Exhibit 4.2
WARRANT AGREEMENT dated as of _______ __, 1999 between Litronic
Inc., a Delaware corporation with executive offices located at ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), on one hand,
and BlueStone Capital Partners, L.P. with executive offices located at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("BlueStone") and Pacific Crest
Securities Inc. with executive offices located at ______________ (together,
BlueStone hereinafter referred to as the "Representatives"), on the other hand.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company proposes to issue to the Representatives, in
their individual capacities and not as representatives of the several
Underwriters (defined below), warrants ("Warrants") to purchase up to 370,000
(as such number may be adjusted from time to time pursuant to Article 8 of this
Agreement) shares (the "Shares") of common stock, par value $.01 per share,
of the Company (the "Common Stock"); and
WHEREAS, the Representatives have agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated _______ __, 1999 between the
Representatives, as representatives of the several underwriters named in
Schedule A to the Underwriting Agreement (the "Underwriters") and the Company,
to act as representatives of the several Underwriters in connection with the
Company's proposed initial public offering (the "Public Offering") of 3,700,000
shares of Common Stock (the "Public Shares") at an initial public offering
price of $____ per Public Share; and
WHEREAS, the Warrants issued pursuant to this Agreement are being
issued by the Company to the Representatives and/or to their designees who are
officers or partners of the Representatives and/or, at the Representatives'
direction, to members of the selling group or underwriting syndicate and/or
their respective officers or partners (collectively, the "Designees"), in
consideration for, and as part of the Representatives' compensation in
connection with, the Representatives' acting as representative of the several
Underwriters pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of THREE HUNDRED AND SEVENTY DOLLARS ($370.00),
the agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. GRANT.
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The Representatives and/or the Designees are hereby granted the right
to purchase, at any time from ______ __, 2000 until 5:00 P.M., New York City
time, on ______ __, 2004, (the "Warrant Exercise Term"), up to 370,000 fully
paid and non-assessable Shares at an initial exercise price (subject to
adjustment as provided in Article 8 hereof) of $_______ per Share.
2. WARRANT CERTIFICATES.
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The warrant certificates delivered and to be delivered pursuant to
this Agreement (the "Warrant Certificates") shall be in the form set forth as
Exhibit A attached hereto and made a part hereof, with such appropriate
insertions, omissions, substitutions and other variations as required or
permitted by this Agreement.
3. EXERCISE OF WARRANTS.
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3.1 CASH EXERCISE. The Warrants initially are exercisable at a
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price of $______ per Share [165% of the initial offering price of the Public
Shares], payable in cash or by check to the order of the Company, or any
combination thereof, subject to adjustment as provided in Article 8 hereof. Upon
surrender of a Warrant Certificate with the annexed Form of Election to Purchase
duly executed, together with payment of the Exercise Price (as hereinafter
defined) for the Shares purchased, at the Company's principal offices in
California (currently located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ 92610) the registered holder of a Warrant Certificate ("Holder" or
"Holders") shall be entitled to receive a certificate or certificates for the
Shares so purchased. The purchase rights represented by each Warrant Certificate
are exercisable at the option of the Holder thereof, in whole or in part (but
not as to fractional shares of the Common Stock). In the case of the purchase of
less than all the Shares purchasable under any Warrant Certificate, the Company
shall cancel said Warrant Certificate upon the surrender thereof and shall
execute and deliver a new Warrant Certificate of like tenor for the balance of
the Shares purchasable thereunder.
