Exhibit 2.1
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SECURITIES PURCHASE AGREEMENT
Among
PACIFIC AEROSPACE & ELECTRONICS, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of July 27, 2000
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SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July 27,
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2000, among Pacific Aerospace & Electronics, Inc., a Washington corporation (the
"Company"), and the investors signatory hereto (each such investor is a
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"Purchaser" and all such investors are, collectively, the "Purchasers").
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WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers and the Purchasers,
severally and not jointly, desire to purchase from the Company, shares of the
Company's common stock, $.001 par value per share (the "Common Stock"), and
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certain other securities of the Company as more fully described in this
Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and the Purchasers agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing.
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(a) The Closing. (i) Subject to the terms and conditions set forth in
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this Agreement, the Company shall issue and sell to the Purchasers and the
Purchasers shall, severally and not jointly, purchase an aggregate of 2,000,000
shares of Common Stock (the "Shares") for an aggregate purchase price of
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$3,500,000. The closing of the purchase and sale of the Shares (the "Closing")
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shall take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
LLP ("▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇"), 1290 Avenue of the Americas, New York, New York
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10104, immediately following the execution hereof or such later date as the
parties shall agree. The date of the Closing is hereinafter referred to as the
"Closing Date."
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(ii) At the Closing, the parties shall deliver or shall cause to
be delivered the following: (A) the Company shall deliver to each Purchaser (1)
a stock certificate representing 57.143% of the number of Shares indicated below
such Purchaser's name on the signature page of this Agreement, registered in the
name of such Purchaser, (2) a Common Stock purchase warrant, in the form of
Exhibit A, registered in the name of such Purchaser, pursuant to which such
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Purchaser shall have the right to acquire shares of Common Stock upon the terms
and in such number as set forth therein (each an "Adjustable Warrant"), (3) a
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Common Stock purchase warrant, in the form of Exhibit B, registered in the name
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of such Purchaser, pursuant to which such Purchaser shall have the right to
acquire shares of Common Stock upon the terms and in such number as set forth
therein (each a "Vesting Warrant"), (4) a Common Stock purchase warrant, in the
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form of Exhibit C, registered in the name of such Purchaser, pursuant to which
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such Purchaser shall have the right to acquire the number of shares of Common
Stock indicated below such Purchaser's name on the signature page of this
Agreement, upon the terms and at the exercise price set forth therein (each, a
"Closing Warrant" and together with the Adjustable Warrants and the Vesting
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Warrant, the
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"Warrants"), (5) the legal opinion of Stoel Rives LLP, outside counsel to the
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Company, substantially in the form of Exhibit F, (6) an executed Registration
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Rights Agreement, dated the date hereof, among the Company and the Purchasers,
in the form of Exhibit D (the "Registration Rights Agreement"), (7) the Transfer
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Agent Instructions, in the form of Exhibit E, executed by the Company and
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delivered to and acknowledged by the Company's transfer agent (the "Transfer
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Agent Instructions"), and (8) the Escrow Agreement (the "Escrow Agreement") of
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even date hereof, among the Company, ▇▇▇▇▇▇ Capital Group, Ltd. and LaSalle Bank
National Association (the "Escrow Agent"); and (B) each Purchaser shall deliver
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to the Escrow Agent for delivery in accordance with the Escrow Agreement) (1)
57.143% of the purchase price indicated below such Purchaser's name on the
signature page to this Agreement in United States dollars in immediately
available funds by wire transfer as designated in the Escrow Agreement for such
purpose, and (2) an executed Registration Rights Agreement.
(iii) Within five Trading Days following the date that the
Underlying Shares Registration Statement (as defined herein) is declared
effective by the Commission (as defined herein) and provided, that the
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Underlying Shares Registration Statement was declared effective within 60 days
after the Closing Date, (A) the Company will, against delivery of the amounts
set forth in clause (B) in this paragraph, deliver to each Purchaser, a stock
certificate representing 42.857% of the number of Shares indicated below such
Purchaser's name on the signature page of this Agreement (subject to equitable
adjustment for stock splits, recombinations and similar events), registered in
the name of such Purchaser, and (B) each Purchaser will deliver to the Company,
42.857% of the purchase price indicated below such Purchaser's name on the
signature page to this Agreement in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose.
