Exhibit 4.3
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NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
PACIFIC AEROSPACE & ELECTRONICS, INC.
WARRANT
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Warrant No. AW 2 Dated: July 27, 2000
Pacific Aerospace & Electronics, Inc., a Washington corporation (the
"Company"), hereby certifies that, for value received, Bay Harbor Investments,
Inc., or its registered assigns ("Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company the total number of shares of
common stock, $.001 par value per share (the "Common Stock"), of the Company
(each such share, a "Warrant Share" and all such shares, the "Warrant Shares")
calculated pursuant to Section 3 of this Warrant (subject to adjustment for
certain events as set forth herein) at an exercise price equal to $.001 per
share (as adjusted from time to time as provided in Section 8, the "Exercise
Price"), at the times set forth herein through and including the 15th Trading
Day (as defined in Exhibit A) following the Third Vesting Date (as defined
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herein) (the "Expiration Date"), and subject to the following terms and
conditions (certain terms used herein are defined in Exhibit A attached hereto).
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1. Registration of Warrant. The Company shall register this Warrant, upon
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records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers. The Company shall register the transfer of
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any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed
to the Company at the address specified in Section 12.
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Upon any such registration or transfer, a new warrant to purchase Common Stock,
in substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be issued
to the transferee and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring Holder.
3. Duration, Vesting and Exercise.
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(a) The vesting of the Warrant Shares which the Holder is permitted to
acquire pursuant to this Warrant shall occur on the dates set forth below. On
each such date, this Warrant shall vest on a cumulative basis with respect to a
number of Warrant Shares calculated pursuant to Section 3(b) below. Only the
Warrant Shares that have vested may be acquired upon exercise of this Warrant.
(i) The "First Vesting Date" shall be the 20th Trading Day
following the date that the Commission first declares effective an Underlying
Shares Registration Statement (the "Effective Date");
(ii) The "Second Vesting Date" shall be the 20th Trading Day
following the First Vesting Date; and
(iii) The "Third Vesting Date" shall be the 20th Trading Day
following the Second Vesting Date.
Each of the First Vesting Date, Second Vesting Date, and Third Vesting
Date shall be referred to herein as a "Vesting Date." Within fifteen Trading
Days after each Vesting Date, the Holder shall exercise any vested Warrant
Shares which such Holder may receive on any Vesting Date.
(b) On each Vesting Date, this Warrant shall vest and become
exercisable with respect to the number of Warrant Shares calculated in
accordance with the following formula:
(Applicable Share Number) x [(Purchase Price/0.92) - (Adjustment Period Price)]
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Adjustment Period Price
If the number calculated in accordance with the foregoing formula is
zero or a negative number, no Warrant Shares shall vest hereunder for such
Vesting Date and the Holder shall not be obligated to transfer any shares of
Common Stock to the Company. In addition, the Holder shall not be obligated to
transfer any shares of Common Stock to the Company and the number of Warrant
Shares exercisable hereunder which shall have previously vested will not
decrease.
(c) Notwithstanding anything herein to the contrary, if the average of
the Per Share Market Values (as defined in Exhibit A) for 20 consecutive Trading
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Days following the Effective Date is greater than 125% of the Purchase Price (as
defined in Exhibit A) (which number
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shall be subject to equitable adjustment for stock splits and reverse stock
splits), this Warrant shall cease to vest for any subsequent Vesting Dates;
provided, however, that such event shall have no effect on Warrant Shares vested
prior thereto.
