EXHIBIT 10.25
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SILICON VALLEY BANK
SPECIALTY FINANCE DIVISION
ACCOUNTS RECEIVABLE FINANCING AGREEMENT
This ACCOUNTS RECEIVABLE FINANCING AGREEMENT (the "AGREEMENT"), dated
as of the Effective Date is between Silicon Valley Bank, Specialty Finance
Division of ("BANK"), M-Wave, Inc., a Delaware corporation and Poly Circuits,
Inc., an Illinois corporation (collectively referred to herein as "BORROWER"),
whose address is ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and with a
FAX number of ▇▇▇ ▇▇▇-▇▇▇▇.
1. DEFINITIONS. In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"ACCOUNT DEBTOR" is defined in the California Uniform Commercial Code
and shall include any person liable on any Financed Receivable, such as, a
guarantor of the Financed Receivable and any issuer of a letter of credit or
banker's acceptance.
"ADJUSTMENTS" are all discounts, allowances, returns, disputes,
counterclaims, offsets, defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or on behalf of any Account
Debtor for any Financed Receivable.
"ADMINISTRATIVE FEE" is defined in SECTION 3.3.
"ADVANCE" is defined in SECTION 2.2.
"ADVANCE RATE" is eighty five percent (85%), net of deferred revenue
and offsets related to each specific Account Debtor, or another percentage as
Bank establishes under SECTION 2.2.
"APPLICABLE RATE" is a rate per annum equal to the "Prime Rate" plus
two and one half of one percent (2.5%).
"BUSINESS DAY" shall mean any day that is not a Saturday, Sunday, or a
day on which Bank is closed.
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"CODE" is the California Uniform Commercial Code.
"COLLATERAL" is attached as EXHIBIT A.
"COLLECTIONS" are all funds received by Bank from or on behalf of an
Account Debtor for Financed Receivables.
"COMPLIANCE CERTIFICATE" is attached as EXHIBIT B.
"DEFERRED MAINTENANCE REVENUE" is all amounts received in advance of
performance under maintenance contract and not yet recognized as revenue.
"DUE DILIGENCE FEE" shall have the meaning set forth in SECTION 3.9
hereof.
"EFFECTIVE DATE" is the date on which Bank executes this Agreement.
"EVENT OF DEFAULT" shall have the meaning set forth in SECTION 9
hereof.
"FACILITY" is an extension of credit by Bank to Borrower in order to
finance receivables with an aggregate Account Balance not exceeding the Facility
Amount.
"FACILITY AMOUNT" is Three Million One Hundred Twenty Five Thousand and
00/100 Dollars ($3,125,000.00).
"FACILITY FEE" shall have the meaning set forth in SECTION 3.4 hereof.
"FACILITY PERIOD" is the period beginning on the Effective Date and
continuing until one year from the Effective Date.
"FINANCE CHARGES" shall have the meaning set forth in SECTION 3.2
hereof.
"FINANCED RECEIVABLES" are all those accounts, receivables, chattel
paper, instruments, contract rights, documents, general intangibles, letters of
credit, drafts, bankers acceptances, and rights to payment, and all proceeds,
including their proceeds (collectively "RECEIVABLES"), which Bank finances and
make an Advance. A Financed Receivable stops being a Financed Receivable (but
remains Collateral) when the Advance made for the Financed Receivable has been
finally paid.
"FINANCED RECEIVABLE BALANCE" is the total outstanding amount, at any
time, of all Financed Receivables.
"GUARANTOR" means any guarantor of the Obligations.
"INELIGIBLE RECEIVABLE" is any accounts receivable:
(A) that is unpaid (90) calendar days after the invoice
date; or
(B) that is owed by an Account Debtor that has filed, or
has had filed against it, any bankruptcy case,
assignment for the benefit of creditors,
receivership, or Insolvency Proceeding or who has
become insolvent (as defined in the United States
Bankruptcy Code) or who is generally not paying its
debts as they become due; or
(C) for which there has been any breach of warranty or
representation in SECTION 6 or any breach of any
covenant in this Agreement; or
(D) for which the Account Debtor asserts any discount,
allowance, return, dispute, counterclaim, offset,
defense, right of recoupment, right of return,
warranty claim, or short payment; provided, however
that any such account receivable shall only be
ineligible to the extent of the amount of each of the
foregoing.
"INSOLVENCY PROCEEDING" are proceedings by or against any person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
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"INVOICE TRANSMITTAL" shows accounts receivable which Bank may finance
and, for each receivable, includes the Account Debtor's, name, address, invoice
amount, invoice date and invoice number and is signed by Borrower's authorized
representative.
