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As filed with the Securities and Exchange Commission on December 22, 1999
Reg. No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
HAWKER PACIFIC AEROSPACE
(Exact name of registrant as specified in its charter)
California
(State or other jurisdiction of incorporation or organization)
95-3528840
(I.R.S. Employer Identification No.)
Hawker Pacific Aerospace
11249 Sherman Way
Sun Valley, CA 91352
(818) 765-6201
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
Phil Panzera
Executive Vice President
Hawker Pacific Aerospace
11249 Sherman Way
Sun Valley, CA 91352
(818) 765-6201
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With a copy to:
Yvonne Wong Chester, Esq.
Troy & Gould Professional Corporation
1801 Century Park East, Suite 1600
Los Angeles, California 90067
(310) 553-4441
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Share Offering Price Fee
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<S> <C> <C> <C> <C>
Common Stock, no par value............ 1,433,881 shares (1) $6.72 (2) $9,635,680 $2,544
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Common Stock, no par value............ 125,000 shares (3) 7.37 (4) 921,250 243
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Common Stock, no par value............ 50,000 shares (3) 2.85 (4) 142,500 38
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Common Stock, no par value............ 222,716 shares (3) 8.00 (4) 1,781,728 471
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Total Registration Fee............................................................................................ $3,296
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</TABLE>
(1) Represents shares of Common Stock issuable upon conversion of the 8%
Series C Convertible Preferred Stock described herein, including stock
dividends on the Series C. In accordance with Rule 416, there is also
being registered hereunder such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the
convertible preferred stock to prevent dilution resulting from stock
splits, stock dividends or similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee.
Based, pursuant to Rule 457, on the average of the high and low sale
prices of Registrant's Common Stock as reported on the Nasdaq National
Market on December 20, 1999.
(3) Represents shares issuable upon exercise of warrants. In accordance with
Rule 416, there is also being registered hereunder such indeterminate
number of additional shares of Common Stock as may become issuable upon
exercise of the warrants to prevent dilution resulting from stock
splits, stock dividends or similar transactions.
(4) Based, pursuant to Rule 457, on the exercise price of the warrants
referred to in note (3) above.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 22, 1999
PROSPECTUS
1,831,597 SHARES
HAWKER PACIFIC AEROSPACE
COMMON STOCK
Hawker Pacific Aerospace is a leading provider of aviation maintenance
services. The Company repairs and overhauls aircraft and helicopter landing
gear, hydromechanical components, wheels, and braking systems for a diverse
international customer base, including major commercial airlines, air cargo
operators, domestic government agencies, aircraft leasing companies, parts
distributors and OEMs.
The securityholders named herein or their assigns are offering for
resale from time to time up to 1,831,597 shares of our common stock which
they have the right to acquire. See "Selling Securityholders." All of the
shares are being offered by the selling securityholders. Of the shares
offered, 397,716 are issuable upon the exercise of outstanding warrants to
purchase common stock and 1,433,881 are issuable upon conversion of our
outstanding convertible preferred stock held by certain of the selling
securityholders and the payment of stock dividends on the preferred stock.
The number of shares offered by these selling securityholders is subject to
increase in certain events by reason of so-called antidilution provisions of
the warrants and convertible preferred stock held by them.
We will receive the exercise price of the warrants described in this
prospectus to the extent they are exercised, but we will not otherwise
receive any proceeds in connection with the sale of the shares by the selling
securityholders. See "Use of Proceeds."
The common stock is traded on the Nasdaq National Market under the symbol
"HPAC." On December 20, 1999, the last sale price for the common stock as
reported on the Nasdaq National Market was $6.75.
The selling securityholders may offer the shares of common stock from
time-to-time to or through brokers, dealers or other agents, or directly to
other purchasers, in one or more market transactions or private transactions
at prevailing market or at negotiated prices. Brokers, dealers or other
agents engaged by the selling securityholders may arrange for other brokers,
dealers or agents to participate in sales of the shares and may receive
commissions, discounts or concessions from the selling securityholders in
amounts to be negotiated. These brokers, dealers or agents may be deemed to
be "underwriters" within the meaning of the federal securities laws, and any
commissions, discounts or concessions they receive may be deemed to be
underwriting discounts or commissions. See "Plan of Distribution."
We will bear the costs and expenses of registering the shares offered by
the selling securityholders. The selling securityholders will bear any
commissions and discounts attributable to sales of the shares.
AN INVESTMENT IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. BEFORE
PURCHASING ANY SHARES, YOU SHOULD CONSIDER CAREFULLY THE RISKS DESCRIBED
UNDER "RISK FACTORS" BEGINNING ON PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE COMMON STOCK OR DETERMINED THAT
THIS PROSPECTUS IS COMPLETE OR ACCURATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-------------------
The date of this prospectus is January __, 2000
<PAGE>
The information in this prospectus is not complete and may be changed. These
Securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell, nor does it seek an offer to buy, these securities in any
state where the offer or sale is not permitted.
<PAGE>
THE COMPANY
GENERAL
Hawker Pacific Aerospace is a leading provider of aviation maintenance
services. We repair and overhaul aircraft and helicopter landing gear,
hydromechanical components, wheels, and braking systems for a diverse
international customer base, including major commercial airlines, air cargo
operators, domestic government agencies, aircraft leasing companies, parts
distributors and OEMs. Our principal executive offices are located at 11249
Sherman Way, Sun Valley, California 91352 and our telephone number is (818)
765-6201.
We have retained the aerospace investment banking team of First Union
Securities, including its mergers and acquisitions group (formerly Bowles
Hollowell Conner), to advise the Company's Board of Direcors on alternatives
for maximizing shareholder value. Based in part on the number of unsolicited
inquiries we had previously received, we believe that the time is right to
explore alternatives for fully realizing the Company's potential.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). We file reports and
other information with the Securities and Exchange Commission in accordance
with the Exchange Act. You can inspect and copy these reports, proxy
statements and other information at the public reference facilities
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the following regional offices: Seven World Trade
Center, New York, New York 10048, and Northwestern Atrium Center, 500 W.
Madison Street, Chicago, Illinois 60661. You can obtain copies of such
material from the Public Reference Section of the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You can also
obtain such materials electronically at the SEC's site on the World Wide Web
at http:/www.sec.gov.
Additional information regarding us and the shares of common stock
offered by the selling securityholders is contained in the registration
statement of which this prospectus forms a part, and the exhibits thereto,
filed with the SEC under the Securities Act of 1933, as amended (the
"Securities Act"). For further information pertaining to us and the offered
shares, reference is made to the registration statement and the exhibits
thereto, which may be inspected without charge at, and copies thereof may be
obtained at prescribed rates from, the office of the SEC at Judiciary Plaza,
450 Fifth Street, Washington, D.C. 20549 or obtained electronically at the
SEC's World Wide Web site referred to above. Statements contained herein
concerning the provisions of any document are not necessarily complete and in
each instance reference is made to the copy of the document filed as an
exhibit or schedule to the registration statement. Each such statement is
qualified by reference to the copies of the applicable documents filed with
the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company (Commission File No. 0-29490)
with the Commission under the Exchange Act are incorporated in this Prospectus
by reference: (a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1998; (b) the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999; (c) the Company's Quarterly Report on Form 10-Q,
as amended, for the quarter ended June 30, 1999; the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30,1999; (d) all other reports
filed pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of
fiscal 1997; (e) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A (Reg. No. 0-29490) under the
Exchange Act; and (f) the description of the Company's preferred share purchase
rights and Series B Junior Participating Preferred Stock contained in the
Company's Registration Statement on Form 8-A, filed March 23, 1999, as amended
April 7, 1999, under the Exchange Act; and including any amendment or report
subsequently filed by the Company for the purpose of updating the descriptions
under (e) and (f).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part of this Prospectus from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in any other subsequently filed document which also is, or
is deemed to
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be, incorporated by reference herein) modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus.
On request, the Company will provide, without charge, to each person,
including any beneficial owner, to whom this Prospectus is delivered a copy
of any or all of the documents incorporated by reference (other than exhibits
to such documents that are not specifically incorporated by reference in such
documents). Requests for such copies should be directed to Hawker Pacific
Aerospace, 11240 Sherman Way, Sun Valley, California 91352, Attention: Phil
Panzera, telephone number (818) 765-6201.
FORWARD LOOKING STATEMENTS
This prospectus contains so-called forward-looking statements within the
meaning of the federal securities laws. These include statements about our
expectations, beliefs, intentions or strategies for the future, which we
indicate by words or phrases such as "anticipate," "expect," "intend,"
"plan," "will," "we believe," "management believes" and similar language. All
forward-looking statements are based on our current expectations and are
subject to certain risks, uncertainties and assumptions. Our actual results
may differ materially from results anticipated in these forward-looking
statements. We base our forward-looking statements on information currently
available to us, and we assume no obligation to update them.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS,
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS WHEN
EVALUATING AN INVESTMENT IN THE SHARES OFFERED HEREBY.
AVIATION INDUSTRY RISKS
The Company derives all of its sales and operating income from the
services and parts that it provides to its customers in the aviation
industry. Therefore, the Company's business is directly affected by economic
factors and other trends that affect its customers in the aviation industry,
including a possible decrease in aviation activity, a decrease in outsourcing
by aircraft operators or the failure of projected market growth to
materialize or continue. When such economic and other factors adversely
affect the aviation industry, they tend to reduce the overall demand for the
Company's products and services, thereby decreasing the Company's sales and
operating income.
FLUCTUATIONS IN RESULTS OF OPERATIONS
The Company's operating results are affected by a number of factors,
including the timing of orders for the repair and overhaul of landing gear
and fulfillment of such contracts, the timing of expenditures to manufacture
parts and purchase inventory in anticipation of future services and sales,
parts shortages that delay work in progress, general economic conditions and
other factors. Although the Company has secured several long-term agreements
to service multiple aircraft, the Company receives sales under these
agreements only when it actually performs a repair or overhaul. Because the
average time between landing gear overhauls is seven years, the work orders
that the Company receives and the number of repairs or overhauls that the
Company performs in particular periods may vary significantly causing the
Company's quarterly sales and results of operations to fluctuate
substantially. The Company is unable to predict the timing of the actual
receipt of such orders and, as a result, significant variations between
forecasts and actual orders will often occur. In addition, the Company's need
to make significant expenditures to support new aircraft in advance of
generating revenues from repairing or overhauling such aircraft may cause the
Company's quarterly operating results to fluctuate. Furthermore, the
rescheduling of the shipment of any large order, or portion thereof, or any
production difficulties or delays by the Company, could have a material
adverse effect on the Company's quarterly operating results.
RISKS RELATING TO ACQUISITION STRATEGY; ESTABLISHMENT OF UNITED KINGDOM
OPERATIONS
The Company may attempt to grow by acquiring service and parts providers
whose operations or inventories complement or expand the Company's existing
repair and overhaul businesses, or whose strategic locations enable the
Company to expand into new geographic markets. The Company's ability to grow
by acquisition depends upon, and may be limited by, the availability of
suitable acquisition candidates and the Company's capital resources.
Acquisitions involve risks that could adversely affect the Company's
operating results, including the assimilation of the operations and personnel
of acquired companies, the amortization of acquired intangible
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assets and the loss of key employees of acquired companies. Although the
Company investigates the operations and assets that it acquires, there may be
liabilities that the Company fails or is unable to discover, and for which
the Company as a successor owner or operator may be liable. In addition,
costs and charges, including legal and accounting fees and reserves and
write-downs relating to an acquisition, may be incurred by the Company or may
be reported in connection with any such acquisition. The Company evaluates
acquisition opportunities from time to time, but the Company has not entered
into any commitments or binding agreements to date, except with respect to
the BA Acquisition. There can be no assurance that the Company will be able
to consummate acquisitions on satisfactory terms, or at all, or that it will
be successful in integrating any such acquisitions into its operations. The
Company had no history or experience operating in the United Kingdom prior to
the BA acquisition.
RISKS ASSOCIATED WITH EXPANSION OF INTERNATIONAL OPERATIONS
The Company's growth strategy is based in large part on the Company's
ability to expand its international operations, which will require
significant management attention and financial resources. The Company
currently has a subsidiary in the United Kingdom and a division in the
Netherlands. There can be no assurance that the Company's efforts to expand
operations internationally will be successful. In addition, international
operations are subject to a number of risks, including longer accounts
receivable collection periods and greater difficulty in accounts receivable
collections, unexpected changes in regulatory requirements, foreign currency
fluctuations, import and export restrictions and tariffs, difficulties and
costs of staffing and managing foreign operations, potentially adverse tax
consequences, political instability, the burdens of complying with multiple,
potentially conflicting laws and the impact of business cycles and economic
instability outside the United States.
The Company's sales are principally denominated in United States dollars
and British pounds, and to a lesser extent in Dutch guilders. The Company
makes substantial inventory purchases in French francs from such suppliers as
Messier-Bugatti, Societe D'Applications Des Machines Motrices and Eurocopter
France. The Company's Netherlands facility's inventory purchases are
primarily United States dollar denominated, while sales and operating
expenses are partially denominated in Dutch guilders. To date, the Company's
business has not been significantly affected by currency fluctuations or
inflation. Fluctuations in currency exchange rates could cause the Company's
products to become relatively more expensive in particular countries, leading
to a reduction in sales in that country.
SUBSTANTIAL COMPETITION
Numerous companies compete with the Company in the aviation services
industry. The Company expects that competition in its industry will increase
substantially as a result of industry consolidations and alliances in
response to the trend in the aviation industry toward outsourcing of repair
and overhaul services. In addition, as the Company moves into new geographic
or product markets it will encounter new competition.
The Company believes that the primary competitive factors in its
marketplace are quality, price, rapid turnaround time and industry
experience. Certain of the Company's competitors have substantially greater
financial, technical, marketing and other resources than the Company. These
competitors may have the ability to adapt more quickly to changes in customer
requirements, may have stronger customer relationships and greater name
recognition and may devote greater resources to the development, promotion
and sale of their products than the Company. There can be no assurance that
competitive pressures will not materially and adversely affect the Company's
business, financial condition or results of operations.
GOVERNMENT REGULATION
The Company's operations are regularly audited and accredited by the
Coordinating Agency for Supplier Evaluation, formed by commercial airlines to
approve FAA approved repair stations and aviation parts suppliers. If
material authorizations or approvals are revoked or suspended, the Company's
operations will be materially and adversely affected. As the Company attempts
to commence operations in countries in which it has not previously operated,
it will need to obtain new certifications and approvals. In addition, if new
and more stringent regulations are adopted by foreign or domestic regulatory
agencies, or oversight of the aviation industry is increased in the future,
the Company's business may be adversely affected.
DEPENDENCE ON KEY SUPPLIERS
The Company purchases landing gear spare parts and components for a
variety of fixed wing aircraft and helicopters. The Company has separate
10-year agreements that each expire in October 2006 with: (i) Dunlop
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Limited, Aviation Division; (ii) Dunlop Limited, Precision Rubber; and (iii)
Dunlop Equipment Division. Under two of these agreements, the Company
purchases discounted parts for resale and repair from Dunlop. For the years
ended December 31, 1998 and 1997, Dunlop accounted for approximately
$4,513,000 and $4,301,000, respectively, of the spare parts and components
that the Company purchased in such periods. Failure by any one of these
divisions of Dunlop to renew its agreement on similar terms when it expires
could have a material adverse affect on the Company's business. The Company's
single largest supplier during 1998 was Boeing, who provided the Company
$13,000,000 of spares parts and components.
