**Exhibit 10.21**

 

**BUSINESSFINANCING MODIFICATION AGREEMENT**

 

This Business Financing ModificationAgreement is entered into as of December 23, 2005, by and between AMLCommunications, Inc. (the “Borrower”) and Bridge Bank, National Association (“Lender”).

 

1.             DESCRIPTIONOF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing byBorrower to Lender, Borrower is indebted to Lender pursuant to, among otherdocuments, a Business Financing Agreement, dated July 8, 2004 by and betweenBorrower to Lender, as may be amended from time to time, (the “BusinessFinancing Agreement”).  Capitalized termsused without definition herein shall have the meanings assigned to them in theBusiness Financing Agreement.

 

Hereinafter, all indebtedness owing by Borrower to Lendershall be referred to as the “Indebtedness” and the Business Financing Agreementand any and all other documents executed by Borrower in favor of Lender shallbe referred to as the “Existing Documents.”

 

2.             DESCRIPTIONOF CHANGE IN TERMS.

 

A.            Modification(s)to Business Financing Agreement:

 

1)             Thefollowing defined terms are hereby added to Section 1.1, entitled “Definitions”:

 

“Equipment” means all present and future machinery,equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts andattachments in which Borrower has any interest.

 

“Equipment Loan 1 Advance” has themeaning set forth in Section 2.3 (a) hereof.

 

“Equipment Loan 2 Advance” has themeaning set forth in Section 2.3 (b) hereof.

 

2)             Thefollowing defined terms are hereby amended to read as follows:

 

“Credit Limit” means $2,023,514.41, ofwhich (i) up to $1,000,000 may be used for Formula balances, (ii) $273,514.41has been fully advanced under Equipment Loan 1 Advances, and (iii) up to$750,000.00 may be used for Equipment Loan 2 Advances, subject to Section 2.2and 2.3.

 

“Equipment Advance” means an EquipmentLoan 1 Advance, or an Equipment Loan 2 Advance, as set forth in Section 2.3hereof.

 

2)             Section2.3 is hereby amended in its entirety to read as follows:

 

2.3           EquipmentAdvances.

 

(a)           Fromthe date of this Agreement through and including the date of this BusinessFinancing Modification Agreement, Lender has made Equipment Advances toBorrower for an aggregate principal amount of $273,514.41 (the “Equipment Loan1 Advances”). The unpaid principal balance of all Equipment Loan 1 Advances asof December 22, 2005 is $253,514.41, all of which shall be repaid in thirty-six(36) equal monthly installments of principal, plus all accrued Finance Charges,beginning on December 31, 2005, and continuing on the last day of each monththereafter until all of the Equipment Loan 1 Advances have been repaid in full.

 

(b)           Subjectto the terms and conditions of this Agreement, from January 1, 2006 through theearlier of June 30, 2006 or the Termination Date, Borrower may requestEquipment Advances of up to an aggregate principal amount of $750,000 tofinance the acquisition of Equipment (each an “Equipment Loan 2 Advance”).  Each Equipment Loan 2 Advance shall notexceed 100% of the invoice price of Equipment approved by Lender from time totime.  On the last day of each month,Borrower shall pay Lender all accrued Finance Charges on all outstandingEquipment Loan 2 Advances during such month. Any Equipment

 

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Loan 2 Advances outstanding on the earlier of(i) June 30, 2006 or (ii) the date that Borrower has requested Equipment Loan 2Advances in an aggregate principal amount of $750,000 (the “Term Out Date”)shall be payable in thirty-six (36) equal monthly installments of principal,plus all accrued Finance Charges, beginning on the last day of the month afterthe Term Out Date (or on the Term Out Date if such date is the last day of themonth) and continuing on the same day of each month thereafter until all of theEquipment Loan 2 Advances have been repaid in full.

 

(c)           Oncethe Equipment Loan 1 Advances and Equipment Loan 2 Advances are termed out, theFinance Charge Percentage for Equipment Loan 1 Advances and Equipment Loan 2Advances shall be fixed at such rate effective as of December 31, 2005, or theTerm Out Date, as applicable.  EquipmentAdvances may be prepaid, but may not be reborrowed.  If this Agreement is terminated prior to allEquipment Advances are paid in full, all outstanding principal balance plus allaccrued Finance Charges of Equipment Advances shall be due immediately.