"LOCKBOX" shall have the meaning set forth in SECTION 6.2 hereof.
"NET INCOME" shall mean, with respect to any Reconciliation Period, the
amount shown opposite the caption "Net Income" or a similar caption on the
consolidated financial statements of the Borrower, prepared in accordance with
GAAP.
"OBLIGATIONS" are all advances, liabilities, obligations, covenants and
duties owing, arising, due or payable by Borrower to Bank now or later under
this Agreement or any other document, instrument or agreement, account
(including those acquired by assignment) primary or secondary, such as all
Advances, Finance Charges, Administrative Fees, interest, fees, expenses,
professional fees and attorneys' fees or other.
"PERMITTED LIENS" are
(a) Liens existing on the date of this Agreement and previously
disclosed to the Bank, or arising under this Agreement or the Intellectual
Property Security Agreement dated even herewith made by the Borrower in favor of
the Bank;
(b) Liens for taxes, fees, assessments or other government charges
or levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its books, if they have no priority over
any of Bank's security interests;
(c) Purchase money liens (i) on equipment acquired or held by
Borrower incurred for financing the acquisition of the equipment, or (ii)
existing on equipment when acquired if the lien is confined to the property and
improvements and proceeds of the equipment;
(d) Leases or subleases and licenses or sublicenses granted in the
ordinary course of Borrower's business, if the leases, subleases, licenses and
sublicenses permit granting Bank a security interest;
(e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by liens described in (a) through (d), but any extension,
renewal or replacement lien must be limited to the property encumbered by the
existing lien and the principal amount of the indebtedness may not increase; and
(f) Liens subordinated to the Bank's lien granted hereunder
pursuant to a subordination agreement acceptable to Bank in all respects.
"PERMITTED INDEBTEDNESS" is
(a) Borrower's indebtedness to Bank under this Agreement;
(b) Indebtedness existing on the date of this Agreement and shown
on financial statements of the Borrower previously delivered to the Bank;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) Indebtedness secured by Permitted Liens;
(f) Other indebtedness not otherwise permitted hereunder not
exceeding $50,000 in the aggregate outstanding at any time; and
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(g) Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (f) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon the Borrower.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"RECONCILIATION DAY" is the last calendar day of each month.
"RECONCILIATION PERIOD" is each calendar month.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (and identified as subordinated by Borrower and Bank).
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities plus Subordinated Debt.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet.
2. FINANCING OF ACCOUNTS RECEIVABLE.
2.1 REQUEST FOR ADVANCES. During the Facility Period, Borrower may
offer accounts receivable to Bank, if there is not an Event of Default. Borrower
will deliver an Invoice Transmittal for each accounts receivable it offers. Bank
may rely on information on or with the Invoice Transmittal.
2.2 ACCEPTANCE OF ACCOUNTS RECEIVABLE. Bank is not obligated to finance
any accounts receivable. Bank may approve any Account Debtor's credit before
financing any receivable. When Bank accepts a receivable, it will pay Borrower
the Advance Rate times the face amount of the receivable (the "ADVANCE"). Bank
may, in its discretion, change the percentage of the Advance Rate. When Bank
makes an Advance, the receivable becomes a "FINANCED RECEIVABLE." All
representations and warranties in SECTION 6 must be true as of the date of the
Invoice Transmittal and of the Advance and no Event of Default exists would
occur as a result of the Advance. The aggregate amount of all Financed
Receivables outstanding at any time may not exceed the Facility Amount.
3. COLLECTIONS, FINANCE CHARGES, REMITTANCES AND FEES. The Obligations shall be
subject to the following fees and Finance Charges. Fees and Finance Charges may,
in Bank's discretion, be charged as an Advance, and shall thereafter accrue fees
and Finance Charges as described below. Bank may, in its discretion, charge fee
and Finance Charges to Borrower's deposit account maintained with Bank.
3.1 COLLECTIONS. Collections will be credited to the Financed
Receivables Balance, but if there is an Event of Default, Bank may apply
Collections to the Obligation in any order it chooses. If Bank receives a
payment for both Financed Receivable and a non Financed Receivable, the funds
will first be applied to the Financed Receivable and, if there is not an Event
of Default, the excess will be remitted to Borrower, subject to SECTION 3.10.
3.2 FINANCE CHARGES. In computing Finance Charges on the Obligations,
all Collections received by Bank shall be deemed applied by Bank on account of
the Obligations three (3) Business Days after receipt of the Collections.
