LITRONIC INC.
3,700,000 Shares of Common Stock
(Par Value $.01 per share)
UNDERWRITING AGREEMENT
New York, New York
_____, 1999
BlueStone Capital Partners, L.P.
Pacific Crest Securities Inc.
as Representatives of the
Several Underwriters named
in Schedule A hereto
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Litronic Inc., a Delaware corporation (the "Company"), proposes to issue
and sell to the underwriters (the "Underwriters") named in Schedule A to this
Underwriting Agreement (the "Agreement"), for whom BlueStone Capital Partners,
L.P. ("BlueStone") and Pacific Crest Securities Inc. are acting as
representatives (together, hereinafter referred to as the "Representatives"),
three million seven hundred thousand (3,700,000) shares of common stock, par
value $.01 per share (the "Offered Shares"), which Offered Shares are presently
authorized but unissued shares of the common stock, par value $.01 per share
(individually a "Common Share" and collectively the "Common Shares"), of the
Company. In addition, the Representatives, in order to cover over-allotments in
the sale of the Offered Shares, may purchase from the Company, for their own
accounts, up to an aggregate of five hundred fifty-five thousand (555,000)
Common Shares (the "Optional Shares"; the Offered Shares and the Optional Shares
are hereinafter sometimes collectively referred to as the "Shares"). The Shares
are described in the Registration Statement, as defined below. The Company also
proposes to issue and sell to the Representatives for their own accounts and/or
the accounts of their designees, warrants to purchase an aggregate of three
hundred and seventy thousand (370,000) Common Shares (the "Warrant Shares") at
an exercise price of $_____ [165% of the initial public offering price per
share] per Warrant Share (the "Representatives'
Warrants"), which sale will be consummated in accordance with the terms and
conditions of the form of Representatives' Warrant Agreement filed as an exhibit
to the Registration Statement.
The Representatives hereby warrant to the Company that they have been
authorized by each of the Underwriters to enter into this Underwriting Agreement
on their behalf and to act for them in the manner herein provided. The Company
hereby confirms its respective agreements with the Representatives and each of
the Underwriters, on whose behalf the Representatives are signing this
Agreement, as follows:
1. Purchase and Sale of Offered Shares. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company hereby agrees to sell the Offered
Shares to the Underwriters, severally, and each Underwriter agrees, severally
and not jointly, to purchase from the Company, at a purchase price of $____ [93%
of the initial public offering price] per share, the number of Offered Shares
set forth opposite the name of such Underwriter in Schedule A attached hereto,
plus any additional Offered Shares which such Underwriter may become obligated
to purchase pursuant to the provisions of Section 10 hereof. The Underwriters
plan to offer the Offered Shares to the public at a public offering price of
$_____ per share.
2. Payment and Delivery.
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(a) Payment for the Offered Shares will be made to the Company by
wire transfer against delivery of the Offered Shares to the Representatives.
Such payment and delivery will be made at 10:00 A.M. New York City time, on the
third business day following the Effective Date (the fourth business day
following the Effective Date in the event that trading of the Offered Shares
commences on the day following the Effective Date), the date and time of such
payment and delivery being herein called the "Closing Date." The certificates
representing the Offered Shares to be delivered will be in such denominations
and registered in such names as the Representatives may request not less than
two full business days prior to the Closing Date, and will be made available to
the Representatives for inspection, checking and packaging at the offices of
Continental Stock Transfer & Trust Company, the Company's transfer agent, at Xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 not less than one full business day prior to
the Closing Date.
(b) On the Closing Date, the Company will sell the Representatives'
Warrants to the Representatives or to their designees (limited to officers and
partners of the Representatives and Underwriters). The Representatives' Warrants
will be in the form of, and in accordance with, the provisions of the
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Representatives' Warrant Agreement attached as an exhibit to the Registration
Statement, with such changes as the Representatives shall approve. The aggregate
purchase price for the Representatives' Warrants is $300. The Representatives'
Warrants will be restricted from sale, transfer, assignment or hypothecation for
a period of one year from the Effective Date, except to officers or partners of
the Representatives and Underwriters and members of the selling group and/or
their officers or partners. Payment for the Representatives' Warrants will be
made to the Company by check or checks payable to its order on the Closing Date
against delivery of the certificates representing the Representatives' Warrants.
The certificates representing the Representatives' Warrants will be in such
denominations and such names as the Representatives may request prior to the
Closing Date.
3. Option to Purchase Optional Shares.
-----------------------------------
(a) On the basis of the representations and warranties and subject to
the terms and conditions set forth herein, for the purposes of covering any
overallotments in connection with the distribution and sale of the Offered
Shares as contemplated by the Prospectus as defined below, the Representatives
are hereby granted an option to purchase for their own accounts, and not as
representatives of the Underwriters, all or any part of the Optional Shares from
the Company. The purchase price to be paid for the Optional Shares will be the
same price per Optional Share as the price per Offered Share set forth in
Section 1 hereof. The option granted hereby may be exercised by the
Representatives as to all or any part of the Optional Shares at any time within
45 days after the Effective Date. The Representatives will not be under any
obligation to purchase any Optional Shares prior to the exercise of such option.
(b) The option granted hereby may be exercised by the Representatives
by giving oral notice to the Company, which must be confirmed by a letter, telex
or telegraph setting forth the number of Optional Shares to be purchased, the
date and time for delivery of and payment for the Optional Shares to be
purchased and stating that the Optional Shares referred to therein are to be
used for the purpose of covering over-allotments in connection with the
distribution and sale of the Offered Shares. If such notice is given prior to
the Closing Date, the date set forth therein for such delivery and payment will
not be earlier than either two full business days thereafter or the Closing
Date, whichever occurs later. If such notice is given on or after the Closing
Date, the date set forth therein for such delivery and payment will not be
earlier than two (2) full business days thereafter. In either event, the date o
set forth will not be more than 15 full business days after the date of such
notice. The date and time set forth in such notice is herein called the "Option
Closing Date." Upon
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exercise of such option, the Company will become obligated to convey to the
Representatives, and, subject to the terms and conditions set forth in Section
3(d) hereof, the Representatives will become obligated to purchase, the number
of Optional Shares specified in such notice.
(c) Payment for any Optional Shares purchased will be made to the Company
by wire transfer against delivery of the Optional Shares purchased to the
Representatives. The certificates representing the Optional Shares to be
delivered will be in such denominations and registered in such names as the
Representatives request not less than two full business days prior to the Option
Closing Date, and will be made available to the Representatives for inspection,
checking and packaging at the aforesaid office of the Company's transfer agent
or correspondent not less than one full business day prior to the Option Closing
Date.
The obligation of the Representatives to purchase and pay for any of the
Optional Shares is subject to the accuracy and completeness (as of the date
hereof and as of the Option Closing Date) of and compliance in all material
respects with the representations and warranties of the Company herein, to the
accuracy and completeness of the statements of the Company or its officers made
in any certificate or other document to be delivered by the Company pursuant to
this Agreement, to the performance in all material respects by the Company of
its obligations hereunder, to the satisfaction by the Company of the conditions,
as of the date hereof and as of the Option Closing Date, set forth in Section
3(b) hereof, and to the delivery to the Representatives of opinions,
certificates and letters dated the Option Closing Date substantially similar in
scope to those specified in Sections 5 and 6(b), (c), (d) and (e) hereof, but
with each reference to "Offered Shares" and "Closing Date" to be, respectively,
to the Optional Shares and the Option Closing Date.
4. Representations and Warranties of the Company and Pulsar. The Company
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and Pulsar (defined hereinafter) each represents and warrants to, and agrees
with, the several Underwriters that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with full power and
authority, corporate and other, to own or lease, as the case may be, and operate
its properties and to conduct its business as described in the Registration
Statement and to execute, deliver and perform this Agreement and the
Representatives' Warrant Agreement and to consummate the transactions
contemplated hereby and thereby. The Company has no subsidiaries as of the date
hereof other than Litronic Industries, Inc., a corporation duly organized,
validly existing and in good standing under the laws of the State of California
("LIT"), and, as of the Closing Date, will have no subsidiaries other than LIT
and Pulsar Data Systems, Inc., a corporation duly organized, validly existing
and in good
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standing under the laws of the State of Delaware ("Pulsar" and, together with
LIT, the "Subsidiaries"). The Company has no equity interest in any entities
other than the Subsidiaries. Unless the context otherwise requires, all
references to the "Company" in this Agreement shall include the Subsidiaries.
(b) Each of the Company and the Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
wherein such qualification is necessary and failure so to qualify could have a
material adverse effect on the financial condition, results of operations,
business or properties of the Company or any of the Subsidiaries. Each of the
Subsidiaries has full power and authority, corporate and other, and all Permits
(defined hereafter) necessary to own or lease, as the case may be, and operate
its properties and to conduct its business as described in the Registration
Statement. On the Closing Date, the Company will own all of the issued and
outstanding shares of capital stock of all of the Subsidiaries, free and clear
of any security interests, liens, encumbrances, claims and charges, and all of
such shares have been duly authorized and validly issued and are fully paid and
non-assessable. There are no options or warrants for the purchase of, or other
rights to purchase, or outstanding securities convertible into or exchangeable
for, any capital stock or other securities of any Subsidiary other than those
described in the Prospectus.