1.2 Certain Defined Terms. For purposes of this Agreement, "Trading Day"
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and "Per Share Market Value" shall have the meanings set forth in Exhibit A and
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"Business Day" shall mean any day except Saturday, Sunday and any day which
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shall be a federal legal holiday or a day on which banking institutions in the
State of New York or Washington are authorized or required by law or other
governmental action to close. A "Person" means an individual or corporation,
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partnership, trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby
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makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a corporation duly
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incorporated and validly existing under the laws of the State of Washington,
with the requisite corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted. The Company has
no subsidiaries other than as set forth in Schedule 2.1(a)
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(collectively, the "Subsidiaries"). Each of the Subsidiaries is an entity, duly
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incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of the Securities (as
defined below) or any of this Agreement, the Registration Rights Agreement, the
Transfer Agent Instructions, Escrow Agreement or the Warrants (collectively, the
"Transaction Documents"), (y) have or result in a material adverse effect on the
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results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (z) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse
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Effect").
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(b) Authorization; Enforcement. The Company has the requisite
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corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder on the terms and subject to the limitations and
qualifications contained therein. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company. Each of the Transaction Documents has been duly executed by the
Company and, when delivered in accordance with the terms hereof, will constitute
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or articles of
incorporation, by-laws or other organizational or charter documents.
(c) Capitalization. The number of shares of authorized, issued and
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outstanding capital stock of the Company is set forth in Schedule 2.1(c).
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Except as disclosed in Schedule 2.1(c), the Company owns all of the capital
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stock of each Subsidiary. No shares of Common Stock are entitled to preemptive
or similar rights, nor is any holder of the securities of the Company entitled
to preemptive or similar rights arising out of any agreement or understanding
with the Company or any Subsidiary by virtue of any of the Transaction
Documents. Except as a result of the purchase and sale of the Shares and the
Warrants and except as disclosed in Schedule 2.1(c), there are no outstanding
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options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. The issue and sale of
the Shares, Warrants or Underlying Shares (as hereinafter defined) will not
obligate the Company to issue shares of Common Stock or other securities to any
Person other than the Purchaser and will not result in a right of any holder of
Company securities to adjust the exercise or conversion or reset price under
such securities.
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(d) Issuance of the Securities. The Securities are duly authorized
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and, when issued and paid for in accordance with the terms hereof and the
Warrants, shall have been duly and validly issued, fully paid and nonassessable,
free and clear of all liens, encumbrances and rights of first refusal of any
kind (collectively, "Liens"). The Company has reserved a sufficient number of
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duly authorized shares of Common Stock for issuance hereunder upon exercise of
the Warrants that is not less than the sum of (i) the Shares to be issued
hereunder; (ii) the number of shares of Common Stock issuable upon exercise of
the Adjustable Warrants on the First Vesting Date (as defined in the Adjustable
Warrant), assuming for such purposes that, on the First Vesting Date, (A) the
Applicable Share Number (as defined in the Adjustable Warrant) equals the entire
number of Shares purchased hereunder and (B) the Adjustment Price (as defined in
the Adjustable Warrant) equals 50% of the Per Share Market Value on the Trading
Day immediately preceding the Closing Date and (iii) the number of shares of
Common Stock as are issuable upon exercise in full of the Closing Warrants (the
number of shares of Common Stock contemplated in (i), (ii) and (iii), the
"Initial Minimum"). The shares of Common Stock issuable upon exercise of the
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Warrants are referred to herein as the "Underlying Shares." The Shares, the
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Warrants and the Underlying Shares are collectively referred to herein as, the
"Securities."
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(e) No Conflicts. The execution, delivery and performance of the
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Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate, have or
result in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor any
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Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required pursuant to Section
3.10, (ii) the filing with the Securities and Exchange Commission (the
"Commission") of a registration statement meeting the requirements set forth in
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the Registration Rights Agreement and covering the resale of the Shares and the
Underlying Shares by the Purchasers (the "Underlying Shares Registration
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Statement"), (iii) the application(s) to the Nasdaq National Market ("NASDAQ")
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for the listing of
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the Shares and the Underlying Shares for trading on the NASDAQ (and with any
other national securities exchange or market on which the Common Stock is then
listed) in the time and manner required thereby, (iv) applicable Blue Sky
filings, and (v) in all other cases where the failure to obtain such consent,
waiver, authorization or order, or to give such notice or make such filing or
registration could not have or result in, individually or in the aggregate, a
Material Adverse Effect (collectively, the "Required Approvals").