Borrower will pay a finance charge (the "FINANCE CHARGE"), which is the greater
of (i) the Applicable Rate times the number of days in the Reconciliation Period
times the outstanding average daily Financed Receivable Balance for that
Reconciliation Period or (ii) the Minimum Finance Charge. After an Event of
Default, Obligations accrue interest at five percent (5%) above the Applicable
Rate effective immediately before the Event of Default.
3.3 ADMINISTRATIVE FEE. Upon receipt of the Collections, Borrower will
pay an Administrative Fee of one half of one percent (.50%) of the face amount
of each Financed Receivable financed during that Reconciliation
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Period (the "ADMINISTRATIVE FEE"); provided, however, that if Borrower's Net
Income before taxes exceeds $200,000.00 for the six month period ending June 30,
2004, then, for the Reconciliation Period beginning July 1, 2004, the
Administration Fee will be reduced to one quarter of one percent (.25%). After
an Event of Default, the Administrative Fee will increase to an additional .50%
effective immediately before the Event of Default.
3.4 FACILITY FEE. A fully earned, non-refundable facility fee of Twenty
Five Thousand and 00/100 Dollars ($25,000.00) (the "FACILITY FEE") shall be paid
in two installments of Twelve Thousand Five Hundred and 00/100 Dollars
($12,500.00), the first due upon execution of this Agreement and the second to
be paid six (6) months following the Effective Date.
3.5 RESERVED.
3.6 RESERVED.
3.7 ACCOUNTING. After each Reconciliation Period, Bank will provide an
accounting of the transactions for that Reconciliation Period, including the
amount of all Financed Receivables, all Collections, Adjustments, Finance
Charges, the Collateral Handling Fee and the Administrative Fee. If Borrower
does not object to the accounting in writing within 30 days it is considered
correct. All Finance Charges and other interest and fees calculated on the basis
of a 360 day year and actual days elapsed.
3.8 DEDUCTIONS. Bank may deduct fees, finance charges and other amounts
due from any Advances made or Collections received by Bank.
3.9 DUE DILIGENCE FEE. Borrower has paid to Bank a fee of Five Thousand
and 00/100 Dollars ($5,000.00) to initiate Bank's due diligence review process
(the "DUE DILIGENCE FEE"). Any portion of the Due Diligence Fee not utilized to
pay expenses will be applied to the Facility Fee.
3.10 ACCOUNT COLLECTION SERVICES. All Borrowers' receivables are to be
paid to the same address/or party and Borrower and Bank must agree on such
address. If Bank collects all receivables and there is not an Event of Default
or an event that with notice or lapse of time will be an Event of Default,
within three (3) days of receipt of those collections, Bank will give Borrower,
the receivables collections it receives for receivables other than Financed
Receivables and/or amount in excess of the amount for which Bank has made an
Advance to Borrower, less any amount due to Bank, such as the Finance Charge,
Administrative Fee and expenses or otherwise. This Section does not impose any
affirmative duty on Bank to do any act other than to turn over amounts. All
receivables and collections are Collateral and if an Event of Default occurs,
Bank need not remit collections of Collateral and may apply them to the
Obligations.
4. REPAYMENT OF OBLIGATIONS.
4.1 REPAYMENT ON MATURITY. Borrower will repay each Advance on the
earliest of: (a) payment of the Financed Receivable in respect which the Advance
was made, (b) the Financed Receivable becomes an Ineligible Receivable, (c) when
any Adjustment is made to the Financed Receivable (but only to the extent of the
Adjustment if the Financed Receivable is not otherwise an Ineligible Receivable,
or (d) the last day of the Facility Period (including any early termination).
Each payment will also include all accrued Finance Charges on the Advance and
all other amounts due hereunder.
4.2 REPAYMENT ON EVENT OF DEFAULT. When there is an Event of Default,
Borrower will, if Bank demands (or, in an Event of Default under SECTION 9(B),
immediately without notice or demand from Bank) repay all of the Advances. The
demand may, at Bank's option, include the Advance for each Financed Receivable
then outstanding and all accrued Finance Charges, Administrative Fees, attorneys
and professional fees, court costs and expenses, and any other Obligations.