(c) This Agreement has been duly executed and delivered by the
Company and Pulsar and constitutes the valid and binding obligation of the
Company and Pulsar, enforceable against the Company and Pulsar in accordance
with its terms, and the Representatives' Warrant Agreement, when executed and
delivered by the Company on the Closing Date, will be the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms. The execution, delivery and performance of this Agreement by the
Company and Pulsar and the Representatives' Warrant Agreement by the Company,
the consummation by the Company and Pulsar of the transactions herein
contemplated and by the Company of the transactions therein contemplated and the
compliance by the Company and Pulsar with the terms of this Agreement and by the
Company with the terms of the Representatives' Warrant Agreement have been duly
authorized by all necessary corporate action and do not and will not, with or
without the giving of notice or the lapse of time, or both, (i) result in any
violation of the Company's or of any of the Subsidiaries' Certificate of
Incorporation or Articles of Incorporation, as the case may be, or By-Laws (or
similar charter documents); (ii) result in a breach of or conflict with any of
the terms or provisions of,
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or constitute a default under, or result in the modification or termination of,
or result in the creation or imposition of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company or any of the
Subsidiaries pursuant to any indenture, mortgage, note, contract, commitment or
other agreement or instrument to which the Company or any of the Subsidiaries is
a party or by which the Company or any of the Subsidiaries or any of their
respective properties or assets is or may be bound or affected; (iii) violate
any existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of the Subsidiaries or any of their respective properties or
business; or (iv) have any effect on any permit, certification, registration,
approval, consent, order, license, franchise or other authorization
(collectively, the "Permits") necessary for the Company or any of the
Subsidiaries to own or lease and operate their respective properties or conduct
their respective businesses or the ability of the Company to make use thereof;
except in the case of clauses (ii), (iii) and (iv) where such breach, conflict,
default, violation, effect or other action or failure would not have a material
adverse effect on the business, financial condition, or results of operations of
the Company and its Subsidiaries taken as a whole.
(d) No Permits of any court or governmental agency or body, other
than under the Securities Act of 1933, as amended (the "Act"), the Regulations
(as hereinafter defined) and applicable state securities or Blue Sky laws, are
required (i) for the valid authorization, issuance, sale and delivery of the
Shares to the Underwriters, and (ii) the consummation by the Company of the
transactions contemplated by this Agreement and the Representatives' Warrant
Agreement or, if so required, all such Permits have been duly obtained and are
in full force and effect, except to the extent that the failure to obtain any
such Permit would not have a material adverse effect on the business, financial
condition or results of operations of the Company and its Subsidiaries taken as
a whole.
(e) The conditions for use of a registration statement on Form S-1
set forth in the General Instructions to Form S-1 have been satisfied with
respect to the Company and the transactions contemplated herein and in the
Registration Statement. The Company has prepared in all material respects in
conformity with the requirements of the Act and the rules and regulations (the
"Regulations") of the Securities and Exchange Commission (the "Commission") and
filed with the Commission a registration statement (File No. 333-72151) on Form
S-1 and has filed one or more amendments thereto, covering the registration of
the Shares under the Act, including the related preliminary prospectus or
preliminary prospectuses (each thereof being herein called a
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"Preliminary Prospectus") and a proposed final prospectus. Each Preliminary
Prospectus was endorsed with the legend required by Item 501(b)(10) of
Regulation S-K of the Regulations and, if applicable, Rule 430A of the
Regulations. Such registration statement including any documents incorporated by
reference therein and all financial schedules and exhibits thereto, as amended
at the time it becomes effective, and the final prospectus included therein are
herein, respectively, called the "Registration Statement" and the "Prospectus,"
except that, (i) if the prospectus filed by the Company pursuant to Rule 424(b)
of the Regulations differs from the Prospectus, the term "Prospectus" shall mean
the prospectus filed pursuant to Rule 424(b), and (ii) if the Registration
Statement is amended or such Prospectus is supplemented after the date the
Registration Statement is declared effective by the Commission (the "Effective
Date") and prior to the Option Closing Date, the terms "Registration Statement"
and "Prospectus" shall include the Registration Statement as amended or
supplemented.
(f) Neither the Commission nor, to the best of the Company's
knowledge, any state regulatory authority has issued any order preventing or
suspending the use of any Preliminary Prospectus or has instituted or, to the
best of the Company's knowledge, threatened to institute any proceedings with
respect to such an order.
(g) The Registration Statement when it becomes effective, the
Prospectus (and any amendment or supplement thereto) when it is filed with the
Commission pursuant to Rule 424(b), and both documents as of the Closing Date
and the Option Closing Date referred to below, will contain all statements which
are required to be stated therein in accordance with the Act and the Regulations
and will in all material respects conform to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, on such dates, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements or omissions made in
reliance upon and in conformity with information furnished in writing to the
Company in connection with the Registration Statement or Prospectus or any
amendment or supplement thereto by the Representatives, or by any Underwriter
through the Representatives, expressly for use therein.
(h) Based on the assumptions stated in the Registration Statement and
the Prospectus, the Company had at the date or dates indicated in the Prospectus
a duly authorized and outstanding capitalization as set forth in the
Registration
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Statement and the Prospectus, and on the Closing Date the Company will have the
adjusted stock capitalization set forth therein. Except as set forth in the
Registration Statement or the Prospectus, on the Effective Date and on the
Closing Date, there will be no options to purchase, warrants or other rights to
subscribe for, or any securities or obligations convertible into, or any
contracts or commitments to issue or sell shares of the Company's capital stock
or any such warrants, convertible securities or obligations. Except as set forth
in the Prospectus, no holder of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise, to have such securities registered under the
Act.
(i) The descriptions in the Registration Statement and the Prospectus
of contracts and other documents are accurate and present fairly the information
required to be disclosed, and there are no contracts or other documents required
to be described in the Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement under the Act or the Regulations which
have not been so described or filed as required.
(j) KPMG LLP, the accountants who have certified the consolidated
financial statements of the Company and certain of the financial statements of
Pulsar (collectively, the "Financial Statements") filed and to be filed with the
Commission as part of the Registration Statement and the Prospectus, are
independent public accountants within the meaning of the Act and Regulations.
The Financial Statements and schedules and the notes thereto filed as part of
the Registration Statement and included in the Prospectus are complete, correct
and present fairly in all material respects the financial position of Pulsar and
the Company as of the dates thereof, and the results of operations and changes
in financial position of the Company and Pulsar for the periods indicated
therein, all in conformity with generally accepted accounting principles applied
on a consistent basis throughout the periods involved, except as otherwise
stated in the Registration Statement and the Prospectus. The selected financial
data set forth in the Registration Statement and the Prospectus present fairly
in all material respects the information shown therein and have been compiled on
a basis consistent with that of the audited and unaudited financial statements
included in the Registration Statement and the Prospectus.
(k) Each of the Company and the Subsidiaries has filed with the
appropriate federal, state and local governmental agencies, and all appropriate
foreign countries and political subdivisions thereof, all tax returns, including
franchise tax returns, which are required to be filed or has duly obtained
extensions of time for the filing thereof and has paid all taxes shown on such
returns and all assessments received by it to the
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extent that the same have become due; and the provisions for income taxes
payable, if any, shown on the Financial Statements filed with or as part of the
Registration Statement are sufficient for all accrued and unpaid foreign and
domestic taxes, whether or not disputed, and for all periods to and including
the dates of such Financial Statements. Except as disclosed in writing to the
Representatives, neither the Company nor any Subsidiary has executed or filed
with any taxing authority, foreign or domestic, any agreement extending the
period for assessment or collection of any income taxes and is not a party to
any pending action or proceeding by any foreign or domestic governmental agency
for assessment or collection of taxes; and no claims for assessment or
collection of taxes have been asserted against the Company or any Subsidiary.
(l) The outstanding Common Shares and outstanding options and
warrants to purchase Common Shares have been duly authorized and validly issued.
The outstanding Common Shares are fully paid and nonassessable. The outstanding
options and warrants to purchase Common Shares constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. None of
the outstanding Common Shares or options or warrants to purchase Common Shares
has been issued in violation of the preemptive rights of any shareholder of the
Company. None of the holders of the outstanding Common Shares is subject to
personal liability solely by reason of being such a holder. The offers and sales
of the outstanding Common Shares and outstanding options and warrants to
purchase Common Shares were at all relevant times either registered under the
Act and the applicable state securities or Blue Sky laws or exempt from such
registration requirements. The authorized Common Shares and outstanding options
and warrants to purchase Common Shares conform to the descriptions thereof
contained in the Registration Statement and Prospectus. Except as set forth in
the Registration Statement and the Prospectus, on the Effective Date and the
Closing Date, there will be no outstanding options or warrants for the purchase
of, or other outstanding rights to purchase, Common Shares or securities
convertible into Common Shares.
(m) No securities of the Company have been sold by the Company or by
or on behalf of, or for the benefit of, any person or persons controlling,
controlled by, or under common control with the Company within the three years
prior to the date hereof, except as disclosed in the Registration Statement.
(n) The issuance and sale of the Shares and the Warrant Shares have
been duly authorized and, when the Shares and the Warrant Shares have been
issued and duly delivered against payment therefor as contemplated by this
Agreement and the Representatives' Warrant Agreement, respectively, the Shares
and
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the Warrant Shares will be validly issued, fully paid and nonassessable, and the
holders thereof will not be subject to personal liability solely by reason of
being such holders. Neither the Shares nor the Warrant Shares will be subject to
preemptive rights of any shareholder of the Company.
(o) The issuance and sale of the Representatives' Warrants have
been duly authorized and, when issued, paid for and delivered as contemplated by
the Representatives' Warrant Agreement, the Representatives' Warrants will
constitute valid and binding obligations of the Company, enforceable as to the
Company in accordance with their terms. The Representatives' Warrants will not
be subject to preemptive rights of any shareholder of the Company. The Warrant
Shares have been duly reserved for issuance upon exercise of the
Representatives' Warrants in accordance with the provisions of the
Representatives' Warrant Agreement. The Representatives' Warrants conform to the
description thereof contained in the Registration Statement and Prospectus.
