SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement") dated as of March 4,
1997, by and among VARI-L COMPANY, INC., a Colorado corporation (the
"Company"), and the entities and individuals listed on Schedule 1 hereto
(the "Purchasers").
WHEREAS, the Company is in need of working capital; and
WHEREAS, pursuant to this Agreement, the Purchasers wish to provide
such capital by purchasing convertible subordinated debentures (the
"Debentures") and three-year, non-redeemable warrants (the "Warrants") to
purchase the Company's $.01 par value common stock (the "Common Stock") to
be issued by the Company in Units, each consisting of a $100,000 Debenture
and 10,000 Warrants (the "Units"); and
WHEREAS, the Company will sell a total of up to 75 Units, consisting
of an aggregate of $7,500,000 in Debentures and 750,000 Warrants; and
WHEREAS, because all of the Purchasers are "accredited investors" as
defined by Rule 501(a) of Regulation D under the Securities Act of 1933,
as amended (the "Act"), the transaction will be exempt from registration
under the Act.
NOW, THEREFORE, in consideration of the aforesaid and the mutual
promises hereinafter made, the parties hereto agree as follows:
1. PURCHASE OF SECURITIES
1.01 SALE OF UNITS.
a. Subject to the terms and conditions hereof, on the First
Closing Date (as hereinafter defined) the Company agrees to issue and
sell, and each Purchaser set forth on Schedule 1 to this Agreement agrees
to purchase, the number of Units set forth opposite such Purchaser's name
on Schedule 1. A total of 50 Units will be purchased on the First Closing
Date, consisting of an aggregate of $5,000,000 in Debentures and 500,000
Warrants. For a period of one hundred twenty (120) days after the First
Closing Date or sixty (60) days after the date of the shareholder approval
referred to in Sections 1.02b. and c. is obtained, whichever is later (the
"Exclusive Option Period"), each Purchaser has an exclusive option to
purchase (an "Option") that number of additional Units equal to 50% of the
number of Units purchased by that Purchaser on the First Closing Date.
For a period of thirty (30) days after the end of the Exclusive Option
Period (the "Nonexclusive Option Period"), the Options shall remain in
force but shall be subject to the Company's prior sale of any or all of
the additional Units. Prior to such shareholder approval, the Company
may, in its discretion, decline to permit the exercise of any Options. If
sales of Units by the Company occur in the Nonexclusive Option Period,
each Purchaser's Option shall be for that Purchaser's pro rata share of
the number of additional Units that remain, provided, however, that
nothing herein shall be construed to limit or prohibit the transfer of
Options by or among Purchasers during the Exclusive Option Period or the
Nonexclusive Option Period subject only to compliance with applicable
securities laws.
b. The Company and the Purchasers agree that, unless the
Company obtains assurances from Nasdaq Stock Market, Inc. satisfactory to
counsel for the Company and the Purchasers, respectively, that this
Agreement comports with Nasdaq Rule 4460(i)(1)(D) (the "Rule")
notwithstanding the failure to obtain prior shareholder approval, the
Company shall submit the sale of the Units pursuant to the terms described
herein (the "Transaction") to its shareholders for approval (or the
portions of the Transaction requiring such approval) at the Company's next
annual shareholders' meeting and will use its best efforts to obtain
shareholder approval at such meeting. Within ten (10) days after the date
hereof, the Company will provide written assurances to Purchasers that the
shares of the Common Stock beneficially owned by Xxxxx X. Xxxxxxx, Xxxxxx
X. Xxxxx, and Xxxxx Xxxxxx, who own of record, or control, not less than
634,251 shares, will be voted in favor of such shareholder approval.
c. Until shareholder approval of the Transaction (or the
portion thereof requiring approval) has been obtained, the Debentures
issued hereunder will be convertible into a maximum aggregate of 765,367
shares of Common Stock on a first-converted basis. If shareholder
approval of the Transaction (or the portion thereof requiring approval)
has not been obtained by one year after the date hereof, or (at
Purchaser's option) if the Registration Statement referred to in Section 6
below is not declared effective by the Securities and Exchange Commission
by the first anniversary date of the date hereof, any Debentures, or
portions thereof, which have not then been converted, shall be redeemed by
the Company three (3) business days after such one-year anniversary for
cash equal to 115% of the principal amount plus accrued interest (the
"Non-approval Redemption Amount").
d. The Warrants issued hereunder shall not be exercisable
until (i) there has been obtained evidence or assurances satisfactory to
counsel for the Company and the Purchasers, respectively, that, if such
Warrants are immediately exercisable in accordance with their terms, this
Agreement comports with the Rule notwithstanding the failure to obtain
prior shareholder approval, or (ii) shareholder approval of the
Transaction is obtained.
1.02 CLOSING DATE; DELIVERY. The closing of the issuance and sale of
the initial 50 Units hereunder will be held at the offices of Xxxxxxx
Xxxxxx, L.L.C. on March 4, 1997 or at such other time and place as to
which the Company and the Purchasers may agree (the "First Closing Date").
On the First Closing Date, the Purchasers will deliver by wire transfer in
immediately available funds the purchase price and the Company will issue
and deliver the Debentures and Warrants to the Purchasers as set forth in
Schedule 1. The closing of the issuance and sale of Units upon the
exercise of each Option will be held at the offices of Xxxxxxx Xxxxxx,
L.L.C. no later than three (3) business days after such exercise.
