Exhibit 10.29
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
July 28, 2004, by and between M-Wave, Inc., a Delaware corporation (the
"Company"), and Xxxxxx X. ("Xxx") Xxxxx ("Employee").
WITNESSETH:
A. Since April 2003, a financial advisory company (herein, "CSI"),
controlled by Employee, has served the Company in the restructuring of its
operations and financial condition and, in connection with the current agreement
between CSI and the Company, Employee presently serves as the Chief Financial
Officer and the Chief Administrative Officer and Secretary of the Company.
B. The Company, pursuant to action of its Board of Directors taken at a
meeting held on July 27, 2004, desires to terminate the agreement between it and
CSI and to retain the benefits of Employee's knowledge, skill, and experience
and employ Employee under a personal employment agreement, upon the terms and
subject to the conditions of this Agreement.
C. Employee desires to cause CSI to terminate its agreement with the
Company and to be personally employed by the Company upon the terms and subject
to the conditions of this Agreement.
AGREEMENTS:
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth below, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Employee hereby
covenant and agree as follows:
1. Duties. During the Term of this Agreement, Employee agrees to be
employed by and to serve the Company as its Chief Executive Officer, and the
Company agrees to employ and retain Employee in such capacity, subject to the
terms of this Agreement. Employee also agrees to continue to serve without
additional compensation as the Secretary of the Company at the will of the Board
of Directors of the Company. Employee shall devote all of his business time,
energy and skill to the affairs of the Company, subject to the direction of the
Board of Directors of the Company. Employee shall have powers and duties
commensurate with his position as provided for herein. Employee shall comply
with the general management policies of the Company as announced from time to
time.
1
2. Term. The term ("Term") of this Agreement shall be for the period
commencing on July 28, 2004 ("Effective Date") and ending on December 31, 2006,
and shall automatically renew for additional one-year periods thereafter unless
either party provides written notice of termination at least ninety (90) days
prior to the expiration of the Term or the then applicable renewal term.
3. Salary, Benefits and Bonus Compensation.
3.1. Salary. Commencing on the Effective Date of this Agreement,
during the initial year of the Term the Company agrees to pay Employee salary at
the rate of $208,000 per annum pursuant to the Company's regular payroll
practices and schedules, and subject to withholding for taxes and applicable
benefits. During the remainder of the Term, the Company agrees to pay Employee a
salary at the rate of $239,000 per annum pursuant to the Company's regular
payroll practices and schedules, and subject to withholding for taxes and
applicable benefits. The Board of Directors of the Company may increase, but may
not decrease, Employee's salary during the Term.
3.2. Additional Benefits. During the Term, Employee shall be
entitled to the following fringe benefits:
3.2.1. Employee Benefits. Employee shall be eligible to
participate in the Company's group health, dental and other insurance or benefit
plans, including stock option grants, stock awards, bonuses, pension and
deferred compensation, as may be generally available to executive employees of
the Company.
3.2.2. Business Expenses. The Company shall reimburse Employee
for all reasonable and necessary expenses incurred in carrying out his duties
under this Agreement, including but not limited to travel and entertainment, and
cell phone expenses, in accordance with the Company's policies in effect from
time to time. Employee shall present to the Company an account of such expenses
in such form as may be required by the Company on a monthly basis.
3.2.3. Paid Time Off. Employee shall be entitled to three (3)
weeks of vacation per calendar year occurring during the Term, and other paid
time off pursuant to the Company's policies, during which time Employee's
compensation shall be paid in full.
3.2.4 Signing Bonus. As a bonus for signing this Agreement,
the Company hereby grants Employee an option to purchase 400,000 shares of
Common Stock of the Company at an exercise price of $1.16 per share, being the
closing price of the Company's Common Stock on the NASDAQ SmallCap Market on the
Effective Date. Such option, when vested, shall be exercisable in whole or in
part on or before July 27, 2009 and shall not be vested at grant but, except as
otherwise provided in Section 3.2.6 hereof, shall become fully vested on October
28, 2004.
2
3.2.5 Cash Bonus. Employee shall be eligible to receive an
annual cash bonus ("Cash Bonus") with respect to the fiscal year ending December
31, 2005 and the fiscal year ending December 31, 2006 equal to ten percent (10%)
of the amount by which the Company's Gross Margin (as defined below) for such
fiscal year exceeds $4,500,000. For the purposes of this Agreement, "Gross
Margin" shall be as reflected in the Company's financial statements and
determined by its regularly engaged independent accountants in a manner
consistent with past practice. Payment of each Cash Bonus is to be made to
Employee as soon as practicable after the end of the fiscal year for which it is
earned. Notwithstanding the foregoing, Employee's Cash Bonus shall not exceed
$200,000 with respect to any fiscal year occurring during the Term.
