Document:

Exhibit
10.22

 

BUSINESS FINANCING MODIFICATION AGREEMENT

 

This Business Financing Modification
Agreement is entered into as of January 19, 2006, by and between AML
Communications, Inc. (the “Borrower”) and Bridge Bank, National
Association (“Lender”).

 

1.                                       DESCRIPTION
OF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing by
Borrower to Lender, Borrower is indebted to Lender pursuant to, among other
documents, a Business Financing Agreement, dated July 8, 2004 by and
between Borrower and Lender, as may be amended from time to time, (the “Business
Financing Agreement”).  Capitalized terms
used without definition herein shall have the meanings assigned to them in the
Business Financing Agreement.

 

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

 

2.                                       DESCRIPTION
OF CHANGE IN TERMS.

 

A.                                   Modification(s)
to Business Financing Agreement:

 

1)                                      The defined term “Credit
Limit” is hereby amended to read as follows:

 

“Credit Limit” means $2,003,514.41, of
which (i) up to $1,000,000 may be used for Formula Advances, (ii) $253,514.41
was outstanding as of December 23, 2005 as unpaid principal balance of
Equipment Loan 1 Advances, and (iii) up to $750,000.00 may be used for
Equipment Loan 2 Advances, subject to Sections 2.2 and 2.3 hereof.

 

“Overadvance” means, (a) the
amount, if any, by which the total amount of Formula Advances then outstanding
exceeds the lesser of $1,000,000 or the Borrowing Base; (b) the entire
amount of any advance made on or after December 23, 2005 as Equipment Loan
1 Advance, or (c) the amount, if any, by which the total amount of Equipment
Loan 2 Advances exceeds $750,000.

 

2)                                      The
following subsections in Section 7, entitled “Miscellaneous Provisions”,
are hereby amended in their entirety to read as follows:

 

(j)                                     Provide to Lender
the following with respect to Borrower’s financial condition and results of
operations for such month and the period then ending, in each case in form and
substance acceptable to Lender, (i) no later than 30 days after the end of
each month, a Compliance Certificate and financial statements including balance
sheet, income statement, and statement of cashflows, (ii) within 5 days
after the end of each month, accounts receivable and payable aging report, and
deferred revenue report, (iii) within 5 days after the end of each month
while any Formula Advances remain unpaid, and prior to any Formula Advance, a
borrowing base certificate, and (iv) such other matters as Lender may
request.

 

(m)                               Permit and cooperate with Lender from
time to time hereafter to audit Borrower’s Receivables at Borrower’s
expense.  Such audit shall be conducted
no later than June 30, 2006 and annually thereafter or as otherwise
requested by Lender. The results of such audit must be acceptable to Lender.

 

3.                                       CONSISTENT
CHANGES.  The Existing Documents are
each hereby amended wherever necessary to reflect the changes described above.

 

4.                                       INTENTIONALLY
OMITTED.

 

5.                                       NO DEFENSES OF BORROWER/GENERAL RELEASE. 
Borrower agrees that, as of this date, it has no defenses against the
obligations to pay any amounts under the Indebtedness.  Each of Borrower and Guarantor (each, a “Releasing
Party”) acknowledges that Lender would not enter into this Business Financing
Modification Agreement without Releasing Party’s assurance that it has no
claims against Lender or any of Lender’s officers, directors, employees or
agents.  Except for the obligations
arising hereafter under this

 

1

 

Business
Financing Modification Agreement, each Releasing Party releases Lender, and
each of Lender’s and entity’s officers, directors and employees from any known
or unknown claims that Releasing Party now has against Lender of any nature,
including any claims that Releasing Party, its successors, counsel, and
advisors may in the future discover they would have now had if they had known
facts not now known to them, whether founded in contract, in tort or pursuant
to any other theory of liability, including but not limited to any claims
arising out of or related to the Agreement or the transactions contemplated
thereby.  Releasing Party waives the
provisions of California Civil Code section 1542, which states:

 

“A
general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.”

 

The
provisions, waivers and releases set forth in this section are binding
upon each Releasing Party and its shareholders, agents, employees, assigns and
successors in interest.  The provisions,
waivers and releases of this section shall inure to the benefit of Lender
and its agents, employees, officers, directors, assigns and successors in
interest.  The provisions of this section shall
survive payment in full of the Obligations, full performance of all the terms
of this Business Financing Modification Agreement and the Agreement, and/or
Lender’s actions to exercise any remedy available under the Agreement or
otherwise.