(d) Notwithstanding anything herein to the contrary, if on any Vesting
Date the Adjustment Period Price shall be less than 70% of the Purchase Price
(the "Floor Price"), then on such Vesting Date: (i) this Warrant shall vest with
respect to the Warrant Shares that would become vested on such vesting date,
pursuant to Section 3(a) and (b) hereof, provided, that the Adjustment Period
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Price pursuant to the formula set forth in Section 3(b) shall, exclusively for
purposes of this Section 3(d)(i), equal the Floor Price (such number of Warrant
Shares, the "Initial Shares") and (ii) with respect to the Warrant Shares whose
vesting would result in a vesting of Warrant Shares in excess of the Initial
Shares, the Company will have the option to elect by written notice (the
"Notice") delivered to the Holder no later than fifteen (15) Trading Days prior
to the applicable Vesting Date to either (x) pay to the Holder, in cash (the
"Cash Payment"), within three (3) Trading Days from the Vesting Date at issue,
an amount equal to the product obtained by multiplying (A) the applicable
Adjustment Period Price and (B) the difference between the number of Warrant
Shares which would have otherwise vested on such Vesting Date pursuant to
Section 3(a) and (b) hereof and the Initial Shares (such number of Warrant
Shares, the "Subsequent Shares") or (y) allow this Warrant to vest with respect
to the Subsequent Shares. A failure by the Company to deliver the Notice to the
Holder pursuant to the terms of this Section shall constitute an election by the
Company to allow this Warrant to vest as to the Subsequent Shares pursuant to
the terms hereof. If the Company shall fail to pay the Cash Payment in full to
the Holder by the third (3rd) Trading Day from the Vesting Date at issue, then,
at the election of the Holder, the Company shall either (x) pay to the Holder
$5,000 per day until the Cash Payment and all additional payments due hereunder
are paid in full, or (y) allow this Warrant to vest with respect to the
Subsequent Shares.
(e) Notwithstanding the foregoing provisions of this Section 3, if any
of the following events (each, an "Event") shall occur, the Holder shall have
the option to elect, by notice to the Company (an "Event Vesting Notice"), to
have this Warrant vest with respect to those Warrant Shares (whether by increase
to 100% of the unused portion of the Applicable Share Number, an acceleration of
the next scheduled Vesting Date or otherwise) that have not yet already vested
(the "Vested Warrant Shares");
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(i) upon the occurrence of any of (i) an acquisition after the date
hereof by an individual or legal entity or "group" (as described in Rule 13d-
5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of in excess of 1/3 of the voting securities of the Company,
(ii) a replacement of more than one-half of the members of the Company's board
of directors which is not approved by those individuals who are members of the
board of directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity,
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions, unless following such transaction or
series of transactions, the holders of the Company's securities prior to the
first such transaction continue to hold at least 2/3 of the securities of the
surviving entity or acquirer of such assets or (iv) the
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execution by the Company of an agreement to which the Company is a party or by
which it is bound, providing for any of the events set forth above in (i), (ii)
or (iii);
(ii) immediately prior to an assignment by the Company for the benefit
of creditors or commencement of a voluntary case under Title 11 of the United
States Code, or an entering into of an order for relief in an involuntary case
under Title 11 of the United States Code, or adoption by the Company of a plan
of liquidation or dissolution;
(iii) five (5) Business Days prior to the proposed consummation with
respect to the Company of a "Rule 13e-3 transaction" as defined in Rule 13e-3
under the Exchange Act (or, if necessary, such earlier date as the Company shall
determine in good faith to be required in order for the Holder to be able to
participate in such transaction), it being agreed that the Holder will receive
actual notice of the 13e-3 Statement filed with the Commission;
(iv) The Common Stock fails to be listed or quoted for trading on the
Nasdaq or a Subsequent Market or for a period of ten consecutive Trading Days;
(v) Subject to Section 2(d) of the Registration Rights Agreement,
after the Effective Date, a holder of Registrable Securities (as defined in the
Registration Rights Agreement) is not permitted to sell Registrable Securities
under the Underlying Shares Registration Statement (as defined in Exhibit A) for
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any reason for ten or more consecutive Trading Days;
(vi) The Underlying Shares Registration Statement shall not be
declared effective by the Commission on or prior to the 180th day following the
Closing Date; or
(vii) The Company shall fail for any reason to deliver certificates
to a Holder prior to the fifth Trading Day after a Date of Exercise pursuant to
and in accordance with Section 4(a);
(viii) The Company shall fail or default in the timely performance of
any material obligation under the Transaction Documents and such failure or
default shall continue uncured for a period of ten (10) Business Days after the
date on which notice of such failure or default is first given to the Company
(it being understood that no prior notice need be provided in the case of
defaults which cannot reasonably be cured within a 10-day period).
