EXHIBIT 10.15
CONSULTING AGREEMENT
This Consulting Agreement is effective as of the September 1, 2003, by
and between M-Wave, Inc., a Delaware corporation, ("M-Wave"), and Credit Support
International, LLC, a Texas limited liability company ("Consultant").
W I T N E S S E T H:
WHEREAS, M-Wave has requested that Consultant provide assistance and
consultation in certain strategic areas of its business, including, but not
limited to, assistance in the development and implementation of a strategic
business restructuring plan, augmentation of management skills, consultation
with the Board of Directors of M-Wave on various matters, and the negotiation of
additional debt and equity investments in M-Wave; and,
WHEREAS, Consultant is willing to provide such services to M-Wave upon
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the adequacy, sufficiency and receipt of which are hereby
acknowledged, M-Wave and Consultant hereby agree as follows:
1. Term. The term of this Agreement shall be for a period of one
(1) year commencing on September 1, 2003 ("Term").
2. Termination.
a. Either party may terminate this Agreement, without
cause, upon delivery to the other party of at least sixty (60) days
written notice thereof ("Notice Period"), and, thereafter, this
Agreement shall be deemed terminated upon the expiration of said Notice
Period. In the event that this Agreement is terminated by M-Wave
without cause, M-Wave shall, within ten (10) days of the effective date
of such termination, pay to Consultant a termination fee equal to the
sum of Ninety-Six Thousand Dollars ($96,000.00) reduced, but not below
zero, by the amount of all Base Fees (as such term is defined in
Section 5(a) below) paid by M-Wave to Consultant under this Agreement.
b. Either party may terminate this Agreement for "Cause"
as defined below, upon delivery to the other party of written notice
thereof, which notice shall state the basis under which Cause exists.
In event of a termination of this Agreement for Cause, M-Wave shall pay
to Consultant all fees and reimbursements though the termination of
this Agreement.
c. For the purpose of this Section 2, "Cause" shall mean
the occurrence of any of the following: (i) conviction of Consultant or
of Xxxxxx X. Xxxxx (the provider of Consultant's services hereunder as
contemplated by Section 4 below) of any felony or other crime involving
dishonesty, fraud or moral turpitude; (ii) the Consultant's habitual
neglect of its duties hereunder, after written notice thereof is
delivered to Consultant, and the
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provision of a reasonable opportunity to cure same; or (iii) a material
breach of this Agreement by either party hereto. Cause shall not mean
with respect to the acts or omissions of Consultant any of the
following:
(1) bad judgment or negligence other than
habitual neglect of duty; or
(2) any act or omission believed by Consultant
in good faith to have been in or not opposed to the interest
of M-Wave, any parent or subsidiary of M-Wave or any successor
to M-Wave (without intent of Consultant to gain therefrom,
directly or indirectly, a profit to which it was not legally
entitled); or
(3) any act or omission in respect of which a
determination could properly have been made by the Board of
Directors of M-Wave or any parent or subsidiary of M-Wave,
that the Consultant 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.
3. Services. During the Term, Consultant hereby agrees to provide
M-Wave with the following services ("Consulting Services"):
a. Assist in the development and execution of a
turnaround business strategy for M-Wave, approved by its Board of
Directors.
b. Evaluate M-Wave's present operating, financial,
strategic planning, and going concern issues in order to recommend a
staged and prioritized turnaround/restructuring plan or, if appropriate
in the view of Consultant, an orderly liquidation to M-Wave's Board of
Directors and management for consideration, including, but not limited
to, divestiture, sale, merger, strategic alliance, or other device.
c. Provide oversight in the development and
implementation of the M-Wave business plan being prepared by M-Wave's
management team. This shall include evaluation of potential
diversification, both internal and external to M-Wave, and the
evaluation of potential mergers, joint ventures or other business
alliances.
d. Utilization of personal and business contacts to
further M-Wave's business objectives, both in terms of its business
opportunities (including new sales), as well as financing activities,
in accordance with its present and changing business models.
e. Provide counsel to the Board of Directors regarding
committees, internal and external reporting procedures, evaluation,
guidance and oversight of the management team.
f. Evaluate outside service provider firms recommended
to Board of Directors or Audit Committee, including public accounting
firms, law firms, public relations firms, investment bankers and
investment research firms.
