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PAC 1092293v.1

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

In re:

POWERWAVE TECHNOLOGIES, INC.,

1

Debtor.

))

))))

Chapter 11

Case No. 13-10134 (MFW)

DECLARATION OF RONALD J. BUSCHUR, PRESIDENT AND CHIEF EXECUTIVE

OFFICER OF POWERWAVE TECHNOLOGIES, INC., IN SUPPORT OF THE

DEBTORS FIRST DAY MOTIONS AND APPLICATIONS

I, Ronald J. Buschur, being duly sworn depose and say:

1. I am the President and Chief Executive Officer and a member of the Board of

Directors of Powerwave Technologies, Inc. (Powerwave or the Debtor). I have held these

positions since February 2005. I joined the Debtor in June 2001 as Chief Operating Officer. In

May 2004, I became President of the Debtor.

2. As part of my employment and service with the Debtor in all of these capacities, I

am fully familiar with the Debtors day-to-day operations, financial condition, business affairs,

and books and records. I submit this declaration (the Declaration) to provide the Court and

other parties in interest with an overview of the Debtors business and to describe the

circumstances compelling the commencement of the Debtors chapter 11 case. I also submit this

Declaration in support of the first day motions and applications (collectively, the First Day

Motions) filed by the Debtor after January 28, 2013 (the Petition Date), by which the Debtor

seeks relief under chapter 11 of title 11 of the United States Code (the Bankruptcy Code)

enabling the Debtor and its non-debtor subsidiaries and affiliates to continue as valuable going

concerns, to operate effectively, to minimize certain o f the potential adverse effects of the

1 The last four digits of the Debtors federal tax identification number are 3423.

Case 13-10134-MFW Doc 24 Filed 01/30/13 Page 1 of 30


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commencement of the Debtors chapter 11 case, and to preserve and maximize the value of the

Debtors estate.

3. Except as otherwise indicated herein, all facts set forth in this Declaration are

based upon my personal knowledge of the Debtors operations and finances, information learned

from my review of relevant documents or reported to me in the ordinary course of business,

information supplied to me by other members of the Debtors management or the Debtors

advisors, or my opinion based on my experience, knowledge, and information concerning the

Debtors operations and financial condition. I am authorized to submit this Declaration on

behalf of the Debtor and, if called upon to testify, I could and would testify competently to the

facts set forth herein.

4. Part I of this Declaration provides an overview of the Debtors business and

operations. Part II describes the Debtors prepetition capital structure. Part III of the Affidavit

describes the developments that led to the filing of the Debtors chapter 11 case. Finally, Part IV

sets forth the relevant facts in support of the First Day Motions.

I. THE DEBTORS BUSINESS AND OPERATIONS

5. Powerwave is a global supplier of end-to-end wireless solutions for wireless

communications networks. Powerwave was incorporated in Delaware in January 1985, under

the name Milcom International, Inc., and changed its name to Powerwave Technologies, Inc. in

June 1996. The Debtor is a publicly traded company on the NASDAQ (ticker: PWAV).

6. Powerwave has developed and acquired an extensive catalog of intellectual

property that it uses in the design, manufacture, marketing and sale of its products to improve

coverage, capacity, and data speed in wireless communications networks. The Debtors products

include distributed antenna systems, antennas, boosters, combiners, cabinets, shelters, filters,



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3PAC 1092293v.1

radio frequency power amplifiers, remote radio head transceivers, repeaters, and tower-mounted

amplifiers, which are primarily sold to the commercial wireless infrastructure industry. The

Debtor also sells its products in the government, public safety, military, and homeland security

markets. The Debtors products are utilized in major wireless networks throughout the world

that support voice, video and data communications by use of wireless phones and other wireless

communication devices.

7. The Debtor has sold its products to both original equipment manufacturers, who

incorporate the products into their proprietary base stations (which they then sell to wireless

network operators), and directly to individual wireless network operators for deployment into

their existing networks. The Debtors products are broken down into three general product

groups:

a. Antenna Systems. This product group includes base station antennas andtower-mounted amplifiers, which cover all major radio frequency bandsincluding cellular, PCS, 3G and 4G bands and support all major wirelesstransmission protocols. The Debtors base station antenna productsinclude single, dual and triple-band solutions based on proprietarytechnology in a variety of sizes. The Debtor also offers remote-adjustableelectrical tilt antennas which provide remote control and monitoringcapabilities and a full line of tower-mounted amplifiers that improvewireless network performance by filtering and amplifying as close as

possible to the receiving antenna, thus significantly reducing signal lossand noise.

b. Base Station Subsystems. This product group includes products that areinstalled into or around the base station of wireless networks and includes

products such as boosters, combiners, filters, radio frequency poweramplifiers, VersaFlex cabinets and radio transceivers, in both single andmulti-carrier radio frequency power amplifiers for use in all major global

frequency bands including cellular, PCS, 3G and 4G bands, supporting allmajor transmission protocols. Typical system applications includeCDMA, CDMA 2000, WCDMA, GSM, EDGE, UMTS and LTE

protocols with output power ranging from 10 to 180 Watts. In addition,the Debtor produces filters that can improve the signal transmission for

both up and down link as well as help to reduce out-of band performance.Along with filters, the Debtor provides radio frequency power combinersthat allow for the connecting of multiple radio frequency power signals



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4PAC 1092293v.1

and a range of integrated radio solutions, which offer new alternativeapproaches to providing lower-cost base station solutions.

c. Coverage Systems. This product group consists primarily of distributedantenna systems, repeaters and advanced coverage solutions. Distributedantenna systems solutions provide the equipment to co-locate multiplewireless operators on multiple frequency bands within a single location,while allowing each operator to maintain full control over parameterscritical to its networks performance. These systems are custom designedfor use in convention centers, airports, subways, transportation centers,dense urban business districts and business campuses and to be readilyconnected to base station equipment, thereby reducing installation costs.

8. The Debtors manufacturing processes involve the assembly of numerous

individual components and precise fine-tuning by production technicians. The parts and

materials used by Powerwave and its contract manufacturers consist primarily of printed circuit

boards, specialized subassemblies, fabricated housings, relays and small electric circuit

components, such as integrated circuits, semiconductors, resistors and capacitors.