1.03 PAYMENT OF COMMISSION. The Company has agreed, pursuant to a
letter agreement dated November 27, 1996, as amended on March 4, 1997, to
pay to Neidiger, Tucker, Bruner, Inc. ("NTB") a commission for the sale of
all Units sold hereunder in the amount of five percent (5%) of the
principal amount of the Debentures sold hereunder. The Company has also
agreed to pay a three percent (3%) finder's fee to Xxxxxxx Trading Company
on the initial $5,000,000 of Debentures to be purchased on the First
Closing Date and on additional Units purchased pursuant to the exercise of
Options. No finder's fee shall be paid for the sale of additional Units
by the Company or NTB which are not made pursuant to the exercise of
Options or for the exercise of Warrants. Neither the Company nor the
Purchasers have agreed to pay, or to cause the other to pay, any
commissions, finders fee or compensation on account of the Transaction
other than as recited herein.
1.04 DESCRIPTION OF DEBENTURES. Subject to the provisions of Section
1.01, all or any portion of the principal and accrued interest of each
Debenture is convertible into Common Stock at the election of the holder
thereof into the number of shares of Common Stock equal to the lower of
(i) the unpaid principal amount of the Debenture plus accrued interest
divided by $9.50 per share, or (ii) 84% of the average closing bid price
of the Company's Common Stock on the Nasdaq National Market (or such other
stock exchange, quotation service or over the counter market on which the
Company's Common Stock may be traded) for the ten (10) trading days prior
to the date that a written request to convert is received by the Company
at its principal offices or by its transfer agent (the "Conversion Date").
Each Debenture shall bear interest at the rate of 7% per annum until the
first to occur of four years from the date of the Debenture (the "Maturity
Date") or until the Conversion Date, provided, however, that if the Common
Stock into which the Debentures are convertible is not registered with the
Commission pursuant to Section 6.01 hereof within 120 days of the First
Closing Date, the Debenture will bear interest at the rate of 15% from the
120th day until the first to occur of the Maturity Date or the Conversion
Date. If the price per share at which any Debenture is to be converted on
the applicable Conversion Date is less than $8 per share, the Company has
the right to decline to permit such conversion and instead redeem the
Debenture by payment of 116% of the principal amount of such Debenture,
together with accrued interest (the "116% Redemption Amount"). Repayment
of the principal of and interest on the Debentures is expressly
subordinated to the Company's secured debt in favor of banks, savings and
loan associations, institutions or other asset-based lenders, in an amount
up to $25,000,000, irrespective of whether such debt is currently owed or
is incurred in the future. Holders of Debentures have registration rights
with respect to the Common Stock issuable upon conversion of the
Debentures as set forth in Section 6.01. The form of Debenture is
attached hereto as Exhibit A. Notwithstanding the failure of any
Debenture to recite any of the terms of this Agreement applicable to such
Debenture, all of such terms shall be binding upon and inure to the
benefit of all Holders of Debentures.
1.05 DESCRIPTION OF WARRANTS. Subject to the provisions of Section
1.01d. requiring shareholder or Nasdaq approval prior to exercise thereof,
Warrants may be exercised by the registered holders thereof for a period
of three years from the date hereof at an exercise price of $9.50 per
share. Warrants may not be redeemed by the Company. Holders of Warrants
have registration rights with respect to the Common Stock issuable upon
exercise of the Warrant as set forth in Section 6.01. The form of warrant
is attached hereto as Exhibit B. Notwithstanding the failure of any
Warrant to recite any of the terms of this Agreement applicable to such
Warrants, all of such terms shall be binding upon and inure to the benefit
of all Holders of Warrants.
1.06 ANTIDILUTION PROVISIONS. The Debentures and the Warrants are
subject to customary antidilution provisions as set forth in such
instruments.
2. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser
hereby represents and warrants as to himself, herself or itself as
follows:
2.01 Purchaser is acquiring the Debentures and Warrants for
investment only and not with a view to or for resale or distribution of
any part thereof, and with no present intention of selling, granting
participation in, or otherwise distributing the same except pursuant to
the registration rights granted by Section 6 hereof.
2.02 Purchaser is an "accredited investor" as defined in Rule 501(a)
of Regulation D of the Securities Act of 1933, as amended (the "Act") and
has executed an Accredited Investor Statement in the form attached hereto
as Exhibit C. Purchaser has such knowledge and experience in business and
financial matters as to be capable of evaluating the risks and merits of
an investment in the Debentures and Warrants and has sufficient financial
resources to bear the economic risks thereof (including possible complete
loss of such investment) for an indefinite period of time. Purchaser has
full and free access to the Company's books, financial statements,
records, contracts, documents and other information concerning the Company
and has been afforded an opportunity to ask questions of the Company's
officers, employees, agents, accountants and representatives concerning
the Company's business, operations, financial condition, assets,
liabilities and other relevant matters, and has been given all such
information as has been requested, in order to evaluate the merits and
risks of the investment in the Debentures and Warrants. Upon request,
Purchaser will provide the Company with access to Purchaser's tax,
financial and other records as are reasonably necessary under the
circumstances to confirm that Purchaser is an accredited investor within
the meaning of Rule 501(a) of Regulation D of the Act.
2.03 a. The Debentures and Warrants are "restricted securities"
within the meaning of Rule 144 under the Act;
b. The Debentures and Warrants are not being registered with
the Securities and Exchange Commission at this time and therefore must be
held until they are subsequently registered under the Act and any
applicable state or foreign securities laws (pursuant to Section 6 hereof
or otherwise) unless an exemption from registration is available;
provided, however, that Purchasers have the registration rights set forth
in Section 6 for the shares of Common Stock issuable upon conversion of
the Debentures and exercise of the Warrants.
c. the exemption from registration under Rule 144 will not be
available for two years from the date of acquisition of the Debentures and
Warrants (unless it is amended, as has been previously proposed, to
shorten such period to one year), and even then may not be available
unless (A) a public trading market still exists for the Common Stock at
that time, (B) adequate information concerning the Company is then
publicly available, and (C) the sale complies with the other terms and
conditions of Rule 144.
