Document:

Silicon Valley Bank 3003 Tasman Dr

Exhibit 10.39

 

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 SILICON

VALLEY BANK (“Buyer”) and AML COMMUNICATIONS, INC. (“Seller”), with

reference to that certain Accounts Receivable Financing Agreement dated

November 10, 2000 (as amended, the “Existing Agreement”). The Existing

Agreement and all related documents, instruments and agreements are referred to

collectively 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 Existing

Agreement.

 

The Parties agree, as

follows:

 

Seller acknowledges that the present unpaid principal

balance of the Seller’s indebtedness, liabilities and obligations to Buyer

under the Loan Documents, including interest accrued through 11/21/01 is

$98,974.65 (the “Financed Receivable Balance”), and that said sum is due and

owing without any defense, offset, or counterclaim of any kind.

 

Effective immediately, the Financed Receivable Balance

shall 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 financial

accommodations under the Loan Documents, and as of this date, Buyer shall not

be obligated to provide any further financial accommodations under any of the

Loan Documents.

 

1.  Definitions.  When used herein, the following terms shall

have the following meanings.

“Account Balance” shall mean, on any given day, the

gross amount of all Purchased Receivables unpaid on that day.

“Account Debtor” shall have the meaning set forth in

the California Uniform Commercial Code and shall include any person liable on

any Purchased Receivable, including without limitation, any guarantor of the

Purchased Receivable and any issuer of a letter of credit or banker’s

acceptance.

“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 behalf

of 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 in

Section 8 hereof.

“Collateral Handling Fee” shall have the meaning set

forth in Section 3.3 hereof.

“Collections” shall mean all good funds received by

Buyer from or on behalf of an Account Debtor with respect to

Purchased Receivables.

“Compliance Certificate” shall mean a certificate, in

a form provided by Buyer to Seller, which contains the certification of the

chief financial officer of Seller that, among other things, the representations

and warranties set forth in this Agreement are true and correct as of the date

such certificate is delivered.

“Event of Default” shall have the meaning set forth in

Section 9 hereof.

“Facility Fee” shall have the meaning set forth in

Section 3.6 hereof.

“Finance Charges” shall have the meaning set forth in

Section 3.2 hereof.

“Invoice Transmittal” shall mean a writing signed by

an authorized representative of Seller which accurately identifies the receivables

which Buyer, at its election, may purchase, and includes for each such

receivable the correct amount owed by the Account Debtor, the name and address

of the Account Debtor, the invoice number, the invoice date and the account

code.

“Obligations” shall mean all advances, financial

accommodations, 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 or

other instrument, whether arising on account or by overdraft, whether direct or

indirect (including those acquired by assignment) absolute or contingent,

primary or secondary, due or to become due, now owing or hereafter arising, and

however acquired; including, without limitation, all Advances, Finance Charges,

Collateral Handling Fees, interest, Repurchase Amounts, fees, expenses,  professional fees and  attorneys’ fees and any other sums

chargeable to Seller hereunder or otherwise.

“Prime Rate” shall mean

the Buyer’s most recently announced “prime rate,” even if it is not Buyer’s

lowest rate.

“Purchased Receivables” shall mean all those accounts,

receivables, chattel paper, instruments, contract rights, documents, general

intangibles, letters of credit, drafts, bankers acceptances, and rights to

payment, and all proceeds thereof (all of the foregoing being referred to as

“receivables”), arising out of the invoices and other agreements identified on

or delivered with any Invoice Transmittal delivered by Seller to Buyer which

Buyer elects to purchase and for which Buyer makes an Advance.

 

 

“Refund” shall have the meaning set forth in Section

3.5 hereof.

“Reserve” shall have the meaning set forth in Section

2.4 hereof.

“Repurchase Amount” shall have the meaning set forth

in Section 4.2 hereof.

“Reconciliation Date” shall mean the last calendar day

of each Reconciliation Period.

“Reconciliation Period” shall mean each calendar month

of every year.

 

2.  Purchase and Sale of Receivables.

 

     2.1.  Offer to Sell Receivables.  During the term hereof, and provided that

there 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 may

request that Buyer purchase receivables and Buyer may, in its sole discretion,

elect to purchase receivables.  Seller

shall deliver to Buyer an Invoice Transmittal with respect to any receivable

for which a request for purchase is made. 

An authorized representative of Seller shall sign each Invoice

Transmittal delivered to Buyer.  Buyer

shall be entitled to rely on all the information provided by Seller to Buyer on

or with the Invoice Transmittal and to rely on the signature on any Invoice

Transmittal as an authorized signature of Seller.

 

     2.2. 

Acceptance of Receivables. 