 

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

 

4.             INTENTIONALLYOMITTED.

 

# **5.**             NO DEFENSES OF BORROWER/GENERAL RELEASE. Borrower agrees that, as of this date, it has no defenses against theobligations to pay any amounts under the Indebtedness.  Each of Borrower and Guarantor (each, a “ReleasingParty”) acknowledges that Lender would not enter into this Business FinancingModification Agreement without Releasing Party’s assurance that it has noclaims against Lender or any of Lender’s officers, directors, employees oragents.  Except for the obligationsarising hereafter under this Business Financing Modification Agreement, eachReleasing Party releases Lender, and each of Lender’s and entity’s officers,directors and employees from any known or unknown claims that Releasing Partynow has against Lender of any nature, including any claims that ReleasingParty, its successors, counsel, and advisors may in the future discover theywould have now had if they had known facts not now known to them, whetherfounded in contract, in tort or pursuant to any other theory of liability,including but not limited to any claims arising out of or related to theAgreement or the transactions contemplated thereby.  Releasing Party waives the provisions ofCalifornia Civil Code section 1542, which states:

 

### **“A general release does not extend toclaims which the creditor does not know or suspect to exist in his favor at thetime of executing the release, which if known by him must have materiallyaffected his settlement with the debtor.”**

 

# **The provisions, waivers and releases setforth in this section are binding upon each Releasing Party and itsshareholders, agents, employees, assigns and successors in interest.  The provisions, waivers and releases of thissection shall inure to the benefit of Lender and its agents, employees,officers, directors, assigns and successors in interest.  The provisions of this section shall survivepayment in full of the Obligations, full performance of all the terms of thisBusiness Financing Modification Agreement and the Agreement, and/or Lender’sactions to exercise any remedy available under the Agreement or otherwise.**

 

6.             CONTINUINGVALIDITY.  Borrower understands andagrees that in modifying the existing Indebtedness, Lender is relying uponBorrower’s representations, warranties, and agreements, as set forth in theExisting Documents.  Except as expresslymodified pursuant to this Business Financing Modification Agreement, the termsof the Existing Documents remain unchanged and in full force and effect.  Lender’s agreement to modifications to theexisting Indebtedness pursuant to this Business Financing ModificationAgreement in no way shall obligate Lender to make any future modifications tothe Indebtedness.  Nothing in thisBusiness Financing Modification Agreement shall constitute a satisfaction ofthe Indebtedness.  It is the intention ofLender and Borrower to retain as liable parties all makers and endorsers ofExisting Documents, unless the party is expressly released by Lender inwriting.  No maker, endorser, orguarantor will be released by virtue of this Business Financing ModificationAgreement.  The terms of this paragraphapply not only to this Business Financing Modification Agreement, but also toany subsequent Business Financing modification agreements.

 

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7.             REFERENCEPROVISION.

 

a.             The parties prefer that any dispute between them be resolved in litigationsubject to a Jury Trial Waiver as set forth in the Loan Documents (definedbelow), but the California Supreme Court has held that pre-dispute Jury TrialWaivers not authorized by statute are unenforceable. This Reference Provisionwill be applicable until: (i) the California Supreme Court holds that apre-dispute Jury Trial Waiver provision similar to that contained in the LoanDocuments is valid or enforceable; or (ii) the California Legislature enacts astatute which becomes law, authorizing pre-dispute Jury Trial Waivers of thetype in the Loan Documents and, as a result, such waivers becomeenforceable.  In addition, this ReferenceProvision, if not already applicable as otherwise provided herein, will becomeapplicable, if a Court, contrary to a choice of law provision contained in theLoan Documents, holds that the laws of the State of California apply to theLoan Documents.

 

b.             Other than (i) nonjudicial foreclosure of security interests in real orpersonal property,  (ii) the appointmentof a receiver or (iii) the exercise of other provisional remedies (any of whichmay be initiated pursuant to applicable law), any controversy, dispute or claim(each, a “Claim”) between the parties arising out of or relating to thisAgreement or any other document, instrument or agreement between Lender and theundersigned (collectively in this Section, the “Loan Documents”), will beresolved by a reference proceeding in California in accordance with theprovisions of Section 638 et seq. of the California Code of Civil Procedure (“CCP”),or their successor sections, which shall constitute the exclusive remedy forthe resolution of any Claim, including whether the Claim is subject to thereference proceeding.  Except asotherwise provided in the Loan Documents, venue for the reference proceedingwill be in the Superior Court or Federal District Court in the County or Districtwhere the real property, if any, is located or in a County or District wherevenue is otherwise appropriate under applicable law (the “Court”).

