CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement"), effective as of February 3,
1998, is entered into by and between PACIFIC AEROSPACE & ELECTRONICS, INC., a
Washington corporation (herein referred to as the "Company") and LIVIAKIS
FINANCIAL COMMUNICATIONS, INC., a California corporation (herein referred to as
the "Consultant").
RECITALS
WHEREAS, Company is a publicly held corporation with its common stock
traded through the NASDAQ National Market System; and
WHEREAS, Consultant has experience in the area of corporate finance,
investor communications and financial and investor public relations; and
WHEREAS, Company desires to engage the services of Consultant to assist and
consult with the Company in matters concerning corporate finance and to
represent the Company in investors' communications and public relations with
existing shareholders, brokers, dealers and other investment professionals as to
the Company's current and proposed activities;
NOW THEREFORE, in consideration of the promises and the mutual covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. Term of Consultancy. Company hereby agrees to retain the Consultant to
act in a consulting capacity to the Company, and the Consultant hereby agrees to
provide services to the Company commencing immediately and ending on February 3,
1999. The Company shall have an option to extend the term for an additional year
without additional consideration.
2. Duties of Consultant. The Consultant agrees that it will generally
provide the following specified consulting services through its officers and
employees during the term specified in Section 1:
a. Advise and assist the Company in developing and implementing
appropriate plans and materials for presenting the Company and its business
plans, strategy and personnel to the financial community, establishing an image
for the Company in the financial community, and creating the foundation for
subsequent financial public relations efforts;
b. Introduce the Company to the financial community;
c. With the cooperation of the Company, maintain an awareness during
the term of this Agreement of the Company's plans, strategy and personnel, as
they may evolve during such
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period, and advise and assist the Company in communicating appropriate
information regarding such plans, strategy and personnel to the financial
community;
d. Assist and advise the Company with respect to its (i) stockholder
and investor relations, (ii) relations with brokers, dealers, analysts and other
investment professionals, and (iii) financial public relations generally;
e. Perform the functions generally assigned to investor/stockholder
relations and public relations departments in major corporations, including
responding to telephone and written inquiries (which may be referred to the
Consultant by the Company); preparing press releases for the Company with the
Company's involvement and approval or reviewing press releases, reports and
other communications with or to shareholders, the investment community and the
general public; advising with respect to the timing, form, distribution and
other matters related to such releases, reports and communications; and
consulting with respect to corporate symbols, logos, names, the presentation of
such symbols, logos and names, and other matters relating to corporate image;
f. Upon the Company's approval, disseminate information regarding the
Company to shareholders, brokers, dealers, other investment community
professionals and the general investing public;
g. Upon the Company's approval, conduct meetings, in person or by
telephone, with brokers, dealers, analysts and other investment professionals to
advise them of the Company's plans, goals and activities, and assist the Company
in preparing for press conferences and other forums involving the media,
investment professionals and the general investment public;
h. At the Company's request, review business plans, strategies,
mission statements, budgets, proposed transactions and other plans for the
purpose of advising the Company of the investment community implications
thereof; and
i. Otherwise perform as the Company's financial relations and public
relations consultant.
3. Allocation of Time and Energies. The Consultant hereby promises to
perform and discharge well and faithfully the responsibilities which may be
assigned to the Consultant from time to time by the officers and duly authorized
representatives of the Company in connection with the conduct of its financial
and investor public relations and communications activities, so long as such
activities are in compliance with applicable securities laws and regulations.
Consultant shall diligently and thoroughly provide the consulting services
required hereunder. Although no specific hours-per-day requirement will be
required, Consultant and the Company agree that Consultant will perform the
duties set forth hereinabove in a diligent and professional manner. The parties
acknowledge and agree that a disproportionately large amount of the effort to be
expended and the costs to be incurred by the Consultant and the benefits to be
received by the Company are expected to occur upon and shortly after, and in any
event, within two months of the effectiveness of this
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Agreement. It is explicitly understood that Consultant's performance of its
duties hereunder will in no way be measured by the price of the Company's common
stock, nor the trading volume of the Company's common stock. It is also
understood that the Company is entering into this Agreement with Liviakis
Financial Communications, Inc. ("LFC"), a corporation and not any individual
member of LFC, and with such, Consultant will not be deemed to have breached
this Agreement if any member, officer or director of LFC leaves the firm or dies
or becomes physically unable to perform any meaningful activities during the
term of the Agreement, provided the Consultant otherwise performs its
obligations under this Agreement.
