Exhibit 10.39

 

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**Silicon Valley Bank**

3003 Tasman Drive

Santa Clara, Ca. 95054

(408) 654-1000 - Fax(408) 980-6410

 

**ACCOUNTS RECEIVABLE PURCHASE AGREEMENT**

 

**               **This **ACCOUNTS RECEIVABLE PURCHASE AGREEMENT**,dated November 20, 2001, (the “Agreement”) is entered into between SILICONVALLEY BANK (“Buyer”) and **AML COMMUNICATIONS, INC.** (“Seller”), withreference to that certain Accounts Receivable Financing Agreement datedNovember 10, 2000 (as amended, the “Existing Agreement”). The ExistingAgreement and all related documents, instruments and agreements are referred tocollectively in this Agreement as the “Loan Documents”.  Capitalized terms used in this Agreement,which are not defined shall have the meanings set forth in the ExistingAgreement.

 

The Parties agree, asfollows:

 

Seller acknowledges that the present unpaid principalbalance of the Seller’s indebtedness, liabilities and obligations to Buyerunder the Loan Documents, including interest accrued through 11/21/01 is$98,974.65 (the “Financed Receivable Balance”), and that said sum is due andowing without any defense, offset, or counterclaim of any kind.

 

Effective immediately, the Financed Receivable Balanceshall be converted to Purchased Receivables, as defined in this Agreement,which Buyer in its sole discretion accepts to purchase under Section 2.  This Agreement shall replace all financialaccommodations under the Loan Documents, and as of this date, Buyer shall notbe obligated to provide any further financial accommodations under any of theLoan Documents.

 

1.  **Definitions.**  When used herein, the following terms shallhave the following meanings.

“Account Balance” shall mean, on any given day, thegross amount of all Purchased Receivables unpaid on that day.

“Account Debtor” shall have the meaning set forth inthe California Uniform Commercial Code and shall include any person liable onany Purchased Receivable, including without limitation, any guarantor of thePurchased Receivable and any issuer of a letter of credit or banker’sacceptance.

“Adjustments” shall mean all discounts, allowances,returns, disputes, counterclaims, offsets, defenses, rights of recoupment,rights of return, warranty claims, or short payments, asserted by or on behalfof any Account Debtor with respect to any Purchased Receivable.

 “Advance”shall have the meaning set forth in Section 2.2 hereof.

“Collateral” shall have the meaning set forth inSection 8 hereof.

“Collateral Handling Fee” shall have the meaning setforth in Section 3.3 hereof.

“Collections” shall mean all good funds received byBuyer from or on behalf of an Account Debtor with respect to

Purchased Receivables.

“Compliance Certificate” shall mean a certificate, ina form provided by Buyer to Seller, which contains the certification of thechief financial officer of Seller that, among other things, the representationsand warranties set forth in this Agreement are true and correct as of the datesuch certificate is delivered.

“Event of Default” shall have the meaning set forth inSection 9 hereof.

“Facility Fee” shall have the meaning set forth inSection 3.6 hereof.

“Finance Charges” shall have the meaning set forth inSection 3.2 hereof.

“Invoice Transmittal” shall mean a writing signed byan authorized representative of Seller which accurately identifies the receivableswhich Buyer, at its election, may purchase, and includes for each suchreceivable the correct amount owed by the Account Debtor, the name and addressof the Account Debtor, the invoice number, the invoice date and the accountcode.

“Obligations” shall mean all advances, financialaccommodations, liabilities, obligations, covenants and duties owing, arising,due or payable by Seller to Buyer of any kind or nature, present or future,arising under or in connection with this Agreement or under any other document,instrument or agreement, whether or not evidenced by any note, guarantee orother instrument, whether arising on account or by overdraft, whether direct orindirect (including those acquired by assignment) absolute or contingent,primary or secondary, due or to become due, now owing or hereafter arising, andhowever acquired; including, without limitation, all Advances, Finance Charges,Collateral Handling Fees, interest, Repurchase Amounts, fees, expenses,  professional fees and  attorneys’ fees and any other sumschargeable to Seller hereunder or otherwise.

“Prime Rate” shall meanthe Buyer’s most recently announced “prime rate,” even if it is not Buyer’slowest rate.

“Purchased Receivables” shall mean all those accounts,receivables, chattel paper, instruments, contract rights, documents, generalintangibles, letters of credit, drafts, bankers acceptances, and rights topayment, and all proceeds thereof (all of the foregoing being referred to as“receivables”), arising out of the invoices and other agreements identified onor delivered with any Invoice Transmittal delivered by Seller to Buyer whichBuyer elects to purchase and for which Buyer makes an Advance.

 

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“Refund” shall have the meaning set forth in Section3.5 hereof.

“Reserve” shall have the meaning set forth in Section2.4 hereof.

“Repurchase Amount” shall have the meaning set forthin Section 4.2 hereof.

“Reconciliation Date” shall mean the last calendar dayof each Reconciliation Period.

“Reconciliation Period” shall mean each calendar monthof every year.