Buyer shall have no obligation to purchase any receivable listed on an

Invoice Transmittal.  Buyer may exercise

its sole discretion in approving the credit of each Account Debtor before

buying any receivable.  Upon acceptance

by Buyer of all or any of the receivables described on any Invoice Transmittal,

Buyer shall pay to Seller 80(%) percent of the face amount of

each receivable Buyer desires to purchase, net of deferred revenue and offsets

related to each specific Account Debtor. 

Such payment shall be the “Advance” with respect to such

receivable.  Buyer may, from time to

time, in its sole discretion, change the percentage of the Advance.  Upon Buyer’s acceptance of the receivable

and payment to Seller of the Advance, the receivable shall become a “Purchased

Receivable.”  It shall be a condition to

each Advance that  (i) all of the

representations and warranties set forth in Section 6 of this Agreement be true

and correct on and as of the date of the related Invoice Transmittal and on and

as of the date of such Advance as though made at and as of each such date,

and  (ii) no Event of Default or any event

or condition that with notice, lapse of time or otherwise would constitute an

Event of Default shall have occurred and be continuing, or would result from

such Advance.   Notwithstanding the

foregoing, in no event shall the aggregate amount of all Purchased Receivables

outstanding at any time exceed One Million Dollars ($1,000,000.00).

 

      2.3.  Effectiveness of Sale to Buyer.  Effective upon Buyer’s payment of an

Advance, and for and in consideration therefor and in consideration of the

covenants of this Agreement, Seller hereby absolutely sells, transfers and

assigns to Buyer, all of Seller’s right, title and interest in and to each

Purchased Receivable and all monies due or which may become due on or with

respect to such Purchased Receivable. 

Buyer shall be the absolute owner of each Purchased Receivable.  Buyer shall have, with respect to any goods

related to the Purchased Receivable, all the rights and remedies of an unpaid

seller under the California Uniform Commercial Code and other applicable law,

including the rights of replevin, claim and delivery, reclamation and stoppage

in transit.

 

     2.4.  Establishment of a Reserve.  Upon the purchase by Buyer of each Purchased

Receivable, Buyer shall establish a reserve. 

The reserve shall be the amount by which the face amount of the Purchased

Receivable exceeds the Advance on that Purchased Receivable (the “Reserve”);

provided, the Reserve with respect to all Purchased Receivables outstanding at

any one time shall be an amount not less than 20(%) percent of the

Account Balance at that time and may be set at a higher percentage at Buyer’s

sole discretion.  The reserve shall be a

book balance maintained on the records of Buyer and shall not be a segregated

fund.

 

3.  Collections, Charges and Remittances.

 

     3.1.  Collections. In computing Finance Charges

on the Obligations, all checks and other items of payment received by Buyer

(including proceeds of Purchased Receivables and payment of Obligations in

full) shall be deemed applied by Buyer on account of the Obligations five

business days after receipt by Buyer of immediately available funds. If Seller

is in default under this Agreement, Buyer shall apply all Collections to

Seller’s Obligations hereunder in such order and manner as Buyer may

determine.  If an item of collection is

not honored or Buyer does not receive good funds for any reason, the amount

shall be included in the Account Balance as if the Collections had not been

received and Finance Charges under Section 3.2 shall accrue thereon.

 

     3.2. Finance Charges.  On each Reconciliation Date Seller shall pay

to Buyer a finance charge in an amount equal to 1.00 percentage points

above Prime Rate per annum of the gross average daily Account Balance

outstanding during the applicable Reconciliation Period (the “Finance

Charges”). Notwithstanding the foregoing, on each Reconciliation Date, Seller

shall pay to Buyer a minimum $3,000.00 Finance Charge. Buyer shall

deduct the accrued Finance Charges from the Reserve as set forth in Section 3.5

below.

 

     3.3. Collateral Handling Fee. On

each Reconciliation Day, Seller will pay to Buyer a collateral handling fee,

equal to .50%

per month of the average daily Account Balance outstanding during the

applicable Reconciliation Period. Buyer shall deduct the Collateral Handling

Fee from the Reserve as set forth in Section 3.5 below.

 

     3.4.  Accounting.  Buyer

shall prepare and send to Seller after the close of business for each

Reconciliation Period, an accounting of the transactions for that

Reconciliation Period, including the amount of all Purchased Receivables, all

Collections,

 

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Adjustments, Finance Charges, and the Collateral Handling Fee.  The accounting shall be deemed correct and

conclusive 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 or

any event or condition that with notice, lapse of time or otherwise would

constitute an Event of Default, Buyer shall refund to Seller by check after the

Reconciliation Date, the amount, if any, which Buyer owes to Seller at the end

of the Reconciliation Period according to the accounting prepared by Buyer for

that 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 that

Reconciliation 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 payment

thereof by deduction from the Refund;

                                                                        (5)          the

Reserve for the Account Balance as of the first day of the following

Reconciliation Period in the minimum percentage set forth in Section 2.4

hereof; and

                                                                        (6) 

all amounts due, including professional fees and expenses, as set forth

in Section 12 for which oral or written

demand has been made by Buyer to Seller during that Reconciliation

Period to the extent Buyer has agreed to accept payment thereof by deduction

from the Refund.