2.04 Each Purchaser acknowledges and agrees that it shall have no
right to convert any Debentures or exercise any Warrants to purchase the
Common Stock of the Company so long as and to the extent that at the time
of such conversion or exercise, such conversion or exercise would cause
the Purchaser then to be the "beneficial owner" of five percent (5%) or
more of the Company's then outstanding common stock. For the purpose
hereof, the term "beneficial owner" shall have the meaning ascribed to it
in Section 13(d) of the Securities Exchange Act of 1934. The legal
opinion of counsel to each Purchaser, in form and substance satisfactory
to the Company, shall prevail in all matters relating to the amount of
such Purchaser's beneficial ownership.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01 ORGANIZATION AND GOOD STANDING. The Company is a corporation,
duly organized, validly existing, and in good standing under the laws of
the State of Colorado and has all requisite corporate power and authority
to own and lease its properties and conduct its business as it is now
being conducted. The Company is not required to be qualified to do
business as a foreign corporation in any jurisdiction in which it is not
qualified and where a failure to be qualified would have a material
adverse effect on the Company.
3.02 CAPITALIZATION STRUCTURE.
a. As of the date of this Agreement, the Company's authorized
capital stock consists of 50,000,000 shares of Common Stock, $.01 par
value, of which 3,826,840 shares are issued and outstanding. The rights,
preferences and privileges of the capital stock are as set forth in the
Articles of Incorporation and Bylaws of the Company. As of the date of
this Agreement, all issued and outstanding shares of Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of
preemptive rights and there is no outstanding subscription, option,
warrant, call, right, agreement, commitment, understanding, or arrangement
relating to the issuance, sale, delivery, transfer or redemption of the
Company's capital stock other than, in the case of Common Stock, in each
case as of March 4, 1997, up to 800,000 shares issuable to employees of
the Company pursuant to the Company's Employee Stock Purchase Plan, and
3,000,000 shares issuable upon the exercise of stock options granted
pursuant to the Company's Tandem Stock Option and Stock Appreciation
Rights Plan and 100,000 issuable pursuant to the Company's Stock Grant
Plan.
b. The Company has reserved 765,367 shares of authorized but
unissued Common Stock for the conversion of Debentures and the exercise of
Warrants hereunder and, upon shareholder approval of the Transaction, will
reserve such additional shares of authorized but unissued Shares of Common
Stock as are necessary to effect the conversion and exercise of all
Debentures and Warrants, respectively, issued hereunder. All of the
shares of the Company's Common Stock issuable upon conversion of the
Debentures and exercise of the Warrants have been duly authorized by all
necessary corporate action and will be when issued in accordance with the
terms of the Debentures and Warrants, validly issued, fully paid and
nonassessable and free of preemptive rights, other than those restrictions
imposed by the Company's Articles of Incorporation and Bylaws.
3.03 AUTHORITY; NO CONFLICT; REQUIRED FILINGS.
a. The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
the Company. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms.
b. The execution and delivery of this Agreement by the Company
and the consummation of the transactions contemplated by this Agreement
will not (i) conflict with or result in any violation or breach of any
provision of the Articles of Incorporation or Bylaws of the Company; (ii)
result in any violation or breach of, or constitute a default or give rise
to a right of termination, cancellation or acceleration of any obligation
or loss of any benefit under any of the terms, conditions or provisions of
any note, bond, mortgage,indenture, lease contract or other agreement,
instrument or obligation to which the Company is a party or by which it or
any of its properties or assets may be bound; or (iii) conflict with or
violate any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its properties or assets, except in the case of (ii) and
(iii) for any such violation, breaches, defaults, termination,
cancellation, accelerations, or conflicts which would not, in the
aggregate, have or result in a material adverse effect on the Company or
impair the ability of the Company to consummate the transactions
contemplated by this Agreement and except for the Nasdaq National Market
Listing Agreement between the Company and Nasdaq to the extent that such
agreement requires shareholder approval of all or a portion of this
Transaction.
c. Other than Nasdaq approval, no consent, approval, order or
authorization of, or registration, declaration or filing with, any
governmental entity, is required by or with respect to the Company in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
3.04 SEC FILINGS; FINANCIAL STATEMENTS.
a. The Company has timely filed and made available to
Purchasers all forms, reports and documents required to be filed by the
Company with the Commission since December 31, 1995, (collectively, the
"Vari-L SEC Reports"). The Vari-L SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and (ii) did not
at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in such Vari-L SEC Reports or necessary in order to
make the statements in such Vari-L SEC Reports, in the light of the
circumstances under which they were made, not misleading.
b. Each of the financial statements (including, in each case,
any related notes) contained in the Vari-L SEC Reports, including any
Vari-L SEC Reports filed after the date of this Agreement until the First
and Second Closing Dates, complied or will comply, as of their respective
dates, in all material respects with all applicable accounting
requirements and the published rules and regulations of the Commission
with respect thereto, was or will be prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout
the periods involved and fairly presented or will present the consolidated
financial position of the Company as at the respective dates and the
results of its operations and cash flows for the periods indicated, except
that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not
expected to be material in amount.