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5. POWER OF ATTORNEY. Borrower irrevocably appoints Bank and its successors and
assigns it attorney-in-fact and authorizes Bank, regardless of whether there has
been an Event of Default, to:
(A) sell, assign, transfer, pledge, compromise, or
discharge all or any part of the Financed
Receivables;
(B) demand, collect, ▇▇▇, and give releases to any
Account Debtor for monies due and compromise,
prosecute, or defend any action, claim, case or
proceeding about the Financed Receivables, including
filing a claim or voting a claim in any bankruptcy
case in Bank's or Borrower's name, as Bank chooses;
(C) prepare, file and sign Borrower's name on any notice,
claim, assignment, demand, draft, or notice of or
satisfaction of lien or mechanics' lien or similar
document;
(D) notify all Account Debtors to pay Bank directly;
(E) receive and open any mail addressed to Borrower, and
make reasonable efforts to maintain and deliver to
Borrower any material items;
(F) endorse Borrower's name on check or other
instruments;
(G) execute on Borrower's behalf any instruments,
documents, financing statements to perfect Bank's
interests in the Financed Receivables and Collateral;
and
(H) do all acts and things necessary or expedient in
connection with the administration of the Advances
and the transactions contemplated by this Agreement.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS.
6.1 REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
for each Financed Receivable:
(A) It is the owner with legal right to sell, transfer
and assign it;
(B) The correct amount is on the Invoice Transmittal and
is not disputed;
(C) Payment is not contingent on any obligation or
contract and it has fulfilled all its obligations as
of the Invoice Transmittal date;
(D) It is based on an actual sale and delivery of goods
and/or services rendered, due to Borrower, it is not
past due or in default, has not been previously sold,
assigned, transferred, or pledged and is free of any
liens, security interests and encumbrances;
(E) There are no defenses, offsets, counterclaims or
agreements for which the Account Debtor may claim any
deduction or discount;
(F) It reasonably believes no Account Debtor is insolvent
or subject to any Insolvency Proceedings;
(G) It has not filed or had filed against it Insolvency
Proceedings and does not anticipate any filing;
(H) Bank has the right to endorse and/ or require
Borrower to endorse all payments received on Financed
Receivables and all proceeds of Collateral.
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(I) No representation, warranty or other statement of
Borrower in any certificate or written statement
given to Bank contains any untrue statement of a
material fact or omits to state a material fact
necessary to make the statement contained in the
certificates or statement not misleading.
6.1.1 ADDITIONAL REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants as follows:
(A) Borrower is duly existing and in good standing in its
state of formation and qualified and licensed to do
business in, and in good standing in, any state in
which the conduct of its business or its ownership of
property requires that it be qualified. The
execution, delivery and performance of this Agreement
has been duly authorized, and does not conflict with
Borrower's organizational documents, nor constitute
an Event of Default under any material agreement by
which Borrower is bound. Borrower is not in default
under any agreement to which or by which it is bound.
(B) Borrower has good title to the Collateral. All
inventory is in all material respects of good and
marketable quality, free from material defects.
(C) Borrower is not an "INVESTMENT COMPANY" or a company
"CONTROLLED" by an "INVESTMENT COMPANY" under the
Investment Company Act. Borrower is not engaged as
one of its important activities in extending credit
for margin stock (under Regulations G, T and U of the
Federal Reserve Board of Governors). Borrower has
complied with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or
rules. None of Borrower's properties or assets has
been used by Borrower, to the best of Borrower's
knowledge, by previous persons, in disposing,
producing, storing, treating, or transporting any
hazardous substance other than legally. Borrower has
timely filed all required tax returns and paid, or
made adequate provision to pay, all taxes. Borrower
has obtained all consents, approvals and
authorizations of, made all declarations or filings
with, and given all notices to, all government
authorities that are necessary to continue its
business as currently conducted.
6.2 AFFIRMATIVE COVENANTS. Borrower will do all of the following:
(A) Maintain its corporate existence and good standing in
its jurisdictions of incorporation and maintain its
qualification in each jurisdiction necessary to
Borrower's business or operations.
(B) Give Bank prior written notice of at least ten (10)
days before making changes to its name, organization,
chief executive office or location of records.
(C) Pay all its taxes including gross payroll,
withholding and sales taxes when due and will deliver
satisfactory evidence of payment if requested.
(D) Provide a written report within ten (10) days if
payment of any Financed Receivable does not occur by
its due date and include the reasons for the delay.
(E) Give Bank copies of all Forms 10-K, 10-Q and 8-K (or
equivalents) within five (5) days of filing with the
Securities and Exchange Commission, while any
Financed Receivable is outstanding, and as soon as
available, but not later than one hundred eighty
(180) days after the end of Borrower's fiscal year,
deliver to Bank together with a compliance
certificate, its audited, consolidated financial
statements prepared under GAAP, consistently applied,
together with an unqualified opinion on the financial
statements from an independent certified public
accounting firm acceptable to Bank.