In

the event the formula set forth in this Section 3.5 results in an amount due to

Buyer from Seller, Seller shall make such payment in the same manner as set

forth in Section 4.3 hereof for repurchases. 

If the formula set forth in this Section 3.5 results in an amount due to

Seller from Buyer, Buyer shall make such payment by check, subject to Buyer’s

rights 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 to

deduct the Facility Fee from the Reserve.

 

4.  Recourse and Repurchase Obligations.

 

     4.1.  Recourse.  Buyer’s

acquisition of Purchased Receivables from Seller shall be with full recourse

against Seller.  In the event the

Obligations exceed the amount of Purchased Receivables and Collateral, Seller

shall be liable for any deficiency.

 

     4.2.  Seller’s Agreement to Repurchase.  Seller agrees to pay to Buyer on demand, the

full face amount, or any unpaid portion, of any Purchased Receivable:

(A)  which

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

(B)  which is owed by any Account Debtor who has

filed, or has had filed against it, any bankruptcy case, assignment for the

benefit of creditors, receivership, or insolvency proceeding or who has become

insolvent  (as defined in the United

States Bankruptcy Code) or who is generally not paying its debts as such debts

become due; or

(C)  with

respect to which there has been any breach of warranty or representation set

forth in Section 6 hereof or any breach of any covenant contained in this

Agreement; or

(D)  with

respect 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 reasonable

attorneys’ and professional fees and expenses and all court costs incurred by

Buyer in collecting such Purchased Receivable and/or enforcing its rights

under, 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 Other

Amounts Due Buyer.  When any

Repurchase Amount or other amount owing to Buyer becomes due, Buyer shall

inform Seller of the manner of payment which may be any one or more of the

following in Buyer’s sole discretion: 

(a) in cash immediately upon demand therefor; (b) by delivery of

substitute invoices and an Invoice Transmittal acceptable to Buyer which shall

thereupon become Purchased Receivables; (c) by adjustment to the Reserve

pursuant to Section 3.5 hereof; (d) by deduction from or offset against the

Refund that would otherwise be due and payable to Seller;  (e) by deduction from or offset against  the amount that otherwise would be forwarded

to Seller in respect of any further Advances that may be made by Buyer; or

(f)  by any combination of the foregoing

as Buyer may from time to time choose.

 

     4.4.  Seller’s Agreement to Repurchase All Purchased

Receivables.  Upon and after

the 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 without

notice or demand from Buyer) repurchase all the Purchased Receivables then

outstanding, or such portion thereof as Buyer may demand.  Such demand may, at Buyer’s option, include

and Seller shall pay to Buyer immediately upon demand, cash in an amount equal

to the Advance with respect to each Purchased Receivable then outstanding

together with all accrued Finance Charges, Adjustments, Collateral Handling

Fees, attorney’s and professional fees, court costs and expenses as provided

for herein, and any other Obligations. 

Upon receipt of payment in full of the Obligations, Buyer shall

immediately instruct Account Debtors to pay Seller directly, and return to

Seller any Refund due to Seller.  For

the purpose of calculating any Refund due 

 

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under this Section only, the Reconciliation Date shall be deemed to be

the date Buyer receives payment in good funds of all the Obligations as

provided in this Section 4.4.

 

5.  Power of Attorney.  Seller does hereby irrevocably appoint Buyer

and 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 of

Default, (a) to sell, assign, transfer, pledge, compromise, or discharge the

whole 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 which

may become due upon or with respect to the Purchased Receivables and to

compromise, prosecute, or defend any action, claim, case or proceeding relating

to the Purchased Receivables, including the filing of a claim or the voting of

such claims in any bankruptcy case, all in Buyer’s name or Seller’s name, as

Buyer may choose; (c)  to prepare, file

and sign Seller’s name on any notice, claim, assignment, demand, draft, or

notice of or satisfaction of lien or mechanics’ lien or similar document with

respect to Purchased Receivables; (d) 

to notify all Account Debtors with respect to the Purchased Receivables

to pay Buyer directly; (e)  to receive,

open, and dispose of all mail addressed to Seller for the purpose of collecting

the Purchased Receivables; (f)  to

endorse Seller’s name on any checks or other forms of payment on the Purchased

Receivables;  (g) to execute on behalf

of Seller any and all instruments, documents, financing statements and the like

to perfect Buyer’s interests in the Purchased Receivables and Collateral; and

(h)  to do all acts and things necessary

or expedient, in furtherance of any such purposes.  If Buyer receives a check or item which is payment for both a

