonably required by Secured Party in aid of such enforcement. If Secured Party elects not to bring suit to enforce any right under the Collateral, including any license thereunder, Debtor agrees to use all reasonable measures, whether by suit, proceeding or other action, to cause to cease any infringement of any right under the Collateral by any Person and for that purpose agrees to diligently maintain any action, suit or proceeding against any Person so infringing necessary to prevent such infringement. 8. Default and Remedies. (a) Default. Debtor shall be deemed in default under this Security Agreement upon the occurrence and during the continuance of an Event of Default. (b) Remedies. Upon the occurrence and during the continuance of any such Event of Default, Secured Party shall have the rights of a secured creditor under the UCC, all rights granted by this Security Agreement and by law, including the right to: (a) require Debtor to assemble the Collateral and make it available to Secured Party at a place to be designated by Secured Party; and (b) prior to the disposition of the Collateral, store, process, repair or recondition it or otherwise prepare it for disposition in any manner and to the extent Secured Party deems appropriate and in connection with such preparation and disposition, without charge, use any trademark, trade name, copyright, patent or technical process used by Debtor. Debtor hereby agrees that ten (10) days' notice of any intended sale or disposition of any Collateral is reasonable. In furtherance of Secured Party's rights hereunder, Debtor hereby grants to Secured Party an irrevocable, non-exclusive license (exercisable without royalty or other payment by Secured Party, but only in connection with the exercise of remedies hereunder) to use, license or sublicense any patent, trademark, trade name, copyright or other intellectual property in which Debtor now or hereafter has any right, title or interest together with the right of access to all media in which any of the foregoing may be recorded or stored. 9. Miscellaneous. (a) Notices. Except as otherwise provided herein, all notices, requests, demands, consents, instructions or other communications to or upon Debtor or Secured Party under this Security Agreement shall be made in accordance with Section 7.1 of the Loan Agreement. (b) Nonwaiver. No failure or delay on Secured Party's part in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. (c) Amendments and Waivers. This Security Agreement may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by Debtor and Secured Party. Each waiver or consent under any provision hereof shall be effective only in the specific instances for the purpose for which given. (d) Assignments. This Security Agreement shall be binding upon and inure to the benefit of Secured Party and Debtor and their respective successors and assigns; provided, however, that neither Secured Party nor Debtor may sell, assign or delegate their respective rights and obligations hereunder without the prior written consent of the other party hereto, except that Lender may assign or transfer, without Debtor's prior written consent, its respective rights and obligations under this Security Agreement in connection with the merger or consolidation of Lender with or into another Person. (e) Cumulative Rights, etc. The rights, powers and remedies of Secured Party under this Security Agreement shall be in addition to all rights, powers and remedies given to Secured Party by virtue of -6- any applicable law, rule or regulation of any governmental authority, the Loan Documents or any other agreement, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Secured Party's rights hereunder. Debtor waives any right to require Secured Party to proceed against any Person or to exhaust any Collateral or to pursue any remedy in Secured Party's power. (f) Payments Free of Taxes, Etc. All payments made by Debtor under the Loan Documents shall be made by Debtor free and clear of and without deduction for any and all present and future taxes, levies, charges, deductions and withholdings. In addition, Debtor shall pay upon demand any stamp or other taxes, levies or charges of any jurisdiction with respect to the execution, delivery, registration, performance and enforcement of this Security Agreement. Upon request by Secured Party, Debtor shall furnish evidence satisfactory to Secured Party that all requisite authorizations and approvals by, and notices to and filings with, governmental authorities and regulatory bodies have been obtained and made and that all requisite taxes, levies and charges have been paid. (g) Partial Invalidity. If at any time any provision of this Security Agreement is or becomes illegal, invalid or unenforceable in any respect under the law or any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Security Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. (h) Expenses. Debtor shall pay on demand all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Secured Party in connection with custody, preservation or sale of, or other realization on, any of the Collateral or the enforcement or attempt to enforce any of the Obligations which is not performed as and when required by this Security Agreement. (i) Headings. Headings in this Security Agreement and each of the other Loan Documents are for convenience of reference only and are not part of the substance hereof or thereof. (j) Plural Terms. All terms defined in this Security Agreement or any other Loan Document in the singular form shall have comparable meanings when used in the plural form and vice versa. (k) Construction. Each of this Security Agreement and the other Loan Documents is the result of negotiations among, and has been reviewed by, Debtor, Secured Party and their respective counsel. Accordingly, this Security Agreement and the other Loan Documents shall be deemed to be the product of all parties hereto, and no ambiguity shall be construed in favor of or against Debtor or Secured Party. (l) Entire Agreement. This Security Agreement and each of the other Loan Documents, taken together, constitute and contain the entire agreement of Debtor and Secured Party and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof. (m) Other Interpretive Provisions. References in this Security Agreement and each of the other Loan Documents to any document, instrument or agreement (a) includes all exhibits, schedules and other attachments thereto, (b) includes all documents, instruments or agreements issued or executed in replacement thereof, and (c) means such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Security Agreement or any other Loan Document refer to this Security Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Security Agreement or such other Loan Document, -7- as the case may be. The words "include" and "including" and words of similar import when used in this Security Agreement or any other Loan Document shall not be construed to be limiting or exclusive. (a) Governing Law. This Security Agreement shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of law rules (except to the extent governed by the UCC). [The remainder of this page is intentionally left blank] -8- EXHIBIT 3 to SCHEDULE 13D IN WITNESS WHEREOF, Debtor has caused this Security Agreement to be executed as of the day and year first