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(F) Execute any further instruments and take further
action as Bank requests to perfect or continue Bank's
security interest in the Collateral or to effect the
purposes of this Agreement.
(G) Provide Bank with a Compliance Certificate no later
than five (5) days following each quarter end or as
requested by Bank.
(H) Provide Bank with, as soon as available, but no later
than thirty (30) days following each Reconciliation
Period, a company-prepared balance sheet and income
statement, prepared under GAAP, consistently applied,
covering Borrower's operations during the period
together with an aged listing of accounts receivable
and accounts payable.
(I) Immediately notify, transfer and deliver to Bank all
collections Borrower receives for Financed
Receivables.
(J) Borrower shall enter into a three party agreement
(the "LOCKBOX AGREEMENT") with Bank and a lockbox
provider (the "LOCKBOX PROVIDER"). The Lockbox
Agreement and Lockbox Provider shall be acceptable to
Bank. Borrower shall use the lockbox address on all
invoices issued by Bank and shall direct all its
Account Debtors to remit their payments to the
lockbox address. The Lockbox Agreement shall provide
that the Lockbox Provider shall remit all collections
received in the lockbox to Bank. Upon Bank's receipt
of such collections, provided that there does not
then exist an Event of Default or event that with
notice, lapse or time or otherwise would constitute
an Event of Default, and subject to Bank's rights in
the Collateral, Bank agrees to remit promptly to
Borrower the amount of the receivables collections it
receives with respect to receivables other than
Financed Receivables. It is understood and agreed by
Borrower that this Section does not impose any
affirmative duty on Bank to do any act other than to
turn over such amounts. All such receivables and
collections are Collateral and in the event of
Borrower's default hereunder, Bank shall have no duty
to remit collections of Collateral and may apply such
collections to the obligations hereunder and Bank
shall have the rights of a secured party under the
California Uniform Commercial Code.
(K) Borrower will allow Bank to audit Borrower's
Collateral, including but not limited to Borrower's
Accounts, at Borrowers expense, no later than ninety
(90) days following the execution of this Agreement
and annually thereafter. Provided however, if an
Event of Default has occurred, Bank may audit
Borrower's Collateral, including but not limited to
Borrower's Accounts at Bank's sole discretion and
without notification and authorization from Borrower.
(L) Borrower shall maintain, as of the last day of each
Reconciliation Period, a Tangible Net Worth of at
least Seven Hundred Thousand and 00/100 Dollars
($700,000.00).
6.3 NEGATIVE COVENANTS. Borrower will not do any of the following
without Bank's prior written consent:
(A) Assign, transfer, sell or grant, or permit any lien
or security interest in the Collateral, other than
Permitted Liens.
(B) Convey, sell, lease, transfer or otherwise dispose of
the Collateral.
(C) Create, incur, assume, or be liable for any
indebtedness, except for Permitted Indebtedness.
(D) Become an "INVESTMENT COMPANY" or a company
controlled by an "INVESTMENT COMPANY," under the
Investment Company Act of 1940 or undertake as one of
its important activities extending credit to purchase
or carry margin stock, or use the
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proceeds of any Advance for that purpose; fail to
meet the minimum funding requirements of ERISA,
permit a Reportable Event or Prohibited Transaction,
as defined in ERISA, to occur; fail to comply with
the Federal Fair Labor Standards Act or violate any
other law or regulation, or permit any of its
subsidiaries to do so.
7. ADJUSTMENTS. If any Account Debtor asserts a discount, allowance, return,
offset, defense, warranty claim, or the like (an "ADJUSTMENT") or if Borrower
breaches any of the representations, warranties or covenants set forth in
SECTION 6, Borrower will promptly advise Bank. Borrower will resell any
rejected, returned, or recovered personal property for Bank, at Borrower's
expense, and pay proceeds to Bank. While Borrower has returned goods that are
Borrower property, Borrower will segregate and ▇▇▇▇ them "property of Silicon
Valley Bank." Bank owns the Financed Receivables and until receipt of payment,
has the right to take possession of any rejected, returned, or recovered
personal property.
8. SECURITY INTEREST. Borrower grants to Bank a continuing security interest in
all presently and later acquired Collateral to secure all Obligations and the
performance of each of Borrower's duties hereunder. Any security interest will
be a first priority security interest in the Collateral.