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g. Provide assistance and recommend structural changes
to the Board of Directors, including, but not limited to, member
deletions and additions.
h. Serve in an ombudsman capacity to receive
confidential information from any party, inside or outside M-Wave,
wherein conflicts of interest, threats, or improper conduct may
adversely impact M-Wave.
i. Consult on compliance with NASDAQ and Securities and
Exchange Commission rules and regulations and compliance with the
Xxxxxxxx-Xxxxx Act of 2003 and the rules thereunder.
j. Assist M-Wave in obtaining debt financing and/or
equity investments.
k. Negotiate with delinquent trade vendors and develop
alternative repayment plans.
l. Analyze and assist in development of a "zero-based"
budget, and assist in achieving a zero or minimal cash burn.
4. Performance of Services. Except as may otherwise be approved
by M-Wave in writing, Consultant shall cause all consulting services set forth
hereunder to be performed by Xxxxxx X. Xxxxx ("Xxxxx"). Consultant's services
shall be performed at M-Wave's offices located in West Chicago, Illinois, New
York, New York, East Stroudsburg, Pennsylvania, or at such other location(s) as
the Board of Directors of M-Wave shall reasonably designate upon proper notice.
It is anticipated that Consultant's services shall require that Consultant
devote at least forty (40) hours per week to its obligations hereunder.
Notwithstanding the foregoing, M-Wave acknowledges and agrees that Xxxxx may
perform duties on behalf of Consultant which do not relate to M-Wave, provided
same do not materially interfere with the services to be provided by Consultant
pursuant hereto. Consultant shall report directly to the Board of Directors of
M-Wave.
5. Compensation, Bonuses, and Stock Options. In consideration of
the Consulting Services rendered by Consultant to M-Wave pursuant to this
Agreement, M-Wave shall pay to Consultant compensation as follows:
a. Base Fees. M-Wave shall pay to Consultant a monthly
fee ("Base Fee") of Twelve Thousand Dollars ($12,000.00). The Base Fee
shall be payable in advance and in twice monthly installments of Six
Thousand Dollars ($6,000.00) each, such payments being paid on the 1st
and 15th day of each calendar month during the Term. The Base Fee may
be periodically adjusted upward based on Consultant's performance upon
the approval of the Compensation Committee of the Board of Directors of
M-Wave.
b. Bonus Fees. In addition to the Base Fee, M-Wave shall
pay to Consultant, additional cash compensation ("Bonus Fee") equal to
fifty percent (50%) of the Base Fee each month during the Term after
all of the following events have occurred (inclusive of the
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month the last of the following occurs): (i) M-Wave generates positive
earnings before interest, taxes, depreciation and amortization
("EBITDA") in accordance with generally accepted accounting principles
consistently applied (without regard to receipt of tax refunds or
proceeds of sale of property outside the ordinary course of business)
for two (2) consecutive months (but in any case not earlier than the
third month after the effective date of this Agreement); (ii) M-Wave
makes payment of all its obligations to Bank One; (iii) M-Wave closes
upon the sale of its former manufacturing plant and adjacent vacant
land located in Bensenville, Illinois; (iv) M-Wave receives any tax
refund due from the State of Illinois for the tax year ended in 2002;
and (v) M-Wave secures a line of credit in the minimum amount of One
Million Five Hundred Thousand Dollars ($1,500,000), which line of
credit may be secured by some or all of the assets of M-Wave. .
c. Success Fee. M-Wave shall also pay to Consultant a
fee ("Success Fee") for any completed transactions described below
(each a "Qualifying Transaction") in which Consultant either (i)
procures or introduces the transaction participant to M-Wave or (ii)
participates in the negotiating of such transaction. The Success Fee
shall be based on the entire transaction value (including all debt,
cash and/or equity) of a Qualifying Transaction, as set forth below:
(1) Two percent (2%) of the maximum principal
loan amount available under any loan, debt, line of credit, or
other credit facility (either term or revolving) in which the
lender thereof is granted a senior secured position in some or
all of M-Wave's assets and/or equipment.
(2) Three percent (3%) of the maximum principal
loan amount available under any loan, debt, line of credit or
other credit facility (either term or revolving) in which the
lender thereof is granted a subordinated security interest in
some or all of the assets and/or equipment of M-Wave,
including, but not limited to, subordinated debt, mezzanine
debt or "Tranche B" debt.
(3) Four percent (4%) of the total gross
consideration received by M-Wave in any private placement of
shares of M-Wave's stock (either common or preferred), without
reduction for any deal fees and expenses.