above written. VARI-L COMPANY, INC. By: /s/ CHARLES R. BLAND --------------------------------------- Name: Charles R. Bland -------------------------------------- Title: C.E.O. ------------------------------------- AGREED: SIRENZA MICRODEVICES, INC. As Secured Party By: /s/ GERALD L. QUINNELL ------------------------------------- Name: Gerald L. Quinnell --------------------------------- Title: EVP Business Development ---------------------------------- [Signature Page to Security Agreement] ATTACHMENT 1 TO SECURITY AGREEMENT All right, title, interest, claims and demands of Debtor in and to the following property: (i) All goods and equipment now owned or hereafter acquired, including, without limitation, all laboratory equipment, computer equipment, office equipment, machinery, fixtures, vehicles, and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located; (ii) All inventory now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Debtor's custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above, and Debtor's books relating to any of the foregoing; (iii) All contract rights, general intangibles, health care insurance receivables, payment intangibles and commercial tort claims, now owned or hereafter acquired, including, without limitation, all patents, patent rights (and applications and registrations therefor), trademarks and service marks (and applications and registrations therefor), inventions, copyrights, mask works (and applications and registrations therefor), trade names, trade styles, software and computer programs, trade secrets, methods, processes, know how, drawings, specifications, descriptions, and all memoranda, notes, and records with respect to any research and development, goodwill, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer disks, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind and whether in tangible or intangible form or contained on magnetic media readable by machine together with all such magnetic media; (iv) All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Debtor arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Debtor (subject, in each case, to the contractual rights of third parties to require funds received by Debtor to be expended in a particular manner), whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Debtor and Debtor's books relating to any of the foregoing; (v) All documents, cash, deposit accounts, letters of credit, letter of credit rights, supporting obligations, certificates of deposit, instruments, chattel paper, electronic chattel paper, tangible chattel paper and investment property, including, without limitation, all securities, whether certificated or uncertificated, security entitlements, securities accounts, commodity contracts and commodity accounts, and all financial assets held in any securities account or otherwise, wherever located, now owned or hereafter acquired and Debtor's books relating to the foregoing; and (vi) Any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds thereof, including, without limitation, insurance, condemnation, requisition or similar payments and the proceeds thereof. SCHEDULE A TO SECURITY AGREEMENT --------------------- COPYRIGHTS Description Registration Date Registration No. - ----------- ----------------- ---------------- None. PATENTS
Title Date Issued Country Patent No. - ----- ----------- ------- ---------- Wide Range Electronic Oscillator November 4, 1986 USA 4,621,241 Wide Range Electronic Oscillator Singapore 95 90657-4 Wide Range Electronic Oscillator Hong Kong 821/1995 Wide Range Electronic Oscillator Canada 1,267,941 Wide Range Electronic Oscillator United Kingdom 0,207,650 Wide Range Electronic Oscillator Austria 0,207,650 Wide Range Electronic Oscillator Sweden 86304343 Wide Range Electronic Oscillator Belgium 0,207,650 Wide Range Electronic Oscillator Italy 0,207,650 Wide Range Electronic Oscillator France 0,207,650 Wide Range Electronic Oscillator Germany 0,207,650 Wide Range Electronic Oscillator Netherlands 0,207,650 Wide Range Electronic Oscillator Switzerland 0,207,650 Multiple Single Layer Monolithic Passive Integrated Circuits and Methods May 11, 1999 USA 5,903,431 Oscillator Voltage Regulator October 7, 1997 USA 5,675,478 Oscillator Voltage Regulator Eurasian 199900014 Oscillator Voltage Regulator EPC App. No. 97924617.0 Oscillator Voltage Regulator Australia 29998/97 Oscillator Voltage Regulator Norway 19990202 Oscillator Voltage Regulator China 97196418.1 Oscillator Voltage Regulator Canada 2,259,662 High Impedance Ratio Wideband Transformer Circuit April 8, 1997 USA 2,619,172 High Impedance Ratio Wideband Transformer Circuit Australia 704537 High Impedance Ratio Wideband Transformer Circuit Canada 2,231,832
Title Date Issued Country Patent No. - ----- ----------- ------- ---------- High Impedance Ratio Wideband Transformer Circuit EPC 96930789.1 High Impedance Ratio Wideband Transformer Circuit Brazil PI9610500-3 High Impedance Ratio Wideband Transformer Circuit China 96197553.9 High Impedance Ratio Wideband Transformer Circuit Norway 19981086 Unbalanced to Balanced High Impedance Ratio Wideband Transformer Circuit April 21, 1998 USA 5,742,213 Orthogonally Mounted Substrate Based Resonators February 2, 1999 USA 5,867,069 Orthogonally Mounted Substrate Based Resonators EPC 98925304.2 Orthogonally Mounted Substrate Based Resonators China 98805934.7 Orthogonally Mounted Substrate Based Resonators Singapore 9906005-5 Orthogonally Mounted Substrate Based Resonators Norway 19996139 Orthogonally Mounted Substrate Based Resonators Australia 77289/98 Orthogonally Mounted Substrate Based Resonators Canada 2,289,538 Oscillator Selectively Operable with a Parallel Tuned or a Series Tuned Resonant Circuit (Switched Mode Oscillator) November 9, 1999 USA 5,982,243 Continuously Adjustable Resonator January 5, 1999 USA 5,856,769 Continuously Adjustable Resonator China 98806014.0 Continuously Adjustable Resonator EPC 98926521.0 Continuously Adjustable Resonator Canada 2,293,357 Continuously Adjustable Resonator Norway 19996138 Continuously Adjustable Resonator Australia 78340/98 Continuously Adjustable Resonator Japan 503159/99 Continuously Adjustable Resonator Singapore 9906033-7 First and Second Oscillator Circuits Selectively Coupled Through Passive Output Circuit to a Loan (Passive Switched Oscl. Output Circuit) December 19, 2000 USA 5,999,061 Oscillator with Power Conservation Mode December 19, 2000 USA 6,163,228
PATENT APPLICATIONS
Title Application Date Application No. - ----- ----------------- --------------- Ferrite Crystal Resonator Structure 11/29/01 09/997,468 TRADEMARKS Mark Registration Date Country Registration No. - ---- ----------------- ------- ---------------- VARIL March 17, 1998 USA 2,144,712 VARI-L Trademark March 10, 1998 USA 2,142,727 VARI-L Trademark Korea 457,609 VARI-L Trademark Australia 776,901 VARI-L Trademark Puerto Rico 44,792 VARI-L Trademark Norway 196,837 VARI-L Trademark Israel 124,416 VARI-L Trademark China 1,417,320 VARI-L Trademark Community 001008978 VARI-L Trademark Canada 528,046 VARI-L Trademark Hong Kong 00420 TRADEMARK APPLICATIONS Mark Application Date Country Application No. - ---- ---------------- ------- --------------- PLAMAG January 30, 2001 USA 78045586 MASK WORKS Description Registration Date Registration No. - ----------- ----------------- ---------------- None.
