EXHIBIT 10.32
AGREEMENT
This Agreement is entered into as of August 27, 1998, among PACIFIC
AEROSPACE & ELECTRONICS, INC., a Washington corporation (the "Company"),
LIVIAKIS FINANCIAL COMMUNICATIONS, INC., a California corporation (the
"Liviakis"), and Xxxxxx X. Xxxx, an individual ("Xx. Xxxx"). Liviakis and Xx.
Xxxx are sometimes referred to together as the "Consultants."
RECITALS
A. The Company and Liviakis are parties to a Consulting Agreement dated as
of February 3, 1998, relating to the provision of financial consulting services
to the Company by Liviakis (the "Consulting Agreement"). Xx. Xxxx is a principal
of Liviakis.
B. In Section 5 of the Consulting Agreement, the Company agreed to pay a
finder's fee to Liviakis under certain specified circumstances. The parties have
differing opinions as to whether such a finder's fee may be currently due in
connection with the Company's engagement of Xxxxxxxx, Xxxxxxxx & Xxxxxx Co.,
Inc. in the Company's recent offering of senior subordinated notes, and desire
to enter into this Agreement in order to amicably resolve the issue.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which
is acknowledged, the parties agree as follows:
1. Consideration. In order to resolve the Finder's Fee Claim (as defined
herein), relating to events occurring prior to the date of this Agreement, the
parties agree as follows:
1.1 Issuance of Shares. In consideration of the release contained in
Section 1.2, the Company shall issue and deliver 590,000 shares of the Company's
newly-issued common stock (the "Shares"), allocated as follows: (a) 395,000 of
the Shares to Liviakis, and (b) 195,000 of the Shares to Xx. Xxxx. The Shares
shall be subject to the following agreements, representations and warranties:
1.1.1 Liviakis and Xx. Xxxx shall not transfer their respective Shares
to any person until the expiration of the term of the Consulting Agreement,
including any extension of such term (the "Lock-up Period"). Upon expiration of
the Lock-up Period, the Shares may be transferred only in compliance with Rule
144 of the Securities Act of 1933, as amended (the "Act"), or any other
available exemption, unless registered for resale pursuant to Section 1.1.7.
1.1.2 The Shares, when issued and delivered, shall be fully paid and
non-assessable. If the Company decides to terminate the Consulting Agreement
prior to February 3, 1999 for any reason whatsoever, it is agreed and understood
that neither Liviakis nor Xx. Xxxx will be requested or demanded by the Company
to return any of the Shares.
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1.1.3 Liviakis and Xx. Xxxx each acknowledge that the Shares have not
been registered under the Act, and accordingly are "restricted securities"
within the meaning of Rule 144 of the Act. As such, the Shares may not be resold
or transferred unless (a) the Company receives, should it so require, an opinion
of counsel reasonably satisfactory to the Company that such resale or transfer
is exempt from the registration requirements of the Act, or (b) the Shares have
been registered for resale pursuant to Section 1.1.7.
1.1.4 In connection with the acquisition of the Shares, Liviakis and
Xx. Xxxx represent and warrant to the Company as follows:
(a) Liviakis and Xx. Xxxx each acknowledge that Liviakis and Xx.
Xxxx have each been afforded the opportunity to ask questions of and
receive answers from duly authorized officers or other representatives of
the Company concerning an investment in the Shares, and have received any
additional information requested by either of them.
(b) Liviakis' and Xx. Xxxx'x investment in the Shares is
reasonable in relation to their respective net worths, which are in excess
of ten (10) times their respective cost basis in the Shares. Liviakis and
Xx. Xxxx have had experience in investments in restricted and publicly
traded securities, and have had experience in investments in speculative
securities and other investments which involve the risk of loss of
investment. Liviakis and Xx. Xxxx acknowledge that an investment in the
Shares is speculative and involves the risk of loss. Liviakis and Xx. Xxxx
have the requisite knowledge to assess the relative merits and risks of
this investment without the necessity of relying upon other advisors, and
Liviakis and Xx. Xxxx can afford the risk of loss of their entire
investment in the Shares. Liviakis and Xx. Xxxx are (i) accredited
investors, as that term is defined in Regulation D promulgated under the
Act, and (ii) purchasers as described in Section 25102(f)(2) of the
California Corporate Securities Law of 1968, as amended.
(c) Liviakis and Xx. Xxxx are acquiring the Shares for their own
account for long-term investment and not with a view toward resale or
distribution thereof except in accordance with applicable securities laws.
1.1.5 Upon receipt of the original Warrants pursuant to Section 2, the
Company shall direct its transfer agent to issue and deliver certificates
representing the Shares to Liviakis and Xx. Xxxx, as allocated pursuant to this
Section 1.