3.2 CASHLESS EXERCISE. At any time during the Warrant Exercise
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Term, the Holder may, at the Holder's option, exchange, in whole or in part, the
Warrants represented by such Holder's Warrant Certificate (a "Warrant
Exchange"), into the number of Shares determined in accordance with this Section
3.2, by surrendering such Warrant Certificate at the principal office of the
Company or at the office of its transfer agent, accompanied by a notice stating
such Holder's intent to effect such exchange, the number of Warrants to be so
exchanged and the date on which the Holder requests that such Warrant Exchange
occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
Shares issuable upon such Warrant Exchange and, if applicable, a new Warrant
Certificate of like tenor representing the Warrants which were subject to the
surrendered Warrant Certificate and not included in the Warrant Exchange, shall
be issued as of the Exchange Date and delivered to the Holder within three (3)
business days following the Exchange Date. In connection with any Warrant
Exchange, the Holder shall be entitled to subscribe for and acquire (i) the
number of Shares (rounded to the next highest integer) which would, but for the
Warrant Exchange, then be issuable pursuant to the provision of Section 3.1
above upon the exercise of the Warrants specified by the Holder in its Notice of
Exchange (the "Total Number") less (ii) the number of Shares equal to the
quotient obtained by dividing (a) the product of the Total Number and the
existing Exercise Price (as hereinafter defined) by (b) the Market Price (as
hereinafter defined) of a Public Share on the day preceding the Warrant
Exchange. "Market Price" at any date shall be deemed to be the last reported
sale price, or, in case no such reported sales takes place on such day, the
average of the last reported sale prices for the last three (3) trading days, in
either case as officially reported by the principal securities exchange on which
the Common Stock is listed or admitted to trading or as reported in the Nasdaq
National Market System, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted on the Nasdaq National
Market System, the closing bid price as furnished by (i) the National
Association of Securities Dealers, Inc. through Nasdaq or (ii) a similar
organization if Nasdaq is no longer reporting such information.
4. ISSUANCE OF CERTIFICATES.
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Upon the exercise of the Warrants, the issuance of certificates for
the Shares purchased shall be made forthwith (and in any event within three (3)
business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Article 5
hereof) be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future Chairman or Vice Chairman of the Board of Directors
or President or Vice President of the Company under its corporate seal
reproduced thereon, attested to by the manual or facsimile signature of the
present or any future Secretary or Assistant Secretary of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
The Warrant Certificates and, upon exercise of the Warrants, in part
or in whole, certificates representing the Shares shall bear a legend
substantially similar to the following:
"The securities represented by this certificate and the other
securities issuable upon exercise thereof have not been
registered for purposes of public distribution under the
Securities Act of 1933, as amended (the "Act"), and may not be
offered or sold except (i) pursuant to an effective registration
statement under the Act, (ii) to the extent applicable, pursuant
to Rule 144 under the Act (or any similar rule under such Act
relating to the disposition of securities), or (iii) upon the
delivery by the holder to the Company of an opinion of counsel,
reasonably satisfactory to counsel to the Company, stating that
an exemption from registration under such Act is available."
5. RESTRICTION ON TRANSFER OF WARRANTS.
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The Holder of a Warrant Certificate, by the Holder's acceptance
thereof, covenants and agrees that the Warrants are being acquired as an
investment and not with a view to the distribution thereof, and that the
Warrants may not be sold, transferred, assigned, hypothecated or otherwise
disposed of, in whole or in part, for a period of one (1) year from the date
hereof, except to the Designees.
6. PRICE.
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6.1 INITIAL AND ADJUSTED EXERCISE PRICE. The initial exercise
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price of each Warrant shall be $____ per Share [165% of the initial offering
price of the Public Shares]. The adjusted exercise price per Share shall be the
price which shall result from time to time from any and all adjustments of the
initial exercise price in accordance with the provisions of Article 8 hereof.
6.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean
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the initial exercise price or the adjusted exercise price, depending upon the
context.
7. REGISTRATION RIGHTS.
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7.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. None of the
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Warrants or Shares have been registered for purposes of public distribution
under the Securities Act of 1933, as amended (the "Act").