(p) Neither the Company nor any Subsidiary is in violation of (i) any
term or provision of its Certificate of Incorporation, Articles of Incorporation
(as the case may be) or By-Laws (or similar charter documents), each as amended;
(ii) in default in any material respect under any material term or provision or
any financial covenants of any indenture, mortgage, contract, commitment or
other agreement or instrument to which it is a party or by which it or any of
its property or business is or may be bound or affected; or (iii) in violation
in any material respect of any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company, any Subsidiary or any of their
respective properties or business. The Company and each Subsidiary owns,
possesses or has obtained all governmental and other (including those obtainable
from third parties) Permits necessary to own or lease, as the case may be, and
to operate its properties, whether tangible or intangible, and to conduct the
business and operations of the Company as presently conducted, and all such
Permits are outstanding and in good standing, and there are no proceedings
pending or to the best of the Company's and Pulsar's knowledge, threatened (nor,
to the best of the Company's and Pulsar's knowledge, is there any basis
therefor) which seek to cancel, terminate or limit such Permits.
(q) Except as set forth in the Prospectus, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries before
any governmental agency, court or tribunal, domestic or foreign, or before any
private arbitration tribunal, pending, or, to the best of the Company's and
Pulsar's knowledge, threatened against the Company or any Subsidiary or
involving the Company's or any of the Subsidiaries' properties or
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business which, if determined adversely to the Company or any of the
Subsidiaries would, individually or in the aggregate, result in any material
adverse change in the financial position, shareholders' equity, results of
operations, properties, business, management or affairs or business prospects of
the Company or any of the Subsidiaries or which question the validity of the
capital stock of the Company or this Agreement or of any action taken or to be
taken by the Company pursuant to, or in connection with, this Agreement; nor, to
the best of the Company's and Pulsar's knowledge, is there any basis for any
such claim, action, suit, proceeding, arbitration, investigation or inquiry.
There are no outstanding orders, judgments or decrees of any court, governmental
agency or other tribunal naming the Company or any of the Subsidiaries and
enjoining the Company or any of the Subsidiaries from taking, or requiring the
Company or any of the Subsidiaries to take, any action, or to which the Company
or any of the Subsidiaries or the Company's or any Subsidiaries' properties or
business is bound or subject.
(r) Neither the Company nor any of the Subsidiaries nor any of their
affiliates has incurred any liability for any finder's fees or similar payments
in connection with the transactions herein contemplated.
(s) Each of the Company and the Subsidiaries owns or possesses
adequate and enforceable rights to use all patents, patent applications,
trademarks, service marks, copyrights, rights, trade secrets, confidential
information, processes and formulations used or proposed to be used in the
conduct of its business as described in the Prospectus (collectively the
"Intangibles"); to the best of the Company's and Pulsar's knowledge, neither the
Company nor any of the Subsidiaries has infringed or is infringing upon the
rights of others with respect to the Intangibles; and neither the Company nor
any of the Subsidiaries has received any notice of conflict with the asserted
rights of others with respect to the Intangibles which could, singly or in the
aggregate, materially adversely affect its business as presently conducted or
the prospects, financial condition or results of operations of the Company or
any Subsidiary and neither the Company nor Pulsar knows of any basis therefor;
and, to the best of the Company's and Pulsar's knowledge, no others have
infringed upon the Intangibles of the Company or any Subsidiary.
(t) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus and the Financial Statements,
neither the Company nor any Subsidiary has incurred any material liability or
obligation, direct or contingent, or entered into any material transaction,
whether or not incurred in the ordinary course of business, or sustained any
material loss or interference with its business from
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fire, storm, explosion, flood or other casualty, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree; and since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there have not been, and prior to the
Closing Date there will not be, any changes in the capital stock or any material
increases in the long-term debt of the Company or any Subsidiary or any material
adverse change in or affecting the general affairs, management, financial
condition, shareholders' equity, results of operations or prospects of the
Company or any Subsidiary, other than as set forth or contemplated in the
Prospectus.
(u) Neither the Company nor any Subsidiary owns any real property.
Each of the Company and the Subsidiaries has good title to all personal property
(tangible and intangible) owned by it, free and clear of all security interests,
charges, mortgages, liens, encumbrances and defects, except such as are
described in the Registration Statement and Prospectus or such as do not
materially affect the value or transferability of such property and do not
interfere with the use of such property made, or proposed to be made, by the
Company or any of the Subsidiaries. The leases, licenses or other contracts or
instruments under which the Company and the Subsidiaries lease, hold or are
entitled to use any property, real or personal, are valid, subsisting and
enforceable only with such exceptions as are not material and do not interfere
with the use of such property made, or proposed to be made, by the Company or
any Subsidiary, and all rentals, royalties or other payments, if any, accruing
thereunder which became due prior to the date of this Agreement have been duly
paid, and neither the Company nor any Subsidiary, nor, to the best of the
Company's and Pulsar's knowledge, any other party is in default thereunder and,
to the best of the Company's and Pulsar's knowledge, no event has occurred
which, with the passage of time or the giving of notice, or both, would
constitute a default thereunder. Neither the Company nor any Subsidiary has
received notice of any violation of any applicable law, ordinance, regulation,
order or requirement relating to its owned or leased properties. Each of the
Company and each of the Subsidiaries has adequately insured its properties
against loss or damage by fire or other casualty and maintains, in adequate
amounts, such other insurance as is usually maintained by companies engaged in
the same or similar businesses located in its geographic area.
(v) Each contract or other instrument (however characterized or
described) to which the Company or a Subsidiary is a party or by which their
respective properties or businesses are or may be bound or affected and to which
reference is made in the Prospectus has been duly and validly executed, is in
full force and effect in all material respects and is enforceable against
the
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parties thereto in accordance with its terms, and none of such contracts or
instruments has been assigned by the Company or any Subsidiary, and neither the
Company nor any Subsidiary, nor, to the best of the Company's and Pulsar's
knowledge, any other party is in default thereunder and, to the best of the
Company's and Pulsar's knowledge, no event has occurred which, with the lapse of
time or the giving of notice, or both, would constitute a default thereunder.
None of the material provisions of such contracts or instruments violates
any existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court having jurisdiction over the Company or any
Subsidiary or any of their respective assets or businesses.
(w) The employment, consulting, confidentiality and non-competition
agreements between the Company and its officers, employees and consultants and
between each of the Subsidiaries and its respective officers, employees and
consultants, described in the Registration Statement, are binding and
enforceable obligations upon the respective parties thereto in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to principles of
equity.
(x) Except as set forth in the Prospectus, neither the Company nor
any Subsidiary has any employee benefit plans (including, without limitation,
profit sharing and welfare benefit plans) or deferred compensation arrangements
that are subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended.
(y) To the best of the Company's and Pulsar's knowledge, no labor
problem exists with any of the Company's employees or any Subsidiary's employees
or is imminent which could adversely affect the Company or any Subsidiary.
(z) Neither the Company nor any Subsidiary has, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in violation
of law or (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than, in each case, payments or contributions required or allowed
by applicable law. Each of the Company's and each of the Subsidiaries' internal
accounting controls and procedures are sufficient to cause the Company to comply
in all material respects with the Foreign Corrupt Practices Act of 1977, as
amended.
-13-
(aa) The Shares have been approved for listing on the Nasdaq National
Market ("Nasdaq").
(ab) The representations and warranties of each of LIT and Pulsar and
their respective stockholders and of the Company contained in the Stock
Acquisition Agreement dated as of February 9, 1999, by and among the Company,
LIT, Pulsar, Xxxxxxx X. Xxxxx, Xx., Xxxxxxx X. Xxxxx, Xxxx Xxxx and Xxxxxxxxx X.
Xxxx, as Trustees of the Xxxx Xxxx and Xxxxxxxxx X. Xxxx Living Trust dated
October 9, 1997, Xxxxxx X. Xxxx and Xxxxxxxx X. Xxxx, as Trustees of the Xxxxxx
X. Xxxx and Xxxxxxxx X. Xxxx Living Trust dated March 22, 1982 as amended on
October 14, 1997, Xxxxx X. Xxxx and Xxxxx X. Xxxx, as Trustees of the Shah
Living Trust dated November 14, 1995, Xxxx Xxxx as Trustee of the Xxxxx Xxxx
Trust dated October 16, 1997 and Xxxx Xxxx, as Trustee of the Xxxxxxx X. Xxxx
Trust dated October 9, 1997, are true, accurate and complete in all material
respects as of the date hereof and all conditions to the consummation by the
Company of the acquisition of Pulsar as described in the Prospectus (the
"Acquisition") have been satisfied.
(ac) The exchange by all of the stockholders of LIT of all of the
outstanding common stock of LIT for all of the currently outstanding Common
Shares of the Company as described in the Prospectus (the "Reorganization") has
been completed on the terms described in the Prospectus.
(ad) The Company has provided to Xxxxxx Xxxxxxxxxx LLP, counsel to the
several Underwriters ("Underwriters' Counsel"), all material agreements,
certificates, correspondence and other items, documents and information
requested by such counsel's Corporate Review Memorandum dated September __,
1998.
Any certificate signed by an officer of the Company or by an officer of a
Subsidiary and delivered to the Representatives or to Underwriters' Counsel
shall be deemed to be a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
5. Certain Covenants of the Company and Pulsar. The Company and Pulsar
-------------------------------------------
covenant with the several Underwriters as follows:
(a) The Company will not at any time, whether before the Effective
Date or thereafter during such period as the Prospectus is required by law to be
delivered in connection with the sales of the Shares by the Representatives or a
dealer, file or publish any amendment or supplement to the Registration
Statement or Prospectus of which the Representatives have not been
previously
-14-
advised and furnished a copy, or to which the Representatives shall in good
faith object in writing.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective and will advise the Representatives promptly, and,
if requested by the Representatives, confirm such advice in writing, (i) when
the Registration Statement, or any post-effective amendment to the Registration
Statement or any supplemented Prospectus is filed with the Commission; (ii) of
the receipt of any comments from the Commission; (iii) of any request of the
Commission for amendment or supplementation of the Registration Statement or
Prospectus or for additional information; and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any Preliminary
Prospectus, or of the suspension of the qualification of the Shares for offering
or sale in any jurisdiction, or of the initiation of any proceedings for any of
such purposes. The Company will use its best efforts to prevent the issuance of
any such stop order or of any order preventing or suspending such use and shall
use every reasonable effort to obtain as soon as possible the lifting thereof,
if any such order is issued.