 

6.                                       CONTINUING
VALIDITY.  Borrower understands and
agrees that in modifying the existing Indebtedness, Lender is relying upon
Borrower’s representations, warranties, and agreements, as set forth in the
Existing Documents.  Except as expressly
modified pursuant to this Business Financing Modification Agreement, the terms
of the Existing Documents remain unchanged and in full force and effect.  Lender’s agreement to modifications to the
existing Indebtedness pursuant to this Business Financing Modification
Agreement in no way shall obligate Lender to make any future modifications to
the Indebtedness.  Nothing in this
Business Financing Modification Agreement shall constitute a satisfaction of
the Indebtedness.  It is the intention of
Lender and Borrower to retain as liable parties all makers and endorsers of
Existing Documents, unless the party is expressly released by Lender in
writing.  No maker, endorser, or
guarantor will be released by virtue of this Business Financing Modification
Agreement.  The terms of this paragraph
apply not only to this Business Financing Modification Agreement, but also to
any subsequent Business Financing modification agreements.

 

7.                                       COUNTERSIGNATURE.  This Business Financing Modification
Agreement shall become effective only when executed by Lender and Borrower.

 

	
  BORROWER:

  	
  LENDER:

  
	
   

  	
   

  
	
  AML COMMUNICATIONS, INC.

  	
  BRIDGE BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
  By:

  	
  /s/: Jacob Inbar

  	
   

  	
  By:

  	
  /s/: Lee
  Shodiss

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Jacob Inbar

  	
   

  	
  Name:

  	
  Lee Shodiss

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  President & CEO

  	
   

  	
  Title:

  	
  Senior Vice
  President

  	
   

  
													

 

2Exhibit 10.23

 

 

PROMISSORY
NOTE

 

	
  Borrower:

  	
   

  	
  AML Communications, Inc.

  	
   

  	
  Lender:

  	
   

  	
  Bank of America, N.A.

  
	
   

  	
   

  	
  1000 Avenida Acaso

  	
   

  	
   

  	
   

  	
  CCS-Small Business/Premier

  
	
   

  	
   

  	
  Camarillo, CA 93012

  	
   

  	
   

  	
   

  	
  CA9-702-05-71

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  101 S. Marengo Avenue, 5th Floor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Pasadena, CA 91101-2428

  

 

	
  Principal
  Amount:

  	
  $640,000.00

  	
  Date of Note:

  	
  January 25, 2006

  

 

PROMISE TO PAY. AML Communications, Inc. (“Borrower”)
promises to pay to Bank of America, N.A. (“Lender”), or order, in lawful money
of the United States of America, the principal amount of Six Hundred Forty
Thousand & 00/100 Dollars ($640,000.00), together with interest at the
rate of 6.760% per annum on the unpaid principal balance from February 10,
2006, until paid in full.

 

PAYMENT. Borrower will pay this loan in 83 regular
payments of $4,425.88 each and one irregular last payment estimated at
$556,594.48. Borrower’s first payment is due March 10, 2006, and all
subsequent payments are due on the same day of each month after that. Borrower’s
final payment will be due on February 10, 2013, and will be for all
principal and all accrued interest not yet paid. Payments include principal and
interest. Unless otherwise agreed or required by applicable law, payments will
be applied first to any accrued unpaid interest; then to principal; then to any
late charges; and then to any unpaid collection costs. Interest on this Note is
computed on a 30/360 simple interest basis; that is, with the exception of odd
days in the first payment period, monthly interest is calculated by applying
the ratio of the annual interest rate over a year of 360 days, multiplied by
the outstanding principal balance, multiplied by a month of 30 days. Interest
for the odd days is calculated on the basis of the actual days to the next full
month and a 360-day year. Borrower will pay Lender at Lender’s address shown
above or at such other place as Lender may designate in writing.

 

PREPAYMENT.
Borrower may pay without penalty all or a portion of the amount owed earlier
than it is due. Early payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower’s obligation to continue to make payments under
the payment schedule. Rather, early payments will reduce the principal balance
due and may result in Borrower’s making fewer payments. Borrower agrees not to
send Lender payments marked “paid in full”, “without recourse”, or similar
language. If Borrower sends such a payment, Lender may accept it without losing
any of Lender’s rights under this Note, and Borrower will remain obligated to
pay any further amount owed to Lender. All written communications concerning
disputed amounts, including any check or other payment instrument that
indicates that the payment constitutes “payment in full” of the amount owed or
that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: Bank of America, N.A.;
CCS-Small Business/Premier; CA9-702-05-71; 101 S. Marengo Avenue, 5th Floor;
Pasadena, CA 91101-2428.