LICENSES OF PATENTS, TRADEMARKS, COPYRIGHTS OR MASK WORKS (other than non-exclusive licenses to end-users) SCHEDULE B TO SECURITY AGREEMENT DEBTOR PROFILE 1. Name. The legal name of Debtor is and the address of its chief executive office is: Vari-L Company, Inc. 4895 Peoria Street Denver CO 80239 2. Organizational Identification Number; Federal Employer Identification Number. The Debtor's organizational identification number in its state of incorporation is 01-65949-000 and Debtor's federal employer identification number is 06-0679347. 3. State of Incorporation; Prior Names. Debtor was incorporated on June 27, 1985 in the state of Colorado. Since its incorporation Debtor has had the following legal names (other than its current legal name): Date Debtor's Name Prior Name Was Changed From Such Name ---------- -------------------------- NONE 4. Debtor does business under the following trade names: Trade Name Is This Name Registered? Registration No. Registration Date ---------- ------------------------ ---------------- ----------------- NONE 5. Place of Business. Debtor has the following places of business: Address Owner of Location ------- ----------------- 11101 E. 51/st/ Ave. Kenneth L. & Jean M. Bettenhausen Denver, CO 5165 Peoria Street J.C. Enterprises Denver, CO 4895 Peoria Street Five K Investments Denver, CO 4955 Peoria Street, Unit D First Industrial, LP Denver, CO 6. Assets in Possession of Third Parties. The following are names and addresses of all persons or entities other than Debtor, such as lessees, consignees, warehousemen or purchasers of chattel paper, which have possession or are intended to have possession of any of the Collateral consisting of instruments, chattel paper, inventory or equipment: Name Mailing Address County State ---- --------------- ------ ----- NONE 7. Qualification To Do Business. Debtor is qualified to do business in the following states: Colorado and Washington. 8. Existing Security Interests. Debtor's assets are subject to the following security interest of Persons other than the Collateral Agent: Assets Name of Secured Party ------ --------------------- SEE ATTACHED 9. Tax Assessments. The following tax assessments are currently outstanding and unpaid: Assessing Authority Amount and Description ------------------- ---------------------- State of Colorado Monthly use tax of approx. $3,000 City of Denver Monthly use tax of approx. $1,000 10. Guaranties. Debtor has directly or indirectly guaranteed the following obligations of third parties: Creditor Amount Debtor -------- ------ ------ Carolyn Kiser $94,113 Joseph H. Kiser & David G. Sherman 11. Subsidiaries. Debtor has the following subsidiaries (list jurisdiction and date of incorporation, federal employer identification number, type and value of assets): NONE 12. Securities; Instruments. The following is a complete list of all stocks, bonds, debentures, notes and other securities and investment property owned by Debtor (provide name of issuer, whether certificated or uncertificated, certificate no. (if applicable), number of shares): NONE 13. Bank Accounts; Securities Accounts: The following is a complete list of all bank accounts and securities accounts maintained by Debtor (provide name and address of depository bank (or brokerage firm), type of account and account number):
Name and Address Type of Account Account Number ---------------- --------------- -------------- Wells Fargo Bank Collateral 850579707 1740 Broadway, Denver, CO Wells Fargo Bank Operating 1010874603 1740 Broadway, Denver, CO Wells Fargo Bank Money Market 1018061084 1740 Broadway, Denver, CO Wells Fargo Bank Controlled Disbursements 8012700636 1740 Broadway, Denver, CO
EXISTING SECURITY INTERESTS Creditor Collateral - -------- ---------- Glesby-Marks Corporation Toyota Truck, VIN 4TAPM62N9WZ165382 Dell Financial Services No. 245813-500 Computer Equipment Dell Financial Services No. 245813-502 Computer Equipment Dell Financial Services No. 245813-503 Computer Equipment Dell Financial Services No. 245813-507 Computer Equipment Dell Financial Services No. 245813-508 Computer Equipment Dell Financial Services No. 245813-509 Computer Equipment Dell Financial Services No. 245813-510 Computer Equipment Dell Financial Services No. 245813-511 Computer Equipment Dell Financial Services No. 245813-513 Computer Equipment Dell Financial Services No. 245813-514 Computer Equipment Dell Financial Services No. 245813-515 Computer Equipment Dell Financial Services No. 245813-517 Computer Equipment Dell Financial Services No. 245813-518 Computer Equipment Dell Financial Services No. 245813-521 Computer Equipment EX-4 6 dex4.txt EXCLUSIVITY AND RIGHT OF FIRST REFUSAL AGREEMENT EXHIBIT 4 to SCHEDULE 13D EXCLUSIVITY AND RIGHT OF FIRST REFUSAL AGREEMENT This EXCLUSIVITY AND RIGHT OF FIRST REFUSAL AGREEMENT (the "Agreement") is made and entered into as of October 7, 2002 among Sirenza Microdevices, Inc., a Delaware corporation ("Parent"), and Vari-L Company, Inc., a Colorado corporation (the "Company"). RECITALS A. Parent and Company wish to mutually evaluate a potential acquisition by Parent of all or substantially all of the assets of the Company (the "Transaction"), on terms to be set forth in a definitive and binding written agreement between the Company and Parent (the "Definitive Agreement"). B. In order to assist the Company in meeting certain working capital requirements and to secure the promises of the Company contained herein, Parent has agreed to lend the Company up to $5,300,000 upon the terms and subject to the conditions set forth in that certain Loan Agreement between the parties dated the date hereof regarding such loan facility (together with the related security agreement any and all exhibits, attachments and other agreements and instruments contemplated thereby, the "Loan Agreement"). C. As an inducement to Parent to make the Loan Agreement and to evaluate the potential Transaction, the Company wishes to make the covenants and enter into the agreements set forth below. NOW, THEREFORE, in consideration of the substantial amount of resources Parent has and will expend in evaluating and negotiating the terms of the Transaction, the Loan Agreement and the covenants, promises and representations set forth herein, and for other good and valuable consideration, intending to be legally bound hereby, the parties agree as follows: ARTICLE I EXCLUSIVITY 1.1 No Solicitation. (a) No Solicitation or Negotiation. From and after the date of this Agreement until March 31, 2003, unless earlier terminated pursuant to Section 1.2 hereof (the "Exclusivity Period"), and except as set forth in this Section 1.1, the Company shall not, nor shall it authorize or permit any of its subsidiaries or any of its or its subsidiaries' respective directors, officers, investment bankers, attorneys, accountants or other advisors or representatives retained by them (such directors, officers, employees, investment bankers, attorneys, accountants, other advisors and representatives, collectively, "Representatives") to directly or indirectly: (i) solicit, initiate, or knowingly encourage or induce the making of any Acquisition Proposal (as defined in Section 1.1(e)), including without limitation to amend or grant any waiver or release under any standstill or similar agreement with respect to any equity securities of the Company; or (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding, furnish to any person any information with respect to, assist or participate in any effort by any person with respect to, or otherwise cooperate in any way with, any Acquisition Proposal. Notwithstanding the foregoing, during the Exclusivity Period, the Company may, to the extent required by the fiduciary obligations of the board of directors of the Company (the "Company Board"), as determined in good faith by the Company Board after consultation with outside counsel, in response to a Superior Proposal (as defined in Section 1.1(e)) that did not result from a breach by Company of this Section 1.1, and subject to compliance with Section 1.1(c), (x) furnish information with respect to the Company to the person making such Superior Proposal and its Representatives pursuant to a customary confidentiality agreement not less restrictive of the other party than the Confidentiality Agreement (as defined in Section 1.1(e)), provided that any such information not previously provided to Parent shall be concurrently provided to Parent as well, (y) participate in discussions or negotiations with such person and its Representatives regarding any Superior Proposal, and (z) enter into a definitive agreement or other documents with respect to such Superior Proposal with such