**Exhibit 10.38**

 

***Partners for Growth***

 

**Loanand Security Agreement**

 
| **Borrower:** |   | **INTERWAVE  COMMUNICATIONS, INC.**                      |
|---------------|--------|----------------------------------------------------------|
|          |   |                                                     |
| **Address:**  |   | **2495 Leghorn,  Mountain View, California  94043** |
|          |   |                                                     |
| **Date:**     |   | **June 4, 2004**                                    |

 

**THISLOAN AND SECURITY AGREEMENT** is entered into on the above datebetween PARTNERS FOR GROWTH, L.P. (“PFG”), whose address is 560 Mission Street,3rd floor, San Francisco, CA 94105 and the borrower named above (the“Borrower”), whose chief executive office is located at the above address(“Borrower’s Address”). The Schedule to this Agreement (the “Schedule”)shall for all purposes be deemed to be a part of this Agreement, and the sameis an integral part of this Agreement. (Definitions of certain terms used in this Agreement are set forth inSection 8 below.)

 

# ***1.***              LOANS.

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***1.1 Loans.*** PFGwill make loans to Borrower (the “Loans”) up to the amounts (the “CreditLimit”) shown on the Schedule, provided no Default or Event of Default hasoccurred and is continuing, and subject to deduction of Reserves for accruedinterest and such other Reserves as PFG deems proper from time to time in itsgood faith business judgment.

 

***1.2 Interest.*** All Loans and all other monetary Obligations shall bear interest at therate shown on the Schedule, except where expressly set forth to the contrary inthis Agreement.  Interest shall bepayable monthly, on the last day of the month. Interest may, in PFG’s discretion, be charged to Borrower’s loanaccount, and the same shall thereafter bear interest at the same rate as theother Loans.

 

***1.3 Overadvances.*** If at any time or for any reason the total of all outstandingLoans exceeds the Credit Limit (an “Overadvance”), Borrower shall immediatelypay the amount of the excess to PFG, without notice or demand.  Without limiting Borrower’s obligation torepay to PFG the amount of any Overadvance, Borrower agrees to pay PFG intereston the outstanding amount of any Overadvance, on demand, at the Default Rate.

 

***1.4 Fees.*** Borrower shall pay PFG the fees shown on the Schedule, which are inaddition to all interest and other sums payable to PFG and are not refundable.

 

***1.5 Loan Requests.*** Toobtain a Loan, Borrower shall make a request to PFG by facsimile or telephone.Loan requests received after 12:00 Noon Pacific Time will not be considered byPFG until the next Business Day. PFG may rely on any telephone request for aLoan given by a person whom PFG believes in good faith is an authorizedrepresentative of Borrower, and Borrower will indemnify PFG for any loss PFGsuffers as a result of that reliance.

 

# ***2.  SECURITY INTEREST.***To secure thepayment and performance of all of the Obligations when due, Borrower herebygrants to PFG a security interest in all of the following (collectively, the“Collateral”):  all right, title andinterest of Borrower in and to all of the following, whether now owned orhereafter arising or acquired and wherever located: all Accounts; allInventory; all Equipment; all Deposit Accounts; all General Intangibles(including without limitation all Intellectual Property); all InvestmentProperty; all Other Property; and any and all claims, rights and interests inany of the above, and all guaranties and security for any of the above, and allsubstitutions and replacements for, additions, accessions, attachments,accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds andclaims against third parties) of, any and all of the above, and all Borrower’sbooks relating to any and all of the above. Notwithstanding anything herein tothe contrary, in no event shall the security interest granted under thisSection 2 attach to any of the following (“Specified Contracts”):  anylease, license, contract, property rights or agreement to which Borrower is aparty or any of its rights (including property rights with respect toequipment) or interests thereunder if and for so long as the grant of suchsecurity interest shall constitute or result in (i) the abandonment,invalidation or unenforceability of any

 

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# ***right,title or interest of Borrower therein or (ii) in a breach or terminationpursuant to the terms of, or a default under, any such lease, license, contractproperty rights or agreement (other than to the extent that any such term wouldbe rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 ofthe Code (or any successor provision or provisions) of any relevantjurisdiction or any other applicable law or principles of equity); providedhowever that such security interest shall attach immediately at such time asthe condition causing such abandonment, invalidation or unenforceability shallbe remedied and to the extent severable, shall attach immediately to anyportion of such lease, license, contract, property rights or agreement thatdoes not result in any of the consequences specified in (i) or (ii) above.Except as disclosed on Exhibit A hereto, Borrower represents and warrants toPFG that there are no Specified Contracts which are material to Borrower’s business.  Borrower shall not, hereafter, without PFG’sprior written consent, enter into any Specified Contract which is material toBorrower’s business. In addition, notwithstandinganything herein to the contrary, in no event shall the security interest grantedunder this Section 2 attach to any of the outstanding capital stock of a controlled foreign corporation(as such term is defined in the Internal Revenue Code of 1986, as amended)  in excess of 65% of the voting power of allclasses of capital stock of such controlled foreign corporation entitled tovote.***

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# ***3.  REPRESENTATIONS, WARRANTIES AND COVENANTS OFBORROWER.***

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In order to induce PFG to enter into this Agreement and to make Loans,subject to the exceptions set forth on the Disclosure Schedule attachedhereto as Exhibit B, Borrower represents and warrants to PFG as follows, andBorrower covenants that the following representations will continue to be true,and that Borrower will at all times comply with all of the following covenants,throughout the term of this Agreement and until all Obligations have been paidand performed in full:

 

***3.1 Corporate Existence and Authority.***  Borrower is and will continue to be, dulyorganized, validly existing and in good standing under the laws of thejurisdiction of its incorporation. Borrower is and will continue to be qualified and licensed to dobusiness in all jurisdictions in which any failure to do so would result in aMaterial Adverse Change.  The execution,delivery and performance by Borrower of this Agreement, and all other documentscontemplated hereby (i) have been duly and validly authorized, (ii) areenforceable against Borrower in accordance with their terms (except asenforcement may be limited by equitable principles and by bankruptcy,insolvency, reorganization, moratorium or similar laws relating to creditors’rights generally), and (iii) do not violate Borrower’s articles or certificateof incorporation, or Borrower’s by-laws, or any law or any material agreementor instrument which is binding upon Borrower or its property, and (iv) do notconstitute grounds for acceleration of any material indebtedness or obligationunder any agreement or instrument which is binding upon Borrower or itsproperty.

 

***3.2 Name; Trade Names and Styles.***  As of the date hereof, the name of Borrowerset forth in the heading to this Agreement is its name as presently set forthin its certificate of incorporation. Listed in the Representations are, as of the date hereof, all prior namesof Borrower and all of Borrower’s present and prior trade names.  Borrower shall give PFG 30 days’ priorwritten notice before changing its name or doing business under any othername.  Borrower has complied, and willin the future comply, in all material respects, with all laws relating to theconduct of business under a fictitious business name, if applicable toBorrower.

 

***3.3 Place of Business; Location of Collateral.***As ofthe date hereof, the address set forth in the heading to this Agreement isBorrower’s chief executive office.  Inaddition, as of the date hereof, Borrower has places of business and Collateralis located only at the locations set forth in the Representations.  Borrower will give PFG at least 30 daysprior written notice before opening any additional place of business, changingits chief executive office, or moving any of the Collateral to a location otherthan Borrower’s Address or one of the locations set forth in theRepresentations, except that Borrower may maintain sales offices in theordinary course of business at which not more than a total of $10,000 fairmarket value of Equipment is located.

 

***3.4 Title to Collateral; Perfection; Permitted Liens.***

 

(a)  Borroweris now, and will at all times in the future be, the sole owner of all theCollateral, except for items of Equipment which are leased to Borrower andexcept for Permitted Liens.  TheCollateral now is and will remain free and clear of any and all liens, charges,security interests, encumbrances and adverse claims, except for PermittedLiens.  PFG now has, and will continueto have, an enforceable security interest in all of the Collateral, subjectonly to the Permitted Liens, and Borrower will at all times defend PFG and theCollateral against all claims of others.

 

(b)         Borrowerhas set forth in the Representations all of Borrower’s Deposit Accounts, as ofthe date hereof, and Borrower will give PFG five Business Days advance writtennotice before establishing any new Deposit Accounts and will cause theinstitution where any such new Deposit Account is maintained to execute anddeliver to PFG a control agreement in form sufficient to perfect PFG’s securityinterest in the Deposit Account and otherwise satisfactory to PFG in its goodfaith business judgment.  Nothing hereinlimits any requirements which may be set forth in the Schedule as to whereDeposit Accounts will be maintained.

 

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(c) In the event that Borrower shall at any time afterthe date hereof have any commercial tort claims against others, which it is assertingor gives written notice of its intention to assert, and in which the potentialrecovery exceeds $100,000, Borrower shall promptly notify PFG thereof inwriting and provide PFG with such information regarding the same as PFG shallrequest (unless providing such information would waive the Borrower’sattorney-client privilege).  Suchnotification to PFG shall constitute a grant of a security interest in thecommercial tort claim and all proceeds thereof to PFG, and Borrower shallexecute and deliver all such documents and take all such actions as PFG shallrequest in connection therewith.

 

(d)         Noneof the Collateral now is or will be affixed to any real property in such amanner, or with such intent, as to become a fixture.  Borrower is not and will not become a lessee under any realproperty lease pursuant to which the lessor may obtain any rights in any of theCollateral and no such lease now prohibits, restrains, impairs or willprohibit, restrain or impair Borrower’s right to remove any Collateral from theleased premises.  Whenever anyCollateral is located upon premises in which any third party has an interest,Borrower shall, whenever requested by PFG, use commercially reasonable effortsto cause such third party to execute and deliver to PFG, in form acceptable toPFG, such waivers and subordinations as PFG shall specify in its good faithbusiness judgment.  Borrower will keepin full force and effect, and will comply with all material terms of, any leaseof real property where any of the Collateral now or in the future may belocated.

 

***3.5 Maintenance of Collateral.*** Borrower will maintain the Collateral in goodworking condition (ordinary wear and tear excepted), and Borrower will not usethe Collateral for any unlawful purpose. Borrower will immediately advise PFG in writing of any material loss ordamage to the Collateral.

 

***3.6 Books and Records.***  Borrower has maintained and will maintain at Borrower’s Addresscomplete and accurate books and records, comprising an accounting system suchthat its financial statements can be prepared in accordance with GAAP.

 

***3.7 Financial Condition, Statements and Reports.***  All financial statements now or in thefuture delivered to PFG have been, and will be, prepared in conformity withGAAP and now and in the future will fairly present, in all material respects,the results of operations and financial condition of Borrower, in accordancewith GAAP, at the times and for the periods therein stated.  Between the last date covered by any suchstatement provided to PFG and the date hereof, there has been no MaterialAdverse Change.

 

***3.8 Tax Returns and Payments; Pension Contributions.***  Borrower has timely filed, and will timelyfile, all material required tax returns and reports, and Borrower has timelypaid, and will timely pay, all federal and state, and all material foreign andlocal taxes, assessments, deposits and contributions now or in the future owedby Borrower.  Borrower may, however,defer payment of any contested taxes, assessments, deposits and contributions,provided that Borrower (i) in good faith contests Borrower’s obligation to paythe same by appropriate proceedings promptly and diligently instituted andconducted, (ii) notifies PFG in writing of the commencement of, and anymaterial development in, the proceedings, and (iii) posts bonds or takes anyother steps required to keep the contested taxes from becoming a lien upon anyof the Collateral.  Borrower is unawareof any claims or adjustments proposed for any of Borrower’s prior tax yearswhich could result in additional taxes becoming due and payable byBorrower.  Borrower has paid, and shallcontinue to pay all amounts necessary to fund all present and future pension,profit sharing and deferred compensation plans in accordance with their terms,and Borrower has not and will not withdraw from participation in, permitpartial or complete termination of, or permit the occurrence of any other eventwith respect to, any such plan which could reasonably be expected to result inany liability of Borrower, including any material liability to the PensionBenefit Guaranty Corporation or its successors or any other governmentalagency.

 

***3.9 Compliance with Law.***  Borrower has, to the best of its knowledge, complied, and willcomply, in all material respects, with all provisions of all foreign, federal,state and local laws and regulations applicable to Borrower, including, but notlimited to, those relating to Borrower’s ownership of real or personalproperty, the conduct and licensing of Borrower’s business, and allenvironmental matters.

 

***3.10 Litigation.*** There is no claim, suit, litigation, proceeding or investigation pendingor (to best of Borrower’s knowledge) threatened against Borrower in any courtor before any governmental agency (or any basis therefor known to Borrower)which could reasonably be expected to result, either separately or in theaggregate, in any Material Adverse Change. Borrower will promptly inform PFG in writing of any claim, proceeding, litigationor investigation in the future threatened or instituted against Borrowerinvolving any single claim of $50,000 or more, or involving $100,000  or more in the aggregate.

 

***3.11 Use of Proceeds.*** All proceeds of all Loans shall be used solely for lawful businesspurposes.  Borrower is not purchasing orcarrying any “margin stock” (as defined in Regulation U of the Board ofGovernors of the Federal Reserve System) and no part of the proceeds of anyLoan will be used to purchase or carry any “margin stock” or to extend creditto others for the purpose of purchasing or carrying any “margin stock.”

 

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# ***4.  ACCOUNTS.***

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***4.1 Representations Relating to Accounts and Purchase Orders.* **Borrower represents and warrants to PFGthat each Account with respect to which Loans are requested by Borrower shall,on the date each Loan is requested and made, (i) represent an undisputed bonafide existing unconditional obligation of the Account Debtor created by thesale, delivery, and acceptance of goods or the rendition of services, or thenon-exclusive licensing of Intellectual Property, in the ordinary course ofBorrower’s business, and (ii) meet the applicable Minimum EligibilityRequirements set forth in Section 8 below. Borrower further represents andwarrants to PFG that each purchase order with respect to which Loans arerequested by Borrower shall, on the date each Loan is requested and made, (i)represent an undisputed bona fide existing unconditional agreement for thepurchase of goods or the rendition of services, or the non-exclusive licensingof Intellectual Property, in the ordinary course of Borrower’s business, and(ii) meet the Minimum Eligibility Requirements—Purchase Orders set forth inSection 8 below.

 

***4.2 Representations Relating to Documents and Legal Compliance. ***Borrower representsand warrants to PFG as follows:  Allstatements made and all unpaid balances appearing in all invoices, instrumentsand other documents evidencing the Accounts are and shall be true and correct inall material respects, and all such invoices, instruments and other documentsand all of Borrower’s books and records are and shall be genuine and in allrespects what they purport to be.  Allsales and other transactions underlying or giving rise to each Account shall complyin all material respects with all applicable laws and governmental rules andregulations.  To the best of Borrower’sknowledge, all signatures and endorsements on all documents, instruments, andagreements relating to all Accounts are and shall be genuine, and all suchdocuments, instruments and agreements are and shall be legally enforceable inaccordance with their terms  (except as enforcement may be limited byequitable principles and by bankruptcy, insolvency, reorganization, moratoriumor similar laws relating to creditors’ rights generally).

 

***4.3 Documents relating to Accounts.***Ifrequested by PFG, Borrower shall furnish PFG with copies (or, at PFG’s request,originals) of all contracts, orders, invoices, and other similar documents, andall shipping instructions, delivery receipts, bills of lading, and otherevidence of delivery, for any goods the sale or disposition of which gave riseto such Accounts, and Borrower warrants the genuineness of all of theforegoing.  Borrower shall also furnishto PFG an aged accounts receivable trial balance as provided in theSchedule.  In addition, subject to therights of the Senior Lender, Borrower shall deliver to PFG, on its request, theoriginals of all instruments, chattel paper, security agreements, guaranteesand other documents and property evidencing or securing any Accounts, in thesame form as received, with all necessary indorsements, and copies of allcredit memos.

 

***4.4 Collection of Accounts.*** Borrower shall have the right to collect all Accounts, unless anduntil a Default or an Event of Default has occurred and is continuing. Subjectto the rights of the Senior Lender, PFG may, in its good faith businessjudgment, require that all proceeds of Collateral be deposited by Borrower intoa lockbox account, or such other “blocked account” as PFG may specify, pursuantto a blocked account agreement in such form as PFG may specify in its goodfaith business judgment.

 

***4.5. Remittance of Proceeds.***Subject to the rights ofthe Senior Lender, all proceeds arising from the disposition of any Collateralshall be delivered, in kind, by Borrower to PFG in the original form in whichreceived by Borrower not later than the following Business Day after receipt byBorrower, to be applied to the Obligations in such order as PFG shalldetermine; provided that, if no Default or Event of Default has occurred and iscontinuing, Borrower shall not be obligated to remit to PFG (i) the proceeds ofAccounts arising in the ordinary course of business, or (ii) the proceeds of thesale of worn out or obsolete Equipment disposed of by Borrower in good faith inan arm’s length transaction for an aggregate purchase price of $25,000 or less(for all such transactions in any fiscal year), and (iii) the proceeds ofinsurance if promptly used to replace or repair the property with respect towhich the proceeds were paid.  Except aspermitted above, Borrower agrees that it will not commingle proceeds ofCollateral with any of Borrower’s other funds or property, but will hold suchproceeds separate and apart from such other funds and property and in anexpress trust for PFG, except as set forth above, and subject to the rights ofthe Senior Lender.  Nothing in thisSection limits the restrictions on disposition of Collateral set forthelsewhere in this Agreement.

 

***4.6 Disputes.*** Borrower shall notify PFG promptly of all disputes or claimsrelating to Accounts.  Borrower shallnot forgive (completely or partially), compromise or settle any Account for lessthan payment in full, or agree to do any of the foregoing, except that Borrowermay do so, provided that: (i) Borrower does so in good faith, in a commerciallyreasonable manner, in the ordinary course of business, and in arm’s lengthtransactions, which are reported to PFG on the regular reports provided to PFG;(ii) no Default or Event of Default has occurred and is continuing; and (iii)taking into account all such discounts, settlements and forgiveness, the totaloutstanding Loans will not exceed the Credit Limit.

 

***4.7 Returns.*** Provided no Event of Default has occurred and is continuing, if anyAccount Debtor returns any Inventory to Borrower, Borrower shall promptlydetermine the reason for such return and promptly issue a credit memorandum tothe Account Debtor in the appropriate amount. In the event any attempted return occurs after the occurrence and duringthe

 

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continuance of any Event of Default, Borrower shallhold the returned Inventory in trust for PFG, and immediately notify PFGof the return of the Inventory.