 

LATE CHARGE. If a payment is 15 days or more late, Borrower will be charged 4.000% of the unpaid portion of the regularly
scheduled payment.

 

INTEREST AFTER DEFAULT.    Upon default, the interest rate on this Note
shall immediately increase by 6.000 percentage points, if permitted under
applicable law.

 

DEFAULT.   Each of the following shall constitute an
event of default (“Event of Default”) under this Note: 

 

Payment
Default.   Borrower fails to make any payment when due
under this Note.

 

Other
Defaults. Borrower
fails to comply with or to perform any other term, obligation, covenant or
condition contained in this Note or in any of the related documents or to
comply with or to perform any term, obligation, covenant or condition contained
in any other agreement between Lender and Borrower.

 

Default in Favor
of Third Parties. Borrower
or any Grantor defaults under any loan, extension of credit, security
agreement, purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower’s property
or Borrower’s ability to repay this Note or perform Borrower’s obligations
under this Note or any of the related documents.

 

False
Statements. Any
warranty, representation or statement made or furnished to Lender by Borrower
or on Borrower’s behalf under this Note or the related documents is false or
misleading in any material respect, either now or at the time made or furnished
or becomes false or misleading at any time thereafter.

 

Insolvency. The dissolution or termination of Borrower’s
existence as a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower’s property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Borrower.

 

Creditor or
Forfeiture Proceedings. Commencement
of foreclosure or forfeiture proceedings, whether by judicial proceeding,
self-help, repossession or any other method, by any creditor of Borrower or by
any governmental agency against any collateral securing the loan. This includes
a garnishment of any of Borrower’s accounts, including deposit accounts, with
Lender. However, this Event of Default shall not apply if there is a good faith
dispute by Borrower as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding and if Borrower gives Lender
written notice of the creditor or forfeiture proceeding and deposits with
Lender monies or a surety bond for the creditor or forfeiture proceeding, in an
amount determined by Lender, in its sole discretion, as being an adequate
reserve or bond for the dispute.

 

Events
Affecting Guarantor. Any
of the preceding events occurs with respect to any guarantor, endorser, surety,
or accommodation party of any of the indebtedness or any guarantor, endorser,
surety, or accommodation party dies or becomes incompetent, or revokes or
disputes the validity of, or liability under, any guaranty of the indebtedness
evidenced by this Note.

 

Change In
Ownership.  Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.

 

Adverse
Change. A material
adverse change occurs in Borrower’s financial condition, or Lender believes the
prospect of payment or performance of this Note is impaired.

 

LENDER’S RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid interest
immediately due, and then Borrower will pay that amount.

 

ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender’s
attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit,
including attorneys’ fees, expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), and appeals.
Borrower also will pay any court costs, in addition to all other sums provided
by law.

 

 

Loan No:
6728515616

 

JURY WAIVER. Lender and Borrower hereby waive the right
to any jury trial in any action, proceeding, or counterclaim brought by either
Lender or Borrower against the other.

 

GOVERNING LAW. This Note will be governed by federal
law applicable to Lender and, to the extent not preempted by federal law, the
laws of the State of California without regard to its conflicts of law
provisions. This Note has been accepted by Lender in the State of California.

 

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon
Lender’s request to submit to the jurisdiction of the courts of any County,
State of California.

 

RIGHT OF SETOFF. To the extent permitted by applicable law,
Lender reserves a right of setoff in all Borrower’s accounts with Lender
(whether checking, savings, or some other account). This includes all accounts
Borrower holds jointly with someone else and all accounts Borrower may open in
the future. However, this does not include any IRA or Keogh accounts, or any
trust accounts for which setoff would be prohibited by law. Borrower authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all sums
owing on the indebtedness against any and all such accounts.