Purchased Receivable and another receivable, the funds shall first be applied

to the Purchased Receivable and, so long as there does not exist an Event of

Default or an event that with notice, lapse of time or otherwise would

constitute an Event of Default, the excess shall be remitted to Seller.  Upon the occurrence and continuation of an

Event of Default, all of the power of attorney rights granted by Seller to

Buyer hereunder shall be applicable with respect to all Purchased Receivables

and 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 accuracy

of the following are being relied upon by the Buyer in determining whether to

accept receivables as Purchased Receivables, Seller represents, warrants,

covenants and agrees, with respect to each Invoice Transmittal delivered to

Buyer and each receivable described therein, that:

(A) Seller is the absolute owner of each receivable

set forth in the Invoice Transmittal and has full legal right to sell, transfer

and assign such receivables;

(B) The correct amount of each receivable is as set

forth in the Invoice Transmittal and is not in dispute;

(C)  The  payment of each receivable is not contingent

upon the fulfillment of any obligation or contract, past or future and any and

all obligations required of the Seller have been fulfilled as of the date of

the Invoice Transmittal;

(D) Each receivable set forth on the Invoice

Transmittal is based on an actual sale and delivery of goods and/or services

actually rendered, is presently due and owing to Seller, is not past due or in

default, has not been previously sold, assigned, transferred, or pledged, and

is free of any and all liens, security interests and encumbrances other than

liens, security interests or encumbrances in favor of Buyer or any other

division or affiliate of Silicon Valley Bank;

(E) There are no defenses, offsets, or counterclaims

against any of the receivables, and no agreement has been made under which the

Account Debtor may claim any deduction or discount, except as otherwise stated

in the Invoice Transmittal;

(F)

Each Purchased Receivable shall be the property of the Buyer and shall be

collected by Buyer, but if for any reason it should be paid to Seller, Seller

shall promptly notify Buyer of such payment, shall hold any checks, drafts, or

monies so received in trust for the benefit of Buyer, and shall promptly

transfer and deliver the same to the Buyer;

(G) Buyer shall have the right of endorsement, and

also the right to require endorsement by Seller, on all payments received in

connection with each Purchased Receivable and any proceeds of Collateral;

(H) Seller, and to Seller’s best knowledge, each

Account Debtor set forth in the Invoice Transmittal, are and shall remain

solvent as that term is defined in the United States Bankruptcy Code and the

California Uniform Commercial Code, and no such Account Debtor has filed or had

filed against it a voluntary or involuntary petition for relief under the

United States Bankruptcy Code;

(I) Each Account Debtor named on the Invoice

Transmittal will not object to the payment for, or the quality or the quantity

of the subject matter of, the receivable and is liable for the amount set forth

on the Invoice Transmittal;

(J) Seller shall continue

to notify and direct all of its Account Debtor’s to make all payment’s to a

lockbox account established with the Buyer (“Lockbox”) or to wire transfer

payments to a cash collateral account that Buyer controls; and

(K) All receivables forwarded to and accepted by Buyer

after the date hereof, and thereby becoming Purchased Receivables, shall comply

with each and every one of the foregoing representations, warranties, covenants

and 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 render

its services to Seller, Seller hereby represents, warrants, covenants and

agrees that:

(A)  Seller will not assign, transfer, sell, or

grant , or permit any lien or security interest in any Purchased Receivables or

Collateral to or in favor of any other party, without Buyer’s prior written

consent;

(B)  The Seller’s

name, form of organization, chief executive office, and the place where the

records concerning all  Purchased

Receivables and  Collateral are kept is

set forth at the beginning of this Agreement, 

Collateral is located only at the location set forth in the beginning of

this Agreement, or,  if located at any

additional location,  as set forth on

 

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a schedule attached to this Agreement, and Seller will

give Buyer at least thirty (30) days prior written notice if such name,

organization, chief executive office or 

other locations of Collateral  or

records concerning Purchased Receivables or Collateral is changed or  added and shall execute any  documents necessary to perfect Buyer’s

interest in the Purchased Receivables and the Collateral;

(C) Seller shall 

(i) pay all of its normal gross payroll for employees, and all federal

and state taxes, as and when due, including without limitation all payroll and

withholding 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 the

proper taxing authorities; and (iii) if requested by Buyer, pay its payroll and

related taxes through a bank or an independent payroll service acceptable to

Buyer.