9. Powerwave, through its subsidiaries, operates company-owned and leased

manufacturing locations and utilizes contract manufacturers for a portion of its finished goods

manufacturing activities. It also relies extensively on contract manufacturers to supply printed

circuit boards, which are key components of many of Powerwaves products. Powerwave

currently has manufacturing operations in India, Thailand and the U.S. In addition, the Debtor

utilizes contract manufacturers to produce products or key components of products in Europe,

Asia, India and the U.S.

10. Powerwave relies upon trade secrets and patents to protect its intellectual property

and executes confidentiality and non-disclosure agreements with its employees and suppliers in

order to limit access to, and distribution of, its proprietary information. Powerwave has an

ongoing program to identify and file applications for both U.S. and foreign patents for various

aspects of its technology. Currently, Powerwave owns approximately 243 U.S. patents and 517



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foreign patents, and has pending applications for 50 additional U.S. patents and 178 additional

foreign patents. Powerwave has invested hundreds of millions of dollars in research and

development with respect to its products and intellectual property. I believe that the Debtors

intellectual property portfolio, together with the knowledge and experience of Powerwaves

management and technical personnel, are key components to the value of the Debtors business.

II. THE DEBTORS ORGANIZATION AND CAPITAL STRUCTURE

A. Organizational Structure and Officers of Powerwave

11. Powerwave is a Delaware corporation and currently has approximately 31 direct

and indirect subsidiaries. A corporate organizational chart is attached hereto as Exhibit A. Most

of the Debtors subsidiaries are organized to either facilitate international sales, or the

manufacturing of its products.

12. I am the President and Chief Executive Officer of Powerwave. The remainder of

the Debtors senior management team includes Kevin T. Michaels, Chief Financial Officer and

Secretary, J. Marvin MaGee, Chief Operating Officer, Khurram P. Sheikh, Chief Technology

Officer, and Robert Suastegui, Vice President Global Sales.

B. Prepetition Indebtedness

(i) Secured Debt

13. On September 11, 2012, the Debtor entered into that certain Credit Agreement

dated September 11, 2012 (the Credit Agreement) with P-Wave Holdings, LLC, as agent (the

Prepetition Agent) and lender (the Prepetition Lender), in the original principal amount of

$35,000,000 (the Closing Date Term Loan). As of the Petition Date, the Debtor was indebted

to the Prepetition Lender under the Prepetition Credit Documents, on account of extensions of

credit in the principal amount of $35,000,000, plus any unpaid interest accrued and accruing (at



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6PAC 1092293v.1

the rates set forth in the Prepetition Credit Documents), costs, expenses, fees (including

reasonable attorneys fees and expenses), and other obligations secured pursuant to the

Prepetition Credit Documents (collectively the Prepetition Debt).

14. The Prepetition Debt is secured, and otherwise evidenced by, that certain Security

Agreement dated September 11, 2012 (the Security Agreement) with the Prepetition Agent, as

agent pursuant to the Credit Agreement, that certain Copyright Security Agreement dated

September 11, 2012 (the Copyright Security Agreement) with the Prepetition Agent, as agent

pursuant to the Credit Agreement, that certain Patent Security Agreement dated September 11,

2012 (the Patent Security Agreement) with the Prepetition Agent, as agent pursuant to the

Credit Agreement, and that certain Trademark Security Agreement dated September 11, 2012

(the Trademark Security Agreement, and together with the Security Agreement, the Copyright

Security Agreement, and the Patent Security Agreement, the Security Agreements and together

with the Credit Agreement and any other related documents, each as amended, modified or

supplemented, the Prepetition Credit Documents) with the Prepetition Agent, as agent pursuant

to the Credit Agreement.

15. Pursuant to the Security Agreements, the Debtor granted to the Prepetition Agent

liens on, and continuing pledges and security interests in (collectively, the Prepetition Liens),

the items defined as Collateral in the Prepetition Credit Documents (collectively, the

Prepetition Collateral). The Prepetition Collateral includes most of the Debtors personal

property, including, among other things, the Debtors accounts, certain deposit accounts,

intellectual property, and inventory, but does not include any real property interests or the

Excluded Accounts (as defined in the Security Agreement), which consist of certain deposit

accounts securing letters of credit and all foreign bank accounts.



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7PAC 1092293v.1

16. In addition to the Prepetition Debt, the Debtor has approximately $5.6 million of

cash collateralized letters of credit with Wells Fargo Capital Finance, LLC.

(ii) Unsecured Debt

17. The Debtor is a party to that certain Indenture, dated as of November 10, 2004

with Deutsche Bank Trust Company Americas as indenture trustee (the l.875% Notes

Indenture) pursuant to which the Debtor issued certain 1.875% Convertible Subordinated Notes

due 2024 (the 1.875% Notes). On December 14, 2012, Wilmington Trust National

Association became the successor indenture trustee under the 1.875% Notes Indenture (the

1.875% Notes Trustee). As of the Petition Date, approximately $51,000 in principal amount

of 1.875% Notes were outstanding.

18. The Debtor is a party to that certain Indenture, dated as of September 24, 2007

with Deutsche Bank Trust Company Americas as indenture trustee (the 3.875% Notes

Indenture) pursuant to which the Debtor issued certain 3.875% Convertible Subordinated Notes

due 2027 (the 3.875% Notes and together with the 1.875% Notes, the Subordinated Notes).

On December 14, 2012, Wilmington Trust National Association became the successor indenture

trustee under the 3.875% Notes Indenture (the 3.875% Notes Trustee and together with the

1.875% Notes Trustee, the Subordinated Notes Trustee). As of the Petition Date,

approximately $150 million in principal amount of 3.875% Notes were outstanding.