In the event the Holder delivers an Event Vesting Notice, this Warrant
shall vest with respect to the number of Warrant Shares calculated in accordance
with the formula set forth in Section 3(b), provided, that for purposes of such
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calculation, (A) the Adjustment Period Price shall be deemed to mean the average
of the lowest Per Share Market Values (which need not occur on consecutive
Trading Days) for any 5 Trading Days during the 20 consecutive Trading Days
preceding the date of the Event Vesting Notice, and (B) the Applicable Share
Number shall be deemed to mean (i) prior to the First Vesting Date, 100% of the
number of shares of Common Stock purchased by the Holder pursuant to the
Purchase Agreement, (ii) after the First Vesting Date and
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prior to the Second Vesting Date, 66 and 2/3% of the number of shares of Common
Stock purchased by the Holder pursuant to the Purchase Agreement, and (iii)
after the Second Vesting Date and prior to the Third Vesting Date, 33 and 1/3%
of the number of shares of Common Stock purchased by the Holder pursuant to the
Purchase Agreement. After the Third Vesting Date the Applicable Share Number
shall equal zero.
(f) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable by the registered Holder on any Business Day before 6:30 P.M., New
York City time, at any time and from time to time on or after the date hereof to
and including the Expiration Date. At 6:30 P.M., New York City time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value.
(g) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable, either in its entirety or, from time to time, for a portion of the
number of Warrant Shares. If less than all of the Warrant Shares which may be
purchased under this Warrant are exercised at any time, the Company shall issue
or cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares for which no exercise has been
evidenced by this Warrant.
4. Delivery of Warrant Shares.
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(a) Upon delivery of the Form of Election to Purchase to the Company
(with the attached Warrant Shares Exercise Log) at its address for notice set
forth in Section 12 and upon payment of the Exercise Price multiplied by the
number of Warrant Shares that the Holder intends to purchase hereunder, the
Company shall promptly (but in no event later than three Business Days after the
Date of Exercise (as defined herein)) issue and deliver to the Holder, a
certificate for the Warrant Shares issuable upon such exercise with the
appropriate legend. Any person so designated by the Holder to receive Warrant
Shares shall be deemed to have become holder of record of such Warrant Shares as
of the Date of Exercise of this Warrant. The Company shall, upon request of the
Holder, if available, use its best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions, provided, that, the Company
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may, but will not be required to change its transfer agent if its current
transfer agent cannot deliver Warrant Shares electronically through the
Depository Trust Corporation.
A "Date of Exercise" means the date on which the Holders shall have
delivered to the Company (i) the Form of Election to Purchase attached hereto
(with the Warrant Exercise Log attached to it), appropriately completed and duly
signed and (ii) payment of the Exercise Price for the number of Warrant Shares
so indicated by the holder hereof to be purchased.
(b) If the Company fails to deliver to the Holder certificate or
certificates representing the Warrant Shares pursuant to Section 4(a) by the
fifth (5th) Trading Day after the Date of Exercise, then the Holder will have
the right to rescind such exercise.
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(c) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to Section 4(a) by the fifth (5th)
Trading Day after the Date of Exercise, and if after such fifth (5th) Trading
Day the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a "Buy-In"),
then the Company shall, to the extent such a payment is not then prohibited or
restricted under the Indenture, pay (1) in cash to the Holder the amount by
which (x) the Holder's total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (A) the number of Warrant Shares that the Company was required to
deliver pursuant to Section 4(b) to deliver to the Holder in connection with the
exercise at issue by (B) the Per Share Market Value at the time of the
obligation giving rise to such purchase obligation and (2) deliver to the Holder
the number of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations under Section 4(b).
For example, if the Holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with a market price on the date of exercise totaled $10,000, under
clause (A) of the immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
(d) The Company's obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of Warrant Shares. If the
Company breaches its obligations under this Warrant, then, in addition to any
other liabilities the Company may have hereunder and under applicable law, the
Company shall pay or reimburse the Holder on demand for all costs of collection
and enforcement (including reasonable attorneys fees and expenses).
5. Payment of Taxes. The Company will pay all documentary stamp taxes
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attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that
may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
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destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation
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hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and customary and reasonable indemnity, if requested.
Applicants for a New Warrant under such circumstances shall also comply with
such other reasonable regulations and procedures and pay such other reasonable
charges as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will at
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all times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions of Section 8). The Company covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.
8. Certain Adjustments. The Adjustment Period Price and number of
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Warrant Shares vesting on any Vesting Date and issuable upon exercise of this
Warrant are subject to adjustment from time to time as set forth in this
Section.
