REGISTRATION RIGHTS AGREEMENT
dated as of
February 27, 1997
among
PACIFIC AEROSPACE & ELECTRONICS, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A HERETO
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS.......................................................1
1.1 Definitions.......................................................1
ARTICLE 2 REGISTRATION RIGHTS...............................................3
2.1 Securities Subject to this Agreement..............................3
2.2 Registration......................................................3
2.3 Registration Procedures...........................................5
2.4 Preparation; Reasonable Investigation.............................8
2.5 Certain Rights of Holders.........................................9
2.6 Registration Expenses.............................................9
2.7 Indemnification; Contribution....................................10
2.8 Participation in Underwritten Registrations......................11
2.9 Selection of Underwriters........................................12
ARTICLE 3 LIQUIDATED DAMAGES...............................................12
ARTICLE 4 RULE 144A........................................................13
ARTICLE 5 MISCELLANEOUS....................................................13
5.1 Entire Agreement.................................................13
5.2 Successors and Assigns...........................................13
5.3 Notices..........................................................13
5.4 Headings.........................................................14
5.5 Counterparts.....................................................14
5.6 Applicable Law...................................................14
5.7 Specific Enforcement.............................................14
5.8 Amendment and Waivers............................................14
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REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of February
27, 1997, by and among PACIFIC AEROSPACE & ELECTRONICS, INC., a Washington
corporation (the "Company") and each of the purchasers of shares of Series A
Convertible Preferred Stock of the Company whose names are set forth on Exhibit
A hereto (each individually, a "Purchaser" and collectively, the "Purchasers").
RECITALS
A. The Purchasers and the Company have entered into a Series A Convertible
Preferred Stock Purchase Agreement dated as of February 27, 1997 (the "Stock
Purchase Agreement"), pursuant to which the Purchasers are purchasing a total of
50,000 shares of the Company's Series A Convertible Preferred Stock.
B. It is a condition precedent to the obligations of each Purchaser under
the Stock Purchase Agreement that the Company grant registration rights with
respect to the shares of the Company's Common Stock issuable upon conversion of
the Series A Convertible Preferred Stock, on the terms and conditions set forth
in this Agreement.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings.
"Board" means the Board of Directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which banks in Salt Lake City (or in such other city as may be the headquarters
of the Company's transfer agent) are authorized by law to close.
"Closing Date" shall mean the Closing Date determined pursuant to the
Stock Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $0.001 per share, of
the Company.
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"Company" means Pacific Aerospace & Electronics, Inc., a Washington
corporation.
"Effective Time" means the date of effectiveness of the Registration
Statement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as now in effect
or any successor registration form to Form S-3 under the Securities Act.
"Holders" has the meaning given to it in Section 2.1(b) hereof.
"NASD" means the National Association of Securities Dealers, Inc.
"Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Preferred Stock" means the Series A Convertible Preferred Stock, par
value $0.001 per share, of the Company.
"Prospectus" means the prospectus included in the Registration
Statement, as amended or supplemented by any prospectus supplement and by all
other amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
"Registration Statement" means the registration statement of the
Company relating to the registration for resale of Restricted Securities
contemplated by Section 2.2, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
"Restricted Securities" means the Preferred Stock or any Securities
until (i) with respect to Securities, a Registration Statement covering such
Securities has been declared effective by the Commission and such Securities
have been disposed of pursuant to such effective Registration Statement, (ii)
such Preferred Stock or Securities are permitted to be sold under circumstances
in which all the applicable conditions of Rule 144 (or any similar provisions
then in force) under the Securities Act are met, or such Preferred Stock or
Securities are permitted to be sold pursuant to Rule 144(k) (or any similar
provision then in force) under the Securities Act, and are freely tradeable
after such sale by the transferee, (iii) such Preferred Stock or Securities are
otherwise transferred, the Company has delivered a new certificate or other
evidence of ownership for such Preferred Stock or Securities not bearing a
legend restricting further transfer and such Preferred Stock or Securities may
be resold without registration under the Securities Act, or (iv) such Preferred
Stock or Securities shall have ceased to be outstanding.
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"Securities" means the Company's Common Stock issuable upon conversion
of the Preferred Stock.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Purchase Agreement" has the meaning given to it in the recitals
to this Agreement.
As used in this Agreement, words in the singular include the plural, and in
the plural include the singular.