3.2.6 Change of Control. In the event that the Company is
subject to a Change of Control (as defined in Section 6.1.5 herein) and (i) the
Company or its successor terminates Employee's employment with the Company
hereunder for any reason other than as set forth in Section 4.1 herein during
the one (1) year period following the date of the Change of Control or (ii)
Employee terminates his employment with the Company hereunder for any reason
during the thirty (30) day period which commences on the date which is ninety
(90) days after the date of the Change of Control, then upon such termination of
his employment Employee shall receive the following severance benefits:
(a) a lump sum payment equal to 150% of the then remaining unpaid
salary due Employee during the Term pursuant to Section 3.1 herein;
(b) all accrued but unpaid benefits due Employee relating to Section
3.2.4 or Section 3.2.5 of this Agreement, to be paid as provided therein;
(c) all other accrued and unpaid benefits due Employee under this
Agreement, including reimbursement of expenses incurred; and
(d) notwithstanding the provisions of any agreement or employee
benefit plan to the contrary, all outstanding stock options, rights to receive
restricted stock or the like shall immediately become fully vested and any
restrictions on such restricted stock shall be deemed terminated.
4. Termination of Employment.
4.1. Termination for Cause. Termination for Cause (as defined in
Subsection 6.1.1 herein) of Employee's employment may be effected by the Company
at any time without liability except as specifically set forth in this
Subsection. The termination shall be effected by written notification to
Employee and shall be effective as of the time set forth in such notice. At the
effective time of a Termination for Cause, the Company shall pay Employee all of
his
3
accrued and unpaid salary pursuant to Section 3.1 of this Agreement and any
reasonable and necessary business expenses incurred by Employee in connection
with his duties hereunder, all to the date of termination.
4.2 Termination By Company Other Than for Cause. The Company may
effect a Termination Other Than for Cause (as defined in Subsection 6.1.2
herein) of Employee's employment at any time upon giving written notice to
Employee of such termination and without liability except as specifically set
forth in this Subsection. The termination shall be effective as of the time set
forth in such notice. At the effective time of any Termination Other Than for
Cause, the Company shall pay Employee his salary as set forth in Section 3.1 of
this Agreement for the remainder of the Term and any reasonable and necessary
business expenses incurred by Employee in connection with his duties hereunder
to the date of termination, and Employee shall receive the benefits contemplated
by Subsections 3.2.6 (b) and (c) of this Agreement.
4.3 Termination by Reason of Disability. If Employee, in the
reasonable judgment of the Board of Directors of the Company, has failed to
perform the essential elements of his position under this Agreement on account
of illness or physical or mental incapacity, and such illness or incapacity
continues for a consecutive period of more than three (3) months, then the
question of whether Employee's illness or incapacity is reasonably likely to
continue shall be submitted to the Company or, if disability insurance is
maintained by Employee, Employee's disability insurance carrier for
determination. In the event the Company or such insurance carrier determines
that Employee is subject to such an illness or incapacity, and is unable to
perform the essential elements of his position with or without a reasonable
accommodation by the Company, the Company shall have the right to terminate
Employee's employment ("Termination for Disability") by written notification to
Employee and shall immediately pay to Employee all of his accrued and unpaid
salary as set forth in Section 3.1 of this Agreement and any reasonable and
necessary business expenses incurred by Employee in connection with his duties
hereunder, to the date of termination, and Employee shall receive the benefits
contemplated by Subsections 3.2.6 (b) and (c) of this Agreement.
4.4 Death. In the event of Employee's death during the term of
employment, Employee's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs, and the Company shall pay
to his estate all of his accrued and unpaid salary as set forth in Section 3.1
of this Agreement and any reasonable and necessary business expenses incurred by
Employee in connection with his duties hereunder, to the date of termination,
and Employee shall receive the benefits contemplated by Subsections 3.2.6 (b)
and (c) of this Agreement.
4.5. Termination By Employee With Good Reason. In the event that
Employee terminates his employment with Good Reason (as defined in Subsection
6.1.3 herein), the Company shall pay Employee his salary as set forth in Section
3.1 of this Agreement for the remainder of the Term and any reasonable and
necessary business expenses incurred by Employee in connection with his duties
hereunder to the date of termination, and Employee shall receive the benefits
contemplated by Subsections 3.2.6 (b) and (c) of this Agreement.
4
4.6. Voluntary Termination. In the event of a Voluntary Termination
(as defined in Subsection 6.1.4 herein) by Employee, the Company shall pay all
of his accrued and unpaid salary as set forth in Section 3.1 of this Agreement
and any reasonable and necessary business expenses incurred by Employee in
connection with his duties hereunder, all to the date of termination.