 

***4.8 Verification.*** PFG may, from time to time, verify directly with the respective AccountDebtors the validity, amount and other matters relating to the Accounts, bymeans of mail, telephone or otherwise, either in the name of Borrower or PFG orsuch other name as PFG may choose.

 

***4.9 No Liability.* **PFGshall not be responsible or liable for any shortage or discrepancy in, damageto, or loss or destruction of, any goods, the sale or other disposition ofwhich gives rise to an Account, or for any error, act, omission, or delay ofany kind occurring in the settlement, failure to settle, collection or failureto collect any Account, or for settling any Account in good faith for less thanthe full amount thereof, nor shall PFG be deemed to be responsible for any ofBorrower’s obligations under any contract or agreement giving rise to anAccount.  Nothing herein shall, however,relieve PFG from liability for its own gross negligence or willful misconduct.

 

# ***5.  ADDITIONAL DUTIES OF BORROWER.***

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***5.1 Financial and Other Covenants.***  Borrower shall at all times comply with thefinancial and other covenants set forth in the Schedule.

 

***5.2 Insurance.*** Borrower shall, at all times insure all of the tangible personalproperty Collateral and carry such other business insurance, with insurersreasonably acceptable to PFG, in such form and amounts as PFG may reasonablyrequire and that are customary and in accordance with standard practices forBorrower’s industry and locations, and Borrower shall provide evidence of suchinsurance to PFG.  All such insurancepolicies shall name PFG as an additional loss payee, and shall contain alenders loss payee endorsement in form reasonably acceptable to PFG.  Upon receipt of the proceeds of any suchinsurance, subject to the rights of the Senior Lender, provided no Default orEvent of Default has occurred and is continuing, PFG shall release to Borrowerinsurance proceeds with respect to Collateral, which shall be utilized byBorrower for the prompt repair or replacement of the Collateral with respect towhich the insurance proceeds were paid. PFG may require reasonable assurance that the insurance proceeds soreleased will be so used.  If Borrowerfails to provide or pay for any insurance, PFG may, but is not obligated to,obtain the same at Borrower’s expense. Borrower shall promptly deliver to PFG copies of all material reportsmade to insurance companies.

 

***5.3 Reports.*** Borrower, at its expense, shall provide PFG with the written reports setforth in the Schedule, and such other written reports with respect to Borrower(including budgets, projections, operating plans and other financialdocumentation), as PFG shall from time to time specify in its good faithbusiness judgment, it beingrecognized by PFG that any projections and forecasts provided by Borrower ingood faith and based upon reasonably assumptions are not to be viewed as factsand that actual results during the period or periods covered by any suchprojections or forecasts may differ from the projected or forecast results.

 

***5.4 Access to Collateral, Books and Records.***  At reasonable times, and on one BusinessDay’s notice, PFG, or its agents, shall have the right to inspect theCollateral, and the right to audit and copy Borrower’s books and records.  All information obtained in any suchinspection or audit shall be subject to the confidentiality agreement inSection 9.16 below.  The foregoinginspections and audits shall be at Borrower’s expense and the charge thereforshall be $750 per person per day (or such higher amount as shall representPFG’s then current standard charge for the same), plus reasonable out-of-pocketexpenses. Notwithstandingthe foregoing, if no Event of Default has occurred and is continuing, Borrowershall not be required to disclose, permit the inspection, examination or makingof extracts, or discussion of, any document, information or other matter (i) inrespect of which disclosure is prohibited by law or any agreement binding onBorrower or any of its Subsidiaries, or (ii) is subject to attorney-client orsimilar privilege or constitutes attorney work product.  If Borrower is withholding any informationrequested by Lender pursuant to the preceding sentence, it shall so advise PFGin writing, giving PFG a general description of the nature of the informationwithheld.

 

***5.5 Negative Covenants.***  Except as may be permitted in the Schedule, Borrower shall not,without PFG’s prior written consent (which shall be a matter of its good faithbusiness judgment), do any of the following: (i) merge or consolidate with another corporation or entity, except that any wholly-ownedSubsidiary of Borrower may be merged with Borrower so long as Borrower is thesurviving corporation; (ii) acquire any assets, except inthe ordinary course of business, or make any Investments other than PermittedInvestments; (iii) consummate any other transaction outside the ordinary courseof business; (iv) sell or transfer any Collateral, except for (A) the sale offinished Inventory in the ordinary course of Borrower’s business, (B) the saleof obsolete or unneeded Equipment in the ordinary course of business, (C) themaking of Permitted Investments, (D) the granting of Permitted Liens, and (E)the non-exclusive licensing of Intellectual Property in the ordinary course ofbusiness ; (v) store any Inventory or other Collateral with any warehouseman orother third party, unless there is in place a bailee agreement in such form asPFG shall specify in its good faith business judgment; (vi) sell any Inventoryon a sale-or-return, guaranteed sale, consignment, or other contingent basis;(vii) make any loans of any money or other assets, other than PermittedInvestments; (viii) incur any Indebtedness, other than Permitted Indebtedness;(ix) guarantee or otherwise become

 

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liable with respect to the obligations of anotherparty or entity; (x) pay or declare any dividends on Borrower’s stock (exceptfor dividends payable solely in stock of Borrower); (xi) redeem, retire,purchase or otherwise acquire, directly or indirectly, any of Borrower’s stock;(xii) engage, directly or indirectly, in any business other than the businessescurrently engaged in by Borrower or reasonably related thereto; or (xiii)dissolve or elect to dissolve. Transactions permitted by the foregoing provisions of thisSection are only permitted if no Default or Event of Default would occuras a result of such transaction.

 

***5.6 Litigation Cooperation.***  Should any third-party suit or proceeding be instituted by oragainst PFG with respect to any Collateral or relating to Borrower, Borrowershall, without expense to PFG, make available Borrower and its officers,employees and agents and Borrower’s books and records, to the extent that PFG maydeem them reasonably necessary in order to prosecute or defend any such suit orproceeding.

 

***5.7 Further Assurances.***  Borrower agrees, at its expense, on request by PFG, to executeall documents and take all actions, as PFG, may, in its good faith businessjudgment, deem necessary or useful in order to perfect and maintain PFG’sperfected security interest in the Collateral (subject only to PermittedLiens), and in order to fully consummate the transactions contemplated by thisAgreement.

 

# ***6.   TERM.***

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***6.1 Maturity Date.*** This Agreement shall continue in effect until the maturity date setforth on the Schedule (the “Maturity Date”), subject to Section 6.3below.

 

***6.2 Early Termination.***  This Agreement may be terminated prior to the Maturity Date asfollows:  (i) by Borrower, effectivethree Business Days after written notice of termination is given to PFG; or(ii) by PFG at any time after the occurrence and during the continuance of anEvent of Default, without notice, effective immediately.  If this Agreement is terminated by Borroweror by PFG under this Section 6.2, Borrower shall pay to PFG a terminationfee in an amount equal to the Unused Line Fee provided in Section 3 of theSchedule, computed as though the outstanding Loan was zero, for the period fromthe effective date of termination to the Maturity Date.  The termination fee shall be due and payableon the effective date of termination and thereafter shall bear interest at arate equal to the highest rate applicable to any of the Obligations.

 

***6.3 Payment of Obligations.***  On the Maturity Date or on any earlier effective date oftermination, Borrower shall pay and perform in full all Obligations, whetherevidenced by installment notes or otherwise, and whether or not all or any partof such Obligations are otherwise then due and payable. Notwithstanding anytermination of this Agreement, all of PFG’s security interests in all of theCollateral and all of the terms and provisions of this Agreement shall continuein full force and effect until all Obligations have been paid and performed infull; provided that PFG may, in its sole discretion, refuse to make any furtherLoans after termination.  No terminationshall in any way affect or impair any right or remedy of PFG, nor shall anysuch termination relieve Borrower of any Obligation to PFG, until all of theObligations have been paid and performed in full.  Upon payment and performance in full of all the Obligations andtermination of this Agreement, PFG shall promptly terminate its financingstatements with respect to the Borrower and deliver to Borrower such otherdocuments as may be required to fully terminate PFG’s security interests.

 

# ***7.  EVENTS OF DEFAULT AND REMEDIES.***

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***7.1 Events of Default.***  The occurrence of any of the following events shall constitute an“Event of Default” under this Agreement, and Borrower shall give PFG immediatewritten notice thereof:

 

(a) Any warranty, representation, statement, report or certificate madeor delivered to PFG by Borrower or any of Borrower’s officers, employees oragents, now or in the future, shall be untrue or misleading in a materialrespect when made or deemed to be made; or

 

(b) Borrower shall fail to pay when due any Loan or any interestthereon or any other monetary Obligation within three Business Days after thedate due; or

 

(c) the total Loans outstanding at any time shall exceed the CreditLimit and the same shall not be cured within three Business Days thereafter; or

 

(d) Borrower shall fail to comply with any of the financial covenantsset forth in the Schedule, or shall breach any of the provisions ofSection 5.5 hereof, or shall fail to perform any other non-monetaryObligation which by its nature cannot be cured, or shall fail to permit PFG toconduct an inspection or audit as provided in Section 5.4 hereof, or shallfail to provide PFG with a borrowing base report under Section 6(a) of theSchedule within one Business Day after the date due; or

 

(e) Borrower shall fail to perform any other non-monetary Obligation,which failure is not cured within ten Business Days after the date due; or

 

(f) any levy, assessment, attachment, seizure, lien or encumbrance(other than a Permitted Lien) is made on the Collateral with a value of $25,000or more, which is not cured within 10 days after the occurrence of the same; or

 

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(g) any default or event of default occurs under any obligation in anamount in excess of $25,000, secured by a Permitted Lien, which is not curedwithin any applicable cure period or waived in writing by the holder of thePermitted Lien; or

 

(h) Borrower breaches any material contract or obligation, which hasresulted or may reasonably be expected to result in a Material Adverse Change;or

 

(i) Dissolution, termination of existence, insolvency or businessfailure of Borrower; or appointment of a receiver, trustee or custodian, forall or any part of the property of, assignment for the benefit of creditors by,or the commencement of any proceeding by Borrower under any reorganization, bankruptcy,insolvency, arrangement, readjustment of debt, dissolution or liquidation lawor statute of any jurisdiction, now or in the future in effect; or

 

(j) the commencement of any proceeding against Borrower or anyguarantor of any of the Obligations under any reorganization, bankruptcy,insolvency, arrangement, readjustment of debt, dissolution or liquidation lawor statute of any jurisdiction, now or in the future in effect, which is notcured by the dismissal thereof within 45 days after the date commenced; or

 

(k) revocation or termination of, or limitation or denial of liabilityupon, any guaranty of the Obligations or any attempt to do any of theforegoing, or commencement of proceedings by any guarantor of any of theObligations under any bankruptcy or insolvency law; or

 

(l) revocation or termination of, or limitation or denial of liabilityupon, any pledge of any certificate of deposit, securities or other property orasset of any kind pledged by any third party to secure any or all of the Obligations,or any attempt to do any of the foregoing, or commencement of proceedings by oragainst any such third party under any bankruptcy or insolvency law; or

 

(m) Borrower makes any payment on account of any indebtedness orobligation which has been subordinated to the Obligations other than aspermitted in the applicable subordination agreement, or if any Person who hassubordinated such indebtedness or obligations terminates or in any way limitshis subordination agreement; or

 

(n) any person (as defined in Section 13(d)(3) orSection 14(d)(2) of the Securities Exchange Act of 1934, as amended (the“Exchange Act”)), (i) becomes the beneficial owner (as determined in accordancewith Rule 13d-3 under the Exchange Act, as in effect on the date hereof) of 50%or more of the capital stock of Parent having the power to vote in the electionof directors of Parent under any circumstances, or (ii) obtains the practicalability, directly or indirectly, to elect or control the election of a majorityof the board of directors of Parent; or

 

(o) Erwin Leichtle shall cease to serve as the chief executive officerof Parent, and Cal Hoagland shall cease to serve as the chief financial officerof Parent; or

 

(p) Parent shall cease to own 100% of the outstanding stock of Borrower;or

 

(q) Borrower shall generally not pay its debts as they become due, orBorrower shall conceal, remove or transfer any part of its property, withintent to hinder, delay or defraud its creditors, or make or suffer anytransfer of any of its property which may be fraudulent under any bankruptcy,fraudulent conveyance or similar law; or

 

(r) a Material Adverse Change shall occur.

 

PFG may cease making any Loans hereunder during any ofthe cure periods provided above, and thereafter if an Event of Default hasoccurred and is continuing.

 

***7.2 Remedies.*** Upon the occurrence and during the continuance of any Event of Default,PFG, at its option, and without notice or demand of any kind (all of which arehereby expressly waived by Borrower), may do any one or more of the following:(a) Cease making Loans or otherwise extending credit to Borrower under thisAgreement or any other Loan Document; (b) Accelerate and declare all or anypart of the Obligations to be immediately due, payable, and performable, notwithstandingany deferred or installment payments allowed by any instrument evidencing orrelating to any Obligation; (c) Take possession of any or all of the Collateralwherever it may be found, and for that purpose Borrower hereby authorizes PFGwithout judicial process to enter onto any of Borrower’s premises withoutinterference to search for, take possession of, keep, store, or remove any ofthe Collateral, and remain on the premises or cause a custodian to remain onthe premises in exclusive control thereof, without charge for so long as PFGdeems it necessary, in its good faith business judgment, in order to completethe enforcement of its rights under this Agreement or any other agreement;provided, however, that should PFG seek to take possession of any of theCollateral by court process, Borrower hereby irrevocably waives: (i) any bondand any surety or security relating thereto required by any statute, court ruleor otherwise as an incident to such possession; (ii) any demand for possessionprior to the commencement of any suit or action to recover possession thereof;and (iii) any requirement that PFG retain possession of, and not dispose of,any such Collateral until after trial or final judgment; (d) Require Borrowerto assemble any or all of the Collateral and make it available to PFG at placesdesignated by PFG which are reasonably convenient to PFG and Borrower, and toremove the Collateral to such locations as PFG may deem advisable; (e) Completethe processing, manufacturing or repair of any Collateral prior to adisposition thereof and, for such purpose and

 

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for the purpose of removal, PFG shall have the rightto use Borrower’s premises, vehicles, hoists, lifts, cranes, and otherEquipment and all other property without charge; (f) Sell, lease or otherwisedispose of any of the Collateral, in its condition at the time PFG obtainspossession of it or after further manufacturing, processing or repair, at oneor more public and/or private sales, in lots or in bulk, for cash, exchange orother property, or on credit, and to adjourn any such sale from time to timewithout notice other than oral announcement at the time scheduled forsale.  PFG shall have the right toconduct such disposition on Borrower’s premises without charge, for such timeor times as PFG deems reasonable, or on PFG’s premises, or elsewhere and theCollateral need not be located at the place of disposition.  PFG may directly or through any affiliatedcompany purchase or lease any Collateral at any such public disposition, and ifpermissible under applicable law, at any private disposition.  Any sale or other disposition of Collateralshall not relieve Borrower of any liability Borrower may have if any Collateralis defective as to title or physical condition or otherwise at the time ofsale; (g) Demand payment of, and collect any Accounts and General Intangiblescomprising Collateral and, in connection therewith, Borrower irrevocablyauthorizes PFG to endorse or sign Borrower’s name on all collections, receipts,instruments and other documents, to take possession of and open mail addressedto Borrower and remove therefrom payments made with respect to any item of theCollateral or proceeds thereof, and, in PFG’s good faith business judgment, togrant extensions of time to pay, compromise claims and settle Accounts and thelike for less than face value; (h) Exercise any and all rights under anypresent or future control agreements relating to Deposit Accounts or InvestmentProperty; and (i) Demand and receive possession of any of Borrower’s federaland state income tax returns and the books and records utilized in thepreparation thereof or referring thereto. All reasonable attorneys’ fees, expenses, costs, liabilities andobligations incurred by PFG with respect to the foregoing shall be added to andbecome part of the Obligations, shall be due on demand, and shall bear interestat a rate equal to the highest interest rate applicable to any of theObligations.  Without limiting any ofPFG’s rights and remedies, from and after the occurrence and during thecontinuance of any Event of Default, the interest rate applicable to theObligations shall be increased by an additional four percent per annum (the“Default Rate”).

 

***7.3 Standards for Determining Commercial Reasonableness.***  Borrower and PFG agree that a sale or otherdisposition (collectively, “sale”) of any Collateral which complies with thefollowing standards will conclusively be deemed to be commercially reasonable:  (i) Notice of the sale is given to Borrowerat least ten days prior to the sale, and, in the case of a public sale, noticeof the sale is published at least five days before the sale in a newspaper ofgeneral circulation in the county where the sale is to be conducted; (ii)Notice of the sale describes the collateral in general, non-specific terms;(iii) The sale is conducted at a place designated by PFG, with or without theCollateral being present; (iv) The sale commences at any time between 8:00 a.m.and 6:00 p.m;  (v) Payment of thepurchase price in cash or by cashier’s check or wire transfer is required; (vi)With respect to any sale of any of the Collateral, PFG may (but is notobligated to) direct any prospective purchaser to ascertain directly fromBorrower any and all information concerning the same.  PFG shall be free to employ other methods of noticing and sellingthe Collateral, in its discretion, if they are commercially reasonable.