3.05 LITIGATION. Except as described in the Vari-L SEC Reports,
there is no action, suit or proceeding, claim, arbitration or
investigation pending or, to the best of the Company's knowledge,
threatened against the Company which would, in the aggregate, have a
material adverse effect on the Company or impair the ability of the
Company to consummate the transactions contemplated by this Agreement.
3.06 BROKERS AND FINDERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated hereby based upon
arrangements made by or an behalf of the Company except for the
commissions described in Section 1.03.
3.07 AVAILABILITY OF S-3 REGISTRATION STATEMENT. The Company is
eligible to use an S-3 Registration Statement to effect the registration
rights granted pursuant to Section 6.
4. [This Section intentionally omitted.]
5. COVENANTS OF THE COMPANY
5.01 The Company covenants and agrees that, so long as any Debentures
or Warrants shall be outstanding:
a. Maintenance of Office. The Company will maintain an office
or agency in such place in the United States of America as the Company may
designate in writing to the registered holders of Debentures and Warrants,
where the Debentures and Warrants may be presented for registration or
transfer and for exchange as their terms may provide, where notices and
demands to or upon the Company in respect of the Debentures and Warrants
may be served.
b. Corporate Existence. The Company will do or cause to be
done all things necessary and lawful to preserve and keep in full force
and effect its corporate existence, rights and franchises.
c. Maintenance of Property. The Company will at all times
maintain and keep, or cause to be maintained and kept, in good repair,
working order and condition all significant properties of the Company used
in the conduct of the business of the Company.
d. Notice of Default. If any one or more events which
constitute a default under either the Debentures or Warrants in accordance
with their terms, or if the holder of any Debentures or Warrants shall
demand payment or take any other action permitted upon the occurrence of
any such default, the Company shall, immediately after it becomes aware
that any such event has occurred or that such demand has been made or that
any such action has been taken, give notice to all holders of the
Debentures and Warrants, specifying the nature of such event or of such
demand or action, as the case may be.
5.02 ADDITIONAL REGULATION D OR REGULATION S OFFERINGS. The Company
agrees that it shall not, without the approval of all of the holders of
Debentures and Warrants issued hereunder, (a) make an unregistered
offering of shares of its Common Stock or of securities convertible into
such Common Stock, pursuant to Regulation D under the Act or otherwise,
pursuant to which registration rights are granted to the purchasers in
such an offering, or (b) make an offering of securities pursuant to
Regulation S under the Act, in either case until the earlier of (i) two
years from the First Closing Date, or (ii) at such time as there are less
than an aggregate of $2,000,000 in Debentures or Common Stock issued upon
conversion of Debentures held by the Purchasers.
5.03 NOTICE OF CONVERSION OF DEBENTURES OR EXERCISE OF WARRANTS;
PAYMENT FOR LATE DELIVERY OF SHARES OR LATE REDEMPTIONS.
a. If the Holder of a Debenture or a Warrant delivers to the
principal office of the Company to the attention of Xxxxx Xxxx, Controller
(a) a copy of the Conversion Notice or Notice of Exercise, respectively,
by telecopy (telecopy number 303/373-3870) and (b) within two business
days thereafter, the Debenture and original Conversion Notice or the
Warrant Price and the original Notice of Exercise, and the Company fails
to deliver to the Holder the Certificate representing the shares of Common
Stock due upon such conversion or exercise within ten (10) business days
(the "Ten-Day Period") after the Debenture and original Conversion Notice
are received by the Company, the Company will pay the Holder the late
payment described in Section 5.03d. below the amount of which payment
shall begin to accrue on the first day after the expiration of the Ten-Day
Period; or
b. in the alternative (but not in addition), if the Holder
delivers (a) a copy of the Conversion Notice or Notice of Exercise,
respectively, by separate telecopies to each of Xxxxx Xxxx, Controller
(303/373-3870), Xxxxx X. Xxxxxxx, President, and Xxx X. Xxxxx, Treasurer
at the Company (303/373-3868), and to Xxxxxxx Xxxxxx, L.L.C., attention:
S. Xxx Xxxxx, Jr. (303/298-0215), and (b) within two (2) business days
thereafter, the original Conversion Notice and the Debenture or the
original Notice of Exercise and the Warrant Price, and the Company fails
to deliver the Certificate within five (5) business days (the "Five-Day
Period") after receiving the original Conversion Notice and Debenture or
the Original Notice of Exercise and the Warrant Price, the Company will
pay the Holder the amount described in (d) below which amount shall begin
to accrue on the first day after the expiration of the Five-Day Period;
provided, however, that if the Company has given notice of redemption of a
Debenture, as provided in Section 1.03 of the Debentures, the Company
shall not be obligated to pay the amount for late delivery described in
these Sections 5.03a. or b.
c. If payment by the Company of any 116% Redemption Amount or
the Non-approval Redemption Amount is not made within the period provided
for such payment, the Company shall pay to the Holder the late payment set
forth in Section 5.03d. below which amount shall begin to accrue on the
first day after the expiration of such the period.
d. The late payment shall be $1,000 per day for each $100,000
in Debentures converted or redeemed or each 10,000 Warrants exercised
)proportionately adjusted for greater or lesser amounts) for the first of
five (5) days and $500 per day thereafter continuing until the stock
certificate or payment (as the case may be) is delivered to Holder.
e. The late payment provided by this Section 5.03 shall be in
addition to, and not in lieu of, the rights or remedies of the Purchasers
or the Holders under the Debentures, the Warrants or this Agreement or
which are otherwise available under law.