In addition, the Company has agreements with Messier-Bugatti, SAMM and
Eurocopter France that enable the Company to purchase new aircraft parts at
discounts from list price. Many of the Company's supplier agreements, other
than its agreements with Dunlop, are short-term and can be terminated by the
supplier upon providing ninety days prior written notice. A decision by any
of these suppliers to terminate their agreements would reduce the competitive
advantage the Company derives therefrom.
CUSTOMER CONCENTRATION
American Airlines, British Airways, Federal Express and the USCG have
been the only customers accounting for more than 10% of sales during the last
three years.
CONCENTRATION OF CREDIT RISK
At December 31, 1998, 10.2%, 25.7% and 19.4% of the Company's total
accounts receivable were associated with American Airlines, British Airways
and Federal Express, respectively. At December 31, 1997, 13.1%, 18.9% and
6.1% of the Company's total accounts receivable were associated with American
Airlines, Federal Express and British Airways, respectively. At December 31,
1996, 7.4% and 9.3% of the Company's total accounts receivable were
associated with Federal Express and the USCG, respectively.
Write-offs against accounts receivable have been one-twentieth of one
percent in 1998, and two-tenths of one percent in 1997. The Company can not
provide any assurance that such favorable bad debt experience will continue.
ENVIRONMENTAL REGULATIONS
The Company's operations are subject to extensive and frequently
changing federal, state and local environmental laws and substantial related
regulation by government agencies, including the EPA, the California
Environmental Protection Agency and the United States Occupational Safety and
Health Administration. Among other matters, these regulatory authorities
impose requirements that regulate the operation, handling, transportation and
disposal of hazardous materials generated by the Company during the normal
course of its operations, govern the health and safety of the Company's
employees and require the Company to obtain and maintain permits in
connection with its operations. This extensive regulatory framework imposes
significant compliance burdens and risks on the Company and, as a result,
substantially affects its operational costs. In addition, the Company may
become liable for the cost of removal or remediation of certain hazardous
substances released on or in its facilities without regard to whether the
Company knew of, or caused, the release of such substances. The Company
believes that it currently is in material compliance with applicable laws and
regulations and is not aware of any material environmental problem at any of
its current or former facilities. There can be no assurance, however, that
its prior activities did not create a material problem for which the Company
could be responsible or that future uses or conditions (including, without
limitation, changes in applicable environmental laws and regulation, or an
increase in the amount of hazardous substances generated by the Company's
operations) will not result in material environmental liability to the
Company and materially and adversely affect the Company's financial condition
and results of operations. The Company's plating operations, which use a
number of hazardous materials and generate a significant volume of hazardous
waste, increase the Company's regulatory compliance burden and compound the
risk that the Company may encounter a material environmental problem in the
future. Furthermore, compliance with laws and regulations in foreign
countries in which the Company locates its operations may cause future
increases in the Company's operating costs or otherwise adversely affect the
Company's results of operations or financial condition.
PRODUCT LIABILITY RISKS
The Company's business exposes it to possible claims for personal
injury, death or property damage which may result from the failure or
malfunction of landing gears, hydromechanical components or aircraft spare
parts repaired or overhauled by the Company. Many factors beyond the
Company's control could lead to liability claims, including the failure of
the aircraft on which landing gear or hydromechanical components
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overhauled by the Company is installed, the reliability of the customer's
operators of the aircraft and the maintenance of the aircraft by the
customer. The Company currently has in force aviation products liability and
premises insurance, which the Company believes provides coverage in amounts
and on terms that are generally consistent with industry practice. The
Company has not experienced any material product liability claims related to
its products. There can be no assurance that the amount of product liability
insurance that the Company carries at the time a product liability claim is
be made will be sufficient to protect the Company.
DEPENDENCE ON KEY PERSONNEL
The continued success of the Company depends to a large degree upon the
services of certain of its executive officers and upon the Company's ability
to attract and retain qualified managerial and technical personnel
experienced in the various operations of the Company's business. Loss of the
services of such employees, particularly David Lokken, President and Chief
Executive Officer; Philip Panzera, Executive Vice President; Dennis Biety,
Managing Director of Hawker Pacific Aerospace Ltd.; Brian Carr, Managing
Director of Sun Valley Operations; or Michael Riley, Vice President-Sales and
Marketing, could adversely affect the operations of the Company.
The Company has entered into employment agreements expiring in 2001 with
Messrs. Lokken and Panzera, and 2003 with Mr. Biety. Messrs. Carr and Riley
have employment agreements with the Company which expire on October 31, 2000.
RISK ASSOCIATED WITH FACILITIES REORGANIZATION
The Company's UK subsidiary has relocated to a new facility in 1999. The
Company believes it has moved the facility with a minimum of disruption,
although operations have been affected by the move.
The Company is in the process of expanding its plating operations at its
Sun Valley facility. This expansion is not expected to be completed until
sometime in 2000. The plating shop of the UK operation is not scheduled to be
completed until the end of December 1999. Any failure or delay in the
expansion or relocation of these plating operations could impair the
Company's ability to service its customers.
YEAR 2000 COMPLIANCE
The year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the applicable year. Any of the
Company's programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000, which could result in
miscalculation or system failures. The Company believes that its mainframe
database and operating systems are year 2000 compliant. In addition, the
Company is working with its external suppliers, vendors and service providers
to ensure that their systems will be able to support and interact with the
Company's server and network. The total costs incurred to address the
Company's year 2000 issues during 1999 approximate $200,000. However, if the
Company, its customers or vendors are unable to resolve such processing
issues in a timely manner, it could have a material adverse impact on the
Company's business, financial condition and results of operations.
Accordingly, the Company plans to devote the necessary resources to becoming
year 2000 compliant in a timely manner.
USE OF PROCEEDS
We will bear the costs and expenses of registering the shares offered by
the selling securityholders, which are estimated at $42,500. Other than the
exercise of the warrants described herein (to the extent they may be
exercised), we will not receive any of the proceeds from the sale of the
shares offered by the selling securityholders. The holders of the warrants
are not obligated to exercise the warrants, and there can be no assurance
that they will choose to do so. If all of the warrants are exercised in full,
we will receive $2,854,228 upon exercise.
The Company intends to use any proceeds it receives from the exercise of
warrants for working capital and general corporate purposes.
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SELLING SECURITYHOLDERS
RECENT FINANCING
Deephaven Private Placement Trading Ltd. ("Deephaven") purchased an
aggregate of $3 million of 8% Series C Convertible Preferred Stock and
warrants from the Company in a private placement transaction which closed on
December 10, 1999. As part of that private placement, Deephaven was issued
preferred stock that may be converted into our common stock and warrants to
acquire 125,000 shares of our common stock ("Deephaven Warrants"). The
preferred stock and the Deephaven Warrants are described in more detail under
"Description of Our Capital Stock." Holders of the preferred stock and the
Deephaven Warrants are prohibited from using them to convert into and acquire
shares of our common stock to the extent that such conversion or acquisition
would result in such holder, together with any affiliate thereof,
beneficially owning in excess of 4.999% of the outstanding shares of our
common stock following such conversion or acquisition. This restriction may
be waived by the holder on not less than 61 days' notice to the Company.
Since the number of shares of our common stock issuable upon conversion of
the preferred stock will change based upon fluctuations of the market price
of our common stock prior to a conversion, the actual number of shares of our
common stock that will be issued under the preferred stock, and consequently
the number of shares of our common stock that will be beneficially owned by
Deephaven, cannot be determined at this time. Because of this fluctuating
characteristic, the Company has agreed to register a number of shares of our
common stock that exceeds the number of shares beneficially owned by
Deephaven. The number of shares of our common stock listed in the table below
as being beneficially owned by Deephaven includes the shares of our common
stock that are issuable to them, subject to the 4.999% limitation, upon
conversion of their preferred stock and exercise of the Deephaven Warrants.
However, the 4.999% limitation would not prevent Deephaven from acquiring and
selling in excess of 4.999% of our common stock through a series of
conversions and sales under the preferred stock and acquisitions and sales
under the warrants.
In connection with this financing, warrants to purchase 50,000 shares of
our common stock at $2.85 per share ("Brighton Warrants") were issued to
Brighton Capital, Ltd., which are also being registered in this prospectus.
IPO WARRANTS
In connection with our initial public offering in 1998, we issued
warrants to purchase up to 222,716 of our shares of common stock ("IPO
Warrants") to the underwriters in that offering. The holders of the IPO
Warrants are registering the shares underlying the warrants pursuant to their
piggyback registration rights.
SELLING SECURITYHOLDER TABLE
The following table sets forth certain information regarding the
beneficial ownership of our common stock by the selling securityholders on
December 22, 1999. To our knowledge, each of the selling securityholders has
sole voting and investment power with respect to the shares of common stock
shown, subject to applicable community property laws.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING(1) AFTER OFFERING (1)
-------------------------- NUMBER OF ----------------------
NUMBER OF SHARES NUMBER OF
SELLING SECURITYHOLDER SHARES PERCENT(2) BEING OFFERED SHARES PERCENT(2)
- ---------------------- ------------- ----------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Everen Securities, Inc./First Union 111,722(3) 1.9% 111,722 -0- --
Securities, Inc.
David Enzer 48,315(3)(4) * 48,315 -0- --
Basil Horner 12,000(3) * 12,000 -0- --
The Seidler Companies Incorporated 13,929(3) * 13,929 -0- --
Kerry Cotter 41,750(3) * 41,750 -0- --
Deephaven Private Placement Trading Ltd. 291,053 4.76% 1,558,881 -0- --
Brighton Capital Ltd.(4) 45,000 * 45,000 -0- --
</TABLE>
7
<PAGE>
- -----------------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Shares of common stock subject to options, warrants and
convertible securities currently exercisable or convertible, or
exercisable or convertible within 60 days, are deemed outstanding,
including for purposes of computing the percentage ownership of the
person holding such option, warrant or convertible security, but not for
purposes of computing the percentage of any other holder.
(2) Included as outstanding for this purpose are 5,822,222 shares outstanding
on December 22, 1999, plus, in the case of each of these selling
securityholders, the shares issuable upon exercise and conversion of the
warrants and/or shares of convertible preferred stock held by such
selling securityholder (but not including shares issuable upon exercise
or conversion of any other warrants, convertible preferred stock or other
securities held by any other person).
(3) Issuable upon exercise of warrants.
(4) Brighton Capital Ltd. transferred 5,000 Brighton Warrants to David Enzer.
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their
shares of Common Stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholders may use any one or more
of the following methods when selling shares:
- - ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- - block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- - purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- - an exchange distribution in accordance with the rules of the applicable
exchange;
- - privately negotiated transactions;
- - short sales;
- - broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
- - a combination of any such methods of sale; and
- - any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in
connection with these trades. The Selling Stockholders may pledge their
shares to their brokers under the margin provisions of customer agreements.
If a Selling Stockholder defaults on a margin loan, the broker may, from time
to time, offer and sell the pledged shares.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser)
in amounts to be negotiated. The Selling Stockholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such
8
<PAGE>
event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to
the Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.
DESCRIPTION OF OUR CAPITAL STOCK
As of the date of this Prospectus, the authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock, no par value, and
5,000,000 shares of preferred stock, no par value.
COMMON STOCK
As of December 22, 1999, 5,822,222 shares of Common Stock were
outstanding, held of record by 34 registered shareholders. The holders of
Common Stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the shareholders and may cumulate their votes
in the election of directors upon giving notice required by law. Subject to
preferences that may be applicable to any shares of Preferred Stock issued in
the future, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefore. The Company's shareholders currently may cumulate their
votes for the election of directors so long as at least one shareholder has
given notice at the meeting of shareholders prior to the voting of that
shareholder's desire to cumulate his or her votes. Cumulative voting means
that in any election of directors, each shareholder may give one candidate a
number of votes equal to the number of directors to be elected multiplied by
the number of shares held by such shareholder, or such shareholder may
distribute such number of votes among as many candidates as the shareholder
sees fit. Cumulative voting will no longer be required or permitted under the
Amended and Restated Articles of Incorporation, as amended (the "Amended
Articles") at such time as (i) the Company's shares of Common Stock are
listed on the Nasdaq National Market and the Company has at least 800 holders
of its equity securities as of the record date of the Company's most recent
annual meeting of shareholders or (ii) the Company's shares of Common Stock
are listed on the New York Stock Exchange or the American Stock Exchange. At
that time, the Company may divide its Board into classes of directors. In the
event of a liquidation, dissolution or winding up of the Company, holders of
the Common Stock are entitled to share ratably with the holders of any then
outstanding Preferred Stock in all assets remaining after payment of
liabilities and the liquidation preference of any then outstanding Preferred
Stock. Holders of Common Stock have no preemptive rights and no right to
convert their Common Stock into any other securities. There are no redemption
or sinking fund provisions applicable to the Common Stock. All outstanding
shares of Common Stock are, and all shares of Common Stock issued by the
Company in the initial public offering are, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has authority to fix the rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any future vote or action by the shareholders. The rights of the holders of
the Common Stock will be subject to, and may be adversely affected by, the
rights of the holders of any preferred stock that may be issued in the
future. The issuance of preferred stock could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding
voting stock of the Company, thereby delaying, deferring or preventing a
change in control of the Company. Furthermore, such preferred stock may have
other rights, including economic rights senior to the common stock, and, as a
result, the issuance thereof could have a material adverse effect on the
market value of the Common Stock.
SERIES B
In March 1999, the Company adopted a Rights Agreement and in connection
therewith, created a Series B Junior Participating Preferred Stock. No shares
of Series B Junior Participating Preferred Stock are currently outstanding.
SERIES C
In connection with the $3,000,000 financing, we issued 300 shares of 8%
Series C Convertible Preferred Stock to Deephaven. The Series C is senior to
the Series B and the common stock in dividends and liquidation. The Series C
is convertible into common stock at fluctuating conversion rates, including
rates
9
<PAGE>
that are below fair market value based upon a formula contained in the
Certificate of Determination for the Series C. In addition, the Series C is
redeemable under certain circumstances.
Deephaven, one of the Selling Securityholders, together with any
affiliate thereof, may not beneficially own shares of Common Stock in excess
of 4.999% of the outstanding shares of Common Stock following a conversion of
preferred stock and exercise of warrants. Such restrictions may be waived by
the Selling Securityholders as to itself upon not less than 61 days' notice
to the Company.
WARRANTS
We have issued and outstanding IPO Warrants to purchase up to 222,716
shares of common stock at $8 per share; Brighton Warrants to purchase up to
50,000 shares of common stock at $2.85 per share; and Deephaven Warrants to
purchase up to 125,000 shares of common stock at $7.37 per share. All of the
warrants contain net exercise provisions.
STOCK TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is U.S.