(i) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend (except scheduled dividends paid on outstanding
preferred stock as of the date hereof which contain a stated dividend rate) or
otherwise make a distribution or distributions on shares of its Common Stock or
on any other class of capital stock payable in shares of Common Stock, (ii)
subdivide outstanding shares of Common Stock into a larger number of shares, or
(iii) combine outstanding shares of Common Stock into a smaller number of
shares, the Adjustment Period Price shall be multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision or combination, and shall apply to successive subdivisions and
combinations.
(ii) In case of any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is converted into other
securities, cash or property, then the Holder shall have the right thereafter to
exercise this Warrant only into the shares of stock and other securities and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification, transfer or share exchange, and the Holder
shall be entitled upon such event to receive such amount of securities or
property equal to the amount of Warrant Shares such Holder would have been
entitled to had such Holder exercised this Warrant immediately prior to such
reclassification or share exchange. The terms of any such reclassification or
share exchange shall include such terms so as to continue to give to the Holder
the right to receive the securities or
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property set forth in this Section 8(b) upon any exercise following any such
reclassification or share exchange.
(iii) If the Company, at any time while this Warrant is outstanding, shall
distribute to all holders of Common Stock (and not to the Holder) evidences of
its indebtedness or assets or rights or warrants to subscribe for or purchase
any security (excluding those referred to in Sections 8(i), (ii) and (iv) and
excluding any shareholder rights to subscribe for shares of the Company's Common
Stock issuable to holders of the Common Stock upon adoption by the Company of a
shareholder rights plan ), then in each such case the Adjustment Period Price
shall be determined by multiplying the Adjustment Period Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Adjustment Period Price determined as of the record date mentioned
above, and of which the numerator shall be such Adjustment Period Price on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Company's independent
certified public accountants that regularly examines the financial statements of
the Company (an "Appraiser").
(iv) If (a) during the ten (10) Trading Days immediately preceding a
Vesting Date, (b) during the ten (10) Trading Days immediately after a Vesting
Date and (c) while this Warrant is outstanding the Company or any subsidiary
thereof, as applicable with respect to Common Stock Equivalents (as defined
below) shall issue or announce publicly (not including any announcements
regarding stock issuances outside of the periods specified in (a) and (b)
above), the issuance of shares of Common Stock or rights, warrants, options or
other securities or debt that is convertible into or exchangeable for shares of
Common Stock (such Common Stock or other securities, "Common Stock
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Equivalents"), entitling any person to acquire shares of Common Stock at a price
per share less than either the Adjustment Period Price or the Purchase Price (if
the holder of the Common Stock or Common Stock Equivalent so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights issued in connection with such issuance, be entitled
to receive shares of Common Stock at a price less than such price, such issuance
shall be deemed to have occurred for less than such price), then, at the option
of the Holder by notice to the Company, the Adjustment Period Price shall be
adjusted to become the sales or issue price, purchase price, conversion price,
exchange price or reset or other pricing applicable to the Common Stock
Equivalent at issue. The Company shall notify the Holder in writing of its
issuance of any such Common Stock Equivalents by the end of the day on which the
Common Stock or derivative instrument is first issued. The adjustment set forth
in this Section shall, at the option of the Holder, occur on the date (during
the applicable ten Trading Day period) of the issuance of the Common Stock
Equivalent at issue, and the Holder shall not have to wait the conversion,
exchange or other adjustment or resetting provision applicable to such Common
Stock Equivalent. Such adjustment shall be made whenever such Common Stock or
Common Stock Equivalents are issued at the times specified in items (a)-(c)
above. Notwithstanding anything herein to the contrary, the following shall not
be subject to the provisions of this Section: (1) issuances of any stock or
stock options under any
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Company stock and option plans of the Company whether now existing or approved
by the Company and its stockholders in the future, (2) the rights, options and
warrants outstanding prior to the date hereof and specified in Schedule 2.1(c)
to the Purchase Agreement of even date herewith between the original Holder and
the Company, but not any modifications thereof.
