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                                                                   EXHIBIT 10.25

                                     [LOGO]
                               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 475 Industrial Drive, West Chicago, Illinois 60185 and with a
FAX number of 630 929-9755.

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.

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         "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, sue, 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 mark 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.

                                       9
<PAGE>

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 Clara 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
<PAGE>

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
<PAGE>

         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:_______________________________

<PAGE>

                                    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.

<PAGE>

                                    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.

<PAGE>

         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
<PAGE>

                                     [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:

<TABLE>
<CAPTION>
      NAME                       TITLE                           SIGNATURE
-----------------------  ------------------------------  -----------------------
<S>                      <C>                             <C>
_______________________  ______________________________  _______________________
_______________________  ______________________________  _______________________
_______________________  ______________________________  _______________________
_______________________  ______________________________  _______________________
_______________________  ______________________________  _______________________
</TABLE>

         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.

<PAGE>

                                     [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:

<TABLE>
<CAPTION>
      NAME                       TITLE                           SIGNATURE
-----------------------  ------------------------------  -----------------------
<S>                      <C>                             <C>
_______________________  ______________________________  _______________________
_______________________  ______________________________  _______________________
_______________________  ______________________________  _______________________
_______________________  ______________________________  _______________________
_______________________  ______________________________  _______________________
</TABLE>

         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.<PAGE>

                                                                   EXHIBIT 10.26

                    INTELLECTUAL PROPERTY SECURITY AGREEMENT

         This Intellectual Property Security Agreement (this "IP AGREEMENT") is
made as of the Effective Date, by and between Poly Circuits, Inc., an Illinois
corporation ("GRANTOR"), and Silicon Valley Bank, a California banking
corporation ("BANK").

                                    RECITALS

         A.       Bank will make advances to Grantor ("ADVANCES") as described
in the Accounts Receivable Finance Agreement (the "FINANCING AGREEMENT"), but
only if Grantor grants Bank a security interest in its Copyrights, Trademarks,
Patents, and Mask Works. Defined terms used but not defined herein shall have
the same meanings as in the Financing Agreement.

         B.       Pursuant to the terms of the Financing Agreement, Grantor has
granted to Bank a security interest in all of Grantor's right title and
interest, whether presently existing or hereafter acquired in, to and under all
of the Collateral.

         NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged and intending to be legally bound, as collateral security
for the prompt and complete payment when due of Grantor's Indebtedness under the
Financing Agreement, Grantor hereby represents, warrants, covenants and agrees
as follows:

         1.       Grant of Security Interest. As collateral security for the
prompt and complete payment and performance of all of Grantor's present or
future Indebtedness, obligations and liabilities to Bank, Grantor hereby grants
a security interest in all of Grantor's right, title and interest in, to and
under its Intellectual Property Collateral (all of which shall collectively be
called the "INTELLECTUAL PROPERTY COLLATERAL"), including, without limitation,
the following:

                  (a)      Any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held, including without limitation those set forth on EXHIBIT A
attached hereto (collectively, the "COPYRIGHTS");

                  (b)      Any and all trade secrets, and any and all
intellectual property rights in computer software and computer software products
now or hereafter existing, created, acquired or held;

                  (c)      Any and all design rights which may be available to
Grantor now or hereafter existing, created, acquired or held;

                  (d)      All patents, patent applications and like protections
including, without limitation, improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, including without
limitation the patents and patent applications set forth on EXHIBIT B attached
hereto (collectively, the "PATENTS");

                  (e)      Any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Grantor connected
with and symbolized by such trademarks, including without limitation those set
forth on EXHIBIT C attached hereto (collectively, the "TRADEMARKS")

                  (f)      All mask works or similar rights available for the
protection of semiconductor chips, now-owned or hereafter acquired, including,
without limitation those set forth on EXHIBIT D attached hereto (collectively,
the "MASK WORKS");

<PAGE>

                  (g)      Any and all claims for damages by way of past,
present and future infringements of any of the rights included above, with the
right, but not the obligation, to sue for and collect such damages for said use
or infringement of the intellectual property rights identified above;

                  (h)      All licenses or other rights to use any of the
Copyrights, Patents, Trademarks, or Mask Works and all license fees and
royalties arising from such use to the extent permitted by such license or
rights;

                  (i)      All amendments, extensions, renewals and extensions
of any of the Copyrights, Trademarks, Patents, or Mask Works; and

                  (j)      All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.