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(g) Litigation; Proceedings. There is no action, suit, inquiry,
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notice of violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action") which (i)
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adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, individually or in the aggregate, have or result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
(A) a claim of violation of or liability under federal or state securities laws
or (B) a claim of breach of fiduciary duty; (iv) except as set forth on Schedule
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2.1(g), the Company does not have pending before the Commission any request for
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confidential treatment of information and the Company has no knowledge of any
expected such request that would be made prior to the Effectiveness Date (as
defined in the Registration Rights Agreement); and (v) there has not been, and
to the best of the Company's knowledge there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company.
(h) No Default or Violation. Neither the Company nor any Subsidiary
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(i) is in default under or in violation of (and no event has occurred which has
not been waived which, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, in each case of clauses (i), (ii) or (iii) above,
except as could not individually or in the aggregate, have or result in a
Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the representations
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and warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"). Neither the Company nor any Person acting on
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its behalf has taken or is, to the knowledge of the Company, contemplating
taking any action which could subject the offering, issuance or sale of the
Securities to the registration requirements of the Securities Act including
soliciting any offer to buy or sell the Securities by means of any form of
general solicitation or advertising.
(j) SEC Reports; Financial Statements. The Company has filed all
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reports required to be filed by it under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to Section 13(a) or 15(d)
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thereof, for the two years preceding the date
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hereof (or such shorter period as the Company was required by law to file such
material) (the foregoing materials being collectively referred to herein as the
"SEC Reports" and, together with the Schedules to this Agreement, the
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"Disclosure Materials") on a timely basis or has received a valid extension of
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such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject have been filed as exhibits to the SEC Reports as
required under the Exchange Act. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved ("GAAP"), except as
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may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments. Since July 20, 2000, except as specifically disclosed in the SEC
Reports, (a) there has been no event, occurrence or development that has or that
could result in a Material Adverse Effect, (b) the Company has not incurred any
liabilities (contingent or otherwise) other than (x) liabilities incurred in the
ordinary course of business consistent with past practice and (y) liabilities
not required to be reflected in the Company's financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (c) the
Company has not altered its method of accounting or the identity of its auditors
and (d) the Company has not declared or made any payment or distribution of cash
or other property to its stockholders or officers or directors (other than in
compliance with existing Company stock option plans) with respect to its capital
stock, or purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock.
(k) Investment Company. The Company is not, and is not an
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Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. Except for certain fees payable to ▇▇▇▇▇▇
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Capital Group, Ltd., no fees or commissions will be payable by the Company to
any broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement, except to the extent the Purchasers have agreed in writing to
any such obligations without the Company's knowledge. The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by this Agreement.
The Company shall indemnify and hold harmless the Purchasers, their employees,
officers, directors, agents, and partners, and their respective Affiliates, from
and against all claims, losses, damages, costs (including the costs of
preparation and attorney's fees) and expenses suffered in respect of any such
claimed or existing fees, as such fees and expenses
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are incurred, except to the extent the Purchasers have agreed in writing to any
such obligations without the Company's knowledge.
(m) Solicitation Materials. Neither the Company nor any Person acting
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on the Company's behalf has solicited any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
(n) Form S-3 Eligibility. The Company is eligible to register its
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Common Stock for resale under Form S-3 promulgated under the Securities Act.
(o) Listing and Maintenance Requirements. Except as set forth in the
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SEC Reports, the Company has not, in the two years preceding the date hereof
received notice (written or oral) from the NASDAQ, any stock exchange, market or
trading facility on which the Common Stock is or has been listed (or on which it
has been quoted) to the effect that the Company is not in compliance with the
listing or maintenance requirements of such exchange, market or trading
facility. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
(p) Patents and Trademarks. The Company and its Subsidiaries have,
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or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights which
are necessary or material for use in connection with their respective businesses
as described in the SEC Reports and which the failure to so have would have a
Material Adverse Effect (collectively, the "Intellectual Property Rights").
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Neither the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or its Subsidiaries violates or
infringes upon the rights of any Person. To the best knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(q) Registration Rights; Rights of Participation. Except as set forth
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on Schedule 6(b) to the Registration Rights Agreement, the Company has not
granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied.
Except as set forth on Schedule 6(b) to the Registration Rights Agreement, no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents.