19. The Debtor is also a party certain Indenture, dated as of July 26, 2011 (the

Senior Notes Indenture) with Deutsche Bank Trust Company Americas as indenture trustee

(the Senior Notes Trustee) pursuant to which the Debtor issued certain 2.75% Convertible

Senior Subordinated Notes due 2041 (the Senior Notes). As of the Petition Date,



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8PAC 1092293v.1

approximately $106 million in principal amount of Senior Notes were outstanding. The Senior

Notes are senior to the Subordinated Notes.

(iii) Trade Debt and Lease Obligations

20. On October 21, 2011, Powerwave received approximately $49.1 million in net

proceeds from the sale of its corporate headquarters facility in Santa Ana, California. In

connection with the closing of the sale, Powerwave entered into a 15-year lease agreement of the

corporate headquarters facility with an effective date of October 21, 2011. The lease provides

for two ten-year extension options and is a triple net lease under which the Debtor will pay

insurance, real estate taxes, and maintenance and repair expense. The initial base rent is

$3,964,000 per annum and escalates 2% per year commencing on the first anniversary of the

effective date of the lease.

21. The Debtors trade debt consists of, among other things, amounts owed to

utilities, suppliers of commodities and raw materials used in the manufacture of the Debtors

products, professional services, and shippers and warehousemen that transport and store the

Debtors raw materials and finished products. As of the Petition Date, the Debtor estimates that

between $15 and $25 million is outstanding to its vendors.

III. EVENTS LEADING TO THE DEBTORS CHAPTER 11 CASE

22. Over the last several years, the Debtor has experienced significant reductions in

demand from both its original equipment manufacturer customers (who account for the majority

of wireless infrastructure equipment purchases in the wireless equipment market), such as Nokia

Siemens Networks, Alcatel-Lucent and Samsung, as well as from its operator customers in North

America and Europe. In addition, consolidation among both original equipment manufacturers

and wireless service providers has enabled such companies to place continual pricing pressure on



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9PAC 1092293v.1

wireless infrastructure manufacturers, which has resulted in downward pricing pressure on the

Debtors products and declining gross margins. The combination o f global economic conditions,

reduced demand for its products as a result of delays in infrastructure development by costumers,

and downward pricing pressure greatly affected the Debtors business and revenues.

23. To respond to these market conditions, the Debtor implemented several cost-

cutting initiatives over the past several years, including reductions in its domestic and foreign

workforce and the closure of certain offices and manufacturing facilities. In addition, the Debtor

endeavored to raise liquidity through several means, including the sale/leaseback of its Santa

Ana California headquarters in October 2011, the sale and licensing of certain technology and

assets to Shenzhen Tatfook Technology Co. Ltd. in August 2012, and obtaining the $35 million

term loan from P-Wave Holdings, LLC in September 2012.

24. Despite these restructuring efforts, the Debtor did not have sufficient liquidity to

make the necessary investments in its working capital to continue manufacturing products at

historical levels. For the last several months, the Debtor was in active discussions with financing

sources to obtain additional liquidity.

25. However, before the Debtors efforts could come to fruition, the Prepetition

Lender declared a default under the Credit Agreement and, despite failing to provide notice to

the Debtor as required, on Friday, January 25, 2013, swept the Debtors cash accounts of

approximately $8.3 million. This improper loss of cash presented the Debtor with an immediate,

severe liquidity crisis. After discussions with professional advisors, the Debtor determined that

it would be in the best interests of its stakeholders to file for chapter 11 in order to obtain a

respite from the Prepetition Lenders actions so that the Debtor may undertake an orderly

restructuring or sale process.



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10PAC 1092293v.1

IV. FACTS IN SUPPORT OF FIRST DAY MOTIONS

26. In connection with the filing of its chapter 11 petition, the Debtor is seeking

orders approving the First Day Motions. The Debtor requests that the relief sought in each of the

First Day Motions be granted as each First Day Motion provides a critical component in ensuring

a smooth transition into, and stabilizing and facilitating the Debtors operations during the

pendency o f, its chapter 11 case. I have reviewed each of the First Day Motions discussed below

and the facts set forth in each First Day Motion are true and correct to the best of my knowledge

and belief with appropriate reliance on corporate officers, employees and advisors.

A. Procedural Motions

(i) Debtors Application for an Order Appointing Kurtzman Carson

Consultants LLC as Claims and Noticing Agent for the Debtor

Pursuant to 28 U.S.C. 156(C), 11 U.S.C. 105(a) AND LBR 2002-

1(f).

27. The Debtor seeks an order authorizing the employment and retention of Kurtzman

Carson Consultants LLC (KCC) as its claims and noticing agent. The Debtor believes that

such relief is prudent in light of the number o f creditors, potential creditors, and parties in

interest to whom certain notices will be sent and from whom proofs of claims will be received.

Although the Debtor has not yet filed its schedules of assets and liabilities, there is expected to

be in excess of 7,000 entities to be noticed. Accordingly, the Debtor believes that the most

effective and efficient manner by which to give notice and provide solicitation services in these

cases is to engage KCC, an independent third party with significant experience in this role, to act

as an agent of the Court.

B. Operational Motions

(ii) Debtors Motion Pursuant to Sections 105(a), 363(b), 363(c), 507(a)(4),

And 507(a)(5) of the Bankruptcy Code and Bankruptcy Rules 6003

and 6004 For Order (I) Authorizing Payment of Prepetition Employee

Obligations and Continuation of Prepetition Employee Benefits, (II)



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Authorizing Financial Institutions to Honor and Process Related

Checks and Transfers, and (III) Granting Certain Other Relief.