 

***7.4 Power of Attorney.***  Upon the occurrence and during the continuance of any Event ofDefault, without limiting PFG’s other rights and remedies, Borrower grants toPFG an irrevocable power of attorney coupled with an interest, authorizing andpermitting PFG (acting through any of its employees, attorneys or agents) atany time, at its option, but without obligation, with or without notice toBorrower, and at Borrower’s expense, to do any or all of the following, inBorrower’s name or otherwise, but PFG agrees that if it exercises any righthereunder, it will do so in good faith and in a commercially reasonablemanner:  (a) Execute on behalf ofBorrower any documents that PFG may, in its good faith business judgment, deemadvisable in order to perfect and maintain PFG’s security interest in theCollateral, or in order to exercise a right of Borrower or PFG, or in order tofully consummate all the transactions contemplated under this Agreement, andall other Loan Documents; (b) Execute on behalf of Borrower, any invoicesrelating to any Account, any draft against any Account Debtor and any notice toany Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claimof mechanic’s, materialman’s or other lien, or assignment or satisfaction ofmechanic’s, materialman’s or other lien; (c) Take control in any manner of anycash or non-cash items of payment or proceeds of Collateral; endorse the nameof Borrower upon any instruments, or documents, evidence of payment orCollateral that may come into PFG’s possession; (d) Endorse all checks andother forms of remittances received by PFG; (e) Pay, contest or settle anylien, charge, encumbrance, security interest and adverse claim in or to any ofthe Collateral, or any judgment based thereon, or otherwise take any action toterminate or discharge the same; (f) Grant extensions of time to pay,compromise claims and settle Accounts and General Intangibles for less thanface value and execute all releases and other documents in connectiontherewith; (g) Pay any sums required on account of Borrower’s taxes or tosecure the release of any liens therefor, or both; (h) Settle and adjust, andgive releases of, any insurance claim that relates to any of the Collateral andobtain payment therefor; (i) Instruct any third party having custody or controlof any books or records belonging to, or relating to, Borrower to give PFG thesame rights of access and other rights with respect thereto as PFG has underthis Agreement; and (j) Take any action or pay any sum required of Borrowerpursuant to this Agreement and any other Loan Documents.  Any and all reasonable sums paid and any andall reasonable costs, expenses, liabilities, obligations and attorneys’ feesincurred by PFG with respect to the foregoing shall be added to and become partof the Obligations, shall be payable on demand, and shall bear interest at arate equal to the highest interest rate applicable to any of

 

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the Obligations. In no event shall PFG’s rights under the foregoing power of attorney orany of PFG’s other rights under this Agreement be deemed to indicate that PFGis in control of the business, management or properties of Borrower.

 

***7.5 Application of Proceeds.***  All proceeds realized as the result of any sale of the Collateralshall be applied by PFG first to the reasonable costs, expenses, liabilities,obligations and attorneys’ fees incurred by PFG in the exercise of its rightsunder this Agreement, second to the interest due upon any of the Obligations,and third to the principal of the Obligations, in such order as PFG shalldetermine in its sole discretion.  Anysurplus shall be paid to Borrower or other persons legally entitled thereto;Borrower shall remain liable to PFG for any deficiency.  If, PFG, in its good faith businessjudgment, directly or indirectly enters into a deferred payment or other credittransaction with any purchaser at any sale of Collateral, PFG shall have theoption, exercisable at any time, in its good faith business judgment, of eitherreducing the Obligations by the principal amount of purchase price or deferringthe reduction of the Obligations until the actual receipt by PFG of the cashtherefor.

 

***7.6 Remedies Cumulative.***  In addition to the rights and remedies set forth in thisAgreement, PFG shall have all the other rights and remedies accorded a securedparty under the Code and under all other applicable laws, and under any otherinstrument or agreement now or in the future entered into between PFG andBorrower, and all of such rights and remedies are cumulative and none isexclusive.  Exercise or partial exerciseby PFG of one or more of its rights or remedies shall not be deemed anelection, nor bar PFG from subsequent exercise or partial exercise of any otherrights or remedies.  The failure or delayof PFG to exercise any rights or remedies shall not operate as a waiverthereof, but all rights and remedies shall continue in full force and effectuntil all of the Obligations have been fully paid and performed.

 

# ***8.  DEFINITIONS. ***As used in this Agreement, the followingterms have the following meanings:

# *** ***

“Account Debtor” means the obligor on an Account.

 

“Accounts” means all present and future “accounts” as defined inthe California Uniform Commercial Code in effect on the date hereof with suchadditions to such term as may hereafter be made, and includes withoutlimitation all accounts receivable and other sums owing to Borrower.

 

“Advanced” means INTERWAVE Advanced Communications, Inc., aDelaware corporation.

 

 “Affiliate” means, withrespect to any Person, a relative, partner, shareholder, director, officer, oremployee of such Person, or any parent or subsidiary of such Person, or anyPerson controlling, controlled by or under common control with such Person.

 

“Business Day” means a day on which PFG is open for business.

 

“Code” means the Uniform Commercial Code as adopted and ineffect in the State of California from time to time.

 

“Collateral” has the meaning set forth in Section 2 above.

 

“continuing” and “during the continuance of” when usedwith reference to a Default or Event of Default means that the Default or Eventof Default has occurred and has not been either waived in writing by PFG orcured within any applicable cure period.

 

“Default” means any event which with notice or passage of timeor both, would constitute an Event of Default.

 

“Default Rate” has the meaning set forth in Section 7.2above.

 

“Deposit Accounts” means all present and future “depositaccounts” as defined in the California Uniform Commercial Code in effect on thedate hereof with such additions to such term as may hereafter be made, andincludes without limitation all general and special bank accounts, demandaccounts, checking accounts, savings accounts and certificates of deposit.

 

“Eligible Accounts” means collectively, EligibleAccounts-Domestic, Eligible Accounts-Foreign and Eligible Accounts-LCSupported. Eligible Accounts-Domestic and Eligible Accounts-Foreign owing fromone Account Debtor will not be deemed Eligible Accounts to the extent theyexceed 25% of the total Eligible Accounts-Domestic and EligibleAccounts-Foreign outstanding.  Inaddition, if more than 50% of the Accounts owing from an Account Debtor areoutstanding for a period longer than their Eligibility Period (without regardto unapplied credits) or are otherwise not eligible Accounts, then all Accountsowing from that Account Debtor will be deemed ineligible for borrowing.

 

“Eligible Accounts-Domestic” means Accounts and GeneralIntangibles arising in the ordinary course of Borrower’s business from the saleof goods or the rendition of services, or the non-exclusive licensing ofIntellectual Property, owing from Account Debtors in the United States orCanada, which PFG, in its good faith business judgment, shall deem eligible forborrowing.  Without limiting the factthat the determination of which Accounts are eligible for borrowing is a matterof PFG’s good faith business judgment, the following (the “MinimumEligibility Requirements—Domestic”) are the minimum requirements for aAccount to be an Eligible Account-Domestic: (i) the Account must not be outstanding for more than 90

 

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days from its invoice date (the “Eligibility Period”),(ii) the Account must not represent progress billings, or be due under afulfillment or requirements contract with the Account Debtor, (iii) the Accountmust not be subject to any contingencies (including Accounts arising from saleson consignment, guaranteed sale or other terms pursuant to which payment by theAccount Debtor may be conditional), (iv) the Account must not be owing from anAccount Debtor with whom Borrower has any dispute (whether or not relating tothe particular Account), in which case the Account shall be ineligible to theextent of the dispute, (v) the Account must not be owing from an Affiliate ofBorrower, (vi) the Account must not be owing from an Account Debtor which issubject to any insolvency or bankruptcy proceeding, or whose financialcondition is not acceptable to PFG in its good faith business judgment, orwhich, fails or goes out of a material portion of its business, (vii) theAccount must not be owing from the United States or any department, agency orinstrumentality thereof (unless there has been compliance, to PFG’ssatisfaction, with the United States Assignment of Claims Act), (viii) theAccount must not be owing from an Account Debtor to whom Borrower is or may beliable for goods purchased from such Account Debtor or otherwise (but, in suchcase, the Account will be deemed not eligible only to the extent of any amountsowed by Borrower to such Account Debtor), and (ix) Senior Lender shall not haveany outstanding loans or other extensions of credit with respect to the Account.PFG may, from time to time, in its good faith business judgment, revise theMinimum Eligibility Requirements—Domestic, upon written notice to Borrower.

 

“Eligible Accounts-Foreign” means Accounts and GeneralIntangibles arising in the ordinary course of Borrower’s business from the saleof goods or the rendition of services, or the non-exclusive licensing ofIntellectual Property, owing by Account Debtors outside the United States andCanada, which PFG, in its good faith business judgment, shall deem eligible forborrowing.  Without limiting the factthat the determination of which Accounts are eligible for borrowing is a matterof PFG’s good faith business judgment, the following (the “MinimumEligibility Requirements—Foreign”) are the minimum requirements for aAccount to be an Eligible Account-Foreign: (i) the Account must not be outstanding for more than 90 days from itsinvoice date (the “Eligibility Period”), (ii) the Account must notrepresent progress billings, or be due under a fulfillment or requirementscontract with the Account Debtor, (iii) the Account must not be subject to anycontingencies (including Accounts arising from sales on consignment, guaranteedsale or other terms pursuant to which payment by the Account Debtor may beconditional), (iv) the Account must not be owing from an Account Debtor withwhom Borrower has any dispute (whether or not relating to the particularAccount), in which case the Account shall be ineligible to the extent of thedispute, (v) the Account must not be owing from an Affiliate of Borrower, (vi)the Account must not be owing from an Account Debtor which is subject to anyinsolvency or bankruptcy proceeding, or whose financial condition is notacceptable to PFG in its good faith business judgment, or which, fails or goesout of a material portion of its business, (vii) the Account must not be owingfrom the United States or any department, agency or instrumentality thereof(unless there has been compliance, to PFG’s satisfaction, with the UnitedStates Assignment of Claims Act), (viii) the Account must be owing from anAccount Debtor located outside the United States or Canada,  (ix) the Account must not be owing from anAccount Debtor to whom Borrower is or may be liable for goods purchased fromsuch Account Debtor or otherwise (but, in such case, the Account will be deemednot eligible only to the extent of any amounts owed by Borrower to such AccountDebtor), and (x) Senior Lender shall not have any outstanding loans or otherextensions of credit with respect to the Account. PFG may, from time to time,in its good faith business judgment, revise the Minimum EligibilityRequirements—Foreign, upon written notice to Borrower.

 

“Eligible Accounts-LC Supported” means Accounts and GeneralIntangibles arising in the ordinary course of Borrower’s business from the saleof goods or the rendition of services, or the non-exclusive licensing ofIntellectual Property, which are backed by a letter of credit satisfactory toPFG, and which PFG, in its good faith business judgment, shall deem eligiblefor borrowing.  Without limiting thefact that the determination of which Accounts are eligible for borrowing is amatter of PFG’s good faith business judgment, the following (the “MinimumEligibility Requirements—LC Supported”) are the minimum requirements for aAccount to be an Eligible Account-LC Supported:  (i) the Account must not be outstanding for more than 90 daysfrom its invoice date (the “Eligibility Period”), (ii) the Account mustnot represent progress billings, or be due under a fulfillment or requirementscontract with the Account Debtor, (iii) the Account must not be subject to anycontingencies (including Accounts arising from sales on consignment, guaranteedsale or other terms pursuant to which payment by the Account Debtor may beconditional), (iv) the Account must not be owing from an Account Debtor withwhom Borrower has any dispute (whether or not relating to the particularAccount), in which case the Account shall be ineligible to the extent of thedispute, (v) the Account must not be owing from an Affiliate of Borrower, (vi)the Account must not be owing from an Account Debtor which is subject to anyinsolvency or bankruptcy proceeding, or whose financial condition is notacceptable to PFG in its good faith business judgment, or which, fails or goesout of a material portion of its business, (vii) the Account must not be owingfrom the United States or any department, agency or instrumentality thereof(unless there has been compliance, to PFG’s satisfaction, with the UnitedStates Assignment of Claims Act), (viii) the Account must not be owing from anAccount Debtor to whom Borrower is or may be liable for goods purchased fromsuch Account Debtor or otherwise (but, in such case, the Account will be deemednot eligible only to the extent of any amounts owed by Borrower to such AccountDebtor), and (ix) Senior Lender shall not have any outstanding loans or otherextensions of credit with respect to the

 

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Account. PFG may, from time to time, in its good faithbusiness judgment, revise the Minimum Eligibility Requirements—LC Supported,upon written notice to Borrower.

 

 “Eligible Inventory”means Inventory which PFG, in its good faith business judgment, deems eligiblefor borrowing.  Without limiting thefact that the determination of which Inventory is eligible for borrowing is amatter of PFG’s good faith business judgment, the following are the minimumrequirements for Inventory to be Eligible Inventory:  the Inventory must (i) consist of raw materials or finishedgoods, in good, new and salable condition, not be perishable, not be obsoleteor unmerchantable, and not be comprised of work in process, packaging materialsor supplies; (ii) meet all applicable governmental standards; (iii) havebeen manufactured in compliance with the Fair Labor Standards Act in all materialrespects; (iv) conform in all material respects to the warranties andrepresentations set forth in this Agreement; (v) be at all times subjectto PFG’s duly perfected, security interest (subject only to the securityinterest of the Senior Lender); (vi) be situated at Borrower’s Address or atone of the locations set forth in the Representations, and (vii) Senior Lendershall not have any outstanding loans or other extensions of credit with respectto the Inventory.

 

 “Eligible Purchase Orders”means purchase orders to Borrower from its customers received in the ordinarycourse of Borrower’s business, which will give rise to Accounts and GeneralIntangibles from the sale of goods or the rendition of services, or thenon-exclusive licensing of Intellectual Property, which are backed by a letterof credit satisfactory to PFG in its good faith business judgment, and whichPFG, in its good faith business judgment, shall deem eligible forborrowing.  Without limiting the factthat the determination of which purchase orders are eligible for borrowing is amatter of PFG’s good faith business judgment, the following (the “MinimumEligibility Requirements—Purchase Orders”) are the minimum requirements fora Account to be an Eligible Purchase Order: upon the sale of goods or the rendition of services, or thenon-exclusive licensing of Intellectual Property which are the subject of thepurchase order, the resulting Account will be an Eligible Account, and SeniorLender shall not have any outstanding loans or other extensions of credit withrespect to the purchase order.  PFG may,from time to time, in its good faith business judgment, revise the MinimumEligibility Requirements—Purchase Orders, upon written notice to Borrower.

 

 “Equipment” means allpresent and future “equipment” as defined in the California Uniform CommercialCode in effect on the date hereof with such additions to such term as mayhereafter be made, and includes without limitation all machinery, fixtures,goods, vehicles (including motor vehicles and trailers), and any interest inany of the foregoing.

 

“Event of Default” means any of the events set forth inSection 7.1 of this Agreement.

 

“GAAP” means generally accepted accounting principlesconsistently applied.

 

“General Intangibles” means all present and future “generalintangibles” as defined in the California Uniform Commercial Code in effect onthe date hereof with such additions to such term as may hereafter be made, andincludes without limitation all Intellectual Property, payment intangibles,royalties, contract rights, goodwill, franchise agreements, purchase orders,customer lists, route lists, telephone numbers, domain names, claims, incometax refunds, security and other deposits, options to purchase or sell real orpersonal property, rights in all litigation presently or hereafter pending(whether in contract, tort or otherwise), insurance policies (including withoutlimitation key man, property damage, and business interruption insurance),payments of insurance and rights to payment of any kind.

 

“good faith business judgment” means honesty in fact and goodfaith (as defined in Section 1201 of the Code) in the exercise of PFG’sbusiness judgment.

 

“including” means including (but not limited to).

 

“Indebtedness” means as to any Person, (a) indebtedness forborrowed money or the deferred purchase price of property or services (otherthan trade payables arising in the ordinary course of business), (b)obligations evidenced by bonds, notes, debentures or other similar instruments,(c) reimbursement obligations with respect to letters of credit and (d) capitallease obligations.

 

 “Intellectual Property”means all present and future (a) copyrights, copyright rights, copyrightapplications, copyright registrations and like protections in each work ofauthorship and derivative work thereof, whether published or unpublished, (b)trade secret rights, including all rights to unpatented inventions andknow-how, and confidential information; (c) mask work or similar rightsavailable for the protection of semiconductor chips; (d) patents, patentapplications and like protections including without limitation improvements,divisions, continuations, renewals, reissues, extensions andcontinuations-in-part of the same; (e) trademarks, servicemarks, trade styles,and trade names, whether or not any of the foregoing are registered, and allapplications to register and registrations of the same and like protections,and the entire goodwill of the business of Borrower connected with andsymbolized by any such trademarks; (f) computer software and computer softwareproducts; (g) designs and design rights; (h) technology; (i) all claims fordamages by way of past, present and future infringement of any of the rightsincluded above; (j) all licenses or other rights to use any property or rightsof a type described above.

 

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“Inventory” means all present and future “inventory” as definedin the California Uniform Commercial Code in effect on the date hereof withsuch additions to such term as may hereafter be made, and includes withoutlimitation all merchandise, raw materials, parts, supplies, packing andshipping materials, work in process and finished products, including withoutlimitation such inventory as is temporarily out of Borrower’s custody orpossession or in transit and including any returned goods and any documents oftitle representing any of the above.

 

“Investment” means any beneficial ownership interest in anyPerson (including any stock, partnership interest or other equity or debtsecurities issued by any Person), and any loan, advance or capital contributionto any Person.

 

“Investment Property” means all present and future investmentproperty, securities, stocks, bonds, debentures, debt securities, partnershipinterests, limited liability company interests, options, security entitlements,securities accounts, commodity contracts, commodity accounts, and all financialassets held in any securities account or otherwise, and all options andwarrants to purchase any of the foregoing, wherever located, and all othersecurities of every kind, whether certificated or uncertificated.

 

“Loan Documents” means, collectively, this Agreement, theRepresentations, and all other present and future documents, instruments andagreements between PFG and Borrower, including, but not limited to thoserelating to this Agreement, and all amendments and modifications thereto andreplacements therefor.

 

“Material Adverse Change” means any of the following: (i) amaterial adverse change in the business, operations, or financial or othercondition of the Borrower, or (ii) a material impairment of the prospect ofrepayment of any portion of the Obligations; or (iii) a material impairment ofthe value or priority (subject to Permitted Liens) of PFG’s security interestsin the Collateral.

 

“Obligations” means all present and future Loans, advances,debts, liabilities, obligations, guaranties, covenants, duties and indebtednessat any time owing by Borrower to PFG, whether evidenced by this Agreement orany note or other instrument or document, or otherwise, whether arising from anextension of credit, opening of a letter of credit, banker’s acceptance, loan,guaranty, indemnification or otherwise, whether direct or indirect (including,without limitation, those acquired by assignment and any participation by PFGin Borrower’s debts owing to others), absolute or contingent, due or to becomedue, including, without limitation, all interest, charges, expenses, fees,attorney’s fees, expert witness fees, audit fees, collateral monitoring fees,closing fees, facility fees, termination fees, minimum interest charges and anyother sums chargeable to Borrower under this Agreement or under any other LoanDocuments.