 

COLLATERAL. Borrower acknowledges this Note is secured by the following collateral
described in the security instrument listed herein: a Deed of Trust dated January 25,
2006, to a trustee in favor of Lender on real property located in Santa Clara
County, State of California. That agreement contains the following due on sale
provision: Lender may, at Lender’s option, declare immediately due and payable
all sums secured by the Deed of Trust upon the sale or transfer, without Lender’s
prior written consent, of all or any part of the Real Property, or any interest
in the Real Property. A “sale or transfer” means the conveyance of Real
Property or any right, title or interest in the Real Property; whether legal,
beneficial or equitable; whether voluntary or involuntary; whether by outright
sale, deed, installment sale contract, land contract, contract for deed,
leasehold interest with a term greater than three (3) years, lease-option
contract, or by sale, assignment, or transfer of any beneficial interest in or
to any land trust holding title to the Real Property, or by any other method of
conveyance of an interest in the Real Property. If any Borrower is a
corporation, partnership or limited liability company, transfer also includes
any change in ownership of more than twenty-five percent (25%) of the voting
stock, partnership interests or limited liability company interests, as the
case may be, of such Borrower. However, this option shall not be exercised by
Lender if such exercise is prohibited by applicable law.

 

Miscellaneous. If this Note or Agreement represents a
renewal, modification, extension, substitution or consolidation of an
obligation owed to us, then you acknowledge and agree that there are no claims,
setoffs, avoidances, counterclaims or defenses or rights to claims, setoffs,
avoidances, counterclaims or defenses to payment or enforcement of the prior
obligation. You agree that if this Note or Agreement is in default, including
the failure to make the Minimum Payment by the due date, you will accept calls
regarding the collection of this Note or Agreement at any residence or place of
employment. The calls can be automatically dialed and a recorded message may be
played. You agree such calls will not be “unsolicited” calls for purposes of
any federal, state or local law. To improve customer service and security,
telephone communications with you may be monitored and recorded. You agree that
monitoring or recording may be done and that no additional notice to you or
additional approval from you is needed. You authorize us, our parent company,
Bank of America Corporation (or any successor company) and Bank of America
Corporation’s affiliates and subsidiaries to: (a) obtain other information
deemed necessary concerning the granting and maintaining of this Note or Credit
Line Account, including the obtaining of credit bureau and other reports
concerning your credit experience and other information from credit reporting
agencies, creditors, any department of motor vehicles or similar state agency,
your employer (past, present and future) and other persons (and all such
entities may release and/or verify such information to us at any time without
notification to you or without your consent), (b) release Note or Credit
Line Account information to comply with any served subpoena, summons or order
issued by any state or federal agency or court, and (c) provide
application, Note and Credit Line Account information to any third party who is
reasonably believed to be conducting an inquiry according to the Federal Fair
Credit Reporting Act or any similar state law. This Note or Agreement constitutes
the entire understanding and agreement between the parties as to the matters
set forth in this Note or Agreement and supercedes all prior understandings and
correspondence, oral or written, with respect to the subject matter hereof. We
reserve the right to defer or delay the date certain changes are to occur
without notice and without being liable for any such deferment or delay. A
court decree for divorce or separation or a non-court approved mutual agreement
does not affect, eliminate or reduce any person’s liability for the Note or
Credit Line balance if we are not a party to the decree or agreement.
Notwithstanding any other provision contained in the Note or this Agreement, we
do not intend to charge, and you shall not be required to pay, any amount of
finance charge or fee more than the maximum permitted by applicable law. Any
payment in excess of the maximum shall be refunded to you or credited against
principal, at our option. If this Note or CreditLine Agreement is a renewal of
a prior Note or CreditLine Agreement, then it is the intent of the parties that
the Note or CreditLine Agreement evidencing the original extension of credit
not be extinguished by the renewal. It is further the intent of the parties
that no novation shall occur by the renewal of such extension of credit. Our
records shall be evidence of whether this Note or CreditLine Agreement is a
renewal.

 

Automatic Payment.

 

The Service.
The Borrower hereby chooses to have its principal and interest payments made
pursuant to the Lender’s Automatic Payment Service, and authorizes the Lender
to collect all sums due hereunder by charging the full amount thereof to the
Borrower’s Account listed in the Disbursement Request and Authorization, or
such other of the Borrower’s accounts with the Lender as designated by the
Borrower in writing. Should there be insufficient funds in the Account to pay
when due all or any portion of the amount due, the full amount of such
deficiency shall be immediately due and payable by the Borrower. The Disbursement
Request and Authorization describes additional terms for the Automatic Payment
Service.