(r) Regulatory Permits. The Company and its Subsidiaries possess
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all certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the failure to possess
such permits could not, individually or in the aggregate, have or result in a
Material Adverse Effect ("Material Permits"), and neither the Company nor any
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such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(s) Title. The Company and the Subsidiaries have good and
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marketable title in fee simple to all real property owned by them which is
material to the business of the Company and
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its Subsidiaries and good and marketable title in all personal property owned by
them which is material to the business of the Company and its Subsidiaries, in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its Subsidiaries and
liens held by the secured lenders of the Company. Any real property and
facilities held under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and its
Subsidiaries are in compliance and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(t) Labor Relations. Except as set forth in Schedule 2.1(t), no
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material labor problem exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company.
(u) Disclosure. The Company confirms that neither it nor any other
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Person acting on its behalf has provided any of the Purchasers or its agents or
counsel with any information that constitutes or might constitute material non-
public information. The Company understands and confirms that the Purchasers
shall be relying on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
2.2 Representations and Warranties of the Purchasers. Each Purchaser
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hereby for itself and for no other Purchaser, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
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organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has
been duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities
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as principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part thereof,
without prejudice, however, to such Purchaser's right, subject to the provisions
of this Agreement, the Registration Rights Agreement and the Warrants, at all
times to sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the Securities Act or
under an exemption from such registration and in compliance with applicable
federal and state securities laws. Nothing contained herein shall be deemed a
representation or warranty by such Purchaser to hold Securities for any period
of time. Such Purchaser is acquiring the Securities hereunder in the ordinary
course of its business. Such
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Purchaser does not have any agreement or understanding, directly or indirectly,
with any Person to distribute the Securities. Such Purchaser understands that
the Securities must be held indefinitely unless they are registered under the
Securities Act or an exemption from registration is available.
(c) Purchaser Status. At the time such Purchaser was offered the
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Securities, it was, and at the date hereof it is, and at each exercise date
under its respective Warrants, it will be, an "accredited investor" as defined
in Rule 501(a) under the Securities Act. Such Purchaser is not a broker or
dealer as such terms are defined in Section 3 of the Securities Exchange Act of
1934.
(d) Experience of such Purchaser. Such Purchaser, either alone or
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together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of such Purchaser to Bear Risk of Investment. Such
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Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges that it has
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reviewed the Disclosure Materials and the Company's earnings release dated July
20, 2000 (which earnings release was reviewed after it was publicly
disseminated) and has been afforded (i) the opportunity to ask such questions as
it has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Securities
and the merits and risks of investing in the Securities; (ii) access to
information about the Company and the Company's financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment; and (iii) the opportunity to obtain such
additional information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment and to verify the accuracy and
completeness of the information contained in the Disclosure Materials. Neither
such inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser's right to rely on the truth, accuracy and completeness of the
Disclosure Materials and the Company's representations and warranties contained
in the Transaction Documents.
(g) General Solicitation. Such Purchaser is not purchasing the
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Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) Reliance. Such Purchaser understands and acknowledges that (i)
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the Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
-9-
The Company acknowledges and agrees that no Purchaser makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of
---------------------
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company and its counsel, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act. Any such transferee shall agree in writing to be
bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Securities:
THESE SECURITIES HAVE NOT 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, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
The Shares and the Underlying Shares may be resold without the legend set
forth above or any other legend while an Underlying Shares Registration
Statement is effective under the Securities Act (provided the Purchaser complies
with the prospectus delivery requirements of the Securities Act) or the holder
is relying on Rule 144 promulgated under the Securities Act ("Rule 144") in
connection with the resale of such Underlying Shares, or in the event there is
not an effective Underlying Shares Registration Statement and Rule 144 is not
then available for resale of the Underlying Shares, at such time, as such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Company's transfer agent on
the date that an Underlying Shares Registration Statement is declared effective
by the Commission (such date, the "Effective Date"). The Company agrees that
--------------
following the Effective Date, it will, no later than three (3) Trading Days
following the delivery by a Purchaser to the Company of (i) a certificate or
certificates representing
-10-
Shares or Underlying Shares issued with a restrictive legend and (ii) written
confirmation that such Shares or Underlying Shares have been sold
contemporaneously to a third party and that the required prospectus has been
delivered to the buyer, deliver to such Purchaser certificates representing such
Shares which shall be free from all restrictive and other legends. The Company
may not make any notation on its records or give instructions to any transfer
agent of the Company which enlarge the restrictions of transfer set forth in
this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
--------------------------
issuance of Underlying Shares upon exercise of the Warrants will result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Underlying Shares upon exercise of the Warrants
pursuant to the terms thereof is unconditional and absolute, subject to the
limitations set forth in the Warrants, regardless of the effect of any such
dilution.