         2.       Authorization and Request. Grantor authorizes and requests
that the Register of Copyrights and the Commissioner of Patents and Trademarks
record this IP Agreement.

         3.       Covenants and Warranties. Grantor represents, warrants,
covenants and agrees as follows:

                  (a)      Grantor is now the sole owner of the Intellectual
Property Collateral, except for nonexclusive licenses granted by Grantor to its
customers in the ordinary course of business.

                  (b)      Performance of this IP Agreement does not conflict
with or result in a breach of any IP Agreement to which Grantor is bound, except
to the extent that certain intellectual property agreements prohibit the
assignment of the rights thereunder to a third party without the licensor's or
other party's consent and this IP Agreement constitutes a security interest.

                  (c)      During the term of this IP Agreement, Grantor will
not transfer or otherwise encumber any interest in the Intellectual Property
Collateral, except for non-exclusive licenses granted by Grantor in the ordinary
course of business or as set forth in this IP Agreement;

                  (d)      To its knowledge, each of the Patents is valid and
enforceable, and no part of the Intellectual Property Collateral has been judged
invalid or unenforceable, in whole or in part, and no claim has been made that
any part of the Intellectual Property Collateral violates the rights of any
third party;

                  (e)      Grantor shall promptly advise Bank of any material
adverse change in the composition of the Collateral, including but not limited
to any subsequent ownership right of the Grantor in or to any Trademark, Patent,
Copyright, or Mask Work specified in this IP Agreement;

                  (f)      Grantor shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents, Copyrights, and Mask
Works deemed material by the Borrower in its reasonable business judgment, (ii)
use its reasonable efforts to detect infringements of the Trademarks, Patents,
Copyrights, and Mask Works and promptly advise Bank in writing of material
infringements detected and (iii) not allow any Trademarks, Patents, Copyrights,
or Mask Works which Borrower deems material in its reasonable business judgment
to be abandoned, forfeited or dedicated to the public without the written
consent of Bank, which shall not be unreasonably withheld, unless Grantor
determines that reasonable business practices suggest that abandonment is
appropriate.

                  (g)      Grantor shall promptly register the most recent
version of any of Grantor's Copyrights, if not so already registered, and shall,
from time to time, execute and file such other instruments, and take such
further actions as Bank may reasonably request from time to time to perfect or
continue the perfection of Bank's interest in the Intellectual Property
Collateral;

                                       2
<PAGE>

                  (h)      This IP Agreement creates, and in the case of after
acquired Intellectual Property Collateral, this IP Agreement will create at the
time Grantor first has rights in such after acquired Intellectual Property
Collateral, in favor of Bank a valid and perfected first priority security
interest in the Intellectual Property Collateral in the United States securing
the payment and performance of the obligations evidenced by the Financing
Agreement upon making the filings referred to in clause (i) below;

                  (i)      To its knowledge, except for, and upon, the filing
with the United States Patent and Trademark office with respect to the Patents
and Trademarks and the Register of Copyrights with respect to the Copyrights and
Mask Works necessary to perfect the security interests created hereunder and
except as has been already made or obtained, no authorization, approval or other
action by, and no notice to or filing with, any U.S. governmental authority of
U.S. regulatory body is required either (i) for the grant by Grantor of the
security interest granted hereby or for the execution, delivery or performance
of this IP Agreement by Grantor in the U.S. or (ii) for the perfection in the
United States or the exercise by Bank of its rights and remedies thereunder;

                  (j)      All information heretofore, herein or hereafter
supplied to Bank by or on behalf of Grantor with respect to the Intellectual
Property Collateral is accurate and complete in all material respects.

                  (k)      Grantor shall not enter into any agreement that would
materially impair or conflict with Grantor's obligations hereunder without
Bank's prior written consent, which consent shall not be unreasonably withheld.
Grantor shall not permit the inclusion in any material contract to which it
becomes a party of any provisions that could or might in any way prevent the
creation of a security interest in Grantor's rights and interest in any property
included within the definition of the Intellectual Property Collateral acquired
under such contracts, except that certain contracts may contain anti-assignment
provisions that could in effect prohibit the creation of a security interest in
such contracts.