 

Termination.
If, for any reason during the term of this Agreement, the Borrower or Lender
terminates this Automatic Payment Service, the interest rate under this Agreement
will increase by one (1) percentage point and the amount of each payment
will be increased accordingly.

 

Loan Fee. If a Loan Fee is due, the amount is shown on the Disbursement Request
and this fee is nonrefundable. Notwithstanding anything to the contrary in this
Agreement, this is not a “flat fee” and varies according to the details of each
transaction. Any Loan Fee upon renewal or increase (if any) will be negotiated
at the time of renewal or increase.

 

Arbitration. (a)  This paragraph concerns the resolution of any
controversies or claims between the parties, whether arising in contract, tort
or by statute, including but not limited to controversies or claims that arise
out of or relate to: (i) this agreement (including any renewals,
extensions or modifications); or (ii) any document related to this
agreement (collectively a “Claim”). For the purposes of this arbitration
provision only, the term “parties” shall include any parent corporation,
subsidiary or affiliate of Lender involved in the servicing, management or
administration of any obligation described or evidenced by this agreement.

 

(b)  At
the request of any party to this agreement, any Claim shall be resolved by
binding arbitration in accordance with the Federal Arbitration Act (Title 9, U.S.
Code) (the “Act”).   The Act will apply
even though this agreement provides that it is governed by the law of a
specified state. The arbitration will take place on an individual basis without
resort to any form of class action.

 

(c)  Arbitration
proceedings will be determined in accordance with the Act, the then-current rules and
procedures for the arbitration of financial services disputes of the American
Arbitration Association or any successor thereof (“AAA”), and the terms of this
paragraph.   In the event of any
inconsistency, the terms of this paragraph shall control.   If AAA is unwilling or unable to (i) serve
as the provider of arbitration or (ii) enforce any provision of this
arbitration clause, any party to this agreement may substitute another
arbitration organization with similar procedures to serve as the provider of
arbitration.

 

2

 

(d)  The
arbitration shall be administered by AAA and conducted, unless otherwise
required by law, in any U.S. state where real or tangible personal property
collateral for this credit is located or if there is no such collateral, in the
state specified in the governing law section of this agreement.   All Claims shall be determined by one
arbitrator; however, if Claims exceed Five Million Dollars ($5,000,000), upon
the request of any party, the Claims shall be decided by three
arbitrators.   All arbitration hearings
shall commence within ninety (90) days of the demand for arbitration and close
within ninety (90) days of commencement and the award of the arbitrator(s)
shall be issued within thirty (30) days of the close of the hearing.   However, the arbitrator(s), upon a showing
of good cause, may extend the commencement of the hearing for up to an additional
sixty (60) days.   The arbitrator(s)
shall provide a concise written statement of reasons for the award.   The arbitration award may be submitted to
any court having jurisdiction to be confirmed, judgment entered and enforced.

 

(e)  The
arbitrator(s) will give effect to statutes of limitation in determining any
Claim and may dismiss the arbitration on the basis that the Claim is barred.
For purposes of the application of the statute of limitations, the service on
AAA under applicable AAA rules of a notice of Claim is the equivalent of
the filing of a lawsuit.   Any dispute
concerning this arbitration provision or whether a Claim is arbitrable shall be
determined by the arbitrator(s).   The
arbitrator(s) shall have the power to award legal fees pursuant to the terms of
this agreement.

 

(f)  This
paragraph does not limit the right of any party to: (i) exercise self-help
remedies, such as but not limited to, setoff; (ii) initiate judicial or non-judicial
foreclosure against any real or personal property collateral; (iii) exercise
any judicial or power of sale rights, or (iv) act in a court of law to
obtain an interim remedy, such as but not limited to, injunctive relief, writ
of possession or appointment of a receiver, or additional or supplementary
remedies.

 

(g)  The
filing of a court action is not intended to constitute a waiver of the right of
any party, including the suing party, thereafter to require submittal of the
Claim to arbitration

 

(h)  The
procedure described above will not apply if the Claim, at the time of the
proposed submission to arbitration, arises from or relates to an obligation to
Lender secured by real property. In this case, all of the parties to this
agreement must consent to submission of the Claim to arbitration. If both
parties do not consent to arbitration, the Claim will be resolved as follows:
The parties will designate a referee (or a panel of referees) selected under
the auspices of AAA in the same manner as arbitrators are selected in AAA
administered proceedings. The designated referee(s) will be appointed by a
court as provided in California Code of Civil Procedure Section 638 and
the following related sections. The referee (or presiding referee of the panel)
will be an active attorney or a retired judge. The award that results from the
decision of the referee(s) will be entered as a judgment in the court that
appointed the referee, in accordance with the provisions of California Code of
Civil Procedure Sections 644 and 645.

