EXHIBIT 99.2
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AMENDED AND RESTATED AGREEMENT
This Amended and Restated Agreement (as the same may be amended,
modified or supplemented from time to time in accordance with the terms hereof,
the "Agreement"), dated as of October 19, 2001, is entered into by and among
Pacific Aerospace & Electronics, Inc. (the "Company"), and each of the
undersigned holders (each, a "Consenting Noteholder") of the 11 1/4% Senior
Subordinated Notes due 2005 (the "Notes") issued pursuant to that certain
indenture (the "Indenture") dated as of July 30, 1998 by and among the Company,
the Guarantors (as defined therein) and The Bank of New York (as successor to
IBJ Xxxxxxxxx Bank & Trust Company), as Trustee (the "Trustee").
RECITALS
WHEREAS the Company has failed to pay the interest payment on the Notes
which was due on August 1, 2001 (the "Default");
WHEREAS by reason of the Default, the holders of the Notes have certain
rights under the Indenture to accelerate payment of the Notes;
WHEREAS the Company and the Consenting Noteholders have engaged in good
faith negotiations with the objective of reaching a mutually acceptable
agreement for the exchange of the Notes for new notes (the "New Notes"), common
stock and preferred stock of the Company;
WHEREAS the Consenting Noteholders have agreed to exchange their Notes
to the Company on the terms set forth in the term sheet attached hereto as
Exhibit A (the "Term Sheet") and incorporated into this Agreement as if fully
set forth herein (the "Exchange");
WHEREAS to expedite and ensure implementation of the Exchange, (i) the
Company is prepared to propose the Exchange, seek the necessary approvals for
the Exchange as expeditiously as possible and perform its other obligations
hereunder and (ii) the Consenting Noteholders are prepared to commit, on the
terms and subject to the conditions of this Agreement and applicable law, to
exchange their Notes when solicited to do so and to perform their other
obligations hereunder; and
WHEREAS, the Company and the Consenting Noteholders previously entered
into an Agreement dated September 7, 2001 (the "Prior Agreement") setting forth
the terms of a restructuring and the parties hereto now wish to amend and
restate the Prior Agreement in full and replace it with this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals, terms and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
Consenting Holder (each a "party" or "Party" and collectively, the "parties" or
"Parties"), intending to be legally bound, agree as follows:
1. Any term defined in the description of the Parties above or in
any of the recitals hereto shall have the meaning given to it in the description
or recital, as the case may be.
2. Means for Effecting the Exchange. The Company and the Consenting
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Noteholders agree that the Exchange shall be in accordance with the terms of the
Term Sheet annexed hereto as Exhibit A and be accomplished by an out of court
exchange and consent solicitation in which 100% of the Notes participate (which
percentage may be waived by the holders of 95% in aggregate principal amount of
the Notes). The exchange offer will be conducted to conform with the
requirements of Section 3(a)(9) of the Securities Act of 1933 and Rule 150,
adopted thereunder, and Section 14(e) of the Exchange Act and Regulation 14E,
adopted thereunder, and all other applicable federal and state securities laws.
3. Preparation of Exchange Documents. Promptly upon execution of this
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Agreement by the holders of at least 97.5% of the outstanding principal amount
of the Notes, the Company shall instruct its counsel to prepare for the review
and approval of the Parties hereto all documents needed to effectuate the
Exchange as contemplated in this Agreement (collectively, the "Exchange
Documents"). The Company and the Consenting Noteholders shall coordinate with
one another in the preparation of the Exchange Documents.
4. Conditions to the Exchange. The Exchange shall not close unless and
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until 100% of the outstanding principal amount of the Notes have tendered their
Notes for exchange (which provision may be waived by the holders of 95% in
aggregate principal amount of the Notes).