 

c.             The referee shall be a retired Judge or Justice selected by mutual writtenagreement of the parties.  If the partiesdo not agree, the referee shall be selected by the Presiding Judge of the Court(or his or her representative).  Arequest for appointment of a referee may be heard on an ex parte or expeditedbasis, and the parties agree that irreparable harm would result if ex parterelief is not granted.  The referee shallbe appointed to sit with all the powers provided by law.  Pending appointment of the referee, the Courthas power to issue temporary or provisional remedies.

 

d.             The parties agree that time is of the essence in conducting the referenceproceedings.  Accordingly, the refereeshall be requested, subject to change in the time periods specified herein forgood cause shown, to (a) set the matter for a status and trial-settingconference within fifteen (15) days after the date of selection of the referee,(b) if practicable, try all issues of law or fact within ninety (90) days afterthe date of the conference and (c) report a statement of decision within twenty(20) days after the matter has been submitted for decision.

 

e.             The referee will have power to expand or limit the amount and duration ofdiscovery.  The referee may set or extenddiscovery deadlines or cutoffs for good cause, including a party’s failure toprovide requested discovery for any reason whatsoever.  Unless otherwise ordered based upon goodcause shown, no party shall be entitled to “priority” in conducting discovery,depositions may be taken by either party upon seven (7) days written notice,and all other discovery shall be responded to within fifteen (15) days afterservice.  All disputes relating todiscovery which cannot be resolved by the parties shall be submitted to thereferee whose decision shall be final and binding.

 

f.              Except as expressly set forth in this Agreement, the referee shalldetermine the manner in which the reference proceeding is conducted includingthe time and place of hearings, the order of presentation of evidence, and allother questions that arise with respect to the course of the referenceproceeding.  All proceedings and hearingsconducted before the referee, except for trial, shall be conducted without acourt reporter, except that when any party so requests, a court reporter willbe used at any hearing conducted before the referee, and the referee will beprovided a courtesy copy of the transcript. The party making such a request shall have the obligation to arrange forand pay the court reporter.  Subject tothe referee’s power to award costs to the prevailing party, the parties willequally share the cost of the referee and the court reporter at trial.

 

g.             The referee shall be required to determine all issues in accordance withexisting case law and the statutory laws of the State of California.  The rules of evidence applicable toproceedings at law in the State of California will be applicable to thereference proceeding.  The referee shallbe empowered to enter equitable as well as legal relief, provide all temporaryor provisional remedies, enter equitable orders that will be binding on the partiesand rule on any motion which would be authorized in a trial, including withoutlimitation motions for summary judgment or summary adjudication.  The referee shall issue a decision andpursuant to CCP §644 the referee’s decision shall be entered by the Court as ajudgment or an order in the same manner as if the action had been tried by theCourt.  The final judgment or order orfrom any appealable decision or order

 

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entered by the referee shall be fully appealable asprovided by law.  The parties reserve theright to findings of fact, conclusions of laws, a written statement ofdecision, and the right to move for a new trial or a different judgment, whichnew trial, if granted, is also to be a reference proceeding under thisprovision.

 

h.             If the enabling legislation which provides for appointment of a referee isrepealed (and no successor statute is enacted), any dispute between the partiesthat would otherwise be determined by reference procedure will be resolved anddetermined by arbitration.  Thearbitration will be conducted by a retired judge or Justice, in accordance withthe California Arbitration Act §1280 through §1294.2 of the CCP as amended fromtime to time.  The limitations withrespect to discovery set forth above shall apply to any such arbitrationproceeding.

 

i.              THE PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER THISREFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY.  AFTER CONSULTING (OR HAVING HAD THEOPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLYAND VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCEPROVISION WILL APPLY TO ANY DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR ISRELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS.

 

8.             COUNTERSIGNATURE.  This Business Financing ModificationAgreement shall become effective only when executed by Lender and Borrower.

 
| **BORROWER:**            | **LENDER:**                       |
|--------------------------|-----------------------------------|
|                     |                              |
| AML COMMUNICATIONS, INC. | BRIDGE BANK, NATIONAL ASSOCIATION |
|                     |                              |   |   |
| By:                      | /s/ Jacob Inbar                   |   | By: | /s/ Lee Shodiss |   |
|                     |                              |   |   |
| Name:                    | Jacob Inbar                       |   | Name: | Lee Shodiss |   |
|                     |                              |   |   |
| Title:                   | President & CEO               |   | Title: | Senior Vice President |   |
|                          |                                   |  |  |  |  |  |  |  |  |

 

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