VOTING AGREEMENT
AGREEMENT
(the "Agreement") entered into as of February 6, 2006, by and between Xxxxxx
X.
Xxxxx (the "Shareholder"), M.A.G. Capital, LLC, a California limited liability
company ("M.A.G."), and Mercator Momentum Fund III, a California limited
partnership (the "Lender"), Mercator Momentum Fund, a California limited
partnership ("Momentum Fund"), and Monarch Pointe Fund, Ltd., a corporation
organized under the laws of the British Virgin Islands ("MPF" and, with the
Lender and Momentum Fund, the "M.A.G. Funds").
RECITALS
The
Shareholder is the owner of voting securities of M-Wave, Inc., a Delaware
corporation (the "Company"). M.A.G. and the M.A.G. Funds (together, the "M.A.G.
Parties") also own securities issued by the Company. The Company is indebted
to
the Lender. The Company has requested that the Lender enter into an agreement
with the Company entitled First Amendment to Loan and Security Agreements (the
"Amendment") to modify certain of the terms of the indebtedness of the Company
to the Lender.
The
Company has further requested that the M.A.G. Funds enter into various
agreements with the Company that provide for the exchange by the M.A.G. Funds
of
senior and subordinated indebtedness of the Company for its shares of
Series B Preferred Stock of the Company and warrants to purchase common
stock (the "Series B Agreements"). The Series B Agreements provide that the
Series B Preferred Stock will be convertible into common stock of the Company,
but that the amount of common stock that may be acquired pursuant to such
conversion is limited to that number of shares of common stock that constitutes
19.9% of the outstanding common stock on the date of the Agreements unless
and
until the Shareholders of the Company approve the conversion of all of the
Series B Preferred Stock into shares of common stock free from this limitation
(the "Shareholder Approval").
The
Company intends to attempt to identify and pursue a transaction in which the
Company would make a significant acquisition of another company or the business
or assets of another company (an "Acquisition"). The Board of Directors of
the
Company has established a special committee of the board (the "Committee")
to
review and consider potential Acquisitions.
The
Lender requires, as a condition to its execution of the Amendment, and the
M.A.G. Funds require, as a condition to their execution of the Series B
Agreements, that the Shareholder enter into this Agreement, pursuant to which
the Shareholder agrees to vote all of the voting securities of the Company
that
he owns or otherwise controls (i) in favor of any Acquisition that is
recommended by the Committee (a "Recommended Acquisition"), (ii) in favor
of any related proposal or transaction that is necessary to effect any
Recommended Acquisition, and (iii) in favor of the Shareholder Approval.
The Shareholder believes that the Amendment and the Series B Agreements
will provide a direct benefit to the Company and an indirect benefit to him
as a
shareholder of the Company and has agreed to enter into this Agreement to induce
the Lender to execute the Amendment and the M.A.G. Funds to execute the Series
B
Agreements.
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NOW,
THEREFORE, in consideration of the mutual agreements, covenants, representations
and warranties contained herein and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Voting
Agreement.
The Shareholder hereby agrees to vote all voting securities of the Company
now
or at any time hereafter owned or controlled by him of record or beneficially
or
with respect to which he holds a proxy (i) in favor of any Recommended
Acquisition, (ii) in favor of any related proposal or transaction that is
necessary to effect any Recommended Acquisition and (iii) in favor of the
Shareholder Approval. This undertaking shall terminate on the earlier of the
first anniversary of this Agreement or the closing of the Recommended
Acquisition.
2. Transfer
Restriction.
The Shareholder shall not, until after the earlier of the first anniversary
of
this Agreement or the closing of the Recommended Acquisition, sell, assign,
otherwise transfer or encumber any voting securities of the Company that he
owns
as of the date of this Agreement or that he acquires during the term of the
commitment made in the preceding portion of this sentence, give up voting
control over any voting securities of the Company with respect to which he
holds
a proxy or over which he otherwise has voting control on the date of this
Agreement or with respect to which he obtains a proxy or over which he otherwise
obtains voting control during the term of the commitment made in the preceding
portion of this sentence or execute any proxy with respect to any of such voting
securities or enter into any agreement or other arrangement relating to the
voting of any of such voting securities other than this Agreement.