3.3 Furnishing of Information. As long as the Purchasers own
-------------------------
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities,
if the Company is not required to file reports pursuant to such sections, it
will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act such
information as is required for the Purchasers to sell the Securities under Rule
144 promulgated under the Securities Act. The Company further covenants that it
will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable such Person to
sell Underlying Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including causing its attorneys to render and deliver any legal
opinion required in order to permit a Purchaser to sell Underlying Shares under
Rule 144 upon receipt of a notice of an intention to sell or other form of
notice having a similar effect and other required documentation. Upon the
request of any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
3.4 Integration. The Company shall not, and shall use its best efforts
-----------
to ensure that, no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the offer or sale of the Securities for the
purposes of the rules and regulations of NASDAQ.
3.5 Increase in Authorized Shares. If on any date the Company would be,
-----------------------------
if a notice of exercise were to be delivered on such date, precluded from
issuing the sum of (i) 200% of the number of Underlying Shares then issuable
upon exercise in full of the Adjustable Warrants and (ii) the number of
Underlying Shares issuable upon exercise in full of the Closing Warrants (the
"Current Required Minimum") due to the unavailability of a sufficient number of
------------------------
authorized but unissued or reserved shares of Common Stock, then the Board of
Directors of the Company shall promptly (and in any case, within 30 Business
Days from such date) prepare and mail to the
-11-
stockholders of the Company proxy materials requesting authorization to amend
the Company's certificate or articles of incorporation to increase the number of
shares of Common Stock which the Company is authorized to issue to at least such
number of shares as reasonably requested by the Purchasers in order to provide
for such number of authorized and unissued shares of Common Stock to enable the
Company to comply with its issuance, exercise and reservation of shares
obligations as set forth in this Agreement and the Warrants (the sum of (x) the
number of shares of Common Stock then outstanding plus all shares of Common
Stock issuable upon exercise of all outstanding options, warrants and
convertible instruments other than the Warrants and (y) the Current Required
Minimum, shall be a reasonable number). In connection therewith, the Board of
Directors shall (a) adopt proper resolutions authorizing such increase, (b)
recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders no later than the earlier to occur of the 60th day after
delivery of the proxy materials relating to such meeting and the 90th day after
request by a holder of Warrants to issue the number of Underlying Shares in
accordance with the terms hereof) and (c) within five Business Days of obtaining
such stockholder authorization, file an appropriate amendment to the Company's
certificate or articles of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company shall (i)
--------------------------------------------
in the time and manner required by NASDAQ and such other exchange, market or
quotation facility on which the Common Stock is traded, prepare and file with
NASDAQ (and such national securities exchange, market or trading or quotation
facility on which the Common Stock is then traded) an additional shares listing
application covering a number of shares of Common Stock which is not less than
the lesser of (x) 6,500,000 /1/ or (y) the Initial Minimum, (ii) take all steps
necessary to cause such shares of Common Stock to be approved for listing on the
NASDAQ (as well as on any such other national securities exchange or market or
trading or quotation facility on which the Common Stock is then listed) as soon
as possible thereafter, and (iii) provide to the Purchasers evidence of such
listing, and the Company shall maintain the listing of its Common Stock thereon.
If the number of Underlying Shares issuable upon exercise of the then
unexercised portion of the Warrants exceeds 85% of the number of Underlying
Shares previously listed on account thereof with NASDAQ (and any such other
required exchanges, then the Company shall take the necessary actions to
immediately list a number of Underlying Shares as equals no less than the then
Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common Stock for
issuance upon exercise in full of the Warrants in accordance with this Agreement
and the Warrants, respectively, in such amount as may be required to fulfill its
obligations in full under the Transaction Documents, which reserve shall equal
no less than the then Current Required Minimum.
3.7 Exercise Procedures. The Transfer Agent Instructions and Form of
-------------------
Election to Purchase under the Warrants set forth the totality of the procedures
with respect to the exercise of the Warrants, including the form of legal
opinion, if necessary, that shall be rendered to the
----------------------
/1/
Represents 19.63% of the number of issued and outstanding shares of the
Company's Common Stock as of the date of this Agreement.
-12-
Company's transfer agent and such other information and instructions as may be
reasonably necessary to enable the Purchasers to exercise their Warrants.