7.2 REGISTRABLE SECURITIES. As used herein the term
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"Registrable Security" means each of the Shares and any shares of Common Stock
issued upon any stock split or stock dividend in respect of such Shares;
provided, however, that with respect to any particular Registrable Security,
such security shall cease to be a Registrable Security when, as of the date of
determination, (i) it has been effectively registered under the Act and disposed
of pursuant thereto, (ii) registration under the Act is no longer required for
the subsequent public distribution of such security or
(iii) it has ceased to be outstanding. The term "Registrable Securities" means
any and/or all of the securities falling within the foregoing definition of a
"Registrable Security." In the event of any merger, reorganization,
consolidation, recapitalization or other change in corporate structure affecting
the Common Stock, such adjustment shall be made in the definition of
"Registrable Security" as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Article 7.
7.3 PIGGYBACK REGISTRATION. If, at any time during the seven
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years following the effective date of the Public Offering, the Company proposes
to prepare and file one or more post-effective amendments to the registration
statement filed in connection with the Public Offering or any new registration
statement or post-effective amendments thereto covering equity or debt
securities of the Company, or any such securities of the Company held by its
shareholders (in any such case, other than in connection with a merger,
acquisition or pursuant to Form S-8 or successor form), (for purposes of this
Article 7, collectively, the "Registration Statement"), it will give written
notice of its intention to do so by registered mail ("Notice"), at least thirty
(30) days prior to the filing of each such Registration Statement, to all
holders of the Registrable Securities. Upon the written request of such a holder
(a "Requesting Holder"), made within twenty (20) days after receipt of the
Notice, that the Company include any of the Requesting Holder's Registrable
Securities in the proposed Registration Statement, the Company shall, as to each
such Requesting Holder, use its best efforts to effect the registration under
the Act of the Registrable Securities which it has been so requested to register
("Piggyback Registration"), at the Company's sole cost and expense and at no
cost or expense to the Requesting Holders (except as provided in Section 7.5(b)
hereof); provided, however, that if, in the written opinion of the Company's
managing underwriter, if any, for such offering, the inclusion of all or a
portion of the Registrable Securities requested to be registered, when added to
the securities being registered by the Company or the selling shareholder(s),
will exceed the maximum amount of the Company's securities which can be marketed
(i) at a price reasonably related to their then current market value, or (ii)
without otherwise materially adversely affecting the entire offering, then the
Company may exclude from such offering all or a portion of the Registrable
Securities which it has been requested to register.
Notwithstanding the provisions of this Section 7.3, the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section 7.3 (irrespective of whether any written request for
inclusion of Registrable Securities shall have already been made) to elect not
to file any such proposed Registration Statement, or to withdraw the same after
the filing but prior to the effective date thereof.
7.4 DEMAND REGISTRATION.
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(a) At any time during the Warrant Exercise Term, any
"Majority Holder" (as such term is defined in Section 7.4.(c) below) of the
Registrable Securities shall have the right (which right is in addition to the
piggyback registration rights provided for under Section 7.3 hereof),
exercisable by written notice to the Company (the "Demand Registration
Request"), to have the Company prepare and file with the Securities and Exchange
Commission (the "Commission"), on one occasion, at the sole expense of the
Company (except as provided in Section 7.5.(b) hereof), a Registration Statement
and such other documents, including a prospectus, as may be necessary (in the
opinion of both counsel for
the Company and counsel for such Majority Holder), in order to comply with the
provisions of the Act, so as to permit a public offering and sale of the
Registrable Securities by the holders thereof. The Company shall use its best
efforts to cause the Registration Statement to become effective under the Act,
so as to permit a public offering and sale of the Registrable Securities by the
holders thereof. Once effective, the Company will use its best efforts to
maintain the effectiveness of the Registration Statement until the earlier of
(i) the date that all of the Registrable Securities have been sold or (ii) the
date that the holders of the Registrable Securities receive an opinion of
counsel to the Company that all of the Registrable Securities may be freely
traded (without limitation or restriction as to quantity or timing and without
registration under the Act) under Rule 144(k) promulgated under the Act or
otherwise. Notwithstanding the foregoing, if (i) in the good faith judgment of
the Board of Directors of the Company, such registration would be materially
detrimental to the Company, and the Board of Directors concludes, as a result,
that it is essential to defer the filing of such Registration Statement at such
time, and (ii) the Company shall furnish to such Holders a certificate signed by
the Chief Executive Officer of the Company stating that, in the good faith
judgment of the Board of Directors of the Company, it would be materially
detrimental to the Company for such Registration Statement to be filed in the
near future and that it is, therefore, essential to defer the filing of such
Registration Statement, then the Company shall have the right to defer such
filing for a period of not more than ninety (90) days after receipt of the
Demand Registration Request, and provided further, that the Company shall not
defer its obligation in this manner more than two (2) times or for more than an
aggregate of one hundred and twenty (120) days in any rolling twelve (12) month
period and should the Company delay the filing of the Registration Statement
upon receipt of a Demand Registration Request, the exercise period of the
Warrants shall be extended, for each delay, for a period of time equal in length
to the delay in registration.