5. Support of the Exchange. Each of the Consenting Noteholders agrees
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that, subject to the conditions that, and only for so long as, (i) each of the
Exchange Documents shall be reasonably satisfactory to it, (ii) the material
terms of the Exchange Documents are substantially identical (subject to the "Tax
Considerations" section of the Term Sheet) to the terms set forth on the Term
Sheet annexed hereto as Exhibit A, and (iii) no Noteholders Termination Event
(as defined below) shall have occurred and not have been waived in accordance
herewith, it (1) shall exchange its Notes (and tender its Notes for exchange in
accordance with the Term Sheet), (2) hereby consents to amendments to the
Indenture if carried out substantially in accordance with the Term Sheet, (3)
shall execute an agreement setting forth the shareholder arrangements set forth
in the section entitled "Post Restructuring Board Composition" contained in the
Term Sheet, (4) to the extent permitted under the Indenture, hereby waives any
default existing on or prior to the date of this Agreement thereunder, and (5)
to the extent permitted under the Indenture, hereby agrees to waive any default
arising after the date of this Agreement under the Indenture through the earlier
of consummation of the Exchange or Termination of this Agreement in accordance
with the provisions hereof. Each of the Consenting Noteholders shall not: (a)
object to the consummation of the Exchange or otherwise commence any proceeding
to oppose the Exchange or any of the Exchange Documents so long as the Exchange
Documents contain terms and conditions substantially identical (subject to the
"Tax Considerations" section of the Term Sheet) with those contained in this
Agreement and the Term Sheet; (b) vote for, consent to, support or participate
in the formulation of any other out-of-court exchange for the Notes or
restructuring of the Company, or a plan of reorganization or liquidation under
applicable bankruptcy or insolvency laws, whether domestic or foreign, in
respect of the Company; (c) directly or indirectly seek, solicit, support or
encourage any other out-of-court exchange for the Notes or restructuring, plan,
proposal or offer of dissolution, winding up, liquidation, reorganization,
merger or restructuring of the Company
(other than one agreed to in writing by the Company and the Consenting
Noteholders) that is inconsistent with this Agreement; or (d) take any other
action, including but not limited to initiating any legal proceeding that is
materially inconsistent with, or that would materially delay consummation of,
the Exchange; provided, however, that nothing contained herein shall limit the
ability of any Consenting Holder to consult with the Company concerning any
matter arising in connection with the Exchange so long as such consultation is
not inconsistent with such Consenting Holder's obligations hereunder and the
terms of the Exchange.
6. Acknowledgment. This Agreement and the terms of the Exchange are the
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product of negotiations between the Company and the Consenting Noteholders. This
Agreement is not and shall not be deemed to be a solicitation for consents to
amendments to the Indenture or a solicitation to tender or exchange the Notes.
Acceptance of the Exchange will not be solicited from any holder of the Notes
until it has received the disclosures required under applicable law.
Notwithstanding anything contained herein, the Consenting Noteholders shall be
under no requirement to consent to amendments to the Indenture or to exchange
their Notes, if the Exchange Documents presented to the Consenting Noteholders
provide for any terms that are materially inconsistent with this Agreement,
including, not limited to, the provisions of the Term Sheet. The Company
acknowledges and agrees that (i) the Indenture and all instruments and documents
executed in connection therewith constitute valid and binding agreements of the
Company and (ii) the Company does not possess and will not assert, any claim,
counterclaim setoff or defense of any kind or nature, which would in any way
affect the validity or enforceability of any claim arising from the Notes, or
which would in any way reduce or affect the absolute and unconditional
obligation of the Company to pay all of the obligations arising from the Notes.
7. Company Agreements. The Company hereby agrees (i) to prepare all of the
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Exchange Documents in a timely fashion, (ii) to ensure that all of the Exchange
Documents contain terms and conditions substantially identical (subject to the
"Tax Considerations" section of the Term Sheet) with those contained in this
Agreement and the Term Sheet, (iii) to file all applicable reports and other
documents as required under the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder within the time limits or periods specified
therein, (iv) to afford reasonable opportunity in advance of filing any such
reports, documents or the Exchange Documents to Xxxxx Xxxxxxxxxx LLP, on behalf
of the Consenting Noteholders, to review and comment upon such reports,
documents, Exchange Documents and any other material disclosure or press
releases, (v) to take all reasonable steps necessary and desirable to obtain
approval for the Exchange as expeditiously as possible under applicable law,
(vi) to use reasonable best efforts to obtain any and all requisite regulatory
and/or third party approvals for the Exchange and (vii) to take commercially
reasonable efforts to identify promptly any Noteholders that are not, as of the
date hereof, Consenting Noteholders.