9. EVENTS OF DEFAULT. Any one or more of the following is an Event of Default.
(A) Borrower fails to pay any amount owed to Bank when
due;
(B) Borrower fails to have the Lockbox discussed in
SECTION 6.2(J) set-up and operational within
forty-five (45) days from the Effective Date.
(C) Borrower files or has filed against it any Insolvency
Proceedings or any assignment for the benefit of
creditors, or appointment of a receiver or custodian
for any of its assets;
(D) Borrower becomes insolvent or is generally not paying
its debts as they become due or is left with
unreasonably small capital;
(E) Any involuntary lien, garnishment, attachment
attaches to the Financed Receivables or any
Collateral;
(F) Borrower breaches any covenant, agreement, warranty,
or representation is an immediate Event of Default;
(G) Borrower is in default under any document, instrument
or agreement evidencing any debt, obligation or
liability in favor of Bank its affiliates or vendors
regardless of whether the debt, obligation or
liability is direct or indirect, primary or
secondary, or fixed or contingent;
(H) An event of default occurs under any Guaranty of the
Obligations or any material provision of any Guaranty
is not valid or enforceable or a Guaranty is
repudiated or terminated;
(I) A material default or Event of Default occurs under
any agreement between Borrower and any creditor of
Borrower that signed a subordination agreement with
Bank;
(J) Any creditor that has signed a subordination
agreement with Bank breaches any terms of the
subordination agreement; or
(K) (i) A material impairment in the perfection or
priority of Bank's security interest in the
Collateral; (ii) a material adverse change in the
business, operations, or conditions (financial or
otherwise) of Borrower occurs; or (iii) a material
impairment of the prospect of repayment of any
portion of the Advances occurs.
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10.REMEDIES.
10.1 REMEDIES UPON DEFAULT. When an Event of Default occurs, (1) Bank
may stop financing receivables or extending credit to Borrower; (2) at Banks
option and on demand, all or a portion of the Obligations or, for to an Event of
Default described in SECTION 9(b), automatically and without demand, are due and
payable in full; (3) apply to the Obligations any (i) balances and deposits of
Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or
the account of Borrower; and (4) Bank may exercise all rights and remedies under
this Agreement and the law, including those of a secured party under the Code,
power of attorney rights in SECTION 5 for the Collateral, and the right to
collect, dispose of, sell, lease, use, and realize upon all Financed Receivables
and Collateral in any commercial manner. Borrower agrees that any notice of sale
required to be given to Borrower is deemed given if at least five days before
the sale may be held.
10.2 DEMAND WAIVER. Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guaranties held by Bank on which
Borrower is liable.
10.3 DEFAULT RATE. If any amount is not paid when due, the amount bears
interest at the Applicable Rate plus five percent until the earlier of (a)
payment in good funds or (b) entry of a final judgment when the principal amount
of any money judgment will accrue interest at the highest rate allowed by law.
11. FEES, COSTS AND EXPENSES. Borrower will pay on demand all reasonable fees,
costs and expenses (including attorneys' and professionals fees with costs and
expenses) that Bank incurs from: (a) preparing, negotiating, administering, and
enforcing this Agreement or related agreement, including any amendments, waivers
or consents, (b) any litigation or dispute relating to the Financed Receivables,
the Collateral, this Agreement or any other agreement, (c) enforcing any rights
against Borrower or any guarantor, or any Account Debtor, (d) protecting or
enforcing its interest in the Financed Receivables or other Collateral, (e)
collecting the Financed Receivables and the Obligations, and (f) any bankruptcy
case or insolvency proceeding involving Borrower, any Financed Receivable, the
Collateral, any Account Debtor, or any Guarantor.
12. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER. California law governs this
Agreement. Borrower and Bank each submit to the exclusive jurisdiction of the
State and Federal courts in Santa ▇▇▇▇▇ County, California.
BORROWER AND BANK EACH WAIVE ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
13. NOTICES. Notices or demands by either party about this Agreement must be in
writing and personally delivered or sent by an overnight delivery service, by
certified mail postage prepaid return receipt requested, or by FAX to the
addresses listed at the beginning of this Agreement. A party may change notice
address by written notice to the other party.
14. GENERAL PROVISIONS.
14.1 SUCCESSORS and Assigns. This Agreement binds and is for the
benefit of successors and permitted assigns of each party. Borrower may not
assign this Agreement or any rights under it without Bank's prior written
consent which may be granted or withheld in Bank's discretion. Bank may, without
the consent of or notice to Borrower, sell, transfer, or grant participation in
any part of Bank's obligations, rights or benefits under this Agreement.