 

“Other Property” means the following as defined in theCalifornia Uniform Commercial Code in effect on the date hereof with suchadditions to such term as may hereafter be made, and all rights relatingthereto: all present and future “commercial tort claims” (including withoutlimitation any commercial tort claims identified in the Representations),“documents”, “instruments”, “promissory notes”, “chattel paper”, “letters ofcredit”, “letter-of-credit rights”, “fixtures”, “farm products” and “money”;and all other goods and personal property of every kind, tangible andintangible, whether or not governed by the California Uniform Commercial Code.

 

“Parent” means Interwave Communications International Ltd., aBermuda corporation.

 

“Payment” means all checks, wire transfers and other items ofpayment received by PFG (including proceeds of Accounts and payment of theObligations in full) for credit to Borrower’s outstanding Loans or, if thebalance of the Loans have been reduced to zero, for credit to its DepositAccounts.

 

“Permitted Indebtedness” means (a) the Loans and otherObligations; and (b)        Indebtednessexisting on the date hereof and shown on Exhibit C hereto; (c) SubordinatedDebt; (d) Indebtedness owing to Senior Lender not to exceed the Senior DebtLimit specified in the Schedule; (d) other Indebtedness secured by PermittedLiens; and (e) reimbursement obligations in respect of letters of credit in anaggregate face amount outstanding not to exceed $1,000,000 at any timeoutstanding, which has been reported to PFG, and, in the case of reimbursementobligations to the Senior Lender in respect of letters of credit not exceedingthe Senior Debt Limit (taking into account all Indebtedness to the SeniorLender).

 

“Permitted Investments” are: (a)          Investments (if any) shown on Exhibit C heretoand existing on the date hereof; (b) marketable direct obligations issued orunconditionally guaranteed by the United States or its agency or any Statematuring within 1 year from its acquisition; (c) commercial paper maturingno more than 1 year after its creation and having the highest rating fromeither Standard & Poor’s Corporation or Moody’s Investors Service,Inc; (d) bank’s certificates of deposit issued maturing no more than 1year after issue; (e) Investments consisting of deposit accounts and investment accounts; (f)Investments consisting of extensions of credit to Borrower’s customers in theordinary course of business, in the nature of accounts receivable, prepaidroyalties or notes receivable arising from the sale or lease of goods, provisionof services or licensing activities of Borrower; (g) Investments received insatisfaction or partial satisfaction of obligations owed by financiallytroubled obligors or acquired as a result of a foreclosure with respect to anysecured Investment; (h) Investments acquired in exchange for any otherInvestments in connection with or as a result of any bankruptcy, workout,reorganization

 

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or recapitalization; (i) deposits,prepayments and other credits to suppliers made in the ordinary course ofbusiness; (j) other Investments in an aggregate amount at any time not toexceed $250,000 combined for all such Investments of Borrower, Parent andAdvanced; (k) Indebtedness of any wholly-owned Subsidiary of Borrower, or anywholly-owned Subsidiary of Parent, which is now or hereafter owing to Borrower,and which is incurred to fund such Subsidiary’s operating expenses, prepaymentsand purchases, all in the ordinary course of business; and (l) Indebtedness ofParent to Borrower which is incurred by Parent to fund operating expenses,prepayments and purchases, all in the ordinary course of business, of awholly-owned Subsidiary of Parent.

 

“Permitted Liens” means the following:  (i) purchase money security interests in specific items ofEquipment (including accessions, additions, parts, replacements, fixtures,improvements and attachments thereto and the proceeds thereof); (ii) leases ofspecific items of Equipment (including accessions, additions, parts, replacements,fixtures, improvements and attachments thereto and the proceeds thereof); (iii)liens for taxes, fees, assessments or other governmental charges or levies notyet payable or being contested in good faith by appropriate proceedings, forwhich Borrower has maintained reserves in accordance with GAAP, and which donot result in a lien on any Collateral; (iv) additional security interests andliens consented to in writing by PFG, which consent may be withheld in its goodfaith business judgment; (v) security interests being terminated substantiallyconcurrently with this Agreement; (vi) liens of materialmen, mechanics,warehousemen, carriers, or other similar liens arising in the ordinary courseof business and securing obligations which are not delinquent; (vii) liensincurred in connection with the extension, renewal or refinancing of theindebtedness secured by liens of the type described above in clauses (i) or(ii) above, provided that any extension, renewal or replacement lien is limitedto the property encumbered by the existing lien and the principal amount of theindebtedness being extended, renewed or refinanced does not increase; (viii)Liens in favor of customs and revenue authorities which secure payment ofcustoms duties in connection with the importation of goods; and (ix) Liens infavor of Senior Lender securing an amount not in excess of the Senior DebtLimit; (x) Liens listed on Exhibit C hereto; (xi) non-exclusive licenses andnon-exclusive sublicenses granted in the ordinary course of business; (xii)leases and subleases granted in the ordinary course of business consisting of(A) short-term rental of Inventory, or (B) leases or subleases of Equipmentwith an aggregate value for all such leases and subleases not in excess of$10,000; (xiii) pledges or deposits in the ordinary course of business inconnection with workers’ compensation, unemployment insurance and socialsecurity legislation, in an aggregate amount not to exceed $25,000 or asotherwise required by law; (xiv) cash deposits to secure the performance ofbids, trade contracts (other than for borrowed money), contracts for thepurchase of property, leases, statutory obligations, surety and appeal bonds,performance bonds and other obligations of a like nature, in each case, incurredin the ordinary course of business and not representing an obligation forborrowed money; (xv) statutory, common law or contractual liens of depositoryinstitutions or institutions holding securities accounts (including rights ofset-off), securing only customary charges and fees in connection with suchaccounts; and (xvi) Liens on insurance proceeds securing the payment offinanced insurance premiums, and (xvii) pledges of cash to secure letters ofcredit permitted by clause (e) of the definition of PermittedIndebtedness.  PFG will have the rightto require, as a condition to its consent under subparagraph (iv) above, thatthe holder of the additional security interest or lien sign an intercreditoragreement on PFG’s then standard form, acknowledge that the security interestis subordinate to the security interest in favor of PFG, and agree not to takeany action to enforce its subordinate security interest so long as anyObligations remain outstanding, and that Borrower agree that any uncureddefault in any obligation secured by the subordinate security interest shallalso constitute an Event of Default under this Agreement.

 

“Person” means any individual, sole proprietorship, partnership,joint venture, trust, unincorporated organization, association, corporation,government, or any agency or political division thereof, or any other entity.

 

 “Representations” meansthe written Representations and Warranties provided by Borrower to PFG referredto in the Schedule.

 

“Reserves” means, as of any date of determination, such amountsas PFG may from time to time establish and revise in its good faith businessjudgment, reducing the amount of Loans, and other financial accommodationswhich would otherwise be available to Borrower under the lending formula(s) providedin the Schedule:  (a) to reflect events,conditions, contingencies or risks which, as determined by PFG in its goodfaith business judgment, do or may adversely affect (i) the Collateral or anyother property which is security for the Obligations or its value (includingwithout limitation any increase in delinquencies of Accounts), (ii) the assets,business or prospects of Borrower or any Guarantor, or (iii) the securityinterests and other rights of PFG in the Collateral (including theenforceability, perfection and priority thereof); or (b) to reflect PFG’s goodfaith belief that any collateral report or financial information furnished byor on behalf of Borrower or any Guarantor to PFG is or may have beenincomplete, inaccurate or misleading in any material respect; or (c) in respectof any state of facts which PFG determines in good faith constitutes an Eventof Default or may, with notice or passage of time or both, constitute an Eventof Default.

 

“Senior Lender”, “Senior Debt” and “Senior Debt Limit”have the meanings set forth in Section 8 of the Schedule.

 

13

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“Subsidiary” means (a) any corporation of which morethan 50% of the issued and outstanding equity securities having ordinaryvoting power to elect a majority of the Board of Directors of such corporationis at the time directly or indirectly owned or controlled by Borrower,(b) any partnership, joint venture, or other association of which morethan 50% of the equity interest having the power to vote, direct orcontrol the management of such partnership, joint venture or other associationis at the time directly or indirectly owned and controlled by Borrower,(c) any other entity included in the financial statements of Borrower on aconsolidated basis.

 

Other Terms. All accounting terms used in this Agreement, unless otherwise indicated,shall have the meanings given to such terms in accordance with GAAP,consistently applied.  All other termscontained in this Agreement, unless otherwise indicated, shall have themeanings provided by the Code, to the extent such terms are defined therein.

 

# ***9.***              GENERAL PROVISIONS.

# *** ***

***9.1 Interest Computation; Float Charge.***  In computing interest on the Obligations,all Payments received after 12:00 Noon Pacific Time on any day shall be deemedreceived on the next Business Day.

 

***9.2 Application of Payments. ***Allpayments with respect to the Obligations may be applied, and in PFG’s goodfaith business judgment reversed and re-applied, to the Obligations, in suchorder and manner as PFG shall determine in its good faith business judgment.

 

***9.3 Charges to Accounts. ***PFGmay, in its discretion, require that Borrower pay monetary Obligations in cashto PFG, or charge them to Borrower’s Loan account, in which event they willbear interest at the same rate applicable to the Loans.

 

***9.4 Monthly Accountings.***  PFG shall provide Borrower monthly with an account of advances,charges, expenses and payments made pursuant to this Agreement.  Such account shall be deemed correct, accurateand binding on Borrower and an account stated (except for reverses andreapplications of payments made and corrections of errors discovered by PFG),unless Borrower notifies PFG in writing to the contrary within one year aftersuch account is rendered, describing the nature of any alleged errors oromissions.

 

***9.5 Notices.*** All notices to be given under this Agreement shall be in writing andshall be given either personally or by reputable private delivery service or byregular first-class mail, or certified mail return receipt requested, addressedto PFG or Borrower at the addresses shown in the heading to this Agreement, orat any other address designated in writing by one party to the other party. Allnotices shall be deemed to have been given upon delivery in the case of noticespersonally delivered, or at the expiration of one Business Day followingdelivery to the private delivery service, or two Business Days following thedeposit thereof in the United States mail, with postage prepaid.

 

***9.6 Severability.*** Should any provision of this Agreement be held by any court of competentjurisdiction to be void or unenforceable, such defect shall not affect theremainder of this Agreement, which shall continue in full force and effect.

 

***9.7 Integration.*** This Agreement and such other written agreements, documents andinstruments as may be executed in connection herewith are the final, entire andcomplete agreement between Borrower and PFG and supersede all prior andcontemporaneous negotiations and oral representations and agreements, all ofwhich are merged and integrated in this Agreement.  There are no oral understandings, representations or agreementsbetween the parties which are not set forth in this Agreement or in otherwritten agreements signed by the parties in connection herewith.

 

***9.8 Waivers; Indemnity.***  The failure of PFG at any time or times to require Borrower tostrictly comply with any of the provisions of this Agreement or any other LoanDocument shall not waive or diminish any right of PFG later to demand andreceive strict compliance therewith. Any waiver of any default shall not waive or affect any other default,whether prior or subsequent, and whether or not similar.  None of the provisions of this Agreement orany other Loan Document shall be deemed to have been waived by any act orknowledge of PFG or its agents or employees, but only by a specific writtenwaiver signed by an authorized officer of PFG and delivered to Borrower.  To the extent permitted by law, Borrowerwaives the benefit of all statutes of limitations relating to any of theObligations or this Agreement or any other Loan Document, and Borrower waivesdemand, protest, notice of protest and notice of default or dishonor, notice ofpayment and nonpayment, release, compromise, settlement, extension or renewalof any commercial paper, instrument, account, General Intangible, document orguaranty at any time held by PFG on which Borrower is or may in any way beliable, and notice of any action taken by PFG, unless expressly required bythis Agreement. Borrower hereby agrees to indemnify PFG and its affiliates,subsidiaries, parent, directors, officers, employees, agents, and attorneys,and to hold them harmless from and against any and all claims, debts,liabilities, demands, obligations, actions, causes of action, penalties, costsand expenses (including reasonable attorneys’ fees), of every kind, which theymay sustain or incur based upon or arising out of any of the Obligations, orany relationship or agreement between PFG and Borrower, or any other matter,relating to Borrower or the Obligations; provided that this indemnity shall notextend to damages proximately caused by the indemnitee’s own gross negligenceor willful misconduct.  Notwithstandingany provision in this Agreement to the contrary, the indemnity agreement setforth in this Section shall survive any termination of this Agreement andshall for all purposes continue in full force and effect.

 

14

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***9.9 [intentionally omitted]***

 

***9.10 Amendment.*** The terms and provisions of this Agreement may not be waived or amended,except in a writing executed by Borrower and a duly authorized officer of PFG.

 

***9.11 Time of Essence.*** Time is of the essence in the performance by Borrower of each and everyobligation under this Agreement.

 

***9.12 Attorneys Fees and Costs.***  Borrower shall reimburse PFG for allreasonable attorneys’ fees and all filing, recording, search, title insurance,appraisal, audit, and other reasonable costs incurred by PFG, pursuant to, orin connection with, or relating to this Agreement (whether or not a lawsuit isfiled), including, but not limited to, any reasonable attorneys’ fees and costsPFG incurs in order to do the following: prepare and negotiate this Agreementand all present and future documents relating to this Agreement; obtain legaladvice in connection with this Agreement or Borrower; enforce, or seek toenforce, any of its rights; prosecute actions against, or defend actions by,Account Debtors; commence, intervene in, or defend any action or proceeding;initiate any complaint to be relieved of the automatic stay in bankruptcy; fileor prosecute any probate claim, bankruptcy claim, third-party claim, or otherclaim; examine, audit, copy, and inspect any of the Collateral or any ofBorrower’s books and records; protect, obtain possession of, lease, dispose of,or otherwise enforce PFG’s security interest in, the Collateral; and otherwiserepresent PFG in any litigation relating to Borrower. If either PFG or Borrowerfiles any lawsuit against the other predicated on a breach of this Agreement,the prevailing party in such action shall be entitled to recover its reasonablecosts and attorneys’ fees, including (but not limited to) reasonable attorneys’fees and costs incurred in the enforcement of, execution upon or defense of anyorder, decree, award or judgment.  Allattorneys’ fees and costs to which PFG may be entitled pursuant to thisParagraph shall immediately become part of Borrower’s Obligations, shall be dueon demand, and shall bear interest at a rate equal to the highest interest rateapplicable to any of the Obligations.

 

***9.13 Benefit of Agreement.***  The provisions of this Agreement shall be binding upon and inureto the benefit of the respective successors, assigns, heirs, beneficiaries andrepresentatives of Borrower and PFG; provided, however, that Borrower may notassign or transfer any of its rights under this Agreement without the priorwritten consent of PFG, and any prohibited assignment shall be void.  No consent by PFG to any assignment shallrelease Borrower from its liability for the Obligations.

 

***9.14 [intentionally omitted]***

 

***9.15 [intentionally omitted]***

 

***9.16 Confidentiality.*** In handling any confidential information, PFG and all employeesand agents of PFG shall exercise the same degree of care that PFG exerciseswith respect to its own proprietary information of the same types to maintainthe confidentiality of any non-public information thereby received or receivedpursuant to this Agreement, except that disclosure of such information may bemade (i) to the subsidiaries or affiliates of PFG in connection with theirpresent or prospective business relations with Borrower or PFG provided thatthey have entered into a comparable confidentiality agreement in favor ofBorrower, (ii) to prospective transferees or purchasers of any interest in theLoans, provided that they have entered into a comparable confidentialityagreement in favor of Borrower, (iii) as required by law, regulations, rule ororder, subpoena, judicial order or similar order, or (iv) as may be required inconnection with the examination, audit or similar investigation of PFG, (iv) asmay be necessary in PFG’s good faith business judgment in connection with the enforcementof its rights or remedies after an Event of Default.  Confidential information hereunder shall not include informationthat either:  (a) is in the publicdomain or in the knowledge or possession of PFG when disclosed to PFG, orbecomes part of the public domain after disclosure to PFG through no fault ofPFG; or (b) is disclosed to PFG by a third party, provided PFG does not haveactual knowledge that such third party is prohibited from disclosing suchinformation.

 

***9.17 Paragraph Headings; Construction.***  Paragraph headings are only used in thisAgreement for convenience.  Borrower andPFG acknowledge that the headings may not describe completely the subjectmatter of the applicable paragraph, and the headings shall not be used in anymanner to construe, limit, define or interpret any term or provision of thisAgreement. This Agreement has been fully reviewed and negotiated between theparties and no uncertainty or ambiguity in any term or provision of thisAgreement shall be construed strictly against PFG or Borrower under any rule ofconstruction or otherwise.

 

***9.18 Governing Law; Jurisdiction; Venue.***  This Agreement and all acts and transactionshereunder and all rights and obligations of PFG and Borrower shall be governedby the laws of the State of California. As a material part of the consideration to PFG to enter into thisAgreement, Borrower (i) agrees that all actions and proceedings relatingdirectly or indirectly to this Agreement shall, at PFG’s option, be litigatedin courts located within California, and that the exclusive venue thereforshall be San Francisco County; (ii) consents to the jurisdiction and venue ofany such court and consents to service of process in any such action orproceeding by personal delivery or any other method permitted by law; and (iii)waives any and all rights Borrower may have to object to the jurisdiction ofany such court, or to transfer or change the venue of any such action orproceeding.

 

15

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***9.19 Mutual Waiver of Jury Trial.*  BORROWER AND PFG EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY INANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO,THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEENPFG AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF PFG OR BORROWER OR ANYOF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONSAFFILIATED WITH PFG OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHERSOUNDING IN CONTRACT OR TORT OR OTHERWISE.**

 
| **Borrower:** | **PFG:**                                  |
|---------------|-------------------------------------------|
|          |                                      |
|          | **INTERWAVE  COMMUNICATIONS, INC.**  | **PARTNERS  FOR GROWTH, L.P.** |
|          |                                      |   |
|          |                                      |   |
|          | **By**                                    | /s/ Cal R. Hoagland |   | **By** | /s/ Andrew Kahn |   |
|          |                                      | **President  or Vice President** |   | **Title** | Manager, Partners for  Growth, LLC |   |
|          |                                      |   |   |   | Its General Partner |   |
|               |                                           |  |  |  |  |  |  |

 

16

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***PARTNERS FOR GROWTH***

 

**Schedule to**

 

**Loanand Security Agreement**

 
| **Borrower:** |   | **INTERWAVE  COMMUNICATIONS, INC.**                      |
|---------------|--------|----------------------------------------------------------|
|          |   |                                                     |
| **Address:**  |   | **2495 Leghorn,  Mountain View, California  94043** |
|          |   |                                                     |
| **Date:**     |   | **June 4, 2004**                                    |

 

This Schedule forms an integral part of the Loan and SecurityAgreement between PARTNERS FOR GROWTH, L.P. and the above-borrower of evendate.