8. Termination of the Consenting Noteholders' Obligations. Each of the
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Consenting Noteholders may terminate its obligations hereunder and rescind its
acceptance of the Exchange by giving written notice thereof to the other
Consenting Noteholders, if any, and the Company of the following (each, a
"Noteholders Termination Event"): (a) the Exchange Documents provide or are
modified to provide for any terms that are adverse to or materially inconsistent
with any of the terms or conditions of this Agreement or the Term Sheet, (b) the
Company materially
breaches this Agreement or fails to satisfy any of the terms or conditions of
the Term Sheet in any material respect, (c) the Exchange is not consummated by
December 31, 2001, (d) the Company shall file any proceeding under any provision
of the Bankruptcy Code or under any other state, federal or foreign bankruptcy
law, (e) any person shall commence any proceeding under any provision of the
Bankruptcy Code or under any other state, federal or foreign bankruptcy law
against the Company, (f) the Company shall withdraw or revoke the Exchange, or
the Company shall publicly announce its intention not to pursue the Exchange,
(g) any other Consenting Noteholder shall have materially breached any of its
material obligations under this Agreement, which breach shall not have been
cured within 10 days of receiving notice thereof or (h) a New Senior Facility
(as defined in the Term Sheet) with terms and conditions reasonably acceptable
to the Consenting Noteholders has not been committed to by a senior lender on or
prior to November 30, 2001, and has not been entered into and obtained by the
Company on or prior to December 31, 2001.
9. Termination of the Company's Obligations. The Company shall have the
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right to terminate this Agreement, by the giving of written notice thereof to
each of the Consenting Noteholders: (a) in the event of a material breach of
this Agreement by the Consenting Noteholders, (b) the failure to satisfy any
material term or condition of the Term Sheet by any Consenting Noteholder or (c)
the Exchange is not consummated by December 31, 2001 (a "Company Termination
Event").
10. Effects of Termination. Subject to Paragraph 22 hereof and the
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confidentiality provisions contained in the Term Sheet, upon the occurrence of a
Noteholders Termination Event or a Company Termination Event, unless such
Noteholders Termination Event or a Company Termination Event has been waived in
accordance with the terms hereof, in each case resulting in the termination of
the Consenting Noteholders' obligations or the Company's obligations (as the
case may be) under the terms of Paragraph 8 or Paragraph 9 above, this Agreement
shall terminate and no party hereto shall have any continuing liability or
obligation to pay any other party thereunder and each party shall have all of
the rights and remedies available to it under applicable law and/or any
Indenture, and any ancillary documents or agreements thereto, including under
this Agreement; provided, however, that no such termination shall relieve any
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party from liability for its breach or non-performance of its obligations
hereunder prior to the date of such termination.
11. Forbearance; Restrictions on Transfers. So long as obligations of the
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Consenting Noteholders have not been terminated: (a) the Consenting Noteholders
will (i) not file a notice of default or sale or take any other action to
collect on the Notes, including, without limitation, instructing the Trustee on
how to proceed in the exercise of any and all remedies, or (ii) give
instructions to the Trustee, if and when reasonably appropriate, to desist from
taking action that is inconsistent with this Agreement or the Exchange, so long
as no indemnity of such Consenting Noteholders is required for such action to be
taken by the Trustee; and (b) each of the Consenting Noteholders will not,
directly or indirectly, sell, assign, transfer, hypothecate or otherwise dispose
of (i) any Notes beneficially owned by it or as to which it has investment
authority or discretion (including Notes acquired after the date hereof), (ii)
any claim (as that term is defined in section 101(5) of the Bankruptcy Code)
arising from, based on or related to the Notes, or (iii) any option, interest
in, or right to acquire any Notes or claim referred to in clauses
(i) and (ii) above, unless the transferee thereof agrees in writing for the
benefit of the other parties hereto to be bound by (y) all of the terms of this
Agreement and executes a counterpart signature page of this Agreement and (z) a
confidentiality agreement in substantially similar form to that executed with
the Company by the transferor, and the transferor provides each of the Company
and the Consenting Noteholders in accordance with Paragraph 12 below with copies
thereof, in which event each party shall be deemed to have acknowledged that its
obligations to the Consenting Holders hereunder shall be deemed to constitute
obligations in favor of such transferee.
12. Notices. Notices given under this Agreement shall be to:
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For the Company:
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Xxxxxxx X. Xxxxxxxx, Esq.
Milbank, Tweed, Xxxxxx & XxXxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxx, 00/xx/ Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
For the Consenting Noteholders:
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Xxxxxxx X. Xxxx, Esq.
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
13. Reservation of Rights. Except as expressly provided in this Agreement,
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nothing herein is intended to, or does, in any manner waive, limit, impair or
restrict the ability of each Consenting Noteholder and the Trustee to protect
and preserve its rights, remedies and interests, including without limitation,
its claims against the Company. Nothing herein shall be deemed an admission of
any kind. Nothing contained herein effects a modification of the Consenting
Noteholders' or the Trustee's rights under the Indenture, the Notes or other
documents and agreements unless and until the Exchange is consummated. If the
transactions contemplated herein are not consummated, or if this Agreement is
terminated for any reason, the parties hereto fully reserve any and all of their
rights. Pursuant to Federal Rule of Evidence 408, any applicable state rules of
evidence and any other applicable law, foreign or domestic, this Agreement and
all negotiations relating thereto shall not be admissible into evidence in any
proceeding other than a proceeding to enforce its terms.