 

2.  **Purchase and Sale of Receivables.**

 

     2.1.  **Offer to Sell Receivables.**  During the term hereof, and provided thatthere does not then exist any Event of Default or any event that with notice,lapse of time or otherwise would constitute an Event of Default, Seller mayrequest that Buyer purchase receivables and Buyer may, in its sole discretion,elect to purchase receivables.  Sellershall deliver to Buyer an Invoice Transmittal with respect to any receivablefor which a request for purchase is made. An authorized representative of Seller shall sign each InvoiceTransmittal delivered to Buyer.  Buyershall be entitled to rely on all the information provided by Seller to Buyer onor with the Invoice Transmittal and to rely on the signature on any InvoiceTransmittal as an authorized signature of Seller.

 

     2.2.** Acceptance of Receivables.** Buyer shall have no obligation to purchase any receivable listed on anInvoice Transmittal.  Buyer may exerciseits sole discretion in approving the credit of each Account Debtor beforebuying any receivable.  Upon acceptanceby Buyer of all or any of the receivables described on any Invoice Transmittal,Buyer shall pay to Seller **80(%)** percent of the face amount ofeach receivable Buyer desires to purchase, net of deferred revenue and offsetsrelated to each specific Account Debtor. Such payment shall be the “Advance” with respect to suchreceivable.  Buyer may, from time totime, in its sole discretion, change the percentage of the Advance.  Upon Buyer’s acceptance of the receivableand payment to Seller of the Advance, the receivable shall become a “PurchasedReceivable.”  It shall be a condition toeach Advance that  (i) all of therepresentations and warranties set forth in Section 6 of this Agreement be trueand correct on and as of the date of the related Invoice Transmittal and on andas of the date of such Advance as though made at and as of each such date,and  (ii) no Event of Default or any eventor condition that with notice, lapse of time or otherwise would constitute anEvent of Default shall have occurred and be continuing, or would result fromsuch Advance.   Notwithstanding theforegoing, in no event shall the aggregate amount of all Purchased Receivablesoutstanding at any time exceed **One Million****Dollars** (**$1,000,000.00**).

 

      2.3.  **Effectiveness of Sale to Buyer.**  Effective upon Buyer’s payment of anAdvance, and for and in consideration therefor and in consideration of thecovenants of this Agreement, Seller hereby absolutely sells, transfers andassigns to Buyer, all of Seller’s right, title and interest in and to eachPurchased Receivable and all monies due or which may become due on or withrespect to such Purchased Receivable. Buyer shall be the absolute owner of each Purchased Receivable.  Buyer shall have, with respect to any goodsrelated to the Purchased Receivable, all the rights and remedies of an unpaidseller under the California Uniform Commercial Code and other applicable law,including the rights of replevin, claim and delivery, reclamation and stoppagein transit.

 

     2.4.  **Establishment of a Reserve. **Upon the purchase by Buyer of each PurchasedReceivable, Buyer shall establish a reserve. The reserve shall be the amount by which the face amount of the PurchasedReceivable exceeds the Advance on that Purchased Receivable (the “Reserve”);provided, the Reserve with respect to all Purchased Receivables outstanding atany one time shall be an amount not less than **20(%)** percent of theAccount Balance at that time and may be set at a higher percentage at Buyer’ssole discretion.  The reserve shall be abook balance maintained on the records of Buyer and shall not be a segregatedfund.

 

3.  **Collections, Charges and Remittances.**

 

     3.1.  **Collections.**In computing Finance Chargeson the Obligations, all checks and other items of payment received by Buyer(including proceeds of Purchased Receivables and payment of Obligations infull) shall be deemed applied by Buyer on account of the Obligations **five**business days after receipt by Buyer of immediately available funds. If Selleris in default under this Agreement, Buyer shall apply all Collections toSeller’s Obligations hereunder in such order and manner as Buyer maydetermine.  If an item of collection isnot honored or Buyer does not receive good funds for any reason, the amountshall be included in the Account Balance as if the Collections had not beenreceived and Finance Charges under Section 3.2 shall accrue thereon.

 

     3.2. **Finance Charges.**  On each Reconciliation Date Seller shall payto Buyer a finance charge in an amount equal to **1.00**percentage pointsabove Prime Rate per annum of the gross average daily Account Balanceoutstanding during the applicable Reconciliation Period (the “FinanceCharges”). Notwithstanding the foregoing, on each Reconciliation Date, Sellershall pay to Buyer a minimum **$3,000.00** Finance Charge. Buyer shalldeduct the accrued Finance Charges from the Reserve as set forth in Section 3.5below.

 

     3.3. **Collateral Handling Fee**. Oneach Reconciliation Day, Seller will pay to Buyer a collateral handling fee,equal to **.50%**per month of the average daily Account Balance outstanding during theapplicable Reconciliation Period. Buyer shall deduct the Collateral HandlingFee from the Reserve as set forth in Section 3.5 below.

 

     3.4.  **Accounting. **Buyershall prepare and send to Seller after the close of business for eachReconciliation Period, an accounting of the transactions for thatReconciliation Period, including the amount of all Purchased Receivables, allCollections,

 

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Adjustments, Finance Charges, and the Collateral Handling Fee.  The accounting shall be deemed correct andconclusive unless Seller makes written objection to Buyer within thirty (30)days after the Buyer mails the accounting to Seller.