3. Representations
and Warranties of the Shareholder.
The Shareholder represents and warrants to the M.A.G. Parties that:
(a) This
Agreement is a valid and binding agreement of the Shareholder, enforceable
against the Shareholder in accordance with its terms;
(b) Neither
the execution of this Agreement by the Shareholder nor the performance by the
Shareholder of his obligations hereunder will constitute a violation of or
default under, or conflict with, any contract, commitment, agreement,
understanding, arrangement or restriction of any kind by which the Shareholder
is bound;
(c) No
consent, approval, order or authorization of any court, administrative agency
or
other governmental entity or any other person as required by or with respect
to
the Shareholder in connection with the execution and delivery of this Agreement
by the Shareholder;
(d) On
the
date hereof the Shareholder has sole voting power or power to direct the vote
with respect to the voting securities of the Company described at the end of
this Agreement, and the Shareholder has not granted any proxy with respect
to
such voting securities that is in effect on the date hereof;
(e) The
Shareholder has not, with the exception of this Agreement, subjected any of
the
voting securities of the Company owned by him to any voting trust or any other
agreement, understanding or arrangement; and
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(f) The
Shareholder acknowledges that this Agreement is made for the benefit of each
of
the M.A.G. Parties, each of which may recover any damages from the Shareholder
that it may suffer as a result of any breach of this Agreement by the
Shareholder.
4. Representations
and Warranties of the Shareholder.
The M.A.G. Parties represent and warrant to the Shareholder that:
(a) This
Agreement is a valid and binding agreement of the M.A.G. Parties, enforceable
against them in accordance with its terms;
(b) Neither
the execution of this Agreement by the M.A.G. Parties nor the performance by
the
M.A.G. Parties of their obligations hereunder will constitute a violation of
or
default under, or conflict with, any contract, commitment, agreement,
understanding, arrangement or restriction of any kind by which any of the M.A.G.
Parties is bound; and
(c) No
consent, approval, order or authorization of any court, administrative agency
or
other governmental entity or any other person as required by or with respect
to
the M.A.G. Parties in connection with the execution and delivery of this
Agreement by the M.A.G. Parties.
5. Indemnification.
The Shareholder, in the one hand, and the M.A.G. Parties, on the other hand,
each agree to indemnify and defend the other from and against all losses
resulting from or arising out of (i) any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of the indemnifying party
contained in this Agreement or (ii) any breach by the indemnifying party of
any obligation imposed upon the indemnifying party by this Agreement; provided,
however, that neither the aggregate liability of the Shareholder to the M.A.G.
Parties under this Section 5, nor the aggregate liability of the M.A.G. Parties
to the Shareholder under this Section 5, shall exceed the product of the closing
price of the Common Stock of the Company on the date of this Agreement and
the
number of shares of the Common Stock of the Company held by the Shareholder
on
the date of this Agreement.
6. Specific
Performance.
The Shareholder acknowledges that irreparable injury would occur in the event
any of the provisions hereof were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, the Shareholder agrees
that each of the M.A.G. Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions hereof and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof, in addition to any
other
remedy to which any of the M.A.G. Parties may be entitled at law or
equity.
7. Termination.
This Agreement shall terminate upon the termination of the commitment made
by
the Shareholder in Section 1.
8. Miscellaneous
Provisions.
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(a) Addresses
for Notices.
Any notice or other document required or permitted to be given or delivered
to
any of the M.A.G. Parties shall be delivered or forwarded to M.A.G. at 000
Xxxxx
Xxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx
X.
Xxxxxxxxx (Facsimile No. 213/553-8285), or to such other address or number
as
shall have been furnished to the Shareholder in writing by M.A.G., with a copy
to Xxxxxxxx Xxxxxx Xxxxxxx & Xxxxxxx LLP, 000 Xxxxx Xxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000 Attention Xxxxx X. Xxxxx
(Facsimile No. 213/620-1398). Any notice or other document required or permitted
to be given or delivered to the Shareholder shall be delivered or forwarded
to
the Shareholder at 00000 Xxxxxxxx Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000
(Facsimile No. 630 929-9755), with a copy to
________________________________________ (Facsimile No. 000 000 0000), or to
such other address or number as shall have been furnished to M.A.G. and the
Lender in writing by the Shareholder.