6. REGISTRATION RIGHTS
6.01 DEMAND REGISTRATION RIGHTS.
a. Right to Demand Registration. If, at any time beginning
thirty (30) days after the First Closing Date until the third anniversary
of the date hereof, any Purchaser holding Debentures or Warrants issued
hereunder makes a written request (the "Request Notice") to the Company
for registration under the Act of all or part of the Common Stock issuable
upon conversion of a Debenture or upon exercise of a Warrant which is
issued hereunder, (irrespective of whether such Common Stock is issued or
is issuable on the conversion of Debentures or the exercise of Warrants
sold on the First Closing Date or thereafter and irrespective of whether
the shareholder approval or Nasdaq approval required by Section 1.01
hereof has yet been obtained) (such Common Stock is hereinafter sometimes
referred to as "Registrable Securities"), the Company shall thereupon file
a registration statement covering all of the Registrable Securities with
the Commission within thirty (30) days after the Company receives the
Request Notice and shall use its best efforts have such registration
statement declared effective by the Commission (a "Registration") within
sixty (60) days after receipt of the Request Notice. Within ten (10) days
after receipt of such request, the Company will serve written notice (the
"Notice") of such registration request to all Purchasers who hold
Debentures or Warrants issued hereunder, and the Company will include in
such registration all Registrable Securities of such Purchasers except for
those for which the Company has received written requests not to be
included therein ("Nonregistration Notices"). If, by reason of a decline
in market price or otherwise, the shares covered by the Registration
Statement are at any time less than the Registrable Securities, the
Company agrees to subsequently file an additional registration statement
to cover all Registrable Securities not included in the first registration
statement except for those submitting Nonregistration Notices. All
Purchasers requesting nonregistration of their Registrable Securities
pursuant to this Section 6.01 will specify the aggregate number of
Registrable Securities not to be registered. All Purchasers permitting
the registration of any of their Registrable Securities (the "Selling
Holders") shall, prior to the filing of the Registration Statement,
deliver a notice to the Company confirming their desire for such
registration (the "Request Notice") which notice will also specify the
intended methods of disposition thereof. Each Purchaser shall be entitled
so to request or participate in a request for one Registration initiated
under this Section 6.01(a) filed with and declared effective by the
Commission, the expenses of which shall be borne by the Company in
accordance with this Agreement, provided, however, that if a Purchaser
elects not to participate in a Registration, such Purchaser shall have no
further rights to participate in or request a Registration.
b. Selection of Underwriter(s). The Purchaser(s) giving a
Request Notice with respect to a proposed Demand Registration pursuant to
this Section 6.01 shall have sole discretion to select the underwriter(s),
if any, to manage the sale of Registrable Securities pursuant to such
Registration under this Section 6.01.
c. Effective Registration Statement. A Registration requested
pursuant to this Section 6.01 will be deemed to have been effected as soon
as it has become effective; provided, however that if the offering of
Registrable Securities pursuant to such registration is interfered with by
any stop order, injunction or other order or requirement of the Commission
or other governmental agency or court within 135 days after it has become
effective, such Registration will be deemed not to have been effected;
provided, however, that the Company shall have a period of up to sixty
(60) days to cause the rescission of such stop order or injunction before
the higher interest rate called for by Section 1.04 hereof shall take
effect. If any such stop order or injunction is rescinded, the effective
periods required by this Agreement shall continue upon such rescission and
be extended by the number of days by which such stop order reduced the
effective period.
6.02 REGISTRATION PROCEDURES. It shall be a condition precedent to
the obligations of the Company and any underwriter(s) to take any action
pursuant to this Section 6 that the Selling Holders in any Registration
shall furnish to the Company such information regarding them, the
Registrable Securities held by them, the intended method of disposition of
such Registrable Securities, and such agreements regarding
indemnification, disposition of such securities and the other matters
referred to in this Section 6 as the Company shall reasonably request.
With respect to any Registration pursuant to this Section 6, the Company
shall, as expeditiously as practicable:
a. Prepare a Form S-3 registration statement, (or the Company
if is not eligible to use a Form S-3, then another appropriate form
prescribed by the Commission) and file it with the Commission within
thirty (30) days after the Company receives a Request Notice and any
necessary amendments thereto covering the Registrable Securities of the
Selling Holders and use its best efforts to cause such registration
statement to become effective within sixty (60) days after receipt of the
Request Notice;
b. Prepare and file with the Commission such amendments and
post-effective amendments to such registration statement and any documents
required to be incorporated by reference therein as may be necessary to
keep the registration statement effective for a period of three (3) years
(or such shorter period which will terminate when there are no longer any
Warrants outstanding hereunder or when all Registrable Securities covered
by such registration statement have been sold or withdrawn, but not prior
to the expiration of the time period referred to in Section 4(3) of the
Act and Rule 174 thereunder, if applicable) and cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act (or any successor rule);
c. Furnish to such Selling Holder, without charge, at least
one conformed copy of the registration statement and any post-effective
amendment thereto, upon request, and a reasonable number of copies of the
final prospectus and any preliminary prospectus(es) and any amendments or
supplements thereto, and any exhibits or documents incorporated therein by
reference;
d. Immediately notify such Selling Holder, at any time when a
prospectus relating thereto is required to be delivered under the Act,
when the Company becomes aware of any event which causes the prospectus to
contain any untrue statement of material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made not misleading and, as promptly
as practicable thereafter, prepare and file and furnish a supplement or
amendment to such prospectus correcting same;
e. Use its best efforts to cause all securities included in
such registration statement to be listed, by the date of the first sale of
securities pursuant to such registration statement, on the NASDAQ National
Market System;
f. Make generally available to Selling Holders an earnings
statement satisfying the provisions of Section 11(a) of the Act no later
than 90 days after the end of the 12-month period beginning with the first