Stock Transfer Corporation, Glendale, California.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Amended Articles provide that, pursuant to the California
Corporations Code, the liability of the directors of the Company for monetary
damages shall be eliminated to the fullest extent permissible under
California law. This is intended to eliminate the personal liability of a
director for monetary damages in an action brought by, or in the right of,
the Company for breach of a director's duties to the Company or its
shareholders. This provision in the Amended Articles does not eliminate the
directors' fiduciary duty and does not apply for certain liabilities: (i) for
acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law; (ii) for acts or omissions that a director
believes to be contrary to the best interest of the Company or its
shareholders or that involve the absence of good faith on the part of the
director; (iii) for any transaction from which a director derived an improper
personal benefit; (iv) for acts or omissions that show a reckless disregard
for the director's duty to the Company or its shareholders in circumstances
in which the director was aware, or should have been aware, in the ordinary
course of performing a director's duties, of a risk of serious injury to the
Company or its shareholders; (v) for acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the
director's duty to the Company or its shareholders; (vi) with respect to
certain transactions or the approval of transactions in which a director has
a material financial interest; and (vii) expressly imposed by statute for
approval of certain improper distributions to shareholders or certain loans
or guarantees. This provision also does not limit or eliminate the rights of
the Company or any shareholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of
care. The Company's Amended and Restated Bylaws require the Company to
indemnify its officers and directors to the full extent permitted by law,
including circumstances in which indemnification would otherwise be
discretionary. Among other things, the Bylaws require the Company to
indemnify directors and officers against certain liabilities that may arise
by reason of their status or service as directors and officers and allows the
Company to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified.
The Company believes that it is the position of the Commission that
insofar as the foregoing provision may be invoked to disclaim liability for
damages arising under the Securities Act, the provision is against public
policy as expressed in the Securities Act and is therefore unenforceable.
Such limitation of liability also does not affect the availability of
equitable remedies such as injunctive relief or rescission.
The Company has entered into indemnification agreements ("Indemnification
Agreement(s)") with each of its directors and executive officers. Each such
Indemnification Agreement provides that the Company will indemnify the
indemnitee against expenses, including reasonable attorneys' fees, judgments,
penalties, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any civil or criminal action or
administrative proceeding arising out of the performance of his duties as a
director or officer, other than an action instituted by the director or
officer. Such indemnification is available if the indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action, had
no reasonable cause to believe his conduct was unlawful. The Indemnification
Agreements require that the Company indemnify the director or other party
thereto in all cases to the fullest extent permitted by applicable law. Each
Indemnification Agreement permits the director or officer that is party
thereto to bring suit to seek recovery of amounts due under the
Indemnification Agreement and to recover the expenses of such a suit if he is
successful. Insofar as
10
<PAGE>
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. The Company
believes that its Amended Articles and Bylaw provisions are necessary to
attract and retain qualified persons as directors and officers.
The Company has been informed that, in the opinion of the Securities and
Exchange Commission (the "Commission"), indemnification provisions such as
the foregoing are against public policy as expressed in the Securities Act
and are therefore unenforceable with respect to claims arising under federal
securities laws.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon by
Troy & Gould Professional Corporation, Los Angeles, California.
EXPERTS
The financial statements of Hawker Pacific Aerospace, as the predecessor
and successor companies, as of December 31, 1997 and 1998 and the related
statements of operations, stockholders' equity and cash flows for the ten
months ended October 31, 1996, the two months ended December 31, 1996 and the
years ended December 31, 1997 and 1998, incorporated by reference in this
prospectus and registration statement have been audited by Ernst & Young,
LLP, independent auditors, as set forth in their report, incorporated herein
by reference. We have incorporated herein by reference our financial
statements in the prospectus and registration statement in reliance on Ernst
& Young's report, given on their authority as experts in auditing and
accounting.
11
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN
CONNECTION WITH THE OFFERING HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY SELLING SECURITYHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES TO ANY PERSON IN ANY
STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
PAGE
The Company.......................................2
Available Information.............................2
Incorporation of Certain
Documents by Reference.........................2
Forward Looking Statements........................3
Risk Factors......................................3
Use of Proceeds...................................6
Selling Securityholders...........................7
Plan of Distribution..............................8
Description of Our Capital Stock..................9
Legal Matters....................................11
Experts..........................................11
COMMON STOCK
HAWKER PACIFIC AEROSPACE
1,831,597 SHARES
------------
PROSPECTUS
------------
January __, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company estimates that expenses in connection with the distributions
described in this Registration Statement will be as set forth below. Such costs
and expenses shall be borne by the Company. Any commissions, discounts and
transfer taxes, if any, attributable to the sales of the shares being registered
hereunder will be borne by the Selling Securityholders.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee ............................. $ 3,296
Nasdaq filing .................................... $17,500
Printing expenses ................................ $ 1,000
Accounting fees and expenses ..................... $ 3,000
Legal fees and expenses .......................... $15,000
Miscellaneous .................................... $ 2,704
-------
Total $42,500
-------
-------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Amended and Restated Articles of Incorporation, as amended
("Amended Articles") provide that, pursuant to the California Corporations
Code, the liability of the directors of the Company for monetary damages
shall be eliminated to the fullest extent permissible under California law.
This is intended to eliminate the personal liability of a director for
monetary damages in an action brought by, or in the right of, the Company for
breach of a director's duties to the Company or its shareholders. This
provision in the Amended Articles does not eliminate the directors' fiduciary
duty and does not apply for certain liabilities: (i) for acts or omissions
that involve intentional misconduct or a knowing and culpable violation of
law; (ii) for acts or omissions that a director believes to be contrary to
the best interest of the Company or its shareholders or that involve the
absence of good faith on the part of the director; (iii) for any transaction
from which a director derived an improper personal benefit; (iv) for acts or
omissions that show a reckless disregard for the director's duty to the
Company or its shareholders in circumstances in which the director was aware,
or should have been aware, in the ordinary course of performing a director's
duties, of a risk of serious injury to the Company or its shareholders; (v)
for acts or omissions that constitute an unexcused pattern of inattention
that amounts to an abdication of the director's duty to the Company or its
shareholders; (vi) with respect to certain transactions or the approval of
transactions in which a director has a material financial interest; and (vii)
expressly imposed by statute for approval of certain improper distributions
to shareholders or certain loans or guarantees. This provision also does not
limit or eliminate the rights of the Company or any shareholder to seek
non-monetary relief such as an injunction or rescission in the event of a
breach of a director's duty of care. The Company's Amended and Restated
Bylaws require the Company to indemnify its officers and directors to the
full extent permitted by law, including circumstances in which
indemnification would otherwise be discretionary. Among other things, the
Bylaws require the Company to indemnify directors and officers against
certain liabilities that may arise by reason of their status or service as
directors and officers and allows the Company to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified.
The Company believes that it is the position of the Commission that
insofar as the foregoing provision may be invoked to disclaim liability for
damages arising under the Securities Act, the provision is against public
policy as expressed in the Securities Act and is therefore unenforceable.
Such limitation of liability also does not affect the availability of
equitable remedies such as injunctive relief or rescission.
The Company has entered into indemnification agreements
("Indemnification Agreement(s)") with each of its directors and executive
officers. Each such Indemnification Agreement provides that the Company will
indemnify the indemnitee against expenses, including reasonable attorneys'
fees, judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any civil or criminal action or
administrative proceeding arising out of the performance of his duties as a
director or officer, other than an action instituted by the director or
officer. Such indemnification is available if the indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action, had
no reasonable cause to believe his conduct was unlawful. The Indemnification
Agreements require that the Company indemnify the director or other party
thereto in all cases to the fullest extent permitted by applicable law. Each
Indemnification
II-1
<PAGE>
Agreement permits the director or officer that is party thereto to bring suit
to seek recovery of amounts due under the Indemnification Agreement and to
recover the expenses of such a suit if he is successful. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. The Company
believes that its Amended Articles and Bylaw provisions are necessary to
attract and retain qualified persons as directors and officers.
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference
as a part of this Registration Statement:
<TABLE>
<S> <C>
3 Certificate of Determination for 8% Series C Convertible Preferred
Stock as filed with the California Secretary of State on December
9, 1999.*
4.1 Copy of Warrant to purchase 50,000 shares issued to Brighton
Capital, Ltd. dated December 10, 1999.*
4.2 Copy of Warrant to purchase 125,000 shares issued to Deephaven
Private Placement Trading Ltd. dated December 10, 1999.*
5 Opinion of Troy & Gould Professional Corporation.*
10.1 Convertible Preferred Stock Purchase Agreement dated December 10,
1999 between the Company and Deephaven Private Placement Trading
Ltd. (to be filed by amendment).
10.2 Registration Rights Agreement dated December 10, 1999 between the
Company and Deephaven Private Placement Trading Ltd.*
23.1 Consent of Troy & Gould Professional Corporation (included in
Exhibit 5).*
23.2 Consent of Ernst & Young LLP*.
24 Power of Attorney (included on page II-5 hereof).*
</TABLE>
- ------------------------------------
* Included herewith.
ITEM 17. UNDERTAKINGS
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in this registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
II-2
<PAGE>
provided, however, that (i) and (ii) do not apply if the registration
statement is on Form S-3, and the information required to be included in a
post-effective amendment is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Exchange Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Company hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the Company's
annual report pursuant to section 13(a) or section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(d) The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Sun Valley, State of
California, on December 21, 1999.
HAWKER PACIFIC AEROSPACE
By: /s/ David Lokken
-------------------------------------
David Lokken
President and Chief Executive Officer
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Lokken, Phil Panzera and Dan Lubeck, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place, and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Dan Lubeck Chairman of the Board December 21, 1999
- --------------------------------------------
Daniel J. Lubeck
/s/ David L. Lokken Chief Executive Officer (Principal December 21, 1999
- -------------------------------------------- Executive Officer), President and
David L. Lokken Director
/s/ Philip Panzera Executive Vice President December 21, 1999
- -------------------------------------------- (Principal Financial and Accounting
Philip Panzera Officer)
/s/ Scott W. Hartman Director December 21, 1999
- --------------------------------------------
Scott W. Hartman
/s/ John G. Makoff Director December 21, 1999
- --------------------------------------------
John G. Makoff
/s/ Daniel C. Toomey, Jr. Director December 21, 1999
- --------------------------------------------
Daniel C. Toomey, Jr.
/s/ Mellon C. Baird Director December 21, 1999
- --------------------------------------------
Mellon C. Baird
/s/ Joel F. McIntyre Director December 21, 1999
- --------------------------------------------
Joel F. McIntyre
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<S> <C>
3 Certificate of Determination for 8% Series C Convertible Preferred
Stock as filed with the California Secretary of State on December
9, 1999.*
4.1 Copy of Warrant to purchase 50,000 shares issued to Brighton
Capital, Ltd. dated December 10, 1999.*
4.2 Copy of Warrant to purchase 125,000 shares issued to Deephaven
Private Placement Trading Ltd. dated December 10, 1999.*
5 Opinion of Troy & Gould Professional Corporation.*
10.1 Convertible Preferred Stock Purchase Agreement dated December 10,
1999 between the Company and Deephaven Private Placement Trading
Ltd. (to be filed by amendment).
10.2 Registration Rights Agreement dated December 10, 1999 between the
Company and Deephaven Private Placement Trading Ltd.*
23.1 Consent of Troy & Gould Professional Corporation (included in
Exhibit 5).*
23.2 Consent of Ernest & Young, LLP.*
24 Power of Attorney (included on page II-5 hereof).*
</TABLE>
- --------------------
* Included herewith.
II-6
<PAGE>
HAWKER PACIFIC AEROSPACE
CERTIFICATE OF DETERMINATION
OF RIGHTS, PREFERENCES, PRIVILEGES, AND
RESTRICTIONS OF 8% SERIES C CONVERTIBLE PREFERRED STOCK
David L. Lokken and Daniel J. Lubeck certify that:
A) They are the president and secretary, respectively, of Hawker Pacific
Aerospace, a California corporation.
B) The Board of Directors has duly adopted the following resolution:
RESOLVED, that a series of the class of authorized Preferred Stock of the
Corporation hereby is created, and that the designation and amount thereof and
the rights, preferences and restrictions of the shares of the series are as
follows:
Section 1. DESIGNATION, AMOUNT AND PAR VALUE. The series of preferred
stock all be designated as its 8% Series C Convertible Preferred Stock (the
"PREFERRED STOCK") and the number of shares so designated shall be 300 (which
shall not be subject to increase without the consent of the holders of 66-2/3%
of the Preferred Stock (each, a "HOLDER" and collectively, the "HOLDERS")). Each
share of Preferred Stock shall have no par value and a stated value equal to the
sum of $10,000 plus all accrued dividends to the date of determination to the
extent not previously paid in cash in accordance with the terms hereof (the
"STATED VALUE").
Section 2. DIVIDENDS.
(a) Holders shall be entitled to receive, out of funds legally available
therefor, and the Company shall pay, cumulative dividends at the rate per share
(as a percentage of the Stated Value per share) of 8% per annum, payable on the
Conversion Date (as defined herein) for such share, in cash or shares of Common
Stock (as defined in Section 8). Payment in the form of Common Stock shall be
valued at the then applicable Conversion Price. Subject to the terms and
conditions herein, the decision whether to pay dividends hereunder in Common
Stock or cash shall be at the discretion of the Company. The Company shall
provide the Holders written notice of its intention to pay dividends in cash or
shares of Common Stock not less than ten (10) days prior to each Conversion Date
for so long as shares of Preferred Stock are outstanding. Failure to timely
provide such written notice shall be deemed (if permitted hereunder) an election
by the Company to pay dividends for such period in shares of Common Stock
pursuant to the terms hereof. Dividends on the Preferred Stock shall be
calculated on the basis of a 360-day year, shall accrue daily commencing on the
Original Issue Date (as defined in Section 8), and shall be deemed to accrue
from such date whether or not earned or declared and whether or not there are
profits, surplus or other funds of the Company legally available for the payment
of dividends. Except as otherwise provided herein, if at any time the Company
pays less than the total amount of dividends then accrued on account of the
Preferred Stock, such payment shall be distributed ratably among the Holders
based upon the number of shares of Preferred Stock held by each Holder. Any
dividends to be paid in cash hereunder that are not paid within three (3)
Trading Days (as defined in Section 8) following a Conversion Date shall
continue to accrue and shall entail a late fee, which must be paid in cash, at
the rate of 18% per annum or the lesser maximum
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rate permitted by applicable law (such fees to accrue daily, from the date such
dividend is due hereunder through and including the date of payment).