(4) Except for the Strategic Operating Alliance
with American Standard Circuits, three percent (3%) of the
gross sales price, economic value or total consideration,
without reduction for any deal fees or expenses, with respect
to any of the following: (i) any sale of all or a material
portion of M-Wave's assets outside the ordinary course of
business; (ii) any going private transaction; (iii) the merger
of M-Wave with any other entity; or (iv) the acquisition by
M-Wave of any other entity.
M-Wave and Consultant shall agree upon the amount of the Success Fee,
or the methodology for quantifying the Success Fee, with respect to
each potential Qualifying Transaction prior to the initiation of
discussions with a potential transaction participant or as soon as
practicable thereafter. The Success Fee shall be paid by M-Wave to
Consultant at the closing of the Qualifying Transaction. Upon receipt
of a written request therefor, M-
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wave shall direct a transaction participant to hold in escrow a sum
equal to the Success Fee and to pay such escrowed sum directly to
Consultant. The Success Fee shall be paid to Consultant for any
Qualifying Transaction that is consummated subsequent to the expiration
or earlier termination of this Agreement.
d. Stock Options. Promptly upon execution of this
Consulting Agreement, M-Wave shall grant to Xxxxx stock options for the
purchase of One Hundred Forty Four Thousand (144,000) shares of M-Wave
common stock ("Stock Options") in the form as shall be agreed to by
M-Wave and Consultant. Such grant of Stock Options shall provide for
the following terms:
(1) The Stock Options shall vest at a rate equal
to Twelve Thousand (12,000) Options per complete calendar
month that this Agreement is in effect; provided, however,
that no Stock Options shall vest with respect to any month in
which a Bonus Fee is paid, and the Stock Options which do not
vest as a result of this Paragraph shall be terminated and
null and void (the "Terminated Options").
(2) The exercise price ("Stock Option Exercise
Price") of each Stock Option shall be the average closing
price of M-Wave's common stock as reported on the NASDAQ Small
Cap Market for the twenty (20) trading days immediately prior
to the date of the grant of such Stock Options.
(3) Vested Stock Options may be exercised, in
one lump sum or from time-to-time, at any time on or prior to
the fifth (5th) anniversary of the grant thereof.
(4) In the event that during the Term, M-Wave is
no longer subject to the periodic reporting provisions of the
Securities Exchange Act of 1934, as a result of a "going
private" transaction or other transaction approved by the
Board of Directors and its shareholders (if necessary under
applicable law), then within thirty (30) days of the
occurrence of such event, M-Wave shall issue to Xxxxx, in
exchange for his Stock Options (whether or not vested), the
number of shares of M-Wave common stock determined by
multiplying:
(i) the total number of shares of M-Wave common stock
either outstanding or reserved for issuance upon the
exercise or conversion of options or rights to
acquire such shares at an exercise price or
conversion price which is less than the "The Stock
Option Exercise Price" times
(ii) two and one-half (2.5%) percent times
(iii) a fraction, the denominator of which is
one-hundred-forty-four thousand (144,000), and the
numerator of which is one-hundred-forty-four thousand
(144,0000) less the number of Terminated Options.
Xxxxx shall be granted such shares in exchange for the
outstanding Stock Options and without payment of any
additional consideration. M-Wave shall promptly issue
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to Xxxxx a stock certificate representing such shares bearing
an appropriate restrictive legend that such shares have not
been registered for sale under the Securities Act of 1933. The
shares so issued shall be deemed fully paid and
non-assessable.
6. Fees, Allowances and Expense Reimbursement. M-Wave
shall pay Consultant the following fees, allowances and expense reimbursements:
a. An annual health care coverage allowance in the
amount of Three Thousand Six Hundred Dollars ($3,600.00), payable in
twelve (12) equal monthly payments, with the first such monthly payment
being due and payable upon execution hereof and the remaining eleven
(11) monthly payments being due and payable on the first day of each
calendar month thereafter.
b. A monthly travel and housing allowance in the amount
of Two Thousand Eight Hundred Dollars ($2,800.00), payable in advance
on the first day of each calendar month during the Term, with the first
such monthly payment being due and payable upon the execution hereof.
c. Reimbursement of the all out of pocket expenses
incurred by Consultant for any professional liability insurance,
directors and officers insurance, or bonding costs reasonably
determined by Consultant to be required in the performance of
Consultant's duties hereunder in accordance with past practices. M-Wave
shall promptly reimburse Consultant for such expenses upon receipt of
invoice therefor.