(b) The Company covenants and agrees to give written notice
of any Demand Registration Request to all holders of the Registrable Securities
within ten (10) business days from the date of the Company's receipt of any such
Demand Registration Request. After receiving notice from the Company as provided
in this Section 7.4(b), holders of Registrable Securities may request the
Company to include their Registrable Securities in the Registration Statement to
be filed pursuant to Section 7.4(a) hereof by notifying the Company of their
decision to have such securities included within ten (10) days of their receipt
of the Company's notice.
(c) The term "Majority Holder" as used in Section 7.4
hereof shall mean any holder or any combination of holders of Registrable
Securities, if included in such holders' Registrable Securities are that
aggregate number of Shares (including Shares already issued and Shares issuable
pursuant to the exercise of outstanding Warrants) as would constitute a majority
of the aggregate number of Shares (including Shares already issued and Shares
issuable pursuant to the exercise of outstanding Warrants) included in all the
Registrable Securities.
7.5. COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. The
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Company covenants and agrees as follows:
(a) In connection with any registration under Section 7.4
hereof, the Company shall file the Registration Statement as expeditiously as
possible, but in any event no later than thirty (30) business days following
receipt of any demand therefor, shall use its best efforts to have any such
Registration Statement declared effective at the earliest possible time, and
shall furnish each holder of Registrable Securities such number of prospectuses
as shall reasonably be requested.
(b) The Company shall pay all costs, fees and expenses
(other than underwriting fees, discounts and nonaccountable expense allowances
applicable to the Registrable Securities and the fees and expenses of counsel
retained by the
holders of the Registrable Securities) in connection with all Registration
Statements filed pursuant to Sections 7.3. and 7.4.(a) hereof including, without
limitation, the Company's legal and accounting fees, printing expenses, and blue
sky fees and expenses.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Registrable Securities included in the
Registration Statement for offering and sale under the securities or blue sky
laws of such states as are reasonably requested by the holders of such
securities, provided that the Company shall not be obligated to execute or file
any general consent to service of process or to qualify as a foreign corporation
to do business under the laws of any such jurisdiction.
(d) The Company shall indemnify any holder of the
Registrable Securities to be sold pursuant to any Registration Statement and any
underwriter or person deemed to be an underwriter under the Act and each person,
if any, who controls such holder or underwriter or person deemed to be an
underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), against all loss,
claim, damage, expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Act, the Exchange Act or otherwise,
arising from such registration statement to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to indemnify
the Underwriters contained in Section 7 of the Underwriting Agreement and to
provide for just and equitable contribution as set forth in Section 8 of the
Underwriting Agreement.
(e) Any holder of Registrable Securities to be sold
pursuant to a Registration Statement, and such Holder's successors and assigns,
shall severally, and not jointly, indemnify, the Company, its officers and
directors 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, against all loss,
claim, damage or expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which they may become subject under the Act, the Exchange Act or otherwise,
arising from information furnished by or on behalf of such Holder, or such
Holder's successors or assigns, for specific inclusion in such Registration
Statement to the same extent and with the same effect as the provisions pursuant
to which the Underwriters have agreed to indemnify the Company contained in
Section 7 of the Underwriting Agreement and to provide for just and equitable
contribution as set forth in Section 8 of the Underwriting Agreement.
