Exhibit 1
LITRONIC INC.
3,000,000 Shares of Common Stock
(Par Value $.01 per share)
UNDERWRITING AGREEMENT
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New York, New York
_______, 1999
Blue Stone Capital Partners, L.P.
as Representative 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") is acting as representative (hereinafter referred
to as the "Representative" or "BlueStone"), three million (3,000,000) 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 Representative, in order to cover
over-allotments in the sale of the Offered Shares, may purchase from the
Company, for its own account, up to an aggregate of four hundred fifty thousand
(450,000) 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 Representative for its
own account and/or the account of its designees, warrants to purchase an
aggregate of three hundred thousand (300,000) Common Shares (the "Warrant
Shares") at an exercise price of $____ [165% of the initial public offering
price per share] per Warrant Share (the "Representative's Warrants"), which sale
will be consummated in accordance with the terms and conditions of the form of
Representative's Warrant Agreement filed as an exhibit to the Registration
Statement.
The Representative hereby warrants to the Company that it has 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 Representative and each of the Underwriters, on whose behalf
the Representative is signing this Agreement, as follows:
1. Purchase and Sale of Offered Shares. On the basis of the
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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 Representative.
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 Representative may request not less than two
full business days prior to the Closing Date, and will be made available to the
Representative for inspection, checking and packaging at the offices of
___________________, the Company's transfer agent, at __________________________
not less than one full business day prior to the Closing Date.
(b) On the Closing Date, the Company will sell the
Representative's Warrants to the Representative or to its designees (limited to
officers and partners of the Representative and Underwriters). The
Representative's Warrants will be in the form of, and in accordance with, the
provisions of the Representative's Warrant Agreement attached as an exhibit to
the Registration Statement, with such changes as the Representative shall
approve. The aggregate purchase price for the Representative's Warrants is $300.
The Representative's 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 Representative and Underwriters and members of the
selling group and/or their officers or partners. Payment for the
Representative's 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 Representative's Warrants. The
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certificates representing the Representative's Warrants will be in such
denominations and such names as the Representative may request prior to the
Closing Date.
3. Option to Purchase Optional Shares.
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(a) 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 Representative is hereby granted an
option to purchase for its own accounts, and not as representative 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 Representative as to all or any
part of the Optional Shares at any time within 45 days after the Effective Date.
The Representative 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
Representative 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 so
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 exercise of such option, the Company will become obligated
to convey to the Representative, and, subject to the terms and conditions set
forth in Section 3(d) hereof, the Representative 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 Representative. The certificates representing the Optional Shares to be
delivered will be in such denominations and registered in such names as the
Representative requests not less than two full business days prior to the Option
Closing Date, and will be made available to the Representative 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.
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(d) The obligation of the Representative 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 Representative 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
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Company 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 Representative's 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 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
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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 the Subsidiary.
(c) This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company, and the
Representative's 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 their respective terms. The
execution, delivery and performance of this Agreement and the Representative's
Warrant Agreement by the Company, the consummation by the Company of the
transactions herein and therein contemplated and the compliance by the Company
with the terms of this Agreement and the Representative's 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, 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.
(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
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transactions contemplated by this Agreement and the Representative's Warrant
Agreement or, if so required, all such Permits have been duly obtained and are
in full force and effect.
(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, the transactions contemplated herein and in the
Registration Statement. The Company has prepared 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-______) 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 "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
circum-
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stances 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 Representative, or by any Underwriter
through the Representative, expressly for use therein.
(h) The Company had at the date or dates indicated in the
Prospectus a duly authorized and outstanding capitalization as set forth in the
Registration Statement and the Prospectus. The Company will have on the Closing
Date 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 the financial position of Pulsar and Litronic 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 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.
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(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 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 Representative, 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
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the Warrant Shares have been issued and duly delivered against payment therefor
as contemplated by this Agreement and the Representative's 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 will be subject to preemptive rights of any shareholder of the
Company.
(o) The issuance and sale of the Representative's Warrants have
been duly authorized and, when issued, paid for and delivered as contemplated by
the Representative's Warrant Agreement, the Representative's Warrants will
constitute valid and binding obligations of the Company, enforceable as to the
Company in accordance with their terms. The Representative's 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
Representative's Warrants in accordance with the provisions of the
Representative's Warrant Agreement. The Representative's Warrants conform to the
description thereof contained in the Registration Statement and Prospectus.
(p) Neither the Company nor any Subsidiary is in violation of,
or in default under, (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) 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) 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 business
which, if determined adversely to the Company or any of
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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 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 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 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
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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 of 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
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
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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.
(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 agreement
dated as of February ___, 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.
-12-
Shah 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 of the
Acquisition (as defined in the Prospectus) have been satisfied.
(ac) The Reorganization (as defined in the Prospectus) 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 Representative 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
Representative or a dealer, file or publish any amendment or supplement to the
Registration Statement or Prospectus of which the Representative has not been
previously advised and furnished a copy, or to which the Representative shall
object in writing.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective and will advise the Representative
promptly, and, if requested by the Representative, 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
-13-
best efforts to prevent the issuance of any such stop order or of any order
preventing or suspending such use and 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
Representative 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 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 furnish such proper information as may be
required and otherwise cooperate in qualifying the Shares for offering and sale
under the securities or Blue Sky laws relating to the offering in such
jurisdictions as the Representative may reasonably designate, provided that no
such qualification will be required in any jurisdiction where, solely as a
result thereof, the Company would be subject to service of general process or to
taxation or qualification as a foreign corporation doing business in such
jurisdiction.
