EXHIBIT 10.15
CONVERSION ADJUSTMENT AGREEMENT
Conversion Adjustment Agreement (this "Agreement"), dated as of
March 19, 2002, by and among Pacific Aerospace & Electronics, Inc., a Washington
corporation (the "Company"), GSCP Recovery, Inc., GSC Recovery II, L.P.,
Alliance Capital Management L.P., M.W. Post Advisory Group L.L.C., Xxxxxxx X.
Xxxxx & Sons Special Situation Partners II, L.P. and HBK Master Fund L.P.
(collectively, the "Holders").
RECITALS
WHEREAS, reference is made to the Exchange Agreement, dated as of
the date hereof (the "Exchange Agreement"), among, the Company, the Holders, and
the Subsidiary Guarantors (as defined therein) pursuant to which each of the
Holders have agreed to exchange their 11 1/4% Senior Subordinated Notes due 2005
of the Company (the "Old Notes") held by such Holders for certain other
securities of the Company, including common stock, preferred stock and
pay-in-kind senior subordinated notes (collectively, the "New Securities"), as
more particularly described therein;
WHEREAS, for each $1,000 of Old Notes tendered to the Company
pursuant to the terms of the Exchange Agreement, the Holders will receive .0158
shares of the Company's Series C Convertible Preferred Stock, par value $0.001
(the "Preferred Stock"), rounded down to the nearest whole share;
WHEREAS, upon receipt of requisite shareholder approval to amend
the Articles of Incorporation of the Company to increase the number of
authorized shares of common stock of the Company, par value $0.001 (the "Common
Stock"), as necessary to effect the full conversion of the Preferred Stock into
shares of Common Stock, the Preferred Stock shall automatically convert (the
"Automatic Conversion") into the number of shares of Common Stock of the Company
which when added to the number of shares of Common Stock of the Company received
at Closing (as defined in the Exchange Agreement) will give the Holders on a
fully-diluted basis, in the aggregate, 97.5% of the outstanding shares of Common
Stock of the Company (the "Conversion Shares");
WHEREAS, the New Securities, including the shares of Preferred
Stock, are being distributed to the Holders via the book-entry system of The
Depository Trust Company ("DTC") upon tender of the Old Notes held by the
Holders;
WHEREAS, the distribution of the New Securities, including the
Preferred Stock, via DTC's book-entry system and the effects of rounding down to
the nearest whole share would, in the absence of this Agreement, otherwise
result in a disproportionate allocation of shares of Preferred Stock among the
Holders following such distribution that is inconsistent with the economic
arrangement agreed to among the parties prior to the exchange transaction (the
"Economic Arrangement"); and
WHEREAS, as more particularly described herein, the Holders
desire that the number of Conversion Shares to be received by each Holder upon
the Automatic Conversion of the Preferred Stock be adjusted to reflect the
Economic Arrangement.
NOW THEREFORE, in consideration of the mutual covenants and
obligations set forth herein, and subject to the terms and conditions contained
herein, the Company and each Holder hereby agree as follows:
Section I. NUMBER OF CONVERSION SHARES
Section 1.1 Conversion Adjustment. Notwithstanding (i) the number
of shares of Preferred Stock received by each Holder at Closing, (ii) the
Conversion Price as set forth in the Designation of Rights and Preferences of
Series C Voting Convertible Preferred Stock (the "Certificate of Designation")
of the Company, and (iii) the number of accounts in which the Preferred Stock is
held by the Holders, the Company and each Holder hereby agree that the number of
Conversion Shares each Holder shall receive upon consummation of the Automatic
Conversion shall be calculated on a pro-rata basis as determined by the
aggregate principal amount of Old Notes tendered by such Holder in relation to
the aggregate principal amount of Old Notes tendered by all of the Holders in
the Exchange, the aggregate principal amount of which shall be $63,700,000 (the
"Conversion Adjustment"). This Section 1.1 is designed solely to effect the true
economic transaction agreed to between the Company and the Holders and to
resolve any disproportionate distributions of Preferred Stock that would
otherwise arise as a result of the rounding down of shares in DTC's book-entry
system.
Notwithstanding the foregoing, the Conversion Adjustment shall
not serve to increase the aggregate number of Conversion Shares issuable upon
the Automatic Conversion, as such terms are set forth in the Company's
Certificate of Designation.
Section 1.2 Amendment. This Agreement may not be amended,
modified or supplemented unless consented to in writing by all parties hereto.
Section 1.3 Governing Law. This Agreement shall be governed by
the laws of the State of New York applicable to contracts made and to be wholly
performed in the State of New York without giving effect to the principles of
conflicts of laws thereof.
Section 1.4 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
THE COMPANY
PACIFIC AEROSPACE &
ELECTRONICS, INC.
BY: /S/ Xxxxxx X. Xxxxxx
_________________________________
Name: Xxxxxx X. Xxxxxx
Title: President and
Chief Executive Officer
THE HOLDERS
GSCP RECOVERY, INC
By: /s/ Xxxxxxx Xxxxxxx
_________________________________
Name: Xxxxxxx Xxxxxxx
Title: Managing Director
GSC RECOVERY II, L.P.
By: GSC Recovery II GP, L.P.,
its general partner
By: GSC RII, LLC,
its general partner
By: GSCP (NJ) Holdings, L.P.,
its sole member
By: GSCP (NJ), Inc.,
its general partner
By: /s/ Xxxxxxx Xxxxxxx
_________________________________
Name: Xxxxxxx Xxxxxxx
Title: Managing Director
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ALLIANCE CAPITAL MANAGEMENT L.P.,
as investment advisor
By: Alliance Capital Management Corp.
By: /s/ Xxxxxxx X. Xxxx
___________________________________________
Name: Xxxxxxx X. Xxxx
Title: Vice President
M.W. POST ADVISORY GROUP L.L.C.,
as investment advisor
By: /s/ Xxxx X. Xxxxxxxxx
___________________________________________
Name: Xxxx X. Xxxxxxxxx
Title: Managing Director
XXXXXXX X. XXXXX & SONS SPECIAL SITUATION
PARTNERS II, L.P.
By: Xxxxxxx X. Xxxxx & Sons Special
Situations II, L.L.C., its General Partner
By: /s/ Xxxx X. Xxxxxx
___________________________________________
Name: Xxxx X. Xxxxxx
Title: Authorized Signatory
HBK MASTER FUND L.P.
By: HBK Investments L.P.
Investment Manager
By: /s/ Xxxxxxx X. Xxxx
___________________________________________
Name: Xxxxxxx X. Xxxx
Title: Authorized Signatory
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