 

     3.5.  **Refund to Seller.**  Provided that there does not then exist an Event of Default orany event or condition that with notice, lapse of time or otherwise wouldconstitute an Event of Default, Buyer shall refund to Seller by check after theReconciliation Date, the amount, if any, which Buyer owes to Seller at the endof the Reconciliation Period according to the accounting prepared by Buyer forthat Reconciliation Period (the “Refund”). The Refund shall be an amount equal to:

                (A)  (1) The Reserve as of the beginning of that Reconciliation Period, **plus**

                                                                        (2) the Reserve created for each Purchased Receivable purchased during thatReconciliation Period, **minus**

                (B)  The total for that Reconciliation Period of:

                                                                        (1) the Collateral Handling Fee;

                                                                        (2) Finance Charges;

                                                                        (3) Adjustments;

                                                                        (4) Repurchase Amounts, to the extent Buyer has agreed to accept paymentthereof by deduction from the Refund;

                                                                        (5)          theReserve for the Account Balance as of the first day of the followingReconciliation Period in the minimum percentage set forth in Section 2.4hereof; and

                                                                        (6) all amounts due, including professional fees and expenses, as set forthin Section 12 for which oral or written

demand has been made by Buyer to Seller during that ReconciliationPeriod to the extent Buyer has agreed to accept payment thereof by deductionfrom the Refund.

Inthe event the formula set forth in this Section 3.5 results in an amount due toBuyer from Seller, Seller shall make such payment in the same manner as setforth in Section 4.3 hereof for repurchases. If the formula set forth in this Section 3.5 results in an amount due toSeller from Buyer, Buyer shall make such payment by check, subject to Buyer’srights under Section 4.3 and Buyer’s rights of offset and recoupment.

 

3.6.     **Facility Fee.**  A fully earned, non–refundable facility fee of $**7,500.00**shall be due upon execution of this Agreement and Seller authorizes Buyer todeduct the Facility Fee from the Reserve.

 

4.  **Recourse and Repurchase Obligations.**

 

     4.1.  **Recourse. **Buyer’sacquisition of Purchased Receivables from Seller shall be with full recourseagainst Seller.  In the event theObligations exceed the amount of Purchased Receivables and Collateral, Sellershall be liable for any deficiency.

 

     4.2.  **Seller’s Agreement to Repurchase.**  Seller agrees to pay to Buyer on demand, thefull face amount, or any unpaid portion, of any Purchased Receivable:

(A)  whichremains unpaid ninety (90) calendar days after the invoice date; or

(B)  which is owed by any Account Debtor who hasfiled, or has had filed against it, any bankruptcy case, assignment for thebenefit of creditors, receivership, or insolvency proceeding or who has becomeinsolvent  (as defined in the UnitedStates Bankruptcy Code) or who is generally not paying its debts as such debtsbecome due; or

(C)  withrespect to which there has been any breach of warranty or representation setforth in Section 6 hereof or any breach of any covenant contained in thisAgreement; or

(D)  withrespect to which the Account Debtor asserts any discount, allowance, return,dispute, counterclaim, offset, defense, right of recoupment, right of return,warranty claim, or short payment;

 together with all reasonableattorneys’ and professional fees and expenses and all court costs incurred byBuyer in collecting such Purchased Receivable and/or enforcing its rightsunder, or collecting amounts owed by Seller in connection with, this Agreement(collectively, the “Repurchase Amount”).

 

     4.3.  **Seller’s Payment of the Repurchase Amount or OtherAmounts Due Buyer.**  When anyRepurchase Amount or other amount owing to Buyer becomes due, Buyer shallinform Seller of the manner of payment which may be any one or more of thefollowing in Buyer’s sole discretion: (a) in cash immediately upon demand therefor; (b) by delivery ofsubstitute invoices and an Invoice Transmittal acceptable to Buyer which shallthereupon become Purchased Receivables; (c) by adjustment to the Reservepursuant to Section 3.5 hereof; (d) by deduction from or offset against theRefund that would otherwise be due and payable to Seller;  (e) by deduction from or offset against  the amount that otherwise would be forwardedto Seller in respect of any further Advances that may be made by Buyer; or(f)  by any combination of the foregoingas Buyer may from time to time choose.

 

     4.4.  **Seller’s Agreement to Repurchase All PurchasedReceivables.**  Upon and afterthe occurrence of an Event of Default, Seller shall, upon Buyer’s demand (or,in the case of an Event of Default under Section 9(B), immediately withoutnotice or demand from Buyer) repurchase all the Purchased Receivables thenoutstanding, or such portion thereof as Buyer may demand.  Such demand may, at Buyer’s option, includeand Seller shall pay to Buyer immediately upon demand, cash in an amount equalto the Advance with respect to each Purchased Receivable then outstandingtogether with all accrued Finance Charges, Adjustments, Collateral HandlingFees, attorney’s and professional fees, court costs and expenses as providedfor herein, and any other Obligations. Upon receipt of payment in full of the Obligations, Buyer shallimmediately instruct Account Debtors to pay Seller directly, and return toSeller any Refund due to Seller.  Forthe purpose of calculating any Refund due 

 

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under this Section only, the Reconciliation Date shall be deemed to bethe date Buyer receives payment in good funds of all the Obligations asprovided in this Section 4.4.