(b) Notwithstanding anything to the contrary contained herein, the Company
must pay dividends in cash if, as permitted under applicable law:
(i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes is insufficient to pay such dividends
in shares of Common Stock;
(ii) after the Dividend Effectiveness Date (as defined in Section 8),
Underlying Shares (as defined in Section 8) (x) are not registered for resale
pursuant to an effective Underlying Shares Registration Statement (as defined in
Section 8) or (y) may not be sold without volume restrictions pursuant to
Rule 144 promulgated under the Securities Act (as defined in Section 8), as
determined by counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent in the form and substance acceptable
to the applicable Holder and such transfer agent (if the Company is permitted
and elects to pay dividends in shares of Common Stock under this clause (ii)
prior to the Dividend Effectiveness Date and thereafter an Underlying Shares
Registration Statement shall be declared effective by the Commission (as defined
in Section 8), the Company shall, within three (3) Trading Days after the date
of such declaration of effectiveness, exchange such Underlying Shares for shares
of Common Stock that are free of restrictive legends of any kind);
(iii) the Common Stock is not then listed or quoted on the Nasdaq
National Market ("NASDAQ"), or on the New York Stock Exchange, American Stock
Exchange or Nasdaq SmallCap Market (each, a "SUBSEQUENT Market");
(iv) the Company has failed to timely satisfy its conversion
obligations hereunder; or
(v) the issuance of the Underlying Shares issuable as payment of such
dividend would result in a violation of Section 5(a)(ii) or the rules of the
Nasdaq Stock Market or any other rules and regulations governing any Subsequent
Market on which the Common Stock is then listed or quoted for trading.
(c) So long as any Preferred Stock shall remain outstanding, neither the
Company nor any subsidiary thereof shall redeem, purchase or otherwise acquire
directly or indirectly any Junior Securities (as defined in Section 8), nor
shall the Company directly or indirectly pay or declare any dividend or make any
distribution (other than a dividend or distribution described in Section 5 or
dividends due and paid in the ordinary course on preferred stock of the Company
at such times when the Company is in compliance with its payment and other
obligations hereunder) upon, nor shall any distribution be made in respect of,
any Junior Securities, nor shall any monies be set aside for or applied to the
purchase or redemption (through a sinking fund or otherwise) of any Junior
Securities or shares pari passu with the Preferred Stock.
Section 3. VOTING RIGHTS. Except as otherwise provided herein and as
otherwise required by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the Company
shall not, without the affirmative vote of the
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Holders of a majority of the shares of the Preferred Stock then outstanding,
(a) alter or change adversely the powers, preferences or rights given to the
Preferred Stock or alter or amend this Certificate of Determination, (b)
authorize or create any class of stock ranking as to dividends or distribution
of assets upon a Liquidation (as defined in Section 4) senior to or otherwise
pari passu with the Preferred Stock, (c) amend its articles of incorporation or
other charter documents so as to affect adversely any rights of the Holders, (d)
increase the authorized number of shares of Preferred Stock, or (e) enter into
any agreement with respect to the foregoing.
Section 4. LIQUIDATION. Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a "LIQUIDATION"), the Holders
shall be entitled to receive out of the assets of the Company, whether such
assets are capital or surplus, for each share of Preferred Stock an amount equal
to the Stated Value per share before any distribution or payment shall be made
to the holders of any Junior Securities, and if the assets of the Company shall
be insufficient to pay in full such amounts, then the entire assets to be
distributed to the Holders shall be distributed among the Holders ratably in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full. A sale, conveyance or disposition
of 50% or more of the assets of the Company or the effectuation by the Company
of a transaction or series of related transactions in which more than 33% of the
voting power of the Company is disposed of, or a consolidation or merger of the
Company with or into any other company or companies into one or more companies
not wholly-owned by the Company shall not be treated as a Liquidation, but
instead shall be subject to the provisions of Section 5. The Company shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each record Holder.
Section 5. CONVERSION.
(a)(i) CONVERSIONS AT OPTION OF HOLDER. Shares of Preferred Stock shall be
convertible into shares of Common Stock (subject to the limitations set forth in
Section 5(a)(ii)), at the Conversion Ratio (as defined in Section 8), at the
option of the Holder at any time and from time to time commencing on the
Original Issue Date on the terms and at the conversion prices set forth herein.
Holders shall effect conversions by surrendering the certificate or certificates
representing the shares of Preferred Stock to be converted to the Company,
together with the form of conversion notice (a "CONVERSION NOTICE") in the form
of Exhibit G of the Purchase Agreement. Each Conversion Notice shall specify the
number of shares of Preferred Stock to be converted and the date on which such
conversion is to be effected, which date may not be prior to the date the Holder
delivers such Conversion Notice by facsimile (the "CONVERSION DATE"). If no
Conversion Date is specified in a Conversion Notice, the Conversion Date shall
be the date that the Conversion Notice is deemed delivered hereunder. If the
Holder is converting less than all shares of Preferred Stock represented by the
certificate or certificates tendered by the Holder with the Conversion Notice,
or if a conversion hereunder cannot be effected in full for any reason, the
Company shall promptly deliver to such Holder (in the manner and within the time
set forth in Section 5(b)) a certificate representing the number of shares of
Preferred Stock as have not been converted.
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(ii) CERTAIN CONVERSION RESTRICTIONS.
(A) A Holder may not convert shares of Preferred Stock to the extent
such conversion would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and the rules
promulgated thereunder) in excess of 4.999% or 9.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon such
conversion 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 a conversion hereunder, unless the
conversion at issue would result in the issuance of shares of Common Stock in
excess of 4.999% or 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 (including as a result of any other exercise or
conversion of other derivative or convertible instruments of the Company), the
Holder shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular conversion
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of the
shares of Preferred Stock are convertible shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Notice of Conversion for
a number of shares of Preferred Stock that 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 number of shares of
Preferred Stock permitted to be converted on such Conversion Date in accordance
with the periods described herein and disregard the balance of such Conversion
Notice, as if never delivered. The provisions of this Section with respect to
either the 4.999% or the 9.999% restriction 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. The
existence of this restriction is generally required by the staff of the
Securities and Exchange Commission to be contained in the Certificate of
Determination or similar instrument defining the rights of the Holders.
(B) [Intentionally left blank]
(C) If the Common Stock is then listed for trading on the NASDAQ or
the Nasdaq National Market and the Company has not obtained the Shareholder
Approval (as defined below), then the Company may not issue in excess of
1,164,386 shares of Common Stock upon conversions of Preferred Stock (such
number of shares, the "ISSUABLE MAXIMUM"). The Issuable Maximum equals 19.999%
of the number of shares of Common Stock outstanding immediately prior to the
closing of transactions set forth in the Purchase Agreement multiplied by the
quotient obtained by dividing (x) the number of shares of Preferred Stock issued
and sold to the original Holder on the Original Issue Date by (y) the number of
shares of Preferred Stock issued and sold by the Company on the Original Issue
Date. If on any Conversion Date (A) the shares of Common Stock are listed for
trading on the NASDAQ or the Nasdaq National Market, (B) the Conversion Price
then in effect is such that the aggregate number of shares of Common Stock that
would then be issuable upon conversion in full of all then outstanding shares of
Preferred Stock, together with any shares of Common Stock previously issued upon
conversion of shares of Preferred Stock, would exceed the Issuable Maximum, and
(C) the Company shall not have previously obtained the vote of shareholders (the
"SHAREHOLDER APPROVAL"), if any,
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as may be required by the applicable rules and regulations of the Nasdaq Stock
Market (or any successor entity) applicable to approve the issuance of shares of
Common Stock in excess of the Issuable Maximum pursuant to the terms hereof,
then the Company shall issue to the Holder requesting a conversion a number of
shares of Common Stock equal to the Issuable Maximum and, with respect to the
remainder of the aggregate Stated Value of the shares of Preferred Stock then
held by such Holder for which a conversion in accordance with the Conversion
Price would result in an issuance of shares of Common Stock in excess of the
Issuable Maximum (the "EXCESS STATED VALUE"), the converting Holder shall have
the option to require the Company to either (1) use its best efforts to obtain
the Shareholder Approval applicable to such issuance as soon as is possible, but
in any event not later than the 60th day after such request, or (2) redeem for
an amount in cash equal to the Mandatory Redemption Amount (as defined in
Section 8) for the Excess Stated Value. If the converting Holder shall have
elected the first option pursuant to the immediately preceding sentence and the
Company shall have failed to obtain the Shareholder Approval on or prior to the
60th day after the delivery of the proxy materials, then within three (3)
Business Days of such 60th day, the Company shall redeem the excess Stated Value
for an amount in cash equal to the Mandatory Redemption Amount for the Excess
Stated Value. If the Company fails to pay the Mandatory Redemption Amount in
full pursuant to this Section within seven (7) days after the date payable, the
Company will pay interest thereon at a rate of 18% per annum or such lesser
maximum amount that is permitted to be paid by applicable law, to the converting
Holder, accruing daily from the Conversion Date 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 to and then held by the Holder as a
result of conversions of Preferred Stock shall not be entitled to cast votes on
any resolution to obtain Shareholder Approval pursuant hereto.
(b)(i) Not later than three (3) Trading Days after each Conversion Date,
the Company will deliver to the Holder (A) a certificate or certificates which
shall be free of restrictive legends and trading restrictions (other than those
required by Section 3.1(b) of the Purchase Agreement) representing the number of
shares of Common Stock being acquired upon the conversion of shares of Preferred
Stock (subject to the limitations set forth in Section 5(a)(ii) hereof), (B) one
or more certificates representing the number of shares of Preferred Stock not
converted and (C) a bank check in the amount of accrued and unpaid dividends (if
the Company has timely elected or is required to pay accrued dividends in cash).
Notwithstanding the foregoing or anything to the contrary contained herein, the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon conversion of any shares of Preferred Stock until one
(1) Trading Day after certificates evidencing such shares of Preferred Stock are
delivered for conversion to the Company, or the Holder of such Preferred Stock
notifies the Company that such certificates have been lost, stolen or destroyed
and provides a bond (or other adequate security) reasonably satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection
therewith. The Company shall, upon request of the Holder, if available, use its
best efforts to deliver any certificate or certificates required to be delivered
by the Company under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions.
(c)(i) The conversion price for each share of Preferred Stock in effect on
any Conversion Date (the "CONVERSION PRICE") shall equal the lesser of (1) $7.37
(the "FIXED CONVERSION PRICE") and (2) Variable Conversion Price (as defined in
Section 8).
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Notwithstanding the foregoing, the following shall govern the determination of
the Conversion Price: (i) from the Original Issue Date to the expiration of the
third month thereafter, all conversions shall be at the Fixed Conversion Price;
(ii) during the fourth month following the Original Issue Date a Holder may
convert up to 5% of the shares of Preferred Stock issued to it on the Original
Issue Date at the Variable Conversion Price, and all other conversions by such
Holder during such month shall be at the Fixed Conversion Price; (iii) during
the fifth month following the Original Issue Date a Holder may convert an
additional 5% of the shares of Preferred Stock issued to it on the Original
Issue Date, measured on a cumulative basis with prior months (accordingly, if
during the fourth month following the Original Issue Date a Holder converted no
shares of Preferred Stock, then during the fifth month up to 10% of the shares
of Preferred Stock issued to such Holder on the Original Issue Date may be
converted by such Holder at the Variable Conversion Price); (iv) during the
sixth month following the Original Issue Date a Holder can convert up to an
additional 10% of the shares of Preferred Stock issued to it on the Original
Issue Date, measured on a cumulative basis with prior months (accordingly, if
prior to the sixth month following the Original Issue Date a Holder converted no
shares of Preferred Stock, then during the sixth month up to 20% of the shares
of Preferred Stock issued to such Holder on the Original Issue Date may be
converted by such Holder at the Variable Conversion Price); (v) during the
seventh month following the Original Issue Date a Holder can convert up to an
additional 15% of the shares of Preferred Stock issued to it on the Original
Issue Date, measured on a cumulative basis with prior months (accordingly, if
prior to the seventh month following the Original Issue Date a Holder converted
no shares of Preferred Stock, then during the seventh month up to 35% of the
shares of Preferred Stock issued to such Holder on the Original Issue Date may
be converted by such Holder at the Variable Conversion Price); (vi) during the
eighth month following the Original Issue Date a Holder can convert up to an
additional 20% of the shares of Preferred Stock issued to it on the Original
Issue Date, measured on a cumulative basis with prior months (accordingly, if
prior to the eighth month following the Original Issue Date a Holder converted
no shares of Preferred Stock, then during the eighth month up to 55% of the
shares of Preferred Stock issued to such Holder on the Original Issue Date may
be converted by such Holder at the Variable Conversion Price); (vii) during the
ninth month following the Original Issue Date a Holder can convert up to an
additional 20% of the shares of Preferred Stock issued to it on the Original
Issue Date, measured on a cumulative basis with prior months (accordingly, if
prior to the ninth month following the Original Issue Date a Holder converted no
shares of Preferred Stock, then during the ninth month up to 75% of the shares
of Preferred Stock issued to such Holder on the Original Issue Date may be
converted by such Holder at the Variable Conversion Price); (viii) during the
tenth month following the Original Issue Date a Holder can convert up to an
additional 20% of the shares of Preferred Stock issued to it on the Original
Issue Date, measured on a cumulative basis with prior months (accordingly, if
prior to the tenth month following the Original Issue Date a Holder converted no
shares of Preferred Stock, then during the tenth month up to 95% of the shares
of Preferred Stock issued to such Holder on the Original Issue Date may be
converted by such Holder at the Variable Conversion Price) and (ix) from and
after the eleventh month following the Original Issue Date, all conversion shall
be at the lower of the Fixed Conversion Price and the Variable Conversion Price.
(ii) If the Company, at any time while any shares of Preferred Stock
are outstanding, shall issue rights, warrants or options to all holders of
Common Stock entitling them
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to subscribe for or purchase shares of Common Stock at a price per share less
than the Per Share Market Value at the record date mentioned below, then the
Conversion Price shall be multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to the
issuance of such rights, warrants or options, plus the number of shares of
Common Stock which the aggregate offering price of the total number of shares so
offered would purchase at such Per Share Market Value, and the denominator of
which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of shares of Common Stock
offered for subscription or purchase. Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
rights or warrants. However, upon the expiration of any right, warrant or option
to purchase shares of Common Stock the issuance of which resulted in an
adjustment in the Conversion Price pursuant to this Section 5(c)(ii), if any
such right, warrant or option shall expire and shall not have been exercised,
the Conversion Price shall immediately upon such expiration shall be recomputed
and effective immediately upon such expiration shall be increased to the price
which it would have been (but reflecting any other adjustments in the Conversion
Price made pursuant to the provisions of this Section 5 upon the issuance of
other rights or warrants) had the adjustment of the Conversion Price made upon
the issuance of such rights, warrants, or options been made on the basis of
offering for subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights, warrants or options
actually exercised.
(iii) If the Company or any subsidiary thereof, as applicable with
respect to Common Stock Equivalents (as defined below), at any time while any
shares of Preferred Stock are outstanding, shall issue shares of Common Stock
or rights, warrants, options or other securities or debt that is convertible
into or exchangeable for shares of Common Stock, except for the Series C
Preferred Stock, and Series D Preferred Stock (the next series of preferred
stock to be issued) if the Fixed Conversion Price for the Series D Preferred
Stock determined in a manner consistent with the Series C Preferred Stock is
less than $7.37, warrants issued in connection thereto and to Brighton Capital,
Ltd. ("COMMON STOCK EQUIVALENTS"), entitling any Person to acquire shares of
Common Stock at a price per share less than the Conversion Price on the Trading
Day before the Board of Directors approves such issuance and on the date of such
issuance (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 at a
price less than the prevailing Conversion Price, such issuance shall be deemed
to have occurred for less than the Conversion Price), then the Conversion Price
shall be multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to the issuance of such
Common Stock or such Common Stock Equivalents plus the number of shares of
Common Stock which the offering price for such shares of Common Stock or Common
Stock Equivalents would purchase at the Conversion Price, and the denominator of
which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of shares of Common Stock so
issued or issuable, PROVIDED, that for purposes hereof, all shares of Common
Stock that are issuable upon conversion, exercise or exchange of Common Stock
Equivalents shall be deemed outstanding immediately after the issuance of such
Common Stock Equivalents. Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents
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are issued. However, upon the expiration of any Common Stock Equivalents the
issuance of which resulted in an adjustment in the Conversion Price pursuant to
this Section, if any such Common Stock Equivalents shall expire and shall not
have been exercised, the Conversion Price shall immediately upon such expiration
be recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section after the
issuance of such Common Stock Equivalents) had the adjustment of the Conversion
Price made upon the issuance of such Common Stock Equivalents been made on the
basis of offering for subscription or purchase only that number of shares of the
Common Stock actually purchased upon the exercise of such Common Stock
Equivalents actually exercised.