14. Good Faith Negotiations of Exchange Documents; Further Assurances. The
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Company and each of the Consenting Noteholders hereby further covenant and agree
to negotiate the definitive documents relating to the Exchange, including,
without limitation, the Exchange Documents, in good faith. Furthermore, each of
the Parties shall take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement
(provided that no Consenting Holder shall be required to incur any expense,
liability or other monetary obligation), and shall refrain from taking any
action which would frustrate the purposes and intent of this Agreement.
15. Effectiveness; Counterparts. This Agreement shall not become effective
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and binding on the parties hereto unless and until counterpart signature pages
hereto shall have been executed and delivered by the Company and each
undersigned Consenting Noteholder. This Agreement may be executed by one of more
of the parties hereto in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts when taken together shall
constitute one and the same instrument. Except as expressly provided for herein,
no modification, amendment or waiver of any provision of this Agreement or the
Term Sheet shall be effective unless such modification, amendment or waiver is
in writing and signed by each of the parties hereto. The agreements,
representations and obligations of the Consenting Noteholders under this
Agreement are, in all respects, several and not joint.
16. Representations and Warranties. Each Consenting Noteholder represents
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and warrants to the Company and each other that it is an accredited investor and
owns the Notes that represent a beneficial interest in the total principal
amount (of record and/or beneficially) set forth next to its name on the
signature pages hereof, or as to which such holder or its Affiliates (as that
term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended, and over whom the Consenting Noteholder exercises sufficient control to
insure enforcement of the provisions of this Agreement) has investment authority
or discretion, and such Notes constitute all of such Notes so owned or
controlled by such holder and its Affiliates. Each party hereunder represents
and warrants that the following statements are true, correct and complete as of
the date hereof.
(a) Power, Authority and Authorization. Execution, delivery and
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performance of this Agreement by such party has been duly authorized by all
necessary corporate action on the part of such party, and the person
executing this Agreement on behalf of such party is duly authorized to do
so;
(b) No Conflicts. The execution, delivery and performance of this
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Agreement by such party does not and shall not (i) violate any provision of
law, rule or regulation applicable to it or any of its subsidiaries or its
organizational documents or those of any of its subsidiaries or (ii) except
to the extent previously disclosed in writing to the Noteholders, conflict
with, result in a breach of or constitute (with due notice or lapse of time
or both) a default under any material contractual obligations to which it
or any of its subsidiaries is a party or under its organizational
documents;
(c) Governmental Consents. The execution, delivery and performance by
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it of this Agreement do not and shall not require any registration or
filing with, consent or approval of, or notice to, or other action to, with
or by, any federal, state or other governmental authority or regulatory
body, except such filing as may be necessary and/or required for disclosure
by the Securities and Exchange Commission or pursuant to state securities
or "blue sky" laws; and
(d) Binding Obligation. This Agreement is the legally valid and
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binding obligation of each of the undersigned, enforceable against it in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws,
both foreign and domestic, relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability.
17. Disclosure of Individual Holdings. Unless required by applicable law
---------------------------------
or regulation, the Company shall not disclose (i) the amount of a Consenting
Noteholder's holdings of Notes, or (ii) the terms of this Agreement, without the
prior written consent of such Consenting Noteholder; and if such announcement or
disclosure is so required by law or regulation, the Company shall afford the
Consenting Noteholders a reasonable opportunity to review and comment upon any
such announcement or disclosure prior to such announcement or disclosure by the
Company. The foregoing shall not prohibit the Company from disclosing the
approximate aggregate holdings of Notes by the Consenting Noteholders or the
holders of the Notes as a group.
18. Entire Agreement. This Agreement, including the Term Sheet and the
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Exchange Documents, constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings of the parties in connection therewith.
19. Representation by Counsel. Each party hereto acknowledges that it has
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been represented by counsel (or had the opportunity to and waived its right to
do so) in connection with this Agreement and the transactions contemplated by
this Agreement. Accordingly, any rule of law or any legal decision that would
provide any party hereto with a defense to the enforcement of the terms of this
Agreement against such party based upon lack of legal counsel shall have no
application and is expressly waived. The provisions of this Agreement shall be
interpreted in a reasonable manner to effect the intent of the parties hereto.