 

**1.  CREDIT LIMIT**

(Section 1.1):

An amount not to exceed the lesser of (a) **$1,500,000** (the “DollarCredit Limit”) at any one time outstanding, or (b) an amount equal to the sumof the following:

 

(1)           up to**80%** (an “Advance Rate”) of the amount ofBorrower’s Eligible Accounts-Domestic (as defined in Section 8 above);plus

 

(2)           up to**80%** (an “Advance Rate”) of the amount ofBorrower’s Eligible Accounts-Foreign (as defined in Section 8 above); plus

 

(3)           up to**100%** (an “Advance Rate”) of the amount ofBorrower’s Eligible Accounts-LC Supported (as defined in Section 8 above);plus

 

(4)           up to**75%** (an “Advance Rate”) of the amount ofBorrower’s Eligible Purchase Orders (as defined in Section 8 above); plus

 

(5)           up to **50%** (an “Advance Rate”) of the value ofBorrower’s Eligible Inventory (as defined in Section 8 above),  calculated at the lower of cost or marketvalue and determined on a first-in, first-out basis.

 

PFG may, from time to time, modify the Advance Rates, in its good faithbusiness judgment, upon notice to the Borrower, based on changes in collectionexperience with respect to Accounts, its evaluation of the Inventory or otherissues or factors relating to the Accounts, Inventory or other Collateral.

 

1

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|                                  |   | Borrower shall have the right to repay and reborrow Loans hereunder,  subject to all of the terms and conditions of this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|---------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **2.  INTEREST.**                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **Interest Rate** (Section 1.2): |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                  |   | A rate equal to 1.5% per month. Interest shall be calculated on the  basis of a 360-day year and a year of twelve months of 30 days each for the  actual number of days elapsed.                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **3.  FEES** (Section 1.4): |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                  |   | Loan Fee:                                            $15,000,  payable concurrently herewith. PFG acknowledges that it has already received  from Borrower $5,000 of the Loan Fee.

                                                                                                                                                                                                                 |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Unused Line Fee:                      |   | In the event, in any calendar month (or portion thereof at the  beginning and end of the term hereof), the average daily principal balance of  the Loans outstanding during the month is less than the amount of the Dollar  Credit Limit, Borrower shall pay PFG an unused line fee in an amount equal to  0.25% of the difference between the amount of the Dollar Credit Limit and the  average daily principal balance of the Loans outstanding during the month,  computed on the basis of a 360-day year, which unused line fee shall be  computed and paid monthly, in arrears, on the first day of the following  month. |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **4.  MATURITY DATE**            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (Section 6.1):                   |   | 364 days from the date of this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **5.  FINANCIAL COVENANTS**      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (Section 5.1):                   |   | Borrower shall cause Parent to comply with each of the following  covenants.  Compliance shall be  determined as of the end of each month:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **Minimum Tangible**                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **Net Worth:**                        |   | Parent shall maintain a Tangible Net Worth of not less than an amount  equal to $750,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **Definitions.**                      |   | For purposes of the foregoing financial covenants, the following term  shall have the following meaning:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

 

2

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|                    |   | “Tangible Net Worth” shall mean, on a consolidated basis, the excess  of total assets less total liabilities, determined in accordance with GAAP,  with the following adjustments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                    |   | (A) there shall be excluded from assets:  (i) notes, accounts receivable and other obligations owing to  Borrower from its officers or other Affiliates, and (ii) all assets which  would be classified as intangible assets under GAAP, including without  limitation goodwill, licenses, patents, trademarks, trade names, copyrights,  capitalized software and organizational costs, licenses and franchises, and  (iii) minority Investments in other Persons.                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                    |   | (B) there shall be excluded from liabilities:  all indebtedness which is subordinated to  the Obligations under a subordination agreement in form specified by PFG or  by language in the instrument evidencing the indebtedness which PFG agrees in  writing is acceptable to PFG in its good faith business judgment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| **6.  REPORTING.** |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (Section 5.3):     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                    |   | Borrower shall provide PFG with the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                    |   | (a)          Monthly borrowing base report, in such form  as PFG shall specify, within five Business Days after the end of each month,  and borrowing base reports at such other times as PFG shall from time to time  request in its good faith business judgment.   Said borrowing base shall not include any Accounts or other Collateral  with respect to which Senior Lender has any outstanding loans or other  extensions of credit.  Borrower shall  also provide PFG with a listing of Accounts and other Collateral submitted to  Senior Lender for financing, at the time so submitted, and Borrower shall not  finance with Senior Lender any Accounts or other Collateral previously  included in any borrowing base report provided to PFG, if the same would  result in an Overadvance under Section 1.3 hereof. |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                    |   | (b)         Monthly accounts receivable agings, aged by  invoice date, within five Business Days after the end of each month.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                    |   | (c)          Monthly accounts payable agings, aged by  invoice date, and outstanding or held check registers, if any, within five  Business Days after the end of each month.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                    |   | (d)         Monthly reconciliations of accounts  receivable agings (aged by invoice date), and general ledger, within ten  Business Days after the end of each month.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

 

3

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|   |   | (e)          Monthly perpetual inventory reports for the  Inventory valued on a first-in, first-out basis at the lower of cost or  market (in accordance with GAAP) or such other inventory reports as are  requested by PFG in its good faith business judgment, all within five  Business Days after the end of each month.                                                                                                                                                                                                                                                                                                                                                                          |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (f)            If requested by PFG, monthly unaudited  financial statements of Parent, as soon as available, and in any event within  thirty days after the end of each month.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (g)         Monthly Compliance Certificates, within  thirty days after the end of each month, in such form as PFG shall reasonably  specify, signed by the Chief Financial Officer of Borrower, certifying that  as of the end of such month Borrower was in full compliance with all of the  terms and conditions of this Agreement, and setting forth calculations  showing compliance with the financial covenants set forth in this Agreement  and such other information as PFG shall reasonably request, including,  without limitation, a statement that at the end of such month there were no  held checks.                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (h)         Quarterly unaudited financial statements of  Parent, as soon as available, and in any event within forty-five days after  the end of each fiscal quarter of Parent. If Parent files a form 10-Q with  the Securities and Exchange Commission and the same is available within said  period through EDGAR, that will satisfy this requirement.                                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)             If requested by PFG, annual operating  budgets (including income statements, balance sheets and cash flow  statements, by month) for the upcoming fiscal year of Parent within thirty  days prior to the end of each fiscal year of Parent, and commensurate with  those provided to Parent’s Board of Directors and utilized by Parent’s  executive management.                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (j)             Annual financial statements of Parent,  as soon as available, and in any event within 90 days following the end of  Parent’s fiscal year (or such shorter time as may be required by the  Securities and Exchange Commission for the filing by Parent of a form 10-K),  certified by, and with an unqualified opinion of, independent certified  public accountants acceptable to PFG. Burr, Pilger & Mayer LLP, Parent’s  present accounting firm, is acceptable to PFG.  If Parent files a form 10-K with the Securities and Exchange  Commission and the same is available within said period through EDGAR, that  will satisfy this requirement. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (k)          Copies of all reports and statements  provided by Borrower and Parent to the Senior Lender at the same time the  same are provided to the Senior Lender, and a listing with such                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

 

4

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|                               |                                                                                                                                                                                                                                                                                                                                                                                                         | frequency as PFG shall request, showing all Accounts financed by the  Senior Lender.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **7.  BORROWER INFORMATION:** |                                                                                                                                                                                                                                                                                                                                                                                                         |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                               | Borrower represents and warrants that the information set forth in  the Representations and Warranties of the Borrower dated                             ,  previously submitted to PFG (the “Representations”) is true and correct as of  the date hereof. |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                         |
| **8.  ADDITIONAL PROVISIONS** |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                         | (a)          **Senior Lender.**  As used herein, “Senior Lender” means **Silicon Valley Bank**.  Borrower shall not permit the total Senior  Debt (as defined below) to exceed **$2,500,000** at any time outstanding (the  “Senior Debt Limit”), including, but not limited to, monies borrowed by  Borrower, interest on loans due from Borrower, fees and expenses for which  Borrower is obligated, sums due from Borrower in connection with issuance of  commercial letters of credit, issuance of forward contracts for foreign  exchange reserve, and any other direct or indirect financial accommodation  Senior Lender may provide to Borrower. As used herein, “Senior Debt”  means total combined Indebtedness of Borrower, Parent and Advanced to Senior  Lender. |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                         | (b)         **Deposit Accounts.**  Concurrently, Borrower shall cause the  banks and other institutions where its Deposit Accounts are maintained to  enter into control agreements with PFG, in form and substance satisfactory to  PFG in its good faith business judgment and sufficient to perfect PFG’s  security interest in said Deposit Accounts; provided that Borrower may have  up to 45 days after the date hereof to cause Wells Fargo Bank to enter into  such a control agreement.  Said control  agreements shall permit PFG, in its discretion (but subject to the rights of  the Senior Lender), to withdraw from said Deposit Accounts accrued interest  and any other Obligations due from Borrower to PFG.                                                                               |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                         | (c)          **Subordination of Inside Debt**.  All present and future indebtedness of  Borrower to its officers, directors and shareholders (“Inside Debt”) shall,  at all times, be subordinated to the Obligations pursuant to a subordination  agreement on PFG’s standard form.   Borrower represents and warrants that there is no Inside Debt  presently outstanding.  Prior to                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |

 

5

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|   |   | incurring any Inside Debt in the future, Borrower shall cause the  person to whom such Inside Debt will be owed to execute and deliver to PFG a  subordination agreement on PFG’s standard form.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   | (d)         **Other Debt Financing—Right of First Refusal. **Borrower hereby grants PFG a  right of first refusal to provide any future debt financing which Borrower  desires.  Prior to entering into any  agreement with any other Person to provide Borrower with debt financing,  Borrower shall advise PFG in writing of the proposed terms of the same and  provide PFG with copies of all proposal letters, commitment letters, proposed  loan documents and other documents relating to the other financing, and PFG  shall have 10 days after receipt of all of the foregoing to agree in writing  to provide debt financing to Borrower on the same terms and conditions. If  PFG does not do so, Borrower may proceed to obtain the debt financing from  the other Person on the terms and conditions advised to PFG, but in the event  of a change in the proposed terms, Borrower shall again give PFG the right of  first refusal to provide the debt financing on such changed terms as provided  above.  The foregoing right of first  refusal shall terminate 90 days after termination of this Agreement and  payment in full of all of the monetary Obligations. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   | (e)          **Guaranty—Affiliate. **Concurrently, Borrower shall cause Advanced to execute and  deliver to PFG a Continuing Guaranty with respect to all of the Obligations,  and a Security Agreement granting PFG a security interest in all of its  assets (subject to “Permitted Liens” as therein defined), and certified  resolutions or other evidence of authority with respect to the execution and  delivery of such Guaranty and Security Agreement, all pursuant to  documentation acceptable to PFG in its good faith business judgment.  Throughout the term of this Agreement  Borrower shall cause such Guaranty and Security Agreement to continue in full  force and effect.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   | (f)            **Guaranty—Parent. **Within 30 days after the date hereof, Borrower shall cause  Parent to execute and deliver to PFG a Continuing Guaranty with respect to  all of the Obligations, and a Security Agreement granting PFG a security  interest in all of its assets (subject to “Permitted Liens” as therein  defined), and certified resolutions or other evidence of authority with  respect to the execution and delivery of such Guaranty and Security  Agreement, all pursuant to documentation acceptable to PFG in its good faith  business judgment.  Throughout the  term of this Agreement Borrower shall cause such Guaranty and Security  Agreement to continue in full force and effect.                                                                                                                                                                                                                                                                                                                                                                                                                                            |

 

6

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|   |   | (g)         **Other Affiliates.**  Borrower represents and warrants that,  except for Advanced and Borrower, Parent does not have any other direct or  indirect Subsidiaries, except for Subsidiaries which do not have assets with  a net book value in excess of $250,000, in the aggregate for all such  Subsidiaries. Except for Advanced and Borrower, Borrower shall not permit  Parent in the future to have any other direct or indirect Subsidiaries,  except for (i) Subsidiaries which do not have assets with a net book value in  excess of $250,000, in the aggregate for all such Subsidiaries, (ii)  Subsidiaries organized under the laws of jurisdictions outside the United  States, and (iii) Subsidiaries which have executed and delivered to PFG a  Continuing Guaranty with respect to all of the Obligations, and a Security  Agreement granting PFG a security interest in all of their assets, and  certified resolutions or other evidence of authority with respect to the  execution and delivery of such Guaranty and Security Agreement, all pursuant  to documentation acceptable to PFG in its good faith business judgment, all  of which continues in full force and effect. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   | (h)         **Intellectual Property Security Agreements. **Borrower, Advanced and Parent  are concurrently executing and delivering to PFG Intellectual Property  Security Agreements.  Borrower shall  provide PFG with the Exhibits to all such Security Agreements of Borrower,  Advanced and Parent which list their respective trademarks and patents, within  15 days after the date hereof.****None of Borrower, Advanced or Parent  have any copyrights registered with the United States Copyright Office.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

 
| **Borrower:** | **PFG:**                                  |
|---------------|-------------------------------------------|
|          |                                      |
|          | **INTERWAVE  COMMUNICATIONS, INC.**  | **PARTNERS  FOR GROWTH, L.P.** |
|          |                                      |   |
|          |                                      |   |
|          | **By**                                    | /s/ Cal R. Hoagland |   | **By** | /s/ Andrew Kahn |   |
|          |                                      | **President  or Vice President** |   | **Title** | Manager, Partners for  Growth, LLC |   |
|          |                                      |   |   |   | Its General Partner |   |
|               |                                           |  |  |  |  |  |  |

 

7

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WARRANTPURCHASE AGREEMENT

 

Interwave Communications International Ltd.

2495 Leghorn Street

Mountain View, California 94043, USA 

 

Ladies & Gentlemen: 

 

This Warrant Purchase Agreement (the “Agreement”) is made as of June 4,2004 (the “Closing Date”) by and between Interwave Communications InternationalLtd. (NASDAQ: IWAV), a Bermuda company (the “Company”), and Partners ForGrowth, L.P., a Delaware limited partnership (“Purchaser”). 

 

In consideration of the payment of $570 and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereto covenant and agree as follows: 

 

1.               Authorization andPurchase of the Warrant. 

 

(A)  Authorization of theWarrant.  As of the Closing Date,  the Company’s Board of Directors hasauthorized the issuance by the Company and the sale to the Purchaser of awarrant (the “Warrant”) to purchase 57,000 fully paid and nonassessable commonshares, par value $0.01 per share (the “Common Shares”), of the Company, all asmore fully described, and subject to the conditions set forth below and in theform of Warrant annexed hereto as Exhibit 1. The Common Shares issuable upon exercise of the Warrant are hereinreferred to as the “Warrant Shares;” and the Warrant and the Warrant Shares aresometimes herein together referred to as the “Securities.” 

 

(B)  Purchase of Warrant.  Subject to the terms and conditions setforth below and in the Warrant, the Company shall issue to Purchaser theWarrant in consideration of the payment of $570 and for other good and valuableconsideration.   

 

2.   The Closing.  The closing of the purchase and sale of theWarrant to Purchaser (the “Closing”) shall be held at the offices of Partnersfor Growth, L.P., 560 Mission Street, Third Floor, San Francisco, CA 94105, orat such other location as may be mutually agreed upon by the partieshereto.  On the Closing Date the Companyshall deliver to Purchaser the Warrant registered in the name of Purchaser. 

 

3.   Representations, Warrantiesand Covenants of the Company.  Except asset forth in the Schedule of Exceptions attached hereto, the Company representsand warrants to, and covenants with, the Purchaser as follows: 

 

(A)   Corporate Power;Authorization.  The Company has allrequisite corporate power and has taken all requisite corporate action toexecute and deliver each of this Agreement and the Warrant, to sell and issuethe Securities and to carry out and perform all of its obligations hereunderand thereunder.  Each of this Agreementand the Warrant 

 

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has been duly authorized, executed anddelivered on behalf of the Company and constitutes the valid and bindingagreement of the Company, enforceable in accordance with its terms, except (i)as limited by applicable bankruptcy, insolvency, reorganization or similar lawsrelating to or affecting the enforcement of creditors’ rights generally and(ii) as limited by equitable principles generally.  The person executing this Agreement and the Warrant is a duly authorizedofficer of the Company with all necessary legal authority to bind the Companygenerally and with the specific legal authority to cause the Company to enterinto this Agreement and to execute and deliver the Warrant.  

 

(B)  Validity ofSecurities.  The Warrant, when soldagainst the consideration therefor as provided herein, will be validlyauthorized and issued, fully paid and nonassessable.  The issuance and delivery of the Warrant is not subject topreemptive or any similar rights of the shareholders of the Company or anyliens or encumbrances arising through the Company; and when the Warrant Sharesare issued upon exercise and in accordance with the terms of the Warrant, theywill be validly issued and outstanding, fully paid and nonassessable and freeof any liens or encumbrances arising through the Company. 

 

(C)  Capitalization. Theauthorized capital of the Company consists of 10,000,000 Preferred Shares ofpar value $0.001 each and 20,000,000 Common Shares of par value $0.01, of whichas of June 1, 2004, no Preferred Shares and 9,022,744 Common Shares were issuedand outstanding. All such issued and outstanding shares have been dulyauthorized and validly issued and are fully paid and nonassessable. As of June1, 2004, the Company has 119,670 Common Shares reserved for issuance uponexercise of outstanding options under its 1994 Stock Plan, 1,039,307 CommonShares reserved for issuance upon exercise of outstanding options under its1999 Option Plan, and 385,536 Common Shares reserved for issuance upon exerciseof outstanding options under its 2001 Supplemental Stock Option Plan. As ofJune 1, 2004, the Company has reserved a total of 454,203 Common Shares forissuance upon exercise of outstanding warrants (excluding the sharesexercisable pursuant to the Warrant). As of June 1, 2004, the Company has reserved a total of 56,335 CommonShares available for issuance under its 1999 Employee Stock Purchase Plan. Inaddition, effective upon the Closing, the Company has reserved such number ofCommon Shares as shall be necessary to provide for the exercise of the Warrant.Except as specified above, as of the date of this Warrant there are no otheroptions, warrants, conversion privileges or other contractual rightsoutstanding to purchase or otherwise acquire any authorized but unissued sharesof the Company’s capital stock or other securities, and the Company has not,since June 1, 2004, authorized or issued any shares of its capital stock orother securities. 