 

5.  **Power of Attorney.**  Seller does hereby irrevocably appoint Buyerand its successors and assigns as Seller’s true and lawful attorney in fact,and hereby authorizes Buyer, regardless of whether there has been an Event ofDefault, (a) to sell, assign, transfer, pledge, compromise, or discharge thewhole or any part of the Purchased Receivables; (b) to demand, collect,receive, sue, and give releases to any Account Debtor for the monies due or whichmay become due upon or with respect to the Purchased Receivables and tocompromise, prosecute, or defend any action, claim, case or proceeding relatingto the Purchased Receivables, including the filing of a claim or the voting ofsuch claims in any bankruptcy case, all in Buyer’s name or Seller’s name, asBuyer may choose; (c)  to prepare, fileand sign Seller’s name on any notice, claim, assignment, demand, draft, ornotice of or satisfaction of lien or mechanics’ lien or similar document withrespect to Purchased Receivables; (d) to notify all Account Debtors with respect to the Purchased Receivablesto pay Buyer directly; (e)  to receive,open, and dispose of all mail addressed to Seller for the purpose of collectingthe Purchased Receivables; (f)  toendorse Seller’s name on any checks or other forms of payment on the PurchasedReceivables;  (g) to execute on behalfof Seller any and all instruments, documents, financing statements and the liketo perfect Buyer’s interests in the Purchased Receivables and Collateral; and(h)  to do all acts and things necessaryor expedient, in furtherance of any such purposes.  If Buyer receives a check or item which is payment for both aPurchased Receivable and another receivable, the funds shall first be appliedto the Purchased Receivable and, so long as there does not exist an Event ofDefault or an event that with notice, lapse of time or otherwise wouldconstitute an Event of Default, the excess shall be remitted to Seller.  Upon the occurrence and continuation of anEvent of Default, all of the power of attorney rights granted by Seller toBuyer hereunder shall be applicable with respect to all Purchased Receivablesand all Collateral.

 

6.               **Representations, Warranties and Covenants.**

 

6.1.      **Receivables’ Warranties, Representations and Covenants. **To induce Buyer to buy receivables and to renders its

services to Seller, and with full knowledge that the truth and accuracyof the following are being relied upon by the Buyer in determining whether toaccept receivables as Purchased Receivables, Seller represents, warrants,covenants and agrees, with respect to each Invoice Transmittal delivered toBuyer and each receivable described therein, that:

(A) Seller is the absolute owner of each receivableset forth in the Invoice Transmittal and has full legal right to sell, transferand assign such receivables;

(B) The correct amount of each receivable is as setforth in the Invoice Transmittal and is not in dispute;

(C)  The  payment of each receivable is not contingentupon the fulfillment of any obligation or contract, past or future and any andall obligations required of the Seller have been fulfilled as of the date ofthe Invoice Transmittal;

(D) Each receivable set forth on the InvoiceTransmittal is based on an actual sale and delivery of goods and/or servicesactually rendered, is presently due and owing to Seller, is not past due or indefault, has not been previously sold, assigned, transferred, or pledged, andis free of any and all liens, security interests and encumbrances other thanliens, security interests or encumbrances in favor of Buyer or any otherdivision or affiliate of Silicon Valley Bank;

(E) There are no defenses, offsets, or counterclaimsagainst any of the receivables, and no agreement has been made under which theAccount Debtor may claim any deduction or discount, except as otherwise statedin the Invoice Transmittal;

(F)Each Purchased Receivable shall be the property of the Buyer and shall becollected by Buyer, but if for any reason it should be paid to Seller, Sellershall promptly notify Buyer of such payment, shall hold any checks, drafts, ormonies so received in trust for the benefit of Buyer, and shall promptlytransfer and deliver the same to the Buyer;

(G) Buyer shall have the right of endorsement, andalso the right to require endorsement by Seller, on all payments received inconnection with each Purchased Receivable and any proceeds of Collateral;

(H) Seller, and to Seller’s best knowledge, eachAccount Debtor set forth in the Invoice Transmittal, are and shall remainsolvent as that term is defined in the United States Bankruptcy Code and theCalifornia Uniform Commercial Code, and no such Account Debtor has filed or hadfiled against it a voluntary or involuntary petition for relief under theUnited States Bankruptcy Code;

(I) Each Account Debtor named on the InvoiceTransmittal will not object to the payment for, or the quality or the quantityof the subject matter of, the receivable and is liable for the amount set forthon the Invoice Transmittal;

(J) Seller shall continueto notify and direct all of its Account Debtor’s to make all payment’s to alockbox account established with the Buyer (“Lockbox”) or to wire transferpayments to a cash collateral account that Buyer controls; and

(K) All receivables forwarded to and accepted by Buyerafter the date hereof, and thereby becoming Purchased Receivables, shall complywith each and every one of the foregoing representations, warranties, covenantsand agreements referred to above in this Section 6.1.

