**Exhibit 10.21**

 

B R I D G E  B A N K

 

July 12,2006

 

**AMLCommunications, Inc.**

Mr. Jacob Inbar, President

1000 Avenida Acaso

Camarillo, CA93012

 

 

Re: Bridge BankCredit Facility

 

 

Dear Jacob:

 

Thank you forallowing **Bridge Bank**(“BB) theopportunity to strengthen its relationship with **AML Communications,****Inc.**(“AML”****or“Borrower”). I would like to take this opportunity to propose some terms andconditions for the credit facility under discussion. **Bridge Bank**(the “Bank” or “Lender”) is interested in continuingits banking relationship with **AML** and willconsider the banking services described below. Please note that this letter isnot intended to constitute a commitment or offer to lend on the part of theLender, but rather to summarize for discussion purposes the credit accommodationthat we are interested in considering at this time. The Lender’s proposal tomake credit facilities available is subject to the approval of its LoanCommittee, and will be represented via the final Business Financing Agreement.

 
| **Borrower:**          |   | AML Communications,  Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **Lender:**            |   | Bridge Bank, NA                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| ** **             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **Credit Facilities:** |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| ** **             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Facility 1             |   | $1,000,000 Domestic Accounts Receivable Line of  Credit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| ** **             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Facility 2:            |   | $1,000,000 Equipment Term Loan (inclusive of the  existing -$200,000 outstanding). Borrower eligible to advance up to an  additional -$800,000 in  Equipment Term debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| ** **             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| ** **             |   | The net amount  outstanding will not exceed $2,000,000 at anytime.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| ** **             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **Purpose:**           |   | Provide working capital and equipment financing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| ** **             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **Advance Rates:**     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| ** **             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Facility 1:            |   | Up to 80% of the gross eligible domestic receivables  (net of pre-paid deposits, offsets, and contras related to each specific  account debtor). Ineligible account criteria is as follows unless otherwise  approved by the Bank: Account balances over 90 days from invoice date, concentration  balances in excess of 30%, pre-billings, affiliated accounts, foreign  accounts with the exception of Canada, progress billings, retention billings,  bill & hold  accounts, cross-aged balances whereby the amounts over 90 days of any account  exceeds 35% of the total balance of that account debtor. Lender to approve  exceptions to the standard concentration limit on a caseby- case basis. In  addition, U.S. Government accounts will be considered eligible with a proper assignment  of claims as required by Lender, or as otherwise approved by Lender. Lender  will approve foreign accounts on a case-by-case basis. |

 

 

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FINANCIAL PROPOSAL FOR AML COMMUNICATIONS,INC.

 
| Facility 2:                        |   | Up to 100% of the invoice cost of purchased  equipment or other eligible purchases acceptable to Lender. Eligible Invoices  included invoices for new capital equipment, furniture, and software purchased  within 90 days of formal loan documentation. Minimum draw of $50,000 per advance.                                                         |
|------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| **Rates****& Fees:**           |   |                                                                                                                                                                                                                                                                                                                                                  |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| Interest Rate - Facility 1:        |   | Wall Street Journal “WSJ” Prime Rate (currently  8.25%) plus 0.25%.                                                                                                                                                                                                                                                                         |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| Interest Rate - Facility 2:        |   | WSJ Prime Rate plus 0.50%.                                                                                                                                                                                                                                                                                                                            |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| Facility Fee:                      |   | $5,000 (0.25% of total Credit Facility) due at  signing of definitive Bank loan documents.                                                                                                                                                                                                                                                            |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| ** **                         |   | $2,500 (0.25% of Facility 1) due 12 months from the  date of definitive Bank loan documents.                                                                                                                                                                                                                                                          |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| **Repayment:**                     |   |                                                                                                                                                                                                                                                                                                                                                  |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| Facility 1:                        |   | Interest to be paid monthly, principal due upon  maturity.                                                                                                                                                                                                                                                                                            |
|                               |   |                                                                                                                                                                                                                                                                                                                                                  |
| Facility 2:                        |   | Existing Term Loans to continue amortizing under  existing repayment schedule. Draw period of six months from date of  Modification Agreement for the remaining eligible Equipment Term Loan  advances. At the end of the draw period, the outstanding advanced amount will  be termed out for principal repayment over 30 (thirty) monthly payments. |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| **Maturity****&Payment Term:** |   |                                                                                                                                                                                                                                                                                                                                                  |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| Facility 1:                        |   | Twenty-four (24) months from date of documents.                                                                                                                                                                                                                                                                                                       |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| Facility 2:                        |   | Thirty-six (36) months from date of documents.                                                                                                                                                                                                                                                                                                        |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| **Warrants:**                      |   | None.                                                                                                                                                                                                                                                                                                                                                 |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| **Financial  Covenants:**          |   |                                                                                                                                                                                                                                                                                                                                                  |
| ** **                         |   | 1.                                                                                                                                                                                                                                                                                                                                                    |   | Borrower to maintain on a monthly basis a Quick  Ratio of 1.50 to 1.00, which shall be defined as unrestricted cash and  equivalents at Bank plus A/R divided  by current liabilities (including all Bank debt). |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |   |   |
| ** **                         |   | 2.                                                                                                                                                                                                                                                                                                                                                    |   | Borrower to stay within 80% of planned quarterly  revenue. |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| **Collateral:**                    |   | Lender will maintain a perfected first priority  security interest in all of the Borrower’s Assets, including intellectual  property and general intangibles currently owned or later acquired. Lender will  be in second position on specific fixed assets previously financed elsewhere.                                                       |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| **Subordinated Debt:**             |   | Any other debt and/or lien holder (if any exist),  will be required to enter into an inter-creditor / subordination agreement acceptable  to the Lender and/or be terminated. Exception for specific fixed asset liens  previously existing.                                                                                                          |
| ** **                         |   |                                                                                                                                                                                                                                                                                                                                                  |
| **Banking  Relationship:**         |   | Borrower will maintain its primary operating and  investment accounts with Lender. All cash & cash equivalents held outside  of Bridge Bank will be subject to a Collateral Control Agreement acceptable  to the Bank.                                                                                                                            |