28. To minimize the personal hardship that the employees would suffer if prepetition

employee-related obligations are not paid when due or as expected and to maintain morale and

stability in the Debtors workforce during this critical time, the Debtor, by this motion, seeks

authority, but not direction, to pay, in its sole discretion, all obligations and costs incurred in

respect of, or related to, (a) employee obligations, including wages, salary, and other

compensation earned prior to the Petition Date, (b) amounts the Debtor is required by law to

withhold relating to federal, state, and local income taxes, payroll taxes, employment insurance,

unemployment insurance, disability, Social Security, Medicare, garnishments, and other similar

charges and taxes from the Debtors wage obligations, (c) service fees, (d) general business

expense reimbursements, and (e) medical insurance, dental insurance, vision insurance, life and

accidental death and dismemberment insurance, supplemental life and accidental death and

dismemberment insurance, disability insurance, travel accident insurance, the Debtors employee

assistance program, vacation and holiday policies, 401(k) plan, employee stock purchase plan,

flexible spending accounts, and transit and parking reimbursement account (each as defined

more specifically in the motion, and collectively, the Employee Obligations). The motion also

seeks the authority, but not direction, to maintain and continue, in its sole discretion, its

prepetition employee-related practices, programs, and policies comprising such Employee

Obligations, as the same may be modified, amended, or supplemented from time to time in the

ordinary course, and to authorize applicable banks and other financial institutions to receive,

honor, process, and pay any and all checks and electronic transfers drawn on the Debtors

accounts, to the extent that such checks or transfers relate to any Employee Obligation.



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12PAC 1092293v.1

29. In the ordinary course of its business, the Debtor incurs payroll and various other

obligations and provides certain benefits to its employees in exchange for the employees

performance of services. As of the Petition Date, the Debtor employed approximately 226

individuals on a full-time basis within the United States, as well as approximately 16 temporary

personnel and 45 persons of interest, who perform work similar to its temporary personnel. The

majority of the Debtors Employees are employed at the Debtors corporate headquarters in

Santa Ana, and the remaining Employees are employed throughout the United States.

30. The Debtor believes it is current with the majority of its Employees Obligations

that have become due and payable. However, certain of these Employee Obligations have

accrued but, as of the Petition Date, have yet to become due and owing. As described in more

detain in the motion, the Debtor estimates that the aggregate amount of the prepetition Employee

Obligations that have accrued but that were not due as of the Petition Date, including all costs

incident to such obligations, is approximately $1,219,270. Notably, this amount largely reflects

accrued wages and benefits that will be paid in the ordinary course other than on the first day of

this chapter 11 case, or may never become due.

31. In this case, any delay in payment or failure to satisfy Employee Obligations

would irreparably impair the Debtors employees morale, dedication, confidence, and

cooperation, and would adversely impact the Debtors relationship with its employees at a time

when the employees support is critical to the Debtors chapter 11 case and ongoing business

operations. At this critical juncture, the Debtor simply cannot risk damage to its business from a

rapid decline in its employees morale, or incur the risk that employees may seek employment

with competitors. Absent the relief requested herein, the employees may suffer undue hardship

and, in many instances, serious financial difficulties, as employees rely on their wages and



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13PAC 1092293v.1

benefits to meet their personal financial obligations. Without the requested relief, the stability of

the Debtors operations will be irreparably harmed. In addition, it would be inequitable to

require the Debtors employees to bear the cost of any business expenses they incurred

prepetition with the belief such expenses would be promptly reimbursed.

32. For the reasons stated above, the Debtor believes it to be in the best interests of its

estate, creditors and other parties in interest to grant the relief requested in the motion.

(iii) Debtors Motion Pursuant to Sections 105(a), 363(b), and 507(a)(8) of

the Bankruptcy Code for Entry of an Order (I) Authorizing Payment

of Prepetition Taxes and Fees to Taxing Authorities, and (II)

Authorizing Financial Institutions to Honor and Process Related

Checks and Transfers.

33. By this motion, the Debtor seeks entry of an order (i) authorizing, but not

directing, the Debtor to pay certain accrued and outstanding prepetition sales, use, franchise, and

real and personal property taxes, and such other similar taxes as the Debtor deems necessary, as

well as fees for licenses, permits, and other similar charges and assessments, including any

penalties and interest thereon, to various taxing authorities, including those obligations

subsequently determined upon audit or otherwise to be owed for periods prior to the Petition

Date; and (ii) authorizing banks and other financial institutions to honor and process checks and

transfers related to these payments.

34. In the ordinary course of its business, the Debtor is continuously required to

collect and pay prepetition sales, use, franchise, real and personal property taxes, and certain

value-added taxes (collectively, the Taxes), regulatory fees, including, but not limited to,

federal, state and local regulatory fees (the Regulatory Fees) and permit or other licensing fees

(the Licensing Fees, and, collectively, with the Taxes and Regulatory Fees, the Taxes and

Fees), as well as any penalties and interest related to the Taxes and Fees, to various federal,

state, and local authorities in the United States, as well as certain foreign taxing authorities



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14PAC 1092293v.1

(collectively, the Taxing Authorities). The Debtor must remit these Taxes and Fees to the

Taxing Authorities. The process by which the Debtor remits the Taxes and Fees varies,

depending on the nature of liability at issue and the Taxing Authority to which the relevant

payment is due.

35. As of the Petition Date, the Debtor estimates a prepetition outstanding balance of

approximately $2,194.00 related to Taxes and Fees through the Petition Date. The Debtor pays

the Taxes and Fees to the Taxing Authorities on a periodic basis with funds drawn by checks or

by means of electronic fund transfers whether sent directly to the Taxing Authorities or sent to a

third-party administrator which then pays the appropriate Taxing Authorities. Prior to the

Petition Date, certain Taxing Authorities may have been sent checks or electronic transfers in

respect of such obligations that may not have cleared the Debtors banks as of the Petition Date.

36. There are several reasons to grant the relief requested in the motion. First, as I

understand the requirements of section 507(a)(8) of the Bankruptcy Code, a portion of the Taxes

and Fees may be entitled to priority status and therefore must be paid in full under any plan of

reorganization. Thus, the payment of certain of the prepetition Taxes and Fees at this time would

not prejudice the rights of other creditors, but merely would accelerate payments that otherwise

would become due in connection with the Debtors chapter 11 case. At the same time, payment

likely would avoid conflict and administrative problems arising from actions the Taxing

Authorities would take against the Debtor to collect due and owing Taxes and Fees.

