EXHIBIT 10.11
FORBEARANCE AGREEMENT
This Forbearance Agreement (the "Agreement"), made as of the 1st day of
January, 2003, by and among Bank One, N.A., formerly known as American National
Bank & Trust Company of Chicago (the "BANK"), and M-Wave, Inc., a Delaware
corporation, and Poly Circuits, Inc., an Illinois corporation (M-Wave, Inc. and
Poly Circuits Inc. hereinafter collectively referred to as the "BORROWER").
WITNESSETH:
WHEREAS, Borrower has entered into a Loan Agreement, dated as
of July 1, 2001 (as amended from time to time, the "LOAN AGREEMENT") with the
Illinois Development Finance Authority (the "ISSUER"), a public body corporate
and politic, pursuant to which Loan Agreement the Issuer has agreed to lend to
the Borrower $8,100,000.00 to finance the costs of the Project (as defined in
the Loan Agreement), which loan is evidenced by the PROMISSORY NOTE (as defined
in the Loan Agreement).
WHEREAS, the Issuer entered into a Trust Indenture, dated as
of July 1, 2001 (as amended from time to time, the "INDENTURE"), naming American
National Bank and Trust Company of Chicago, an Illinois banking corporation, now
known as Bank One, N.A., as trustee (together with any successor trustee under
the Indenture, the "TRUSTEE").
WHEREAS, Pursuant to the Loan Agreement and the Indenture, the
Issuer issued its $8,100,000 Variable Rate Demand Industrial Development Revenue
Bonds (M-Wave Inc. Project), Series 2001 (the "BONDS");
WHEREAS, to provide for payment of the Bonds, the Bank issued the
Irrevocable Letter of Credit in the amount of $8,199,864 dated July 26, 2001 in
favor of American National Bank and Trust Company of Chicago, as Trustee (the
"LETTER OF Credit");
WHEREAS, Borrower is obligated to reimburse the Bank for draws under
the Letter of Credit pursuant to the Reimbursement Agreement dated as of July
26, 2001 between Bank and Borrower (the "REIMBURSEMENT AGREEMENT");
WHEREAS, Borrower defaulted under the Reimbursement Agreement because
of its failure to comply with the financial ratios set forth in Section 7.5
thereof, which defaults continue to the date hereof;
WHEREAS, Borrower and Bank entered into a Forbearance Agreement dated
November 22, 2002 pursuant to which Bank agreed to forbear from exercising
certain of its remedies under the Reimbursement Agreement, through December 31,
2002; and
WHEREAS, Borrower and Bank wish to extend the period of forbearance by
the Bank to August 31, 2003, subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual
undertakings herein set forth, the parties hereto agree as follows:
1. Recitals. The foregoing recitals are incorporated by reference into
this Agreement and shall be binding upon the parties.
2. Capitalized Terms. Unless otherwise defined herein, capitalized
terms used in this Agreement shall have the meanings given them in the Loan
Agreement, the Indenture, the Reimbursement Agreement and any other of the
Operating Documents (as defined in the Reimbursement Agreement).
3. Forbearance. Provided Borrower complies with all of the terms and
conditions hereof in the time provided therefor, Bank agrees to forbear for the
period from the date hereof to August 31, 2003 from pursuing its rights under
the Reimbursement Agreement to give written notice to the Trustee as provided in
Section 601 of the Indenture to accelerate the maturity of the Bonds in
accordance with Section 602 of the Indenture, and to declare all of the
Obligations (as defined in the Reimbursement Agreement) immediately payable at
the Default Rate (as defined in Section 3.1(b) of the Reimbursement Agreement.
Nothing herein or in any negotiations in connection herewith shall be deemed to
be a waiver of any other or future default by Borrower, nor shall any cure by
Borrower of the current defaults terminate or invalidate any of the provisions
hereof.