person after complying with all applicable obligations of the Company set forth in Article II hereof. Without limiting the foregoing, it is agreed that any violation of the restrictions set forth in this Section 1.1(a) by any Representative of the Company or any of its subsidiaries, whether or not such person is purporting to act on behalf of the Company or otherwise, shall be deemed to be a breach of this Section 1.1(a) by the Company. (b) No Alternative Acquisition Agreement. During the Exclusivity Period, neither the Company Board nor any committee thereof shall: (i) cause or permit the Company to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or similar agreement constituting or relating to any Acquisition Proposal (other than a confidentiality agreement referred to in Section 1.1(a) entered into in the circumstances referred to in Section 1.1(a)); or (ii) adopt, approve or recommend, or propose to adopt, approve or recommend, anyAcquisition Proposal. Notwithstanding the foregoing, during the Exclusivity Period, the Company Board may, in response to a Superior Proposal that did not result from a breach by the Company of this Section 1.1, take any action described in clauses (i) or (ii) of the first sentence of this Section 1.1(b), but only to -2- the extent that the Company Board determines in good faith (after consultation with outside counsel) that its fiduciary obligations require it to do so, and only after (A) the fifth business day following receipt by Parent of written notice advising it that the Company Board desires to take such action due to the existence of a Superior Proposal, specifying the action proposed to be taken by the Company Board, the material terms and conditions of such Superior Proposal and the identity of the person making such Superior Proposal, and (B) the Company has satisfied in all respects any and all of its applicable obligations to Parent pursuant to Article II hereof. Nothing in this Section 1.1 shall be deemed to affect any obligation of the Company under this Agreement except as explicitly set forth above. Notwithstanding the foregoing, the notice contemplated by clause (A) above need not be given with respect to any Third Party Offer (as defined in Section 2.2) during any period in which Article II is not applicable by virtue of Section 2.4. (c) Notices; Additional Negotiations. The Company shall promptly advise Parent orally, with written confirmation to follow promptly (and in any event within one business day), of any Acquisition Proposal or any request for nonpublic information, or of any inquiry with respect to, or that could reasonably be expected to lead to, any Acquisition Proposal, the material terms and conditions of any such Acquisition Proposal or inquiry and the identity of the person making any such Acquisition Proposal or inquiry. The Company shall not provide any information to or participate in discussions or negotiations with the person or entity making any Superior Proposal until two business days after the Company has first notified Parent of such Acquisition Proposal as required by the preceding sentence. The Company shall (i) keep Parent fully informed, on a current basis, of the status and details (including any change to the terms) of any such Acquisition Proposal or inquiry, (ii) provide to Parent as soon as practicable after receipt or delivery thereof copies of all correspondence and other written material (A) sent or provided to the Company from any third party in connection with any Acquisition Proposal (other than confidential due diligence materials regarding such third party sent to the Company by such third party in connection with an Acquisition Proposal) or (B) sent or provided by the Company to any third party in connection with any Superior Proposal, and (iii) if Parent shall make a counterproposal, consider and cause its financial and legal advisors to negotiate on its behalf in good faith with respect to the terms of such counterproposal. Contemporaneously with providing any information to a third party in connection with any such Superior Proposal or inquiry, the Company shall furnish a copy of such information to Parent to the extent that such copy has not previously been provided to Parent. In addition to the foregoing, the Company shall provide Parent with at least 24 hours prior notice (or such lesser prior notice as provided to the members of the Company Board but in no event less than eight hours) of any meeting of the Company Board at which the Company Board is reasonably expected to consider a Superior Proposal or to recommend a Superior Proposal to its stockholders and together with such notice a copy of the definitive documentation relating to such Superior Proposal to the extent that such copy has not previously been provided to Parent. (d) Cessation of Ongoing Discussions. The Company shall, and shall cause its subsidiaries and its and their Representatives to, cease immediately all discussions and negotiations existing as of the date of this Agreement regarding any proposal that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal. As of the date of this Agreement, the Company represents that neither it nor any of its subsidiaries nor their Representatives is engaged, directly or indirectly, in any discussions or negotiations with any other party (other than Parent) with respect to an Acquisition Proposal. -3- (e) Definitions. For purposes of this Agreement: "Acquisition Proposal" means (i) any inquiry, proposal or offer for a merger, consolidation, dissolution, sale of substantial assets, tender offer, recapitalization, share exchange or other business combination involving the Company or any of its subsidiaries, (ii) any proposal for the issuance by the Company or any of its subsidiaries of over 15% of its equity securities or (iii) any proposal or offer to acquire in any manner, directly or indirectly, over 15% of the equity securities or assets (on a book or market value basis) of the Company, in each case other than a proposal or offer by Parent. "Confidentiality Agreement" means that certain letter agreement between the parties hereto and dated October 3, 2002 regarding their mutual non-disclosure obligations. "Superior Proposal" means any unsolicited, bona fide written proposal made by a third party to acquire more than 50% of the equity securities or assets of the Company, pursuant to a tender or exchange offer, a merger, a consolidation or a sale of its assets or otherwise, (i) on terms which the Company Board determines in its good faith judgment to be materially more favorable to the stockholders of the Company than the Transaction as then currently proposed by Parent in a Definitive Agreement or otherwise, taking into account all the terms and conditions of such third party proposal and the Transaction as then currently proposed by Parent in a Definitive Agreement or otherwise (including any proposal by Parent to amend the terms of the Transaction or the Definitive Agreement in response to the third party proposal) and (ii) that in the good faith judgment of the Company Board is reasonably capable of being completed on the terms proposed, taking into account all financial, regulatory, legal and other aspects of such proposal; provided, however, that no Acquisition Proposal shall be deemed to be a Superior Proposal if any financing required to consummate the Acquisition Proposal is not committed, unless the Company Board determines in its good faith judgment (after consultation with a nationally recognized financial adviser) that such financing is more likely than not to be obtained upon reasonable terms and on a timely basis. (f) Anti-Takeover Statutes. The Company hereby represents to Parent that the entry by the parties into this Agreement, the Loan Agreement and the other documents and instruments contemplated thereby will not result in the applicability of any State of Colorado super-majority vote requirement, interested stockholder statute, anti-takeover statute or similar law or regulation to the parties or the Transaction. 