                  (l)      Upon any executive officer of Grantor obtaining
actual knowledge thereof, Grantor will promptly notify Bank in writing of any
event that materially adversely affects the value of any material Intellectual
Property Collateral, the ability of Grantor to dispose of any material
Intellectual Property Collateral of the rights and remedies of Bank in relation
thereto, including the levy of any legal process against any of the Intellectual
Property Collateral.

         4.       Bank's Rights. Bank shall have the right, but not the
obligation, to take, at Grantor's sole expense, any actions that Grantor is
required under this IP Agreement to take but which Grantor fails to take, after
fifteen (15) days' notice to Grantor. Grantor shall reimburse and indemnify Bank
for all reasonable costs and reasonable expenses incurred in the reasonable
exercise of its rights under this section 4.

         5.       Inspection Rights. Grantor hereby grants to Bank and its
employees, representatives and agents the right to visit, during reasonable
hours upon prior reasonable written notice to Grantor, and any of Grantor's
plants and facilities that manufacture, install or store products (or that have
done so during the prior six-month period) that are sold utilizing any of the
Intellectual Property Collateral, and to inspect the products and quality
control records relating thereto upon reasonable written notice to Grantor and
as often as may be reasonably requested, but not more than one (1) in every six
(6) months; provided, however, nothing herein shall entitle Bank access to
Grantor's trade secrets and other proprietary information.

         6.       Further Assurances; Attorney in Fact.

                  (a)      On a continuing basis, Grantor will, subject to any
prior licenses, encumbrances and restrictions and prospective licenses, make,
execute, acknowledge and deliver, and file and record in the proper filing and
recording places in the United States, all such instruments, including
appropriate financing and continuation statements and collateral agreements and
filings with the United States Patent and Trademarks Office and the Register of
Copyrights, and take all such action as may reasonably be deemed necessary or
advisable, or as requested by Bank, to perfect Bank's security interest in all
Copyrights, Patents, Trademarks, and Mask Works and otherwise

                                       3
<PAGE>

to carry out the intent and purposes of this IP Agreement, or for assuring and
confirming to Bank the grant or perfection of a security interest in all
Intellectual Property Collateral.

                  (b)      Grantor hereby irrevocably appoints Bank as Grantor's
attorney-in-fact, with full authority in the place and stead of Grantor and in
the name of Grantor. Bank or otherwise, from time to time in Bank's discretion,
upon Grantor's failure or inability to do so, to take any action and to execute
any instrument which Bank may deem necessary or advisable to accomplish the
purposes of this IP Agreement, including:

                           (i)      To modify, in its sole discretion, this IP
Agreement without first obtaining Grantor's approval of or signature to such
modification by amending Exhibit A, Exhibit B, Exhibit C, and Exhibit D hereof,
as appropriate, to include reference to any right, title or interest in any
Copyrights, Patents, Trademarks or Mask Works acquired by Grantor after the
execution hereof or to delete any reference to any right, title or interest in
any Copyrights, Patents, Trademarks, or Mask Works in which Grantor no longer
has or claims any right, title or interest; and

                           (ii)     To file, in its sole discretion, one or more
financing or continuation statements and amendments thereto, relative to any of
the Intellectual Property Collateral without the signature of Grantor where
permitted by law.

         7.       Events of Default. The occurrence of any of the following
shall constitute an Event of Default under this IP Agreement:

                  (a)      An Event of Default occurs under the Financing
Agreement; or

                  (b)      Grantor breaches any warranty or agreement made by
Grantor in this IP Agreement.

         8.       Remedies. Upon the occurrence and continuance of an Event of
Default, Bank shall have the right to exercise all the remedies of a secured
party under the California Uniform Commercial Code, including without limitation
the right to require Grantor to assemble the Intellectual Property Collateral
and any tangible property in which Bank has a security interest and to make it
available to Bank at a place designated by Bank. Bank shall have a nonexclusive,
royalty free license to use the Copyrights, Patents, Trademarks, and Mask Works
to the extent reasonably necessary to permit Bank to exercise its rights and
remedies upon the occurrence of an Event of Default. Grantor will pay any
expenses (including reasonable attorney's fees) incurred by Bank in connection
with the exercise of any of Bank's rights hereunder, including without
limitation any expense incurred in disposing of the Intellectual Property
Collateral. All of Bank's rights and remedies with respect to the Intellectual
Property Collateral shall be cumulative.