5. Protection of the Company's Business. In consideration of his
employment by the Company, and recognizing the Company's concerns regarding the
protection of its business, Employee agrees as follows:
5.1 Non-Competition. Employee agrees that during the
Non-Competition Period, as defined hereinafter, he shall not enter into any
agreement with, or engage in, or be connected or associated with, or own any
interest in, or work for any individual, firm or corporation or other entity
which is engaged in or connected with any business which is in competition with
the Company in the continental United States or any other country in which the
Company is doing business or is reasonably expected to do business, unless he
obtains the express written approval of the Board in its sole discretion after
full disclosure of the nature of the intended arrangement. The "Non-Competition
Period" means the period of the Employee's employment during the Term and a
period of one year following the Employee's termination of employment for any
reason.
5.2 Non-Solicitation. Employee agrees that during the
Non-Competition Period, he shall not (a) encourage any employee of the Company
or any of its subsidiaries to leave employment with the Company or subsidiary or
(b) solicit any customers of the Company or any of its subsidiaries to reduce or
no longer do business with the Company, directly or indirectly.
5.3 Non-Disclosure. Employee agrees not to disclose either during
the period of his employment hereunder or at any time thereafter to any person,
firm, or corporation any information that the Company desires to protect and
keep secret and confidential concerning the business or affairs of the Company
which he may have acquired in the course of, or as incident to, his employment
hereunder for his own benefit or to the detriment or intended detriment of the
Company.
5.4 Injunction. Employee acknowledges that the Company is relying
on the provisions of this Section 5 to protect its legitimate business interests
and that the same are not an unreasonable restriction on him, and that monetary
damages will not be an adequate remedy to a breach of this Section, and that it
would be impossible for the Company to measure damages in the event of such a
breach. Therefore, Employee agrees that, in addition to other rights that the
Company may have, the Company is entitled to an injunction, without posting
bond, preventing Employee from doing any act that would be in breach of this
Section 5.
5
6. Definitions.
6.1 Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
6.1.1. "Termination for Cause" shall mean termination by the
Company of Employee's employment by the Company by reason of (i) a material
breach of Employee's duty of loyalty to the Company or any act of dishonesty or
fraud with respect to the Company, (ii) the commission by Employee of a felony
or a crime involving moral turpitude, or the commission by Employee of such
other act causing significant harm to the Company's standing or reputation,
(iii) conduct tending to bring the Company into public disgrace or disrepute or
which could reasonably subject the Company to legal action, including but not
limited to sexual or other illegal harassment, (iv) repeated failure, after
written notice to perform duties reasonably directed by the Company, (v) gross
negligence or willful misconduct with respect to the Company, or (vi) failure to
comply with the terms and provisions of Section 5 of this Agreement. . "Cause"
shall not mean, with respect to the acts or omissions of Employee, (a) bad
judgment or negligence other than habitual neglect of duty; or (b) any act or
omission believed by Employee in good faith to have been in or not opposed to
the interest of the Company, or any parent or subsidiary or successor to the
Company (without intention of Employee to gain therefrom, directly or
indirectly, a profit to which he was not legally entitled); or (c) any act or
omission in respect of which a determination could properly have been made by
the Board of Directors of the Company or any parent or subsidiary or successor
of the Company, that Employee met the applicable standard of conduct for
indemnification or reimbursement as applicable to officers and directors under
the bylaws or the laws and regulations under which such company is governed, in
each case in effect at the time of such act or omission.
6.1.2. "Termination Other Than for Cause" shall mean
termination by the Company of Employee's employment by the Company, other than a
Termination for Cause or Termination for Disability, for any or no reason,
including, without limitation, constructive termination or discharge of Employee
by reason of the Company's material breach of its obligations under this
Agreement.
6.1.3. "Termination by Employee with Good Reason" shall mean
Employee's resignation of employment with the Company because of a material
change in the terms or conditions of Employee's employment with the Company to
Employee's detriment, including but not limited to (i) a material reduction in
Employee's job duties, or the substitution of job duties requiring substantially
less skill, independent judgment or experience, (ii) the diminution of rank or
title accorded to Employee, (iii) a reduction of more than 10% in Employee's
compensation, including employee benefits and any applicable equity
compensation, or (iv) the relocation of Employee's primary work location to a
new location more than 50 miles away from the previous location.
6
6.1.4. "Voluntary Termination" shall mean termination by
Employee of Employee's employment with the Company other than a Termination by
Employee for Good Reason. To effect Voluntary Termination, Employee shall give
no less than four (4) weeks' written notice to the Company, and shall remain
available to the Company, at the Company's option, for the entire period until
the date of termination.
