**EXHIBIT 10.3**

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**ACCOUNTSRECEIVABLE PURCHASE MODIFICATION AGREEMENT**

 

This AccountsReceivable Purchase Modification Agreement is entered into as ofSeptember 24, 2003, by and between AML Communications, Inc. (the “Seller”)and Silicon Valley Bank (“Buyer”).

 

1.                                       DESCRIPTIONOF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing bySeller to Buyer, Seller is indebted to Buyer pursuant to, among otherdocuments, an Accounts Receivable Purchase Agreement, dated November 20,2001 by and between Seller and Buyer, as may be amended from time to time, (the“Accounts Receivable Purchase Agreement”). The Accounts Receivable Purchase Agreement provides for, among otherthings, an aggregate amount of all Purchased Receivable in the original amountof One Million Dollars ($1,000,000.00). Capitalized terms used without definition herein shall have the meaningsassigned to them in the Accounts Receivable Purchase Agreement.

 

Hereinafter, all indebtedness owing by Seller to Buyer shall be referredto as the “Indebtedness”.

 

2.                                       DESCRIPTIONOF COLLATERAL.   The Collateral asdescribed in the Accounts Receivable Purchase Agreement and in the IntellectualProperty Security Agreement secures repayment of the Indebtedness.

 

Hereinafter, theabove-described security documents and guaranties, together with all otherdocuments securing repayment of the Indebtedness shall be referred to asthe  “Security Documents”.  Hereinafter, the Security Documents,together with all other documents evidencing or securing the Indebtedness shallbe referred to as the “Existing Documents”.

 

3.                                       DESCRIPTIONOF CHANGE IN TERMS.

 

A.                                   Modification(s)to Accounts Receivable Purchase Agreement:

 

1.                                       Section 2.2 entitled “Acceptance ofReceivables” is hereby amended in part to provide that in no event shall theaggregate amount of all Purchased Receivables outstanding at any time exceedTwo Million Dollars ($2,000,000.00).

 

2.                                       Section 3.2 entitled “Finance Charges” ishereby amended in part to provide that Seller shall pay to Buyer a minimum of$6,500 (Six Thousand Five Hundred Dollars) in Finance Charge on eachReconciliation Period.

 

3.                                       Section 3.3 entitled “Collateral Handling Fee”is hereby amended in part to provide that on each Reconciliation Date, Sellerwill pay to Buyer a collateral handling fee, equal 0.75% per month of theaverage Daily Account Balance outstanding during the applicable ReconciliationPeriod.

 

4.                                       Section 3.7 entitled “Early Termination Fee” ishereby amended in its entirety to read as follows:

 

A fully earned, non-refundableearly termination fee of $50,000 is due upon voluntary full payment of theObligations and termination of the Accounts Receivable Purchase Agreement priorto November 20, 2004 unless the Obligations are paid in full from aninitial advance from a loan agreement with Silicon Valley Bank.

 

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5.                                       Section 17 entitled “Term and Termination” ishereby amended in part to provide that the term of the Loan Agreement shall bethrough November 20, 2004 unless terminated in writing by Buyer or Seller.

 

 

B.                                     Modificationto the IP Agreement:

 

Item “(g)” underSection 3 entitled “Covenants and Warranties” is hereby amended to read asfollows:

 

Grantor shall not register any Copyrights or Mask Works with the UnitedStates Copyright Office unless it: (i) has given at least fifteen (15) days’prior notice to Bank of its intent to register such Copyrights or Mask Worksand has provided Bank with a copy of the application it intends to file withthe United States Copyright Office (excluding exhibits thereto); (ii) executesa security agreement or such other documents as Bank may reasonably request inorder to maintain the perfection and priority of Bank’s security interest inthe Copyrights proposed to be registered with the United States CopyrightOffice; and (iii) records such security documents with the United StatesCopyright Office contemporaneously with filing the Copyright application(s)with the United States Copyright Office. Grantor shall promptly provide to Bank a copy of the Copyrightapplication(s) filed with the United States Copyright Office, together withevidence of the recording of the security documents necessary for Bank tomaintain the perfection and priority of its security interest in suchCopyrights or Mask Works.  Grantor shallprovide written notice to Bank of any application filed by Grantor in theUnited States Patent Trademark Office for a patent or to register a trademarkor service mark within 30 days of any such filing;

 

4.                                       CONSISTENTCHANGES.  The Existing Documents areeach hereby amended wherever necessary to reflect the changes described above.

 

5.                                       NODEFENSES OF SELLER.  Seller agreesthat, as of this date, it has no defenses against the obligations to pay anyamounts under the Indebtedness.

 

6.                                       CONTINUINGVALIDITY.  Seller understands andagrees that in modifying the existing Indebtedness, Buyer is relying uponSeller’s representations, warranties, and agreements, as set forth in theExisting Documents.  Except as expresslymodified pursuant to this Accounts Receivable Purchase Modification Agreement,the terms of the Existing Documents remain unchanged and in full force andeffect.  Buyer’s agreement tomodifications to the existing Indebtedness pursuant to this Accounts ReceivablePurchase Modification Agreement in no way shall obligate Buyer to make anyfuture modifications to the Indebtedness. Nothing in this Accounts Receivable Purchase Modification Agreementshall constitute a satisfaction of the Indebtedness.  It is the intention of Buyer and Seller to retain as liableparties all makers and endorsers of Existing Documents, unless the party isexpressly released by Buyer in writing. No maker, endorser, or guarantor will be released by virtue of this AccountsReceivable Purchase Modification Agreement. The terms of this paragraph apply not only to this Accounts ReceivablePurchase Modification Agreement, but also to any subsequent Accounts ReceivablePurchase modification agreements.

 

7.                                       COUNTERSIGNATURE.  This Accounts Receivable Purchase ModificationAgreement shall become effective only when executed by Seller and Buyer.

 
| **SELLER:**               | **BUYER:**          |
|---------------------------|---------------------|
|                      |                |
| AML COMMUNICATIONS,  INC. | SILICON VALLEY BANK |

 

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| By:    |              |   | By:    |            |   |
|--------|-------------------|--------|--------|-----------------|--------|
| Name:  | Jacob Inbar       |   | Name:  | Robert Anderson |   |
| Title: | President and CEO |   | Title: | Vice-President  |   |
|        |                   |        |        |                 |        |  |  |  |

 

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