37. Second, certain Taxing Authorities may assert that certain of the Taxes and Fees

are so-called trust fund taxes that the Debtor is required to collect from third parties and hold

in trust for the benefit of such Taxing Authorities. Further, even if some of the Taxes and Fees

would not ordinarily be considered trust fund taxes in a particular jurisdiction, payment of



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such Taxes and Fees should nevertheless be authorized because some Taxing Authorities may

audit the Debtor if such Taxes and Fees are not timely paid. Such audits would needlessly divert

the Debtors attention from its reorganization effort. In addition, as with unpaid property taxes,

some Taxing Authorities may also seek to impose liens on the Debtors assets on account of

unpaid trust fund Taxes, which liens would require time, effort, and expense for the Debtor to

challenge and remove. An improper lien or the failure to pay certain Taxes might also affect the

Debtors good standing in a particular state, potentially affecting the Debtors ability to continue

operating in the ordinary course. Timely payment of the Taxes and Fees is necessary to avoid

such distractions and is thus in the best interest of the Debtor and its estate.

38. Any delay in paying the obligations relating to the Taxes and Fees would be

detrimental to the Debtor, its creditors and its estates. Timely payment of the Taxes and Fees is

necessary to avoid such distractions and is thus in the best interests of the Debtor and its estate.

(iv) Debtors Motion for Entry of an Order Pursuant to Sections 105(a),

363(b), and 363(c) of the Bankruptcy Code (I) Authorizing

Continuation of Insurance Policies and Payment of Prepetition

Insurance Obligations, and (IIi) Authorizing Banks and Financial

Institutions To Honor and Process Related Checks and Transfers.

39. By this motion, the Debtor seeks entry of an order (i) authorizing, but not

directing, the Debtor to continue its insurance programs and to pay, in its sole discretion, any

prepetition insurance obligations that become due in the ordinary course of business, to renew

any insurance policies, and to enter into new insurance arrangements as may be required as the

annual terms of existing arrangements expire, in the ordinary course of business, and

(ii) authorizing banks and financial institutions to process, honor, and pay all checks and

electronic fund transfers relating to the foregoing.

40. In the ordinary course of business, the Debtor maintains various insurance

policies (each, an Insurance Policy, and together, the Insurance Policies). The Debtor



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maintains the Insurance Policies in amounts and types of coverage in compliance with state and

local laws governing the multiple jurisdictions in which the Debtor operates. The Insurance

Policies provide coverage for, among other things, property, general liability, automotive

liability, excess/umbrella liability, foreign liability, cargo, directors and officers liability,

employment practices liability, crime, fiduciary liability, railroad protective liability, and

pollution liability.

41. The Debtor maintains the Insurance Policies through several different insurance

carriers (collectively, the Insurance Carriers). The aggregate annual amount of annual

premiums (including any taxes, administrative fees, and other fees, the Premiums) due under

the Insurance Policies is approximately $1,947,640.00. For certain of the Insurance Policies, the

Premiums are fully paid in advance. For the remainder of the Insurance Policies, the Debtor

pays the Premiums according to a set payment schedule.

42. As of the Petition Date, the Debtor believes that it is current on all of its

obligations for Premiums under the Insurance Policies. However, approximately $378,158.00 in

Premiums is to become due and payable over the course of the next several months. If the

Debtor is not authorized to pay these Premiums as they become due in the ordinary course, the

Debtors insurance coverage may lapse, forcing the Debtor to obtain new insurance coverage on

an emergency basis, potentially at a significantly increased cost. Accordingly, the Debtor

requests authority to pay the Premiums as they become due.

43. Further, although the Debtor is not aware of any obligations owed under the

Insurance Policies other than those specifically mentioned above, the Debtor further requests

authority to comply with any such obligations if and when they become known to ensure

continuous insurance coverage.



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17PAC 1092293v.1

44. Maintaining the Insurance Policies on an uninterrupted basis, including payment

of the Premiums, is essential. The nonpayment of any Premiums could result in Insurance

Carriers declining to renew the Debtors existing policies or refusing to enter into new

agreements with the Debtor. If the Insurance Policies lapse, the Debtor could be exposed to

substantial liability, to the detriment of the Debtors estate and all parties in interest, as the

Debtor would be required to obtain replacement coverage on an expedited basis, likely at

significant additional cost.



(v) Debtors Motion Pursuant to Sections 105(a), 363(b), and 503(b)(1) of

the Bankruptcy Code (A) Authorizing the Debtor to Honor Certain

Prepetition Warranty Programs, and (B) Authorizing Financial

Institutions to Honor and Process Checks and Transfers Related

Thereto.

46. By this motion, the Debtor seeks an order (A) authorizing the Debtor, subject to

its business judgment and in its sole discretion, to (i) perform and honor its prepetition

obligations under certain of its warranty programs, and (ii) continue such warranty programs in

the ordinary course of its business, and (B) authorizing the Debtors banks and financial

institutions to honor and process checks and other payment transfers related to such obligations.

47. The Debtor provides certain limited warranty programs, under which the Debtor

is contractually obligated to repair or replace parts or components that may be defective or

provide general service repair obligations under the terms of the applicable limited warranty for a

specified period of time and as may be required by law (the Warranty Programs), to promote

product sales, build key relationships, and maintain goodwill and promote customer loyalty.

48. The Warranty Programs provide coverage for various lengths to its customers

depending upon the specific product and terms of the customer purchase agreement. The



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18PAC 1092293v.1

Debtors standard warranties require it to repair or replace defective product returned during the

warranty period at no cost to the customer. The Debtor records an estimate for standard

warranty related costs based on its actual historical return rates and repair costs at the time of the

sale and updates these estimates throughout the warranty period.

49. The Debtor also has contractual commitments to various customers that require it

to incur costs to repair an epidemic defect with respect to its products outside of its standard

warranty period if such defect was to occur. Any costs related to epidemic defects are generally

recorded at the time the epidemic defect becomes known to the Debtor, and the costs of repair

can be reasonably estimated.

50. One of the Debtors primary sources of revenue is sales of its Powerwave

Products. If a customer has been promised a certain sales incentive or warranty and the Debtor

is unable to fulfill its obligations, the Debtor risks losing active sale contracts or being unable to

attract new customers from the Debtors competitors who may be able to offer the customer

incentives.