3.8 Exercise Obligations. The Company shall honor exercises of the
--------------------
Warrants and shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Warrants.
3.9 Subsequent Financings; Limitation on Registration.
-------------------------------------------------
(a) Subject to Section 3.9(d) and (e), the Company shall not, directly
or indirectly, offer, sell, grant any option to purchase, or otherwise dispose
of (or announce any offer, sale, grant or any option to purchase or other
disposition) any of its equity or equity-equivalent securities or securities of
any of its Affiliates that are exchangeable or convertible (directly or
indirectly) for shares of Common Stock, including the issuance of any debt or
other instrument at any time over the life thereof convertible into or
exchangeable for Common Stock (collectively, a "Subsequent Placement") from the
--------------------
date hereof until the expiration of the 180th day after the Effective Date,
unless (A) the Company delivers to each of the Purchasers a written notice (the
"Subsequent Placement Notice") of its intention to effect such Subsequent
---------------------------
Placement, which Subsequent Placement Notice shall describe in reasonable detail
the proposed terms of such Subsequent Placement, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Placement shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto and (B) such Purchaser shall not have notified the Company by
6:30 p.m. (New York City time) on the tenth Trading Day after its receipt of the
Subsequent Placement Notice of its willingness to provide (or to cause its sole
designee to provide), subject to completion of mutually acceptable
documentation, financing to the Company on the same terms set forth in the
Subsequent Placement Notice. If the Purchasers shall fail to notify the Company
of their intention to enter into such negotiations within such time period, the
Company may effect the Subsequent Placement substantially upon the terms and to
the Persons (or Affiliates of such Persons) set forth in the Subsequent
Placement Notice; provided, that the Company shall provide the Purchasers with a
--------
second Subsequent Placement Notice, and the Purchasers shall again have the
right of first refusal set forth above in this paragraph (a), if the Subsequent
Placement subject to the initial Subsequent Placement Notice shall not have been
consummated for any reason on the terms set forth in such Subsequent Placement
Notice within 30 Trading Days after the date of the initial Subsequent Placement
Notice with the Person (or an Affiliate of such Person) identified in the
Subsequent Placement Notice. If the Purchasers shall indicate a willingness to
provide financing in excess of the amount set forth in the Subsequent Placement
Notice, then each Purchaser shall be entitled to provide financing pursuant to
such Subsequent Placement Notice up to an amount equal to such Purchaser's pro-
rata portion of the aggregate number of Shares purchased by such Purchaser under
this Agreement, but the Company shall not be required to accept financing from
the Purchasers in an amount in excess of the amount set forth in the Subsequent
Placement Notice.
(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Section 6(c) of
the Registration Rights Agreement to be registered, in the Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock permitted to be issued pursuant to Section 3.9 (e), the Company
-13-
shall not, for a period of not less than 60 days after the Effective Date,
without the prior written consent of the Purchasers (i) issue or sell any of its
or any of its Affiliates' equity or equity-equivalent securities pursuant to
Regulation S promulgated under the Securities Act, or (ii) register any
securities of the Company.
(d) With respect to Section 3.9(a) and (b) the 60 and 180 day periods
shall be extended for the number of days during such period (A) in which trading
in the Common Stock is suspended by any securities exchange or market or
quotation system on which the Common Stock is then listed, or (B) during which
the Underlying Shares Registration Statement is not effective, or (C) during
which the prospectus included in the Underlying Shares Registration Statement
may not be used by the holders thereof for the resale of Underlying Shares.
(e) The restrictions contained in Section 3.9(a) and (b) above, shall
not apply to (i) the granting of options or warrants to employees, officers and
directors of the Company, and the issuance of Common Stock upon exercise of such
options or warrants granted under any stock option plan heretofore or
hereinafter duly adopted by the Company, (ii) issuances of any stock or stock
options under any Company stock and option plans of the Company whether now
existing or approved by the Company and its stockholders in the future and (iii)
issuances of Common Stock pursuant to a Strategic Transaction (as defined
herein). A "Strategic Transaction" shall mean a transaction or relationship in
---------------------
which the Company issues shares of Common Stock to a Person which is, itself or
through its subsidiaries, an operating company in a business related to the
business of the Company and in which the Company receives material benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities.