1.1.6 Liviakis and Xx. Xxxx acknowledge that the certificates
representing the Shares will bear substantially the following legend unless the
Shares are registered pursuant to Section 1.1.7, or such legend can be removed
under applicable securities laws:
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND WERE
OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENT OF
THE ACT AND SUCH LAWS. THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THESE SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THESE SECURITIES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY
PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE ACT, AND/OR THE LAWS
OF CERTAIN STATES, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE
AND, IF REQUIRED BY THE COMPANY, THE HOLDER HAS PROVIDED THE COMPANY WITH A
LEGAL OPINION ACCEPTABLE TO THE COMPANY TO THAT EFFECT.
While registered pursuant to Section 1.1.7, Liviakis and Xx. Xxxx
acknowledge that the certificates representing the Shares will bear
substantially the following legend until the Shares are sold to a third party,
and the Company has been provided confirmation of sale and prospectus delivery
in a form reasonably acceptable to the Company:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE THE SUBJECT OF A REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT OF 1933. SUCH SHARES MAY BE TRANSFERRED ONLY: (A) (1) IF SUCH REGISTRATION
IS EFFECTIVE AS OF THE DATE OF TRANSFER, AND (2) UPON DELIVERY OF CONFIRMATION
TO THE COMPANY, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT SUCH SALE
WAS MADE IN COMPLIANCE WITH THE PROSPECTUS DELIVERY REQUIREMENTS OF RULES
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION; OR (B) UPON THE COMPANY'S
RECEIPT OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION
AND/OR PROSPECTUS DELIVERY IS NOT REQUIRED.
1.1.7 If the Company shall determine to register any of its common
stock either for its own account or for the account of a security holder or
holders prior to August 21, 2000, other than a registration relating solely to
employee benefit plans, or registration on any registration form that does not
permit secondary sales, the Company will (a) promptly give written notice of the
proposed registration to each of the Consultants (the "Registration Notice");
and (b) include in such registration (and any related qualification or other
compliance filing under applicable blue sky laws), and in any underwriting
involved therein, all or any portion of the Shares for resale, as specified in a
written request by either of the Consultants, which is received by the Company
within 30 days after delivery of the Registration Notice to the Consultants.
(a) If the registration described in the Registration Notice
involves an underwriting, the Company shall so state in the Registration
Notice. In such event, the Consultants' rights to registration pursuant to
this Section 1.1.7 shall be conditioned upon their participation in the
underwriting and the inclusion of Shares in the underwriting to the extent
provided herein. The Consultants and the Company (and any other security
holders proposing to distribute their securities through the underwriting)
shall enter into an underwriting agreement in customary form with the
representatives of the underwriter or underwriters selected for such
underwriting by the Company.
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(b) Notwithstanding any other provisions of this Section 1.1.7,
if the representatives of the underwriter or underwriters determine in good
faith that marketing factors make it advisable to impose a limitation on
the number of secondary shares to be included in the registration, the
number of such secondary shares, if any, that may be included in the
registration and underwriting on behalf of such holders, and any other
security holders proposing to distribute their securities of the Company
through such underwriting shall be allocated in proportion, as nearly as
practicable, to the respective amounts of securities that they had
requested to be included in such registration at the time of filing the
registration statement. If the Consultants disapprove of the terms of any
such underwriting, they may elect to withdraw therefrom by written notice
to the Company and the representatives of the underwriter or underwriters.
(c) If representatives of the underwriter or underwriters exclude
any of the Shares from the underwritten offering, then the Consultants
shall not offer or sell any of the Shares for the earlier of (i) a period
ending 180 days following the effective date of such registered public
offering, or (ii) the date that the underwriter agrees that an offering or
sale of the Shares by the Consultants may proceed.
(d) The Company agrees to indemnify and hold harmless the
Consultants from and against any and all losses, claims, damages,
liabilities, judgments or expenses (including reasonable attorneys' fees
and costs) actually incurred by them, arising under either Section 15 of
the Securities Act or Section 20 of the Exchange Act as the result of (i)
any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus in which Shares are
included (or any amendment or supplement thereto), except as is furnished
in writing to the Company by or on behalf of the Consultants, or (ii) any
omission or alleged omission by the Company to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading.
(e) The Consultants agree to indemnify and hold harmless the
Company from and against any and all losses, claims, damages, liabilities,
judgments or expenses (including reasonable attorneys' fees and costs)
actually incurred by it, arising under either Section 15 of the Securities
Act or Section 20 of the Exchange Act as the result of (i) any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus in which Shares are included (or any
amendment or supplement thereto), which was furnished in writing to the
Company by or on behalf of the Consultants, or (ii) any omission or alleged
omission by the Consultants to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading.