 

(D)  SEC Documents; FinancialStatements.  The Company’s Annual Reporton Form 10-K for the fiscal year ended June 30, 2003 (as filed on September 29,2003),  the Company’s Quarterly Reporton Form 10-Q for the three months ended September 30, 2003 (as filed onNovember 14, 2003), the Company’s Quarterly Report on Form 10-Q for the threemonths ended December 31, 2003 (as originally filed on February 17, 2004; asamended and filed on March 2, 2004; and as further amended and filed on March25, 2004), the Company’s Current Report on Form 8-K filed on March 9, 2004, the

 

2

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Company’s Current Report on Form 8-K filed onMarch 25, 2004, the Company’s Current Report on Form 8-K filed on March 31,2004, the Company’s Current Report on Form 8-K filed on April 22, 2004, theCompany’s Quarterly Report on Form 10-Q for the period ending March 31, 2004(as filed on May 14, 2004), all as filed by the Company with the Securities andExchange Commission (the “SEC”) are incorporated herein by reference (the “SECDocuments”).  Each of the SEC Documentsconforms in all material respects to the requirements of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”), as applicable, and therules, regulations and instructions of the Commission thereunder.  Each of the SEC Documents did not as of itsrespective date contain any untrue statement of a material fact or omit tostate a material fact required to be stated therein or necessary to make thestatements made therein, in the light of the circumstances in which they weremade, not misleading.  The financialstatements of the Company included in the SEC Documents (the “FinancialStatements”) comply as to form in all material respects with applicableaccounting requirements and with the published rules and regulations of theCommission with respect thereto.  Exceptas may be indicated in the notes to the Financial Statements, the FinancialStatements have been prepared in accordance with generally accepted accountingprinciples consistently applied and fairly present the consolidated financial positionof the Company and its subsidiaries at the dates thereof.   

 

(E)  No Conflict.  The execution and delivery of this Agreementand the Warrant do not, and the consummation of the transactions contemplatedhereby and thereby will not, conflict with, or result in any violation of, ordefault (with or without notice or lapse of time, or both), or give rise to aright of termination, cancellation or acceleration of any obligation or to aloss of a material benefit, under, any provision of the Memorandum ofAssociation, Bye-Laws or other constitutional documents of the Company, asamended, or any mortgage, indenture, lease or other agreement or instrument,permit, concession, franchise, license, judgment, order, decree, statute, law,ordinance, rule or regulation applicable to the Company, its properties orassets, the effect of which would have a material adverse effect on the Companyor materially impair or restrict its power to perform its obligations ascontemplated hereby or thereby. 

 

(F)  Governmental Consent, etc.Other than approval from the Bermuda Monetary Authority, no consent, approvalor authorization of or designation, declaration or filing with any governmentalauthority on the part of the Company is required in connection with the validexecution and delivery of this Agreement, or the offer, sale or issuance of theWarrant or the Warrant Shares upon exercise of the Warrants, or theconsummation of any other transaction contemplated hereby. 

 

(G)  Authorized and UnissuedCommon Shares.  During the period withinwhich the Warrant may be exercised, the Company will at all times haveauthorized and reserved, for the purpose of issue or transfer upon exercise ofthe Warrant, a sufficient number of authorized but unissued Common Shares, whenand as required to provide for the exercise of the rights represented by thisWarrant. 

 

3

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(H)  Duty to Promptly EnterHolder’s Name in Register of Members.   The Company shall, immediately upon due exercise of the Warrant in fullor in part, and provided that all necessary approvals of the Bermuda MonetaryAuthority have been obtained, enter the name of the Purchaser or otherexercising Holder (as defined in the Warrant), as the case may be, in theRegister of Members of the Company for the appropriate number of shares issuedupon such exercise.  

 

(I)  Company Reports Filed Underthe Exchange Act.  With a view to makingavailable to the Purchaser the benefits of Rule 144 and other rules orregulations of the SEC that may permit the Purchaser to sell Warrant Shares tothe public without registration, the Company shall for a period of two yearsfollowing the date of this Agreement use commercially reasonable efforts to:(a) make and keep public information available, as those terms are understoodand defined in Rule 144, at all times after the Closing; (b) file with the SECin a timely manner all reports and other documents required of the Companyunder the Securities Act and the Exchange Act; and (c) furnish to the Purchaser,so long as the Purchaser owns any Securities within a reasonable period oftime: (i) a written statement by the Company that it has complied with thereporting requirements of Rule 144, the Securities Act and the Exchange Act,and (ii) such other information as may be reasonably requested in order toavail the Purchaser of any rule or regulation of the SEC that permits theselling of any such Securities without registration. 

 

4.  Representations and Warranties of Purchaser.  Purchaser hereby represents and warrants to the Company as of theClosing Date as follows: 

 

(A)  Investment Experience.  Purchaser is an “accredited investor” withinthe meaning of Rule 501 under the Securities Act of 1933, as amended (the“Securities Act”), and was not organized for the specific purpose of acquiringthe Securities.  Purchaser is aware ofthe Company’s business affairs and financial condition and has acquiredsufficient information about the Company to reach an informed and knowledgeabledecision to acquire the Securities. Purchaser has such business and financial experience as is required togive it the capacity to protect its own interests in connection with thepurchase of the Securities.   

 

(B)  Investment Intent.  Purchaser is purchasing the Securities forinvestment for its own account only and not with a view to, or for resale inconnection with, any “distribution” thereof within the meaning of theSecurities Act.  Purchaser understandsthat the Warrant has not been registered under the Securities Act or registeredor qualified under any state securities law in reliance on specific exemptionstherefrom, which exemptions may depend upon, among other things, the bona fidenature of Purchaser’s investment intent as expressed herein. 

 

(C)  Authorization.  Purchaser has all requisite power and hastaken all requisite action to execute and deliver each of this Agreement and tocarry out and perform all of its obligations hereunder.  This Agreement has been duly authorized,executed and delivered on behalf of Purchaser and constitutes the valid andbinding agreement of Purchaser, enforceable in accordance with its terms,except (i) as limited by applicable 

 

4

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bankruptcy, insolvency, reorganization orsimilar laws relating to or affecting the enforcement of creditors’ rightsgenerally and (ii) as limited by equitable principles generally.  The consummation of the transactionscontemplated herein and the fulfillment of the terms herein will not result ina breach of any of the terms or provisions of Purchaser’s partnership agreementor other similar organizational documents. The execution and delivery of thisAgreement and the purchase of the Warrant do not, and the consummation of thetransactions contemplated hereby and thereby will not, conflict with, or resultin any violation of, or default (with or without notice or lapse of time, orboth), or give rise to a right of termination, cancellation or acceleration ofany obligation or to a loss of a material benefit, under, any provision of theLimited Partnership Agreement or other constitutional documents of thePurchaser, as amended, or any mortgage, indenture, lease or other agreement orinstrument, permit, concession, franchise, license, judgment, order, decree,statute, law, ordinance, rule of regulation applicable to the Purchaser, itsproperties or assets, the effect of which would have a material adverse effecton the Purchaser or materially impair or restrict its power to perform itsobligations as contemplated hereby or thereby. 

 

(D)  No Legal, Tax or InvestmentAdvice.  Purchaser understands thatnothing in this Agreement or any other materials presented to Purchaser inconnection with the purchase and sale of the Securities constitutes legal, taxor investment advice. Purchaser has consulted such legal, tax and investmentadvisors as it, in its sole discretion, has deemed necessary or appropriate inconnection with its purchase of the Warrant. 

 

5.  Restrictions on Transfer of Securities; Registrable Securities.  The restrictions on transfer of theSecurities and the registration rights granted to the Purchaser in connectionwith the Securities are as set forth in the Warrant. 

 

6.               Miscellaneous. 

 

(A)  Waivers andAmendments.  This Agreement and any termhereof may be changed, waived, discharged or terminated only by an instrumentin writing signed by the party against which enforcement of such change,waiver, discharge or termination is sought. 

 

(B)  Governing Law; Venue.  This Agreement and the Warrant shall each beconstrued and enforced in accordance with, and the rights of the parties shallbe governed by, the laws of the State of California without regard to conflictof laws.  The parties each irrevocablysubmit to the exclusive jurisdiction of the U.S. state and federal courtslocated in San Francisco, California in connection with any dispute arisingunder this Agreement or the Warrant. 

 

(C)  Survival.  The representations, warranties, covenantsand agreements made herein shall survive any investigation made by the Companyor Purchaser and the Closing. 

 

5

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(D)  Successors andAssigns.  The provisions hereof shallinure to the benefit of, and be binding upon, the successors, assigns, heirs,executors and administrators of the parties hereto (specifically including anyperson that becomes a holder of the Warrant through transfer thereof from thePurchaser, and any other successors in interest to the Securities).  In the event of any merger, amalgamation,consolidation or acquisition involving the Company in which the Company is notthe surviving entity, the Company’s obligations hereunder and under the Warrantshall be expressly or by operation of law assumed by the surviving entity.  

 

(E)  Entire Agreement;Construction.  This Agreement and theWarrant constitute the full and entire understanding and agreement between theparties with regard to the subject hereof. In the event of any conflict between the terms of this Agreement and theterms of the Warrant (including any Schedule attached thereto), the terms ofthe Warrant shall prevail.  The term “$”or “dollars” means United States dollars; the term “including” means “includingwithout limitation”; “days” means business days in the United States, unlessotherwise indicated. 

 

(F)  Notices, etc.  Any notice or other communication givenunder this Agreement shall be sufficient if in writing and sent by personalservice, facsimile, courier service promising overnight delivery or registeredor certified mail, return receipt requested, postage prepaid, to a party at itsaddress set forth below (or at such other address as shall be designated forsuch purpose by such party in a written notice to the other party hereto): 

 

if toPurchaser, at 

 

Partners for Growth, L.P.

560 Mission Street, Third Floor

San Francisco, California 94105

Attention:  Lorraine Nield                

Fax:  (415) 315-7959 

 

with a copy to 

 

Benjamin Greenspan, Esq.

620 Laguna Road 

Mill Valley, CA 94941

(415) 358-4780 

 

or 

 

if to the Company, at 

 

Interwave Communications International, Ltd. 

2495 Leghorn Street 

Mountain View, California 94043, USA 

 

6

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Attention: Chief Financial Officer

Fax:  (650) 967-1029 

 

with a copyto: 

 

Wilson Sonsini Goodrich & Rosati 

650 Page Mill Road 

Palo Alto, CA 94304 

Attention: Christopher D. Mitchell, Esq. 

Telephone (650) 493-9300 

 

or in any case at such other address asPurchaser or the Company shall have furnished to the other in writing. The term“notify” means to give notice in writing as specified above. 

 

(G)  Severability of thisAgreement.  If any provision of thisAgreement shall be judicially determined to be invalid, illegal orunenforceable, the validity, legality and enforceability of the remainingprovisions shall not in any way be affected or impaired thereby. 

 

(H)  Titles and Subtitles.  The titles of the paragraphs andsubparagraphs of this Agreement are for convenience of reference and shall not,by themselves, determine the construction of this Agreement. 

 

(I)  Counterparts.  This Agreement may be executed in any numberof counterparts, each of which shall be an original, but all of which togethershall constitute one instrument. 

 

[Signaturepage follows]

 

7

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Please confirm that the foregoing correctly sets forth the agreementbetween us by signing in the space provided below for that purpose. 

 
|                                                      | PARTNERS FOR GROWTH, L.P.                      |
|-----------------------------------------------------------|------------------------------------------------|
|                                                      |                                           |
|                                                      | /s/ Andrew Kahn                                |   |
|                                                      | By:                                            | Andrew W. Kahn | , Manager of |
|                                                      | Partners for Growth, LLC, its General  Partner |
|                                                      |                                           |
|                                                      |
| AGREED AND ACCEPTED,  as of the date first above written: |
|                                                      |
|                                                      |
| Interwave Communications International Ltd.               |
|                                                      |
|                                                      |
| By:                                                       | /s/ Cal R. Hoagland                            |   |
| Its:                                                      | SVP and CFO                                    |   |
|                                                           |                                                |  |  |  |  |  |  |

 

8

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**WARRANT**

 

THIS WARRANT (THE “WARRANT”) IS ISSUED PURSUANT TO THE TERMS OF THEPROVISIONS OF A WARRANT PURCHASE AGREEMENT (THE “AGREEMENT”) BETWEEN INTERWAVECOMMUNICATIONS INTERNATIONAL LTD. (THE “COMPANY”) AND THE INITIAL WARRANTHOLDER.  A COPY OF SUCH AGREEMENT IS ONFILE AT THE OFFICE OF THE  CORPORATESECRETARY OF THE COMPANY.  THIS SECURITYWAS SOLD IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACTOF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY BE  OFFERED OR SOLD ONLY IF REGISTERED UNDER THESECURITIES ACT OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

 
| Company:          | Interwave Communications International Ltd., a Bermuda company |
|-------------------|----------------------------------------------------------------|
| Number of Shares: | 57,000                                                         |
| Class of Shares:  | Common, par value US$0.01 each                                 |
| Exercise Price:   | $3.60 (subject to adjustment to FMV at closing, if less)       |
| Issue Date:       | June 4, 2004                                              |
| Expiration Date:  | June 4, 2011                                              |

 

The term “Holder” shall initially refer to Partners for Growth, L.P., aDelaware limited partnership, which is the initial holder of this Warrant andshall further refer to any subsequent permitted holder of this Warrant fromtime to time.

 

The Holder is subject to certain restrictions as set forth in theAgreement.

 

The Company does hereby certify and agree that, for the agreed sum of$570 and for other good and valuable consideration, the Holder, or itspermitted successors and assigns, hereby is entitled to purchase from InterwaveCommunications International, Ltd. (the “Company”) Fifty-Seven Thousand(57,000) duly authorized, validly issued, fully paid and non-assessable commonshares, par value US$0.01 each (“Shares”) of the Company upon the terms andsubject to the provisions of this Warrant.

 

**Section 1.****                                          Term,Price and Exercise of Warrant.**

 

1.1                                 Termof Warrant. This Warrant shall be exercisable for a period of seven (7)years after the date hereof (hereinafter referred to as the “Expiration Date”).

 

1.2                                 ExercisePrice.  The price per share at whichthe Shares are issuable upon exercise of this Warrant (the “Warrant Shares”)shall be $3.60, subject to adjustment from time to time as set forth herein(the “Exercise Price”).

 

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1.3                                 Exerciseof Warrant.

 

(a)                                  ThisWarrant may be exercised or converted, in whole or in part, upon surrender tothe Company at its then principal offices in the United States of this Warrantto be exercised, together with the form of election to exercise attached heretoas Exhibit A duly completed and executed, and upon payment to the Company ofthe Exercise Price for the number of Warrant Shares in respect of which thisWarrant is then being exercised.

 

(b)                                 Paymentof the aggregate Exercise Price may be made (i) in cash or by cashier’s or bankcheck or (ii) by converting this Warrant through a Cashless Exercise (asdefined herein).  Upon a “CashlessExercise” the Holder shall receive Shares on a net basis such that, without thepayment of any funds, the Holder shall surrender this Warrant in exchange forthe number of Shares equal to “X” (as defined below), computed using thefollowing formula:

 
|           |      |
|----------------|-----------|
| X  = | Y * (A-B) |   |
|           | A         |   |
|           |      |

 

Where

 
| X      | =      | the number  of Shares to be issued to Holder.                       |
|--------|--------|---------------------------------------------------------------------|
|   |   |                                                                |
| Y      | =      | the number  of Shares to be exercised under this Warrant            |
|   |   |                                                                |
| A      | =      | the fair  market value of one Common Share.                         |
|   |   |                                                                |
| B      | =      | the Exercise  Price (as adjusted to the date of such calculations). |

 

(c)                                  Forpurposes of this Warrant, the fair market value of one Common Share of theCompany shall be, if the Common Shares are listed on a stock exchange orover-the-counter market, the highest closing sale price reported on suchexchange or over-the-counter market for the thirty (30) day period prior to thedate of deterimation of fair market value. If the Common Shares are not tradedover-the-counter or on an exchange, the fair market value of the Company’sCommon Shares shall be the price per share which the Company could obtain froma willing buyer for shares sold by the Company from authorized but unissuedshares, as such price shall be agreed by the Company and the Holder.

 

(d)                                 Subjectto Section 2 hereof, upon surrender of this Warrant, and the dulycompleted and executed form of election to exercise, and payment of theExercise Price or conversion of this Warrant through Cashless Exercise, theCompany shall endeavor to

 

2

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issue and deliver within three (3) business days, but shall in allcases issue and deliver or cause to be issued and delivered within ten (10)calendar days to the Holder or such other person as the Holder may designate inwriting a certificate or certificates for the number of Warrant Shares sopurchased upon the exercise or conversion of this Warrant. Such certificate orcertificates shall be deemed to have been issued and any person so designatedto be named therein shall be deemed to have become a holder of record of suchShares as of the date of the surrender of this Warrant, and the duly completedand executed form of election to exercise, and payment of the Exercise Price orconversion of this Warrant through Cashless Exercise; provided, that if thedate of surrender of this Warrant and payment of the Exercise Price is not abusiness day, the certificates for the Shares shall be issued as of the nextbusiness day (whether before or after the Expiration Date), and, until suchdate, the Company shall be under no duty to cause to be delivered anycertificate for such Shares or for shares of such other class of shares.  If this Warrant is exercised or converted inpart, a new warrant of the same tenor and for the number of Warrant Shares notexercised or converted shall be executed by the Company.

 

1.4                                 FractionalInterests. The Company shall not be required to issue fractions of Sharesupon the exercise of this Warrant.  Ifany fraction of a Common Share would be issuable upon the exercise of thisWarrant (or any portion thereof), the Company shall purchase such fraction foran amount in cash equal to the same fraction of the last  reported sale price of the Common Shares onthe NASDAQ National Market System or any other national securities exchange ormarket on which the Common Shares are then listed or traded.