ARTICLE 2
REGISTRATION RIGHTS
2.1 Securities Subject to this Agreement.
(a) The Securities are entitled to the benefits of this Agreement, but
only for so long as they remain Restricted Securities.
(b) A Person is deemed to be a "Holder" whenever such Person is the
registered holder of Preferred Stock or Securities.
2.2 Registration.
(a) The Company shall:
(i) as expeditiously as practicable, cause to be filed a
Registration Statement on Form S-3 and pursuant to Rule 415 under the
Securities Act, as applicable, which Registration Statement shall permit
resales of all Securities; provided that the Holders whose Securities are
covered by the Registration Statement shall have provided the information
required pursuant to Section 2.2(d); and
(ii) use its best efforts to cause such Registration Statement to
be declared effective by the Commission by June 13, 1997.
(b) The Company may elect to file the Registration Statement on a form
other than Form S-3 if the Company determines that doing so would be in its best
interests, so long as the Holders would receive at least the same rights of
resale as would have been available if the Registration Statement were filed on
Form S-3.
(c) In connection with the Registration Statement, the Company shall
comply with all the provisions of Section 2.3 below and shall use its reasonable
best efforts to effect such registration to permit the resale of the Securities
in accordance with the intended method
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or methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 2.2(d)). Subject to Section 2.2(e), the Company
shall use its reasonable best efforts to keep such Registration Statement
continuously effective, supplemented and amended to the extent necessary to
ensure that it is available for resales of Securities by the Holders, and to
ensure that it conforms with the requirements of this Agreement, the Securities
Act and the policies, rules and regulations of the Commission as announced from
time to time, for a period of two (2) years after the Effective Time or such
longer period as required by Section 2.2(e) or such shorter period that will
terminate when all the Securities covered by the Registration Statement have
been sold pursuant to the Registration Statement or otherwise cease to be
Restricted Securities. The Company shall be obligated to effect only one
registration pursuant to this Agreement. Upon the occurrence of any event that
would cause the Registration Statement or the Prospectus contained therein (i)
to contain a material misstatement or omission or (ii) not to be effective and
usable for resale of Securities during the period required by this Agreement,
the Company shall file promptly an appropriate amendment to such Registration
Statement or the related Prospectus or any document incorporated therein by
reference, in the case of clause (i), correcting any such misstatement or
omission, and, in the case of either clause (i) or (ii), use its reasonable best
efforts to cause such amendment to be declared effective and such Registration
Statement and the related Prospectus to become usable for its intended
purpose(s) as soon as practicable thereafter. The Company shall give each holder
of Restricted Securities a copy of such amendment promptly after its filing.
(d) No Holder may include any of its Securities in the Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 10 Business Days after receipt of a written
request therefor, the information specified in Item 507 of Regulation S-K under
the Securities Act and such other information as the Company may reasonably
request for use in connection with the Registration Statement or Prospectus or
preliminary Prospectus included therein and in any application to the NASD or
Nasdaq. Each Holder as to which the Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
(e) Notwithstanding anything to the contrary contained herein, if (i)
the Board determines in good faith that the registration and distribution of
Securities (or the use of such Registration Statement or the Prospectus
contained therein) would interfere with any proposed or pending material
corporate transaction involving the Company or any of its subsidiaries or would
require premature disclosure thereof or would require the Company to disclose
information that the Company has not otherwise made public and that the Company
reasonably determines is in the best interests of the Company not to disclose at
such time, and (ii) the Company notifies the Holders in writing not later than
five (5) Business Days after such determination (such notice shall be a
"Blackout Notice"), the Company may (A) postpone the filing of the Registration
Statement, or (B) allow the Registration Statement to fail to be effective and
usable or elect that the Registration Statement shall not be usable for a
reasonable period of time, but not in excess of 90 days (a "Blackout Period");
provided, however, that the aggregate number of days included in all Blackout
Periods shall not exceed 90 during any
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consecutive 12 months and shall not exceed 180 during the period specified in
Section 2.2(c) of this Agreement; and provided, further, that the period
referred to in Section 2.2(c) during which the Registration Statement is
required to be effective and usable shall be extended by the aggregate number of
days during which the Registration Statement was not effective or usable
pursuant to the foregoing provisions.