 

     6.2.  **Additional Warranties, Representations and Covenants.**  In addition to the foregoing warranties,representations and covenants, to induce Buyer to buy receivables and to renderits services to Seller, Seller hereby represents, warrants, covenants andagrees that:

(A)  Seller will not assign, transfer, sell, orgrant , or permit any lien or security interest in any Purchased Receivables orCollateral to or in favor of any other party, without Buyer’s prior writtenconsent;

(B)  The Seller’sname, form of organization, chief executive office, and the place where therecords concerning all  PurchasedReceivables and  Collateral are kept isset forth at the beginning of this Agreement, Collateral is located only at the location set forth in the beginning ofthis Agreement, or,  if located at anyadditional location,  as set forth on

 

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a schedule attached to this Agreement, and Seller willgive Buyer at least thirty (30) days prior written notice if such name,organization, chief executive office or other locations of Collateral  orrecords concerning Purchased Receivables or Collateral is changed or  added and shall execute any  documents necessary to perfect Buyer’sinterest in the Purchased Receivables and the Collateral;

(C) Seller shall (i) pay all of its normal gross payroll for employees, and all federaland state taxes, as and when due, including without limitation all payroll andwithholding taxes and state sales taxes; (ii) deliver at any time and from time to time at Buyer’s request,evidence satisfactory to Buyer that all such amounts have been paid to theproper taxing authorities; and (iii) if requested by Buyer, pay its payroll andrelated taxes through a bank or an independent payroll service acceptable toBuyer.

(D) Seller has not, as of the time Seller delivers toBuyer an Invoice Transmittal, or as of the time Seller accepts any Advance fromBuyer, filed a voluntary petition for relief under the United States BankruptcyCode or had filed against it an involuntary petition for relief;

(E) If Seller owns, holds or has any interest in, anycopyrights (whether registered, or unregistered), patents or trademarks, andlicenses of any of the foregoing, such interest has been disclosed to Buyer andis specifically listed and identified on a schedule to this Agreement, andSeller shall immediately notify Buyer if Seller hereafter obtains any interestin any additional copyrights, patents, trademarks or licenses that aresignificant in value or are material to the conduct of its business;

(F)Seller shall provide Buyer with a Compliance Certificate (i) on a quarterlybasis to be received by Buyer no later than the fifth calendar day followingeach calendar quarter, and; (ii) on a more frequent or other basis if and asrequested by Buyer;

(G)Provide Buyer with, as soon as available, but no later than 30 days followingeach Reconciliation Period, a deferred revenue report, an aged listing ofaccounts receivable and accounts payable, a company prepared balance sheet andincome statement, prepared under GAAP, consistently applied, covering Seller’soperations during the period; and

(H)On request by Buyer, Seller will promptly furnish any information Buyer mayreasonably request to determine financial condition of Seller, including, butnot limited to all of Seller’s Obligations, and the condition of any ofSeller’s receivables which may include but are not limited to PurchasedReceivables.

 

7.  **Adjustments.**  In the event of a breach of any of therepresentations, warranties, or covenants set forth in Section 6.1, or in theevent any Adjustment or dispute is asserted by any Account Debtor, Seller shallpromptly advise Buyer and shall, subject to the Buyer’s approval, resolve suchdisputes and advise Buyer of any adjustments. Unless the disputed Purchased Receivable is repurchased by Seller andthe full Repurchase Amount is paid, Buyer shall remain the absolute owner ofany Purchased Receivable which is subject to Adjustment or repurchase underSection 4.2 hereof, and any rejected, returned, or recovered personal property,with the right to take possession thereof at any time.  If such possession is not taken by Buyer,Seller is to resell it for Buyer’s account at Seller’s expense with the proceedsmade payable to Buyer.  While Sellerretains possession of said returned goods, Seller shall segregate said goodsand mark them “property of Silicon Valley Bank.”

 

8.  **Security Interest. **To secure the prompt payment andperformance to Buyer of all of the Obligations, Seller hereby grants to Buyer acontinuing lien upon and security interest in all of Seller’s now existing orhereafter arising rights and interest in the following, whether now owned orexisting or hereafter created, acquired, or arising, and wherever located(collectively, the “Collateral”):

                                                (A) All accounts,  receivables,contract rights,  chattel paper,instruments, documents,  letters ofcredit,  bankers acceptances, drafts,checks, cash,  securities, and generalintangibles (including, without limitation, all claims, causes of  action,deposit accounts, guaranties, rights in and claims under insurance policies(including rights to  premiumrefunds),  rights to tax refunds,copyrights, patents, trademarks, rights in and under license agreements, andall other intellectual property);

(B)  Allinventory,  including Seller’s rights toany returned or rejected goods, with respect to which Buyer shall have all therights of any unpaid seller, including the rights of replevin, claim and delivery,reclamation, and stoppage in transit;

(C)  Allmonies, refunds and other amounts due Seller, including, without limitation,amounts due Seller under this Agreement (including Seller’s right of offset andrecoupment);

                (D)  All equipment, machinery, furniture, furnishings, fixtures, tools, suppliesand motor vehicles;

                (E)  All farm products, crops, timber, mineralsand the like (including oil and gas);

                (F)  All accessions to, substitutions for, andreplacements of, all of the foregoing;

                (G)  All books and records pertaining to all ofthe foregoing; and

                (H)  All proceeds of the foregoing, whether dueto voluntary or involuntary disposition, including insurance proceeds.