 

ASSIGNMENT.
Lender may sell or offer to sell this Note, together with any and all documents
guaranteeing, securing or executed in connection with this Note, to one or more
assignees without notice to or consent of Borrower. Lender is hereby authorized
to share any information it has pertaining to the loan evidenced by this Note,
including without limitation credit information on the undersigned, any of its
principals, or any guarantors of this Note, to any such assignee or prospective
assignee.

 

COUNTERPARTS. This Note may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

PRE BILLING. If the Borrower and Lender elect to use pre-billing calculation, for
each payment date (the “Due Date”) the amount of each payment debit will be
determined as follows: On the “Billing Date” Lender will prepare and mail to
Borrower an invoice of the amounts that will be due on that Due Date (“Billed
Amount”). (The “Billing Date” will be a date that is a specified number of
calendar days prior to the Due Date, which number of days will be mutually
agreed from time to time by Lender and Borrower.) The calculation of the Billed
Amount will be made on the assumption that no new extensions of credit or
payments will be made between the Billing Date and the Due Date, and that there
will be no changes in the applicable interest rate. On the Due Date Lender will
debit the Designated Account for the Billed Amount, regardless of the actual
amount due on that date (“Accrued Amount”). If the Due Date does not fall on a
Business Day, Lender shall debit the Designated Account on the first Business
Day following the Due Date. For purposes of this Agreement, “Business Day”
means a day other than Saturday, Sunday or other day on which commercial banks
are authorized to close or are in fact closed in the state where the Lender’s
lending office is located. If the Billed Amount debited to the Designated
Account differs from the Accrued Amount, the difference will be treated as follows:
If the Billed Amount is less than the Accrued Amount, the Billed Amount for the
following Due Date will be increased by the amount of the underpayment.
Borrower will not be in default by reason of any such underpayment. If the
Billed Amount is more than the Accrued Amount, the Billed Amount for the
following Due Date will be decreased by the amount of the overpayment.
Regardless of any such difference, interest will continue to accrue based on
the actual amount of principal outstanding without compounding. Lender will not
pay interest on any overpayment.

 

AUTOMATIC PAYMENTS. Borrower hereby authorizes Lender automatically to deduct from Borrower’s
account numbered 17113-01042 the amount of any loan payment. If the funds in
the account are insufficient to cover any payment, Lender shall not be
obligated to advance funds to cover the payment. At any time and for any
reason, Borrower or Lender may voluntarily terminate Automatic Payments.

 

TERMINATION OF AUTOMATIC PAYMENTS. In the event that Borrower terminates the
Automatic Payment arrangement with Lender, Borrower agrees that the interest
rate under the Note will increase, at the discretion of the Lender, by one-half
percentage point (0.50%) per annum over the rate of interest stated in the
Note, and the amount of each interest installment will be increased
accordingly. The effective rate of interest under the Note shall not in any
event exceed the maximum rate permitted by law.

 

FINAL AGREEMENT. BY SIGNING THIS DOCUMENT EACH PARTY
REPRESENTS AND AGREES THAT: (A) THIS DOCUMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, (B) THIS
DOCUMENT SUPERSEDES ANY COMMITMENT LETTER, TERM SHEET OR OTHER WRITTEN OUTLINE
OF TERMS AND CONDITIONS RELATING TO THE SUBJECT MATTER HEREOF, UNLESS SUCH
COMMITMENT LETTER, TERM SHEET OR OTHER WRITTEN OUTLINE OF TERMS AND CONDITIONS
EXPRESSLY PROVIDES TO THE CONTRARY, (C) THERE ARE NO ORAL AGREEMENTS
BETWEEN THE PARTIES, AND (D) THIS DOCUMENT MAY NOT BE CONTRADICTED BY
EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR
UNDERSTANDINGS OF THE PARTIES.