2.3 Registration Procedures. In connection with the Registration Statement
and any Prospectus required by this Agreement to permit the resale of
Securities, the Company shall:
(a) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period set forth in
Section 2.2(c); cause the Prospectus to be supplemented by any required
Prospectus supplement; and as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and to comply fully with the applicable provisions of
Rules 424 and 430A, as applicable, under the Securities Act in a timely manner;
and comply with the provisions of the Securities Act with respect to the
disposition of all Securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration Statement or
supplement or the Prospectus;
(b) advise the Holders of Securities covered by such Registration
Statement and, if requested by such Holders, confirm such advice in writing, (i)
when the Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and when the same has become effective, (ii) of any request by the
Commission for post-effective amendments to such Registration Statement or
post-effective amendments or supplements to the Prospectus or for additional
information relating thereto, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of any such Registration Statement under
the Securities Act or of the suspension by any state securities commission of
the qualification of the Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, and (iv) of
the existence of any fact or the happening of any event that makes any statement
of a material fact made in any such Registration Statement, the related
Prospectus, any amendment or supplement thereto, or any document incorporated by
reference therein untrue, or that requires the making of any additions to or
changes in any such Registration Statement or the related Prospectus to make the
statements therein not materially misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of such Registration
Statement, or any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption from
qualification of the Securities under state securities or Blue Sky laws, the
Company shall use its reasonable efforts to obtain the withdrawal or lifting of
such order at the earliest possible time;
(c) promptly furnish to each Holder whose Securities are covered by
the Registration Statement, and each underwriter, if any, without charge, at
least one conformed copy of any Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all documents incorporated
by reference therein and all exhibits (including
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exhibits incorporated therein by reference) and such other documents as such
Holder may reasonably request;
(d) deliver to each Holder whose Securities are covered by the
Registration Statement, and each underwriter, if any, without charge, as many
copies of the Prospectus (including each preliminary Prospectus) and any
amendment or supplement thereto as such person reasonably may request;
(e) enter into such customary agreements and take all such other
reasonable action in connection therewith (including those reasonably requested
by the selling Holders or the underwriter(s), if any) required to expedite or
facilitate the disposition of such Securities pursuant to such Registration
Statement, including, but not limited to, dispositions pursuant to an
underwritten registration, and in such connection:
(i) make such representations and warranties to the selling
Holders and underwriter(s), if any, in form, substance and scope as are
customarily made by issuers in underwritten offerings (whether or not sales
of securities pursuant to the Registration Statement are to be to an
underwriter(s)) and confirm the same if and when requested;
(ii) obtain opinions of counsel to the Company addressed to each
selling Holder and underwriter, if any, covering the matters customarily
covered in opinions requested in underwritten offerings (whether or not
sales of securities pursuant to such Registration Statement are to be made
to an underwriter(s)) and dated the date of effectiveness of the
Registration Statement (and, in the case of any underwritten sale of
securities pursuant to the Registration Statement, each closing date of
sales to the underwriter(s) pursuant thereto);
(iii) use its reasonable best efforts to obtain comfort letters
dated the date of effectiveness of the Registration Statement (and, in the
case of any underwritten sale of securities pursuant to the Registration
Statement, each closing date of sales to the underwriter(s) pursuant
thereto) from the independent certified public accountants of the Company
addressed to each selling Holder and underwriter, if any, such letters to
be in customary form and covering matters of the type customarily covered
in comfort letters in connection with underwritten offerings (whether or
not sales of securities pursuant to such Registration Statement are to be
made to an underwriter(s));
(iv) provide the indemnification provisions and procedures of
Section 2.7 hereof with respect to selling Holders and the underwriter(s),
if any; and
(v) deliver such documents and certificates as may be reasonably
requested by the selling Holders or the underwriter(s), if any, and which
are customarily delivered in underwritten offerings (whether of not sales
of securities pursuant to such Registration Statement are to be made to an
underwriter(s)), such documents and certificates to be dated the date of
effectiveness of the Registration Statement.