(D) Seller has not, as of the time Seller delivers to

Buyer an Invoice Transmittal, or as of the time Seller accepts any Advance from

Buyer, filed a voluntary petition for relief under the United States Bankruptcy

Code or had filed against it an involuntary petition for relief;

(E) If Seller owns, holds or has any interest in, any

copyrights (whether registered, or unregistered), patents or trademarks, and

licenses of any of the foregoing, such interest has been disclosed to Buyer and

is specifically listed and identified on a schedule to this Agreement, and

Seller shall immediately notify Buyer if Seller hereafter obtains any interest

in any additional copyrights, patents, trademarks or licenses that are

significant in value or are material to the conduct of its business;

(F)

Seller shall provide Buyer with a Compliance Certificate (i) on a quarterly

basis to be received by Buyer no later than the fifth calendar day following

each calendar quarter, and; (ii) on a more frequent or other basis if and as

requested by Buyer;

(G)

Provide Buyer with, as soon as available, but no later than 30 days following

each Reconciliation Period, a deferred revenue report, an aged listing of

accounts receivable and accounts payable, a company prepared balance sheet and

income statement, prepared under GAAP, consistently applied, covering Seller’s

operations during the period; and

(H)

On request by Buyer, Seller will promptly furnish any information Buyer may

reasonably request to determine financial condition of Seller, including, but

not limited to all of Seller’s Obligations, and the condition of any of

Seller’s receivables which may include but are not limited to Purchased

Receivables.

 

7.  Adjustments.  In the event of a breach of any of the

representations, warranties, or covenants set forth in Section 6.1, or in the

event any Adjustment or dispute is asserted by any Account Debtor, Seller shall

promptly advise Buyer and shall, subject to the Buyer’s approval, resolve such

disputes and advise Buyer of any adjustments. 

Unless the disputed Purchased Receivable is repurchased by Seller and

the full Repurchase Amount is paid, Buyer shall remain the absolute owner of

any Purchased Receivable which is subject to Adjustment or repurchase under

Section 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 proceeds

made payable to Buyer.  While Seller

retains possession of said returned goods, Seller shall segregate said goods

and mark them “property of Silicon Valley Bank.”

 

8.  Security Interest.  To secure the prompt payment and

performance to Buyer of all of the Obligations, Seller hereby grants to Buyer a

continuing lien upon and security interest in all of Seller’s now existing or

hereafter arising rights and interest in the following, whether now owned or

existing or hereafter created, acquired, or arising, and wherever located

(collectively, the “Collateral”):

                                                (A) 

All accounts,  receivables,

contract rights,  chattel paper,

instruments, documents,  letters of

credit,  bankers acceptances, drafts,

checks, cash,  securities, and general

intangibles (including, without limitation, 

all claims, causes of  action,

deposit accounts, guaranties, rights in and claims under insurance policies

(including rights to  premium

refunds),  rights to tax refunds,

copyrights, patents, trademarks, rights in and under license agreements, and

all other intellectual property);

(B)  All

inventory,  including Seller’s rights to

any returned or rejected goods, with respect to which Buyer shall have all the

rights of any unpaid seller, including the rights of replevin, claim and delivery,

reclamation, and stoppage in transit;

(C)  All

monies, refunds and other amounts due Seller, including, without limitation,

amounts due Seller under this Agreement (including Seller’s right of offset and

recoupment);

                (D)  All 

equipment, machinery, furniture, furnishings, fixtures, tools, supplies

and motor vehicles;

                (E)  All farm products, crops, timber, minerals

and the like (including oil and gas);

                (F)  All accessions to, substitutions for, and

replacements of, all of the foregoing;

                (G)  All books and records pertaining to all of

the foregoing; and

                (H)  All proceeds of the foregoing, whether due

to voluntary or involuntary disposition, including insurance proceeds.

                Seller is not authorized to

sell, assign, transfer or otherwise convey any Collateral without Buyer’s prior

written consent, except for the sale of finished inventory in the Seller’s

usual course of business.  Seller agrees

to sign UCC financing statements, in a form acceptable to Buyer, and any other

instruments and documents requested by Buyer to evidence, perfect, or protect

the 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 and

Collateral.

 

9.  Default.  The occurrence of any one or more of the

following shall constitute an Event of Default hereunder.