1.2 Release. In exchange for issuance of the Shares, Liviakis and Xx.
Xxxx forever release and discharge the Company from any and all claims, causes
of action, rights and damages (including attorneys fees and costs) (individually
and collectively, "Claims"), (a) that either Liviakis or Xx. Xxxx have or may
have, whether known or unknown, with regard to any finder's fee claims that
either arise under Section 5 of the Consulting Agreement or arising in any other
manner, (i) based on events prior to the date of this Agreement, including but
not limited to those Claims relating in any way to the Company's issuance of
senior subordinated
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notes in July 1998 (the "Finder's Fee Claim"), or any Claims relating to the
Company's acquisition of Aeromet International plc, or (ii) that Liviakis or Xx.
Xxxx now or hereafter may have with respect to any financing or any acquisition
candidate that in the past or in the future is provided directly or indirectly
to the Company by Friedman, Billings, Xxxxxx & Co., Inc. or by BancBoston
Securities Inc., or (b) that either Liviakis or Xx. Xxxx have or may have,
whether known or unknown, in any way arising out of or in connection with the
Warrants ("Warrant Claims"). Liviakis and Xx. Xxxx agree to indemnify, defend
and hold the Company harmless against all Claims released in this Section 1.2
that any third party may assert against the Company. Liviakis and Xx. Xxxx each
covenant not to bring or voluntarily aid in any claim, suit, civil action,
complaint, arbitration, or administrative action in any court, agency or
arbitration with respect to any such released Claims.
1.3 No Admissions. This Agreement and all documents executed in order to
effect its terms shall not be construed as an admission or evidence of liability
by the Company with respect to any Claims released in Section 1.2.
2. Cancellation of Warrants. Liviakis and Xx. Xxxx shall return to the Company
for cancellation as soon as possible after the execution of this Agreement, the
originals of the Common Stock Purchase Warrants, dated as of February 10, 1998
and covering an aggregate of 1,290,000 shares of the Company's common stock,
which were issued in connection with the Consulting Agreement (the "Warrants").
The Warrants were issued as follows: (1) to Liviakis for 967,500 shares of the
Company's common stock (the "Liviakis Warrant"), and (2) to Xx. Xxxx for 322,500
shares of the Company's common stock (the "Prag Warrant"). Liviakis and Xx. Xxxx
agree and acknowledge that immediately upon execution of this Agreement, (a) the
Warrants shall be null and void, and of no further effect, without further
action by the Company, and (b) neither Liviakis nor Xx. Xxxx shall have any
further rights, and the Company shall have no further obligations, under the
Warrants or under Section 4.1 of the Consulting Agreement. Each of Liviakis and
Xx. Xxxx represent and warrant to the Company as follows:
2.1 Liviakis Warrant. Liviakis (a) owns the Liviakis Warrant as its sole
property, (b) has and is conveying to the Company good, clear and marketable
title to the Liviakis Warrant, free and clear of any liens, restrictions, claims
or other encumbrances, (c) owns no other shares of the Company's capital stock,
and (d) other than as set forth in this Agreement, has no outstanding options,
warrants, rights, conversion privileges or other agreements or instruments
obligating the Company to issue Liviakis any additional shares of capital stock
or any other security of the Company.
2.2 Prag Warrant. Xx. Xxxx (a) owns the Prag Warrants as his separate
personal property, (b) has and is conveying to the Company good, clear and
marketable title to the Prag Warrant, free and clear of any interest of Xx.
Xxxx'x marital community, liens, restrictions, claims or other encumbrances, (c)
owns no other shares of the Company's capital stock, and (d) other than as set
forth in this Agreement, has no outstanding options, warrants, rights,
conversion privileges or other agreements or instruments obligating the Company
to issue any additional shares of capital stock or any other security of the
Company.
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3. Authority and Validity. The parties each represent and warrant that they have
all requisite power and authority to (a) execute and deliver this Agreement and
all other documents to be executed and delivered by them in connection with this
Agreement, and (b) to consummate the transactions contemplated by this
Agreement. This Agreement has been duly executed and delivered by the parties,
and constitutes the valid and binding obligation of each of them enforceable in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally. The execution and delivery of this Agreement will not conflict with,
result in a violation of, or constitute a default under any agreement, note,
lease, instrument, permit, license, judgment, order, decree, statute, law, rule
or regulation applicable to the parties or their respective properties or
assets.
4. Scope. This Agreement modifies the Consulting Agreement only to the extent
specifically set forth in this Agreement. All other terms and conditions of the
Consulting Agreement remain in full force and effect as written.
Executed as of the first date written above.
Company:
PACIFIC AEROSPACE & ELECTRONICS , INC.
By: /s/ XXXXXX X. XXXXXX
-------------------------------------
Xxxxxx X. Xxxxxx
President and Chief Executive Officer
Liviakis:
LIVIAKIS FINANCIAL COMMUNICATIONS,
INC.
By: /s/ XXXX X. XXXXXXXX
-------------------------------------
Xxxx X. Xxxxxxxx
President
Xx. Xxxx:
By: /s/ XXXXXX X. XXXX
-------------------------------------
Xxxxxx X. Xxxx
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