(iv) If the Company, at any time while shares of Preferred Stock are
outstanding, shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
5(c)(ii)-(iv)), then in each such case the Conversion Price at which each share
of Preferred Stock shall thereafter be convertible shall be determined by
multiplying the Conversion 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 Per Share Market Value
determined as of the record date mentioned above, and of which the numerator
shall be such Per Share Market Value 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 shares of Common Stock
as determined by the Board of Directors in good faith; PROVIDED, that in the
event of a distribution exceeding ten percent (10%) of the net assets of the
Company, if the Holders of a majority in interest of the Preferred Stock dispute
such valuation, such fair market value shall be determined by a nationally
recognized or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Company) (an "APPRAISER")
selected in good faith by the Holders of a majority in interest of the shares of
Preferred Stock then outstanding; and PROVIDED, FURTHER, that the Company, after
receipt of the determination by such Appraiser shall have the right to select an
additional Appraiser, in good faith, in which case the fair market value shall
be equal to the average of the determinations by each such Appraiser. In either
case the adjustments shall be described in a statement provided to the Holders
of the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
(vi) Notwithstanding anything herein to the contrary, whenever the
Conversion Price is adjusted pursuant to Section 5(c),(iii),(iv), or (v), the
Fixed Conversion Price shall likewise also be adjusted in the same manner as the
Conversion Price. Whenever either the Conversion Price or the Fixed Conversion
Price is adjusted pursuant to Section 5(c)(ii),(iii),(iv), or (v), the Company
shall promptly mail to each Holder, a notice setting forth the Conversion Price
or the Fixed Conversion Price (as applicable) after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
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(vii) 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 (other than compulsory share exchanges which
constitute Change of Control Transactions), the Holders of the Preferred Stock
then outstanding shall have the right thereafter to convert such shares only
into the shares of stock and other securities, cash and property receivable upon
or deemed to be held by holders of Common Stock following such reclassification
or share exchange, and the Holders of the Preferred Stock shall be entitled upon
such event to receive such amount of securities, cash or property as a holder of
the number of shares of Common Stock of the Company into which such shares of
Preferred Stock could have been converted immediately prior to such
reclassification or share exchange would have been entitled. This provision
shall similarly apply to successive reclassifications or share exchanges.
(viii) In case of any (1) merger or consolidation of the Company with
or into another Person that would constitute a Change of Control Transaction, or
(2) sale by the Company of more than one-half of the assets of the Company (on
an as valued basis) in one or a series of related transactions, or (3) tender or
other offer or exchange (whether by the Company or another Person) pursuant to
which holders of Common Stock are permitted to tender or exchange their shares
for other securities, stock, cash or property of the Company or another Person,
a Holder shall have the right thereafter to (A) convert its shares of Preferred
Stock into 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 such Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and
property as the shares of Common Stock into which such shares of Preferred Stock
could have been converted immediately prior to such merger, consolidation or
sales would have been entitled or (B) in the event of an exchange or tender
offer or other transaction contemplated by clause (3) of this Section, tender or
exchange its shares of Preferred Stock for such securities, stock, cash and
other property receivable upon or deemed to be held by holders of Common Stock
that have tendered or exchanged their shares of Common Stock following such
tender or exchange, and such Holder shall be entitled upon such exchange or
tender to receive such amount of securities, cash and property as the shares of
Common Stock into which such shares of Preferred Stock could have been converted
(taking into account all then accrued and unpaid dividends) immediately prior to
such tender or exchange would have been entitled as would have been issued. The
terms of any such merger, sale, consolidation, tender or exchange shall include
such terms so as continue to give the Holders of Preferred Stock 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. The rights set forth in this Section 5(c)(viii)
shall not alter the rights of a Holder set forth in Section 7, provided, that, a
Holder may only exercise the rights set forth in this Section 5(c)(viii) or the
rights set forth in Section 7 with respect to a single event giving rise to such
rights.
(ix) If (a) the Company shall declare a dividend (or any other
distribution) on the Common Stock, (b) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock, (c) the
Company shall authorize the granting to all holders of Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of any class
or of any rights, (d) 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
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the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share of exchange whereby the Common
Stock is converted into other securities, cash or property, or (e) the Company
shall authorize the voluntary or involuntary dissolution, liquidation or winding
up of the affairs of the Company; then the Company shall cause to be filed at
each office or agency maintained for the purpose of conversion of Preferred
Stock, and shall cause to be mailed to the Holders at their last addresses as
they shall appear upon the stock books of the Company, 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 Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange. Holders are entitled to convert shares of
Preferred Stock during the 20-day period commencing the date of such notice to
the effective date of the event triggering such notice.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of Preferred Stock and payment of
dividends on Preferred Stock, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of Common Stock as shall be
issuable (taking into account the provisions of Section 5(a) and Section 5(c))
upon the conversion of all outstanding shares of Preferred Stock. The Company
covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly and validly authorized, issued and fully paid, nonassessable.
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, the Holder of a share of
Preferred Stock shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(f) The issuance of certificates for Common Stock on conversion of
Preferred Stock shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder of such shares of Preferred Stock so converted.
(g) Shares of Preferred Stock converted into Common Stock or redeemed
in accordance with the terms hereof shall be canceled and may not be reissued.
(h) Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Conversion
Notice, shall be in writing and
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delivered personally, by facsimile or sent by a nationally recognized overnight
courier service, addressed to the attention of the Chief Financial Officer of
the Company addressed to 11240 Sherman Way, Sun Valley, California 91352 or to
facsimile number (818) 765-8078 and (818) 765-2416, or to such other address or
facsimile number as shall be specified in writing by the Company for such
purpose. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to each Holder at the facsimile telephone number or address of such
Holder appearing on the books of the Company, or if no such facsimile telephone
number or address appears, at the principal place of business of the Holder. Any
notice or other communication or deliveries hereunder 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 8:00 p.m. (New York City time), (ii) the date
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
8:00 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date, (iii) upon receipt, if sent by a nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
Sections 6 and 7 [Intentionally left blank]
Section 8. DEFINITIONS. For the purposes hereof, the following terms
shall have the following meanings:
"CHANGE OF CONTROL AMOUNT" for each share of Preferred Stock means the
sum of (i) the product of (1) the Redemption Rate and (2) the Stated Value and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such share of Preferred Stock due hereunder or under the Purchase Agreement.
"CHANGE OF CONTROL TRANSACTION" means 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 Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's board of directors which is
not approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
all or substantially all of the assets of the Company in one or a series of
related transactions, or (iv) the 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).
"COMMISSION" means the Securities and Exchange Commission.
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"COMMON STOCK" means the Company's common stock, no par value, and
stock of any other class into which such shares may hereafter have been
reclassified or changed.
"CONVERSION RATIO" means, at any time, a fraction, the numerator of
which is Stated Value and the denominator of which is the Conversion Price at
such time.
"DISCOUNT RATE" means (i) during the period commencing on the 4th
month following the Original Issue Date and ending on the expiration of the 7th
month following the Original Issue Date, 88%, (ii) during the period commencing
on the 8th month following the Original Issue Date and ending on the expiration
of the 10th month following the Original Issue Date, 84%, and (iii) then and
after the commencement of the 11th month following the Original Issue Date, 80%.
"DIVIDEND EFFECTIVENESS DATE" means the earlier to occur of (x) the
Effectiveness Date (as defined in the Registration Rights Agreement) and (y) the
Effective Date.
"EFFECTIVE DATE" means the date that the Underlying Shares
Registration Statement is first declared effective by the Commission.
"JUNIOR SECURITIES" means the Common Stock and all other equity and
equity equivalent securities of the Company.
"MANDATORY REDEMPTION AMOUNT" for each share of Preferred Stock means
the sum of (i) the greater of (A) 125% of the Stated Value and (B) the product
of (a) the Per Share Market Value on the Trading Day immediately preceding (x)
the date of the Triggering Event or the Conversion Date, as the case may be, or
(y) the date of payment in full by the Company of the applicable redemption
price, whichever is greater, and (b) the Conversion Ratio calculated on the date
of the Triggering Event, or the Conversion Date, as the case may be, and (ii)
all other amounts, costs, expenses and liquidated damages due in respect of such
share of Preferred Stock.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"PER SHARE MARKET VALUE" means on any particular date (a) the closing
bid price per share of Common Stock on such date on the NASDAQ or on the
Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing bid price on the NASDAQ or
on such Subsequent Market on the date nearest preceding such date, or (b) if the
Common Stock is not then listed or quoted on the NASDAQ or on a Subsequent
Market, the closing bid price for a shares 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
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good faith by the Holder, or (d) if the Common Stock are 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 shares of
the Preferred Stock.
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"PURCHASE AGREEMENT" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holders are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"REDEMPTION RATE" means (i) from the Original Issue Date to the
expiration of the of the 3rd month following the Original Issue Date, 105%, (ii)
from the commencement of the 4th month following the Original Issue Date to the
expiration of the 6th month following the Original Issue Date, 112.5%, and (iii)
from and after the commencement of the 7th month following the Original Issue
Date, 120%.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"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 on 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, HOWEVER, 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 any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"UNDERLYING SHARES" means, collectively, the shares of Common Stock
into which the shares of Preferred Stock are convertible and the shares of
Common Stock issuable upon payment of dividends thereon in accordance with the
terms hereof.
"UNDERLYING SHARES REGISTRATION STATEMENT" means a registration
statement that meets the requirements of the Registration Rights Agreement and
registers the resale of all Underlying Shares by the Holder, who shall be named
as a "selling stockholder" thereunder.
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"VARIABLE CONVERSION PRICE" means the product obtained by multiplying
the Discount Rate (as defined in Section 8) and the average of the five (5)
lowest Per Share Market Values during the thirty (30) Trading Days immediately
preceding the applicable Conversion Date (which, at the Holder's option may
include Trading Days prior to the Initial Floating Conversion Date), PROVIDED,
that such thirty (30) Trading Day period shall be extended for the number of
Trading Days during such period in which (A) trading in the Common Stock is
suspended by the NASDAQ or a Subsequent Market on which the Common Stock is then
listed, or (B) after the Effective Date, the Underlying Shares Registration
Statement is either not effective or the Prospectus included in the Underlying
Shares Registration Statement may not be used by the Holder for the resale of
Underlying Shares.
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C) The number of shares of 8% Series C Convertible Preferred Stock is 300,
none of which have been issued.
The undersigned declare under penalty under the laws of the State of
California that he has read the foregoing certificate and knows the contents
thereof and that the same is true of his own knowledge.
Dated: /s/ 12-9-99 /s/ David L. Lokken
---------------------------- --------------------------------
David L. Lokken, President
/s/ Daniel J. Lubeck
--------------------------------
Daniel J. Lubeck, Secretary
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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 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.
HAWKER PACIFIC AEROSPACE
WARRANT
Warrant No. 2 Dated: December 10, 1999
Hawker Pacific Aerospace, a California corporation (the "Company"),
hereby certifies that, for value received, Brighton Capital, Ltd., or its
registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company up to a total of 50,000 shares of common
stock, no par value per share (the "Common Stock"), of the Company (each such
share, a "Warrant Share" and all such shares, the "Warrant Shares") at an
exercise price equal to $2.85 per share (as adjusted from time to time as
provided in Section 9, the "Exercise Price"), at any time and from time to time
from and after the date hereof and through and including December 10, 2004 (the
"Expiration Date"), and subject to the following terms and conditions:
1. REGISTRATION OF WARRANT. The Company shall register this
Warrant, upon 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.
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2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) The Company shall register the transfer of 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 Transfer Agent or to the Company at the office specified in or
pursuant to Section 3(b). 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. The acceptance of the New Warrant
by the transferee thereof shall be deemed the acceptance of such transferee
of all of the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender
hereof by the Holder to the office of the Company specified in or pursuant to
Section 3(b) for one or more New Warrants, evidencing in the aggregate the
right to purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such exchange.
3. DURATION AND EXERCISE OF WARRANTS.
(a) This Warrant shall be exercisable by the registered
Holder on any business day before 8:00 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 8:00 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. Prior to the Expiration Date, the Company may not call or
otherwise redeem this Warrant without the prior written consent of the Holder.
(b) Upon surrender of this Warrant, with the Form of
Election to Purchase attached hereto duly completed and signed, to the
Company at its address for notice set forth in Section 13 and upon payment of
the Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, in the manner provided hereunder, all as
specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than 3 business days after the Date of
Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or
names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends except (i) either in
the event that a registration statement covering the resale of the Warrant
Shares and naming the Holder as a selling stockholder thereunder is not then
effective or the Warrant Shares are not freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) if this Warrant shall have
been issued pursuant to a written agreement between the original Holder and
the Company, as required by such agreement. 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.
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A "Date of Exercise" means the date on which the
Company shall have received (i) this Warrant (or any New Warrant, as
applicable), with the Form of Election to Purchase attached hereto (or
attached to such New Warrant) 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.
(c) 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. PIGGYBACK REGISTRATION RIGHTS. During the Effectiveness
Period (as defined in the Registration Rights Agreement, of even date
herewith, between the Company and the original Holder), the Company may not
file any registration statement with the Securities and Exchange Commission
(other than registration statements of the Company filed on Form S-8 or Form
S-4, each as promulgated under the Securities Act, pursuant to which the
Company is registering securities pursuant to a Company employee benefit plan
or pursuant to a merger, acquisition or similar transaction including
supplements thereto, but not additionally filed registration statements in
respect of such securities) at any time when there is not an effective
registration statement covering the resale of the Warrant Shares and naming
the Holder as a selling stockholder thereunder, unless the Company provides
the Holder with not less than 20 days notice of its intention to file such
registration statement and provides the Holder the option to include any or
all of the applicable Warrant Shares therein. The piggyback registration
rights granted to the Holder pursuant to this Section shall continue until
all of the Holder's Warrant Shares have been sold in accordance with an
effective registration statement or upon the Expiration Date. The Company
will pay all registration expenses in connection therewith.