month of the Company's first fiscal quarter commencing after the effective
date of the registration statement, which statement shall cover said 12-
month period;
g. Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at
the earliest possible moment;
h. As promptly as practicable after filing with the Commission
of any subsequently filed document which is incorporated by reference into
a registration statement (such as a Form 10-Q), deliver a reasonable
number of copies of such document to such Selling Holder;
i. Prior to the date on which the registration statement is
declared effective, use its best efforts to register or qualify the
securities covered by the registration statement for offer and sale under
the securities or blue sky laws of each state of the United States as such
Selling Holder or underwriter(s), may reasonably request and to keep each
such registration or qualification effective, including through new
filings, or amendments or renewals, during the period such registration
statement is required to be kept effective and to do any and all other
acts or things necessary or advisable to enable the disposition in all
such jurisdictions of the Registrable Securities covered by the applicable
registration statement;
j. Enter into such customary agreements (including an
underwriting agreement in customary form) and take such other actions
customarily taken by registrants as sellers of a majority of such
Registrable Securities or the underwriter(s), if any, reasonably request
in order to expedite or facilitate the disposition of such Registrable
Securities;
k. Obtain a "cold comfort" letter or letters from the
Company's independent public accountants in customary form as may
reasonably be requested;
l. Make available for inspection by any Selling Holder holding
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other agent
retained by any such Selling Holder or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of the Company, and supply all information reasonably requested by any
such Selling Holder, underwriter, attorney, accountant or agent in
connection with such registration statement;
m. Cooperate with such Selling Holder and the underwriter(s),
if any, to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legends) representing the Shares to be sold
under the registration statement, and enable such securities to be in such
denominations and registered in such names as the Selling Holder or the
underwriter(s), if any, may request; and
n. Use its best efforts to cause the Shares covered by the
registration statement to be registered with or approved by such other
governmental agencies or authorities within the United States, including,
without limitation, the National Association of Securities Dealers, Inc.,
as may be necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Registrable
Securities.
The Selling Holders, upon receipt of any notice from the Company
of any event of the kind described in paragraph (d) of this Section 6.02,
will forthwith discontinue disposition of the Shares until the Selling
Holders' receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (d) of this Section 6.02 or until they are
advised in writing (the "Advice") by the Company that the use of the
prospectus may be resumed, and have received copies of any additional or
supplemental filings which are incorporated by reference in the
prospectus. In the event the Company shall give any such notice, the time
periods mentioned in paragraph (b) of this Section 6.02 shall be extended
by the number of days during the period from and including any date of the
giving of such notice to and including the date when each seller of
securities covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by paragraph
(d) of this Section 6.02 hereof or the Advice.
6.03 BLACKOUT PERIODS. (i) At any time when a registration
statement effected pursuant to Section 6.01 relating to Registrable
Securities is effective, upon written notice from the Company to the
Selling Holders that either:
a. after the registration statement covering the Registrable
Securities has been effective for a period of at least one hundred twenty
(120 days), the Company has determined to engage in a publicly registered
offering of its Common Stock and has been advised in writing (with a copy
to the Selling Holders) by a nationally recognized independent investment
banking firm selected by the Company that, in such firm's opinion, the
Selling Holders' sale of Registrable Securities pursuant to the
registration statement would adversely affect such immediately planned
Company Offering (a "Transaction Blackout"), provided, however, that there
may not be more than one Transaction Blackout in any 365 day period; or
b. the Company determines in the good faith judgment of legal
counsel to the Company that the cessation of the Selling Holders' sale of
Registrable Securities pursuant to the registration statement is mandated
by law (an "Information Blackout"),
the Selling Holders shall suspend sales of Registrable Securities pursuant
to such registration statement until the earlier of:
a. in the case of a Transaction Blackout, the earliest of (A)
thirty (30) days after the beginning of such Transaction Blackout, (b) the
termination of any "blackout" period required by the underwriters to be
applicable to the Selling Holders, if any, in connection with such Company
offering, (C) promptly after abandonment of such Company offering or (D)
sixty (60) days after the date of the Company's written notice of a
Transaction Blackout, or (ii) in the case of an Information Blackout, the
earlier of (A) the date upon which the cessation of such sales would, in
the opinion of the Company's legal counsel, no longer be mandated by law,
or (iii) thirty (30) days after the beginning of such Information
Blackout; or
b. such time as the Company notifies the Selling Holders that
sales pursuant to such registration statement may be resumed (the number
of days from such suspension of sales of the Selling Holders until the day
when such sales may be resumed hereunder is hereinafter called a "Sales
Blackout Period);
provided that the Company may not impose a Transaction Blackout during (a)
any underwritten public offering, (b) the 120 day period immediately
following the date on which a registration statement effected pursuant to
Section 6.01 first became effective or (c) the 365 day period immediately
following the expiration of any Transaction Blackout.
(ii) if there is a Transaction Blackout or an Information
Blackout, the time periods set forth in Section 6.02(b) shall be extended
for a number of days equal to the number of days in the Sales Blackout
Period.
6.04 REGISTRATION EXPENSES. In the case of any Registration, the
Company shall bear all of the costs and expenses of such Registration
(including, without limitation, the expenses of preparing any registration
statement, Commission and state "blue sky" filing, registration and
qualification fees, the cost of providing any legal opinion or "cold
comfort" letters reasonably requested by the Selling Holders and printing
costs); provided, however, that the Company shall not be responsible for
legal fees or expense of counsel for any of the Selling Holders, or for
any underwriter's discounts or commissions that are attributable to the
Registrable Securities of a Selling Holder.