(c) The Company will deliver to each Underwriter, without charge,
from time to time until the Effective Date, as many copies of each Preliminary
Prospectus as each Underwriter may reasonably request, and the Company hereby
consents to the use of such copies for purposes permitted by the Act. The
Company will deliver to each Underwriter, without charge, as soon as the
Registration Statement becomes effective, and thereafter from time to time as
requested, such number of copies of the Prospectus (as supplemented, if the
Company makes any supplements to the Prospectus) as each Underwriter may
reasonably request. The Company has furnished or will furnish to each of the
Representatives a signed copy of the Registration Statement as originally filed
and of all amendments thereto, whether filed before or after the Registration
Statement becomes effective, a copy of all exhibits filed therewith and a signed
copy of all consents and certificates of experts.
(d) The Company will comply with the Act, the Regulations, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder so as to permit the continuance of sales of and
dealings in the Offered Shares and in any Optional Shares which may be issued
and sold. If, at any time when a prospectus relating to the Shares is required
to be delivered under the Act, any event occurs as a result of which the
Registration Statement and Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements
-15-
therein, in light of the circumstances under which they were made, not
misleading, or if it shall be necessary to amend or supplement the Registration
Statement and Prospectus to comply with the Act or the regulations thereunder,
the Company will promptly file with the Commission, subject to Section 5(a)
hereof, an amendment or supplement which will correct such statement or omission
or which will effect such compliance.
(e) The Company will make generally available to its security
holders, in the manner specified in Rule 158(b) under the Act, and deliver to
the Representatives and Underwriters' Counsel as soon as practicable and in any
event not later than 45 days after the end of its fiscal quarter in which the
first anniversary date of the effective date of the Registration Statement
occurs, an earning statement meeting the requirements of Rule 158(a) under the
Act covering a period of at least 12 consecutive months beginning after the
effective date of the Registration Statement.
(f) For a period of three years from the Effective Date, the Company
will deliver to the Representatives, on a timely basis (i) a copy of each report
or document, including, without limitation, reports on Forms 8-K, 10-C, 10-K and
10-Q and exhibits thereto, filed or furnished to the Commission, any securities
exchange or the National Association of Securities Dealers, Inc. (the "NASD") on
the date each such report or document is so filed or furnished; (ii) as soon as
practicable, copies of any reports or communications (financial or other) of the
Company mailed to its security holders; (iii) as soon as practicable, a copy of
any Schedule 13D, 13G, 14D-1 or 13E-3 received or prepared by the Company from
time to time; (iv) to the extent available, quarterly statements setting forth
such information regarding the Company's results of operations and financial
position (including balance sheet, profit and loss statements and data regarding
backlog) as is regularly prepared by management of the Company; and (v) such
additional information concerning the business and financial condition of the
Company as the Representatives may from time to time reasonably request and
which can be prepared or obtained by the Company without unreasonable effort or
expense. The Company will furnish to its stockholders annual reports containing
audited financial statements and such other periodic reports as it may determine
to be appropriate or as may be required by law.
(g) Neither the Company nor any person that controls, is controlled
by or is under common control with the Company will take any action designed to
or which might be reasonably expected to cause or result in the stabilization or
manipulation of the price of the Common Shares.
-16-
(h) If the transactions contemplated by this Agreement are
consummated, the Company will pay or cause to be paid the following: all costs
and expenses incident to the performance of the obligations of the Company under
this Agreement, including, but not limited to, the fees and expenses of
accountants and counsel for the Company; the preparation, printing, mailing and
filing of the Registration Statement (including financial statements and
exhibits), Preliminary Prospectuses and the Prospectus, and any amendments or
supplements thereto; the reproducing and mailing of the Selected Dealer
Agreement; the issuance and delivery of the Shares to the Representatives; all
taxes, if any, on the issuance of the Shares; the fees, expenses and other costs
of listing the Shares on Nasdaq and of qualifying the Shares for sale under the
"Blue Sky" or securities laws of those states in which the Shares are to be
offered or sold, including the fees and disbursements of Underwriters' Counsel
incurred in connection therewith, and the cost of reproducing and mailing the
"Blue Sky Survey"; the filing fees incident to securing any required review by
the NASD; the cost of furnishing to the several Underwriters copies of the
Registration Statement, Preliminary Prospectuses and the Prospectus as herein
provided; the costs of placing "tombstone advertisements" in any publications
which may be selected by the Representatives; and all other costs and expenses
incident to the performance of the Company's obligations hereunder which are not
otherwise specifically provided for in this Section 5(h).
In addition, at the Closing Date and the Option Closing Date, the
Representatives will deduct from the payment for the Shares an amount equal to
the Representatives' accountable out-of-pocket costs, fees and expenses (up to
an aggregate maximum of $_______ [1.0% of the gross proceeds from the sale of
the Shares]) incurred in connection with the registration process, which amount
will include the fees and expenses of Underwriters' Counsel (other than those
payable by the Company in connection with "Blue Sky" qualifications referred to
in the preceding paragraph) incurred in connection with the registration process
and all of the costs associated with the marketing and selling of the Shares.
(i) If the transactions contemplated by this Agreement or related
hereto are not consummated because the Company and/or Pulsar decides not to
proceed with the offering and/or the Acquisition for any reason or if the
Representatives decide not to proceed with the offering because of a breach by
the Company and/or Pulsar of their representations, warranties or covenants in
this Agreement or as a result of adverse changes in the affairs of the Company
and/or Pulsar, the Company and Pulsar will reimburse the Representatives for all
of their accountable expenses reasonably incurred in connection with the
offering. In no event, however, will the Representatives, in the event the
offering is terminated,
-17-
be entitled to receive more than an amount equal to their actual accountable
out-of-pocket expenses.
(j) The Company intends to apply the net proceeds from the sale of
the Shares for the purposes set forth in the Prospectus.
(k) During the period of twenty-four (24) months following the date
hereof, (i) neither the Company nor any of its officers, directors or
securityholders will offer for sale, sell, transfer, pledge or otherwise dispose
of, directly or indirectly, any securities of the Company, in any manner
whatsoever, whether pursuant to Rule 144 of the Regulations or otherwise, (other
than by bona fide gift, will or the laws of descent or distribution to the
securityholder's spouse, children or grandchildren, or partnership, the general
partner of which is the securityholder (or a corporation, a majority of whose
outstanding stock is owned of record or beneficially by the securityholder or
any of the foregoing) or partners of the securityholder in connection with the
securityholder partnership's distribution of its Common Shares to its partners;
provided in each case that the transferee first executes and delivers to the
Underwriter an undertaking to be bound by the provisions of this Section 5(k))
provided that, after the first six (6) months of such period, this restriction
can be waived by BlueStone, in its sole discretion, and provided further that,
after the first twelve (12) months of such period, sales may be made, without
BlueStone's consent, as long as the number of shares (or share equivalents) sold
by all of such holders, in the aggregate, does not exceed, during any 90-day
period, the greater of (I) 1% of the then outstanding shares of Common Stock and
(II) the average weekly trading volume of the Common Stock during the four
calendar weeks preceding the holder's sale, and (ii) no holder of registration
rights relating to securities of the Company will execute any such registration
rights without the prior written consent of BlueStone. The Company will deliver
to the Representatives the undertakings as of the date hereof of its officers,
directors and securityholders to this effect.
(l) The Company will not file any registration statement relating to
the offer or sale of any of the Company's securities, including any registration
statement on Form S-8, during the twenty-four (24) months following the date
hereof (the "Restriction Period") without BlueStone's prior written consent;
except that after the twelve month (12) anniversary of the date hereof, the
Company may file a registration statement on Form S-8, provided that no more
than 100,000 shares of Common Stock may be sold pursuant to such registration
statement during the Restriction Period by persons who are not officers or
directors of the Company or family members of an officer or director of the
Company.
-18-
(m) The Company maintains and will continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurances that:
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(n) The Company will use its best efforts to maintain the listing of
the Shares on Nasdaq or another exchange that is mutually agreed upon by the
Company and the Representatives for so long as the Shares are qualified for such
listing.
(o) The Company will, concurrently with the Effective Date, register
the class of equity securities of which the Shares are a part under Section
12(g) of the Exchange Act and the Company will maintain the registration for a
minimum of five (5) years after the Effective Date.
(p) Subject to the sale of the Offered Shares, BlueStone and its
successors will have the right to designate up to two (2) nominees for election,
at its or their option, either as members of or non-voting advisors to the Board
of Directors of the Company, and the Company will use its best efforts to cause
such nominees to be elected and continued in office as a director of the Company
or as such advisor until the expiration of three (3) years from the Effective
Date. Following the election of such nominee(s) as a director(s) or advisor(s),
such persons shall receive no more or less compensation than is paid to other
non-officer directors of the Company for attendance at meetings of the Board of
Directors of the Company and shall be entitled to receive reimbursement for all
reasonable costs incurred in attending such meetings, including, but not limited
to, food, lodging and transportation. The Company agrees to indemnify and hold
each of such director(s) and/or advisor(s)harmless, to the maximum extent
permitted by law, against any and all claims, actions, awards and judgments
arising out of his service as a director or advisor and, in the event the
Company maintains a liability insurance policy affording coverage for the acts
of its officers and directors, to include such director(s) or advisor(s) as an
insured under such policy. The rights and benefits of such indemnification and
the benefits of such insurance shall, to the extent possible, extend to
BlueStone insofar as it may be or may be alleged to be responsible for such
director(s) or advisor(s).
-19-
If BlueStone does not exercise its option to designate members of or
advisors to the Company's Board of Directors, it shall nonetheless have the
right to send a representative (who need not be the same individual from meeting
to meeting) to observe each meeting of the Board of Directors. The Company
agrees to give BlueStone notice of each such meeting and to provide BlueStone
with an agenda and minutes of the meeting no later than it gives such notice and
provides such items to the directors.