51. The Debtors ongoing operations depend on the continued loyalty and patronage

of the customers that purchase Powerwave Products, and the relief requested herein is essential

to business operations and customer confidence. In addition, the Debtors ability to honor the

Warranty Programs will enable it to maintain and potentially expand its existing customer base.

Therefore, honoring the Warranty Programs will result in a higher net cash flow when compared

to the alternative of reneging on Warranty Programs, resulting in the loss of sales to competitors.



(vi) Debtors Motion Pursuant to Sections 105(a) And 366 of the

Bankruptcy Code for Order (I) Prohibiting Utility Providers From



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Altering, Refusing, or Discontinuing Utility Services, (II) Approving

the Debtors Proposed Form of Adequate Assurance, (III)

Establishing Procedures for Resolving Objections Thereto by Utility

Providers, and (IV) Scheduling a Final Hearing Thereon.

53. By this Motion, the Debtor seeks entry of (i) an interim order and (ii) a final

order: (a) finding that the utilities providers (collectively, the Utility Providers), have adequate

assurance of future payment within the meaning of section 366 of the Bankruptcy Code based,

inter alia, on the Debtors establishment of a security deposit in a segregated account equal to

50% of the average monthly bill for each Utility Provider, which amount may be adjusted by the

Debtor for reasons specified herein following the final hearing on this motion and which is

without prejudice to the Utility Providers rights to request additional adequate assurance

according to the procedures set forth below, (b) enjoining the Utility Providers from altering,

refusing, discontinuing, or interfering with services to the Debtor on account of any unpaid

invoice for pre-petition services, including the making of demands for security deposits or

accelerated payment terms, or while a request for adequate assurance of payment in accordance

with the procedures set forth herein is pending, (c) establishing procedures for determining

requests for additional adequate assurance and authorizing the Debtor to provide such adequate

assurance to the Utility Providers, and (d) scheduling the final hearing on the relief sought in the

motion.

(a) In connection with its ongoing business operations, the Debtor incurs utility

expenses in the ordinary course for, among other things, the use of electricity, water, sewer

service, local and long-distance telephone service, Internet services, waste disposal, and other

similar services (collectively, the Utility Services). On a monthly basis, the Debtor spends an

aggregate of approximately $321,802 per month for the various Utility Services. These Utility



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Services are supplied by numerous Utility Providers throughout the United States with which the

Debtor may have multiple accounts.

54. Uninterrupted Utility Services are essential to the Debtors ongoing operations.

Without these essential services, the Debtors business will cease to operate. Moreover,

replacement Utility Providers would be difficult to identify and, in some locations, impossible to

find, given that many utilities enjoy a virtual monopoly in certain regions, leaving consumers

with no alternatives. The business disruption that would likely result from interruption of the

Utility Services would negatively impact the Debtors operations, and would adversely affect the

Debtors estate, creditors, and employees. Accordingly, to continue as a going concern, the

Debtor must continue to receive uninterrupted Utility Services.

55. As I understand, the Bankruptcy Code prohibits utilities from altering, refusing, or

discontinuing service to a debtor for the first 20 days of a bankruptcy case. However, a utility

provider may only refuse or discontinue service to a debtor after the first 30 days if the debtor

has not furnished the utility provider with adequate assurance of future payment within such

period. The Debtor intends to pay all postpetition obligations owed to the Utility Providers in a

timely manner, consistent with the ordinary course of operating its business. However, to

provide adequate assurance of payment for future services as required by section 366(c) of the

Bankruptcy Code, the Debtor proposes to deposit (within twenty (20) days of the Petition Date)

an amount into an interest-bearing, newly-created, segregated account (the Adequate Assurance

Account) equal in the aggregate to 50% of the average monthly bill for each Utility Provider

over the course of the last twelve months prior to the Petition Date (the Adequate Assurance

Deposit) pending further order of the Court. If the Debtor has not received Utility Services

from a Utility Provider for the twelve months prior to the Petition Date, then the Adequate



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Assurance Deposit will be equal to approximately 50% of the Debtors estimated average

postpetition monthly cost for utility consumption from that particular Utility Provider. Because

the Debtors approximate monthly spending on all Utility Services is approximately $321,802,

the initial Adequate Assurance Deposit will be approximately one half of that amount, or

$160,901.

56. The Debtor further proposes to maintain the Adequate Assurance Account with a

minimum balance in the aggregate equal to 50% of the Debtors average monthly cost of Utility

Services through the final hearing on the Motion. Thereafter, the Debtor proposes to adjust the

amount in the Adequate Assurance Account to reflect several factors such as (i) the termination

of Utility Services by the Debtor regardless of any Utility Providers additional assurance request

and (ii) an agreement with any Utility Provider pursuant to the procedures below. These

adjustments will permit the Debtor to maintain the Adequate Assurance Account in an amount

that consistently provides the Utility Providers with a half-months deposit on account of such

services.

57. The Debtor submits the Adequate Assurance Deposit, taken together with the

facts and circumstances of the Debtors chapter 11 case (together, the Proposed Adequate

Assurance), constitutes sufficient adequate assurance to the Utility Providers.

58. These protections ensure that all Utility Providers will have adequate assurance of

payment throughout these cases, and the Debtor believes no other or further assurance is

necessary. If any Utility Provider believes adequate assurance is required beyond the Proposed

Adequate Assurance, however, it must request such additional assurance pursuant to the

procedures described below (the Adequate Assurance Procedures).



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59. The relief requested herein will ensure the Debtors business operations will not

be disrupted by the lack of critical Utility Services. If a disruption occurs, it would severely

harm the Debtors business operations and, indeed, could result in the cessation of the Debtors

operations altogether. The Adequate Assurance Procedures provide the Utility Providers with

sufficient protection during the Debtors chapter 11 case, as well as fair and orderly procedures

under which to resolve requests for additional or different adequate assurance. Absent approval

of the proposed Adequate Assurance Procedures, the Debtor could be forced to negotiate with

each Utility Provider individually with the attendant risk that a Utility Provider will delay until

the expiration of the 30-day period in section 366(c)(2). During this critical postpetition period,

the Debtors efforts and resources would unquestionably be more productive if focused on the

continuation of its operations.