None of the parties hereto shall have any term or provision construed against
such party solely by reason of such party having drafted the same.
20. Specific Performance. It is understood and agreed by each of the
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parties hereto that money damages would not be a sufficient remedy for any
breach of this Agreement by any party and each non-breaching party shall be
entitled to specific performance and injunctive or other equitable relief as a
remedy of any such breach.
21. Prevailing Party. If any party brings an action against any other
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party based upon a breach by such other party of its obligations hereunder, the
prevailing party shall be entitled to all reasonable expenses incurred,
including reasonable attorneys', accountants' and financial advisors' fees in
connection with such action.
22. Survival. Notwithstanding the sale of the Notes in accordance with
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Paragraph 11 hereof or the termination of the Consenting Noteholders'
obligations hereunder in accordance with Paragraph 8 hereto, the Company's
obligations and agreements set forth in Paragraph 17 (with respect to disclosure
of certain information) hereof shall survive such termination and shall continue
in full force and effect for the benefit of the Consenting Noteholders in
accordance with the terms hereof.
23. Successors and Assigns. This Agreement is intended to bind and inure
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to the benefit of the parties and their respective successors, assigns, heirs,
executors, administrators and representatives; provided, however, that nothing
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contained in this Paragraph shall be deemed to permit sales, assignments or
transfers other than in accordance with Paragraph 11.
24. No Third Party Beneficiaries. Unless expressly stated herein, this
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Agreement shall be solely for the benefit of the parties hereto and no other
person or entity.
25. Headings. The headings of the sections, paragraphs and subsections of
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this Agreement are inserted for convenience only and shall not affect the
interpretation thereof.
26. Further Acquisition of Notes. Any Consenting Holder may acquire
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additional Notes to the extent permitted by applicable law. However, each such
Consenting Holder agrees that it shall exchange any such additional Notes, in
accordance with the terms hereof and for so long as such Consenting Holder is
obligated to exchange its Notes in accordance with the terms hereof.
27. Amendments and Waivers. Once effective (unless otherwise provided
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herein), this Agreement may not be modified, amended or supplemented, and none
of the Noteholders Termination Events may be waived, except in writing signed by
holders of at least 75% of the aggregate principal amount of Notes; provided,
however, it shall require the waiver, in writing, of all parties hereto to
extend any of the dates set forth in Sections 8 and 9 hereto by more than ten
(10) business days from the dates set forth in such Section; and further
provided, however, that any modification of, or amendment or supplement to, this
Section 27 or any material term or provision of the Term Sheet or the Exchange
shall require the written consent of all of the parties.
28. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY AND
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CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO ANY CONFLICTS OF LAW PROVISIONS WHICH WOULD REQUIRE THE APPLICATION OF
THE LAW OF ANY OTHER JURISDICTION. BY ITS EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES FOR
ITSELF THAT ANY LEGAL ACTION, SUIT OR PROCEEDING AGAINST IT WITH RESPECT TO ANY
MATTER UNDER OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT RENDERED IN ANY SUCH ACTION, SUIT OR
PROCEEDING, MAY BE BROUGHT IN ANY FEDERAL OR STATE COURT IN THE BOROUGH OF
MANHATTAN, THE CITY OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HEREBY IRREVOCABLY ACCEPTS AND SUBMITS ITSELF TO
THE NONEXCLUSIVE JURISDICTION OF EACH SUCH COURT, GENERALLY AND UNCONDITIONALLY,
WITH RESPECT TO ANY SUCH ACTION, SUIT OR PROCEEDING.
29. Fees and Expenses. Notwithstanding anything contained herein to the
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contrary, the Consenting Holders shall not be obligated to perform under this
Agreement unless the
Company shall have fully discharged all of its obligations then due and owing
under that certain letter agreement heretofore entered into by the Company and
Xxxxx Xxxxxxxxxx LLP.
30. Prior Negotiations; Prior Agreement. This Agreement and Exhibit A
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annexed hereto supersede all prior negotiations with respect to the subject
matter hereof and replace in full the Prior Agreement, except that the parties
acknowledge that any confidentiality agreements heretofore executed between the
Company and each Consenting Holder shall continue in full force and effect.
Pursuant to Section 27 of the Prior Agreement, the Prior Agreement is hereby
terminated, and shall be of no further force or effect.
