Prepared by MERRILL CORPORATION





Exhibit 4.5


 


THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.


 


 


WARRANT TO PURCHASE STOCK


 


 


Corporation:                                          Advanced
Power Technology, Inc.


Number of Shares:                               1,725


Class of Stock:                                      Common


Initial Exercise Price:                            $1.16
per share


Issue Date:                                            February
___, 2002


 


THIS WARRANT CERTIFIES
THAT, for good and valuable consideration, Mark Gates ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the class
of securities (the "Shares") of the corporation (the
"Company") at the initial exercise price per Share (the "Warrant
Price") all as set forth above and as adjusted pursuant to Article 2 of
this Warrant, subject to the provisions and upon the terms and conditions set
forth in this Warrant.  This Warrant
shall expire on July 31, 2006 (the “Expiration Date”).


ARTICLE 1            EXERCISE.


1.1           Method of Exercise.  Holder may exercise this Warrant
by delivering a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company.  Unless Holder is exercising the conversion
right set forth in Section 1.2, Holder shall also deliver to the Company
payment for the aggregate Warrant Price for the Shares being purchased.


1.2           Conversion Right. 
In lieu of exercising this Warrant as specified in Section
1.1, Holder may from time to time convert this Warrant, in whole or in part,
into a number of Shares determined by dividing (a) the aggregate fair market
value of the Shares or other Securities otherwise issuable upon exercise of
this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share.  The fair
market value of the Shares shall be determined pursuant Section 1.4.


1.3           Alternative Stock Appreciation Right.  At Holder's option, the Company
shall pay Holder the fair market value of the Shares issuable upon conversion
of this Warrant pursuant to Section 1.2 in cash in lieu of such Shares, unless
such payment in cash at the time would be prohibited by applicable corporate
law.



1.4           Fair Market Value. 
If the Shares are traded in a public market, the fair market
value of the Shares shall be the closing price of the Shares (or the closing
price of the Company's stock into which the Shares are convertible) reported
for the business day immediately before Holder delivers its Notice of Exercise
to the Company.  If the Shares are not
traded in a public market, the Board of Directors of the Company shall
determine fair market value in its reasonable good faith judgment.  The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation.  If the valuation of such investment banking firm is greater than
that determined by the Board of Directors, then all fees and expenses of such
investment banking firm shall be paid by the Company.  In all other circumstances, such fees and expenses shall be paid
by Holder.


1.5           Delivery of Certificate and New
Warrant.  Promptly after Holder exercises
or converts this Warrant, the Company shall deliver to Holder certificates for
the Shares acquired and, if this Warrant has not been fully exercised or
converted and has not expired, a new Warrant to purchase the Shares not so
acquired.


1.6           Replacement of Warrants.  On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant,
a new warrant of like tenor.


1.7           Repurchase
on Sale, Merger, or Consolidation of the Company.


                1.7.1        "Acquisition".  For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50 percent of the
outstanding voting securities of the surviving entity after the transaction.


                1.7.2        Assumption
of Warrant.  If upon the closing of any
Acquisition the successor entity assumes the obligations of this Warrant, then
this Warrant shall be exercisable for the same securities, cash, and property
as would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. 
The Warrant Price shall be adjusted accordingly.



                1.7.3        Nonassumption.  If upon the closing of any
Acquisition the successor entity does not assume the obligations of this
Warrant and Holder has not otherwise exercised this Warrant in full, then the
unexercised portion of this Warrant shall be deemed to have been automatically
converted pursuant to Section 1.2 immediately prior to the record date or
closing, as applicable, and thereafter Holder shall participate in the
acquisition on the same terms as other holders of the common stock of the Company.


                1.7.4        Purchase
Right.  Notwithstanding the foregoing, at
the election of Holder, the Company shall purchase the unexercised portion of
this Warrant for cash upon the closing of any Acquisition for an amount equal
to (a) the fair market value of any consideration that would have been received
by Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero;
provided, however, that Holder may not require such purchase in cash if such
cash purchase at the time would be prohibited by applicable corporate law.


ARTICLE 2            ADJUSTMENTS TO THE SHARES.


2.1           Stock Dividends, Splits, Etc.  If the Company declares or pays a
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock
or subdivides the Shares in a transaction that increases the amount of common
stock into which the Shares are convertible, then upon exercise of this
Warrant, for each Share acquired, Holder shall receive, without cost to Holder,
the total number and kind of securities to which Holder would have been
entitled had Holder owned the Shares of record as of the date the dividend or
subdivision occurred.


2.2           Reclassification, Exchange or
Substitution.  Upon any
reclassification, exchange, substitution, or other event that results in a
change in the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property that
Holder would have received for the Shares if this Warrant had been exercised
immediately before such reclassification, exchange, substitution, or other
event.  The Company or its successor
shall promptly issue to Holder a new Warrant for such new securities or other
property.  The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. 
The provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.


2.3           Adjustments for Combinations, Etc.  If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased.






2.4           No Impairment. 
The Company shall not, by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed under this Warrant by the Company, but shall
at all times in good faith assist in carrying out all of the provisions of this
Warrant and in taking all such action as may be necessary or appropriate to
protect Holder's rights under this Warrant against impairment.  If the Company takes any action affecting
the Shares or its common stock other than as described above that adversely
affects Holder's rights under this Warrant, the Warrant Price shall be adjusted
downward and the number of Shares issuable upon exercise of this Warrant shall
be adjusted upward in such a manner that the aggregate Warrant Price of this
Warrant and to the extent reasonably possible, the benefit of this Warrant to
Holder is unchanged.