(vii) Debtors Motion For Order Pursuant To Sections 1107(a), 1108,

363(b), and 105(a) of the Bankruptcy Code (I) Authorizing Payment

of Prepetition Claims of Shippers, Warehousemen, Customs Brokers,

and Other Transportation Lien Claimants and (II) Authorizing

Financial Institutions to Honor and Process Related Checks and

Transfers.

61. By the motion, the Debtor requests entry of an order, authorizing, but not

directing, the Debtor to pay prepetition claims of shippers, warehousemen, customs brokers, and

other transportation lien claimants that have or are capable of asserting possessory liens against

the Debtors goods.

62. In order to ensure the steady movement of products, the Debtor relies on a

complex and international network of shippers, railroad carriers, freight carriers (the

Transporters) who ship Powerwave products, parts, and accessories (collectively, the Goods)



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from their warehouses or to warehouses operated by third-parties (the Warehousemen).

Powerwave Products that are received from overseas affiliates are shipped to various ports in the

United States, cleared for customs, loaded onto railroad containers, and finally moved onto

trucks, which transport the products to the six warehouse facilities located throughout the United

States.

63. To the extent that Goods are received from international sources, the Debtor is

required to pay customs duty charges and the Debtor utilizes the services of custom brokers (the

Customs Brokers) who facilitate the payment of the customs duty charges and fees. If the

Debtor fails to pay any Customs Broker, Transporter, or Warehouseman (collectively, the Lien

Claimants) for charges incurred in connection with the use, storage, or transport of the products,

various statutes, tariffs and agreements permit the Lien Claimants to assert liens against the

products in their possession.

64. As of the Petition Date, the Debtor estimates that approximately $6,442,456.00 is

owed on account of prepetition claims to the Lien Claimants; however, the Debtor believes that

Goods that are in the possession of Lien Claimants is substantially less, if any. Payment of the

foregoing shipping, customs, and storage charges will avoid disruption in the Debtors business

and enable the Debtor to realize the value of the Goods. The Debtors business is dependent

upon the ability to timely deliver the Goods to its customers. While the Debtor believes that it is

relatively current on its payments to the Lien Claimants, to the extent that additional amounts are

found to be outstanding (most likely due to delayed invoicing or the timing of certain shipments),

the Debtor must be able to pay such amounts to gain access to the Goods. The Debtor requires

timely receipt of the Goods to be able to sell them and to timely service consumers products.



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Any disruption in the Debtors complex movement of Goods could result in significant

consequences to the Debtors business.

65. Paying Lien Claimants will benefit the Debtors estate and its creditors by

allowing the Debtors business operations to continue without interruption. Under certain

statutes, tariffs, and agreements between the parties, a Lien Claimant may have a lien on the

goods in its possession that secures the charges or expenses incurred in connection with the

storage and/or transport of the products. The Lien Claimants may be unwilling to release the

products in their possession to which they may be entitled to liens, because releasing possession

of the products may convert their claims against the Debtor from secured to unsecured.

Therefore, unless the Court authorizes the Debtor to pay the Lien Claimants, the Debtor will

likely not continue to have access to the products in possession of the Lien Claimants. If the

Lien Claimants possess lien rights, failure to satisfy the Lien Claimants claims could have a

material adverse effect that could have severe repercussions on the Debtors operations and the

ability to timely deliver Goods to the Debtors dealers and consumers, which will result in

material harm to the Debtors estate and creditor.



C. Cash Management and Cash Collateral.

(viii) Debtors Motion Pursuant to Sections 105(a), 363, and 364 of the

Bankruptcy Code and Bankruptcy Rules 6003 and 6004 for Order

Authorizing Maintenance of Existing Bank Accounts, Continued Use

of Existing Business Forms, Continued Use of Existing Cash

Management System and for Related Relief.

67. The Debtor seeks authority to continue utilizing its cash management system (the

Cash Management System) in accordance with any budget approved by this Court. The Cash

Management System is an ordinary course, essential business practice that provides significant



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benefits to the Debtor by maintaining the stability and efficiency of the Debtors business.

Disruption of the Cash Management System at this critical juncture could irreversibly and

irreparably harm the Debtors business operations. The Debtor believes the maintenance of the

existing Cash Management System is in the best interests of its estate and all parties in interest.

To ensure the continuing transparency of the Cash Management System, the Debtor will

continue to maintain all records relating to receipts, disbursements, and transfers in accordance

with its pre-Petition Date practices, including in connection with any intercompany transactions.

68. In the ordinary course of business, the Debtor utilizes its Cash Management

System to streamline collection, transfer, and disbursement of funds generated by the Debtors

business operations. The Debtor accurately records collections, transfers, and disbursements as

they are made. The Debtor is the primary user of the Cash Management System; the Debtors

non-debtor affiliates each have separate cash accounts.

69. As described in further detail in the motion, all cash inflows and outflows of the

Debtor are administered through various bank accounts. Cash inflows are received from

payments on accounts receivable balances and income from various subleases. The Debtor

maintains a concentration account to consolidate all cash receipts received in its depository

accounts and other cash inflows. Cash outflows consist of payments, taxes, interest payments,

expense reimbursements, and intercompany transfers. The Debtor utilizes several accounts to

manage outflows, which such accounts are funded through transfers from the concentration

account. In total, the Debtor maintains thirteen bank accounts as part of its Cash Management

System, nine of which are held at Wells Fargo Bank, one at Deutsche Bank, and three at Bank of

America.



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70. Although the non-debtor affiliates of the Debtor have separate cash accounts,

from time to time in the ordinary course of business, the Debtor may issue wire transfers to non-

debtor affiliates in U.S. dollars from its concentration account and in Euros and British pounds

from its foreign currency accounts. The Debtor settles intercompany trade accounts receivable

and payable in the ordinary course of business. It is essential to the Debtors operations that its

intercompany netting arrangements remain uninterrupted because they are integral to

intercompany trading, financing and reimbursements. These intercompany transactions typically

consist of the following: (a) sales of inventory from foreign non-debtor entities to the Debtor to

customers, for which an internal reconciliation is maintained; (b) expense charges for which the

Debtor makes the initial payment and then invoices non-debtor affiliates, including insurance

payments and travel; and (c) transfer pricing adjustments that are recorded monthly and

performed quarterly for tax purposes.