         9.       Indemnity. Grantor agrees to defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this IP Agreement, and
(b) all losses or expenses in any way suffered, incurred, or paid by Bank as a
result of or in any way arising out of, following or consequential to
transactions between Bank and Grantor, whether under this IP Agreement or
otherwise (including without limitation, reasonable attorneys fees and
reasonable expenses), except for losses arising from or out of Bank's gross
negligence or willful misconduct.

         10.      Reassignment. At such time as Grantor shall completely satisfy
all of the obligations secured hereunder, Bank shall execute and deliver to
Grantor all deeds, assignments, and other instruments as may be reasonably
necessary or proper to reinvest in Grantor title to the property to the extent
assigned hereunder, subject to any disposition thereof which may have been made
by Bank pursuant hereto.

         11.      Course of Dealing. No course of dealing, nor any failure to
exercise, nor any delay in exercising any right, power or privilege hereunder
shall operate as a waiver thereof.

                                       4
<PAGE>

         12.      Attorneys' Fees. If any action relating to this IP Agreement
is brought by either party hereto against the other party, the prevailing party
shall be entitled to recover reasonable attorneys' fees, costs and
disbursements.

         13.      Amendments. This IP Agreement may be amended only by a written
instrument signed by both parties hereto.

         14.      Counterparts. This IP Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.

         15.      Law and Jurisdiction. This IP Agreement shall be governed by
and construed in accordance with the laws of the State of California, without
regard for choice of law provisions. Grantor and Bank consent to the
nonexclusive jurisdiction of any state or federal court located in Santa Clara
County, California.

         16.      Confidentiality. In handling any confidential information,
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this IP Agreement except that the disclosure of this information may
be made (i) to the affiliates of the Bank, (ii) to prospective transferee or
purchasers of an interest in the obligations secured hereby, provided that they
have entered into comparable confidentiality agreement in favor of Grantor and
have delivered a copy to Grantor, (iii) as required by law, regulation, rule or
order, subpoena judicial order or similar order and (iv) as may be required in
connection with the examination, audit or similar investigation of Bank.

                            [SIGNATURE PAGE FOLLOWS]

                                       5
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Intellectual
Property Security Agreement as of the Effective Date of the Financing Agreement.

ADDRESS OF GRANTOR:                    GRANTOR:

475 Industrial Drive                   POLY CIRCUITS, INC.,
West Chicago, IL                       an Illinois corporation
60185

                                       By:     _________________________________
                                       Name:   _________________________________
                                       Title:  _________________________________

<PAGE>

Exhibit "A" attached to that certain Intellectual Property Security Agreement
dated as of the Effective Date of the Financing Agreement.

                                   EXHIBIT "A"

                                   COPYRIGHTS

SCHEDULE A - ISSUED COPYRIGHTS

<TABLE>
<CAPTION>
COPYRIGHT DESCRIPTION                   REGISTRATION NUMBER     DATE OF ISSUANCE
---------------------                   -------------------     ----------------
<S>                                     <C>                     <C>
</TABLE>

SCHEDULE B - PENDING COPYRIGHT APPLICATIONS

<TABLE>
<CAPTION>
                                                                  FIRST DATE OF
                           APPLICATION    DATE OF                    PUBLIC
COPYRIGHT DESCRIPTION         NUMBER       FILING    CREATION     DISTRIBUTION
---------------------      -----------    -------    --------     --------------
<S>                        <C>            <C>        <C>          <C>
</TABLE>

SCHEDULE C - UNREGISTERED COPYRIGHTS (Where No Copyright Application is Pending)

<TABLE>
<CAPTION>
                                                                                       DATE AND
                                                                                      RECORDATION
                                                                                     NUMBER OF IP
                                                                                     AGREEMENT TO
                                                                                       OWNER OF
                                                                                      GRANTOR (IF
                                                                ORIGINAL                ORIGINAL
                                                                AUTHOR OR               AUTHOR OR
                                                                 OWNER OF               OWNER OF
                                                              COPYRIGHT (IF           COPYRIGHT IS
 COPYRIGHT            DATE OF            FIRST DATE OF        DIFFERENT FROM         DIFFERENT FROM
DESCRIPTION          CREATION            DISTRIBUTION            GRANTOR)                GRANTOR)
---------------  -----------------  ----------------------  ------------------   ----------------------
<S>              <C>                <C>                     <C>                  <C>
</TABLE>

<PAGE>

Exhibit "B" attached to that certain Intellectual Property Security Agreement
dated as of the Effective Date of the Financing Agreement.