31. Consideration. It is hereby acknowledged by the parties that no
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consideration shall be due or paid to the Consenting Holders for their agreement
to participate in the Exchange, in accordance with the terms and conditions of
this Agreement other than the obligations imposed upon the Company pursuant to
the terms of this Agreement and the Term Sheet, including, without limitation,
the obligation to take reasonable steps necessary and desirable to obtain
approval of the Exchange as expeditiously as possible under applicable law and
to use reasonable best efforts to obtain any and all requisite regulatory and/or
third party approvals for the Exchange in accordance with the terms and
conditions of this Agreement.
32. Severability. If any provision of this Agreement is held to be invalid
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or unenforceable in whole or in part, such invalidity or unenforceability shall
attach only to such provision or part thereof and the remaining part of such
provision hereof shall continue in full force and effect.
IN WITNESS WHEREOF, each of the parties below have executed a
counterpart of this Agreement, the terms of which shall be effective upon
execution by the Company and the Consenting Noteholders.
Dated: October 19, 2001 Pacific Aerospace & Electronics, Inc.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
Dated: October 19, 2001 GSCP Recovery, Inc.
By: /s/ Xxxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Managing Director
Address: 00 X. 00/xx/ Xxxxxx
Xxx Xxxx, XX 00000
Tel.: (000) 000-0000
Fax: (000) 000-0000
Principal amount of Notes held:
$34.26 million
Dated: October 11, 2001 Alliance Capital Management L.P., as
investment advisor
By: Alliance Capital Management Corp
By: /s/ Xxxxxxx X. Xxxx
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Name: Xxxxxxx X. Xxxx
Title: Vice President
Address: 0000 Xxxxxx xx xxx Xxxxxxxx
00/xx/ Xxxxx
Xxx Xxxx, XX 00000
Tel.: (000) 000-0000
Fax: (000) 000-0000
Principal amount of Notes held:
$8.5 million
Dated: October 12, 2001 M.W. Post Advisory Group L.L.C., as
investment advisor
By: /s/ Xxxxxxxx Post
------------------------------
Name: Xxxxxxxx Post
Title: Managing Member
Address: 0000 Xxxxxxx Xxxx Xxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000
Tel.: (000) 000-0000
Fax: (000) 000-0000
Principal amount of Notes held:
$17.145 million
Dated: October 19, 2001 Xxxxxxx X. Xxxxx & Sons Special Situation
Partners II, L.P.
By: /s/ Xxxx X. Xxxxxx
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Name: Xxxx X. Xxxxxx
Title: Principal
Address: 00000 Xxxxxxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Tel.: 000-000-0000
Fax: 000-000-0000
Principal amount of Notes held:
$2.5 million
EXHIBIT A
TERM SHEET
PACIFIC AEROSPACE & ELECTRONICS, INC.
Exchange of Senior Subordinated Notes
October 19, 2001
The following constitutes the principal terms for an exchange (the "Exchange")
of the 11 1/4% Senior Subordinated Notes due 2005 (the "Notes") issued by
Pacific Aerospace & Electronics, Inc. (the "Company"), to be followed by (1) a
solicitation of the stockholders of the Company with respect to voting on an
amendment to the Company's Articles of Incorporation to increase the number of
authorized shares of common stock and (2) upon such amendment becoming
effective, an automatic conversion of the convertible preferred stock received
in the Exchange (collectively, with the Exchange, the "Transaction"). This term
sheet does not address any obligations of the Company to any other of its
creditors. The terms discussed herein are part of a comprehensive compromise,
each element of which is consideration for the other elements and an integral
aspect of the proposed restructuring. Except for the Confidentiality provision
below, this proposed term sheet does not constitute an offer or a legally
binding obligation of the Company or the Noteholders or any other party in
interest. This term sheet is proffered in the nature of a settlement proposal in
furtherance of settlement discussions, and is intended to be entitled to
protection from any use or disclosure to any party or person pursuant to Fed. R.
Evid. 408 or any other applicable rule of evidence.
Objective: The holders of the Company's Notes (the
"Noteholders") will exchange their Notes
for a combination of new Pay-in-kind notes
("PIK Notes"), common stock and convertible
preferred stock. Upon consummation of the
Exchange and conversion of the preferred
stock issued hereunder, the pro forma
capitalization of the Company will be as
follows:
Pro Forma percentage of
Holders: Common Stock:/1/
Participating Noteholders 97.5%
Existing Common Shrs (including 2.5%
all currently outstanding options
and other securities convertible
into Common Stock)
/1/ Does not reflect 10% of the Company's pro
forma common stock reserved for issuance to
management as set forth herein.
The Exchange will be effected pursuant to Section 3(a)(9) of
the Securities Act of 1933, as amended.