1.2 Termination. This Article I shall terminate upon the earlier of the date that Parent advises the Company in writing that (i) Parent is terminating all negotiations with the Company regarding a Transaction, (ii) Parent is no longer interested in pursuing the Transaction with the Company, or (iii) Parent defaults on its obligations to make loans pursuant to the Loan Agreement. ARTICLE II RIGHT OF FIRST REFUSAL 2.1 Grant of Right of First Refusal. The Company hereby grants to Parent a right of first refusal ("Right of First Refusal") as follows: the Company shall not execute or enter into any definitive agreement providing for, or redeem, amend or otherwise make its Rights Plan inapplicable -4- to, an Acquisition Proposal unless a Third Party Sale Notice (as defined below) shall have first been provided to Parent and all applicable terms of this Article II shall have first been complied with by the Company. As used herein, "Rights Plan" shall mean that certain Rights Agreement dated as of March 15, 1996 between the Company and American Securities Transfer, Inc., as amended from time to time. 2.2 Notice of Offer. The "Third Party Sale Notice" required to be delivered to Parent under Section 2.1 hereof shall include the following elements: (a) a bona fide, written offer to the Company from a third party that sets forth in reasonable detail the material terms of the contemplated Acquisition Proposal, including, without limitation, the structure of the proposed transaction, the form and amount of consideration to be received by the Company and/or its shareholders, the material conditions to closing and pre and post closing covenants, any indemnity, escrow and termination fee terms, the material terms of any related agreements to be entered into in connection therewith and the name and address of the offeror (collectively, a "Third Party Offer"), (b) if such approval would be required to consummate the transaction contemplated by the Acquisition Proposal under the terms of the Company's charter documents or applicable law, written confirmation by an authorized representative of the Company that the Third Party Offer has been approved by resolution of the Company Board, (c) written confirmation by an authorized representative of the Company that Parent has the right to exercise its Right of First Refusal with regard to the Third Party Offer, and (d) copies of any correspondence and other materials available to the Company relating to such Third Party Offer (to the extent not previously provided). 2.3 Exercise of Right of First Refusal. Upon delivery of a Third Party Sale Notice and within ten (10) business days of delivery thereof, Parent may elect to exercise its Right of First Refusal by providing the Company with an offer on terms and conditions which are in all material respects not less favorable from a financial point of view to the stockholders of the Company than those proposed by the Third Party Offer (the "Parent Offer"). The determination of whether the terms and conditions of a Parent Offer are in all material respects not less favorable from a financial point of view to the stockholders of the Company than those proposed by the Third Party Offer shall be made in good faith by the Company Board. Parent shall exercise its Right of First Refusal, if at all, by delivery of written notice to the Company on or before that date which is ten (10) business days following delivery of a Third Party Sale Notice (the "Expiration Date"). Failure to deliver such written notice by the Expiration Date shall be deemed conclusive evidence of Parent's intent not to exercise such Right of First Refusal with respect to the Acquisition Proposal specified in the Third Party Sale Notice. In the event that Parent exercises its Right of First Refusal in accordance with this Article II, the Company shall use its commercially reasonable efforts in good faith to negotiate and execute a Definitive Agreement that reflects the Parent Offer, and the Company and its Representatives shall, consistent with the fiduciary duties of the Company Board, immediately terminate all current discussions with the third party regarding the Third Party Offer. 2.4 Non-Exercise of a Right of First Refusal. In the event Parent does not affirmatively exercise its Right of First Refusal by the Expiration Date, the Company shall have the right, but not the obligation, to effect the transaction contemplated by the Acquisition Proposal proposed in the Third Party Offer on terms and conditions that are the same in all material respects to the terms and conditions described in the Third Party Sale Notice and the Third Party Offer. In the event such Acquisition Proposal is not (a) set forth in a definitive and binding written agreement executed by all -5- necessary parties thereto within thirty (30) days following the Expiration Date, and (b) consummated within one hundred fifty (180) days following the Expiration Date, then the provisions of this Article II shall once again apply to such transaction and the Company shall be required to deliver a new Third Party Sale Notice with respect thereto and to otherwise comply with the terms hereof with respect thereto. If any new or modified Acquisition Proposal arises during the pendency of such a Third Party Offer, such Acquisition Proposal shall be subject to Article I (to the extent stated therein), Parent's Right of First Refusal and this Article II as well. 2.5 Termination. Parent's Right of First Refusal shall expire at the earlier of: (i) the date that Parent advises the Company in writing that Parent is terminating all negotiations with the Company regarding a Transaction, (ii) the date that Parent advises the Company in writing that Parent is no longer interested in pursuing the Transaction with the Company, (iii) such time as the Loan Agreement has terminated and no loans remain outstanding thereunder, or (iv) such time as Parent defaults on its obligations to make loans pursuant to the Loan Agreement. ARTICLE III MISCELLANEOUS 3.1 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or mailed by registered or certified mail (return receipt requested) or sent via facsimile (with acknowledgment of complete transmission) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent, to: Sirenza Microdevices, Inc. 522 Almanor Avenue Sunnyvale, CA 94085 Attention: Chief Financial Officer Telephone No.: (408) 616-5441 Facsimile No.: (408) 739-0952 with a copy to: Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, California 94304 Attention: Steven V. Bernard Telephone No.: (650) 493-9300 Facsimile No.: (650) 493-6811 (b) if to the Company, to: -6- Vari-L Company, Inc. 4895 Peoria Street Denver, CO 80239 Attention: Chief Financial Officer Telephone No.: (303) 371-1560 Facsimile No.: (303) 373-3870 with a copy to: Cooley Godward LLP 380 Interlocken Crescent, Suite 900 Broomfield, CO 80021 Attention: James Linfield Telephone No.: (720) 566-4000 Facsimile No.: (650) 566-4099 3.2 Interpretation. The word "agreement" when used herein shall be deemed in each case to mean any contract, commitment or other agreement, whether oral or written, that is legally binding. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 3.3 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart. 3.4 Entire Agreement; Assignment. This Agreement and the documents and instruments and other agreements among the parties hereto referenced herein: (a) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; (b) are not intended to confer upon any other person any rights or remedies hereunder; and (c) shall not be assigned by operation of law or otherwise except as otherwise specifically provided, except that Parent may assign its rights and delegate its obligations hereunder to its affiliates. 3.5 Severability. In the event that any provision of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the greatest extent possible, the economic, business and other purposes of such void or unenforceable provision. 3.6 Other Remedies. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other -7- remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. 3.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Each of the parties hereto agrees that process may be served upon them in any manner authorized by the laws of the State of Delaware for such persons and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction and such process. 3.8 Rules of Construction. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 3.9 Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. 3.10 Termination. This Agreement may be terminated at any time by mutual written consent of the Company and Parent, and otherwise shall terminate at such time as all agreements contained in Articles I and II hereof have terminated by their terms. 3.11 Amendment and Waiver. This Agreement may be amended (and compliance with any provision hereof may be waived) by the parties hereto at any time by execution of an instrument in writing signed on behalf of each of the parties hereto. 