(A) Seller fails

to pay any amount owed to Buyer as and when due;

(B) There shall be commenced by or against Seller any

voluntary or involuntary case under the United States Bankruptcy Code, or any

assignment for the benefit of creditors, or appointment of a receiver or

custodian for any of its assets;

 

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(C) Seller shall become insolvent in that its debts

are greater than the fair value of its assets, or Seller is generally not

paying its debts as they become due or is left with unreasonably small capital;

(D) Any involuntary lien, garnishment, attachment or

the like is issued against or attaches to the Purchased Receivables or any

Collateral;

(E)

Seller shall breach any covenant, agreement, warranty, or representation shall

constitute an immediate default hereunder;

(F) Seller is not in compliance with, or otherwise is

in default under, any term of any document, instrument or agreement evidencing

a debt, obligation or liability of any kind or character of Seller, now or

hereafter existing, in favor of Buyer or any division or affiliate of Silicon

Valley Bank, regardless of whether such debt, obligation or liability is direct

or indirect, primary or secondary, joint, several or joint and several, or

fixed or contingent, together with any and all 

renewals and extensions of such debts, obligations and liabilities, or

any part thereof;

(G) An event of default shall occur under any guaranty

executed by any guarantor of the Obligations of Seller to Buyer under this

Agreement, or any material provision of any such guaranty shall for any reason

cease to be valid or enforceable or any such guaranty shall be repudiated or

terminated, including by operation of law;

(H) A default or event of default shall occur under

any agreement between Seller and any creditor of Seller that has entered into a

subordination agreement with Buyer;

(I)

Any creditor that has entered into a subordination agreement with Buyer shall

breach any of the terms of or not comply with such subordination agreement; or

(J) (i) There is a material adverse change in the

business, operations, or condition (financial or otherwise) of the Seller, or (ii)

there is a material impairment of the prospect of repayment of any portion of

the Obligations or (iii) there is a material impairment of the value or

priority 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 buying

receivables or extending any financial accommodations to Seller;  (2) all or a portion of the Obligations shall

be, at the option of and upon demand by Buyer, or with respect to an Event of

Default 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 the

rights and remedies under this Agreement and under applicable law, including

the rights and remedies of a secured party under the California Uniform

Commercial Code, all the power of attorney rights described in Section 5 with

respect to all Collateral, and the right to collect, dispose of, sell, lease,

use, and realize upon all Purchased Receivables and all Collateral in any

commercial reasonable manner.  Seller

and Buyer agree that any notice of sale required to be given to Seller shall be

deemed to be reasonable if given five (5) days prior to the date on or after

which the sale may be held.  In the

event that the Obligations are accelerated hereunder, Seller shall repurchase

all of the Purchased Receivables as set forth in Section 4.4.

 

11.           Accrual of Interest.  If any amount owed by Seller hereunder is

not paid when due, including, without limitation, amounts due under Section

3.5, Repurchase Amounts, amounts due under Section 12, and any other

Obligations, such amounts shall bear interest at a per annum rate equal to the

per annum rate of the Finance Charges until the earlier of (i) payment in good

funds or (ii) entry of a final judgment thereof, at which time the principal

amount of any money judgment remaining unsatisfied shall accrue interest at the

highest rate allowed by applicable law.

 

12.            Fees, Costs

and Expenses; Indemnification.  The

Seller will pay to Buyer immediately upon demand all fees, costs and

expenses  (including fees of attorneys

and professionals and their costs and expenses) that Buyer incurs or may from

time to time impose in connection with any of the following:  (a) preparing, negotiating, administering,

and enforcing this Agreement  or any

other agreement executed in connection herewith,  including any amendments, 

waivers or consents in connection with any of the foregoing,  (b) any litigation or dispute (whether

instituted by Buyer, Seller or any other person) in any way relating to the

Purchased Receivables, the Collateral, this Agreement or any other agreement

executed in connection herewith or therewith, (c) enforcing any rights against

Seller or any guarantor, or any Account Debtor, (d) protecting or enforcing its

interest in the Purchased Receivables or the Collateral, (e) collecting the

Purchased Receivables and the 

Obligations, and  (f) the

representation of Buyer in connection with any bankruptcy case or insolvency

proceeding involving Seller, any Purchased Receivable, the Collateral, any

Account Debtor, or any guarantor. 

Seller shall indemnify and hold Buyer harmless from and against any and

all claims, actions, damages, costs, expenses, and liabilities of any nature

whatsoever arising in connection with any of the foregoing.

 

13.           Severability, Waiver, and Choice of Law.  In the event that any provision of this

Agreement is deemed invalid by reason of law, this Agreement will be construed

as not containing such provision and the remainder of the Agreement shall

remain in full force and effect.  Buyer

retains all of its rights, even if it makes an Advance after an Event of

Default.  If Buyer waives an Event of

Default, it may enforce a later Event of Default.  Any consent or waiver under, or amendment of, this Agreement must

be in writing.   Nothing contained

herein, or any action taken or not taken by Buyer at any time, shall be

construed at any time to be indicative of any obligation or willingness on the

part of Buyer to amend this Agreement or to grant to Seller any waivers or

consents.  This Agreement has been

transmitted by Seller to Buyer at Buyer’s office in the State of California and

has been executed and accepted by Buyer in the State of California.  This Agreement shall be governed by and

interpreted in accordance with the internal laws of the State of California.