Exchange The Company will exchange all of the existing Notes,
Consideration: together with accrued interest through the date of the
Exchange for the following package of securities:
1) That number of shares of common stock that represents a
majority of the outstanding common shares of the
Company (the "Initial Common Issuance"), with signed
agreements of the CEO, COO and General Counsel locking
up such officers from exercising their issued and
outstanding options and other convertible securities of
the Company.
2) 1,000 shares of convertible preferred stock (the
"Preferred") with an aggregate liquidation preference
equal to $45 million. The Preferred will accrue
dividends cumulatively at a rate of 10% per annum from
the date of issuance (which dividend rate will increase
to 14% per annum if the Automatic Conversion (as
defined below) has not occurred on or prior to December
31, 2001). The Preferred shall be automatically
converted (the "Automatic Conversion") upon shareholder
authorization of a sufficient number of shares of
common stock to effect the conversion in full into that
number of shares of common stock that, when added to
the number of shares of common stock issued to the
Noteholders in the Initial Common Issuance, would equal
97.5% of the authorized, outstanding common stock of
the Company. The Preferred will rank senior to all
other classes of stock of the Company as to
liquidation, dissolution, distributions, etc. The
Preferred shall have the voting rights described under
the section entitled "Voting Rights" below.
3) PIK Notes in an aggregate principal amount of $15
million with the following terms:
Interest rate: 10% per annum (increased to 14% if
the Automatic Conversion has not occurred on or
prior to December 31, 2001), interest payable
semi-annually
Maturity: ___________, 2006 (five years from the
date of issuance)
Prepayment: Payable in full at any time without
penalty
Interest payment: Interest on the PIK Notes shall be
payable in cash or in kind at the same interest
rate at theCompany's option through and including
the fourth interest payment on the PIK Notes.
Thereafter, interest on the PIK Notes shall be
payable in cash only.
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New Senior Financing The Company shall use its best commercially
reasonable efforts to obtain anew senior credit
facility in the amount of at least $20.0 million
(the "New Senior Facility") and to use the New
Senior Facility to repay the Company's senior
secured notes (for the holders of which DDJ
Capital Management LLC acts as agent for the
Lenders pursuant to a Loan Agreement dated as of
March 1, 2001) (the "Senior Secured Loans") in
full. If the proceeds received by the Company from
the New Senior Facility are in excess of the
amount required to fully repay the Senior Secured
Loans as contemplated above (the "Excess Loan
Proceeds"), then the Company shall use the Excess
Loan Proceeds for working capital, including
repayment of outstanding indebtedness.
Voting Rights: The Preferred shall be entitled to vote with the
common stock on all matters requiring such vote
and shall be entitled to the number of votes equal
to the number of shares into which it is
convertible. The Preferred shall not vote as a
separate class for any matter except as required
by law.
Transfer: The Preferred shall be transferable without the
Company's consent only if such transfer is in
compliance with applicable securities laws and the
transferee thereof agrees in writing for the
benefit of all the parties to the Exchange to be
bound to the Lock-up Agreement to which this Term
Sheet is attached and the transferor provides
notice to the Company and Xxxxx Xxxxxxxxxx LLP,
0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000,
Attn: Xxxxxxx X. Xxxx, Esq., Facsimile: (212)
259-6333. The common stock and the PIK Notes shall
be transferable without the Company's consent in
compliance with applicable securities laws.
Management 10% of the Company's common stock on a
Incentives: fully-diluted basis shall be reserved for issuance
to management upon or after consummation of the
Exchange, allocated 50% to the Chief Executive
Officer, 25% to the Chief Operating Officer, and
25% to other senior management (in the discretion
of the Company's board of directors). Options
shall vest over 3 years and shall be outstanding
for ten years; 1/3 each anniversary from the date
of the Exchange. The percentage of the outstanding
common stock subject to the options will increase
based on increases in the enterprise value of the
Company pursuant to the following:
1) 2.5% of the outstanding common stock - based on
a per share strike price determined by an
enterprise value of $65 million
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2) 5% of the outstanding common stock - based on a per
share strike price determined by an enterprise
value of $80 million
3) 7.5% of the outstanding common stock - based on a
per share strike price determined by an enterprise
value of $95 million
4) 10% of the outstanding common stock - based on a
per share strike price determined by an enterprise
value of $110 million
Covenants: 1) File a proxy or information statement with the SEC
regarding increase in authorized common stock as
soon as reasonably practicable.
2) Hold a shareholders meeting to approve increase in
authorized common stock as soon as reasonably
practicable following SEC clearance to do so.