5. DEMAND REGISTRATION RIGHTS. During the Effectiveness
Period if the Warrant Shares are not registered pursuant to an effective
registration statement, the Holder may make a written request for the
registration under the Securities Act (a "Demand Registration"), of all of
the Warrant Shares (the "Registrable Securities"), and the Company shall use
its best efforts to effect such Demand Registration as promptly as possible,
but in any case within 90 days thereafter. Any request for a Demand
Registration shall specify the aggregate number of Registrable Securities
proposed to be sold and shall also specify the intended method of disposition
thereof. The right to cause a registration of the Registrable Securities
under this Section 5 shall be limited to one such registration. In any
registration initiated as a Demand Registration, the Company will pay all of
its registration expenses in connection therewith. A Demand Registration
shall not be counted as a Demand Registration hereunder until the
registration statement filed pursuant to the Demand Registration has been
declared effective by the Securities and Exchange Commission and maintained
continuously effective for a period of at least 360 days or such shorter
period when all Registrable Securities included therein have been sold in
accordance with such registration statement, provided, however that any days
on which such registration statement is not effective or on which the Holder
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is not permitted by the Company or any governmental authority to sell Warrant
Shares under such registration statement shall not count towards such 360 day
period.
6. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes 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.
7. REPLACEMENT OF WARRANT. If this Warrant is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation 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 indemnity, if requested, satisfactory to it. 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.
8. RESERVATION OF WARRANT SHARES. The Company covenants
that it will at 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 9). 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.
9. CERTAIN ADJUSTMENTS. The Exercise Price and number of
Warrant Shares issuable upon exercise of this Warrant are subject to
adjustment from time to time as set forth in this Section 9. Upon each such
adjustment of the Exercise Price pursuant to this Section 9, the Holder shall
thereafter prior to the Expiration Date be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Shares issuable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(a) 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
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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 Exercise 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.
(b) 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 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
property set forth in this Section 9(b) upon any exercise following any such
reclassification or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to
holders of this Warrant) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred
to in Sections 9(a), (b) and (d)), then in each such case the Exercise Price
shall be determined by multiplying the Exercise 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
Exercise Price determined as of the record date mentioned above, and of which
the numerator shall be such Exercise 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").
(d) If at any time the Company or any subsidiary
thereof, as applicable with respect to Common Stock Equivalents (as defined
below), shall issue shares of Common Stock or rights, warrants, options or
other securities or debt that is convertible into or exchangeable for shares
of Common Stock ("COMMON STOCK EQUIVALENTS"), entitling any person or entity
to acquire shares of Common Stock at a price per share less than both the
market price of the Common Stock at the time of issuance and the Exercise
Price then in effect (if the holder of the Common Stock or Common Stock
Equivalent so issued shall at any time, whether by
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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 at a price less than the prevailing
Exercise Price or market price, such issuance shall be deemed to have occurred
for less than such Exercise Price or market price), then, forthwith upon such
issue or sale, the Exercise Price shall be reduced to the price (calculated to
the nearest cent) determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall be the sum
of (i) the number of shares of Common Stock outstanding immediately prior to
such issuance, and (ii) the number of shares of Common Stock which the aggregate
consideration received (or to be received, assuming exercise or conversion in
full of such Common Stock Equivalents) for the issuance of such additional
shares of Common Stock would purchase at the Exercise Price, and the denominator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares. For purposes hereof,
all shares of Common Stock that are issuable upon conversion, exercise or
exchange of Common Stock Equivalents shall be deemed outstanding immediately
after the issuance of such Common Stock Equivalents. Such adjustment shall be
made whenever such Common Stock or Common Stock Equivalents are issued. However,
upon the expiration of any Common Stock Equivalents the issuance of which
resulted in an adjustment in the Exercise Price pursuant to this Section, if any
such Common Stock Equivalents shall expire and shall not have been exercised,
the Exercise Price shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Exercise Price made
pursuant to the provisions of this Section after the issuance of such Common
Stock Equivalents) had the adjustment of the Exercise Price made upon the
issuance of such Common Stock Equivalents been made on the basis of offering for
subscription or purchase only that number of shares of the Common Stock actually
purchased upon the exercise of such Common Stock Equivalents actually exercised.
(e) 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, or (3) tender or other offer or exchange
(whether by the Company or another Person) pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other
securities, stock, cash or property of the Company or another Person; then
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 (C) in the event of an exchange or tender offer or other
transaction contemplated by clause (3) of this Section, tender or exchange
this Warrant for such securities, stock, cash and other property receivable
upon or deemed to be held by holders of Common Stock that have tendered or
exchanged their shares of Common Stock following such tender or exchange, and
the Holder shall be entitled upon such exchange or tender to receive such
amount of securities, cash and property as the shares of Common Stock for
which this Warrant could have been exercised immediately prior to such tender
or exchange would
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have been entitled as would have been issued. The terms of any such merger,
sale, consolidation, tender or exchange 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.
(f) For the purposes of this Section 9, the following
clauses shall also be applicable:
(i) RECORD DATE. In case the Company shall
take a record of the 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 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.
(g) All calculations under this Section 9 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
(h) Whenever the Exercise Price is adjusted pursuant to
Section 9(c) 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 Exercise 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.
(i) If:
(i) the Company shall declare a
dividend (or any other
distribution) on its Common Stock;
or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
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<PAGE>
(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; or
(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 30 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, HOWEVER, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
10. PAYMENT OF EXERCISE PRICE. The Holder shall pay the
Exercise Price in one of the following manners:
(a) CASH EXERCISE. The Holder may deliver immediately
available funds; or
(b) CASHLESS EXERCISE. The Holder may surrender this
Warrant to the 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
where:
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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.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged 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.
11. CERTAIN EXERCISE RESTRICTIONS.
(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 Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares of Common Stock 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 4.999% of the then outstanding shares of Common Stock without regard
to any other shares of Common Stock 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 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 disregard the balance of such Form of
Election to Purchase, as if never delivered The provisions of this Section 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) 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
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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 of Common Stock 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
of Common Stock 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 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 disregard the balance of such Form of Election to Purchase, as if
never delivered The provisions of this Section 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.
12. 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, 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.
13. 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 8:00 p.m. (New York City time) on a business day, (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 8:00 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (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
11240 Sherman Way, Sun Valley, California 91352, to Facsimile No.(818) 765-2416
and (818) 765-8073, 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.
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<PAGE>
14. WARRANT AGENT. The Company shall serve as warrant agent under
this Warrant. Upon thirty (30) days' notice to the Holder, the Company may
appoint a new warrant agent. 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.
15. MISCELLANEOUS.
(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 15(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 California 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. Each of the Company and the Holder hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by receiving a copy thereof sent
to the Company at the address in effect for notices to it under this instrument
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
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<PAGE>
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
HAWKER PACIFIC AEROSPACE
By: /s/ Philip M. Panzera
-----------------------------------------
Name: Philip M. Panzera
---------------------------------------
Title: Executive Vice President
--------------------------------------
<PAGE>
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 Hawker Pacific Aerospace:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of common stock, no par value per share, of Hawker Pacific Aerospace (the
"Common Stock") 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)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: Name of Holder:
-----------
(Print)
-----------------------------------
(By:)
-------------------------------------
(Name:)
(Title:)
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
<PAGE>
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 Hawker Pacific
Aerospace to which the within Warrant relates and appoints ________________
attorney to transfer said right on the books of Hawker Pacific Aerospace 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:
- --------------------------
<PAGE>
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 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.
HAWKER PACIFIC AEROSPACE
WARRANT
Warrant No. 1 Dated: December 10, 1999
Hawker Pacific Aerospace, a California corporation (the "Company"),
hereby certifies that, for value received, Deephaven Private Placement
Trading, Limited, or its registered assigns ("Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company up to a total of
125,000 shares of common stock, no par value per share (the "Common Stock"),
of the Company (each such share, a "Warrant Share" and all such shares, the
"Warrant Shares") at an exercise price equal to $7.37 per share (as adjusted
from time to time as provided in Section 9, the "Exercise Price"), at any
time and from time to time from and after the date hereof and through and
including December 10, 2004 (the "Expiration Date"), and subject to the
following terms and conditions:
1. REGISTRATION OF WARRANT. The Company shall register this
Warrant, upon 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.
<PAGE>
2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) The Company shall register the transfer of 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 Transfer Agent or to the Company at the office specified in or
pursuant to Section 3(b). 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. The acceptance of the New Warrant
by the transferee thereof shall be deemed the acceptance of such transferee
of all of the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the
surrender hereof by the Holder to the office of the Company specified in or
pursuant to Section 3(b) for one or more New Warrants, evidencing in the
aggregate the right to purchase the number of Warrant Shares which may then
be purchased hereunder. Any such New Warrant will be dated the date of such
exchange.
3. DURATION AND EXERCISE OF WARRANTS.
(a) This Warrant shall be exercisable by the
registered Holder on any business day before 8:00 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 8:00 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. Prior to the Expiration Date, the
Company may not call or otherwise redeem this Warrant without the prior
written consent of the Holder.
(b) Upon surrender of this Warrant, with the Form
of Election to Purchase attached hereto duly completed and signed, to the
Company at its address for notice set forth in Section 13 and upon payment of
the Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, in the manner provided hereunder, all as
specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than 3 business days after the Date of
Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or
names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends except (i) either in
the event that a registration statement covering the resale of the Warrant
Shares and naming the Holder as a selling stockholder thereunder is not then
effective or the Warrant Shares are not freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) if this Warrant shall have
been issued pursuant to a written agreement between the original Holder and
the Company, as required by such agreement. 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.
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<PAGE>
A "Date of Exercise" means the date on which the
Company shall have received (i) this Warrant (or any New Warrant, as
applicable), with the Form of Election to Purchase attached hereto (or
attached to such New Warrant) 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.
(c) 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. PIGGYBACK REGISTRATION RIGHTS. During the Effectiveness
Period (as defined in the Registration Rights Agreement, of even date
herewith, between the Company and the original Holder), the Company may not
file any registration statement with the Securities and Exchange Commission
(other than registration statements of the Company filed on Form S-8 or Form
S-4, each as promulgated under the Securities Act, pursuant to which the
Company is registering securities pursuant to a Company employee benefit plan
or pursuant to a merger, acquisition or similar transaction including
supplements thereto, but not additionally filed registration statements in
respect of such securities) at any time when there is not an effective
registration statement covering the resale of the Warrant Shares and naming
the Holder as a selling stockholder thereunder, unless the Company provides
the Holder with not less than 20 days notice of its intention to file such
registration statement and provides the Holder the option to include any or
all of the applicable Warrant Shares therein. The piggyback registration
rights granted to the Holder pursuant to this Section shall continue until
all of the Holder's Warrant Shares have been sold in accordance with an
effective registration statement or upon the Expiration Date. The Company
will pay all registration expenses in connection therewith.
5. DEMAND REGISTRATION RIGHTS. During the Effectiveness
Period if the Warrant Shares are not registered pursuant to an effective
registration statement, the Holder may make a written request for the
registration under the Securities Act (a "Demand Registration"), of all of
the Warrant Shares (the "Registrable Securities"), and the Company shall use
its best efforts to effect such Demand Registration as promptly as possible,
but in any case within 90 days thereafter. Any request for a Demand
Registration shall specify the aggregate number of Registrable Securities
proposed to be sold and shall also specify the intended method of disposition
thereof. The right to cause a registration of the Registrable Securities
under this Section 5 shall be limited to one such registration. In any
registration initiated as a Demand Registration, the Company will pay all of
its registration expenses in connection therewith. A Demand Registration
shall not be counted as a Demand Registration hereunder until the
registration statement filed pursuant to the Demand Registration has been
declared effective by the Securities and Exchange Commission and maintained
effective for a period of at least 360 Business Days or such shorter period
when all Registrable Securities included therein have been sold in accordance
with such registration statement, provided, however that any days on which
such registration statement is not effective or on which the Holder
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<PAGE>
is not permitted by the Company or any governmental authority to sell Warrant
Shares under such registration statement shall not count towards such 360
Business Day period.
6. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes 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.
7. REPLACEMENT OF WARRANT. If this Warrant is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation 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 indemnity, if requested, satisfactory to it. 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.
8. RESERVATION OF WARRANT SHARES. The Company covenants
that it will at 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 9). 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.
9. CERTAIN ADJUSTMENTS. The Exercise Price and number of
Warrant Shares issuable upon exercise of this Warrant are subject to
adjustment from time to time as set forth in this Section 9. Upon each such
adjustment of the Exercise Price pursuant to this Section 9, the Holder shall
thereafter prior to the Expiration Date be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Shares issuable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(a) 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
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<PAGE>
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 Exercise 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.
(b) 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 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
property set forth in this Section 9(b) upon any exercise following any such
reclassification or share exchange.
(c) If the Company, at any time while this Warrant
is outstanding, shall distribute to all holders of Common Stock (and not to
holders of this Warrant) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred
to in Sections 9(a), (b) and (d)), then in each such case the Exercise Price
shall be determined by multiplying the Exercise 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
Exercise Price determined as of the record date mentioned above, and of which
the numerator shall be such Exercise 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").
(d) If at any time the Company or any subsidiary
thereof, as applicable with respect to Common Stock Equivalents (as defined
below), shall issue shares of Common Stock or rights, warrants, options or
other securities or debt that is convertible into or exchangeable for shares
of Common Stock ("COMMON STOCK EQUIVALENTS"), entitling any person or entity
to acquire shares of Common Stock at a price per share less than both the
market price of the Common Stock at the time of issuance and the Exercise
Price then in effect (if the holder
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<PAGE>
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 at a
price less than the prevailing Exercise Price or market price, such issuance
shall be deemed to have occurred for less than such Exercise Price or market
price), then, forthwith upon such issue or sale, the Exercise Price shall be
reduced to the price (calculated to the nearest cent) determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of (i) the number of shares
of Common Stock outstanding immediately prior to such issuance, and (ii) the
number of shares of Common Stock which the aggregate consideration received
(or to be received, assuming exercise or conversion in full of such Common
Stock Equivalents) for the issuance of such additional shares of Common Stock
would purchase at the Exercise Price, and the denominator of which shall be
the sum of the number of shares of Common Stock outstanding immediately after
the issuance of such additional shares. For purposes hereof, all shares of
Common Stock that are issuable upon conversion, exercise or exchange of
Common Stock Equivalents shall be deemed outstanding immediately after the
issuance of such Common Stock Equivalents. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. However,
upon the expiration of any Common Stock Equivalents the issuance of which
resulted in an adjustment in the Exercise Price pursuant to this Section, if
any such Common Stock Equivalents shall expire and shall not have been
exercised, the Exercise Price shall immediately upon such expiration be
recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Exercise Price made pursuant to the provisions of this Section after the
issuance of such Common Stock Equivalents) had the adjustment of the Exercise
Price made upon the issuance of such Common Stock Equivalents been made on
the basis of offering for subscription or purchase only that number of shares
of the Common Stock actually purchased upon the exercise of such Common Stock
Equivalents actually exercised.
(e) 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, or (3) tender or other offer or exchange
(whether by the Company or another Person) pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other
securities, stock, cash or property of the Company or another Person; then
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 (C) in the event of an exchange or tender offer or other
transaction contemplated by clause (3) of this Section, tender or exchange
this Warrant for such securities, stock, cash and other property receivable
upon or deemed to be held by holders of Common Stock that have tendered or
exchanged their shares of Common Stock following such tender or exchange, and
the Holder shall be entitled upon such exchange or tender to receive such
amount of securities, cash and property as the shares of Common Stock for
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<PAGE>
which this Warrant could have been exercised immediately prior to such tender
or exchange would have been entitled as would have been issued. The terms of
any such merger, sale, consolidation, tender or exchange 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.