4. Remuneration. As full and complete compensation for services described
in this Agreement, the Company shall compensate Consultant as follows:
4.1 For undertaking this engagement and for other good and valuable
consideration, the Company agrees to issue and deliver to the Consultant a
"Commencement Bonus" payable in the form of Warrants to purchase 1,290,000
shares of the Company's common stock (the "Warrants"). The form and content of
the Warrant agreement is attached hereto and referenced as "Exhibit A." Among
other things, the Warrants will contain the following terms and conditions:
a. the Warrants will be exercisable at a price of Four Dollars
and Sixty-Two Cents ($4.62) per share;
b. the term of the Warrants will expire on February 10, 2002;
c. the Warrants will contain no call and/or redemption
provisions;
d. the Warrants will contain (i) "piggyback registration rights"
such that the shares of common stock issuable upon the exercise of the
Warrants may be included in the next appropriate registration, if any,
filed by the Company before November 30, 1998, subject to certain
conditions, and (ii) if no registration in which the Consultants are
permitted to participate is anticipated to occur by November 30, 1998, the
Company's agreement to use its best efforts to file a Form S-3 registration
statement by November 30, 1998 registering for resale the shares of common
stock issuable upon the exercise of the Warrants. All registration costs
shall be borne solely by the Company; and
e. the Warrants shall be exercisable after May 15, 1998.
This Commencement Bonus shall be issued to the Consultant promptly
following execution of this Agreement and the shares issuable upon exercise of
the Warrants shall, when issued and delivered to Consultant, be fully paid and
non-assessable. The Company understands and agrees that Consultant has foregone
significant opportunities to accept this engagement and that the
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Company derives substantial benefit from the execution of this Agreement and the
ability to announce its relationship with Consultant. The Warrants to purchase
1,290,000 shares of the Company's common stock issued as a Commencement Bonus,
therefore, constitute payment for Consultant's agreement to represent the
Company and are a nonrefundable, non-apportionable, and non-ratable retainer;
such Warrants are not a prepayment for future services. If the Company decides
to terminate this Agreement prior to February 3, 1999 for any reason whatsoever,
it is agreed and understood that Consultant will not be requested or demanded by
the Company to return any of the Warrants paid to it hereunder. Warrants to
purchase 967,5000 shares pursuant to this Agreement shall be evidenced by a
Warrant agreement or agreements issued in the name of Liviakis Financial
Communications, Inc. and Warrants to purchase 322,500 shares pursuant to this
Agreement shall be evidenced by a Warrant agreement or agreements issued in the
name of Xxxxxx X. Xxxx ("Prag").
4.2 Consultant and Prag (hereinafter referred to as "Consultants")
acknowledge that the shares of common stock to be issued pursuant to the
Warrants (collectively, the "Shares") have not been registered under the
Securities Act of 1933, as amended (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 the Company has received an opinion of
counsel reasonably satisfactory to the Company that such resale or transfer is
exempt from the registration requirements of the Act.
4.3 In connection with the acquisition of the Warrants and the shares
issuable upon exercise of the Warrants, the Consultant and Xx. Xxxx (together,
"Consultants") represent and warrant to the Company as follows:
(a) Consultants acknowledge that the Consultants have 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 Warrants and the underlying Shares, and any additional
information which the Consultants have requested.
(b) Consultants' investment in restricted securities is
reasonable in relation to the Consultants' net worth, which is in excess of
ten (10) times the Consultants' cost basis in the Warrants. Consultants
have had experience in investments in restricted and publicly traded
securities, and Consultants have had experience in investments in
speculative securities and other investments which involve the risk of loss
of investment. Consultants acknowledge that an investment in the Warrants
is speculative and involves the risk of loss. Consultants have the
requisite knowledge to assess the relative merits and risks of this
investment without the necessity of relying upon other advisors, and
Consultants can afford the risk of loss of their entire investment in the
Warrants. Consultants 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.