d. Reimbursement of legal fees incurred by Consultant in
negotiating this Agreement and the performance of Consultant's duties
pursuant hereto in the amount not to exceed Two Thousand Five Hundred
Dollars ($2,500.00) during the Term. M-Wave shall promptly reimburse
Consultant for such fees upon receipt of an invoice therefor.
e. Reimbursement of any other fees and expenses as shall
be incurred by Consultant in the performance of its duties hereunder,
which expenses have been approved by M-Wave. M-Wave shall promptly
reimburse Consultant for such fees upon receipt of invoice therefor.
7. Put Option. M-Wave hereby grants to Xxxxx the following put
option ("Put Option"):
a. In the event the Stock Options are exchanged for
shares of M-Wave's common stock ("Conversion Shares") pursuant to
Subparagraph 5(d)(4) above, Xxxxx shall have an option (on one
occasion) to require M-Wave to acquire up to all the Conversion Shares
on the terms set forth below. The Put Option granted in this Section
7(a) may be exercised by Xxxxx at any time on or before the fifth
anniversary of the date of issuance to him of the Stock Options, by
delivery of a written notice thereof to M-Wave. If Xxxxx so exercises
such option, M-Wave shall be obligated to purchase each such Conversion
Share at a per share price equal to the quotient derived by (i) the
product of the M-Wave's
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earnings before interest, taxes, depreciation and amortization
(determined in accordance with generally accepted accounting principles
consistently applied) for the twelve (12) month period ending on the
last day of the last complete calendar quarter immediately preceding
the date on which such option is exercised, multiplied by four (4), and
divided by (ii) the number of shares of the common stock of M-Wave
issued and outstanding on the date of exercise of the Put Option.
("Conversion Option Price"). The Conversion Option Price shall be paid
to Xxxxx in accordance with Paragraph 7(b) below.
b. M-Wave shall pay to Xxxxx the Conversion Option
Price, as applicable, in twelve (12) equal monthly installments of
principal and interest, with interest accruing at a rate equal to the
applicable federal rate for short term obligations as in effect on the
date of exercise of the applicable Put Option, as such rate is
determined by the Internal Revenue Service. The first such payment
shall be due on the first day of the first month following the month in
which such option is exercised, with additional payments being due on
the first day of each subsequent month until paid in full.
8. Confidential Information. Consultant and M-Wave agree that any
information received by such party, and its respective, officers, directors,
members, employees and agents (collectively, the "Receiving Party"), which was
provided by the other party, or its respective, officers, directors, members,
employees and agents (collectively, the "Disclosing Party") and which concerns
the personal, financial, business plans, legal or other affairs of the
Disclosing Party and which is not readily available to the general public
("Confidential Information"), will be treated by the Receiving Party as fully
confidential; and, except as may be required in the performance of the Receiving
Party's duties and obligations herein provided, the Receiving Party covenants
and agrees not to disclose such Confidential Information to any other persons,
firms or organizations without the expressed written permission of the
Disclosing Party.
9. Indemnification. M-Wave shall indemnify, defend and hold
harmless Consultant, and its members, employees and agents (collectively, the
"Indemnitee") from and against any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative to which an
Indemnitee is made a party or is threatened to be made a party by reason of the
fact that the Indemnitee is or was a acting as an advisor to the Board of
Directors of M-Wave, or as a director, officer or agent of M-Wave, or any
subsidiary of M-Wave, or is or was serving or at any time serves at the request
of M-Wave as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, whether for
profit or not, against any and all expenses (including, without limitation,
attorneys' fees), judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by Indemnitee in connection with such action,
suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of M-Wave,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe Indemnitee's conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in or not opposed to the best interests of M-Wave, or,
with respect to any criminal action or proceeding, that Indemnitee had
reasonable cause to believe that Indemnitee's conduct was unlawful.
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10. Independent Contractor. It is specifically agreed and
understood that in performing the services herein specified, Consultant and its
employees are acting as an independent contractor and not as an agent or
employee of M-Wave. Further, nothing contained in this Agreement shall be
construed to create the relationship of principal and agent, partnership, joint
venture or any other relationship between the parties hereto other than the
relationship of independent contractors.