                Seller is not authorized tosell, assign, transfer or otherwise convey any Collateral without Buyer’s priorwritten consent, except for the sale of finished inventory in the Seller’susual course of business.  Seller agreesto sign UCC financing statements, in a form acceptable to Buyer, and any otherinstruments and documents requested by Buyer to evidence, perfect, or protectthe interests of Buyer in the Collateral. Seller agrees to deliver to Buyer the originals of all instruments,chattel paper and documents evidencing or related to Purchased Receivables andCollateral.

 

9.  **Default.**  The occurrence of any one or more of thefollowing shall constitute an Event of Default hereunder.

(A) Seller failsto pay any amount owed to Buyer as and when due;

(B) There shall be commenced by or against Seller anyvoluntary or involuntary case under the United States Bankruptcy Code, or anyassignment for the benefit of creditors, or appointment of a receiver orcustodian for any of its assets;

 

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(C) Seller shall become insolvent in that its debtsare greater than the fair value of its assets, or Seller is generally notpaying its debts as they become due or is left with unreasonably small capital;

(D) Any involuntary lien, garnishment, attachment orthe like is issued against or attaches to the Purchased Receivables or anyCollateral;

(E)Seller shall breach any covenant, agreement, warranty, or representation shallconstitute an immediate default hereunder;

(F) Seller is not in compliance with, or otherwise isin default under, any term of any document, instrument or agreement evidencinga debt, obligation or liability of any kind or character of Seller, now orhereafter existing, in favor of Buyer or any division or affiliate of SiliconValley Bank, regardless of whether such debt, obligation or liability is director indirect, primary or secondary, joint, several or joint and several, orfixed or contingent, together with any and all renewals and extensions of such debts, obligations and liabilities, orany part thereof;

(G) An event of default shall occur under any guarantyexecuted by any guarantor of the Obligations of Seller to Buyer under thisAgreement, or any material provision of any such guaranty shall for any reasoncease to be valid or enforceable or any such guaranty shall be repudiated orterminated, including by operation of law;

(H) A default or event of default shall occur underany agreement between Seller and any creditor of Seller that has entered into asubordination agreement with Buyer;

(I)Any creditor that has entered into a subordination agreement with Buyer shallbreach any of the terms of or not comply with such subordination agreement; or

(J) (i) There is a material adverse change in thebusiness, operations, or condition (financial or otherwise) of the Seller, or (ii)there is a material impairment of the prospect of repayment of any portion ofthe Obligations or (iii) there is a material impairment of the value orpriority of Buyer’s security interests in the Collateral.

 

10.           **Remedies Upon Default.**  Upon the occurrence of an Event of Default,(1) without implying any obligation to buy receivables, Buyer may cease buyingreceivables or extending any financial accommodations to Seller;  (2) all or a portion of the Obligations shallbe, at the option of and upon demand by Buyer, or with respect to an Event ofDefault described in Section 9(B), automatically and without notice or demand,due and payable in full; and (3) Buyer shall have and may exercise all therights and remedies under this Agreement and under applicable law, includingthe rights and remedies of a secured party under the California UniformCommercial Code, all the power of attorney rights described in Section 5 withrespect to all Collateral, and the right to collect, dispose of, sell, lease,use, and realize upon all Purchased Receivables and all Collateral in anycommercial reasonable manner.  Sellerand Buyer agree that any notice of sale required to be given to Seller shall bedeemed to be reasonable if given five (5) days prior to the date on or afterwhich the sale may be held.  In theevent that the Obligations are accelerated hereunder, Seller shall repurchaseall of the Purchased Receivables as set forth in Section 4.4.

 

11.           **Accrual of Interest.**  If any amount owed by Seller hereunder isnot paid when due, including, without limitation, amounts due under Section3.5, Repurchase Amounts, amounts due under Section 12, and any otherObligations, such amounts shall bear interest at a per annum rate equal to theper annum rate of the Finance Charges until the earlier of (i) payment in goodfunds or (ii) entry of a final judgment thereof, at which time the principalamount of any money judgment remaining unsatisfied shall accrue interest at thehighest rate allowed by applicable law.

 

12.            **Fees, Costsand Expenses; Indemnification. **TheSeller will pay to Buyer immediately upon demand all fees, costs andexpenses  (including fees of attorneysand professionals and their costs and expenses) that Buyer incurs or may fromtime to time impose in connection with any of the following:  (a) preparing, negotiating, administering,and enforcing this Agreement  or anyother agreement executed in connection herewith,  including any amendments, waivers or consents in connection with any of the foregoing,  (b) any litigation or dispute (whetherinstituted by Buyer, Seller or any other person) in any way relating to thePurchased Receivables, the Collateral, this Agreement or any other agreementexecuted in connection herewith or therewith, (c) enforcing any rights againstSeller or any guarantor, or any Account Debtor, (d) protecting or enforcing itsinterest in the Purchased Receivables or the Collateral, (e) collecting thePurchased Receivables and the Obligations, and  (f) therepresentation of Buyer in connection with any bankruptcy case or insolvencyproceeding involving Seller, any Purchased Receivable, the Collateral, anyAccount Debtor, or any guarantor. Seller shall indemnify and hold Buyer harmless from and against any andall claims, actions, damages, costs, expenses, and liabilities of any naturewhatsoever arising in connection with any of the foregoing.