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The actions required by clauses (i) through (v) above shall be done at each
closing under such underwriting or similar agreement, as and to the extent
required thereunder; provided that the Company shall not be required to
participate in more than one closing in any 180-day period;
(f) prior to any public offering of Securities, cooperate with the
selling Holders, the underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Securities under the
securities or Blue Sky laws of such U.S. jurisdictions as the selling Holders or
underwriter(s), if any, may reasonably request in writing by the time any
Registration Statement is declared effective by the Commission, and do any and
all other acts or filings necessary or advisable to allow the disposition in
such U.S. jurisdictions of the Securities covered by the Registration Statement
and to file such consents to service of process or other documents needed to
effect such registration or qualification; provided, however, that the Company
shall not be required to register or qualify as a foreign corporation in any
jurisdiction where it is not then so qualified or as a dealer in securities in
any jurisdiction where it would not otherwise be required to register or qualify
but for this Section 2.3, or to take any action that would subject it to the
service of process in suits or to taxation, in any jurisdiction where it is not
then so subject;
(g) in connection with any sale of Securities that will result in such
Securities no longer being Restricted Securities, cooperate with the selling
Holders and the underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Securities to be sold and not bearing any
restrictive legends; and enable such Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any, may
request at least two (2) Business Days prior to any sale of Securities made by
such underwriters;
(h) use its reasonable best efforts to cause the disposition of the
Securities covered by the Registration Statement to be registered with or
approved by such other U.S. governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter(s), if any,
to consummate the disposition of such Securities, subject to the proviso
contained in Section 2.3(f);
(i) if any fact or event contemplated by Section 2.3(b) shall exist or
have occurred, prepare a supplemental or post-effective amendment to any
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact necessary
to make the statement therein not misleading;
(j) cooperate and assist in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the rules and
regulations of the NASD, and use its reasonable best efforts to cause the
Registration Statement to become effective and approved by such U.S.
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governmental agencies or authorities as may be necessary to permit the Holders
selling Securities to consummate the disposition of such Securities;
(k) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available
to its security holders with regard to the Registration Statement, as soon as
practicable, a consolidated earnings statement meeting the requirements of Rule
158 (which need not be audited) for the twelve-month period (i) commencing at
the end of any fiscal quarter in which Securities are sold to an underwriter in
a firm or best efforts underwritten offering or (ii) if not sold to an
underwriter in such an offering, beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of any Registration
Statement;
(l) use its reasonable best efforts to list or have accepted for
quotation, not later than the effective date of the Registration Statement, all
Securities covered by the Registration Statement on the Nasdaq National Market
System or any other trading market on which the Common Stock is then admitted or
quoted for trading; and
(m) provide promptly to each Holder of Securities covered by the
Registration Statement upon request each document filed with the Commission
pursuant to the requirements of Section 12 and Section 14 of the Exchange Act.
Each Holder agrees by acquisition of a Restricted Security that, upon
receipt of any notice from the Company of the existence of any fact of the kind
described in Section 2.3(b)(iv) or the commencement of a Black-Out Period, such
Holder will forthwith discontinue disposition of Securities pursuant to the
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 2.3(i), or until it
is advised in writing (in accordance with the notice provisions of Section
5.3)(the "Advice") by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus. If so directed by the Company, each
Holder will deliver to the Company all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Securities
that was current at the time of receipt of such notice. If the Company shall
give any such notice, the time period regarding the effectiveness of the
Registration Statement set forth in Section 2.2(c) shall be extended by the
number of days during the period from and including the date of the giving of
such notice pursuant to Section 2.3(b)(iv) or the commencement of a Black-Out
Period until the date that the Company gives notice that the Registration
Statement (as it may then have been amended or supplemented) is again effective
or usable.
2.4 Preparation; Reasonable Investigation. In connection with preparation
and filing of the Registration Statement under the Securities Act, the Company
will give the Holders of Securities registered under the Registration Statement,
their underwriter, if any, and their respective counsel and accountants, the
opportunity to participate at their own expense in the preparation of the
Registration Statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them
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access to its books and records and such opportunities to discuss the business,
finances and accounts of the Company and its subsidiaries with its officers,
directors and the independent public accountants who have certified its
financial statements as shall be reasonably necessary, in the opinion of such
Holders and such underwriter's respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
2.5 Certain Rights of Holders. Except as otherwise required by applicable
law or regulation, the Company will not file any registration statement under
the Securities Act that refers to any Holder of Securities by name or otherwise
without the prior written approval of such Holder, which may not be unreasonably
withheld.
2.6 Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made with the NASD and Nasdaq and counsel fees in connection therewith); (ii)
all fees and expenses of compliance with federal securities and state Blue Sky
or securities laws (including all reasonable fees and expenses of one counsel to
the underwriter(s) in any underwriting) in connection with compliance with state
Blue Sky or securities laws; (iii) all expenses of printing, messenger and
delivery services and telephone calls; (iv) all fees and disbursements of
counsel for the Company; and (v) all fees and disbursements of independent
certified public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such performance),
but excluding from this paragraph, fees and expenses of any underwriters or
counsel to the underwriter(s), if any, unless otherwise set forth herein.