3.12 No Obligation. The Company and Parent acknowledge and agree that except as otherwise expressly provided herein, neither this Agreement nor any action taken in connection with this Agreement will give rise to any obligation on the part of either party (a) to continue discussions or negotiations with the other with respect to the Transaction, or (b) to pursue or enter into the Transaction or any other relationship of any nature with the other party. [Remainder of page intentionally left blank] -8- IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be signed by their duly authorized respective officers, all as of the date first written above. SIRENZA MICRODEVICES, INC. By: /s/ GERALD L. QUINNELL ---------------------- Name: Gerald L. Quinnell Title: EVP Business Development VARI-L COMPANY, INC. By: /s/CHARLES R. BLAND ------------------- Name: Charles R. Bland Title: C.E.O. -9- EX-5 7 dex5.txt RESALE REGISTRATION RIGHTS AGREEMENT EXHIBIT 5 to SCHEDULE 13D VARI-L COMPANY, INC. RESALE REGISTRATION RIGHTS AGREEMENT OCTOBER 7, 2002 VARI-L COMPANY, INC. RESALE REGISTRATION RIGHTS AGREEMENT This Resale Registration Rights Agreement (the "Agreement") is made and entered into as of October 7, 2002 by and between Vari-L Company, Inc., a Colorado corporation (the "Company") and Sirenza Microdevices, Inc., a Delaware corporation (the "Investor"). RECITALS WHEREAS, the Company desires for the Investor to provide a loan facility of up to $5,300,000 to the Company on the terms and conditions stated in the Loan Agreement between the Company and the Investor dated the date hereof (the "Loan Agreement"); WHEREAS, pursuant to the Loan Agreement, the Company intends to issue to the Investor a $1,300,000 principal amount convertible promissory note (the "Tranche A Note"), the face amount of which shall be convertible into fully paid, nonassessable shares of Common Stock (as defined below) of the Company (the "Note Shares") upon the terms and subject to the conditions set forth in the Loan Agreement and the Tranche A Note; and WHEREAS, as an inducement for the Investor to enter into the Loan Agreement, the Company desires to enter into this Agreement with the Investor. 1. RIGHTS OF INVESTORS The Company hereby grants to the Investor the registration rights and other rights contained herein (collectively the "Investor Rights"). The Investor accepts the Investor Rights, and agrees to be bound by the obligations contained herein. 2. REGISTRATION RIGHTS. 2.1 Definitions. (a) Common Stock. The term "Common Stock" means shares of common stock of the Company, par value $0.01. (b) Exchange Act. The term "Exchange Act" means the Securities Exchange Act of 1934, as amended. (c) Form S-1. The term "Form S-1" means such form under the Securities Act as is in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC. (d) Form S-3. The term "Form S-3" means such form under the Securities Act as is in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. (e) Holder. The term "Holder" means any person owning of record Registrable Securities that have not been sold to the public in a registered offering or pursuant to Rule 144 promulgated under the Securities Act or any assignee of record of such Registrable Securities to whom rights under this Section 2 have been duly assigned in accordance with this Agreement. (f) Registrable Securities. The term "Registrable Securities" means: (i) all Note Shares issued or issuable pursuant to the Tranche A Note, and (ii) any shares of the Common Stock of the Company or other securities issued in connection with any stock split, stock dividend, recapitalization or similar event relating to the foregoing; excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which rights under this Section 2 are not assigned in accordance with this Agreement or any Registrable Securities sold to the public in a registered offering or sold pursuant to Rule 144 promulgated under the Securities Act. (g) Registration. The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement. (h) Registration Expenses. "Registration Expenses" shall mean all expenses incurred by the Company in complying with Section 2.2 hereof, including, without limitation, all registration and filing fees, listing fees, printing expenses, fees and disbursements of counsel and accountants for the Company, fees and expenses of one counsel for all the Holders (not to exceed $25,000), blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company). (i) SEC. The term "SEC" or "Commission" means the U.S. Securities and Exchange Commission. (j) Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended. (k) Selling Expenses. "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities. 2.2 Resale Registration. (a) Required Registration. The Company shall: -2- (i) as soon as practicable, but no later than 30 days after the date of original issuance of the Note Shares pursuant to the conversion of the Tranche A Note (the "Shelf Filing Deadline"), cause to be filed with the Commission a registration statement on Form S-1 (or, to the extent available to the Company, Form S-3) pursuant to Rule 415 promulgated under the Securities Act (the "Shelf Registration Statement"), which Shelf Registration Statement shall provide for the offer and sale of all Registrable Securities held by Holders that have provided to the Company the information required pursuant to the terms of Section 2.6 hereof; (ii) use its reasonable efforts to cause the Shelf Registration Statement to be declared effective by the Commission as promptly as practicable, but not later than 120 days after the date of original issuance of the Note Shares pursuant to the conversion of the Tranche A Note (the "Effectiveness Target Date"); and (iii) upon and after the declaration of the effectiveness of the Shelf Registration Statement by the Commission, use its reasonable efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 2.5 hereof (subject to the right of the Company to suspend the use of the Shelf Registration Statement by delivery of a Suspension Notice in accordance with Section 2.5 hereof) to the extent necessary to ensure that (A) it is available for resales of Registrable Securities by the Holders, and (B) conforms with the requirements of this Agreement and the Securities Act and the rules and regulations of the Commission promulgated thereunder as announced from time to time, for a period (the "Effectiveness Period") ending on the earliest of: (1) the date when the Holders of Registrable Securities are able to sell all such Registrable Securities immediately without restriction pursuant to the volume limitation provisions of Rule 144 under the Securities Act; and (2) the date when all of the Registrable Securities of the Holders have been registered under the Shelf Registration Statement and have been disposed of in accordance with the Shelf Registration Statement. 2.3 Liquidated Damages. (a) Triggers and Amounts. If: (i) the Shelf Registration Statement is not filed with the Commission prior to or on the Shelf Filing Deadline; (ii) the Shelf Registration Statement has not been declared effective by the Commission prior to or on the Effectiveness Target Date; (iii) except as provided in Section 2.5 hereof, the Shelf Registration Statement is filed and declared effective but, during the Effectiveness Period, shall thereafter cease to be effective or usable or the prospectus contained therein ceases to be usable, in either case, in connection with resales of Registrable Securities without being succeeded within five business days -3- by a post-effective amendment to the Shelf Registration Statement, a supplement to the prospectus or a report filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act that cures such failure and, in the case of a post-effective amendment, is itself immediately declared effective; or (iv) either (1) the use of the prospectus included in the Shelf Registration Statement is suspended by the Company pursuant to Section 2.5(h) hereof for more than 30 days in any particular case or (2) the use of the prospectus included in the Shelf Registration Statement is suspended by the Company pursuant to Section 2.5(h) hereof for more than 60 days in the aggregate in any consecutive twelve-month period, (each such event referred to in the foregoing clauses (i) through (iv), a "Registration Default"), the Company hereby agrees to pay liquidated damages ("Liquidated Damages") to the Holders of Registrable Securities as follows: (A) from and including the day following the Registration Default to, but excluding, the earlier of (1) the day on which the Registration Default has been cured, (2) the thirtieth day following the date of the Registration Default, and (3) the date the Shelf Registration Statement is no longer required to be kept effective hereunder, the Company shall reserve and accrue daily for later payment to the account of each Holder an amount of cash in respect of each Registrable Security held by such Holder