14.2 INDEMNIFICATION. Borrower will indemnify, defend and hold harmless
Bank and its officers, employees, and agents against: (a) obligations, demands,
claims, and liabilities asserted by any other party in connection with the
transactions contemplated by this Agreement; and (b) losses or expenses
incurred, or paid by
10
Bank from or consequential to transactions between Bank and Borrower (including
reasonable attorneys fees and expenses), except for losses caused by Bank's
gross negligence or willful misconduct.
14.3 TIME OF ESSENCE. Time is of the essence for performance of all
obligations in this Agreement.
14.4 SEVERABILITY OF PROVISION. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
14.5 AMENDMENTS IN WRITING, INTEGRATION. All amendments to this
Agreement must be in writing. This Agreement is the entire agreement about this
subject matter and supersedes prior negotiations or agreements.
14.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts and when executed
and delivered are one Agreement.
14.7 SURVIVAL. All covenants, representations and warranties made in
this Agreement continue in force while any Financed Receivable amount remains
outstanding. Borrower's indemnification obligations survive until all statutes
of limitations for actions that may be brought against Bank have run.
14.8 CONFIDENTIALITY. Bank will use the same degree of care handling
Borrower's confidential information that it uses for its own confidential
information, but may disclose information: (i) to its subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the Agreement, (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with an
examination or audit, (v) as it considers appropriate exercising the remedies
under this Agreement and (vi) otherwise to third parties only pursuant to a
waiver by the Borrower, the form of which has been previously provided by the
Bank to the Borrower. Confidential information does not include information that
is either: (a) in the public domain or in Bank's possession when disclosed, or
becomes part of the public domain after disclosure to Bank; or (b) disclosed to
Bank by a third party, if Bank does not know that the third party is prohibited
from disclosing the information.
14.9 OTHER AGREEMENTS. This Agreement may not adversely affect Banks
rights under any other document or agreement. If there is a conflict between
this Agreement and any agreement between Borrower and Bank, Bank may determine
in its sole discretion which provision applies. Borrower acknowledges that any
security agreements, liens and/or security interests securing payment of
Borrower's Obligations also secure Borrower's Obligations under this Agreement
and are not adversely affected by this Agreement. Additionally, (a) any
Collateral under other agreements or documents between Borrower and Bank secures
Borrowers Obligations under this Agreement and (b) a default by Borrower under
this Agreement is a default under agreements between Borrower and Bank.
[SIGNATURE PAGES FOLLOW]
11
IN WITNESS WHEREOF, the parties hereto have executed this Accounts
Receivable Financing Agreement as of the Effective Date recorded below.
BORROWER: M-WAVE, INC.,
a Delaware corporation
By: __________________________________
Name: __________________________________
Title: __________________________________
POLY CIRCUITS, INC.,
an Illinois corporation
By: __________________________________
Name: __________________________________
Title: __________________________________
BANK: SILICON VALLEY BANK
By: __________________________________
Name: __________________________________
Title: __________________________________
EFFECTIVE DATE:_______________________________
EXHIBIT A
DEFINITION OF "COLLATERAL"
The Collateral consists of all of Borrower's right, title and interest
in and to the following:
All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing;
All Borrower's Books relating to the Collateral and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
EXHIBIT B
[LOGO]
SILICON VALLEY BANK
SPECIALTY FINANCE DIVISION
COMPLIANCE CERTIFICATE
I, as authorized officer of M-Wave, Inc., a Delaware corporation and Poly
Circuits, Inc., an Illinois corporation (collectively referred to herein as
"BORROWER") certify under the Accounts Receivable Financing Agreement (the
"AGREEMENT") between Borrower and Silicon Valley Bank ("BANK") as follows.
BORROWER REPRESENTS AND WARRANTS FOR EACH FINANCED RECEIVABLE:
It is the owner with legal right to sell, transfer and assign it;
The correct amount is on the Invoice Transmittal and is not disputed;
Payment is not contingent on any obligation or contract and it has
fulfilled all its obligations as of the Invoice Transmittal date;
It is based on an actual sale and delivery of goods and/or services
rendered, due to Borrower, it is not past due or in default, has not been
previously sold, assigned, transferred, or pledged and is free of any liens,
security interests and encumbrances;
There are no defenses, offsets, counterclaims or agreements for which
the Account Debtor may claim any deduction or discount;
It reasonably believes no Account Debtor is insolvent or subject to any
Insolvency Proceedings;
It has not filed or had filed against it proceedings and does not
anticipate any filing;
Bank has the right to endorse and/ or require Borrower to endorse all
payments received on Financed Receivables and all proceeds of Collateral.
No representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statement contained in the certificates or statement not misleading.
ADDITIONALLY, BORROWER REPRESENTS AND WARRANTS AS FOLLOWS:
Borrower is duly existing and in good standing in its state of
formation and qualified and licensed to do business in, and in good standing in,
any state in which the conduct of its business or its ownership of property
requires that it be qualified. The execution, delivery and performance of this
Agreement has been duly authorized, and do not conflict with Borrower's
formations documents, nor constitute an Event of Default under any material
agreement by which Borrower is bound. Borrower is not in default under any
agreement to which or by which it is bound.
Borrower has good title to the Collateral. All inventory is in all
material respects of good and marketable quality, free from material defects.
Borrower is not an "INVESTMENT COMPANY" or a company "CONTROLLED" by an
"INVESTMENT COMPANY" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations G, T and U of the Federal Reserve Board of Governors). Borrower has
complied with the Federal Fair Labor Standards Act. Borrower has not violated
any laws, ordinances or rules. None of Borrower's properties or assets has been
used by Borrower, to the best of Borrower's knowledge, by previous persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower has timely filed all required tax returns and paid,
or made adequate provision to pay, all taxes. Borrower has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted.
All representations and warranties in the Agreement are true and
correct in all material respects on this date.
Sincerely,
________________________________________
SIGNATURE
________________________________________
TITLE
________________________________________
DATE
2
[LOGO]
SILICON VALLEY BANK
SPECIALTY FINANCE DIVISION
SECRETARY'S CERTIFICATE OF RESOLUTION
I, as Secretary of M-WAVE, INC., a Delaware corporation (the
"CORPORATION"), certify that at a meeting duly convened at which a quorum was
present the following resolutions were adopted by the Board of Directors of the
Corporation and that these resolutions have not been modified, amended, or
rescinded and remain effective as of today's date.
It is resolved that ANY ONE of the following officers of the Corporation, whose
name, title and signature is below:
NAME TITLE SIGNATURE
----------------------- ------------------------------ -----------------------
_______________________ ______________________________ _______________________
_______________________ ______________________________ _______________________
_______________________ ______________________________ _______________________
_______________________ ______________________________ _______________________
_______________________ ______________________________ _______________________
may act for the Corporation and:
Sell the Corporation's accounts receivable to Bank
Grant to Bank a security interest in any of the Corporation's
assets
Execute and deliver certain agreements in connection with the
sale of receivables, and granting of security interests.
Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including
documents or agreement that waive the Corporation's right to a
jury trial) they think necessary to effectuate these
Resolutions.
Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.
I certify that the persons listed above are the Corporation's officers with the
titles and signatures shown following their names and that these resolutions
have not been modified are currently effective.
X________________________________________ _______________________________
*Secretary or Assistant Secretary Date
X_________________________________________________
* If the certifying officer is designated as a signer in these resolutions
then another corporate officer must also sign.
[LOGO]
SILICON VALLEY BANK
SPECIALTY FINANCE DIVISION
SECRETARY'S CERTIFICATE OF RESOLUTION
I, as Secretary of POLY CIRCUITS, INC., an Illinois corporation (the
"CORPORATION"), certify that at a meeting duly convened at which a quorum was
present the following resolutions were adopted by the Board of Directors of the
Corporation and that these resolutions have not been modified, amended, or
rescinded and remain effective as of today's date.
It is resolved that ANY ONE of the following officers of the Corporation, whose
name, title and signature is below:
NAME TITLE SIGNATURE
----------------------- ------------------------------ -----------------------
_______________________ ______________________________ _______________________
_______________________ ______________________________ _______________________
_______________________ ______________________________ _______________________
_______________________ ______________________________ _______________________
_______________________ ______________________________ _______________________
may act for the Corporation and:
Sell the Corporation's accounts receivable to Bank
Grant to Bank a security interest in any of the Corporation's
assets
Execute and deliver certain agreements in connection with the
sale of receivables, and granting of security interests.
Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including
documents or agreement that waive the Corporation's right to a
jury trial) they think necessary to effectuate these
Resolutions.
Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.
I certify that the persons listed above are the Corporation's officers with the
titles and signatures shown following their names and that these resolutions
have not been modified are currently effective.
X_________________________________________ ___________________________________
*Secretary or Assistant Secretary Date
X_________________________________________________
* If the certifying officer is designated as a signer in these resolutions
then another corporate officer must also sign.