6.1.5 "Change of Control" shall mean an event as a result of
which: (i) any "person" (as such term is used in Sections 13d) and 14(d) of the
Securities and Exchange Act of 1934 (the "Exchange Act")), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, except that
a person shall be deemed for such purposes to have "beneficial ownership" of all
securities that such person has a right to acquire, whether such right is
exercisable immediately or only after the passage of time or upon the
satisfaction of performance criteria or other conditions), directly or
indirectly, of more than 50% of the total voting power of the voting stock of
the Company (or its successors and assigns); (ii) the Company consolidates with,
or merges with or into another corporation or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any person, or any corporation consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which the
outstanding voting stock of the Company is changed into or exchanged for cash,
securities or other property, other than any such transaction where (A) the
outstanding voting stock of the Company is changed into or exchanged for (x)
voting stock of the surviving or transferee corporation or (y) cash, securities
(whether or not including voting stock) or other property, and (B) the holders
of the voting stock of the Company immediately prior to such transaction own,
directly or indirectly, not less than 50% of the voting power of the voting
stock of the surviving corporation immediately after such transaction; (iii) any
person or group, other than the stockholders of the Company as a whole has a
right to designate or has designated the majority of the Board of Directors of
the Company or the designees/affiliates of such person or group constitute a
majority of the Board or (iv) the Company is liquidated or dissolved or adopts a
plan of liquidation.
7. Remedies.
7.1 Costs. If litigation is brought to enforce or interpret or is
maintained to defend any provision contained herein, the court shall award
reasonable attorneys' fees and disbursements to the prevailing party as
determined by the court.
7.2 Severability. THE PARTIES HAVE CAREFULLY CONSIDERED ALL OF
SECTIONS 4, 5, AND 6 OF THIS AGREEMENT AND AGREE THAT THEY REPRESENT A PROPER
BALANCING OF THEIR INTERESTS AND WILL NOT PREVENT EMPLOYEE FROM EARNING A LIVING
AFTER TERMINATION OF HIS EMPLOYMENT. It is the express intent of the parties
hereto that the obligations of, and restrictions on, the parties as provided in
such Sections shall be enforced and given effect to the fullest extent legally
permissible. If, in any judicial proceeding, a court shall refuse to enforce one
or more of the covenants or agreements contained in this Agreement because the
duration
7
thereof is too long, the scope thereof is too broad or some other reason, for
the purpose of such proceeding, the court may reduce such duration or scope to
the extent necessary to permit the enforcement of such obligations and
restrictions.
8. Miscellaneous.
8.1 Waiver. The waiver of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of the same or other provision hereof.
8.2 Entire Agreement; Modifications. This Agreement represents the
entire understanding between the parties with respect to the subject matter
hereof, and this Agreement supersedes any and all prior understandings,
agreements, plans and negotiations, whether written or oral, with respect to the
subject matter hereof, including, without limitation, any understandings,
agreements or obligations respecting any past or future compensation, bonuses,
reimbursements or other payments to Employee from the Company. All modifications
to this Agreement must be in writing and signed by the party against whom
enforcement of such modification is sought.
8.3 Notices. All notices and other communications under this
Agreement shall be in writing and shall be given by hand delivery, or
first-class mail, certified or registered with return receipt requested, or by
commercial overnight courier or by fax and shall be deemed to have been duly
given upon hand delivery, receipt if mailed, the first business day following
delivery to a commercial overnight courier or upon receipt of a fax, addressed
as follows:
If to the Company:
M-Wave, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxx X. Xxxxx, Esq.
Xxxxxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
8
If to Employee:
Xxxxxx X. ("Xxx") Xxxxx
000 Xxxxxxxxxxx Xxxx.
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxxxx X.Xxxxxx, Esq.
Levun, Xxxxxxx & Xxxxx
000 Xxxxxx Xxxx., Xxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Any party may change such party's address for notices by notice given pursuant
to this Section 8.3.
8.4 Headings. The Section headings herein are intended for
reference and shall not by themselves determine the construction or
interpretation of this Agreement.
8.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois without
application of its conflict of laws rules.
8.6 Severability. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, so that it is enforceable to the maximum extent
possible, and all other provisions of the Agreement shall be deemed valid and
enforceable to the extent possible.
8.7 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
executors, administrators, heirs, successors and assigns. The provisions of this
Agreement relating to the duties and obligations of the Company are
transferable, assignable and delegable by the Company. Those provisions relating
to the duties and obligations of the Employee are not transferable, assignable
or delegable.
8.8 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
8.9 Withholdings; Setoff. All compensation and benefits to
Employee hereunder shall be reduced by all federal, state, local and other
withholdings and similar taxes and payments required by applicable law. The
Company may withhold amounts due it from Employee arising out of Employee's
employment relationship with the Company, including for example, overpayments of
compensation and personal charges incurred on Company accounts, from amounts due
under this Agreement to Employee.
9
8.10 Survival. The provisions set forth in Section 3.2 and Article
4 hereof shall survive the expiration or earlier termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
EMPLOYEE M-WAVE, INC.
____________________________ By: ________________________________
Xxxxxx X. ("Xxx") Xxxxx
Its: ________________________________
10