                                   EXHIBIT "B"

                                     PATENTS

<TABLE>
<CAPTION>
                                DOCKET                                        FILING
PATENT DESCRIPTION                NO.         COUNTRY         SERIAL NO.       DATE        STATUS
------------------------    ------------   -------------  ----------------  ----------   -----------
<S>                         <C>            <C>            <C>               <C>          <C>
</TABLE>

<PAGE>

Exhibit "C" attached to that certain Intellectual Property Security Agreement
dated as of the Effective Date of the Financing Agreement.

                                   EXHIBIT "C"

                                   TRADEMARKS

<TABLE>
<CAPTION>
 TRADEMARK DESCRIPTION        COUNTRY        SERIAL NO.       REG. NO.        STATUS
------------------------    ------------   -------------  ----------------  ----------
<S>                         <C>            <C>            <C>               <C>
</TABLE>

<PAGE>

Exhibit "D" attached to that certain Intellectual Property Security Agreement
dated as of the Effective Date of the Financing Agreement.

                                   EXHIBIT "D"

                                   MASK WORKS

<TABLE>
<CAPTION>
 MASK WORK DESCRIPTION        COUNTRY        SERIAL NO.       REG. NO.        STATUS
------------------------    ------------   -------------  ----------------  ----------
<S>                         <C>            <C>            <C>               <C>
</TABLE>

<PAGE>

                            VALIDITY INDEMNIFICATION

To:      Silicon Valley Bank

RE:      That certain Accounts Receivable Financing Agreement dated as of the
         Effective Date (defined therein) (the "AGREEMENT"), between M-Wave,
         Inc., a Delaware corporation and Poly Circuits, Inc., an Illinois
         corporation (collectively referred to herein as "BORROWER") and Silicon
         Valley Bank ("BANK")

         I am the chairman and chief executive officer of Borrower and have read
and understand the Agreement. Capitalized words not defined here are defined in
the Agreement. To induce you to extend financial accommodations to Borrower
under the Agreement, I personally warrant and represent the following:

         1.       All Financed Receivables reported to you on behalf of
Borrower, such as agings, transmittals, compliance certificates, collateral
reports or financial statements, are genuine obligations of Account Debtors from
the sale and completed delivery of merchandise or services rendered by Borrower
(the "SOLD GOODS") in the ordinary course of its business in complete
performance of that Account Debtors order.

         2.       All proceeds of the Financed Receivables such as checks,
drafts, notes, letters of credit and acceptances Borrower receives will be held
in trust for you and immediately forwarded to you.

         3.       No Financed Receivables are subject to any material offsets,
defenses or counterclaims, nor will Borrower impede or interfere with the
collection or payment of the Financed Receivables.

         4.       Sold Goods will be Borrower's sole property until sale and
both Financed Receivables and Sold Goods will be free of all liens and security
interests except those of Silicon Valley Bank.

         5.       The due dates of the Financed Receivables reported to Silicon
Valley Bank will be accurate.

         6.       Borrower will promptly report all disputes, rejections,
returns and resales of Sold Goods and all credits it allows on Financed
Receivables.

         7.       All Borrower's reports such as those about the Financed
Receivables, other Accounts and Inventory will be accurate except for minor
inadvertent errors.

         8.       Seller will not sell its Inventory except in the ordinary
course of business.

         I hereby indemnify and hold Silicon Valley Bank harmless from any
direct or consequential damage or loss which it sustains from the breach of any
of my representations or warranties (which continue and are irrevocable while
the Borrower is indebted to Silicon Valley Bank), or its reliance (whether
reasonable or not) on any misstatement (intentional or not), fraud, deceit or
criminal act of Borrower's officers, employees, or agents, or any costs
(including reasonable attorneys' fees and expenses) Silicon Valley Bank incurs
enforcing its rights. I will pay any loss, cost or damage on upon demand.

         My obligations are in addition to and not in lieu of Borrower's
obligations under the Agreement. This Validity Indemnification does not impair
or modify or otherwise affect the Agreement. This Validity Indemnification binds
me and my personal representatives, successors and assigns.

Date: April____,2004

                                        Very truly yours,

                                        ________________________________________
                                        Name: Joseph A. Turek
                                        Social Security Number: ________________
                                        Address: ____________________
                                        City/ST/Zip: ___________________
                                        Telephone: ___________________

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