(f) Nothing contained in this Agreement shall be construed
as requiring any Holder to exercise the Warrants held
by such Holder prior to the initial filing of any Registration Statement or the
effectiveness thereof.
(g) The Company shall promptly deliver copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the Registration Statement to each Holder of Registrable Securities
included for registration in such Registration Statement pursuant to Section 7.3
or Section 7.4 hereof that requests such correspondence and memoranda and to the
managing underwriter, if any, of the offering in connection with which such
Holder's Registrable Securities are being registered and shall permit each such
Holder and managing underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
Registration Statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. Such investigation shall include access to books, records and
properties and opportunities to discuss the business of the Company with its
officers and independent auditors, all to such reasonable extent and at such
reasonable times and as often as any such Holder or managing underwriter shall
reasonably request.
8. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SHARES.
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8.1 COMPUTATION OF ADJUSTED PRICE. In case the Company shall at
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any time after the date hereof pay a dividend in shares of Common Stock or make
a distribution in shares of Common Stock, then upon such dividend or
distribution, the Exercise Price in effect immediately prior to such dividend or
distribution shall forthwith be reduced to a price determined by dividing:
(a) an amount equal to the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution multiplied
by the Exercise Price in effect immediately prior to such dividend or
distribution, by
(b) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For the purposes of any computation to be made in accordance with
the provisions of this Section 8.1, the Common Stock issuable by way of dividend
or other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the date following the date
fixed for the determination of stockholders entitled to receive such dividend or
other distribution.
8.2 SUBDIVISION AND COMBINATION. In case the Company shall at
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any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be
proportionately decreased in the case of subdivision or increased in the case of
combination.
8.3 ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
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Exercise Price pursuant to the provisions of this Article 8, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full number by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares issuable
upon exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
8.4 RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In case of any
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reclassification or change of the outstanding shares of Common Stock (other than
a change in par value to no par value, or from no par value to par value, or as
a result of a subdivision or combination), or in the case of any consolidation
of the Company with, or merger of the Company into, another corporation (other
than a consolidation or merger in which the Company is the surviving corporation
and which does not result in any reclassification or change of the outstanding
shares of Common Stock, except a change as a result of a subdivision or
combination of such shares or a change in par value, as aforesaid), or in the
case of a sale or conveyance to another corporation of the property of the
Company as an entirety, the Holders shall thereafter have the right to purchase
the kind and number of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance as if the Holders were the owners of the shares of Common Stock
underlying the Warrants immediately prior to any such events at a price equal to
the product of (x) the number of shares of Common Stock issuable upon exercise
of the Holder's Warrants and (y) the Exercise Price in effect immediately prior
to the record date for such reclassification, change, consolidation, merger,
sale or conveyance as if such Holders had exercised the Warrants.
8.5 DETERMINATION OF OUTSTANDING SHARES OF COMMON STOCK. The
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number of shares of Common Stock at any one time outstanding shall include the
aggregate number of shares of Common Stock issued and the aggregate number of
shares of Common Stock issuable upon the exercise of options, rights, warrants
and upon the conversion or exchange of convertible or exchangeable securities.
8.6 DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO
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OUTSTANDING SECURITIES. In the event that the Company shall at any time prior to
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the exercise of all Warrants make any distribution of its assets to holders of
its Common Stock as a liquidating or a partial liquidating dividend, then the
holder of Warrants who exercises its Warrants after the record date for the
determination of those holders of Common Stock entitled to such distribution of
assets as a liquidating or partial liquidating dividend shall be entitled to
receive for the Exercise Price per Warrant, in addition to each share of Common
Stock, the amount of
such distribution (or, at the option of the Company, a sum equal to the value of
any such assets at the time of such distribution as determined by the Board of
Directors of the Company in good faith) which would have been payable to such
holder had he been the holder of record of the Common Stock receivable upon
exercise of his Warrant on the record date for the determination of those
entitled to such distribution. At the time of any such dividend or distribution,
the Company shall make appropriate reserves to ensure the timely performance of
the provisions of this Subsection 8.6.