(f) 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 Representative and Underwriters' Counsel as soon as practicable and in any
event not later than 45
-14-
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.
(g) For a period of three years from the Effective Date, the
Company will deliver to the Representative, 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 Representative 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.
(h) 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.
(i) 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 printing and mailing of the Selected Dealer Agreement;
the issuance and delivery of the Shares to the Representative; 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
-15-
therewith, and the cost of printing 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 Representative; 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(i).
In addition, at the Closing Date and the Option Closing Date, the
Representative will deduct from the payment for the Shares an amount equal to
the Representative's accountable out-of-pocket costs, fees and expenses (up to
an aggregate maximum of $_______ [1.5% 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.
(j) 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
Representative decides 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,
the Company and Pulsar will reimburse the Representative for all of its
accountable expenses reasonably incurred in connection with the offering. In no
event, however, will the Representative, in the event the offering is
terminated, be entitled to receive more than an amount equal to its actual
accountable out-of-pocket expenses.
(k) The Company intends to apply the net proceeds from the sale of
the Shares for the purposes set forth in the Prospectus.
(l) 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,
provided that, after the first six (6) months of such period, this restriction
can be waived by the Representative, in its sole discretion, and provided
further that, after the first twelve (12) months of such period, sales may be
made, without the Representative'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
-16-
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 Representative the
undertakings as of the date hereof of its officers, directors and
securityholders to this effect.
(m) 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.
(n) 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.
(o) 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 Representative for so long as the Shares are qualified for such
listing.
(p) 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.
(q) 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. Each of the Company's current officers,
-17-
directors and securityholders agrees to vote all of the Common Shares owned by
such person or entity so as to elect and continue in office such nominee(s) of
BlueStone. 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).
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.
(r) 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.
(s) 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.
(t) 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
-18-
sufficient for these purposes) and shall use its best efforts to have the
Company listed in such manual at or prior to the Effective Date and shall
maintain such listing for a period of three (3) years following the Effective
Date.
(u) 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.
(v) 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.
(w) 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.
(x) 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.
(y) 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.
(z) For a period of two (2) years 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.
-19-
(aa) On or prior to the Closing Date, the Company will complete
the Acquisitions (as defined in the Prospectus) 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:
(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 Representative 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 Representative's 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 Representative 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 (and any other opinions of counsel referred to in such opinion of
Company Counsel or relied upon by Company Counsel in rendering their opinion),
reasonably satisfactory to Underwriters' Counsel to the effect that:
(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
-20-
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 security of the Subsidiaries.
(ii) The Company has full power and authority, corporate and
other, to execute, deliver and perform this Agreement and the Representative's
Warrant Agreement and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance of this Agreement and the
Representative's Warrant Agreement by the Company, the consummation by the
Company of the transactions herein and therein contemplated and the compliance
by the Company with the terms of this Agreement and the Representative's Warrant
Agreement have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, and the Representative's
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
and the Representative's Warrant Agreement by the Company, the consummation by
the Company of the transactions herein and therein contemplated and the
compliance by the Company with the terms of this Agreement and the
Representative's 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
-21-
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.
(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
Representative's Warrants, and the consummation by the Company of the
transactions contemplated by this Agreement and the Representative's 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
-22-
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.
(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 Representative's 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 Representative's Warrants
have been duly authorized and, when issued, paid for and delivered pursuant to
the terms of the
-23-
Representative's 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 Representative's Warrants in accordance with the provisions of
the Representative's Warrant Agreement. The Representative's 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 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 Representative exercises 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 Representative hereunder, the Representative
(assuming it is a bona fide purchaser 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
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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 (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.
(c) At the Closing Date, there will have been delivered to the
Representative 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 Representative, specifying
the same, and with respect to such other related matters as the Representative
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
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the Prospectus nor any amendment or supplement thereto 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; (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 Representative 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 Representative will have received such other and further
certificates of officers of the Company as the Representative or Underwriters'
Counsel may reasonably request.
(e) At the time that this Agreement is executed and at the
Closing Date, the Representative will have received a signed letter from KPMG
Peat Marwick LLP, dated the date such letter is to be received by the
Representative and addressed to it, confirming that it is a firm of independent
public accountants within the meaning of the Act and Regulations and stating
that: (i) insofar as
-26-
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, if more recent than that appearing
in the Registration Statement and Prospectus, inquiries of officers of the
Company 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 a reading of the minutes of meetings of the shareholders, the
Board of Directors of the Company and any committees of the Board of Directors,
as set forth in the minute books of the Company, 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 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, 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,
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 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, 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 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 Representative
certificates representing the Offered Shares to be sold on the Closing Date.
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(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 Representative.
(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 Representative's 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 Representative 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 Underwriters 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).
If any of the conditions specified in this Section 6 have not
been fulfilled, this Agreement may be terminated by the Representative 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
-28-
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
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
-29-
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 Representative 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 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
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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 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
-31-
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 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
Representative, 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
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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 Representative 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 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
Representative, or the Representative, 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.
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(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; (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 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 Representative, 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
Representative, 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.
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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, stabilizing the market price of
the Shares, and BlueStone, respectively, as such information appears in any
Preliminary Prospectus and in the Prospectus.
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 Representative, or the Underwriters, to
BlueStone Capital Partners, L.P., 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. 00000-0000, 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.
-35-
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.
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:
Acting on behalf of itself
as the Representative of the
several Underwriters named in
Schedule A hereto.
-36-
SCHEDULE A
TO THE UNDERWRITING AGREEMENT
Underwriter Number of Shares
----------- ----------------
BlueStone Capital Partners, L.P..............
Total............................... 3,000,000
-37-