6.05 INDEMNIFICATION AND CONTRIBUTION.
a. Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Selling Holder, its officers, directors
and agents and each person who controls (within the meaning of the Act and
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) such
Selling Holder, including, without limitation, any general partner or
manager of any thereof, against all losses,claims, damages, liabilities
and expenses arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in any registration statement,
prospectus or preliminary prospectus in which such Selling Holder is
participating or in any document incorporated by reference therein or any
omission or alleged omission to state therein a material fact necessary to
make the statement therein (in the case of the prospectus or any
preliminary prospectus, in light of the circumstances under which they
were made) not misleading, except insofar as the same are caused by, based
upon or contained in any information with respect to such Selling Holder
furnished in writing to the Company by such Selling Holder expressly for
use therein; provided, however, that the foregoing indemnity agreement
with respect to any preliminary prospectus shall not inure to the benefit
of any Selling Holder from whom the person asserting such loss, claim,
damage or liability purchased the securities if it is determined that it
was the responsibility of such Selling Holder to provide such person with
a current copy of the prospectus and such current copy of the prospectus
would have cured such loss, claim, damage or liability. The Company will
also indemnify underwriters (as such term is defined in the Act), their
officers and directors and each person who controls such persons (within
the meaning of the Act) to the same extent as provided above with respect
to the indemnification of the Selling Holders.
b. Indemnification by the Selling Holders. In connection with
any Registration in which a Selling Holder is participating, such Selling
Holder will furnish to the Company in writing such information and
affidavits with respect to such Selling Holder as the Company reasonably
requests for use in connection with any registration statement or
prospectus and agrees to indemnify and hold harmless the Company, its
directors, officers and agents and each person who controls (within the
meaning of the Act and the Exchange Act) the Company against any losses,
claims, damages, liabilities and expenses arising out of or based upon any
untrue statement of a material fact or any omission to state a material
fact necessary to make the statements in the registration statement or
prospectus or preliminary prospectus (in the case of the prospectus or
preliminary prospectus, in light of the circumstances under which they
were made) not misleading, to the extent, but only to the extent, that
such untrue statement or omission is contained in any information or
affidavit such Selling Holder furnished in writing to the Company by such
Selling Holder expressly for use therein; provided, however, that the
amount recoverable by the Company from any Selling Holder under this
indemnification provision shall not exceed the amount of net proceeds
received by the Selling Holder from the sale of Registrable Securities
hereunder; and provided, further, that the indemnity agreement contained
in this Section 6.05 shall not apply to amounts paid in settlement of any
loss, claim, damage, liability or action arising pursuant to a
registration under Section 6 if such settlement is effected without the
consent of the Selling Holder (which consent shall not be unreasonably
withheld). Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any
of the prospective sellers, or any of their respective affiliates,
directors, officers or controlling persons and shall survive the transfer
of such securities by such seller.
c. Conduct of Indemnification Proceedings. Any person
entitled to indemnification hereunder will (i) give prompt written notice
to the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest may exist between such indemnified and
indemnifying party, permit the indemnifying party to assume the defense of
such claim, jointly with any other indemnifying party similarly notified
to the extent it may elect, with counsel reasonably satisfactory to the
indemnified party. The failure to so notify the indemnifying party shall
relieve the indemnifying party from any liability hereunder with respect
to the action to the extent that such failure materially prejudices the
indemnifying party; provided, however, that any such failure shall not
relieve the indemnifying party from any other liability which it may have
to any other party. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent
will not be unreasonably withheld). No indemnifying party will consent to
entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of
such claim or litigation. An indemnifying party who is not entitled to,
or elects not to, assume the defense of a claim will not be obligated to
pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless
in the reasonable judgment of any indemnified party a conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying party
shall be obligated to pay the reasonable fees and expenses of such
additional counsel or counsels.
d. Contribution. If for any reason the indemnification
provided for in the preceding paragraphs (a) and (b) of this Section 6.05
is unavailable to an indemnified party as contemplated by the preceding
paragraphs (a) and (b) of this Section 6.05 for any reason, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative
benefits received by the indemnified party and the indemnifying party, but
also the relative fault of the indemnified party and the indemnifying
party, as well as any other relevant equitable considerations.
Notwithstanding the foregoing, if the indemnifying party is a Selling
Holder, any contribution pursuant to this Section 6.05(d) shall be several
and not joint, and shall be limited to the amount of net proceeds received
by such Selling Holder from the sale of Registrable Securities hereunder.
e. Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 6.05 (with
appropriate modifications) shall be given by the Company and each seller
of Registrable Securities with respect to any required registration or
other qualification of securities under any federal or state law or
regulation or governmental authority other than the Act.
6.06 EXCHANGE ACT REPORTS. The Company agrees that at all times
after it has filed a registration statement pursuant to the requirements
of the Act relating to any class of equity securities of the Company, it
will use its best efforts to file in a timely manner all reports required
to be filed by it pursuant to the Exchange Act to the extent the Company
is required to file such reports. Upon request of a Selling Holder, the
Company will furnish the requesting Selling Holder with such information
as may be necessary to enable such Selling Holder to effect sales pursuant
to Rule 144A. Notwithstanding the foregoing, the Company may deregister
any class of its equity securities under Section 12 of the Exchange Act or
suspend its duty to file reports with respect to any class of its
securities pursuant to Section 15(d) of the Exchange Act if it is then
permitted to do so pursuant to the Exchange Act and rules and regulations
thereunder.