 

13.           **Severability, Waiver, and Choice of Law.**  In the event that any provision of thisAgreement is deemed invalid by reason of law, this Agreement will be construedas not containing such provision and the remainder of the Agreement shallremain in full force and effect.  Buyerretains all of its rights, even if it makes an Advance after an Event ofDefault.  If Buyer waives an Event ofDefault, it may enforce a later Event of Default.  Any consent or waiver under, or amendment of, this Agreement mustbe in writing.   Nothing containedherein, or any action taken or not taken by Buyer at any time, shall beconstrued at any time to be indicative of any obligation or willingness on thepart of Buyer to amend this Agreement or to grant to Seller any waivers orconsents.  This Agreement has beentransmitted by Seller to Buyer at Buyer’s office in the State of California andhas been executed and accepted by Buyer in the State of California.  This Agreement shall be governed by andinterpreted in accordance with the internal laws of the State of California.

 

14.           **Intentionally omitted.**

 

15.           **Notices.**  All notices shall be given to Buyer andSeller at the addresses or faxes set forth on the first page of this Agreementand shall be deemed to have been delivered and received: (a) if mailed, three(3) calendar days after deposited in

 

 

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the United States mail, first class, postage pre-paid, (b) one (1)calendar day after deposit with an overnight mail or messenger service; or (c)on the same date of confirmed transmission if sent by hand delivery, telecopy,telefax or telex.

 

16.           **Jury Trial.**  SELLER AND BUYER EACH HEREBY (a) WAIVE THEIRRESPECTIVE RIGHTS TO A JURY TRIAL ON ANY CLAIM OR ACTION ARISING OUT OF OR INCONNECTION WITH THIS AGREEMENT, ANY RELATED AGREEMENTS, OR ANY OF THETRANSACTIONS CONTEMPLATED HEREBY OR THEREBY; (b) RECOGNIZE AND AGREE THAT THEFOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THISAGREEMENT; AND (c) REPRESENT AND WARRANT THAT IT HAS REVIEWED THIS WAIVER, HASDETERMINED FOR ITSELF THE NECESSITY TO REVIEW THE SAME WITH ITS LEGAL COUNSEL,AND KNOWINGLY AND VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL.

 

17.           **Term and Termination.**  The term of this Agreement shall be for one(1) year from the date hereof, and from year to year thereafter unlessterminated in writing by Buyer or Seller. Seller and Buyer shall each have the right to terminate this Agreementat any time.  Notwithstanding theforegoing, any termination of this Agreement shall not affect Buyer’s securityinterest in the Collateral and Buyer’s ownership of the Purchased Receivables,and this Agreement shall continue to be effective, and Buyer’s rights andremedies hereunder shall survive such termination, until all transactionsentered into and Obligations incurred hereunder or in connection herewith havebeen completed and satisfied in full.

 

18.           **Titles and Section Headings.**  The titles and section headings used hereinare for convenience only and shall not be used in interpreting this Agreement.

 

19.           **Other Agreements.**  The terms and provisions of this Agreementshall not adversely affect the rights of Buyer or any other division oraffiliate of Silicon Valley Bank under any other document, instrument oragreement.  The terms of such otherdocuments, instruments and agreements shall remain in full force and effectnotwithstanding the execution of this Agreement.  In the event of a conflict between any provision of thisAgreement and any provision of any other document, instrument or agreementbetween Seller on the one hand, and Buyer or any other division or affiliate ofSilicon Valley Bank on the other hand, Buyer shall determine in its solediscretion which provision shall apply. Seller acknowledges specifically that any security agreements, liensand/or security interests currently securing payment of any obligations of Sellerowing to Buyer or any other division or affiliate of Silicon Valley Bank alsosecure Seller’s obligations under this Agreement, and are valid and subsistingand are not adversely affected by execution of this Agreement.  Seller further acknowledges that (a) anycollateral under other outstanding security agreements or other documentsbetween Seller and Buyer or any other division or affiliate of Silicon ValleyBank secures the obligations of Seller under this Agreement and (b) a defaultby Seller under this Agreement constitutes a default under other outstandingagreements between Seller and Buyer or any other division or affiliate ofSilicon Valley Bank.

 

     IN WITNESS WHEREOF, Seller and Buyer haveexecuted this Agreement on the day and year above written.

 

SELLER:  **AML COMMUNICATIONS, INC.**

 

 
| By    | /s/Jacob Inbar                          |
|-------|-----------------------------------------|
| Title | President & Chief Executive Officer |

 

 

 

 

BUYER:  **SILICON VALLEY BANK**

 

 

 
| By    |   |
|-------|--------|
| Title |   |

 

 

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******

**Silicon Valley Bank**

3003 Tasman Drive

Santa Clara, California95054

(408) 654-1000 - Fax(408) 980-6410

 

**CERTIFICATION of OFFICERS**

 

                The undersigned,being all the officers of **AML COMMUNICATIONS, INC.**, a Delawarecorporation (the “Corporation”), hereby certify to Silicon Valley Bank (“SVB”)that:

 

                1.  The correct name of the Corporation is AMLCOMMUNICATIONS, INC., as set forth in the Articles of Incorporation.

 

                2.  The Corporation was incorporated on December1995, under the laws of the State of Delaware, and is in good standing undersuch laws.