 

ADDITIONAL DEFAULTS. Each of the following shall constitute an
additional event of default (“Event of Default”) under this Note:

 

Event of Default Under Related Documents. A default or event of default occurs under the
terms of any promissory note, guaranty, pledge agreement, security agreement or
other agreement or instrument executed by Borrower or any guarantor, pledgor,
accommodation party or other obligor in connection with or relating to this
Note.

 

Judgment. The entry of a judgment against any Borrower or guarantor, pledgor,
accommodation party or other obligor which Lender deems to be of a material
nature, in Lender’s sole discretion.

 

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any assets of Borrower and/or any guarantor, pledgor, accommodation party or
other obligor. This includes a garnishment of: (1) any of Borrower’s
accounts, including deposit accounts, with Lender and/or (2) any account,
including deposit accounts, with Lender of any guarantor, pledgor,
accommodation party or other obligor. However, this Event of Default shall not
apply if there is a good faith dispute by such Borrower and/or guarantor,
pledgor,

 

3

 

accommodation party or other obligor as to the validity or
reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if such Borrower and/or guarantor, pledgor, accommodation party
or other obligor gives Lender written notice of the creditor of forfeiture
proceeding and deposits with Lender monies or a surety bond for the creditor or
forfeiture proceeding, in an amount determined by Lender, in its sole
discretion, as being an adequate reserve or bond for the dispute.

 

Adverse Change of Obligor. A materiel adverse change occurs in the
financial condition of any guarantor, pledgor, accommodation party or other
obligor, as determined by Lender in its sole discretion.

 

Resignation/Withdrawal. The resignation or withdrawal of any partner or a material owner of
Borrower or any guarantor, pledgor, accommodation party or other obligor, as
determined by Lender in its sole discretion.

 

Adverse Government Action. Any governmental authority (including, without limitation, any nation,
state or other political subdivision thereof, any central bank, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions, and any corporation or other entity owned or controlled by any of
the foregoing) takes or institutes action, which, in the opinion of Lender,
will adversely affect Borrower’s financial condition or ability to pay or
perform Borrower’s obligations under this Note or any instrument or agreement
required under, or executed in connection with, this Note.

 

ADDRESS FOR NOTICES. Any notice required to be given under this Note shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed if to Borrower at the address shown near the beginning of
this Note and if to Lender at the address set forth below. Any party may change
its address for notices under this Note by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change the party’s
address. For notice purposes, Borrower agrees to keep Lender informed at all
times of Borrower’s current address. Unless otherwise provided or required by
law, if there is more than one Borrower, any notice given by Lender to any
Borrower is deemed to be notice given to all Borrowers. Notwithstanding
anything to the contrary herein, all notices and communications to the Lender
shall be directed to the following address:

 

Bank of America, N.A. 

Pasadena BCS, Attn: Notice Desk 

101 South Marengo Avenue, 5th Floor 

Pasadena, CA 91101-2428.

 

Additional Interest After Default. Upon any Event of Default under this Note, Lender,
at its option, may, if permitted under applicable law, increase the interest
rate on this Note to the interest rate specified in the paragraph above
entitled “Interest After Default”.

 

FINANCIAL STATEMENTS AND OTHER INFORMATION. Borrower will provide Lender with such
financial statements, Including tax returns, other statements of condition or
other information, in form and content acceptable to Lender, as Lender shall
request from time to time within fifteen days of the date of the request.

 

MAINTENANCE OF PRINCIPAL DEPOSIT ACCOUNTS. Borrower agrees to maintain its principal
deposit accounts with Lender. 

 

Successor lnterests. The terms of this Note shall be binding upon Borrower, and upon
Borrower’s hairs, personal representatives, successors and assigns, and shall
inure to the benefit of Lender and its successors and assigns.

 

General Provisions. Lender may delay or forgo enforcing any of its rights or remedies under
this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for payment, and notice
of dishonor. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender’s security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lander may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made. The obligations under this Note are joint
and several.

 

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, BORROWER AGREES TO THE TERMS OF THE NOTE.

 

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY
NOTE.

 

BORROWER:

 

	
  AML COMMUNICATIONS, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jacob Inbar

  	
   

  	
  By:

  	
  /s/ Ed McAvoy

  	
   

  
	
   

  	
  Jacob Inbar, President of AML
  Communications, Inc.

  	
   

  	
  Ed McAvoy, Secretary of AML Communications,

  Inc.

  
						

 

4

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