(b) In addition, in connection with the filing of the Registration
Statement required to be filed by this Agreement, the Company will reimburse the
Holders of the Securities being registered pursuant to any Registration
Statement, as a group, for the reasonable fees and disbursements of not more
than one counsel to review such Registration Statement.
(c) Notwithstanding the foregoing, the Company will not be responsible
for any underwriting discounts, commissions or fees attributable to the sale of
Securities or any legal fees or disbursements (other than any such fees or
disbursements relating to Blue Sky compliance or otherwise as set forth under
Section 2.6(a)) incurred by any underwriter(s) in any underwritten offering if
the underwriter(s) participate in such underwritten offering at the request of
the Holders, or any transfer taxes that may be imposed in connection with a sale
or transfer of Securities. The Company may withdraw the registration statement
at the request of the Holders of two-thirds of the Securities covered thereby,
and in such case shall not be required to pay any expenses of any registration
proceedings begun pursuant to this Agreement, and Holders participating in the
withdrawal request shall bear such expenses.
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(d) The Company shall, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
2.7 Indemnification; Contribution.
(a) The Company agrees to indemnify and hold harmless (i) each Holder
of Securities covered by the Registration Statement, (ii) each other Person who
participates as an underwriter in the offering or sale of Securities pursuant to
the Registration Statement, (iii) each person, if any who controls (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
any such Holder or underwriter (any of the persons referred to in this clause
(iii) being hereinafter referred to as a "controlling person"), and (iv) the
respective officers, directors, partners, employees, representatives and agents
of any such Holder or underwriter or any controlling person (any person referred
to in clause (i), (ii), (iii) or (iv) may hereinafter be referred to as an
"Indemnified Person"), from and against any and all losses, claims, damages,
liabilities, judgments or expenses (including, without limitation, reasonable
attorneys' fees and disbursements), joint or several (or actions or proceedings,
whether commenced or threatened, in respect thereof) (collectively, "Claims"),
to which such Indemnified Person may become subject under either Section 15 of
the Securities Act or Section 20 of the Exchange Act, insofar as such Claims
arise out of or are based upon or caused by any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any state securities law, or any rule or
regulation promulgated under the Securities Act or any state securities law, or
any other law applicable to the Company relating to any such registration or
qualification, except insofar as such losses, claims, damages, liabilities,
judgments or expenses (including, without limitation, reasonable attorneys' fees
and disbursements) of any such Indemnified Person: (x) are caused by any such
untrue statement or omission or alleged untrue statement or omission that is
based upon information relating to such Indemnified Person furnished in writing
to the Company by or on behalf of any of such Indemnified Person expressly for
use therein; (y) with respect to the preliminary Prospectus, result from the
fact that such Holder sold Securities or Restricted Securities to a person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the Prospectus, as amended or supplemented, if the Company
shall have previously furnished copies thereof to such Holder in accordance with
this Agreement and the Prospectus, as amended or supplemented; or (z) are a
result of the use by an Indemnified Person of any Prospectus when, upon receipt
of a BlackOut Notice or a notice from the Company of the existence of any fact
of the kind described in Section 2.3(b)(iv), the Indemnified Person or the
related Holder was not permitted to do so. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of any
Indemnified Person and shall survive the transfer of such Securities by such
Holder.
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If any action shall be brought or asserted against any Indemnified Person
with respect to which indemnity may be sought against the Company, such
Indemnified Person shall promptly notify the Company and the Company shall
assume the defense thereof. Such Indemnified Person shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Indemnified Person unless (i) the employment of such counsel shall have been
specifically authorized in writing by the Company, (ii) the Company shall have
failed to assume the defense and employ counsel, or (iii) the named parties to
any such action include both the Indemnified Person and the Company and the
Indemnified Person shall have been advised in writing by its counsel that there
may be one or more legal defenses available to it that are different from or
additional to those available to the Company (in which case the Company shall
not have the right to assume the defense of such action on behalf of the
Indemnified Person), it being understood, however, that the Company shall not,
in connection with such action or similar or related actions or proceedings
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for all the Indemnified Persons,
which firm shall be (A) designated by such Indemnified Persons and (B)
reasonably satisfactory to the Company. The Company shall not be liable for any
settlement of any such action or proceeding effected without the Company's prior
written consent, which consent shall not be withheld unreasonably, and the
Company agrees to indemnify and hold harmless any Indemnified Person from and
against any loss, claim, damage, liability, judgment or expense by reason of any
settlement of any action effected with the written consent of the Company. The
Company shall not, without the prior written consent of each Indemnified Person,
settle or compromise or consent to the entry of judgment on or otherwise seek to
terminate any pending or threatened action, claim, litigation or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Person is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional release
of each Indemnified Person from all liability arising out of such action, claim,
litigation or proceeding.
