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EXHIBIT 10.18
AGREEMENT FOR STRATEGIC OPERATING ALLIANCE
THIS AGREEMENT R A STRATEGIC OPERATING ALLIANCE (the "Agreement")
is
made this 28th day of January 2004 by and
between American Standard Circuits,
Inc., an Illinois corporation ("American
Standard"), with a principal place of
business at 3615 Wolf Road, Franklin Park,
Illinois, and M-Wave, Inc., a
Delaware corporation ("M-Wave"), with a
principal place of business at 475
Industrial Drive, West Chicago, Illinois.
American Standard and M-Wave may be
referred to herein individually as a
"Party" and collectively as the "Parties."
RECITALS
M-Wave and American Standard are each value-added service
providers
that develop, manufacture, and market high
performance circuit boards
(collectively, the "Products").
M-Wave has a manufacturing facility located at 475 Industrial
Drive,
West Chicago, Illinois (the "Manufacturing
Facility") at which M-Wave has
heretofore manufactured Products and which
M-Wave is selling, together with
certain related manufacturing equipment, to
affiliates of American Standard,
concurrently with the execution and
delivery of this Agreement.
American Standard and M-Wave desire to enter into a strategic
alliance
pursuant to which American Standard shall
manufacture Products in place of
M-Wave at the Manufacturing Facility and
M-Wave shall assist American Standard
in the sales and marketing of Products,
subject to the terms and conditions of
this Agreement.
The Parties have been party to an Interim Agreement for a
Strategic
Operating Alliance, dated as of September
2, 2003 amended on November 14, 2003
(the "Prior Agreement") that is null and
void upon execution and delivery of
this Agreement, except for accounts
receivable due either party thereunder which
are accrued and unpaid as of the date of
execution hereof.
In consideration of the mutual promises contained herein, and for
other
good and valuable consideration, the
receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be
legally bound, hereby agrees as
follows:
AGREEMENT
1. RECITALS. The
foregoing recitals are a part of this Agreement
and are hereby adopted by this reference
and incorporated herein.
2. No
CONDITIONS PRECEDENT. This Agreement shall be effective
upon its execution and delivery by the
Parties and supercedes all previous
writings relating to the subject matter
hereof, including without limitation the
Prior Agreement.
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3.
MANUFACTURING. American Standard shall manufacture Products
for M-Wave customers at the Manufacturing
Facility in accordance with the terms
of this Agreement. Nothing set forth in
this Agreement shall preclude M-Wave,
within in its sole discretion, from
fulfilling customer orders for Products
outside the Manufacturing Facility from one
or more Asian third party vendors
(such Products are herein referred to as
"VM Products").
4.
SALES.
(a) Selling.
During the Term, M-Wave may sell (1) VM Products to
American Standard's current customers, all
of which are listed on Schedule
4(a)(i) attached hereto, and any customers
subsequently obtained by American
Standard (collectively, "American
Standard's Customers") and (ii) Products and
VM Products to its current customers, all
of which are listed on Schedule
4(a)(ii) attached hereto, and any customers
subsequently obtained by M-Wave
(collectively, "M-Wave's Customers").
American Standard will receive a six
percent (6%) commission on the sale of VM
Products procured by M-Wave for resale
to American Standard's customers. It is the
intent of the parties, albeit not
binding on either of them and subject to
the making by them in writing of mutual
agreements, that within the Term (as
defined hereinbelow) M-Wave will commence,
and thereafter during the Term continue, to
sell, as a representative of
American Standard, all Products to the
American Standard Customers, and not
merely VM Products.
(b)
Administration. During the Term, M-Wave will administer,
invoice, collect and service all VM
Products it has sold to the American
Standard Customers and all Products and VM
Products it has sold to the M-Wave
Customers.
5.
PURCHASE ORDERS. M-Wave will obtain written purchase orders,
which shall specify all Work to be
completed, for review by American Standard.
For the purposes of this Agreement, "Work"
shall mean to procure labor,
components, raw materials, equipment and
other supplies, and to manufacture,
bond, test, label and deliver the Products
to M-Wave. Each purchase order shall
specify the quantity of all Products
ordered, the part number, the requested
delivery date and delivery address, price,
and reference the applicable written
Specifications. As used herein,
"Specifications" shall include, without
limitation, manufacturing plans, test data,
quality control data, compositions,
bills of material, samples, schematics,
process documentation, labels and test
specifications. Purchase orders shall
normally be deemed approved by American
Standard upon receipt, provided, however
that American Standard may in good
faith reject any order that (a) American
Standard does not have the
technological capacity to manufacture or
that does not substantially conform to
the terms and conditions of this Agreement,
(b) following a credit check by
American Standard, comes from a customer
who does not meet American Standard's
reasonable credit requirements, or (c) does
not provide a price that is
reasonably acceptable to American Standard.