3) File with the SEC, and transmit to all holders of
common stock of the Company as of the applicable
record date, the information contemplated by Rule
14f-1 under the Securities Exchange Act of 1934, as
amended, so as to permit the Noteholders to achieve
the composition of the Board of Directors of the
Company contemplated under "Post Restructuring
Board Composition" simultaneously with the
consummation of the Exchange. The Noteholders will
supply the information with respect to their
designees for membership on the Board of Directors
of the Company as is contemplated by Rule 14f-1.
4) Obtain the New Senior Facility in the amount of at
least $20.0 million from a new third party lender
on terms more favorable than the Company's existing
senior secured loan. The Company shall repay the
Senior Secured Loan in full from the proceeds of
the New Senior Facility.
Choice of Law: New York as to contracts, but Washington as to corporate
matters.
Conditions to 1) Executed lock-up agreement (including required
Closing: waivers and forbearance) by Noteholders holding
100% of the outstanding principal amount of Notes
(which requirement may be waived by the holders of
95% of the outstanding principal amount of Notes)
and exchange agreement executed by each of such
Noteholders, the Company and the Company's CEO, COO
and General Counsel (solely, with
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respect to each such person, with respect to
the provisions thereof applicable to such
person as specified therein) (which will assure
the majority vote required by Washington law to
approve the increase in the authorized common
stock).
2) Tender of the Notes by holders of 100% of the
outstanding principal amount of Notes (which
requirement may be waived by the holders of 95%
of the outstanding principal amount of Notes)
and execution and delivery of an exit
consent/supplemental indenture amending the
existing indenture governing the Notes to
remove all covenants except payment covenants.
3) Opinion from a nationally recognized investment
bank other than Jefferies & Co., as to the
fairness of the Transaction as a whole to the
Company and the Company's existing shareholders
not participating in the Exchange.
Post Restructuring Upon the issuance of the Common Stock and the
Board Composition: Preferred Stock in the Exchange, the Noteholders
shall be entitled to appoint four of five board
seats, with the fifth seat being reserved for the
Company's Chief Executive Officer. The exchange
agreement shall provide how such seats are to be
allocated among the Noteholders as well as certain
other customary agreements among the Company's
shareholders.
Existing Employment The Exchange and conversion of Preferred shall be
Agreements: deemed not to constitute a change of control
pursuant to existing management agreements.
Following the Exchange, the Noteholders shall
cause the Company to enter into new employment
agreements with Xx. Xxxxxx, Xx. Xxxxxxxxxxx and
Xx. Xxxxxxx to be effective upon the Initial
Common Issuance date on substantially the same
terms as the existing employment agreements,
including, but not limited to, terms regarding
change of control and severance packages, except
that the guaranteed option grant provisions shall
be eliminated. Such new employment agreements
shall have three year terms.
Any and all existing consulting agreements will be
terminated.
Registration Rights: The Company shall grant the holders of new common
stock customary registration rights. The terms of
such registration rights are to be determined, but
will provide, without limitation, that the Company
shall (i) file with the Securities and Exchange
Commission ("SEC") within two weeks following the
date of the
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Exchange a registration statement pursuant to
which the Noteholders may resell any Common Stock
received in the Exchange or upon the Automatic
Conversion (the "Resale Registration Statement"),
and (ii) use its best efforts to have the Resale
Registation Statement declared effective by the
SEC as promptly as practicable following the date
of the Exchange.
Reverse Stock Split: After the Exchange and subsequent conversion of
the Preferred, the Company shall promptly
consummate a reverse stock split to improve the
liquidity of the post-restructuring common stock
with a view to having, after the reverse stock
split, approximately 10 million to 15 million
shares of Common Stock outstanding, with the exact
number of shares to be determined by the
post-restructuring board of directors. Any
fractional shares resulting from the reverse stock
split shall be rounded up to one whole share, to
the extent permitted under Washington law.
Tax Considerations: Each of the Company and the Noteholders hereby
agrees to work in good faith to permit the
Noteholders, in the case of the Company, or the
other Noteholders and the Company, in the case of
a Noteholder, to make economically neutral changes
to the structure and documentation of the
Transaction as necessary to enhance such party's
respective tax position, so long as no other party
to the Transaction is economically harmed by such
change.
Confidentiality: Neither this Term Sheet nor the subject matter
hereof is to be shared with parties (other than
the parties to the Lock-up Agreement to which this
term sheet has been attached as an exhibit), their
respective counsel, their respective accountants
and their respective financial advisors at any
time prior to or after execution, except as
required by law.
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