(q) The Company shall retain a transfer agent for the Common Shares,
reasonably acceptable to BlueStone, for a period of three (3) years following
the Effective Date. In addition, for a period of three (3) years following the
Effective Date, the Company, at its own expense, shall cause its transfer agent
to provide BlueStone, if so requested in writing, with copies of the Company's
daily transfer sheets and when requested by BlueStone, a current list of the
Company's security holders, including a list of the beneficial owners of
securities held by a depository trust company and other nominees.
(r) The Company hereby agrees, at its sole cost and expense, to
supply and deliver to Underwriters' Counsel, within a reasonable period from the
date hereof, five bound volumes, including the Registration Statement, as
amended or supplemented, all exhibits to the Registration Statement, the
Prospectus and all other underwriting documents.
(s) The Company shall, within ten days of the date hereof, have
applied for listing in Standard & Poor's Corporation Records Service (including
annual report information) or Xxxxx'x Industrial Manual (Xxxxx'x OTC Industrial
Manual not being sufficient for these purposes) and shall use its best efforts
to have the Company listed in such manual and shall maintain such listing for a
period of three (3) years following the Effective Date.
(t) For a period of two (2) years from the Effective Date, the
Company shall provide BlueStone, on a not less than annual basis, with internal
forecasts setting forth projected results of operations for each annual period
in the two (2) fiscal years following the respective dates of such forecasts;
provided, however, that BlueStone shall keep confidential and shall not disclose
to any third party any material non-public information. Such forecasts shall be
provided to BlueStone more frequently than annually if prepared more frequently
by management, and revised forecasts shall be prepared and provided to BlueStone
when required to reflect more current information, revised assumptions or actual
results that differ materially from those set forth in the forecasts.
-20-
(u) For a period of three (3) years following the Effective Date, the
Company shall continue to retain KPMG Peat Marwick LLP (or such other nationally
recognized accounting firm as is acceptable to BlueStone) as the Company's
independent public accountants.
(v) For a period of three (3) years following the Effective Date, the
Company, at its expense, shall cause its independent certified public
accountants, as described in Section 5(u) above, to review (but not audit) the
Company's financial statements for each of the first three fiscal quarters prior
to the announcement of quarterly financial information, the filing of the
Company's 10-Q quarterly report and the mailing of quarterly financial
information to shareholders.
(w) For a period of twenty-five (25) days following the Effective
Date, the Company will not issue press releases or engage in any other publicity
without BlueStone's prior written consent, other than normal and customary
releases issued in the ordinary course of the Company's business or those
releases required by law.
(x) For a period of three (3) years following the Effective Date, the
Company will cause its Board of Directors to meet, either in person or
telephonically, a minimum of four (4) times per year and will hold a
shareholder's meeting at least once per annum.
(y) For a period of 18 months following the Effective Date, the
Company will not offer or sell any of its securities (i) pursuant to Regulation
S of the Act, or (ii) at a discount from the then current market price, without
the prior written consent of BlueStone.
(z) On or prior to the Closing Date, the Company will complete the
Acquisition on the terms described in the Prospectus.
6. Conditions of the Underwriters' Obligation to Purchase Shares from the
----------------------------------------------------------------------
Company. The obligation of the several Underwriters to purchase and pay for the
-------
Offered Shares which they have agreed to purchase from the Company is subject
(as of the date hereof and the Closing Date) to the accuracy of, and the
Company's compliance in all material respects with, the representations and
warranties of the Company herein, to the accuracy of the statements of the
Company and its officers made pursuant hereto, to the performance in all
material respects by the Company or its Subsidiaries of their respective
obligations hereunder, and to the following additional conditions:
-21-
(a) The Registration Statement will have become effective not later
than 9:30 A.M., New York City time, on the day following the date of this
Agreement, or at such later time or on such later date as the Representatives
may agree to in writing; prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or will be pending or, to
the best of the Representatives' or the Company's knowledge, will be
contemplated by the Commission; and any request on the part of the Commission
for additional information will have been complied with to the satisfaction of
Underwriters' Counsel.
(b) At the time that this Agreement is executed and at the Closing
Date, there will have been delivered to the Representatives a signed opinion of
Arent Fox Xxxxxxx Xxxxxxx & Xxxx, PLLC, counsel for the Company ("Company
Counsel"), dated as of the date hereof or the Closing Date, as the case may be,
substantially in the form of Exhibit 6(b) hereto.
In rendering its opinion pursuant to this Section 6(b), Company counsel may
rely upon the certificates of government officials and officers of the Company
as to matters of fact, provided that Company shall state that they have no
reason to believe, and no not believe, that they are justified in relying upon
such opinions or such certificates of government officials and officers of the
Company as to matters of fact, as the case may be.
The opinion letters delivered pursuant to this Section 6(b) shall state
that any opinion given therein qualified by the phrase "to the best of our
knowledge" is being given by Company Counsel after due investigation of the
matters therein discussed.
(c) At the Closing Date, there will have been delivered to the
Representatives a signed opinion of Underwriters' Counsel, dated as of the
Closing Date, to the effect that the opinions delivered pursuant to Section 6(b)
hereof appear on their face to be appropriately responsive to the requirements
of this Agreement, except to the extent waived by the Representatives,
specifying the same, and with respect to such other related matters as the
Representatives may require.
(d) At the Closing Date (i) the Registration Statement and the
Prospectus and any amendments or supplements thereto will contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and will conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto will
contain any untrue statement of a material fact or omit to state
-22-
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (ii) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there will not have been any
material adverse change in the financial condition, results of operations or
general affairs of the Company from that set forth or contemplated in the
Registration Statement and the Prospectus, except changes which the Registration
Statement and the Prospectus indicate might occur after the Effective Date;
(iii) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no material
transaction, contract or agreement entered into by the Company, other than in
the ordinary course of business, which would be required to be set forth in the
Registration Statement and the Prospectus, other than as set forth therein; and
(iv) no action, suit or proceeding at law or in equity will be pending or, to
the best of the Company's knowledge, threatened against the Company which is
required to be set forth in the Registration Statement and the Prospectus, other
than as set forth therein, and no proceedings will be pending or, to the best of
the Company's knowledge, threatened against the Company before or by any
federal, state or other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding would materially adversely affect the
business, property, financial condition or results of operations of the Company,
other than as set forth in the Registration Statement and the Prospectus. At the
Closing Date, there will be delivered to the Representatives a certificate
signed by the Chairman of the Board or the President or a Vice President of the
Company, dated the Closing Date, evidencing compliance with the provisions of
this Section 6(d) and stating that the representations and warranties of the
Company set forth in Section 4 hereof were accurate and complete in all material
respects when made on the date hereof and are accurate and complete in all
material respects on the Closing Date as if then made; that the Company has
performed all covenants and complied with all conditions required by this
Agreement to be performed or complied with by the Company prior to or as of the
Closing Date; and that, as of the Closing Date, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been initiated or, to the best of his knowledge, are
contemplated or threatened. In addition, the Representatives will have received
such other and further certificates of officers of the Company as the
Representatives or Underwriters' Counsel may reasonably request.
(e) At the time that this Agreement is executed and at the Closing
Date, the Representatives will have received a signed letter from KPMG LLP,
dated the date such letter is to be received by the Representatives and
addressed to it, confirming that it is a firm of independent public accountants
within the
-23-
meaning of the Act and Regulations and stating that: (i) insofar as reported on
by it, in its opinion, the Financial Statements included in the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Act and the applicable Regulations; (ii) on the basis of
procedures and inquiries (not constituting an examination in accordance with
generally accepted auditing standards) consisting of a reading of the unaudited
interim financial statements of the Company, if any, appearing in the
Registration Statement and the Prospectus and the latest available unaudited
interim financial statements of the Company and Pulsar, if more recent than that
appearing in the Registration Statement and Prospectus, inquiries of officers of
the Company and officers of Pulsar responsible for financial and accounting
matters as to the transactions and events subsequent to the date of the latest
audited financial statements of the Company and Pulsar, and a reading of the
minutes of meetings of the shareholders, the Board of Directors and any
committees of the Board of Directors of each of the Company and of Pulsar, as
set forth in the minute books of the Company and of Pulsar, nothing has come to
its attention which, in its judgment, would indicate that (A) during the period
from the date of the latest financial statements of the Company and Pulsar
appearing in the Registration Statement and Prospectus to a specified date not
more than three business days prior to the date of such letter, there have been
any decreases in net current assets or net assets as compared with amounts shown
in such financial statements or decreases in net sales or decreases in total or
per share net income compared with the corresponding period in the preceding
year or any change in the capitalization or long-term debt of the Company or
Pulsar, except in all cases as set forth in or contemplated by the Registration
Statement and the Prospectus, and (B) the unaudited interim financial statements
of the Company and Pulsar, if any, appearing in the Registration Statement and
the Prospectus, do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Regulations or are not
fairly presented in conformity with generally accepted accounting principles and
practices on a basis substantially consistent with the audited financial
statements included in the Registration Statement or the Prospectus; and (iii)
it has compared specific dollar amounts, numbers of shares, numerical data,
percentages of revenues and earnings, and other financial information pertaining
to the Company and Pulsar set forth in the Prospectus (with respect to all
dollar amounts, numbers of shares, percentages and other financial information
contained in the Prospectus, to the extent that such amounts, numbers,
percentages and information may be derived from the general accounting records
of the Company or Pulsar, and excluding any questions requiring an
interpretation by legal counsel) with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance
-24-
with generally accepted auditing standards) set forth in the letter, and found
them to be in agreement.
(f) There shall have been duly tendered to the Representatives
certificates representing the Offered Shares to be sold on the Closing Date.