 

1.5                                 AutomaticConversion upon Expiration.  In theevent that, upon the Expiration Date, the fair market value of one Share (orother security issuable upon the exercise hereof) as determined in accordancewith Section 1.3 above is greater than the Exercise Price in effect onsuch date, then this Warrant shall automatically be deemed on and as of suchdate to be converted pursuant to Section 1.2 above as to all Shares (orsuch other securities) for which it shall not previously have been exercised orconverted, and the Company shall promptly deliver a certificate representingthe Shares ( or such other securities) issued upon such conversion to theHolder.

 

**Section 2.****                                          Exchangeand Transfer of Warrant.**

 

(a)                                  ThisWarrant may be transferred, in whole or in part, without restriction, subjectto (i) the Holder’s delivery of an opinion of counsel in customary form thatsuch transfer is in compliance with applicable securities laws and (ii) thetransferee holder of the new Warrant assumes in writing the obligations of theHolder set forth in the Agreement.  Atransfer may be registered with the Company by submission to it of thisWarrant, together with the annexed Assignment Form attached hereto as Exhibit Bduly completed and executed. After the Company’s receipt of this Warrant andthe Assignment Form so completed and executed, the Company will issue anddeliver to the transferee a new warrant (representing the portion of thisWarrant so transferred) at the same Exercise Price per share and otherwisehaving the same terms and provisions as this Warrant, which the Company willregister in the new holder’s name.  Inthe event of a partial

 

3

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transfer of this Warrant, the Company shall concurrently issue anddeliver to the transferring holder a new warrant that entitles the transferringholder to purchase the balance of this Warrant not so transferred and thatotherwise is upon the same terms and conditions as this Warrant.  Upon the due delivery of this Warrant fortransfer, the transferee holder shall be deemed for all purposes to have becomethe holder of the new warrant issued for the portion of this Warrant sotransferred, effective immediately prior to the close of business on the dateof such delivery, irrespective of the date of actual delivery of the newwarrant representing the portion of this Warrant so transferred.

 

(b)                                 Inthe event of the loss, theft or destruction of this Warrant, the Company shallexecute and deliver an identical new warrant to the Holder in substitutiontherefor upon the Company’s receipt of (i) evidence reasonably satisfactory tothe Company of such event and (ii) if requested by the Company, an indemnityagreement reasonably satisfactory in form and substance to the Company.  In the event of the mutilation of or otherdamage to the Warrant, the Company shall execute and deliver an identical newwarrant to the Holder in substitution therefor upon the Company’s receipt ofthe mutilated or damaged warrant.

 

(c)                                  TheCompany shall pay all costs and expenses incurred in connection with theexercise, exchange, transfer or replacement of this Warrant, including, withoutlimitation, the costs of preparation, execution and delivery of a new warrantand of share certificates representing all Warrant Shares; provided, that theHolder shall pay all stamp and other transfer taxes payable in connection withthe transfer or replacement of this Warrant.

 

**Section 3.****                                          CertainCovenants.**

 

(a)                                  TheCompany shall at all times reserve for issuance and keep available out of itsauthorized and unissued Shares, solely for the purpose of providing for theexercise of this Warrant, such number of Shares as shall from time to time besufficient therefor.

 

(b)                                 TheCompany will not, by amendment of its Memorandum of Association or Bye-Laws orthrough reorganization, consolidation, merger, amalgamation, sale of assets orotherwise, avoid or seek to avoid the observance or performance of any of theterms of this Warrant.  Without limitingthe foregoing, the Company (i) will not increase the par value of any sharesreceivable upon the exercise of this Warrant above the amount payable thereforupon such exercise and (ii) will take all such action as may be necessary orappropriate in order that the Company may validly and legally issue fully paidand nonassessable shares upon the exercise of this Warrant.

 

**Section 4.****                                          Adjustmentsto Exercise Price and Number of Warrant Shares.**

 

4.1                                 Adjustments.In order to prevent dilution of the rights granted hereunder, the ExercisePrice shall be subject to adjustment from time to time in accordance with thisSection 4. Except as specifically excluded in Section 4.5, upon eachadjustment of the Exercise Price pursuant to this Section 4, the Holdershall thereafter be entitled to acquire upon exercise, at the Exercise Priceresulting from such adjustment, the number

 

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of Common Shares of the Companyobtainable by multiplying the Exercise Price in effect immediately prior tosuch adjustment by the number of Common Shares acquirable immediately prior tosuch adjustment and dividing the product thereof by the new Exercise Priceresulting from such adjustment (e.g., the price at which Additional CommonShares is issued in the case of a Dilutive Issue).

 

4.2                                 Subdivisions,Combinations and Share Dividends. If the Company shall at any timesubdivide by split-up or otherwise, its outstanding Common Shares into agreater number of shares, or issue additional Common Shares as a dividend,bonus issue or otherwise with respect to any Common Shares, the Exercise Pricein effect immediately prior to such subdivision or share dividend or bonusissue shall be proportionately reduced. Conversely, in case the outstandingCommon Shares of the Company shall be combined into a smaller number of shares,the Exercise Price in effect immediately prior to such combination shall beproportionately increased.

 

4.3.                              Reorganization,Reclassification, Consolidation, Merger or Sale of Assets. If any capitalreorganization or reclassification of the Common Shares of the Company, orconsolidation, amalgamation or merger of the Company with another corporation,or the sale of all or substantially all of its assets to another corporationshall be effected in such a way that holders of Common Shares shall be entitledto receive shares, securities, cash or other property with respect to or inexchange for Common Shares, then, as a condition of such reorganization,reclassification, consolidation, amalgamation, merger or sale, lawful andadequate provision shall be made whereby the Holder shall have the right toacquire and receive upon exercise of this Warrant (or at the option of theHolder, shall have the right to receive a new and equivalent Warrant for) suchshares, securities, cash or other property issuable or payable (as part of thereorganization, reclassification, consolidation, amalgamation, merger or sale)with respect to or in exchange for such number of outstanding Common Shares aswould have been received upon exercise of this Warrant at the Exercise Pricethen in effect. The Company will not effect any such consolidation,amalgamation, merger or sale unless, prior to the consummation thereof, thesuccessor corporation (if other than the Company) resulting from suchconsolidation or merger or the corporation purchasing such assets shall assumeby written instrument mailed or delivered to the Holder, the obligation todeliver such shares, securities or assets that the Holder may be entitled topurchase in accordance with the foregoing provisions. If a purchase, tender orexchange offer is made to and accepted by the holders of more than 50% of theoutstanding Common Shares of the Company, the Company shall not effect anyconsolidation, amalgamation, merger or sale with the person having made suchoffer or with any Affiliate of such person, unless prior to the consummation ofsuch connsolidation, merger or sale the Holder shall have been given areasonable opportunity to then elect to receive upon the exercise of this Warranteither the shares, securities or assets then issuable with respect to theCommon Shares of the Company or the shares, securities or assets, or theequivalent, issued to previous holders of the Common Shares in accordance withsuch offer. For purposes hereof the term “Affiliate” with respect to any givenperson shall mean any person controlling, controlled by or under common controlwith the given person. Notwithstanding the foregoing Section 4.3, a newWarrant issuable to the Holder in connection with a consolidation,amalgamation,

 

5

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merger (other than a merger forreorganizational purposes) or sale of assets transaction shall not include theprice-based antidilution protection set forth in Section 4.5.

 

4.4.                              Noticesof Record Date, Etc.  In the eventthat:

 

(1)                                  theCompany shall declare any dividend or bonus issue upon its Common Sharespayable in Company shares to the holders of its Common Shares, or

 

(2)                                  thereshall be any capital reorganization or reclassification of the securities ofthe Company, including any subdivision or combination of its outstanding CommonShares, or consolidation, amalgamation, or merger of the Company with, or saleof all or substantially all of its assets to, another corporation,

 

then, in connection with suchevent, the Company shall give to the Holder:

 

(i)             at least ten (10)days prior written notice of the date on which the books of the Company shallclose or a record shall be taken for such dividend or bonus issue or fordetermining rights to vote in respect of any such reorganization,reclassification, consolidation, merger or sale; and

 

(ii)          in the case of any suchreorganization, reclassification, consolidation, amalgamation, merger or sale at least ten (10) days priorwritten notice of the date when the same shall take place. Such notice inaccordance with the foregoing clause (i) shall also specify, in the case of anysuch dividend or bonus issue, the date on which the holders of Common Sharesshall be entitled thereto and the terms of such dividend or bonus issue, andsuch notice in accordance with this clause (ii) shall also specify the date onwhich the holders of Common Shares shall be entitled to exchange their CommonShares for securities or other property deliverable upon such reorganization,reclassification, consolidation, amalgamation, merger or sale, as the case maybe, and the terms of such exchange. Each such written notice shall be given byfirst class mail, postage prepaid, addressed to the holder of this Warrant atthe address of the Holder.

 

4.5.                              ExercisePrice Adjustment for Dilutive Issuances. If the Company at any time (and at each such time) issues AdditionalCommon Shares after the date of this Warrant for consideration per share lessthan the Exercise Price in effect immediately before such issue (a “DilutiveIssue”), the Exercise Price shall be reduced, concurrently with such DilutiveIssue, to the price per share paid or payable for such Additional CommonShares.  In the case of Dilutive Issuesauthorized or effected by the Company after 364 calendar days from the ClosingDate, the second sentence of Section 4.1 shall not apply.  The term “Additional Common Shares” meansall Common Shares (including reissued shares) issued or, in the case of convertibleor derivative securities or Common Share equivalents, deemed issued, after thedate of this Warrant, but excluding convertible and derivative securities andCommon Share equivalents outstanding prior to the date of this Warrant.  For example only, if the Exercise Price is$2.00, the number of shares issuable under the Warrant is 50,000, and theCompany issues Common Shares at $1.75 on the 90th day after the dateof this Warrant, the new Exercise Price pursuant to

 

6

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this Section 4.5 is deemedto be $1.75 and the new number of shares issuable under Section 4.1 uponexercise of the Warrant is 57,143 (($2.00 * 50,000) / $1.75).  Ifthe issuance of Additional Common Shares were to occur 390 calendar days afterthe date of this Warrant, the Exercise Price would be adjusted to $1.75 but thenumber of shares subject to the Warrant would remain at 50,000. As a furtherexample, if the Company engaged in a merger transaction after the date of thisWarrant and a new Warrant is issued for the appropriately adjusted number ofshares and adjusted Exercise Price as determined in this Section 4, thenew Warrant issuable to the Holder would not include price-based antidilutionprotection set forth in this Section 4.5 in respect of future dilutiveissues.

 

4.6.                              Adjustmentby Board of Directors. If any event occurs as to which, in the opinion ofthe Board of Directors of the Company, the provisions of this Section 4are not strictly applicable or if strictly applicable would not fairly protectthe rights of the Holder in accordance with the essential intent and principlesof such provisions, then the Board of Directors shall make an adjustment in theapplication of such provisions, in accordance with such essential intent andprinciples, so as to protect such rights, but in no event shall any adjustmenthave the effect of increasing the Exercise Price as otherwise determinedpursuant to any of the provisions of this Section 4, except in the case ofa combination of shares of a type contemplated in Section 4.2 and then inno event to an amount larger than the Exercise Price as adjusted pursuant toSection 4.2.

 

4.7.                              Officers’Statement as to Adjustments. Whenever the Exercise Price and/or number ofShares subject to the Warrant is required to be adjusted as provided inSection 4, the Company shall forthwith file at each office designated forthe exercise of this Warrant a statement, signed by the Chief ExecutiveOfficer, Chief Financial Officer or any Managing Director of the Company,showing in reasonable detail the facts requiring such adjustment, the ExercisePrice and number of issuable shares that will be effective after suchadjustment; provided, however, such statement shall not be required to theextent the information requested in this Section 4.7 is available throughthe Company’s reports filed with the Securities and Exchange Commission. If theinformation described in this Section 4.7 is readily available through theCompany’s reports filed with the Securities and Exchange Commission, theCompany shall not be required to provide a separate notice of adjustment to theHolder; provided, however, if such information is not readily available throughthe Company’s reports filed with the Securities Exchange Commission and madepublic, the Company shall cause a notice setting forth any such adjustments tobe sent by mail, first class, postage prepaid, to the record Holder of thisWarrant at its address appearing herein or otherwise in the Company’s Registerof Members.  If such notice relates toan adjustment resulting from an event referred to in Section 4.3, suchnotice shall be included as part of the notice required to be mailed andpublished under the provisions of Section 4.3.

 

4.8                                 Issueof Securities other than Common Shares. In the event that at any time, as a result of any adjustment madepursuant to Section 4, the Holder thereafter shall become entitled toreceive any shares of the Company, other than Common Shares, 

 

7

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thereafter the number of such other shares so receivable upon exerciseof this Warrant shall be subject to adjustment from time to time in a mannerand on terms as nearly equivalent as practicable to the provisions with respectto the Common Shares contained in Section 4.

 

**Section 5.****                                          Rightsand Obligations of the Warrant Holder.**

 

This Warrant shall not entitle the Holder to any rights of ashareholder in the Company.  The Holdershall have the specific “piggyback” registration rights set forth in Exhibit Cattached hereto and made a part hereof. Capitalized terms not otherwise defined in Exhibit C shall have themeanings set forth herein.

 

**Section 6.****                                          RestrictiveShare Legend.**

 

This Warrant and the Warrant Shares have not been registered under anysecurities laws.  Accordingly, any sharecertificates issued pursuant to the exercise of this Warrant shall (untilreceipt of an opinion of counsel in customary form that such legend is nolonger necessary) bear the following legend:

 

THIS WARRANT AND THE WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF HAVENOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEENACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALEOF DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUTAN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL INCUSTOMARY FORM THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.

 

**Section 7.****                                          Notices.**

 

Any notice or other communication required or permitted to be givenhere shall be in writing and shall be effective (a) upon hand delivery ordelivery by e-mail or facsimile at the address or number designated below (ifdelivered on a business day during normal business hours where such notice isto be received) or the first business day following such delivery (if deliveredother than on a business day during normal business hours where such notice isto be received), or (b) on the third business day following the date of mailingby express courier service, fully prepaid, addressed to such address, or uponactual receipt of such mailing, whichever shall first occur. The addresses forsuch communication shall be:

 

If to the Company:

 

InterwaveCommunications International, Ltd.

 

8

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2495Leghorn Street

MountainView, California 94043, USA

Telephone: (650) 314-2533

Facsimile: (650) 967-1029

E-Mail: choagland@iwv.com

Attention: Cal R. Hoagland, Senior Vice President and Chief FinancialOfficer

 

With a copy to:

Wilson Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, CA 94304

Attention: Christopher D. Mitchell, Esq.

Telephone (650) 493-9300

 

If to the Holder:

 

Partners for Growth, L.P.

560 Mission Street, Third Floor

San Francisco, CA 94105

Telephone:  (415) 315-7944

Telecopier: (415) 315-7959

E-Mail: lorraine@pfgrowth.com

Attention: Lorraine Nield

 

with a copy to

 

Benjamin Greenspan, Esq.

620 Laguna Road

Mill Valley, CA 94941

(415) 358-4780

 

Each party hereto may from time to time change its address for noticesunder this Section 7 by giving at least 10 calendar days’ notice of suchchanges address to the other party hereto.

 

**Section 8.****                                          Amendmentsand Waivers.**

 

This Warrant and any term hereof may be changed, waived, discharged orterminated only by an instrument in writing signed by the party against whichenforcement of such change, waiver, discharge or termination is sought.

 

**Section 9.****                                          ApplicableLaw; Severability.**

 

This Warrant shall be governed by and construed and enforced inaccordance with the laws of the State of California.  If any one or more of the provisions contained in this

 

9

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Warrant, or any application of any provision thereof, shall be invalid,illegal, or unenforceable in any respect, the validity, legality andenforceability of the remaining provisions contained herein and all otherapplications of any provision thereof shall not in any way be affected orimpaired thereby.

 

**Section 10.****                                   Construction.**

 

The terms of the Warrant Purchase Agreement to which this Warrant isattached as Exhibit 1 are incorporated by reference herein. Terms used but notdefined herein have the meaning set forth in the Warrant Purchase Agreement.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be dulyexecuted on the day and year first above written.

 

COMPANY:

 
| Interwave Communications International Ltd. |
|---------------------------------------------|
|                                        |
|                                        |
| By:                                         | /s/ Cal R. Hoagland |   |
|                                        |   |   |
| Name:                                       | Cal R. Hoagland |   |
|                                        |   |   |
| Title:                                      | SVP and CFO |   |
|                                             |  |  |  |  |

 

 

ACKNOWLEDGED AND AGREED:

 

HOLDER:

 

Partners for Growth, L.P.

 

 
| By:    | /s/ Andrew Kahn           |   |
|--------|---------------------------|--------|
|   | Andrew Kahn, Manager of   |
|   | Partners for Growth, LLC, |
|   | Its General Partner       |

 

10

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Exhibit A

 

To:                              Interwave Communications International Ltd.

 

ELECTION TO EXERCISE

 

1.                                       Theundersigned hereby exercises its right to subscribe for and purchase______________ fully paid, validly issued and nonassessable Shares covered bythe attached Warrant and tenders payment herewith in the amount of $___________in accordance with the terms thereof.

 

1.                                       Theundersigned hereby elects to convert the attached Warrant into fully paid,validly issued and nonassessable Shares by Cashless Exercise in the mannerspecified in Section 1.3 of the attached Warrant. This conversion isexercised with respect to __________ of shares.

 

[Strike theparagraph above that does not apply.]

