EXHIBIT 2
to SCHEDULE 13D
LOAN AGREEMENT
BETWEEN
SIRENZA MICRODEVICES, INC.
AND
VARI-L COMPANY, INC.
October 7, 2002
TABLE OF CONTENTS
Page
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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
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TABLE OF CONTENTS
(continued)
Page
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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
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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 Xxxxx 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.
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(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.
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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.
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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
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(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
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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 Xxxxx 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 Xxxxx 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;
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(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, Xxxxxx Xxxxxxxxxxx and Xxxxxxxxxxx Xxxxxxxxxxx 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
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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
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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
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"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.
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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
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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.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
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Borrower: VARI-L COMPANY, INC.
0000 Xxxxxx Xx.
Xxxxxx, XX 00000
Attn: Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to: Xxxxxx Godward LLP
000 Xxxxxxxxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
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.
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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.
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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/ XXXXXX X. XXXXXXXX By: /s/ XXXXXXX X. XXXXX
-------------------------------- -------------------------------
Name: Xxxxxx X. Xxxxxxxx Name: Xxxxxxx X. Xxxxx
------------------------------ -----------------------------
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.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
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/ XXXXXXX X. XXXXX
-------------------------------------
Name: Xxxxxxx X. Xxxxx
-----------------------------------
Title: C.E.O.
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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/ XXXXXXX X. XXXXX
------------------------------
Name: Xxxxxxx X. Xxxxx
-----------------------------
Title: C.E.O.
----------------------------
B-3
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Date Amount of Tranche B Amount of Tranche B Balance of Notation Made By
---- ------------------- ------------------- ---------- ----------------
Loan Loan Prepaid Principal Unpaid
---- ------------ ----------------
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B-4
EXHIBIT C
FORM OF SECURITY AGREEMENT
C-1
EXHIBIT D
FORM OF OPINION OF COUNSEL
D-1