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(c) Consultants are acquiring the Warrants for the Consultants'
own account for long-term investment and not with a view toward resale or
distribution thereof except in accordance with applicable securities laws.
5. Financing "Finder's Fee". It is understood that in the event Consultant
introduces Company, or its nominees, to a lender or equity purchaser, not
already having a preexisting relationship with the Company, with whom Company,
or its nominees, ultimately finances or causes the completion of such financing,
Company agrees to compensate Consultant for such services with a "finder's fee"
in the amount of 2.5% of total gross funding provided by such lender or equity
purchaser, such fee to be payable in cash. Such fee will be in addition to any
fees payable by Company to any other intermediary, if any, which shall be per
separate agreements negotiated between Company and such other intermediary. It
is also understood that in the event Consultant introduces Company, or its
nominees, to an acquisition candidate, either directly or indirectly through
another intermediary, not already having a preexisting relationship with the
Company, with whom Company, or its nominees, ultimately acquires or causes the
completion of such acquisition, Company agrees to compensate Consultant for such
services with a "finder's fees" in the amount of 2% of total gross consideration
provided by such acquisition, such fee to be payable in cash. This will be in
addition to any fees payable by Company to any other intermediary, if any, which
shall be per separate agreements negotiated between Company and such other
intermediary. It is specifically understood that Consultant is not nor does it
hold itself out to be a Broker/Dealer, but is rather merely a "Finder" in
reference to the Company procuring financing sources and acquisition candidates.
The obligation contained in this Section 5 will expire one year after the
termination of this Agreement.
5.1 It is further understood that Company, and not Consultant, is
responsible to perform any and all due diligence on such lender, equity
purchaser or acquisition candidate introduced to it by Consultant under this
Agreement, prior to Company receiving funds or closing on any acquisition.
However, Consultant will not introduce any parties to Company about which
Consultant has any prior knowledge of questionable, unethical or illicit
activities.
5.2 Company agrees that said compensation to Consultant shall be paid
in full at the time said financing or acquisition is closed. Moreover, said
compensation will be a condition precedent to the closing of such financing or
acquisition and Company shall execute any and all documents necessary to effect
said compensation.
5.3 As further consideration to Consultant, Company, or its nominees,
agrees to pay with respect to any financing or acquisition candidate provided
directly or indirectly to the Company by any lender or equity purchaser covered
by this Section 5, during the period of one year from the date of this
Agreement, a fee to Consultant equal to that outlined in Section 5 herein.
5.4 Consultant will notify Company of introductions it makes for
potential sources of financing or acquisitions in a timely manner (within
approximately 3 days of introduction) via facsimile memo. If Company has a
preexisting relationship with such nominee and believes such
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party should be excluded from this Agreement, then Company will notify
Consultant immediately of such circumstance via facsimile memo.
6. Expenses. Consultant agrees to pay for all its expenses (phone, mailing,
labor, etc.), other than extraordinary items (travel required by/or specifically
requested by the Company, luncheons or dinners for large groups of investment
professionals, mass faxing to a sizable percentage of the Company's
constituents, investor conference calls, print advisements in publications,
etc.) approved by the Company prior to its incurring an obligation for
reimbursement.
7. Indemnification. The Company warrants and represents that all oral
communications, written documents or materials furnished to Consultant by the
Company with respect to financial affairs, operations, profitability and
strategic planning of the Company are accurate in all material respects and
Consultant will protect, indemnify and hold harmless Consultant against any
claims or litigation including any damages, liability, cost and reasonable
attorney's fees as incurred with respect thereto ("Damages") resulting from
Consultant's communication or dissemination of any said information, documents
or materials not designated by the Company to the Consultant as "confidential"
or "Company private," excluding any such claims or litigation resulting from
Consultant's communication or dissemination of information not provided or
authorized by the Company. Consultant will indemnify and hold harmless the
Company, its officers, directors, employees, agents and affiliates against any
Damages resulting from Consultant's gross negligence or willful misconduct, or
from Consultant's dissemination of information that the Company has advised
Consultant is not accurate or is materially misleading.