American Standard shall notify
M-Wave of its disapproval of any purchase
order within three (3) business days
of receipt of such order. M-Wave and
American Standard will use reasonable
efforts to satisfy any order changes made
by a customer and will respond to the
customer regarding meeting the requested
change within seven (7) business days
of receipt of a written order requesting
such change. The Parties agree that the
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terms and conditions contained in this
Agreement shall prevail over any terms
and conditions of any purchase order,
acknowledgment form or other instrument.
6.
PRICE AND PAYMENT TERMS.
(a) Unit
Price. For each Product manufactured for M-Wave
Customers, M-Wave shall pay to American
Standard the "Unit Price," which shall
be the standard cost of such Product as set
forth in the pricing matrix
spreadsheet used by M-Wave based upon
"version 14 of the Calculator" heretofore
agreed upon by the Parties, as may be
changed hereafter from time to time by
mutual agreement of the Parties. The
standard cost on such pricing matrix
spreadsheet generally equals the difference
between (i) the price of such
Product to the customer and (ii) an
agreed-upon discount ("Discount"). M-Wave
shall retain the excess of the amount paid
by its customer for the Product over
the Unit Price paid by M-Wave to American
Standard and disclose this amount to
American Standard.
(b) Terms and
Lien. Except as otherwise set forth in Section 6(c)
below, payment for each Product by M-Wave
to American Standard hereunder is due
within the first to occur of (i) twenty
(20) days following the earlier of
shipment to M-Wave or M-Wave's invoicing of
the respective receivable or (ii)
five (5) business days following M-Wave's
receipt of payment of the applicable
receivable. M-Wave will make best efforts
to ship its finished Products within
one (1) business day of manufacture. To
secure payment of certain of its
obligations under this Paragraph 6(b),
M-Wave hereby grants American Standard a
security interest in its accounts
receivable with respect to the payment of such
obligations to American Standard..
(c) Revised
Terms. M-Wave and American Standard agree that, upon
M-Wave obtaining a credit facility to
finance its accounts receivable and
inventory separate from its other assets,
American Standard shall immediately
provide M-Wave with thirty (30) day payment
terms and a maximum credit limit of
$300,000 and, upon receipt of payment from
M-Wave of all amounts due under this
Paragraph 6 in excess of $300,000, shall
release the security interest in
M-Wave's accounts receivables granted to
American Standard pursuant to Paragraph
6(b) above.
(d) Other. The
Unit Price is exclusive of federal, state and local
excise, sales, use and similar taxes, and
any duties; and M-Wave shall be
responsible for the collection of all such
amounts from customers and the
remission of such amounts to the
appropriate authorities. The Unit Price is also
exclusive of freight, insurance and other
shipping expenses.
7.
MANUFACTURING EXPENSES. During the Term, the Parties shall
mutually agree in writing as to the
allocation between them of the expenses
incurred in connection with the
manufacturing activities at the Manufacturing
Facility, including employee costs,
insurance, permits and licenses, leasing,
maintenance and repair of equipment,
utilities and replacement of equipment.
8.
PACKAGING AND LABELING. M-Wave, at its own expense, will
package and include Labels on or with all
M-Wave Products and packaging to be
supplied in accordance with the applicable
Specifications. As used herein,
"Label(s)" shall mean all (a) labels and
other written,
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printed or graphic matter placed upon the
Products, (b) containers and/or
wrappers utilized with the Products
including, without limitation, Product
inserts which bear the trademarks or trade
dress of M-Wave, and (c) other matter
designated in the Specifications or on
approved prototypes/samples.
9.
SHIPMENTS. M-Wave, at its own expense, shall ship all Products
to the customer in accordance with the
applicable Specifications.
10. ACCEPTANCE
AND REJECTION. If a customer (a) rejects in whole
or in part any shipment of Products because
such Products were determined not to
be in accordance with the applicable
Specifications (the "Nonconforming
Products") or (b) informs M-Wave of any
shortage in quantity of any shipment of
Products, M-Wave shall promptly provide
American Standard written notice of such
rejection or shortage and American Standard
shall use reasonable efforts to
replace the Nonconforming Products or make
up the shortage, at no additional
cost to the customer and as quickly as
possible, but in any event within ten
(10) business days of receiving notice of
such rejection or shortage. Shipments
of Nonconforming Products may, at M-Wave's
option and American Standard's
expense, be returned to M-Wave or destroyed
by the customer. The remedy of
replacement or refund will not be available
for Nonconforming Products if such
nonconformance was caused by the customer's
misuse, unauthorized modifications,
neglect, improper testing or improper
storage of such Nonconforming Products.