 

14.           Intentionally omitted.

 

15.           Notices.  All notices shall be given to Buyer and

Seller at the addresses or faxes set forth on the first page of this Agreement

and shall be deemed to have been delivered and received: (a) if mailed, three

(3) calendar days after deposited in

 

 

6

 

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 THEIR

RESPECTIVE RIGHTS TO A JURY TRIAL ON ANY CLAIM OR ACTION ARISING OUT OF OR IN

CONNECTION WITH THIS AGREEMENT, ANY RELATED AGREEMENTS, OR ANY OF THE

TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY; (b) RECOGNIZE AND AGREE THAT THE

FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS

AGREEMENT; AND (c) REPRESENT AND WARRANT THAT IT HAS REVIEWED THIS WAIVER, HAS

DETERMINED 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 unless

terminated in writing by Buyer or Seller. 

Seller and Buyer shall each have the right to terminate this Agreement

at any time.  Notwithstanding the

foregoing, any termination of this Agreement shall not affect Buyer’s security

interest in the Collateral and Buyer’s ownership of the Purchased Receivables,

and this Agreement shall continue to be effective, and Buyer’s rights and

remedies hereunder shall survive such termination, until all transactions

entered into and Obligations incurred hereunder or in connection herewith have

been completed and satisfied in full.

 

18.           Titles and Section Headings.  The titles and section headings used herein

are for convenience only and shall not be used in interpreting this Agreement.

 

19.           Other Agreements.  The terms and provisions of this Agreement

shall not adversely affect the rights of Buyer or any other division or

affiliate of Silicon Valley Bank under any other document, instrument or

agreement.  The terms of such other

documents, instruments and agreements shall remain in full force and effect

notwithstanding the execution of this Agreement.  In the event of a conflict between any provision of this

Agreement and any provision of any other document, instrument or agreement

between Seller on the one hand, and Buyer or any other division or affiliate of

Silicon Valley Bank on the other hand, Buyer shall determine in its sole

discretion which provision shall apply. 

Seller acknowledges specifically that any security agreements, liens

and/or security interests currently securing payment of any obligations of Seller

owing to Buyer or any other division or affiliate of Silicon Valley Bank also

secure Seller’s obligations under this Agreement, and are valid and subsisting

and are not adversely affected by execution of this Agreement.  Seller further acknowledges that (a) any

collateral under other outstanding security agreements or other documents

between Seller and Buyer or any other division or affiliate of Silicon Valley

Bank secures the obligations of Seller under this Agreement and (b) a default

by Seller under this Agreement constitutes a default under other outstanding

agreements between Seller and Buyer or any other division or affiliate of

Silicon Valley Bank.

 

     IN WITNESS WHEREOF, Seller and Buyer have

executed 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

  	

   

  

 

 

7

 

Silicon Valley Bank

3003 Tasman Drive

Santa Clara, California

95054

(408) 654-1000 - Fax

(408) 980-6410

 

CERTIFICATION of OFFICERS

 

                The undersigned,

being all the officers of AML COMMUNICATIONS, INC., a Delaware

corporation (the “Corporation”), hereby certify to Silicon Valley Bank (“SVB”)

that:

 

                1.  The correct name of the Corporation is AML

COMMUNICATIONS, INC., as set forth in the Articles of Incorporation.

 

                2.  The Corporation was incorporated on December

1995, under the laws of the State of Delaware, and is in good standing under

such laws.

 

                3.  The Corporation’s place of business and

chief executive office being the place at which the Corporation maintains its

books and records pertaining to accounts, accounts receivables, contract

rights, chattel paper, general intangibles, instruments, documents, inventory,

and equipment, is located at:

 

                                1000

Avenida  Acaso

                                Camarillo, California

93012

 

                4.  The Corporation has other places of business

at the following addressees:

 

 

 

 

 

                5.  There is no provision in the Certificate of

Incorporation, Articles of Incorporation, or Bylaws of the Corporation, or in

the laws of the State of its incorporation, requiring any vote or consent of

shareholders to authorize the sale of receivables or the grant of a security

interest in any assets of the Corporation. 

Such power is vested exclusively in the Corporation’s Board of

Directors.

 

6.  The

officers of the Corporation, and their respective titles and signatures are as

follows:

 

	

  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)

  

 

 

8

 

 

                7.  Except as indicated in this paragraph 7,

each of the officers listed in paragraph 6 has signatory powers with respect to

all the Corporation’s transactions with SVB. 