 

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| **Reporting:**                |   | Borrower to provide the following information:                                                                                                                                                                                                                                                                          |
|-------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                    |   | ·                                                                                                                                                                                                                                                                                                                  |   | Within 30 days of each month end: Balance Sheet,  Income Statement and statement of cash flows together with compliance  certificate. |
| ** **                    |   | ·                                                                                                                                                                                                                                                                                                                  |   | Prior to borrowing and within 30 days of each  month-end while borrowing on Facility 1: Accounts receivable and payable  aging reports together with borrowing base certificate. |
| ** **                    |   | ·                                                                                                                                                                                                                                                                                                                  |   | Within 150 days of each fiscal year end: CPA  prepared annual financial statements. |
| ** **                    |   | ·                                                                                                                                                                                                                                                                                                                  |   | Within 30 days prior to each fiscal year end: Annual  board approved financial forecast. |
| ** **                    |   |                                                                                                                                                                                                                                                                                                                    |   |   |
| **Field  Examination:**       |   | Prior to borrowing on Facility 1 and while there is a balance  outstanding, annual field examinations required, or upon Lenders’ request at  the Borrower’s expense. Costs may range fiom $750.00 - $1,250.00 per day with the duration and scope of the exam to  be determined at time of field examination. |
| ** **                    |   |                                                                                                                                                                                                                                                                                                                    |
| **Insurance:**                |   | Bank to be named loss payee on primary genera1  business insurance.                                                                                                                                                                                                                                                     |
| ** **                    |   |                                                                                                                                                                                                                                                                                                                    |
| **Conditions of****Closing:** |   |                                                                                                                                                                                                                                                                                                                    |
| ** **                    |   | ·                                                                                                                                                                                                                                                                                                                  |   | After due diligence inquiry conducted by Lender,  there shall be no discovery of any facts or circumstances which would, as  determined by Lender at its sole discretion, negatively effect or potentially  negatively effect the collectability of the obligations under or in  connection with the Business Finance Agreement. |
| ** **                    |   |                                                                                                                                                                                                                                                                                                                    |   |   |
| ** **                    |   | ·                                                                                                                                                                                                                                                                                                                  |   | No representation, warranty, or disclosure made to  Lender by Borrower shall prove to be false or misleading as of the date made. |
| ** **                    |   |                                                                                                                                                                                                                                                                                                                    |   |   |
| ** **                    |   | ·                                                                                                                                                                                                                                                                                                                  |   | All documentation forms would be provided by Lender  and, assuming that Lender has approved all due diligence concerning Borrower,  Borrower shall have properly executed all documentation required by the  Lender. |
| ** **                    |   |                                                                                                                                                                                                                                                                                                                    |   |   |
| ** **                    |   | ·                                                                                                                                                                                                                                                                                                                  |   | Borrower to insure subordination of any debt or  lien, fiom any other secured party, and supply Lender with any other support  deemed necessary. |
|                               |        |                                                                                                                                                                                                                                                                                                                         |  |  |  |  |

 

This proposalletter is provided solely for the purpose described herein and may not bedisclosed to or relied upon by any other party without the Lender’s priorwritten consent. This proposal is intended to form the basis for a discussionof a credit accommodation, and further negotiations adding to or modifying thegeneral scope of the major terms shall not be precluded by the issuance of thisProposal Letter. The Lender’s proposal to make the credit facilities availableis subject to the approval of its Loan Committee, and any commitment to lendwill be made in writing. This proposal is confidential and proprietary for thesole purpose of discussions between the parties hereunder.

 

Bridge Bankreserves the right to issue press releases, advertisements and otherpromotional materials describing any successfid outcome of services provided onyour behalf. The Borrower agrees that Bridge Bank shall have the right to identifythe Borrower by name in those materials.

 

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Whether or not thetransactions contemplated hereby are consummated, by your acceptance hereof:(a) you agree to bear all reasonable out-of-pocket expenses of Lender and allfees and disbursements of Lender’s counsel (including the allocated costs ofinside counsel) relating to the preparation of this letter and of the proposedfinancing documentation and to the transaction contemplated hereby and thereby,and (b) you agree to indemnify Lender, its affiliates, and their respective directors,officers and employees and to defend and hold Lender, its affiliates and suchother persons harmless from and against all losses, claims, damages,liabilities and expenses (including expenses of litigation or preparationthereof) which Lender or any such affiliates or such other persons inconnection with or arising out of the matters referred to herein, except fordamages resulting from the gross negligence or willful misconduct of theLender.

 

If the basic termsand conditions described above are acceptable, please so indicate by signingthis letter and returning the same to the attention of the undersigned by nolater than **July****21, 2006,**or by such date agreed upon by Bridge Bank in writing.

 

Thanks again forallowing Bridge Bank to make this proposal and please feel free to contact mewith any questions you may have. I look forward to establishing a relationshipwith you.

 

Best Regards,

 

 

 

 

Mike Lederman

Vice President

 

 

Agreed and acknowledged:

 

 
| /s/ Jacob Inbar           |   | 7/17/06 |   |
|---------------------------|--------|---------|--------|
| AML Communications,  Inc. |   | Date    |

 

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