(g) The NASD shall have indicated that it has no objection to the
underwriting arrangements pertaining to the sale of the Offered Shares by the
Underwriters or the sale of the Shares by the Representatives.
(h) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing Date or
the Option Closing Date, as the case may be, for any member firm of the NASD to
execute transactions (as principal or as agent) in the Shares, and no
proceedings for the purpose of taking such action shall have been instituted or
shall be pending, or, to the best of the Representatives' or the Company's
knowledge, shall be contemplated by the Commission or the NASD. The Company
represents at the date hereof, and shall represent as of the Closing Date or
Option Closing Date, as the case may be, that it has no knowledge that any such
action is in fact contemplated by the Commission or the NASD.
(i) The Common Shares have been approved for listing on Nasdaq.
(j) All proceedings taken at or prior to the Closing Date or the
Option Closing Date, as the case may be, in connection with the authorization,
issuance and sale of the Shares shall be reasonably satisfactory in form and
substance to the Representatives and to Underwriters' Counsel, and such counsel
shall have been furnished with all such documents, certificates and opinions as
they may request for the purpose of enabling them to pass upon the matters
referred to in Section 6(c) hereof and in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company, the performance of any covenants of the Company, or the compliance by
the Company with any of the conditions herein contained.
(k) As of the date hereof, the Company will have delivered to the
Representatives the written undertakings of its officers, directors and security
holders and/or registration rights holders, as the case may be, to the effect of
the matters set forth in Section 5(l).
(l) Each of the Company's current officers, directors and
securityholders shall have agreed to vote all of the Common Shares owned by such
person or entity so as to elect and
-25-
continue in office such nominee(s) of BlueStone as more fully set forth in
section 5(p) above.
If any of the conditions specified in this Section 6 have not been
fulfilled, this Agreement may be terminated by the Representatives on notice to
the Company.
7. Indemnification.
----------------
(a) Each of the Company and Pulsar agrees, jointly and severally, to
indemnify and hold harmless each Underwriter, including specifically each person
that may be substituted for an Underwriter as provided in Section 10 hereof,
each officer, director, partner, employee and agent of any Underwriter, and each
person, if any, who controls any of the Underwriters within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, from and against any
and all losses, claims, damages, expenses or liabilities, joint or several (and
actions in respect thereof), to which they or any of them may become subject
under the Act or under any other statute or at common law or otherwise, and,
except as hereinafter provided, will reimburse each of the Underwriters and each
such person, if any, for any legal or other expenses reasonably incurred by them
or any of them in connection with investigating or defending any actions,
whether or not resulting in any liability, insofar as such losses, claims,
damages, expenses, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained (i) in
the Registration Statement, in any Preliminary Prospectus or in the Prospectus
(or the Registration Statement or Prospectus as from time to time amended or
supplemented) or (ii) in any application or other document executed by the
Company, or based upon written information furnished by or on behalf of the
Company, filed in any jurisdiction in order to qualify the Shares under the
securities laws thereof (hereinafter "application"), or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, in light of the circumstances under which they were
made, unless such untrue statement or omission was made in such Registration
Statement, Preliminary Prospectus, Prospectus or application in reliance upon
and in conformity with information furnished in writing to the Company in
connection therewith by the Underwriter or any such person through the
Underwriter expressly for use therein; provided, however, that the indemnity
agreement contained in this Section 7(a) with respect to any Preliminary
Prospectus will not inure to the benefit of the Underwriter (or to the benefit
of any other person that may be indemnified pursuant to this Section 7(a)) if
(A) the person asserting any such losses, claims, damages, expenses or
liabilities purchased the Shares which are the subject thereof from such
Underwriter or other indemnified person; (B) such
-26-
Underwriter or other indemnified person failed to send or give a copy of the
Prospectus to such person at or prior to the written confirmation of the sale of
such Shares to such person; and (C) the Prospectus did not contain any untrue
statement or alleged untrue statement or omission or alleged omission giving
rise to such cause, claim, damage, expense or liability.
(b) Each Underwriter (including specifically each person that may be
substituted for an Underwriter as provided in Section 11 hereof) agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, from and against any and all losses, claims, damages,
expenses or liabilities, joint or several (and actions in respect thereof), to
which they or any of them may become subject under the Act or under any other
statute or at common law or otherwise, and, except as hereinafter provided, will
reimburse the Company and each such director, officer or controlling person for
any legal or other expenses reasonably incurred by them or any of them in
connection with investigating or defending any actions, whether or not resulting
in any liability, insofar as such losses, claims, damages, expenses, liabilities
or actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in the Registration Statement, in any
Preliminary Prospectus or in the Prospectus (or the Registration Statement or
Prospectus as from time to time amended or supplemented) or (ii) in any
application (including any application for registration of the Shares under
state securities or Blue Sky laws), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, in light of the circumstances under which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by such Underwriter, or by the Representatives on behalf of such
Underwriter, expressly for use therein.
(c) Promptly after receipt of notice of the commencement of any
action in respect of which indemnity may be sought against any indemnifying
party under this Section 7, the indemnified party will notify the indemnifying
party in writing of the commencement thereof, and the indemnifying party will,
subject to the provisions hereinafter stated, assume the defense of such action
(including the employment of counsel satisfactory to the indemnified party and
the payment of expenses) insofar as such action relates to an alleged liability
in respect of which indemnity may be sought against the indemnifying party.
After notice from the indemnifying party of its election to assume the
-27-
defense of such claim or action, the indemnifying party shall no longer be
liable to the indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that if, in the reasonable judgment of the indemnified party or parties, it is
advisable for the indemnified party or parties to be represented by separate
counsel, the indemnified party or parties shall have the right to employ a
single counsel to represent the indemnified parties who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the indemnified parties thereof against the indemnifying party, in which
event the fees and expenses of such separate counsel shall be borne by the
indemnifying party. Any party against whom indemnification may be sought under
this Section 7 shall not be liable to indemnify any person that might otherwise
be indemnified pursuant hereto for any settlement of any action effected without
such indemnifying party's consent.
8. Contribution. To provide for just and equitable contribution, if
------------
(i) an indemnified party makes a claim for indemnification pursuant to Section 8
hereof (subject to the limitations thereof) and it is finally determined, by a
judgment, order or decree not subject to further appeal, that such claim for
indemnification may not be enforced, even though this Agreement expressly
provides for indemnification in such case; or (ii) any indemnified or
indemnifying party seeks contribution under the Act, the Exchange Act, or
otherwise, then the Company and Pulsar (including, for this purpose, any
contribution made by or on behalf of any director of the Company, any officer of
the Company who signed the Registration Statement and any controlling person of
the Company) as one entity and the Underwriters (including, for this purpose,
any contribution by or on behalf of each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and each officer, director, partner, employee and agent of any of
the Underwriters) as a second entity, shall contribute to the losses,
liabilities, claims, damages and expenses whatsoever to which any of them may be
subject, so that the Underwriters are responsible for the proportion thereof
equal to the percentage which the underwriting discount per Share set forth on
the cover page of the Prospectus represents of the initial public offering price
per Share set forth on the cover page of the Prospectus and the Company is
responsible for the remaining portion; provided, however, that if applicable law
does not permit such allocation, then, if applicable law permits, other relevant
equitable considerations such as the relative fault of the Company and Pulsar on
the one hand, and the Underwriters, on the other hand, in connection with the
facts which resulted in such losses, liabilities, claims, damages and expenses
shall also be considered. The relative fault, in the case of an
-28-
untrue statement, alleged untrue statement, omission or alleged omission, shall
be determined by, among other things, whether such statement, alleged statement,
omission or alleged omission relates to information supplied by the Company or
by the Underwriters, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement, alleged
statement, omission or alleged omission. The Company and Pulsar, on one hand,
and the Underwriters, on the other hand, agree that it would be unjust and
inequitable if the respective obligations of the Company, Pulsar and the
Underwriters for contribution were determined by pro rata or per capita
allocation of the aggregate losses, liabilities, claims, damages and expenses or
by any other method of allocation that does not reflect the equitable
considerations referred to in this Section 8. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
controls any of the Underwriters within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partner, employee
and agent of any of the Underwriters will have the same rights to contribution
as the Underwriters, and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who has signed the Registration Statement and each
director of the Company will have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 8. Anything in
this Section 8 to the contrary notwithstanding, no party will be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 8 is intended to supersede, to the
extent permitted by law, any right to contribution under the Act or the Exchange
Act or otherwise available.
9. Survival of Indemnities, Contribution, Warranties and
-----------------------------------------------------
Representations. The respective indemnity and contribution agreements of the
---------------
Company, Pulsar and the Underwriters contained in Sections 7 and 8 hereof, and
the representations and warranties of the Company and Pulsar contained in this
Agreement shall remain operative and in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation made by or on
behalf of the Underwriters, the Company or any of its directors and officers or
Pulsar or any controlling person referred to in said Sections, and shall survive
the delivery of, and payment for, the Shares.
10. Substitution of Underwriters.
-----------------------------
(a) If one or more Underwriters should default in its or their
obligation to purchase and pay for any Offered Shares
-29-
hereunder and if the aggregate number of such Offered Shares which all
Underwriters so defaulting have agreed to purchase does not exceed 10% of the
total number of the Offered Shares, the non-defaulting Underwriters will be
obligated severally to purchase and pay for (in addition to the number of
Offered Shares set forth opposite their names in Schedule A attached hereto) the
full number of Offered Shares agreed to be purchased by all defaulting
Underwriters, and not so purchased, in proportion to their respective
commitments hereunder. In such event the Representatives, for the accounts of
the several nondefaulting Underwriters, may take up and pay for all or any part
of such additional Offered Shares to be purchased by each such Underwriter under
this Section 10(a), and may postpone the Closing Date to a time not exceeding
three full business days after the Closing Date determined as provided in
Section 2 hereof.