(b) Each Holder of Securities covered by any Registration Statement
agrees, severally and not jointly, to indemnify and hold harmless the Company
and its directors, officers and any person controlling (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) the Company,
its subsidiaries and their respective officers, directors, partners, employees,
representatives and agents of each such person, to the same extent as the
foregoing indemnity from the Company to each of the Indemnified Persons, but
only with respect to actions based on Claims referred to in clauses (x), (y) or
(z) of Section 2.7(a), and subject to the limitation that no Holder's liability
for such indemnification shall be greater than an amount equal to the total
original purchase price of the Preferred Stock purchased by such Holder pursuant
to the Stock Purchase Agreement, as set forth on Exhibit A attached hereto. If
any action or proceeding shall be brought against the Company, any of its
subsidiaries or any of their respective directors or officers or any such
controlling person in respect of which indemnity may be sought against a Holder
of Securities covered by any Registration Statement, such Holder shall have the
rights and duties given the Company in Section 2.7(a) (except that the Holder
may but shall not be required to assume the defense thereof), and the Company or
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such subsidiary, its directors or officers or such controlling person shall have
the rights and duties given to each Holder by Section 2.7(a).
2.8 Participation in Underwritten Registrations. No Holder may participate
in any underwritten registration hereunder unless such Holder (a) agrees to sell
such Holder's Securities on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements, and (b)
completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such underwriting arrangements.
2.9 Selection of Underwriters. The Holders of Securities covered by any
Registration Statement who desire to do so may sell such Securities in an
underwritten offering. In any such underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
will be selected by the Holders of a majority of the Securities included in such
offering and the terms of such offering shall be reasonably satisfactory to such
Holders; provided, however, that such investment bankers and managers and the
terms of the underwriting must be reasonably satisfactory to the Company. Such
investment bankers and managers are referred to herein as the "underwriters."
ARTICLE 3
LIQUIDATED DAMAGES
Each of the Company and the Purchasers (on behalf of themselves and each
subsequent Holder of Restricted Securities) agrees that each Holder of
Restricted Securities will suffer damages if the Registration Statement is not
filed with and declared effective by the Commission and maintained in the manner
and within the time period contemplated by Article 2 hereof and it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
subject to adjustment for any Blackout Period, if (i) the Registration Statement
is not filed with the Commission and declared effective by June 13, 1997, or
(ii) the Registration Statement is filed and declared effective but shall
thereafter cease to be effective (without being succeeded immediately by an
additional Registration Statement filed and declared effective) for a period of
time that shall exceed 90 days in the aggregate per year (defined as a period of
365 days commencing on the date the Registration Statement is declared
effective) (each such event referred to in clauses (i) and (ii), a "Registration
Default"), except as a result of extraordinary circumstances beyond the
Company's control, then the Company shall pay as Liquidated Damages to each
Holder of Restricted Securities who has complied with such Holder's obligations
hereunder an amount equal to 2% per month of the liquidation preference of the
Preferred Stock in cash (subject to adjustment in the event of stock splits,
stock recombinations, stock dividends and the like), ratably according to the
number of shares of Preferred Stock held by such Holder or previously converted
to Securities held by such Holder, immediately following the occurrence of such
Registration Default and continuing until such Registration Default is cured.
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ARTICLE 4
RULE 144A
The Company hereby agrees with each Holder of Restricted Securities,
beginning on June 13, 1997 and for so long as a Registration Statement is not
effective and any of the Restricted Securities remain outstanding and continue
to be "restricted securities" within the meaning of Rule 144 under the Act, and
during any period in which the Company is not subject to Section 13 or 15(d) of
the Exchange Act, to make available to the Holders of Restricted Securities the
information required by Rule 144A(d)(4) under the Act in order to permit resales
of such Restricted Securities pursuant to Rule 144A.