(f) For the purposes of this Section 9, the
following clauses shall also be applicable:
(i) RECORD DATE. In case the Company
shall take a record of the 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 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.
(g) All calculations under this Section 9 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may
be.
(h) Whenever the Exercise Price is adjusted
pursuant to Section 9(c) 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 Exercise 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.
(i) If:
(i) the Company shall declare a
dividend (or any other
distribution) on its Common Stock;
or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
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<PAGE>
(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; or
(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 30
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,
HOWEVER, that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
10. PAYMENT OF EXERCISE PRICE. The Holder shall pay the
Exercise Price in one of the following manners:
(a) CASH EXERCISE. The Holder may deliver
immediately available funds; or
(b) CASHLESS EXERCISE. The Holder may surrender
this Warrant to the 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
where:
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<PAGE>
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.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged 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.
11. CERTAIN EXERCISE RESTRICTIONS.
(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 Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the rules promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares of Common Stock 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 4.999% of the then outstanding shares of Common Stock
without regard to any other shares of Common Stock 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
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 disregard the
balance of such Form of Election to Purchase, as if never delivered. The
provisions of this Section 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) 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
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<PAGE>
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 of Common Stock 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 of Common Stock 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
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 disregard the
balance of such Form of Election to Purchase, as if never delivered The
provisions of this Section 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.
12. 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, 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.
13. 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 8:00 p.m. (New York City time) on a business day, (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 8:00 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (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
11240 Sherman Way, Sun Valley, California 91352, to Facsimile No.(818) 765-2416
and (818) 765-8073, 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.
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<PAGE>
14. WARRANT AGENT. The Company shall serve as warrant agent
under this Warrant. Upon thirty (30) days' notice to the Holder, the Company
may appoint a new warrant agent. 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.
15. MISCELLANEOUS.
(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 15(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 California
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. Each of the Company and the Holder hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by receiving a copy thereof sent to the Company at
the address in effect for notices to it under this instrument 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
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<PAGE>
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to
be duly executed by its authorized officer as of the date first indicated
above.
HAWKER PACIFIC AEROSPACE
By: /s/ Philip M. Panzera
------------------------------
Name: Philip M. Panzera
----------------------------
Title: Executive Vice President
---------------------------
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<PAGE>
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 Hawker Pacific Aerospace:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of common stock, no par value per share, of Hawker Pacific Aerospace (the
"Common Stock") 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)
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed Warrant, the undersigned
requests that a New Warrant (as defined in the Warrant) evidencing the right
to purchase the shares of Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
_______________________________________________________________________________
Dated:____,__ Name of Holder:
(Print)_________________________________
(By:)___________________________________
(Name:)
(Title:)
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
<PAGE>
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 Hawker Pacific
Aerospace to which the within Warrant relates and appoints ________________
attorney to transfer said right on the books of Hawker Pacific Aerospace 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:
__________________________
<PAGE>
EXHIBIT 5
TROY & GOULD
PROFESSIONAL CORPORATION
1801 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CALIFORNIA 90067
TELEPHONE (310) 553-4441
December 22, 1999
Hawker Pacific Aerospace
11249 Sherman Way
Sun Valley, CA 91352
Re: REGISTRATION STATEMENT ON FORM S-3
At your request, we have examined the Registration Statement on Form S-3
(the "Registration Statement") of Hawker Pacific Aerospace, Inc. (the
"Company"), which has been prepared for filing with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act").
The Registration Statement relates to 1,831,597 shares of the Company's
common stock (the "Shares") issuable upon the exercise of certain warrants or
upon the conversion of certain convertible preferred stock, as described in
the Registration Statement. The Shares are to be offered for resale by
certain selling securityholders as described therein. Capitalized terms not
defined herein shall have the definitions ascribed to them in the
Registration Statement.
We are familiar with the corporate proceedings heretofore taken or
proposed to be taken by the Company in connection with the authorization for
issuance of the Shares. In addition, we have examined such records of the
Company as in our judgment were necessary or appropriate to enable us to
render the opinions expressed herein.
Based on the foregoing, it is our opinion that the Shares have been duly
and validly authorized and, when issued in accordance with the warrants
relating thereto or the certificate of designations authorizing the series of
the convertible preferred stock converted thereto, as applicable, will be
duly and validly issued, fully paid and nonassessable.
We consent to the use of our name under the caption "Legal Matters" in
the Registration Statement and the Prospectus made part thereof, and to the
filing of this opinion as an exhibit to the Registration Statement. By giving
you this opinion and consent, we do not admit that we are experts with
respect to any part of the Registration Statement or Prospectus within the
meaning of the term "expert" as used in Section 11 of the Act, or the rules
and regulations promulgated thereunder, nor do we admit that we are in the
category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Troy & Gould
----------------------------------------
Troy & Gould
Professional Corporation
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made
and entered into as of December 10, 1999, among Hawker Pacific Aerospace, a
California corporation (the "COMPANY"), and the investors signatory hereto (each
such investor is a "PURCHASER" and all such investors are, collectively, the
"PURCHASERS").
This Agreement is made pursuant to the Convertible Preferred
Stock Purchase Agreement, dated as of the date hereof among the Company and the
Purchasers (the "PURCHASE AGREEMENT").
The Company and the Purchasers hereby agree as follows:
1. DEFINITIONS
Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"AFFILIATE" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "CONTROL," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have
meanings correlative to the foregoing.
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York or the state of California generally are authorized or
required by law or other government actions to close.
"CLOSING DATE" shall have the meaning set forth in the
Purchase Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's common stock, no par value,
or such securities that such stock shall hereafter be reclassified into.
"EFFECTIVENESS DATE" means the 90th day following the Closing
Date, PROVIDED, HOWEVER, that in the event that the Commission requires the
Registration Statement to be on a form other than form S-3 by virtue of the
identity of the Purchasers, the Effectiveness Date shall mean the 150th day
following the Closing Date, and PROVIDED further, in the event that the
Commission fails to provide comments to or gives a notice that there will be no
review of the initially filed
Registration Rights Agreement
<PAGE>
Registration Statement within 30 days of the date of the filing thereof , the
Effectiveness Date shall be extended by the number of days beyond 30 until such
response is received from the Commission.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 2(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means the 30th day following the Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"PERSON" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"REGISTRABLE SECURITIES" means the shares of Common Stock
issuable upon (i) conversion in full of the Shares and (ii) exercise in full of
the Warrants.
"REGISTRATION STATEMENT" means the registration statement and
any additional registration statements contemplated by Section 2(a), including
(in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
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<PAGE>
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 424" means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SHARES" means the shares of the Company's Series C
Convertible Preferred Stock issued to the Purchasers in accordance with the
Purchase Agreement.
"SPECIAL COUNSEL" means one special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
"UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"WARRANTS" shall mean the Common Stock purchase warrants
issued to the Purchasers pursuant to the Purchase Agreement.
-3-
<PAGE>
2. SHELF REGISTRATION
(a) On or prior to the Filing Date, the Company shall
prepare and file with the Commission a "Shelf" Registration Statement
covering the resale of all Registrable Securities for an offering to be made
on a continuous basis pursuant to Rule 415. The Registration Statement shall
be on Form S-3 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith as
the Holders may consent). The Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
Effectiveness Date, and shall use its best efforts to keep such Registration
Statement continuously effective under the Securities Act until the date
which is two (2) years after the date that such Registration Statement is
declared effective by the Commission or such earlier date when all
Registrable Securities covered by such Registration Statement have been sold
or may be sold without volume restrictions pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter
to such effect, addressed and acceptable to the Company's transfer agent and
the affected Holders (the "EFFECTIVENESS PERIOD"), PROVIDED, that the Company
shall not be deemed to have used its best efforts to keep the Registration
Statement effective during the Effectiveness Period if it voluntarily takes
any action that would result in the Holders not being able to sell the
Registrable Securities covered by such Registration Statement during the
Effectiveness Period, unless such action is required under applicable law or
the Company has filed a post-effective amendment to the Registration
Statement and the Commission has not declared it effective.
(b) The initial Registration Statement required to be filed
hereunder shall include (but not be limited to), for the benefit of the Holders,
a number of shares of Common Stock equal to the sum of (i) the number of shares
of Common Stock as would be issuable upon exercise in full of the Warrants, and
(ii) 200% of the number of shares of Common Stock as would be issuable upon
conversion in full of 100% of the Shares, assuming for such purposes that such
Shares are outstanding for three (3) years and that the conversion occurred on
the Closing Date or the day preceding the Filing Date, whichever yields the
lowest Conversion Price (as defined in the Purchase Agreement).
(c) If the Holders of a majority of the Registrable Securities
then outstanding so elect, an offering of Registrable Securities pursuant to the
Registration Statement may be effected in the form of an Underwritten Offering.
In such event, and, if the managing underwriters advise the Company and such
Holders in writing that in their opinion the amount of Registrable Securities
proposed to be sold in such Underwritten Offering exceeds the amount of
Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro-rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(d) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering upon consultation with the
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Company. No Holder may participate in any Underwritten Offering hereunder
unless such Holder (i) agrees to sell its Registrable Securities on the basis
provided in any underwriting agreements approved by the Persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such arrangements.
(e) If the Company is in discussions regarding a significant
acquisition, consolidation or merger that the Board reasonably determines not to
be in the Company's best interest to disclose, then the Company may during the
Effectiveness Period suspend the right of the Holders to sell Registrable
Securities under a Registration Statement for a period not to exceed up to an
aggregate of 20 Business Days in any twelve month period (such period, the
"PERMITTED BLACKOUT"). If the Company exercises its rights under this paragraph,
the days during which the Conversion Price is to be determined under the
Preferred Stock shall be tolled. The same events or series of events may not be
used to justify consecutive blackouts hereunder. The Company shall immediately
notify the Holders of its exercise of rights hereunder by delivery of a written
notice of the existence of such event (but will not disclose in such notice or
otherwise to the Holders any material non-public information relating thereto).
The Company shall, immediately upon the expiration of the legal need for such
Permitted Blackout, notify the Holders that the Permitted Blackout has ended and
take any and all actions necessary to enable the Holders to resume sales of
Registrable Securities under the Registration Statement.
3. REGISTRATION PROCEDURES
In connection with the Company's registration obligations
hereunder, the Company shall:
(a)(i) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on the form contemplated by Section 2(a)
which Registration Statement shall contain (except if otherwise directed by the
Holders) the "Plan of Distribution" attached hereto as ANNEX A, and cause the
Registration Statement to become effective and remain effective as provided
herein; PROVIDED, HOWEVER, that not less than five (5) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto, PROVIDED, HOWEVER, the time periods above shall
be extended for each Business Day after the second Business Day from the receipt
of materials to review and to comment, that the Holder does not provide comments
to the Registration Statement or any related Prospectus or any amendment or
supplement thereto provided for their review (including any document that would
be incorporated or deemed to be incorporated therein by reference), the Company
shall, (i) furnish to the Holders, their Special Counsel and any managing
underwriters, copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference) will
be subject to the review of such Holders, their Special Counsel and such
managing underwriters, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to such Holders
and such underwriters, to conduct a reasonable investigation within the meaning
of the Securities Act. The Company shall not file the Registration Statement or
any such Prospectus or any amendments
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or supplements thereto to which the Holders of a majority of the Registrable
Securities, their Special Counsel, or any managing underwriters, shall
reasonably object.
(ii) If (a) the Underlying Shares Registration Statement is
not filed on or prior to the Filing Date (if the Company files such
Underlying Shares Registration Statement without affording the Holder the
opportunity to review and comment on the same as required by Section 3(a) of
the Registration Rights Agreement, the Company shall not be deemed to have
satisfied this clause (a); provided, however that the time to file such
Registration Statement shall be subject to the second provision of Section
3(a)(i)), or (b) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 12d1-2 promulgated under the Exchange
Act, within five (5) Trading Days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that an
Underlying Shares Registration Statement will not be "reviewed," or not
subject to further review or comment, or (c) the Underlying Shares
Registration Statement is not declared effective by the Commission on or
prior to the Effectiveness Date, or (d) such Underlying Shares Registration
Statement is filed with and declared effective by the Commission but
thereafter ceases to be effective as to all Registrable Securities at any
time prior to the expiration of the Effectiveness Period (as defined in the
Registration Rights Agreement), without being succeeded within ten (10)
Trading Days by an amendment to such Underlying Shares Registration Statement
or by a subsequent Underlying Shares Registration Statement filed with and
declared effective by the Commission, or (e) the Common Stock shall be
delisted or suspended from trading on the NASDAQ or on any Subsequent Market
for more than three (3) Trading Days (which need not be consecutive Trading
Days), or (f) the conversion rights of the Holders are suspended for any
reason, or (g) an amendment to the Underlying Shares Registration Statement
is not filed by the Company with the Commission within ten (10) Trading Days
of the Commission's notifying the Company that such amendment is required in
order for the Underlying Shares Registration Statement to be declared
effective (if the Company files such amendment without affording the Holder
the opportunity to review and comment on the same as required by Section
3(a)(i) above, the Company shall not be deemed to have satisfied this clause
(g)) (any such failure or breach being referred to as an "EVENT," and for
purposes of clauses (a), (c), (f) the date on which such Event occurs, or for
purposes of clause (b) the date on which such five (5) Trading Days period is
exceeded, or for purposes of clauses (d) and (g) the date which such 10
Trading Days period is exceeded, or for purposes of clause (e) the date on
which such three day-period is exceeded, being referred to as "EVENT DATE"),
then, on the Event Date, the Company shall pay to the Holder 1.0% of the
aggregate Stated Values of the shares of Preferred Stock purchased by such
Holder pursuant to the Purchase Agreement, in cash, as liquidated damages and
not as a penalty. On the first month anniversary of the Event Date (assuming
the applicable Event has not been cured prior to such date) and each monthly
anniversary thereof until the applicable Event is cured, the Company shall
pay to the Holder 3.0% of the aggregate Stated Values of the shares of
Preferred Stock purchased by such Holder pursuant to the Purchase Agreement,
in cash, as liquidated damages and not as a penalty. If the Company fails to
pay any liquidated damages pursuant to this Section in full within seven (7)
days after the date payable, the Company will pay interest thereon 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 such
liquidated damages are due until such amounts, plus all such interest
thereon, are paid in full. The liquidated damages pursuant to the terms
hereof shall apply on a pro-rata basis for any portion
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of a month prior to the cure of an Event. The provisions of this Section are
not exclusive and shall in no way limit the Company's obligations under the
any or all the Transaction Documents.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten (10)
days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence from
and to the Commission relating to the Registration Statement; and (iv) comply in
all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c)(i) File additional Registration Statements if the number
of Registrable Securities at any time exceeds 85% of the number of shares of
Common Stock then registered in a Registration Statement. The Company shall have
the later of thirty (30) days or five (5) Business Days following the Holder's
review and written consent to file such additional Registration Statements after
such requirement notice of which is given by the Holders. In such event, the
Registration Statement required to be filed by the Company shall include a
number of shares of Common Stock equal to no less than 200% of the number of
shares of Common Stock into which all then outstanding Shares are convertible
(assuming such conversion occurred on the Filing Date for such Registration
Statement or the Trading Day before the filing of the final acceleration request
therefor, whichever date yields a lower Conversion Price) and any other
Registrable Securities not then registered in a Registration Statement.