(b) If one or more Underwriters should default in its or their
obligation to purchase and pay for any Offered Shares hereunder and if the
aggregate number of such Offered Shares which all Underwriters so defaulting
have agreed to purchase exceeds 10% of the total number of Offered Shares, or if
one or more Underwriters for any reason permitted hereunder should cancel its or
their obligation to purchase and pay for Offered Shares hereunder, the non-
cancelling and non-defaulting Underwriters (hereinafter called the "remaining
Underwriters") will have the right to purchase such Offered Shares in such
proportion as may be agreed among them at the Closing Date determined as
provided in Section 2 hereof. If the remaining Underwriters do not purchase and
pay for such Offered Shares at such Closing Date, the Closing Date will be
postponed for 24 hours and the remaining Underwriters will have the right to
purchase such Offered Shares, or to substitute another person or persons to
purchase the same, or both, at such postponed Closing Date. If purchasers have
not been found for such Offered Shares by such postponed Closing Date, the
Closing Date will be postponed for a further 24 hours, and the Company will have
the right to substitute another person or persons, reasonably satisfactory to
the Representatives to purchase such Offered Shares at such second postponed
Closing Date. If it shall be arranged for the remaining Underwriters or
substituted underwriters to take up the Firm Shares of the defaulting
Underwriter or Underwriters as provided in this Section, (A) the Company shall
have the right to postpone the time of delivery for a period of not more than
three (3) full Business Days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary. If the Company has not found such purchasers for
such Offered Shares by such second postponed Closing Date, then this Agreement
will automatically terminate, and neither the
-30-
Company nor the remaining Underwriters will be under any obligation under this
Agreement (except that the Company and the Underwriters will remain liable to
the extent provided in Sections 7 and 8 hereof and the Company will also remain
liable to the extent provided in Section 5(j) hereof). As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 10(b). Nothing in Section 11 hereof will relieve
a defaulting Underwriter from the liability for its default and nothing in this
Section 10(b) will obligate any Underwriter to purchase or find purchasers for
any Offered Shares in excess of those agreed to be purchased by such Underwriter
under the terms of Section 2 hereof.
11. Termination of Agreement.
-------------------------
(a) The Company, by written or telegraphic notice to the
Representatives, or the Representatives, by written or telegraphic notice to the
Company, may terminate this Agreement prior to the earlier of (i) 11:00 A.M.,
New York City time, on the first full business day after the Effective Date; or
(ii) the time when the Underwriters, after the Registration Statement becomes
effective, release the Offered Shares for public offering. The time when the
Underwriters "release the Offered Shares for public offering" for the purposes
of this Section 11 means the time when the Underwriters release for publication
the first newspaper advertisement, which is subsequently published, relating to
the Offered Shares, or the time when the Underwriters release for delivery to
members of a selling group copies of the Prospectus and an offering letter or an
offering telegram relating to the Offered Shares, whichever will first occur.
(b) This Agreement, including without limitation, the obligation
to purchase the Shares and the obligation to purchase the Optional Shares after
exercise of the option referred to in Section 3 hereof, is subject to
termination in the absolute discretion of the Underwriters, by notice given to
the Company prior to delivery of and payment for all the Offered Shares or the
Optional Shares, as the case may be, if, prior to such time, any of the
following shall have occurred: (i) the Company withdraws the Registration
Statement from the Commission or the Company does not or cannot expeditiously
proceed with the public offering; (ii) the representations and warranties in
Section 4 hereof are not materially correct or cannot be complied with; (iii)
trading in securities generally on the New York Stock Exchange or the American
Stock Exchange will have been suspended, other than intra-day programmed trading
curbs imposed by Nasdaq; (iv) limited or minimum prices will have been
established on either such Exchange; (v) a banking moratorium will have been
declared either by federal or New York State authorities; (vi) any other
restrictions on transactions in securities materially affecting the free market
for securities
-31-
or the payment for such securities, including the Offered Shares or the Optional
Shares, will be established by either of such Exchanges, by the Commission, by
any other federal or state agency, by action of the Congress or by Executive
Order; (vii) trading in any securities of the Company shall have been suspended
or halted by any national securities exchange, the NASD or the Commission;
(viii) there has been a materially adverse change in the condition (financial or
otherwise), prospects or obligations of the Company; (ix) the Company will have
sustained a material loss, whether or not insured, by reason of fire, flood,
accident or other calamity; (x) any action has been taken by the government of
the United States or any department or agency thereof which, in the judgment of
the Representatives, has had a material adverse effect upon the market or
potential market for securities in general; or (xi) the market for securities in
general or political, financial or economic conditions will have so materially
adversely changed that, in the judgment of the Representatives, it will be
impracticable to offer for sale, or to enforce contracts made by the
Underwriters for the resale of, the Offered Shares or the Optional Shares, as
the case may be.
(c) If this Agreement is terminated pursuant to Section 6 hereof or
this Section 11 or if the purchases provided for herein are not consummated
because any condition of the Underwriters' obligations hereunder is not
satisfied or because of any refusal, inability or failure on the part of the
Company to comply with any of the terms or to fulfill any of the conditions of
this Agreement, or if for any reason the Company shall be unable to or does not
perform all of its obligations under this Agreement, the Company will not be
liable to any of the Underwriters for damages on account of loss of anticipated
profits arising out of the transactions covered by this Agreement, but the
Company will remain liable to the extent provided in Sections 5(j), 7, 8 and 9
of this Agreement.
12. Information Furnished by the Underwriters to the Company. It is hereby
--------------------------------------------------------
acknowledged and agreed by the parties hereto that for the purposes of this
Agreement, including, without limitation, Sections 4(e), 7(a), 7(b) and 8
hereof, the only information given by the Underwriters to the Company for use in
the Prospectus are the statements set forth in the last sentence of the last
paragraph on the cover page, information in the ____ paragraph on page ___ with
respect to concessions and reallowances, the table on page _____ regarding the
offering syndicate, and the information in the ____, ________ and ________ full
paragraphs on page ____ with respect to discretionary accounts, the
determination of the public offering price and stabilizing the market price of
the Shares, respectively, as such information appears in any Preliminary
Prospectus and in the Prospectus.
-32-
13. Notices and Governing Law. All communications hereunder will be in
-------------------------
writing and, except as otherwise provided, will be delivered at, or mailed by
certified mail, return receipt requested, or telecopied to, the following
addresses: if to BlueStone, the Representatives, or the Underwriters, to
BlueStone Capital Partners, L.P., Attention: Xxxx X. Xxxxxxx, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Facsimile No. (000) 000-0000, with a copy to Xxxxxx
Xxxxxxxxxx LLP, Attention: Xxxxxx X. Xxxxxxx, Esq., 000 Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Facsimile No. (000) 000-0000; if to the Company, to
Litronic Inc., 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxx Xxxx, Chief Executive Officer; with a copy to Arent Fox Xxxxxxx
Xxxxxxx & Xxxx, PLLC, 0000 Xxxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000-
4339, Attention: Xxxxxx X. XxXxxxxx, Esq., Facsimile No. (000) 000-0000.
This Agreement shall be deemed to have been made and delivered in New York
City and shall be governed as to validity, interpretation, construction, effect
and in all other respects by the internal laws of the State of New York. The
Company (1) agrees that any legal suit, action or proceeding arising out of or
relating to this Agreement shall be instituted exclusively in New York State
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York, (2) waives any objection which the Company
may have now or hereafter to the venue of any such suit, action or proceeding,
and (3) irrevocably consents to the jurisdiction of the New York State Supreme
Court, County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. The Company
further agrees to accept and acknowledge service of any and all process which
may be served in any such suit, action or proceeding in the New York State
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York and agrees that service of process upon the
Company mailed by certified mail to the Company's address (Attention: President)
shall be deemed in every respect effective service of process upon the Company
in any such suit, action or proceeding.
14. Parties in Interest. This Agreement is made solely for the benefit of
-------------------
the several Underwriters, the Company and, to the extent expressed, any person
controlling the Company or the Underwriters, each officer, director, partner,
employee and agent of the Underwriters, the directors of the Company, its
officers who have signed the Registration Statement, and their respective
executors, administrators, successors and assigns, and, no other person will
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" will not include any purchaser of the Shares from any
of the Underwriters, as such purchaser.
-33-
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement between the Company, Pulsar and the Underwriters in
accordance with its terms.
Very truly yours,
LITRONIC INC.
By: ___________________________
Name:
Title:
PULSAR DATA SYSTEMS, INC.
By:____________________________
Name:
Title:
Confirmed and accepted in New York, N.Y.,
as of the date first above written:
BLUESTONE CAPITAL PARTNERS, L.P.
By: BlueStone Capital Management, Inc.,
General Partner
By: ____________________________________
Name:
Title:
PACIFIC CREST SECURITIES INC.
By: ____________________________________
Name:
Title:
Acting on behalf of themselves as the
Representatives of the several Underwriters
named in Schedule A hereto.
-34-
SCHEDULE A
TO THE UNDERWRITING AGREEMENT
Underwriter Number of Shares
----------- ----------------
BlueStone Capital Partners, L.P
Pacific Crest Securities Inc. _________
Total.................................. 3,700,000
=========
EXHIBIT 6(b)
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
power and authority, corporate and other, and with all Permits necessary to own
or lease, as the case may be, and operate its properties, whether tangible or
intangible, and to conduct its business as described in the Registration
Statement. Other than LIT, the Company has no subsidiaries as of the date hereof
and, as of the Closing Date, will have no subsidiaries other than LIT and
Pulsar. The Company has no equity interest in any entities other than the
Subsidiaries. Each of the Subsidiaries is a corporation duly organized and
validly existing under the laws of its state of incorporation. Unless the
context otherwise requires, all references to the "Company" in this opinion
shall include the Subsidiaries. Each of the Company and of the Subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in all jurisdictions wherein such qualification is necessary and failure so to
qualify could have a material adverse effect on the financial condition, results
of operations, business or properties of the Company. Each of the Subsidiaries
has full power and authority, corporate and other, and all Permits necessary to
own or lease, as the case may be, and operate its properties, whether tangible
or intangible, and to conduct its business as described in the Registration
Statement.