ARTICLE 5
MISCELLANEOUS
5.1 Entire Agreement. This Agreement, together with the Stock Purchase
Agreement (including the exhibits and schedules thereto), constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof.
5.2 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation, subsequent Holders of Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and then only to the extent such
successor or assign acquired Restricted Securities from such Holder at a time
when such Holder could not transfer such Restricted Securities pursuant to any
Registration Statement or pursuant to Rule 144 under the Securities Act as
contemplated by clause (ii) of the definition of Restricted Securities.
5.3 Notices. All notices and other communications given or made pursuant
hereto, unless otherwise specified, shall be in writing and shall be deemed to
have been duly given or made if delivered personally, by confirmed facsimile
transmission, or by overnight courier or sent by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the facsimile
number, if any, or address set forth below or at such other numbers or addresses
as shall be furnished by the parties by like notice. Notices sent by facsimile
shall be effective when receipt is confirmed, notices delivered personally or by
overnight courier shall be effective upon receipt and notices sent by registered
or certified mail shall be effective three days after mailing:
13
If to a Holder: To such Holder at the address set forth in Exhibit A.
In addition, copies of all such notices or other
communications shall be concurrently delivered by the
person giving the same to each person who has been
identified to the Company by such Holder as a person who is
to receive copies of such notice.
If to the Company: Xxxxxx X. Xxxxxx
Pacific Aerospace & Electronics, Inc.
000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxxx
Stoel Rives LLP
One Union Square
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Fax: (000) 000-0000
5.4 Headings. The headings contained in this Agreement are for convenience
only and shall not affect the meaning or interpretation of this Agreement.
5.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
5.6 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF WASHINGTON, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CHOICE OF LAW.
5.7 Specific Enforcement. Each party hereto acknowledges that the remedies
at law of the other parties for a breach or threatened breach of this Agreement
would be inadequate, and, in recognition of this fact, any party to this
Agreement, without posting any bond, and in addition to all other remedies that
may be available, shall be entitled to obtain equitable relief in the form of
specific performance, a temporary restraining order, a temporary or permanent
injunction or any other equitable remedy that may then be available.
5.8 Amendment and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority in interest of the Restricted
Securities.
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THE COMPANY:
PACIFIC AEROSPACE & ELECTRONICS, INC.
By XXXXXX X. XXXXXX
------------------------------------
Xxxxxx X. Xxxxxx
President and Chief Executive Officer
15
AG SUPER FUND INTERNATIONAL
PARTNERS, L.P.
By Xxxxxx, Xxxxxx & Co., L.P.
Its General Partner
By XXXXXXX X. XXXXXX
-------------------------------
Xxxxxxx X. Xxxxxx
Chief Operating Officer
GAM ARBITRAGE INVESTMENTS, INC.
By Xxxxxx, Xxxxxx & Co., L.P.
Investment Advisor
By XXXXXXX X. XXXXXX
-------------------------------
Xxxxxxx X. Xxxxxx
Chief Operating Officer
PARESCO, INC. THE XXXXXX XXXXXX LIVING TRUST
DATED 11/26/96
By XXX XXXXX By XXXXXX XXXXXX
------------------------------- ----------------------------------
Its Chief Financial Officer Xxxxxx Xxxxxx, Trustee
------------------------------
XXXXXX GLOBAL INCOME FUND XXXXXX PARTNERS, L.P.
By XXXX XXXXXXX By XXXX XXXXXXX
------------------------------- ----------------------------------
Its Director Its Chief Financial Officer of its
------------------------------ General Partner
---------------------------------
XXXXXX OFFSHORE, LTD. XXXXXX SUSSKIND HEDGECAP, L.P.
By XXXX XXXXXXX By XXXX XXXXXXX
------------------------------- ----------------------------------
Its Director Its Chief Financial Officer of its
------------------------------- General Partner
---------------------------------
16
XXXXXX FAMILY FOUNDATION XXXX XXXXXX, XXX
By XXXX XXXXXXX By XXXX XXXXXX
------------------------------- ----------------------------------
Its Secretary
------------------------------
17
XXXXXXXX, L.P.
By Xxxxxx, Xxxxxx & Co., L.P.
Its General Partner
By XXXXXXX X. XXXXXX
-------------------------------
Xxxxxxx X. Xxxxxx
Chief Operating Officer
18
[EXHIBIT OMITTED AS NOT MATERIAL]