3.10 Certain Securities Laws Disclosures; Publicity. The Company shall:
----------------------------------------------
(i) on the Closing Date issue a press release reasonably acceptable to the
Purchasers disclosing the transactions contemplated hereby, (ii) file with the
Commission a Report on Form 8-K disclosing the transactions contemplated hereby
within ten Business Days after the Closing Date, and (iii) timely file with the
Commission a Form D promulgated under the Securities Act. The Company shall, no
less than two Business Days prior to the filing of any disclosure required by
clauses (ii) and (iii) above, provide a copy thereof to the Purchasers for
their review. The Company and the Purchasers shall consult with each other in
issuing any other press releases or otherwise making public statements or
filings and other communications with the Commission or any regulatory agency
or stock market or trading facility with respect to the transactions
contemplated hereby and neither party shall issue any such press release or
otherwise make any such public statement, filings or other communications
without the prior written consent of the other, except if such disclosure is
required by law or stock market regulation, in which such case the disclosing
party shall promptly provide the other party with prior notice of such public
statement, filing or other communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the names of the Purchasers, or include the
names of the Purchasers in any filing with the Commission, or any regulatory
agency, trading facility or stock market without the prior written consent of
the Purchasers, except to the extent such disclosure (but not any disclosure as
to the controlling Persons thereof) is required by law or stock market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure.
-14-
3.11 Use of Proceeds. The Company shall use the net proceeds from the
---------------
sale of the Securities hereunder for working capital purposes and to pay
interest due or accrued on debt obligations of the Company and not to redeem any
Company equity or equity-equivalent securities or to settle any outstanding
litigation.
3.12 Reimbursement. If any Purchaser becomes involved in any capacity in
-------------
any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, solely as a result of acquiring the
Securities under this Agreement and the Warrants, the Company will reimburse
such Purchaser for its reasonable legal and other expenses (including the cost
of any investigation preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of the Purchasers who are actually named in
such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchasers and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Purchasers and any such Affiliate and any such Person. The Company
also agrees that neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons shall have any liability to
the Company or any Person asserting claims on behalf of or in right of the
Company solely as a result of acquiring the Securities under this Agreement and
the Warrants. The Company shall have no obligations under this paragraph to the
extent the action, proceeding or investigation arises out of or relates to
breaches of any Purchaser's representations or warranties under this Agreement,
or to such Purchaser's gross negligence or willful misconduct.
3.13 Placement Agent. The Purchasers understand that ▇▇▇▇▇▇ Capital
---------------
Group, Ltd. (the "Placement Agent") has been engaged by the Company to act as
---------------
placement agent on behalf of the Company in connection with the transaction
contemplated hereby and will be compensated by the Company for acting in such
capacity. The Purchasers acknowledge that they have not obtained any advice
from the Placement Agent concerning their investment in the Company or their
participation in the transactions contemplated by this Agreement, that to the
knowledge of the Purchasers, the information and data provided to the Purchasers
in connection with the transactions contemplated by this Agreement have not been
subjected to independent verification by the Placement Agent, and that the
Placement Agent has made no representation or warranty to the Purchasers with
respect to the accuracy or completeness of such information, data or other
disclosure material.
3.14 Limitations on Short Sales. Each Purchaser agrees that, so long as it
--------------------------
owns Shares, it will not enter into any Net Short Sales (as hereinafter
defined). For purposes of this Section 3.14, a "Net Short Sale" by a Purchaser
--------------
shall mean a sale of Common Stock by such Purchaser that is marked as a short
sale and that is made at a time when there is no equivalent offsetting long
position in Common Stock held by such Purchaser. For purposes of determining
whether there is an equivalent offsetting long position in Common Stock held by
a Purchaser, Underlying Shares that have not yet been issued on exercise of
Warrant held by a Purchaser shall be deemed to be held long by such Purchaser.
3.15 Compliance with Securities Laws. From the date hereof until the date
-------------------------------
that the Purchasers have disposed of all Securities acquired or to be acquired
by them pursuant to this
-15-
Agreement, Purchasers agree that they shall not (i) engage in any transactions
or a series of transactions with respect to the Company's Common Stock that
would result in a violation of the antimanipulation and antifraud provisions of
the federal securities laws, including, without limitation, Regulation M,
Section 17(a) of the Securities Act and Sections 9 and 10(b) of the Exchange
Act.