4. Covenants of Borrowers. Borrower agrees that:
(a) Borrower shall deposit in the Sinking Fund Account:
(i) $1,500,000 on the earlier of (x) receipt by the Borrower of
any federal tax refund or (y) April 30, 2003; and
(ii) $500,000 on the earlier of (x) receipt by the Borrower of any
state tax refund or (y) June 30, 2003; and
(iii) $300,000 on the earlier of (x) receipt by Borrower of the
proceeds of the sale of its real estate located at 000 Xxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxx or (y) August 15, 2003. Nothing herein shall
be deemed a consent by the Bank to any sale of real estate, as may
be required under any of the Operating Documents.
(b) Borrower agrees that all funds deposited in the Sinking Fund Account
may be used by the Bank in its sole discretion at any time to pay any
of the Obligations and to allocate such payments among the Obligations
as the Bank shall determine in its sole discretion. The Bank shall
notify Borrower in writing of its use of such funds to pay any of the
Obligations.
(c) Borrower shall not request and agrees that from the date hereof it
shall not be entitled to any disbursement from the Project Fund for
Costs of the Project or any other purpose without the prior written
consent of the Bank, which consent shall be at Bank's sole discretion,
whether or not an Event of Default (as defined in the Reimbursement
Agreement) exists at the time of any request for such consent.
(d) Borrower shall take all action necessary to cause the Project Fund to
be and remain pledged to Bank to secure the Obligations of Borrower to
Bank under the Reimbursement Agreement, as provided in the Pledge
Agreement relating to the Project Fund, executed and delivered by
Borrower to Bank.
(e) No other Event of Default shall occur under the Reimbursement
Agreement.
5. Waiver and Release of Claims. Borrower represents to the Bank that
it has no defenses, setoffs, claims or counterclaims of any kind or nature
whatsoever against the Bank in connection with the Bonds, the Letter of Credit,
the Reimbursement Agreement or any of the Loan Documents, or any action taken or
not taken by the Bank with respect thereto. Without limiting the generality of
the foregoing, and in consideration of Bank's agreements hereunder, Borrower
hereby releases and forever discharges the Bank, its affiliates and each of
their officers, agents, employees, attorneys, insurers, successors and assigns
(collectively the "Released Parties"), from and against any and all liabilities,
rights, claims, losses, expenses or causes of action, known or unknown, arising
out of any action or inaction by any of the Released Parties to the date hereof
with respect to the Bonds, the Indenture, the Letter of Credit, the
Reimbursement Agreement or any of the Loan Documents, or this Agreement, no
matter in any way related thereto or arising in conjunction therewith. The
Borrower also waives, releases and forever discharges the Released Parties and
each of them from and against any and all known or unknown rights to setoff,
defenses, claims, counterclaims, causes of action, and any other bar to the
enforcement of this Agreement, the Bonds, the Indenture, the Letter of Credit,
the Reimbursement Agreement or any of the Loan Documents.
6. Disclaimer of Reliance. Borrower expressly disclaims any reliance on
any oral representation made by the Released Parties or any of them in respect
to the subject matter of this Agreement. Borrower acknowledges and agrees that
the Bank is specifically relying upon the representations, warranties, releases
and agreements contained herein, and that this Agreement is being executed by
Borrower and delivered to the Bank as an inducement to the Bank to forbear from
exercising remedies available to the Bank.
7. Notice. All notices and demands under and with respect to this
Agreement, if any, shall be in writing and shall be given as provided in the
Reimbursement Agreement, except that notices to Bank shall be directed to:
Bank One, N.A.
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn.: Xxxxx X. Xxxxx
Sixth Floor
8. Joint and Several Liability. The obligations of Borrower hereunder
shall be joint and several.
IN WITNESS WHEREOF, the parties named below have caused this Agreement
to be executed as of the day and year first above written.
LENDER:
BANK ONE, N.A.
By:
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Name:
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Title:
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BORROWERS:
M-WAVE, INC.
By:
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Name:
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Title:
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POLY CIRCUITS, INC.
By:
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Name:
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Title:
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