(v) In case of any (1) merger or consolidation of the Company with or into
another Person, or (2) sale by the Company of more than one-half of the assets
of the Company (on a book value basis) in one or a series of related
transactions, the Holder shall have the right thereafter to (A) exercise this
Warrant for the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger, consolidation or sale, and the Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and
property as the Common Stock for which this Warrant could have been exercised
immediately prior to such merger, consolidation or sales would have been
entitled or (B) in the case of a merger or consolidation, (x) require the
surviving entity to issue common stock purchase warrants equal to the number
Warrant Shares to which this Warrant then permits, which newly warrant shall be
identical to this Warrant, and (y) simultaneously with the issuance of such
warrant, the holder of such new warrant shall have the right to exercise such
warrant only into shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger or consolidation. In the case of clause (B), the exercise price for
such new warrant shall be based upon the amount of securities, cash and property
that each share of Common Stock would receive in such transaction and the
Exercise Price of this Warrant immediately prior to the effectiveness or closing
date for such transaction. The terms of any such merger, sale or consolidation
shall include such terms so as continue to give the Holder the right to receive
the securities, cash and property set forth in this Section upon any conversion
or redemption following such event. This provision shall similarly apply to
successive such events.
(vi) For the purposes of this Section 8, the following clauses shall also
be applicable:
(i) Record Date. In case the Company shall take a record of the
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holders of its Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe for
or purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold
upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase, as the
case may be.
(ii) Treasury Shares. The number of shares of Common Stock
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outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(vii) All calculations under this Section 8 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
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(viii) Whenever the Adjustment Period Price is adjusted pursuant to
Section 8(iii) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Adjustment Period Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. Such adjustment shall become effective immediately after the record
date mentioned above.
(ix) If (i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; (ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; (iii) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (iv) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or (v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall cause to be mailed to each Holder at their last addresses as they
shall appear upon the Warrant Register, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, that the failure to mail such notice or any defect
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therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.
9. Payment of Exercise Price. The Holder shall pay the Exercise Price in
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one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately available
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funds; or
(b) Cashless Exercise. The Holder may surrender this Warrant to the
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Company together with a notice of cashless exercise, in which event the Company
shall issue to the Holder the number of Warrant Shares determined as follows:
X = Y [(A-B)/A]
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where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock for the five (5) trading days immediately prior to
(but not including) the Date of Exercise as reported by
Bloomberg Information Systems, Inc. (or any successor to its
function of reporting stock prices).
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged, subject to changes in applicable regulations or
Commission (as defined in Exhibit A) interpretations thereof, that the Warrant
Shares issued in a cashless exercise transaction shall be deemed to have been
acquired by the Holder, and the holding period for the Warrant Shares shall be
deemed to have been commenced, on the issue date.
10. Certain Exercise Restrictions.
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(a) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and
the rules promulgated thereunder) in excess of 9.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon such exercise
and held by such Holder after application of this Section. Since the Holder
will not be obligated to report to the Company the number of shares of Common
Stock it may hold at the time of an exercise hereunder, unless the exercise at
issue would result in the issuance of shares of Common Stock in excess of 9.999%
of the then outstanding shares of Common Stock without regard to any other
shares which may be beneficially owned by the Holder or an affiliate thereof,
the Holder shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular exercise
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of this
Warrant is exercisable shall be the responsibility and obligation of the Holder.
If the Holder has delivered a Form of Election to Purchase for a number of
Warrant Shares that, without regard to any other shares that the Holder or its
affiliates may beneficially own, would result in the issuance in excess of the
permitted amount hereunder, the Company shall notify the Holder of this fact and
shall honor the exercise for the maximum portion of this Warrant permitted to be
exercised on such Date of Exercise in accordance with the periods described
herein and, at the option of the Holder, either keep the portion of the Warrant
tendered for exercise in excess of the permitted amount hereunder for future
exercises or return such excess portion of the Warrant to the Holder. The
provisions of this Section
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may be waived by a Holder (but only as to itself and not to any other Holder)
upon not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.