11. CUSTOMER
COMPLAINTS. If M-Wave receives a consumer complaint
relating to a defect in any Product or the
packaging or Label of any Product,
M-Wave may, in a prompt and reasonable
manner, seek the resolution of such
complaint by American Standard in
accordance with the terms of this Agreement.
12. HAZARDOUS
OR UNSAFE CONDITION OF PRODUCTS. In the event
American Standard or M-Wave learns of any
condition relating to a potential
safety hazard or unsafe condition in any of
the Products, or is advised of such
by any state or federal regulatory
authorities having jurisdiction over such
Products, such Party shall immediately
advise the other Party and provide all
relevant information, and the Parties shall
exert all reasonable efforts to
promptly resolve the situation.
13. TERM AND
TERMINATION.
(a) Term This
Agreement shall commence on the date hereof and
shall continue in effect for two (2) years
thereafter (the "Term").
(b) Early
Termination.
(i)
Notwithstanding the above, the non-breaching Party
shall have the right to terminate this Agreement immediately, if
the
other Party materially breaches this Agreement at any time and
such
breach is not cured (x) within seven (7) days of written notice of
a
breach caused by the failure of the other Party to make any
payment
required
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under this Agreement or (y) within thirty (30) days of written
notice
thereof for any other material breach of this Agreement. In either
case
such notice shall specify in detail the nature of the breach.
(ii)
Either Party may terminate this Agreement, effective
immediately upon the giving of written notice, if the other Party
shall
file a petition for bankruptcy, or shall be adjudicated a bankrupt
or
insolvent, or shall take advantage of the insolvency laws of any
state
of the United States, or shall make an assignment for the benefit
of
creditors, or shall have a receiver appointed, whether by
private
instrument or by court officer, for its property, or become subject
to
an involuntary petition for bankruptcy, or have a major portion of
its
assets become subject to attachment that is not rescinded
within
forty-five (45) days.
(iii) This
Agreement may be terminated by either Party upon
sixty (60) days written notice to the other if any conditions
constituting a Force Majeure as described in Section 25(b) herein
exist
for a period in excess of forty-five (45) days in any one-year
period.
(c) Effect of
Termination. Termination or expiration of this Agreement
shall not (i) affect any other rights of
either Party which may have accrued up
to the date of such termination or
expiration, or (ii) relieve either Party of
its obligation to pay to the other Party
sums due in respect of Products
delivered and accepted prior to termination
or expiration of this Agreement. The
provisions of Sections 14 (Intellectual
Property), 17 (Product Warranty), 18
(Records and Audit), 19 (Confidentiality),
20 (Non-Solicitation of Customers and
Employees), 22 (Indemnification), and 25
(Miscellaneous) of this Agreement shall
survive termination or expiration of this
Agreement.
14.
INTELLECTUAL PROPERTY. Unless specifically and expressly
granted herein and notwithstanding a
Party's use thereof, no licenses or rights
under either Party's intellectual property
rights including, without limitation,
copyrights, trademarks, trade names, trade
secrets, patents or any other
proprietary rights issued, honored and/or
enforceable under any applicable laws,
are implied or granted in this Agreement.
Each Party shall retain full ownership
of all its intellectual property.
15. REGULATORY
MATTERS.
(a) Each Party
represents and warrants that it currently has all
material licenses and permits necessary for
the operation of its business as
currently conducted.
(b) American
Standard will be responsible for any reporting of
matters regarding the manufacture of
Products, as applicable, to relevant
regulatory authorities, in accordance with
pertinent laws and regulations and
shall notify M-Wave of any occurrence or
information that arises out of its
manufacturing activities that has adverse
regulatory compliance and/or reporting
consequences concerning a Product.
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(c) American
Standard shall be responsible for handling and
responding to any governmental agency
inspections with respect to manufacturing
of Products during the Term and shall
provide to M-Wave copies of any
information requested by any governmental
agency in connection with any
governmental inspection related to the
Products.
(d) Each Party
shall comply with all applicable laws, rules and
regulations in fulfilling their obligations
under this Agreement.
16.
MANUFACTURING CERTIFICATIONS. American Standard and M-Wave
each represents and warrants that it
currently has UL and ISO ce