8.7 SUBSCRIPTION RIGHTS FOR SHARES OF COMMON STOCK OR OTHER
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SECURITIES. If the Company or an affiliate of the Company shall at any time
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after the date hereof and prior to the exercise of all the Warrants issue any
rights, warrants or options to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the shareholders of
the Company, the Holders of unexercised Warrants on the record date set by the
Company or such affiliate in connection with such issuance of rights, warrants
or options shall be entitled, in addition to the shares of Common Stock or other
securities receivable upon the exercise of the Warrants, to receive such rights,
warrants or options that such Holders would have been entitled to receive had
they been, on such record date, the holders of record of the number of whole
shares of Common Stock then issuable upon exercise of their outstanding Warrants
(assuming for purposes of this Section 8.7, that the exercise of the Warrants
is permissible immediately upon issuance).
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.
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Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of Shares in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS.
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The Company shall not be required to issue certificates representing
fractions of Shares, nor shall it be required to issue
scrip or pay cash in lieu of fractional interests, it being the intent of the
parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of Shares.
11. RESERVATION AND LISTING OF SECURITIES.
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The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants, such number of shares of Common Stock as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants and payment of the Exercise Price therefor, all Shares
issuable upon such exercise shall be duly and validly issued, fully paid, non-
assessable and not subject to the preemptive rights of any shareholder. As long
as the Warrants shall be outstanding, the Company shall use its best efforts to
cause all shares of Common Stock issuable upon the exercise of the Warrants to
be listed on the Nasdaq National Market or listed on such national securities
exchanges as the Common Stock is listed at such time.
12. NOTICES TO WARRANT HOLDERS.
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Nothing contained in this Agreement shall be construed as conferring
upon the Holder or Holders the right to vote or to consent or to receive notice
as a shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the expiration of
the Warrants and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; or
(d) reclassification or change of the outstanding shares of
Common Stock (other than a change in par value to no par value, or from no par
value to par value, or as a result of a
subdivision or combination), consolidation of the Company with, or merger of the
Company into, another corporation (other than a consolidation or merger in which
the Company is the surviving corporation and which does not result in any
reclassification or change of the outstanding shares of Common Stock, except a
change as a result of a subdivision or combination of such shares or a change in
par value, as aforesaid), or a sale or conveyance to another corporation of the
property of the Company as an entirety is proposed; or
(e) The Company or an affiliate of the Company shall propose to
issue any rights to subscribe for shares of Common Stock or any other securities
of the Company or of such affiliate to all the shareholders of the Company;
then, in any one or more of said events, the Company shall give written notice
to the Holder or Holders of such event at least fifteen (15) days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, options or
warrants, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend or distribution, or the
issuance of any convertible or exchangeable securities or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up or
sale.
13. NOTICES.
-------
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when delivered,
or mailed by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 of
this Agreement or to such other address as the Company may designate by notice
to the Holders.
14. SUPPLEMENTS AND AMENDMENTS.
--------------------------
The Company and BlueStone may from time to time supplement or amend
this Agreement without the approval of any Holders of Warrant Certificates in
order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and BlueStone may deem necessary or desirable and which the
Company and the BlueStone deem not to
adversely affect the interests of the Holders of Warrant Certificates.
15. SUCCESSORS.
----------
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Holders inure to the benefit of their respective
successors and assigns hereunder.
16. TERMINATION.
-----------
This Agreement shall terminate at the close of business on _______ __,
2007. Notwithstanding the foregoing, this Agreement will terminate on any
earlier date when all Warrants have been exercised and all the Shares have been
resold to the public; provided, however, that the provisions of Section 7.5.
hereof shall survive any termination pursuant to this Section 16 until the close
of business on _______ __, 2010.