On the Closing Date, the Company will own all of the issued and
outstanding shares of capital stock of each of the Subsidiaries, free and clear
of any security interests, liens, encumbrances, claims and charges, and all of
such shares have been duly authorized and validly issued and are fully paid and
non-assessable. There are no options or warrants for the purchase of, or other
rights to purchase, or outstanding securities convertible into or exchangeable
for, any capital stock or other securities of any Subsidiary other than those
described in the Prospectus.
(ii) The Company and Pulsar each has full power and
authority, corporate and other, to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby and the Company has full
power and authority, corporate and other, to execute, deliver and perform the
Representatives' Warrant Agreement and to consummate the transactions
contemplated thereby. The execution, delivery and performance of this Agreement
by the Company and Pulsar and the Representatives' Warrant Agreement by the
Company, the consummation by the Company and Pulsar of the transactions herein
and by the Company of the transactions therein contemplated and the compliance
by the Company and Pulsar with the terms of this Agreement and by the Company
with the terms of the Representatives' Warrant Agreement have been duly
authorized by all
-1-
necessary corporate action. This Agreement has been duly executed and delivered
by the Company and Pulsar and constitutes the valid and binding obligation of
the Company and Pulsar, and the Representatives' Warrant Agreement, when
executed and delivered by the Company on the Closing Date, will be the valid and
binding obligation of the Company, enforceable in accordance with their
respective terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and the discretion of courts in granting equitable
remedies and except that enforceability of the indemnification provisions set
forth in Section 7 and the contribution provisions set forth in Section 8 of
this Agreement may be limited by the federal securities laws or public policy
underlying such laws.
(iii) The execution, delivery and performance of this Agreement
by the Company and Pulsar and the Representatives' Warrant Agreement by the
Company, the consummation by the Company and Pulsar of the transactions herein
contemplated and by the Company of the transactions therein contemplated and the
compliance by the Company and Pulsar with the terms of this Agreement and by the
Company with the terms of the Representatives' Warrant Agreement do not, and
will not, with or without the giving of notice or the lapse of time, or both,
(A) result in a violation of the Certificate of Incorporation or Articles of
Incorporation, as the case may be, or By-Laws (or similar charter documents),
each as amended, of the Company or of any Subsidiary, (B) result in a breach of
or conflict with any terms or provisions of, or constitute a default under, or
result in the modification or termination of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any Subsidiary pursuant to any indenture,
mortgage, note, contract, commitment or other agreement or instrument to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective properties or assets are or may be bound
or affected; (C) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any Subsidiary or any of their
respective properties or business; or (D) have any effect on any Permit
necessary for the Company or any Subsidiary to own or lease and operate their
respective properties or conduct their businesses or the ability of the Company
to make use thereof except in the case of clauses (ii), (iii) and (iv) where
such breach, conflict, default, violation, effect or other action or failure
would not have a material adverse effect on the business, financial condition or
results of operations of the Company and its Subsidiaries taken as a whole.
-2-
(iv) To the best of Company Counsel's knowledge, no Permits of
any court or governmental agency or body (other than under the Act, the
Regulations and applicable state securities or Blue Sky laws) are required for
the valid authorization, issuance, sale and delivery of the Shares or the
Representatives' Warrants, and the consummation by the Company and Pulsar of the
transactions contemplated by this Agreement and by the Company of the
transactions contemplated by the Representatives' Warrant Agreement.
(v) The Registration Statement has become effective under the
Act; to the best of Company Counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued; and no proceedings
for that purpose have been instituted or are pending, threatened or contemplated
under the Act or applicable state securities laws.
(vi) The Registration Statement and the Prospectus, as of the
Effective Date, and each amendment or supplement thereto as of its effective or
issue date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which Company Counsel need not
express an opinion) comply as to form in all material respects with the
requirements of the Act and Regulations and the conditions for use of a
registration statement on Form S-1 have been satisfied by the Company.
(vii) The descriptions in the Registration Statement and the
Prospectus of statutes, regulations, government classifications, contracts and
other documents (including opinions of such counsel); and the response to Item
10 of Form S-1 have been reviewed by Company Counsel, and, based upon such
review, are accurate in all material respects and present fairly the information
required to be disclosed, and there are no material statutes, regulations or
government classifications, or, to the best of Company Counsel's knowledge,
material contracts or documents, of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not so described or filed as required.
None of the material provisions of the contracts or instruments
described above violates any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court having
jurisdiction over the Company or any Subsidiary or any of their assets or
businesses. To the best of Company counsel's knowledge, the Company is not in
default under any contract or agreement material to its business or under any
promissory note or other evidence of indebtedness for borrowed funds.
-3-
(viii) The outstanding Common Shares and outstanding options and
warrants to purchase Common Shares have been duly authorized and validly issued.
The outstanding Common Shares are fully paid and nonassessable. The outstanding
options and warrants to purchase Common Shares constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. None of
the outstanding Common Shares or options or warrants to purchase Common Shares
has been issued in violation of the preemptive rights of any shareholder of the
Company. None of the holders of the outstanding Common Shares is subject to
personal liability solely by reason of being such a holder. The offers and sales
of the outstanding Common Shares and outstanding options and warrants to
purchase Common Shares were at all relevant times either registered under the
Act and the applicable state securities or Blue Sky laws or exempt from such
registration requirements. The authorized Common Shares and outstanding options
and warrants to purchase Common Shares conform to the descriptions thereof
contained in the Registration Statement and Prospectus. To the best of Company
Counsel's knowledge, except as set forth in the Prospectus, no holders of any of
the Company's securities has any rights, "demand", "piggyback" or otherwise, to
have such securities registered under the Act.
(ix) The issuance and sale of the Shares and Warrant Shares
have been duly authorized and, when the Shares and Warrant Shares have been
issued and duly delivered against payment therefor as contemplated by this
Agreement and the Representatives' Warrant Agreement, respectively, the Shares
and the Warrant Shares will be validly issued, fully paid and nonassessable, and
the holders thereof will not be subject to personal liability solely by reason
of being such holders. Neither the Shares nor the Warrant Shares are subject to
preemptive rights of any shareholder of the Company. The certificates
representing the Shares are in proper legal form.
(x) The issuance and sale of the Representatives' Warrants
have been duly authorized and, when issued, paid for and delivered pursuant to
the terms of the Representatives' Warrant Agreement, they will constitute the
valid and binding obligations of the Company, enforceable as to the Company in
accordance with their terms. The Warrant Shares have been duly reserved for
issuance upon exercise of the Representatives' Warrants in accordance with the
provisions of the Representatives' Warrant Agreement. The Representatives'
Warrants conform to the descriptions thereof contained in the Registration
Statement and the Prospectus.
(xi) Upon delivery of the Offered Shares to the Underwriters
against payment therefor as provided in this Agreement, the Underwriters
(assuming they are bona fide purchasers
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within the meaning of the Uniform Commercial Code) will acquire good title to
the Offered Shares, free and clear of all liens, encumbrances, equities,
security interests and claims.
(xii) Assuming that the Representatives exercise the over-allotment
option to purchase any of the Optional Shares and make payment therefor in
accordance with the terms of this Agreement, upon delivery of the Optional
Shares so purchased to the Representatives hereunder, the Representatives
(assuming they are bona fide purchasers within the meaning of the Uniform
Commercial Code) will acquire good title to such Optional Shares, free and clear
of any liens, encumbrances, equities, security interests and claims.
(xiii) To the best of Company Counsel's knowledge, there are no
claims, actions, suits, proceedings, arbitrations, investigations or inquiries
before any governmental agency, court or tribunal, foreign or domestic, or
before any private arbitration tribunal, pending or threatened against the
Company or any Subsidiary, or involving the Company's or any Subsidiary's
properties or businesses, other than as described in the Prospectus, such
description being accurate, and other than litigation incident to the kind of
business conducted by the Company which, individually and in the aggregate, is
not material.
(xiv) Each of the Company and of the Subsidiaries owns or possesses
adequate and enforceable rights to use all patents, patent applications,
trademarks, service marks, copyrights, rights, trade secrets, confidential
information, processes and formulations used or proposed to be used in the
conduct of its business as described in the Prospectus (collectively the
"Intangibles"); to the best of Company Counsel's knowledge, neither the Company
nor any Subsidiary has infringed or is infringing upon the rights of others with
respect to the Intangibles; and, to the best of Company Counsel's knowledge,
neither the Company nor any Subsidiary has received any notice that it has or
may have infringed upon, is infringing upon or is conflicting with the asserted
rights of others with respect to the Intangibles which might, singly or in the
aggregate, materially adversely affect its business, results of operations or
financial condition and such counsel is not aware of any licenses with respect
to the Intangibles which are required to be obtained by the Company or any
Subsidiary.
(xv) Company Counsel has participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus, and in the course of such reviews and discussions and such other
investigation as Company Counsel deemed necessary, no facts came to its
attention which lead it to believe that (A) the Registration Statement
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(except as to the financial statements and other financial data contained
therein, as to which Company Counsel need not express an opinion), on the
Effective Date, contained any untrue statement of a material fact required to be
stated therein or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or that (B) the
Prospectus (except as to the financial statements and other financial data
contained therein, as to which Company Counsel need not express an opinion)
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering its opinion pursuant to this Section 6(b), Company
counsel may rely upon the certificates of government officials and officers of
the Company as to matters of fact, provided that Company shall state that they
have no reason to believe, and no not believe, that they are justified in
relying upon such opinions or such certificates of government officials and
officers of the Company as to matters of fact, as the case may be.
The opinion letters delivered pursuant to this Section 6(b) shall
state that any opinion given therein qualified by the phrase "to the best of our
knowledge" is being given by Company Counsel after due investigation of the
matters therein discussed.
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