(b) If the Company Stock is then listed for trading on the Nasdaq or
the Nasdaq SmallCap Market and the Company has not obtained the Shareholder
Approval (as defined below), then the Company may not, upon exercise of this
Warrant, issue in excess of the product of (i) 6,621,712 Warrant Shares (which
equals 19.999% of the number of shares of Common Stock outstanding on the
Closing Date) or such lesser number of Warrant Shares as the Company and the
Holder may agree is required pursuant to an interpretation by Nasdaq of its
applicable rules and (ii) the quotient obtained by dividing (x) the number of
shares of Common Stock issued and sold to the original Holder on the Closing
Date by (y) the number of shares of Common Stock issued and sold by the Company
on the Closing Date (such number of shares, the "Issuable Maximum"). If any
Holder shall no longer hold Warrants then such Holder's remaining portion of the
Issuable Maximum shall be allocated pro-rata among the remaining Holders. If on
any Date of Exercise (A) the Company Stock is listed for trading on the Nasdaq
or the Nasdaq SmallCap Market, (B) the Exercise Price then in effect is such
that the aggregate number of shares of Common Stock that would then be issuable
upon exercise in full of this Warrant, together with any shares of Common Stock
previously issued upon exercise of this Warrant, would equal or exceed the
Issuable Maximum, and (C) the Company shall not have previously obtained the
vote of shareholders, if any, as may be required by the applicable rules and
regulations of the Nasdaq Stock Market to approve the issuance of shares of
Common Stock in excess of the Issuable Maximum pursuant to the terms hereof (the
"Shareholder Approval"), then the Company shall issue to the Holder a number of
shares of Common Stock equal to the Issuable Maximum and, with respect to the
shares whose issuance would result in an issuance of shares of Common Stock in
excess of the Issuable Maximum, (the "Excess Warrant Shares"), the Company shall
have the option to either (1) use its best efforts to obtain the Shareholder
Approval applicable to such issuance as soon as possible, but in any event no
later than 60 days after such request (such 60th day, the "Target Date") or (2)
pay to the Holder, within ten (10) Trading Days from the request therefor, an
amount in cash equal to the product of (x) the Excess Warrant Shares multiplied
by (y) the closing sales price of the Common Stock on (a) the Target Date or (b)
the Date of Exercise giving rise to the obligation to seek Shareholder Approval,
whichever is greater (the "Cash Payment"). In the event the Company elects to
seek the Shareholder Approval pursuant to clause (1) of the immediately
preceding sentence and the Company does not obtain the Shareholder Approval on
or prior to the Target Date, then, on the Target Date, the Company shall, to the
extent such a payment is not then prohibited or restricted under the Indenture,
pay the Cash Payment to the Holder. If the Company fails to pay the Cash
Payment in full pursuant to this Section within twenty (20) days after the date
payable, the Company will, to the extent such a payment is not then prohibited
or restricted under the Indenture, pay interest on such amount at a rate of 18%
per annum, or such lesser maximum amount that is permitted to be paid by
applicable law, to the Holder, accruing daily from the date payable until such
amount, plus all such interest thereon, is paid in full. The Company and the
Holder understand and agree that shares of Common Stock issued upon exercise of
this Warrant and then held by the Holder or an affiliate thereof may not cast
votes or be deemed outstanding for purposes of any vote to obtain the
Shareholder Approval.
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11. Fractional Shares. The Company shall not be required to issue or
-----------------
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section 12, be issuable
on the exercise of this Warrant, the Company shall pay an amount in cash equal
to the Exercise Price multiplied by such fraction.
12. Notices. Any and all notices or other communications or deliveries
-------
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 P.M. (New York City time) on a Business Day (with
confirmation of transmission), (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 6:30 P.M. (New
York City time) on any date and earlier than 11:59 P.M. (New York City time) on
such date (with confirmation of transmission), (iii) the Business Day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company,
to 000 Xxxx Xxxxxxx Xxxx, Xxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000, facsimile:
(000) 000-0000, attention Xxxxxx X. Xxxxxx, Chief Executive Officer, with a copy
to Xxxxxx X. Xxxxxxx, General Counsel, 000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxxx, XX
00000, facsimile: (000) 000-0000 or (ii) if to the Holder, to the Holder at the
address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.
13. Warrant Agent.
-------------
(a) The Company shall serve as warrant agent under this Warrant. Upon
thirty days' notice to the Holder, the Company may appoint a new warrant agent.
(b) Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
14. Miscellaneous.
-------------
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(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. This Warrant may be
amended only in writing signed by the Company and the Holder and their
successors and assigns.
(b) Subject to Section 14(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or cause under this Warrant. This
Warrant shall inure to the sole and exclusive benefit of the Company and the
Holder.