2.5           Fractional Shares. 
No fractional Shares shall be issuable upon exercise or
conversion of the Warrant and the number of Shares to be issued shall be
rounded down to the nearest whole Share. 
If a fractional share interest arises upon any exercise or conversion of
the Warrant, the Company shall eliminate such fractional share interest by
paying Holder in cash an amount computed by multiplying the factional interest
by the fair market value of a full Share.


2.6           Certificate as to Adjustments.  Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is
based.  The Company shall, upon written
request, furnish Holder a certificate setting forth the Warrant Price in effect
upon the date thereof and the series of adjustments leading to such Warrant
Price.


ARTICLE 3            REPRESENTATIONS AND COVENANTS OF THE COMPANY.


3.1           Representations and Warranties.  The Company hereby represents and
warrants to the Holder that all Shares which may be issued upon the exercise or
conversion of this Warrant upon issuance be duly authorized, validly issued,
fully paid and nonassessable, and free of any liens and encumbrances except for
restrictions on transfer provided for herein or under applicable federal and
state securities laws.



3.2           Notice of Certain Events.  If the Company proposes at any
time (c) to declare any dividend or distribution upon its common stock, whether
in cash, property, stock, or other securities and whether or not a regular cash
dividend; (d) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (e) to effect any reclassification or recapitalization of common
stock; (f) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (g) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the Company's
securities for cash, then, in connection with each such event, the Company
shall give Holder (1) at least 20 days prior written notice of the date on
which a record will be taken for such dividend, distribution, or subscription
rights (and specifying the date on which the holders of common stock will be
entitled thereto) or for determining rights to vote, if any, in respect of the
matters referred to in (c) and (d) above; (2) in the case of the matters
referred to in (c) and (d) above at least 20 days prior written notice of the
date when the same will take place (and specifying the date on which the
holders of common stock will be entitled to exchange their common stock for securities
or other property deliverable upon the occurrence of such event); and (3) in
the case of the matter referred to in (e) above, the same notice as is given to
the holders of such registration rights.


3.3           Information Rights.  So long as the Holder holds this
Warrant and/or any of the Shares, the Company shall deliver to the Holder (h)
promptly after mailing, copies of all notices or other written communications
to the shareholders of the Company, (i) within 90 days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(j) within 45 days after the end of each of the first three quarters of each
fiscal year, the Company's quarterly, unaudited financial statements.


ARTICLE 4            MISCELLANEOUS.


4.1           Term; Notice of Expiration.  This Warrant is exercisable, in
whole or in part, at any time and from time to time on or before the Expiration
Date set forth above.


4.2           Legends. 
This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:


THIS SECURITY HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.






4.3           Compliance with Securities Laws on
Transfer.  This Warrant and the Shares
issuable upon exercise of this Warrant (and the securities issuable, directly
or indirectly, upon conversion of the Shares, if any) may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws by the transferor and the transferee (including, without
limitation, the delivery of investment representation letters and legal
opinions reasonably requested by and satisfactory to the Company).  The Company shall not require Holder to
provide an opinion of counsel if the transfer is to an affiliate of Holder or
if there is no material question as to the availability of current information
as referenced in Rule 144(c), Holder represents that it has complied with Rule
144(d) and (e) in reasonable detail, the selling broker represents that it has
complied with Rule 144(f), and the Company is provided with a copy of Holder s
notice of proposed sale.


4.4           Transfer Procedure.  Subject to the provisions of
Section 4.3, Holder may transfer all or part of this Warrant or the Shares
issuable upon exercise of this Warrant (or the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) by giving the Company notice
of the portion of the Warrant being transferred setting forth the name, address
and taxpayer identification number of the transferee and surrendering this
Warrant to the Company for reissuance to the transferee(s) (and Holder if
applicable).  Unless the Company is
filing financial information with the SEC pursuant to the Securities Exchange
Act of 1934, the Company shall have the right to refuse to transfer any portion
of this Warrant to any person who directly competes with the Company.


4.5           Notices. 
All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.


4.6           Waiver. 
This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.


4.7           Attorneys' Fees. 
In the event of any dispute between the parties concerning
the terms and provisions of this Warrant, the party prevailing in such dispute
shall be entitled to collect from the other party all costs incurred in such
dispute, including reasonable attorneys' fees.


4.8           Governing Law. 
This Warrant shall be governed by and construed in accordance
with the laws of the State of Oregon, without giving effect to its principles
regarding conflicts of law.






ADVANCED POWER TECHNOLOGY, INC.


 


 


By:                                                                                          


Name:                                                                                     


Title:                                                                                       











APPENDIX I


 


NOTICE OF EXERCISE


 


 


1.             The undersigned hereby elects to purchase shares of the
Common Stock of Advanced Power Technology, Inc. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.


1.             The undersigned hereby elects to convert the attached
Warrant into Shares/cash [strike one] in the manner specified in the Warrant.  This conversion is exercised with respect to
of the Shares covered by the Warrant.


[Strike paragraph that does not apply.]


2.             Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name as is
specified below:


(Name)


                                                


                                                


(Address)


 


3.             The undersigned represents it is acquiring the shares
solely for its own account and not as a nominee for any other party and not
with a view toward the resale or distribution thereof except in compliance with
applicable securities laws.


 


                                                                                


(Signature)


                                                                                


(Date)