 

                3.  The Corporation’s place of business andchief executive office being the place at which the Corporation maintains itsbooks and records pertaining to accounts, accounts receivables, contractrights, chattel paper, general intangibles, instruments, documents, inventory,and equipment, is located at:

 

                                **1000Avenida  Acaso**

                                **Camarillo, California93012**

 

                4.  The Corporation has other places of businessat the following addressees:

 

 

 

 

 

                5.  There is no provision in the Certificate ofIncorporation, Articles of Incorporation, or Bylaws of the Corporation, or inthe laws of the State of its incorporation, requiring any vote or consent ofshareholders to authorize the sale of receivables or the grant of a securityinterest in any assets of the Corporation. Such power is vested exclusively in the Corporation’s Board ofDirectors.

 

6.  Theofficers of the Corporation, and their respective titles and signatures are asfollows:

 
| **President:**                                                                                              |                |
|-------------------------------------------------------------------------------------------------------------|---------------------|
|                 Jacob  Inbar     | /s/ Jacob Inbar     |
|                                                                                                        | (Signature)         |
| **Vice  President:**                                                                                        |                |
|                 Tiberiu  Mazilu  | /s/ Tiberiu Mazilu  |
|                                                                                                        | (Signature)         |
| **Secretary:**                                                                                              |                |
|                 Edwin  J. McAvoy | /s/ Edwin J. McAvoy |
|                                                                                                        | (Signature)         |
| **Treasurer:**                                                                                              |                |
|                 David  A. Swoish | /s/ David A. Swoish |
|                                                                                                        | (Signature)         |
| **Other  Officer:**                                                                                         |                |
| **Title:**                                                                                                  |                |
|                                                                                                        |                |
|                                                                                                        | (Signature)         |

 

 

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                7.  Except as indicated in this paragraph 7,each of the officers listed in paragraph 6 has signatory powers with respect toall the Corporation’s transactions with SVB. Explanation of exceptions:

 

                8.  The undersigned shall give SVB promptwritten notice of any change or amendment with respect to any of theforegoing.  Until such written notice isreceived by SVB, SVB shall be entitled to rely upon the foregoing in allrespects.

 

                IN WITNESSWHEREOF, the undersigned have executed this Certification of Officers on 11/20/2001.

 
| **President:**      | /s/ Jacob Inbar     |
|---------------------|---------------------|
| **Vice President:** | /s/ Tiberiu Mazilu  |
| **Secretary:**      | /s/ Edwin J. McAvoy |
| **Treasurer:**      | /s/ David A. Swoish |

 

 

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**Silicon Valley Bank**

3003 Tasman Drive

Santa Clara, California95054

(408) 654-1000 - Fax(408) 980-6410

 

**SECRETARY’S CERTIFICATE OF RESOLUTION**

 

                The undersigned,as Secretary of AML COMMUNICATIONS, INC., a Delaware corporation (the“Corporation”), hereby certifies to Silicon Valley Bank that at a meeting dulyconvened at which a quorum was present the following resolutions were adoptedby the Board of Directors of the Corporation and that such resolutions have notbeen modified, amended, or rescinded in any respect and are in full force andeffect as of today’s date.

 

                RESOLVED, that thiscorporation be and hereby is authorized to sell this corporation’s accountsreceivable to Silicon Valley Bank, and to grant Silicon Valley Bank a securityinterest in this corporation’s assets, including, without limitation, accounts,accounts receivable, contract rights, chattel paper, general intangibles,instruments, documents, letters of credit, drafts, inventory and equipment,presently owned or hereafter acquired and proceeds and products of theforegoing (the “ Collateral,” as defined in the Accounts Receivable PurchaseAgreement).

 

                RESOLVED, thatthis corporation be and hereby is authorized and directed to execute anddeliver certain agreements in connection with the sale of receivables, andgranting of security interests in the Collateral to Silicon Valley Bankincluding, without limitations, an Accounts Receivable Purchase Agreement andUCC-1 financing statement.

 

                RESOLVED, that thefollowing named officers of this corporation (“Authorized Officers”) be, andany of them hereby are, authorized, empowered, and directed to execute anddeliver to Silicon Valley Bank on behalf of this corporation all such furtheragreements and instruments as may be deemed necessary or advisable in order tofully effectuate the purposes and intent of the foregoing resolutions.

 
| Print Names of  Authorized Officers:                                                                        |   | Title:                                                                                                                  |
|-------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|
|                 Jacob  Inbar     |   |                 President  & CEO         |
|                 David  A. Swoish |   |                 Director  of Finance         |
|                 Edwin  J. McAvoy |   |                 Secretary  & VP of Sales |
|                                                                                                        |   |                                                                                                                    |
|                                                                                                        |   |                                                                                                                    |
|                                                                                                        |   |                                                                                                                    |

 

                                RESOLVED, that the Secretary orAssistant Secretary of this corporation be, and hereby is authorized, empoweredand directed to certify to the passage of the foregoing resolutions under theseal of this corporation.

 

IN WITNESS WHEREOF, the undersigned has duly executed this Certificatethis Twentieth day of November 2001.

 
|   | /s/ Edwin J. McAvoy                      |
|--------|------------------------------------------|
|   | Signature                                |
|   |                                     |
|   | Secretary of**AML COMMUNICATIONS, INC.** |

 

 

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