8. Representations. Consultant represents that it is not required to
maintain any licenses any registrations under federal or any state regulations
necessary to perform the services set forth herein. Consultant acknowledges
that, to the best of its knowledge, the performance of the services set forth
under this Agreement will not violate any rule or provision of any regulatory
agency having jurisdiction over Consultant. Consultant acknowledges that, to the
best of its knowledge, Consultant and its officers and directors are not the
subject of any investigation, claim, decree or judgment involving any violation
of the SEC or securities laws. Consultant further acknowledges that it is not a
securities Broker/Dealer or a registered investment advisor. Company
acknowledges that, to the best of its knowledge, that it has not violated any
rule or provision of any regulatory agency having jurisdiction over the Company
that would have a material adverse effect on the Company. Company acknowledges
that, to the best of its knowledge, Company is not the subject of any
investigation, claim, decree or judgment involving any violation of the SEC or
securities laws.
9. Legal Representation. The Company acknowledges that it has been
represented by independent legal counsel in the preparation of this Agreement.
Consultant represents that they have consulted with independent legal counsel
and/or tax, financial and business advisors, to the extent the Consultant deemed
necessary.
10. Status as Independent Contractor. Consultant's engagement pursuant to
this Agreement shall be as an independent contractor, and not as an employee,
officer or other agent of
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the Company. Neither party to this Agreement shall represent or hold itself out
to be the employer or employee of the other. Consultant further acknowledges the
consideration provided hereinabove is a gross amount of consideration and that
the Company will not withhold from such consideration any amounts as to income
taxes, social security payments or any other payroll taxes. All such income
taxes and other such payment shall be made or provided for by Consultant and the
Company shall have no responsibility or duties regarding such matters. Neither
the Company or the Consultant possess the authority to bind each other in any
agreements without the express written consent of the entity to be bound.
11. Attorneys' Fees. If any legal action or any arbitration or other
proceeding is brought for the enforcement or interpretation of this Agreement,
or because of an alleged dispute, breach, default or misrepresentation in
connection with or related to this Agreement, the successful or prevailing party
shall be entitled to recover reasonable attorneys' fees and other costs in
connection with that action or proceeding, in addition to any other relief to
which it or they may be entitled, including those incurred on appeal or in
bankruptcy proceedings.
12. Waiver. The waiver by either party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by such other party.
13. Notices. All notices, requests, and other communications hereunder
shall be deemed to be duly given if hand delivered, sent by courier, sent via
confirmed facsimile transmission, or sent by U.S. mail, postage prepaid,
addressed to the other party at the address as set forth herein below:
To the Company: Pacific Aerospace & Electronics, Inc.
Xx. Xxx X. Xxxxxx, President & CEO
000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
To the Consultant: Liviakis Financial Communications, Inc.
Xxxx X. Xxxxxxxx, President
0000 X Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
It is understood that either party may change the address to which notices
for it shall be addressed by providing notice of such change to the other party
in the manner set forth in this paragraph.
14. Choice of Law, Jurisdiction and Venue. This Agreement shall be governed
by, construed and enforced in accordance with the laws of the State of
California. The parties agree that
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Sacramento County, California, will be the venue of any dispute and will have
jurisdiction over all parties.
15. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the alleged breach thereof, or relating to Consultant's
activities or remuneration under this Agreement, shall be settled by binding
arbitration in California, in accordance with the applicable rules of the
American Arbitration Association, and judgment on the award rendered by the
arbitrator(s) shall be binding on the parties and may be entered in any court
having jurisdiction thereof. The provisions of Title 9 of Part 3 of the
California Code of Civil Procedure, including section 1283.05, and successor
statutes, permitting expanded discovery proceedings shall be applicable to all
disputes that are arbitrated under this paragraph.
16. Complete Agreement. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof. This Agreement and its terms may
not be changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
AGREED TO:
"Company" PACIFIC AEROSPACE & ELECTRONICS , INC.
Date: February 3, 1998 By: XXX X. XXXXXX
-------------------- -------------------------------------
Xxx X. Xxxxxx, President & CEO
"Consultants" LIVIAKIS FINANCIAL COMMUNICATIONS, INC.
Date: February 3, 1998 By: XXXX X. XXXXXXXX XXXXXX X. XXXX
-------------------- ---------------- ------------------
Xxxx X. Xxxxxxxx Xxxxxx X. Xxxx
President Sr. Vice President
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