11. Governing Law. This Agreement shall be governed and controlled
by the laws of the state of Illinois as to interpretation, enforcement,
validity, construction, and effect and in all other respects.
12. Notices. Any notices relating to this Agreement shall be given
in writing and shall be deemed sufficiently given, served, and received for all
purposes upon the first to occur of actual receipt or delivery by generally
recognized overnight courier service or by fax or three (3) days after deposit
in the United States Mail, certified or registered, return receipt requested,
with postage prepaid, addressed as follows:
If to M-Wave: If to Consultant:
000 Xxxxxxxxxx Xxxxx 000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000 Xxxx Xxxxxxxxxxx, XX 00000
or at such other address(es) as shall be designated by either party in writing
and delivered to the other party hereto.
13. Successors and Assigns. Neither party may assign this
Agreement without the express written consent of the other party.
Notwithstanding the foregoing, Consultant may assign this Agreement to Xxxxx
without the prior consent of M-Wave. This Agreement shall be binding upon and
the benefits thereof, shall inure to the parties hereto and their respective
legal representatives, heirs, successors, and assigns.
14. Dispute Resolution Provisions.
a. Informal Resolution. If any dispute arises out of
this Agreement, the parties shall promptly notify one another of the
dispute and/or any alleged breach of this Agreement or default of this
Agreement in writing. Each party shall promptly designate a
representative to resolve the dispute. The representatives shall meet
within ten (10) days following the first receipt by a party of such
written notice and shall attempt to resolve the dispute within fifteen
(15) days of the meeting. Disputes that are not resolved by a meeting
of the representatives shall be submitted with the consent of both
parties to a mediation process. If mediation is mutually acceptable,
the parties will, within twenty (20) days of agreeing to mediate,
select a mediator for the purposes of resolving the dispute.
b. Arbitration. Any matter not resolved by designated
representatives or by the mutually agreed upon mediation process shall
be resolved by binding arbitration before a single arbitrator in
Chicago, Illinois, in accordance with the commercial rules of the
American Arbitration Association then in effect, and judgment on the
arbitration award may
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be entered in any court having jurisdiction. Either party may submit
any dispute to arbitration hereunder within thirty (30) days after the
end of the negotiation period referenced above or an unsuccessful
mediation. The parties shall select the arbitrator within thirty (30)
days thereafter and shall instruct the arbitrator to render a
determination of the matter within thirty (30) days after the date of
submission to arbitration. The procedures specified in this paragraph
shall be the sole and exclusive procedures for the resolution of
disputes between the parties arising out of or relating to this
Agreement; provided, however, that a party may seek a preliminary
injunction or other injunctive judicial relief in a court of competent
jurisdiction, if, in the judgment of that party, such action is
necessary to avoid irreparable damage. Despite the initiation of any
such judicial proceedings, the parties will continue to participate in
good faith in the procedures specified in this paragraph. The
arbitrator's fee shall be shared equally between Consultant and M-Wave.
The arbitrator shall have the authority to award reasonable attorneys'
fees and expenses to the prevailing party, including fees and expenses
incurred in the arbitration or in any litigation concerning the
dispute, including but not limited to litigation to compel arbitration
or stay court proceedings. In the absence of such an award, attorneys'
fees and expenses shall be borne by the party engaging such attorney or
incurring such expenses.
15. Joint Drafting. Each of the parties hereto has joined in and
contributed to drafting this Agreement; there shall be no presumption favoring
or burdening any one or more parties hereto based upon draftsmanship.
16. Survival. The provisions of Sections 5, 7, 8, 9, and 14 shall
survive the expiration or early termination of this Agreement.
17. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and shall be deemed to supersede and cancel any
other agreement between the parties relating to the transactions contemplated in
this agreement. None of the previous and contemporaneous negotiations,
preliminary drafts, or previous versions of this agreement leading up to its
execution and not set forth in this Agreement shall be used by any of the
parties to construe or affect the validity of this Agreement. Each party
acknowledges that no representation, inducement, or condition not set forth in
this Agreement has been made or relied on by either party.
IN WITNESS WHEREOF, M-Wave and Consultant have caused this Agreement to
be executed by its duly authorized member, officer or agent as of the day and
year first above written.
M-Wave: Consultant:
M-Wave, Inc. Credit Support International, LLC
By: _______________________________ By: _____________________________
Xxxxxx X. Xxxxx Xxxxxx X. Xxxxx
Its: Chairman of the Board Its: Manager
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