71. All intercompany transactions and claims are documented in the Debtors books

and records through its ordinary course accounting process and are netted through

accounting/journal entries on a regular basis.

72. It is my understanding that the Office of the United States Trustee for the District

of Delaware (the UST) has established certain operating guidelines for debtors in possession

that operate their business. One such provision requires a chapter 11 debtor in possession to

open new bank accounts and to close all existing accounts. It is my understanding that this

requirement, designed to provide a clear line of demarcation between prepetition and postpetition

claims and payments, helps to protect against the inadvertent payment of prepetition claims by

preventing banks from honoring checks drawn before the bankruptcy filing.



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73. The Debtor seeks a waiver of the USTs requirement that the bank accounts be

closed and new postpetition accounts be opened. If enforced in this case, the requirement would

cause undue disruption to the Debtors cash flow and business operations. In order to continue

its operations and preserve the value of its business, the Debtor needs to be able to continue to

issue checks to vendors, service providers, employees and others.

74. If the Debtor is not able to continue its Cash Management System on an

uninterrupted basis, it would cause immediate and irreparable harm to the Debtor an its business

operations because it would require the Debtor establish new transfer accounts with the hundreds

of counterparties that it does business with on a daily basis and delay the collection of accounts

receivable. Any change in the Cash Management System would needlessly cost the Debtor time

and money with no discernible benefit. Likewise, if the Debtor is not permitted to maintain and

utilize its existing bank accounts and existing business forms, significant disruption to the

Debtors financial affairs and daily business operations is likely to occur through delay in the

administration of the Debtors estate and attendant costs relating to establishing new systems,

opening new accounts, and ordering new business forms.



(ix) Motion for Entry of Interim Order (I) Authorizing Non-Consensual

Use of Cash Collateral; (II) Providing Adequate Protection to

Prepetition Lender; And (III) Scheduling a Final Hearing.

76. By this motion (the Cash Collateral Motion), the Debtor seeks entry of an

interim order, among other things: (a) authorizing the Debtor to use the cash collateral; (b)

approving the adequate protection provided to the Prepetition Agent and Prepetition Lender; and

(c) scheduling the final hearing on the motion to consider entry of a final order authorizing and

granting the relief requested in the motion.



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77. This proceeding was commenced in large part because, prior to the Petition Date,

on January 25, 2013, the Prepetition Agent, in violation of the Prepetition Credit Documents,

unilaterally, without contractually-required notice to the Debtor, took action that resulted in the

Prepetition Agent sweeping approximately $8,300,000 from the Debtors bank accounts.

Since the Petition Date, after written demand by the Debtor, the Prepetition Agent caused

approximately $2,000,000 of the improperly swept funds to be returned to the Debtors bank

accounts; however, approximately $6,300,000 has yet to be returned. This abrupt and

inappropriate enforcement action forced a rapid chapter 11 filing and the Debtor requests interim

authority to use cash collateral in accordance with the terms of the proposed interim order

attached to the Cash Collateral Motion.

78. The Debtor has a critical need to use cash collateral to maximize the value of its

assets for all stakeholders and to avoid immediate and irreparable harm to the Debtors estate.

Access to cash collateral is essential to ensure timely payment of employees wages and salaries

and other employee-related obligations to maintain employee morale and not risk the loss of

personnel critical to maximizing the value of the Debtors assets. Without access to cash

collateral, the Debtor may be required to entirely cease its operations and the Debtor, its estate

and its creditors would be irreparably harmed.

79. In addition, the ability to use cash collateral has certain intangible benefits that are

critical to the Debtors restructuring efforts. The success of the Debtors case hinges on the

ongoing cooperation of customers, suppliers, vendors, and employees to ensure a process that

preserves and enhances value for the benefit of all parties in interest. These parties need to be

assured that not only will the Debtors business continue, but that the Debtor will have access to



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the necessary funds in the coming months. Accordingly, without access to cash collateral, the

value of the Debtors assets would be irreparably harmed.

80. The Debtors need for use of cash collateral is urgent and immediate so that the

Debtor may maintain and preserve its property, operate its business, pay expenses relating

thereto, and pay the costs and expenses of administering its estates. The budget attached to the

Cash Collateral Motion shows that the Debtor can use cash collateral to meet all of its projected

operating and restructuring expenses during the period covered by the proposed interim order.

81. The Debtor does not have available unencumbered sources of working capital or

financing to carry on the operation of its business without the use of cash collateral. Use of cash

collateral, therefore, is essential to the Debtors continued viability and will enhance the

prospects for a successful reorganization or going concern disposition of the Debtor.

82. The Debtor here is only seeking to use cash collateral for an interim, four-week

period. During this period, the Debtor will, among other things, continue the process of

marketing its assets and business for sale, along with negotiating with its constituents on the best

way to implement an exit from chapter 11.

83. The proposed adequate protection to the Prepetition Agent and Prepetition Lender

ensures that the Prepetition Agent will not suffer a diminution in the value of its interest in the

Prepetition Collateral as a result of the Debtors use of the cash collateral. The use of the cash

collateral will enable the Debtor to continue to operate and pursue a sale or reorganization, which

the Debtor believes is the best means of preserving the value of the Prepetition Agents interest

in the Debtors property and maximizing returns for all creditor constituencies.



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84. Given the immediate need to use cash collateral and the irreparable harm that

would occur if use of cash collateral was not granted, the Debtor believes that the interim relief

requested is appropriate and the interim order should be entered.

Pursuant to 28 U.S.C. 1746, I declare under penalty of perjury that the foregoing is true

and correct.

Dated: January 30, 2013 /s/ Ronald J. Buschur

Ronald J. BuschurPresident and Chief Executive OfficerPowerwave Technologies, Inc.


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