17. GOVERNING LAW.
-------------
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the laws of said State.
18. BENEFITS OF THIS AGREEMENT.
--------------------------
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Representatives and any other
registered holder or holders of the Warrant Certificates, Warrants or the Shares
any legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Representatives and any other holder or holders of the Warrant Certificates,
Warrants or the Shares.
19. COUNTERPARTS.
------------
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
[SEAL] LITRONIC INC.
By:
------------------------------------------
Name:
Title:
Attest:
____________________________
BLUESTONE CAPITAL PARTNERS, L.P.
By: BlueStone Capital Management, Inc.,
General Partner
By:
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇,
Title: President
PACIFIC CREST SECURITIES INC.
By:
------------------------------------------
Name:
Title:
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, _______ __, 2004
No. W-
_______ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _______________ ____________ or
registered assigns, is the registered holder of _______ Warrants to purchase, at
any time from _______ __, 2000 until 5:00 P.M. New York City time on ______ __,
2004 ("Expiration Date"), up to _____ fully-paid and non-assessable shares (the
"Shares") of common stock, par value $.01 per share (the "Common Stock"), of
Litronic Inc., a Delaware corporation (the "Company"), at the initial exercise
price, subject to adjustment in certain events (the "Exercise Price"), of $____
per Share upon surrender of this Warrant Certificate and payment of the Exercise
Price at an office or agency of the Company, but subject to the conditions set
forth herein and in the warrant agreement dated as of ______ __, 1999 between
the Company and BlueStone Capital Partners, L.P. and Pacific Crest Securities
Inc. (the "Warrant Agreement"). Payment of the Exercise Price may be made in
cash, or by certified or official bank check in New York Clearing House funds
payable to the order of the Company, or any combination thereof.
No Warrant may be exercised after 5:00 P.M., New York City time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly authorized
issue of Warrants issued pursuant to the Warrant Agreement, which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events, the
Exercise Price and/or number of the Company's securities issuable thereupon may,
subject to certain conditions, be adjusted. In such event, the Company will, at
the request of the holder, issue a new Warrant Certificate evidencing the
adjustment in the Exercise Price and the number and/or type of securities
issuable upon the exercise of the Warrants; provided, however, that the failure
of the Company to issue such new Warrant Certificates shall not in any way
change, alter, or otherwise impair, the rights of the holder as set forth in the
Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant Certificate at
an office or agency of the Company, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the absolute
owner(s) of this Warrant Certificate (notwithstanding any notation of ownership
or other writing hereon made by anyone), for the purpose of any exercise hereof,
and of any distribution to the holder(s) hereof, and for all other purposes, and
the Company shall not be affected by any notice to the contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly
executed under its corporate seal.
Dated: _______ __, 1999 LITRONIC INC.
[SEAL] By:________________________________
Name:
Title:
Attest:
______________________________
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase _________ Shares and herewith tenders in
payment for such Shares cash or a certified or official bank check payable in
New York Clearing House Funds to the order of Litronic Inc. in the amount of
$__________ , all in accordance with the terms hereof. The undersigned requests
that a certificate for such Shares be registered in the name of , whose address
is __________________, and that such Certificate be delivered to
__________________, whose address is _____________.
Dated: Signature:
________________________________________
(Signature must conform in
all respects to name of holder
as specified on the face of
the Warrant Certificate.)
___________________________
___________________________
(Insert Social Security or Other
Identifying Number of Holder)
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED
_____________________________
hereby sells, assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee) this Warrant Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint _______________, Attorney, to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
Dated: Signature:
________________________________________
(Signature must conform in
all respects to name of holder
as specified on the face of
the Warrant Certificate.)
________________________________________
________________________________________
(Insert Social Security or Other
Identifying Number of Holder)
___________________________
___________________________
(Insert Social Security or Other
Identifying Number of Assignee)