3.16 Shareholders Rights Plan In the event that a shareholders rights
------------------------
plan is adopted by the Company, no claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any such plan or in any way could be deemed to trigger the provisions of such
plan by virtue of receiving Shares or Underlying Shares under the Transaction
Documents.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing the Company shall reimburse the
-----------------
Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ $20,000 for the preparation and negotiation of the Transaction
Documents. The amount contemplated by the immediately preceding sentence shall
be delivered by the Purchasers to the Escrow Agent at the Closing for
disbursement to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. Other than the amount contemplated herein
and except as otherwise set forth in the Registration Rights Agreement, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all stamp and other taxes and duties levied in
connection with the issuance of the Securities.
4.2 Entire Agreement; Amendments. The Transaction Documents, together
----------------------------
with the Exhibits and Schedules thereto and Transfer Agent Instructions, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
4.3 Notices. Any and all notices or other communications or deliveries
-------
required or permitted to be provided 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 confirmed facsimile at the facsimile telephone number specified in this
Agreement 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
U.S. nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:
-16-
If to the Company: Pacific Aerospace & Electronics, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Pacific Aerospace & Electronics, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature
pages hereto
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be waived or
-------------------
amended except in a written instrument signed, in the case of an amendment, by
both the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
4.5 Headings. The headings herein are for convenience only, do not
--------
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 Governing Law. All other questions concerning the construction,
-------------
validity, enforcement and interpretation of this Agreement 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. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication
-17-
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the
enforcement of any of the Transaction Documents), 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, that
such suit, action or proceeding is improper. The Purchasers 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
Purchaser at the address in effect for notices to such Purchaser 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, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 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.
4.9 Survival. The representations, warranties, agreements and covenants
--------
contained herein shall survive the Closing and the delivery and exercise of the
Warrants.
4.10 Execution. This Agreement may be executed in two or more
---------
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11 Severability. In case any one or more of the provisions of this
------------
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.12 Remedies. In addition to being entitled to exercise all rights
--------
provided herein or granted by law, including recovery of damages, each of the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any
breach of obligations described in the foregoing sentence and hereby agrees to
waive in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.
4.13 Independent Nature of Purchasers' Obligations and Rights. The
--------------------------------------------------------
obligations of each Purchaser under any Transaction Document is several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such
-18-
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
PACIFIC AEROSPACE & ELECTRONICS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President Administration and General Counsel
-▇▇-
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Attorney-in-Fact
Purchase Price for Shares: $1,750,000
Number of Shares to be acquired: 1,000,000
Warrant Shares subject to Closing
Warrant: 192,500
Address for Notice:
Strong River Investments, Inc.
c/o ▇▇▇▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ (BVI) Limited
Wickhams Cay I, ▇▇▇▇▇▇▇▇▇▇ Plaza
P.O. Box 873
Road Town, Tortolla, B.V.I.
Facsimile No.:
Attn:
With a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ and (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq. and
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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BAY HARBOR INVESTMENTS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Attorney-in-Fact
Purchase Price for Shares: $1,750,000
Number of Shares to be acquired: 1,000,000
Warrant Shares subject to Closing
Warrant: 192,500
Address for Notice:
Bay Harbor Investments, Inc.
c/o ▇▇▇▇▇▇▇▇-▇▇▇▇ & ▇▇▇▇▇▇ (BVI) Limited
Wickhams Cay I, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇
With copies to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ and (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq. and ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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List of Exhibits and Schedules to the Securities Purchase Agreement
The following list briefly identifies the contents of all exhibits and schedules
to the Securities Purchase Agreement, dated as of July 27, 2000, between Pacific
Aerospace & Electronics, Inc., Strong River Investments, Inc. and Bay Harbor
Investments, Inc. (the "Agreement"). All of the exhibits and schedules listed
below are omitted from the Agreement, filed as Exhibit 2.1 to the foregoing
report on Form 8-K, pursuant to Regulation S-K, item 601(b)(2). The Company
agrees to furnish supplementally a copy of any of the omitted exhibits and
schedules to the Securities and Exchange Commission upon request.
EXHIBITS:
Exhibit A -Adjustable Warrant
Exhibit B -Vesting Warrant
Exhibit C -Closing Warrant
Exhibit D -Registration Rights Agreement
Exhibit E -Transfer Agent Instructions
Exhibit F -Legal Opinion
SCHEDULES:
Schedule 2.1(a) -Subsidiaries
Schedule 2.1(c) -Capitalization
Schedule 2.1(g) -Confidential Treatment Request
Schedule 2.1(t) -Labor Relations
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