(ii) File such supplements or attach "stickers" to
the Registration Statement or Prospectus as and when required by the Commission
to evidence a material amount of resales by a Holder pursuant to a Prospectus.
In connection therewith, if such supplements or such "stickers" are periodically
required by the Commission, the Company shall, within four (4) Business Days,
file such supplements or attach such "stickers" whenever a Holder has sold 50%
of the Registrable Securities covered by the then outstanding Prospectus (as
last supplemented or "stickered") in order to cover 100% of the number of the
outstanding Registrable Securities.
(d) Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any managing underwriters as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than five (5) Business Days
(or, in the case of a supplement or "sticker" required to be filed pursuant to
Section 3(c)(ii), within one Business Day) prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than two
(2) Business Days following the day
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(i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Regis tration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible for
inclusion therein or any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(e) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(f) If requested by any managing underwriter or the Holders of
a majority in interest of the Registrable Securities to be sold in connection
with an Underwritten Offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as such managing underwriters and such Holders reasonably agree
should be included therein, and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment, PROVIDED, that the
Company shall not be required to take any action pursuant to this Section 3(f)
that would, in the opinion of counsel for the Company, violate applicable law or
be materially detrimental to the business prospects of the Company.
(g) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules and all exhibits to the extent requested by such Person
promptly after the filing of such documents with the Commission.
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<PAGE>
(h) Promptly deliver to each Holder, their Special Counsel,
and any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(i) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders, any underwriters and their Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; PROVIDED, HOWEVER, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(j) Cooperate with the Holders and any managing underwriters
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names as any such managing underwriters or Holders may request.
(k) Upon the occurrence of any event contemplated by Section
3(d)(vi), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(l) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the Nasdaq National
Market ("NASDAQ") or on any other stock market or trading facility on which the
shares of Common Stock are traded, listed or quoted (each a "SUBSEQUENT MARKET")
as and when required pursuant to the Purchase Agreement.
(m) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings) and take all such other actions in connection therewith (including
those reasonably requested by any managing underwriters and the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and whether or not an
underwriting agreement is entered
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into, (i) make such representations and warranties to such Holders and such
underwriters as are customarily made by issuers to underwriters in
underwritten public offerings (subject to the scheduling of appropriate
exceptions to insure such representations and warranties are accurate), and
confirm the same if and when requested; (ii) in the case of an Underwritten
Offering obtain and deliver copies thereof to each Holder and the managing
underwriters, if any, of opinions of counsel to the Company and updates
thereof addressed to each Holder and each such underwriter, in form, scope
and substance reasonably satisfactory to any such managing underwriters and
Special Counsel to the selling Holders covering the matters customarily
covered in opinions requested in Underwritten Offerings and such other
matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the
Registration Statement, and, in the case of an Underwritten Offering, at the
time of delivery of any Registrable Securities sold pursuant thereto, use its
best reasonable efforts to obtain and deliver copies to the Holders and the
managing underwriters, if any, of "cold comfort" letters and updates thereof
from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is, or is required to be,
included in the Registration Statement), addressed to the Company in form and
substance as are customary in connection with Underwritten Offerings; (iv) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
Holders and the under writers, if any, than those set forth in Section 5 (or
such other provisions and procedures acceptable to the managing underwriters,
if any, and holders of a majority of Registrable Securities participating in
such Underwritten Offering); and (v) deliver such documents and certificates
as may be reason ably requested by the Holders of a majority of the
Registrable Securities being sold, their Special Counsel and any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to Section 3(m)(i) above and to evidence compliance
with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company.
(n) Make available for inspection by the selling Holders,
any representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant
retained by such selling Holders or underwriters, at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors, agents and employees of the
Company and its subsidiaries to supply all information in each case
reasonably requested by any such Holder, representative, underwriter,
attorney or accountant in connection with the Registration Statement,
PROVIDED, that any information that is determined in good faith by the
Company in writing to be of a confidential nature at the time of delivery of
such information shall be kept confidential by such Persons, unless (i)
disclosure of such information is required by court or administrative order
or is necessary to respond to inquiries of regulatory authorities; (ii)
disclosure of such information, in the opinion of counsel to such Person, is
required by law; (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard by such
Person; or (iv) such information becomes available to such Person from a
source other than the Company and such source is not known by such Person to
be bound by a confidentiality agreement with the Company.
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(o) Comply with all applicable rules and regulations of the
Commission.
(p) The Company may require each selling Holder to furnish
to the Company such information regarding the distribution of such
Registrable Securities and the beneficial ownership of Common Stock held by
such Holder as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such
information within a reasonable time after receiving such request.
(q) If the Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (if such reference to such Holder by
name or otherwise is not required by the Securities Act or any similar
Federal statute then in force) the deletion of the reference to such Holder
in any amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.
4. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company, except as and to the extent
specified in Section 4(b), shall be borne by the Company whether or not
pursuant to an Underwritten Offering and whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the NASDAQ and any Subsequent Market on which the Common Stock is then
listed for trading, and (B) in compliance with state securities or Blue Sky
laws (including, without limitation, fees and disbursements of counsel for
the Holders in connection with Blue Sky qualifications or exemptions of the
Registrable Securities and determination of the eligibility of the
Registrable Securities for investment under the laws of such jurisdictions as
the managing underwriters, if any, or the Holders of a majority of
Registrable Securities may designate)), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable
Securities and of printing prospectuses if the printing of prospectuses is
requested by the managing underwriters, if any, or by the holders of a
majority of the Registrable Securities included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and Special Counsel for the Holders,
(v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated
by this Agreement. In addition, the Company shall be responsible for all of
its internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
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(b) If the Holders require an Underwritten Offering
pursuant to the terms hereof and during the Effectiveness Period there shall
not be at such time an effective Registration Statement covering all of the
Registrable Securities pursuant to which the Holders are both named Selling
Securityholders thereunder and permitted to utilize the Prospectus thereunder
to resell such Registrable Securities held by them and when as required by
this Agreement, then the Company shall be responsible for all costs, fees and
expenses in connection therewith, except for the fees and disbursements of
the Underwriters (excluding any underwriting commissions and discounts) and
their legal counsel and accountants. By way of illustration which is not
intended to diminish from the provisions of Section 4(a), the Holders shall
not be responsible for, and the Company shall be required to pay, the fees or
disbursements incurred by the Company (including by its legal counsel and
accountants) in connection with, the preparation and filing of a Registration
Statement and related Prospectus for such offering, the maintenance of such
Registration Statement in accordance with the terms hereof, the listing of
the Registrable Securities in accordance with the requirements hereof, and
printing expenses incurred to comply with the requirements hereof. If the
Holders require an Underwritten Offering at a time when all of the
circumstances specified in the opening clause to the first sentence of this
Section 4(b) are present, then such Holders shall bear all the fees and
disbursements of the underwriters, including those costs specified in this
Section 4(b). Notwithstanding anything herein to the contrary, in the event
that the Company shall be required by the Commission to file a Form S-1 by
virtue of the identity of the Purchasers, the first $20,000 in additional
expenses in preparing such registration statement over and above the expenses
of preparation of a Form S-3 Registration Statement will be equally divided
between the Company and the Purchasers and the Company shall provide a
reasonably detailed statement evidencing such additional expenses.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents (including any
underwriters retained by such Holder in connection with the offer and sale of
Registrable Securities), brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and
employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and attorneys' fees) and
expenses (collectively, "LOSSES"), as incurred, arising out of or relating to
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, except
to the extent, but only to the extent, that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished
in writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such
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Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (2) in the case of an occurrence of an event
of the type specified in Section 3(d)(ii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 6(e). The Company shall notify
the Holders promptly of the institution, threat or assertion of any Proceeding
of which the Company is aware in connection with the transactions contemplated
by this Agreement.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall,
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, agents or employees of
such controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses (as determined by a court of competent
jurisdiction in a final judgment not subject to appeal or review) arising
solely out of or based solely upon any untrue statement of a material fact
contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out
of or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities and
was reviewed and expressly approved in writing by such Holder expressly for
use in the Registration Statement, such Prospectus or such form of
Prospectus, or in any amendment or supplement thereto. In no event shall the
liability of any selling Holder hereunder be greater in amount than the
dollar amount of the net proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any
Proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party shall
promptly notify the Person from whom indemnity is sought (the "INDEMNIFYING
PARTY") in writing, and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (1) the Indemnifying Party has
agreed in writing to pay such fees and expenses; or (2) the Indemnifying
Party shall have failed promptly
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to assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the
named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within fifteen (15) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; PROVIDED,
that the Indemnifying Party may require such Indemnified Party shall
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) CONTRIBUTION. If a claim for indemnification under
Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees
or expenses if the indemnification provided for in this Section was available
to such party in accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by
PRO RATA allocation or by any other method of allo cation that does not take
into account the equitable considerations referred to in the immediately
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preceding paragraph. Notwithstanding the provisions of this Section 5(d), no
Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Holder
from the sale of the Registrable Securities subject to the Proceeding exceeds
the amount of any damages that such Holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
6. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company or by
a Holder, of any of their obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to exercise
all rights granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not
provide adequate compensation for any losses incurred by reason of a breach
by it of any of the provisions of this Agreement and hereby further agrees
that, in the event of any action for specific performance in respect of such
breach, it shall waive the defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any
of its subsidiaries has entered, as of the date hereof, nor shall the Company
or any of its subsidiaries, on or after the date of this Agreement, enter
into any agreement with respect to its securities that is inconsistent with
the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Except as and to the extent specified in SCHEDULE
6(b) hereto, neither the Company nor any of its subsidiaries has previously
entered into any agreement granting any registration rights with respect to
any of its securities to any Person. Without limiting the generality of the
foregoing, without the written consent of the Holders of a majority of the
then outstanding Registrable Secu rities, the Company shall not grant to any
Person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted will not
conflict with the rights of the Holders set forth herein and are not
otherwise in conflict or inconsistent with the provisions of this Agreement.
(c) NO PIGGYBACK ON REGISTRATIONS. Except as and to the
extent specified in SCHEDULE 6(b) hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other
than the Registrable Securities, and the Company shall not after the date
hereof enter into any agreement providing any such right to any of its
security holders.
(d) COMPLIANCE. Each Holder covenants and agrees that it
will comply with the prospectus delivery requirements of the Securities Act
as applicable to it in connection with sales of Registrable Securities
pursuant to the Registration Statement.
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(e) DISCONTINUED DISPOSITION. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice
from the Company of the occurrence of any event of the kind described in
Sections 3(d)(ii), 3(d)(iii), 3(d)(iv), 3(d)(v) or 3(d)(vi), such Holder will
forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(k), or until it is advised in writing (the "ADVICE") by the Company
that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
(f) PIGGY-BACK REGISTRATIONS. At any time during the
Effectiveness Period when there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall determine to
prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities
Act of any of its equity securities, other than on Form S-4 or Form S-8 (each
as promulgated under the Securities Act) or their then equivalents relating
to equity securities to be issued solely in connection with any acquisition
of any entity or business or equity securities issuable in connection with
stock option or other employee benefit plans, then the Company shall send to
each Holder written notice of such determination and, if within fifteen (15)
days after receipt of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered.
(g) AMENDMENTS AND WAIVERS. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of at least two-thirds of the then
outstanding Registrable Securities. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of particular Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; PROVIDED, HOWEVER, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.
(h) 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, (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 the Purchase 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, (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 address for such notices and communications shall be as follows:
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if to the Company: Hawker Pacific Aerospace
11240 Sherman Way,
Sun Valley, California 91352
Facsimile No.:(818) 765-2416 and (818) 765-8073
Attn: Chief Financial Officer
With copies to: Troy & Gould Professional Corporation
1801 Century Park East, Suite 1600
Los Angeles, CA 90067
Facsimile No.: (310) 201-4746
Attn: Yvonne Wong Chester, Esq.
William D. Gould, Esq.
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature pages
hereto.
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears
in the stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(i) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. The
Company may not assign its rights or obligations hereunder without the prior
written consent of each Holder. Each Holder may assign their respective
rights hereunder in the manner and to the Persons as permitted under the
Purchase Agreement.
(j) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be
an original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid 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 were the original
thereof.
(k) GOVERNING LAW. All 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 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, that such
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<PAGE>
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement 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.
(l) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(m) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ
an alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(n) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(o) SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company
or its Affiliates (other than any Holder or transferees or successors or
assigns thereof if such Holder is deemed to be an Affiliate solely by reason
of its holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
(p) INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND
RIGHTS. The obligations of each Purchaser hereunder is several and not joint
with the obligations of any other Purchaser hereunder, and neither Purchaser
shall be responsible in any way for the performance of the obligations of any
other Purchaser hereunder. Nothing contained herein or in any other agreement
or document delivered at any closing, and no action taken by any Purchaser
pursuant hereto or 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 obligations or the transactions contemplated by this
Agreement. Each Purchaser shall be entitled to protect and enforce its
rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Purchaser to be joined
as an additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
HAWKER PACIFIC AEROSPACE
By: /s/ Philip M. Panzera
-----------------------------------------
Name: Philip M. Panzera
---------------------------------------
Title: Executive Vice President
--------------------------------------
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASERS TO FOLLOW]
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<PAGE>
DEEPHAVEN PRIVATE PLACEMENT
TRADING LTD.
By: /s/ Irwin Kessler
-----------------------------------------
Name: Irwin Kessler
---------------------------------------
Title: Managing Director
--------------------------------------
Address for Notice:
Deephaven Private Placement Trading Ltd.
c/o Deephaven Capital Management LLC
130 Cheshire Lane
Minnetonka, MN 55305
Facsimile No.: (612) 249-5300
Attn: Bruce Lieberman
With copies to:
Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and (212) 541-1432
Attn: Kenneth L. Henderson, Esq.
Eric L. Cohen, Esq.
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<PAGE>
ANNEX A
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
- - ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- - block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- - purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- - an exchange distribution in accordance with the rules of the applicable
exchange;
- - privately negotiated transactions;
- - short sales;
- - broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
- - a combination of any such methods of sale; and
- - any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the
box, puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser)
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<PAGE>
in amounts to be negotiated. The Selling Stockholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event,
any commissions received by such broker-dealers or agents and any profit on
the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to
the Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.
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EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
Hawker Pacific Aerospace
Sun Valley, California
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Hawker Pacific
Aerospace for the registration of 1,831,597 shares of its common stock and to
the incorporation by reference therein of our report dated February 13, 1999,
except for paragraphs 5 through 9 of Note 5 for which the date is April 12,
1999, with respect to the consolidated financial statements and schedules of
Hawker Pacific Aerospace included in its Annual Report (Form 10-K) for the year
ended December 31, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Woodland Hills, California
December 22, 1999