(c) The corporate laws of the State of Washington shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or that such suit,
action or proceeding is improper. The Holders hereby irrevocably waive personal
service of process and consent to process being served in any such suit, action
or proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such Holder at the address in
effect for notices to such Holder under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. The Company consents to being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to JGB Service Corporation, 000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000 and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
(d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
PACIFIC AEROSPACE & ELECTRONICS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President Administration and General Counsel
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FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Pacific Aerospace & Electronics, Inc.
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of common stock ("Common Stock"), $.001 par value per share, of Pacific
Aerospace & Electronics, Inc. and, if such Holder is not utilizing the cashless
exercise provisions set forth in this Warrant, encloses herewith $________ in
cash, certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of shares of
Common Stock to which this Form of Election to Purchase relates, together with
any applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
--------------------------------
--------------------------------------------------------------------------------
(Please print name and address)
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Warrant Shares Exercise Log
---------------------------
Date Number of Warrant Number of Warrant Shares Number of Warrant
Shares Available to be Exercised Shares Remaining
Exercised to be Exercised
-----------------------------------------------------------------------------------------------------
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FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Pacific Aerospace &
Electronics, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Pacific
Aerospace & Electronics, Inc. with full power of substitution in the premises.
Dated:
_______________, ____
_______________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
_______________________________________
Address of Transferee
_______________________________________
_______________________________________
In the presence of:
__________________________
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Exhibit A
---------
(i) "Adjustment Period Price" means the average of the lowest 5 Per Share
Market Values (which need not occur on consecutive Trading Days) during the 20
consecutive Trading Days preceding a Vesting Date (which may include Trading
Days prior to the Effective Date) as selected by the Holder. The Adjustment
Period Price shall be subject to adjustment in accordance with Section 8.
(ii) "Applicable Share Number" means 1/3 of the number of shares of Common
Stock purchased by the Holder pursuant to the Purchase Agreement.
(iii) "Business Day" shall have the meaning set forth in the Purchase
Agreement.
(iv) "Closing Date" shall have the meaning set forth in the Purchase
Agreement.
(v) "Commission" means the Securities and Exchange Commission.
(vi) "Effective Date" the date on which the Underlying Shares Registration
Statement is first declared effective by the Commission.
(vii) "Indenture" means the Indenture dated as of July 30,1998, among the
Company and Balo Precision Parts, Inc., Cashmere Manufacturing Co. Inc., Ceramic
Devices, Inc., Electronic Specialty Corporation, Xxxxx Industries, Inc.
Northwest Technical Industries, Inc., Pacific Coast Technologies, Inc., PA&E
International, Inc. and Seismic Safety Products, Inc.
(viii) "Nasdaq" means the Nasdaq National Market.
(ix) "Per Share Market Value" means on any particular date (a) the closing
price per share of the Common Stock on such date on the Nasdaq or on any
Subsequent Market on which the Common Stock is then listed or quoted, as
reported by Bloomberg Information Services, Inc. (or any successor entity
succeeding to its function of reporting prices), or if there is no such price on
such date, then the closing price on the Nasdaq or on such Subsequent Market on
the date nearest preceding such date, as reported by Bloomberg Information
Services, Inc. (or any successor entity succeeding to its function of reporting
prices), or (b) if the Common Stock is not then listed or quoted on the Nasdaq
or a Subsequent Market, the closing price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the Holder, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an Appraiser selected in good faith by the Holders of a majority
of the applicable Warrant Shares.
(x) "Purchase Agreement" means the Securities Purchase Agreement, dated the
date hereof to which the Company and the original Holder are parties and
pursuant to which this Warrant was issued.
(xi) "Purchase Price" means $1.75 (which number shall be subject to
equitable adjustment for stock splits, recombinations and similar events).
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(xii) "Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof to which the Company and the original Holder
are parties.
(xiii) "Subsequent Market" shall mean any of the New York Stock Exchange,
American Stock Exchange, or Nasdaq SmallCap Market.
(xiv) "Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq or on the Subsequent Market on which the Common Stock is then listed
or quoted, as the case may be, or (b) if the Common Stock is not listed on the
Nasdaq or a Subsequent Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board , or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, that in the event that the Common
--------
Stock is not listed or quoted as set forth in (a), (b) and (c) hereof, then
Trading Day shall mean a Business Day.
(xv) "Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
(xvi) "Underlying Shares Registration Statement" shall have the meaning
ascribed to it in the Purchase Agreement.
-20-