equal to (x) $3,000 divided by (y) the total number of Registrable Securities outstanding as of the date of the Registration Default; and (B) upon and after the thirtieth day following the date of the Registration Default, each Holder of Registrable Securities shall have the right to sell the Registrable Securities held by him, her or it to the Company for a cash price per share equal to the greater of: (1) (x) $1,300,000 divided by (y) the total number of Note Shares originally issued upon conversion of the Tranche A Note (as adjusted for any stock split, stock dividend, recapitalization or similar event applicable to such shares through that date); and (2) the average of the daily closing price per share of the Common Stock of the Company as quoted on the OTC Bulletin Board or any nationally-recognized securities exchange or interdealer quotation system for the thirty trading days prior to and including the thirtieth day following the Registration Default. (b) Payment. All Liquidated Damages accrued pursuant to subsection (A) above by reason of a Registration Default shall be paid in arrears to the Holders by the Company on the earlier of (1) the day on which such Registration Default has been cured, (2) the thirtieth day following the date of such Registration Default, and (3) the date the Shelf Registration Statement is no longer required to be kept effective hereunder. Upon the cure of any Registration Default, the accrual of Liquidated Damages pursuant to subsection (A) above in respect of such Registration Default will cease. Any Holder of Registrable Securities may exercise its right to sell its Registrable Securities to the Company on the terms stated in subsection (B) above by delivering the certificate(s) -4- representing such Registrable Securities (or an executed affidavit of loss in form reasonably acceptable to the Company, without any requirement of a bond or other security) to the principal executive offices of the Company, along with a written demand for payment hereunder. With each payment of Liquidated Damages remitted to a Holder by the Company pursuant hereto, the Company shall provide a written calculation (performed in accordance with the terms of this Section) of the Liquidated Damages so paid. (c) Acknowledgement of Reasonableness. The parties hereto agree that the Holders of Registrable Securities will suffer damages, and that it will not be feasible to ascertain the extent of such damages with precision, if a Registration Default occurs. The parties hereto further agree that the Liquidated Damages provided for in this Section constitute a reasonable estimate of the damages that may be incurred by Holders of Registrable Securities by reason of a Registration Default. Therefore, the parties hereto agree that the sole damages payable for a violation of the terms of this Agreement with respect to which Liquidated Damages is expressly provided for (including any non-compliance with a covenant that results, directly or indirectly, in a Registration Default) shall be such Liquidated Damages. 2.4 Expenses of Registration. All Registration Expenses incurred in connection with any registration or attempted registration pursuant hereto shall be borne by the Company, and all Selling Expenses shall be borne by the Holders of the Registrable Securities so registered pro rata on the basis of the number of their shares so registered by each such Holder. 2.5 Obligations of the Company. Whenever required to effect the registration of any Registrable Securities under this Agreement, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its reasonable efforts to cause such registration statement to become effective, and keep such registration statement effective until the distribution is completed. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and all amendments and supplements thereto, and such other documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them that are included in such registration. (d) Use its reasonable efforts to register, list on the same exchange as all other listed company shares and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the -5- Holders, provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and, following such notification, promptly deliver to each Holder copies of all amendments or supplements referred to in paragraphs (b) and (c) of this Section. (g) Furnish, at the request of any Holder registering Registrable Securities, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering addressed to the underwriters, if any, and if there are no underwriters, to the Holders requesting registration of Registrable Securities and (ii) a "comfort" letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters. (h) Notwithstanding the foregoing, in the event (i) of the happening of any Suspension Event (as defined below) or (ii) that, in the good faith judgment of the board of the directors of the Company, it is advisable to suspend the use of the prospectus for a discrete period of time due to pending material Company developments that have not yet been publicly disclosed and as to which the board of directors of the Company determines in good faith that public disclosure would be materially prejudicial to the Company, the Company shall deliver a certificate in writing, signed by an authorized executive officer of the Company, to the Holders (a "Suspension Notice"), to the effect of the foregoing and thereafter the use of the prospectus shall be suspended, and the Company, subject to the terms of this Section 2.5(h), shall thereafter not be required to maintain the effectiveness or update the Shelf Registration Statement. The Company will use its commercially reasonable efforts to ensure that the use of the prospectus may be resumed as soon as practicable, in the case of suspension under Section 2.5(h)(i) hereof, and, in the case of a pending material Company development referred to in Section 2.5(h)(ii) hereof, as soon as, in the good faith judgment of the board of directors of the Company, public disclosure of such pending material Company development would not have a material adverse effect on the Company. Notwithstanding the -6- foregoing, the Company shall not under any circumstances be entitled to exercise its right under this Section 2.5(h) to suspend the use of the prospectus (whether as a result of events referred to in Section 2.5(h)(i) hereof or as a result of the pending development or event referred to in Section 2.5(h)(ii) hereof) for more than 30 days in any particular instance and 60 days in the aggregate in any consecutive twelve-month period. The Company shall not be required to specify in the Suspension Notice to the Holders the nature of the event giving rise to the suspension of the use of the prospectus, though it shall be required to restate the standard set forth in this subsection and certify that such standard has been met. A "Suspension Event" shall mean any of the following: (i) any request by the SEC or any other federal or state governmental authority for amendments or supplements to Shelf Registration Statement or related prospectus, (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the Shelf Registration Statement, (iii) the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, and (iv) the existence of any fact or happening of any event which makes any statement of a material fact in the Shelf Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue or which would require the making of any changes in the Shelf Registration Statement or prospectus in order that, in the case of the Shelf Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2.6 Furnish Information. It shall be a condition precedent to the obligation of the Company to register the Registrable Securities held by each Holder that such Holder shall furnish to the Company such information as the Company may reasonably request in writing regarding such Holder, the Registrable Securities held by them, and the intended method of disposition of such securities as shall be required under the Securities Act to be disclosed in the Shelf Registration Statement to timely effect the registration of Registrable Securities, which writing shall be delivered to each Holder at its address as listed in the Company's stock records, or at such other address as the Holder may provide. 