(b) Effectiveness
of Notices.
All notices, requests and approvals required by this Agreement shall be in
writing and shall be conclusively deemed to be given (i) when hand-delivered
to
the other party, (ii) when received if sent by facsimile at the address and
number set forth above; provided that notices given by facsimile shall not
be
effective, unless either (a) a duplicate copy of such facsimile notice is
promptly given by depositing the same in the mail, postage prepaid and addressed
to the party as set forth below or (b) the receiving party delivers a written
confirmation of receipt for such notice by any other method permitted under
this
paragraph; and further provided that any notice given by facsimile received
after 5:00 p.m. (recipient’s time) or on a non-business day shall be deemed
received on the next business day; (iii) five (5) business days after deposit
in
the United States mail, certified, return receipt requested, postage prepaid,
and addressed to the party as required by Section 8(a), or (iv) the next
business day after deposit with an international overnight delivery service,
postage prepaid, addressed to the party as required by Section 8(a) with next
business day delivery guaranteed; provided that the sending party receives
confirmation of delivery from the delivery service provider.
(c) Governing
Law.
This Agreement shall be governed by and construed in accordance with the laws
of
the State of California as applied to agreements among California residents
made
and to be performed entirely within the State of California, without giving
effect to the conflict of law principles thereof.
(d) Waiver,
Amendments and Headings.
This Agreement and any provision hereof may be changed, waived, discharged
or
terminated only by an instrument in writing signed by both parties (either
generally or in a particular instance and either retroactively or
prospectively). The headings in this Agreement are for purposes of reference
only and shall not affect the meaning or construction of any of the provisions
hereof.
(e) Jurisdiction.
Each of the parties irrevocably agrees that any and all suits or proceedings
based on or arising under this Agreement may be brought only in and shall be
resolved in the federal or state courts located in the City of Los Angeles,
California and consents to the jurisdiction of such courts for such purpose.
Each of the parties irrevocably waives the defense of an inconvenient forum
to
the maintenance of such suit or proceeding in any such court. Each of the
parties further agrees that service of process upon such party mailed by first
class mail to the address set forth in Section 6(a) shall be deemed in every
respect effective service of process upon such party in any such suit or
proceeding. Nothing herein shall affect the right of a party to serve process
in
any other manner permitted by law. Each of the parties agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive
and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
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(f) Attorneys'
Fees and Disbursements.
If any action at law or in equity is necessary to enforce or interpret the
terms
of this Agreement, the prevailing party or parties shall be entitled to receive
from the other party or parties reasonable attorneys’ fees and disbursements in
addition to any other relief to which the prevailing party or parties may be
entitled.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed as the
date first above written.
Voting
Securities of the Company held by the Shareholder: 1,379,000.
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first set forth above.
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/s/
Xxxxxx X. Xxxxx
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Xxxxxx
X. Xxxxx
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M.A.G.
Capital, LLC
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By:
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/s/
Xxxxx X. Xxxxxxxxx
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Xxxxx
X. Xxxxxxxxx,
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Managing
Member
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Mercator
Momentum Fund III, L.P.
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By:
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M.A.G.
Capital, LLC,
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General
Partner
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By:
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/s/
Xxxxx X. Xxxxxxxxx
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Xxxxx
X. Xxxxxxxxx,
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Managing
Member
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Mercator
Momentum Fund, L.P.
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By:
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M.A.G.
Capital, LLC,
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General
Partner
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By:
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/s/
Xxxxx X. Xxxxxxxxx
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Xxxxx
X. Xxxxxxxxx,
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Managing
Member
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Monarch
Pointe Fund, Ltd.
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By:
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/s/
Xxxxx X. Xxxxxxxxx
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Xxxxx
X. Xxxxxxxxx,
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Managing
Member
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