Explanation of exceptions:

 

                8.  The undersigned shall give SVB prompt

written notice of any change or amendment with respect to any of the

foregoing.  Until such written notice is

received by SVB, SVB shall be entitled to rely upon the foregoing in all

respects.

 

                IN WITNESS

WHEREOF, 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

  

 

 

9

Silicon Valley Bank

3003 Tasman Drive

Santa Clara, California

95054

(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 duly

convened at which a quorum was present the following resolutions were adopted

by the Board of Directors of the Corporation and that such resolutions have not

been modified, amended, or rescinded in any respect and are in full force and

effect as of today’s date.

 

                RESOLVED, that this

corporation be and hereby is authorized to sell this corporation’s accounts

receivable to Silicon Valley Bank, and to grant Silicon Valley Bank a security

interest 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 the

foregoing (the “ Collateral,” as defined in the Accounts Receivable Purchase

Agreement).

 

                RESOLVED, that

this corporation be and hereby is authorized and directed to execute and

deliver certain agreements in connection with the sale of receivables, and

granting of security interests in the Collateral to Silicon Valley Bank

including, without limitations, an Accounts Receivable Purchase Agreement and

UCC-1 financing statement.

 

                RESOLVED, that the

following named officers of this corporation (“Authorized Officers”) be, and

any of them hereby are, authorized, empowered, and directed to execute and

deliver to Silicon Valley Bank on behalf of this corporation all such further

agreements and instruments as may be deemed necessary or advisable in order to

fully 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 or

Assistant Secretary of this corporation be, and hereby is authorized, empowered

and directed to certify to the passage of the foregoing resolutions under the

seal of this corporation.

 

IN WITNESS WHEREOF, the undersigned has duly executed this Certificate

this Twentieth day of November 2001.

 

	

   

  	

  /s/ Edwin J. McAvoy

  
	

   

  	

  Signature

  
	

   

  	

   

  
	

   

  	

  Secretary of AML COMMUNICATIONS, INC.

  

 

 

10UNITED STATES SECURITIES AND EXCHANGE COMMISSION

EXHIBIT 10.40

 

Promissory

Note

 

                This promissory

note (the “Note”), effective this 30th day of December, 2001, is made by and

between Tiberiu Mazilu (the “Holder”), and AML Communications, Inc., a Delaware

corporation (the “Company”), having a place of business at 1000 Avenida Acaso,

Camarillo, Ca 93012. 

 

                The Note is for

the principal sum (the “Sum”) of Fifty thousand Dollars ($50,000). 

 

Methods

of payment:

1.                                       The

Company promises to pay Interest (see definitions) on the Sum at the end of

each fiscal quarter (the “Installment”), commencing on September 30, 2002, for

the entire period defined in paragraph two (2) below. The unpaid interest for

the first two quarters should be accrued and payable by the Due Date, or at an

earlier date by mutual agreement between the Holder and the Company.

2.                                       The

said Sum, including any remaining Interest (see definitions) should be fully

paid by the due date (the “Due Date”) of January 02, 2005. If, by the Due Date,

the financial situation of the Company is not significantly improved to make

the above payment, the Holder and the Company will re-negotiate the terms of

the Note in good faith.

3.                                       The

Note shall be immediately due and paid in full, including remaining Interest

(see definitions), upon the occurrence of any of the following:

a)                      In case the

Company is consolidated, or merged with or into another corporation or

corporations, or a sale of all the assets of the Company.

b)                     Upon the

death of the Holder.

c)                      Upon the

involuntary termination of the Holder’s employment with the Company.

4.                                       The

note shall be paid in full including remaining Interest (see definitions),

twelve (12) months after the Holder’s voluntary termination of employment with

the Company.

5.                                       In

case of default in the payment of any Installment due under this Note, and not

solved or made within ten (10) days from the due date, it shall be accumulated

to the next Installment and payable with an accrued interest due under this

Note and interest definitions given below.

6.                                       The

Company reserves the right to pre-pay this Note in whole or in part, including

remaining Interest (see definitions), without penalty.

 

Definitions:

1.                                       Interest

rate (the “Interest”) shall be defined as the Annual Percentage Rate (APR),

equal to the prime rate + 1.25%, of the principal Sum, calculated quarterly

from a monthly averaged APR for that quarter.

2.                                       Prime

rate is defined as the interest rate charged by banks to their creditworthy

customers 

                                                (www.forecasts.org/prime.htm).

 

All payments shall be made to such address as given above or designated

by the Holder.

 

Dated this 30th day of December, 2001

	

  By:

  	

  Jacob Inbar

  
	

   

  	

  President and CEO

  
	

   

  	

  AML Communications

  
	

   

  	

   

  
	

  Signature:

  	

   

  	

  /s/

  	

  Jacob Inbar

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