6.70 PARTICIPATION IN REGISTRATIONS. No Selling Holder may
participate in any Registration hereunder unless such Selling Holder (a)
agrees to sell the Selling Holder's securities on the basis provided in
any underwriting arrangements approved by the persons entitled hereunder
to approve such arrangements, and (b) completes and executes all
questionnaires, powers of attorney, underwriting agreements and other
documents customarily required under the terms of such underwriting
arrangements.
6.08 REMEDIES. Each Selling Holder shall have the right and remedy
to have the provisions of Section 6.01 specifically enforced by any court
having jurisdiction in the event that the Company breaches such
provisions, and the Company shall reimburse such Selling Holder for the
reasonable costs of the expenses for counsel for such Purchaser incurred
in connection with such proceeding.
7. MISCELLANEOUS
7.01 NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile or similar
writing) and shall be given to such party at its address or facsimile
number set forth on the signature pages hereof or such other address or
facsimile number as such party may hereafter specify in writing to the
Secretary of the Company for the purpose by notice to the party sending
such communication. Each such notice, request or other communication
shall be effective (i) if given by facsimile, when such message is
transmitted to the number set forth on such signature pages or such other
number as a party may specify in writing to the Secretary of the Company
or (ii) if given by any other means, the earlier of (x) when delivered by
hand to the address set forth on such signature pages or such other
address as a party may specify in writing to the Secretary of the Company
or (y) five business days after the mailing of such notice by certified
mail. If more than one Purchaser specified the same address for such
notices, then a single notice to such address shall be deemed to be notice
to all Purchasers at that address.
7.02 BINDING EFFECT; BENEFITS. This Agreement shall be binding upon
and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended or shall be construed to give any person
other than the parties to this Agreement or their respective successors or
assigns any legal or equitable right, remedy or claim under or in respect
of any agreement or any provision contained herein provided, however, that
nothing herein shall be construed to preclude the assignment by Purchasers
hereunder of their respective Options or, in connection with their resale
of Warrants, Debentures or Units purchased hereunder, of the rights
attendant thereto, including but not limited to the registration rights
for Registrable Securities, subject only to compliance with applicable
securities laws. This Agreement constitutes the entire agreement and
understanding, and supersedes and terminates all prior agreements and
understandings, both oral and written, between the parties hereto relating
to the subject matter hereof.
7.03 WAIVER. Any party hereto may, without binding any other party,
by written notice to another party (a) extend the time for the performance
of any of the obligations or other actions of such other party under this
Agreement; (b) waive compliance with any of the conditions or covenants of
such other party contained in this Agreement; and (c) waive or modify
performance of any of the obligations of such other party under this
Agreement. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute
a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained herein.
Neither the waiver by any party hereto of a breach of any provision hereof
or any preceding or succeeding breach nor the failure by any party to
exercise any right or privilege hereunder shall be deemed a waiver of such
party's rights or privileges hereunder nor shall it be deemed a waiver of
such party's rights to exercise the same at any subsequent time or times
hereunder.
7.04 AMENDMENT. This Agreement may be amended, modified or
supplemented only by a written instrument executed by all of the parties
hereto (including Transferees of Purchasers).
7.05 ASSIGNABILITY. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by either the Company or any Purchaser except as otherwise
contemplated hereunder and except that the rights of Purchasers may be
assigned as provided herein.
7.06 TERMINATION. The right of any Purchaser to Demand Registration
hereunder will terminate at such time as there are no longer Registerable
Securities held by that Purchaser.
7.07 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF COLORADO WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS.
7.08 PRONOUNS. Whenever the context may require any pronoun used
herein shall include the corresponding masculine, feminine or neuter
forms.
7.09 ATTORNEYS FEES. In the event of a dispute concerning the
provisions of this Agreement which results in litigation, arbitration or
other dispute resolution proceedings, the parties agree that the legal
fees and other expenses of the prevailing party shall be borne by the
other, non-prevailing parties to the dispute.
7.10 SECTION AND OTHER HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
7.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts or separate number of counterparts, each of which shall be
deemed to be an original and all of which together shall be deemed to be
one and the same instrument.
7.12 NO JOINT AND SEVERAL LIABILITY AMONG PURCHASERS. The
obligations, representations and warranties of the Purchasers hereunder
are made by each Purchaser as to himself, herself or itself only. There
shall be no joint and several liability among the Purchasers.
IN WITNESS WHEREOF, the Company and each Purchaser has executed this
Agreement as of the day and year first above written.
ATTEST: VARI-L COMPANY, INC.
/s/Xxx X. Xxxxx By:/s/Xxxxx X. Xxxxxxx
Xxx X. Xxxxx, Vice President Xxxxx X. Xxxxxxx, President
of Finance and Treasurer
Notices: 00000 Xxxx 00xx Xxx.
Xxxxxx, XX 00000
Facsimile: 303/371-0845
PURCHASERS:
Millenco LP
Newark Sales
Sales Link
Xxxx Xxxxxx
Xxxxx Xxxxxx
Ace Foundation
Xxxxx Xxxxxxxxx
Xxxx Xxxxxxxxx
Broadway Partners
Xxxxxx Xxxxx
Xxxxx Xxxxx
Xxxxxx Xxxx
Xxxx Xxxxx
LIST OF SCHEDULES AND EXHIBITS
Schedule 1 Purchasers - First Closing Date
Exhibit A Form of Convertible Subordinated Debenture
Exhibit B Form of Warrant
Exhibit C Form of Accredited Investor Statement