2.7 Indemnification. In the event any Registrable Securities are included in a registration statement hereunder: (a) By the Company. To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, members, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): -7- (i) any untrue statement or alleged untrue statement of a material fact contained or incorporated by reference in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any federal or state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any federal or state securities law in connection with the offering covered by such registration statement; and the Company will reimburse each such Holder, partner, member, officer or director, underwriter or controlling person for any legal or other expenses reasonably incurred by them, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to any such Holder, partner, member, officer or director, underwriter or controlling person for any such loss, claim, damage, liability or action to the extent (and only to the extent) that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished in writing and expressly stated for use in connection with such registration by such person or entity. (b) By Selling Holders. To the extent permitted by law, each selling Holder will, severally and not jointly, if Registrable Securities held by such Holder are included in the securities as to which such registration is being effected, indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter (as defined in the Securities Act) and any other Holder selling securities under such registration statement or any of such other Holder's partners, members, directors or officers or any person who controls such underwriter or other Holder within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such Holder, member, partner or director, officer or controlling person of such underwriter or other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder by an instrument duly executed by such Holder and stated to be specifically for use in such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, partner, member, officer, director or controlling person of such other Holder or underwriter in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement -8- contained in this subsection shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further, that the total amounts payable in indemnity by a Holder under this Section in respect of any Violation shall not exceed the net proceeds received by such Holder in the registered offering out of which such Violation arises. (c) Notice. Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential conflict of interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable period of time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of liability to the indemnified party under this Section only to the extent that the indemnifying party's ability to defend such action is so materially prejudiced, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section. (d) Survival. The obligations of the Company and Holders under this Section shall survive the completion of any offering of Registrable Securities in a registration statement, and otherwise. 2.8 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Registrable Securities to the public without registration, the Company agrees to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times (it being understood that the Company's failure to include in any filing with the Commission the report of an independent accountant expressing an unqualified opinion of the Company's statements of operations, cash flows and shareholders' equity for periods ending on or before June 30, 2000, or on its balance sheet as of any date prior to June 30, 2000, shall not be considered a violation hereof); (b) Use its reasonable efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and -9- (c) So long as a Holder owns any Registrable Securities, to furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144, and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration. 2.9 Assignment of Registration Rights. The rights of a Holder under this Agreement may be assigned by any Holder in connection with any transfer or assignment by a Holder of Registrable Securities provided that: (i) such transfer may otherwise be effected in accordance with applicable securities laws, and (ii) such other party agrees in writing with the Company to be bound by all of the provisions of this Agreement. 3. LEGENDS. The Investor understands that the share certificates evidencing any Registrable Securities shall be endorsed with the following legends (in addition to any legends required under applicable state securities laws): (a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED." 4. MISCELLANEOUS 4.1 Successors and Assigns. Except as otherwise expressly provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted transferees and permitted assigns of the parties. The Company may not assign its obligations hereunder by operation of law or otherwise without the prior written consent of Investor. 4.2 Governing Law. This Agreement shall be governed in all respects by the laws of the State of Delaware as applied to contracts made and to be performed entirely within that state between residents of that state. 4.3 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one instrument. Facsimile copies of signature pages hereto shall be deemed binding originals hereunder. 4.4 Titles and Subtitles. The titles of the paragraphs and subparagraphs of this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. -10- 4.5 Stock Splits, etc. All share numbers used in this Agreement are subject to adjustment in the case of any stock split, reverse stock split, combination or similar events. 4.6 Notices. Any notice required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be deemed given and effective on the earlier of (i) the date of delivery by facsimile, (ii) the business day after deposit with a nationally-recognized courier or overnight service, including Express Mail, for United States deliveries, or (iii) five (5) business days after deposit in the United States mail by registered or certified mail for United States deliveries. All notices not delivered personally or by facsimile will be sent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth below such party's signature on this Agreement or at such other address as such party may designate by ten (10) days advance written notice to the other parties hereto. All notices for delivery outside the United States will be sent by facsimile, or by nationally recognized courier or overnight service. Any notice given hereunder to more than one person will be deemed to have been given, for purposes of counting time periods hereunder, on the date given to the last party required to be given such notice. Notices to the Company will be marked to the attention of the Chief Financial Officer. 4.7 Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 4.8 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of all parties hereto; provided, however that with respect to any Holder, the consent of the Investor shall be sufficient to bind such Holder. 4.9 Severability. If any provision of this Agreement is held to be unenforceable under applicable law, then such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision was so excluded and shall be enforceable in accordance with its terms. 4.10 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with respect to the subject matter hereof and supersedes all prior negotiations, correspondence, agreements, understandings, duties or obligations among the parties with respect to the subject matter hereof. 4.11 Further Assurances. From and after the date of this Agreement, upon the request of a party, the other parties shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. -11- 4.12 Termination. This Agreement shall terminate upon the earlier of (i) the date that all parties hereto agree in writing to so terminate the Agreement, and (ii) the date that all outstanding Registrable Securities have either been repurchased by the Company for cash pursuant to Section 2.3 hereof or sold by the Holders pursuant to a Shelf Registration Statement or pursuant to Rule 144 promulgated under the Securities Act. [Remainder of Page Intentionally Left Blank] -12- IN WITNESS WHEREOF, the parties hereto have executed this Resale Registration Rights Agreement as of the date first above written. VARI-L COMPANY, INC. /s/ CHARLES R. BLAND --------------------------------------- By: Charles R. Bland Title: C.E.O. Address: 4895 Peoria Street Denver, CO 80239 Attention: Chief Financial Officer Telephone No.: (303) 371-1560 Facsimile No.: (303) 373-3870 INVESTOR SIRENZA MICRODEVICES, INC. /s/ GERALD L. QUINNELL --------------------------------------- By: Gerald L. Quinnell Title: EVP Business Development Address: 522 Almanor Avenue Sunnyvale, CA 94085 Attention: Chief Financial Officer Telephone No.: (408) 616-5441 Facsimile No.: (408) 739-0952 -----END PRIVACY-ENHANCED MESSAGE-----