 

 

, and requests thatcertificates for such shares be issued in the name of, and delivered to:

 
|   |   |     |   |   |
|--------|--------|----------|--------|--------|
|   |   |     |   |   |
|   |   |     |   |   |
| Date:  |   | [Holder] |   |   |
|   |   |     |   |
|   |   | By       |   |   |
|   |   | Name:    |   |
|   |   | Title:   |   |
|        |        |          |        |        |  |  |

 

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Exhibit B

 

ASSIGNMENT FORM

 
| To:                                                                                                                    | Interwave Communications International Ltd. |   |   |
|------------------------------------------------------------------------------------------------------------------------|---------------------------------------------|--------|--------|
|                                                                                                                   |                                        |
| The undersigned hereby  assigns and transfers this Warrant to                                                          |                                        |   |
|                                                                                                                   |                                        |   |
|                                                                                                                   |                                        |   |
| (Insert assignee’s social security or tax identification number)                                                  |                                        |   |
|                                                                                                                   |                                        |   |
|                                                                                                                   |                                        |   |
| (Print or type assignee’s name, address and postal code)                                                          |                                        |   |
|                                                                                                                   |                                        |   |
|                                                                                                                   |                                        |   |
| and irrevocably appoints ______________________________________ to  transfer this Warrant on the books of the Company. |

 
| Date:  |                                          |     Partners For Growth, L.P. |
|--------|-----------------------------------------------|---------------------------------------------------|
|   |
|   | By                                            |                                              |   |
|   | Name:                                         |                                              | , Manager of |
|   | Partners for Growth, LLC, Its General Partner |
|        |                                               |                                                   |  |  |  |  |  |

 

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EXHIBIT C

 

PIGGYBACK REGISTRATION RIGHTS

 

1. PIGGYBACK REGISTRATION RIGHTS.

 

1.1                                 PiggybackRights. If (but without any obligation to do so) the Company proposes toregister any of its equity securities under the United States Securities Act of1933 (the “Act”) in connection with the public offering of such shares (otherthan (i) a registration relating solely to the sale of securities toparticipants in a Company equity option or share rights or share purchase plan,(ii) a registration relating to a corporate reorganization or other transactionunder Rule 145 of the Act, or (iii) a registration relating to the offer andsale of debt securities, (iv) a registration on any registration form that doesnot permit secondary sales, or (v) a registration on any form that does notinclude substantially the same information as would be required to be includedin a registration statement covering the sale of the Warrant Shares, theCompany shall, at such time, promptly give the Holder written notice of suchregistration. Upon the written request of the Holder given within ten (10)business days after mailing of such notice by the Company, the Company shall,subject to the provisions of Section 1.4 of this Exhibit C, use allcommercially reasonable efforts to cause a registration statement to becomeeffective, which includes all of the Warrant Shares that the Holder requests tobe registered by such notice and for which the Holder (or its individualmembers) is then the shareholder of record (or would be the shareholder of recordupon the exercise of its Warrant). Notwithstanding the foregoing, unless the consent of the requisiteHolders under the Sixth Amended and Restated Investor Rights Agreement amongthe Company and the undersigned Investors therein) has been obtained pursuantto the amendment or waiver provisions therein, the inclusion of the WarrantShares in any registration pursuant to this Section 1.1 shall not reducethe number of Registrable Securities (as defined in the Sixth Amended andRestated Investor Rights Agreement) also to be included in the sameregistration, and shall be limited in its entirety prior to any limitation onthe number of Registrable Securities included in such registration.

 

1.2                                 Rightto Terminate Registration. The Company shall have the right to terminate orwithdraw any registration initiated by it under this Section 1 prior tothe effectiveness of such registration whether or not the Holder has elected toinclude securities in such registration.

 

1.3                                 Expensesof Registration. All expenses other than underwriting discounts andcommissions incurred in connection with registrations, filings orqualifications pursuant to this Section, including without limitation allregistration, filing and qualification fees (including Blue Sky fees), printers’and accounting fees, and fees and disbursements of counsel for the Company andthe reasonable fees and disbursements for one counsel for the Holder shall beborne by the Company. Any fees or disbursements of counsel for the Holder(other than the single counsel referenced above) shall be borne by the Holder.

 

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1.4                                 UnderwritingRequirements. In connection with any offering involving an underwriting ofCommon Shares of the Company, the Company shall not be required under thisSection to include any of the Warrant Shares in such underwriting unlessthe Holder accepts the terms of the underwriting as agreed upon between theCompany and the underwriters selected by it (or by other persons entitled toselect the underwriters) and enters into an underwriting agreement in customaryform with an underwriter or underwriters selected by the Company. If the totalamount of securities, including Warrant Shares, requested by shareholders orother securities holders to be included in such offering exceeds the amount ofsecurities sold other than by the Company that the underwriters determine intheir sole discretion is compatible with the success of the offering, then theCompany shall be required to include in the offering only that number of suchsecurities, including Warrant Shares, that the underwriters determine in theirsole discretion will not  jeopardize thesuccess of the offering (the securities so included to be apportioned pro rataamong the selling shareholders, including Holder, according to the total amountof securities entitled to be included therein owned by each selling shareholderor in such other proportions as may be mutually agreed to by such sellingshareholders).

 

1.5                                 Informationfrom the Holder. It shall be a condition precedent to the obligations ofthe Company to take any action pursuant to this Section 1 with respect tothe Warrant Shares that the Holder shall furnish to the Company suchinformation regarding itself and its individual members, the Warrant Sharesheld by Holder or its members, and the intended method of disposition of suchsecurities as shall be reasonably required to effect the registration of theWarrant Shares.

 

1.6                                 NoDelay of Registration. The Holder shall not have any right to obtain orseek an injunction restraining or otherwise delaying any such registration asthe result of any controversy that might arise with respect to theinterpretation or implementation of this Section 1.

 

2.                                       INDEMNIFICATION

 

In the event any shares of Warrant Shares are included in aregistration statement under Section 1 of this Exhibit C:

 

2.1                                 TheCompany Indemnity. To the extent permitted by law, the Company willindemnify, defend and hold harmless the Holder, its partners or officers,directors, shareholders, legal counsel and accountants for the Holder, anyunderwriter (as defined in the Act) for the Holder and each person, if any, whocontrols the Holder or underwriter, within the meaning of the Securities Act orthe Securities Exchange Act of 1934, as amended (the “Exchange Act”) (each an“Indemnified Person”), against any losses, claims, damages or liabilities(joint or several) to which they may become subject under the Securities Act,the Exchange Act or any state securities laws, insofar as such losses, claims,damages or liabilities (or actions in respect thereof) arise out of or arebased upon any of the following statements, omissions or violations(collectively a “Violation”): (i) any untrue statement or alleged untruestatement of a material fact contained in such

 

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registration statement, including any preliminary prospectus or finalprospectus contained therein or any amendments or supplements thereto, (ii) theomission or alleged omission to state therein a material fact required to bestated therein, or necessary to make the statements therein not misleading, or(iii) any violation or alleged violation by the Company of the Securities Act,the Exchange Act, any state securities laws or any rule or regulationpromulgated under the Securities Act, the Exchange Act or any state securitieslaws in connection with such registration; and the Company will reimburseeach  Indemnified Person for any legalor other expenses reasonably incurred by them in connection with investigatingor defending any such loss, claim, damage, liability or action as such expensesare incurred; provided however that the indemnity agreement contained in thisSection 2.1 shall not apply to amounts paid in settlement of any suchloss, claim, damage, liability or action if such settlement is effected withoutthe consent of the Company (which consent shall not be unreasonably withheld),nor shall the Company be liable in any such case for any such loss, claim,damage, liability or action to the extent that it arises out of or is basedupon a Violation that occurs in reliance upon and in conformity with writteninformation furnished expressly for use in connection with such registration byany Indemnified Person; provided further, however, that the  foregoing indemnity agreement with respectto any preliminary prospectus shall not inure to the benefit of any IndemnifiedPerson from whom the person asserting any such losses, claims, damages orliabilities purchased Warrant Shares in the offering, if a copy of theprospectus (as then amended or supplemented if the Company shall have furnishedany amendments or supplements thereto) was not sent or given by or on behalf ofsuch Indemnified Person to such person, if required by law so to have beendelivered, at or prior to the written confirmation of the sale of the shares tosuch person, and if the prospectus (as so amended or supplemented) would havecured the defect giving rise to such loss, claim, damage or liability.

 

2.2                                 HolderIndemnity. To the extent permitted by law, the Holder and each of them willjointly and severally indemnify, defend and hold harmless the Company, each ofits directors, each of its officers, each of its partners, each person, if any,who controls the Company within the meaning of the Securities Act, legalcounsel and accountants for the Company, any underwriter, any other shareholderselling securities in such registration statement and any controlling person ofany such  underwriter or othershareholder, against any losses, claims, damages or liabilities (joint orseveral) to which any of the foregoing persons may become subject, under theSecurities Act, the Exchange Act or any state securities laws, insofar as suchlosses, claims, damages or liabilities (or actions in respect thereto) ariseout of or are based upon any Violation (but excluding clause (iii) of thedefinition thereof), in each case to the extent (and only to the extent) thatsuch Violation occurs in reliance upon and in conformity with writteninformation furnished by the Holder expressly for use in connection with suchregistration; and the Holder will reimburse any person intended to beindemnified pursuant to this Section 2.2 for any legal or other expensesreasonably incurred by such person in connection with investigating ordefending any such loss, claim, damage, liability or action; provided howeverthat the indemnity agreement contained in this Section 2.2 shall not applyto amounts paid in settlement of any such loss, claim, damage, liability oraction if such

 

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settlement is effected without the consent of the Holder (which consentshall not be unreasonably withheld).

 

2.3                                 PromptNotice Required. Promptly after receipt by an indemnified party under thisSection 2 of actual knowledge of the commencement of any action (includingany governmental action), such indemnified party will, if a claim in respectthereof is to be made against any indemnifying party under this Section 2,deliver to the indemnifying party a written notice of the commencement thereofand the indemnifying party shall have the right to participate in, and, to theextent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assumethe defense thereof with counsel mutually satisfactory to the parties; providedhowever that an indemnified party (together with all other indemnified partiesthat may be represented without conflict by one counsel) shall have the rightto retain one separate counsel, with the fees and expenses to be paid by theindemnifying party, if representation of such indemnified party by the counselretained by the indemnifying party would be inappropriate due to actual orpotential differing interests between such indemnified party and any otherparty represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying partywithin a reasonable time of the commencement of any such action, if prejudicialto its ability to defend such action, shall relieve such indemnifying party ofany liability to the indemnified party under this Section 2 to the extentof such prejudice, but the omission to so deliver written notice to theindemnifying party will not relieve it of any liability that it may have to anyindemnified party otherwise than under this Section 2.3.

 

2.4                                 AlternativeRelief. If the indemnification provided for in this Section 2 is heldby a court of competent jurisdiction to be unavailable to an indemnified partywith respect to any loss, liability, claim, damage or expense referred toherein, then the indemnifying party, in lieu of indemnifying such indemnifiedparty hereunder, shall contribute to the amount paid or payable by suchindemnified party as a result of such loss, liability, claim, damage or expensein such proportion as is appropriate to reflect the relative fault of and therelative benefits received by the indemnifying party on the one hand and of theindemnified party on the other in connection with the statements or omissionsthat resulted in such loss, liability, claim, damage or expense, as well as anyother relevant equitable considerations, provided that no person guilty offraud shall be entitled to contribution. The relative fault of the indemnifyingparty and of the indemnified party shall be determined by reference to, amongother things, whether the untrue or alleged untrue statement of a material factor the omission to state a material fact relates to information supplied by theindemnifying party or by the indemnified party and the parties’ relativeintent, knowledge, access to information, and opportunity to correct or preventsuch statement or omission.  Therelative benefits received by the indemnifying party and the indemnified partyshall be determined by reference to the net proceeds and underwriting discountsand commissions from the offering received by each such party.

 

2.5                                 UnderwritingAgreement. Notwithstanding the foregoing, to the extent that the provisionson indemnification and contribution contained in the underwriting

 

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agreement entered into in connection with the underwritten publicoffering are in conflict with the foregoing provisions of this Section 2,the provisions in the underwriting agreement shall control.

 

2.6                                 Survival.The obligations of the Company and the Holder under this Section 2 shallsurvive the completion of any offering of the Warrant Shares in a registrationstatement under Section 1 of this Exhibit C.

 

3.                                       ASSIGNMENT

 

The rights to cause the Company to register Warrant Shares pursuant toSection 1 of this  Exhibit C may beassigned (but only with all related obligations) by Holder to  a transferee or assignee of such securitiesprovided; (a) the Company is, within a reasonable time after such transfer,furnished with written notice of  thename and address of such transferee or assignee and the securities with  respect to which such registration rightsare being assigned and (b) such transferee or assignee agrees in writing to be bound by and subject tothe  terms and conditions of theAgreement.

 

4.                                       TERMINATIONOF REGISTRATION RIGHTS

 

The Holder shall not be entitled to exercise any right provided for inSection  1 of this Exhibit C after such time at which all Warrant Sharesof the relevant holder can be sold in any three (3) month period without registration in compliance  with Rule 144 of the Act.

 

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***Partnersfor Growth***

*** ***

**Security Agreement**

*** ***
| **Debtor:**  |   | **INTERWAVE COMMUNICATIONS INTERNATIONAL  LTD.,** |
|--------------|--------|---------------------------------------------------|
|         |   | **a Bermuda corporation**                         |
|         |   |                                              |
| **Address:** |   | **Clarendon House**                               |
|         |   | **2 Church Street**                               |
|         |   | **P.O. Box HM 1022**                              |
|         |   | **Hamilton, HM DX, Bermuda**                      |
|         |   |                                              |
| **Date:**    |   | **June 4, 2004**                                  |

 

**THIS SECURITY AGREEMENT**is entered into on the above date between PARTNERS FOR GROWTH, L.P. (“PFG”),whose address is 560 Mission Street, 3rd floor, San Francisco, CA 94105 and theDebtor named above (the “Debtor”), whose chief executive office is located atthe above address (“Debtor’s Address”). 

 

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**1. [INTENTIONALLY OMITTED]**

# *** ***

# ***2.  SECURITY INTEREST.***To secure the payment andperformance of all of the Obligations when due, Debtor hereby grants to PFG asecurity interest in all of the following (collectively, the“Collateral”):  all right, title andinterest of Debtor in and to all of the following, whether now owned orhereafter arising or acquired and wherever located: all Accounts; allInventory; all Equipment; all Deposit Accounts; all General Intangibles(including without limitation all Intellectual Property); all InvestmentProperty; all Other Property; and any and all claims, rights and interests inany of the above, and all guaranties and security for any of the above, and allsubstitutions and replacements for, additions, accessions, attachments,accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds andclaims against third parties) of, any and all of the above, and all Debtor’sbooks relating to any and all of the above. Notwithstanding anything herein tothe contrary, in no event shall the security interest granted under thisSection 2 attach to any  (“SpecifiedContracts”):  any lease, license,contract, property rights or agreement to which Debtor is a party or any of itsrights (including property rights with respect to equipment) or intereststhereunder if and for so long as the grant of such security interest shallconstitute or result in (i) the abandonment, invalidation or unenforceabilityof any right, title or interest of Debtor therein or (ii) in a breach ortermination pursuant to the terms of, or a default under, any such lease,license, contract property rights or agreement (other than to the extent thatany such term would be rendered ineffective pursuant to Sections 9-406, 9-407,9-408 or 9-409 of the Code (or any successor provision or provisions) of anyrelevant jurisdiction or any other applicable law or principles of equity);provided however that such security interest shall attach immediately at suchtime as the condition causing such abandonment, invalidation orunenforceability shall be remedied and to the extent severable, shall attachimmediately to any portion of such lease, license, contract, property rights oragreement that does not result in any of the consequences specified in (i) or(ii) above. Except as disclosed on Exhibit A hereto, Debtor represents andwarrants to PFG that there are no Specified Contracts which are material toDebtor’s business.  Debtor shall not,hereafter, without PFG’s prior written consent, enter into any SpecifiedContract which is material to Debtor’s business. In addition, notwithstandinganything herein to the contrary, in no event shall the security interestgranted under this Section 2 attach to any of the outstanding capital stock of a controlled foreign corporation(as such term is defined in the Internal Revenue Code of 1986, as amended) inexcess of 65% of the voting power of all classes of capital stock of suchcontrolled foreign corporation entitled to vote.

# *** ***

# ***3.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.***

# *** ***

In order to inducePFG to enter into a loan agreement with the Borrower and make loans to theBorrower, subject to the exceptions set forth on the Disclosure Scheduleattached hereto as Exhibit B, Debtor represents and warrants to PFG as follows,and Debtor covenants that the following representations will continue to betrue, and that Debtor will at all times comply with all of the followingcovenants, throughout the term of this Agreement and until all Obligations havebeen paid and performed in full:

 

***3.1  CorporateExistence and Authority.*** Debtor is and will continue to be, duly organized, validly existing andin good standing under the laws of the jurisdiction of its incorporation.  Debtor is and will continue to be qualifiedand licensed to do business in all jurisdictions in which any failure to do sowould result in a Material Adverse Change. The execution, delivery and performance by Debtor of this Agreement, andall other documents contemplated hereby (i) have been duly and validlyauthorized, (ii) are enforceable against Debtor in accordance with their terms(except as enforcement may be limited by equitable principles and bybankruptcy, insolvency, reorganization, moratorium or similar laws relating tocreditors’ rights generally), and (iii) do not violate Debtor’s articles orcertificate of incorporation, or Debtor’s by-laws, or any law or any materialagreement or instrument which is binding upon Debtor or its property, and (iv)do not constitute grounds for acceleration of any material indebtedness orobligation under any agreement or instrument which is binding upon Debtor orits property.

 

***3.2  Name; TradeNames and Styles.*** As of the date hereof, the name of Debtor set forth in the heading tothis Agreement is its name as presently set forth in its certificate ofincorporation.  Listed on Exhibit Ahereto are, as of the date hereof, all prior names of Debtor and all ofDebtor’s present and prior trade names. Debtor shall give PFG 30 days’ prior written notice before changing itsname or doing business under any other name. Debtor has complied, and will in the future comply, in all materialrespects, with all laws relating to the conduct of business under a fictitiousbusiness name, if applicable to Debtor.

 

***3.3  Place ofBusiness; Location of Collateral.***As of the date hereof,the address set forth in the heading to this Agreement is Debtor’s chiefexecutive office.  In addition, as ofthe date hereof, Debtor has places of business and Collateral is located onlyat the locations set forth on Exhibit A hereto.  Debtor will give PFG at least 30 days prior written notice beforeopening any additional place of business, changing its chief executive office,or moving any of the Collateral to a location other than Debtor’s Address orone of the locations set forth on Exhibit A hereto, except that Debtor maymaintain sales offices in the ordinary course of business at which not morethan a total of $10,000 fair market value of Equipment is located.

 

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***3.4  Title toCollateral; Perfection; Permitted Liens.***  

 

(a)  Debtor is now, and will atall times in the future be, the sole owner of all the Collateral, except foritems of Equipment which are leased to Debtor and except for PermittedLiens.  The Collateral now is and willremain free and clear of any and all liens, charges, security interests,encumbrances and adverse claims, except for Permitted Liens.  PFG now has, and will continue to have, anenforceable security interest in all of the Collateral, subject only to thePermitted Liens, and Debtor will at all times defend PFG and the Collateralagainst all claims of others.  

 

(b)   Debtor has set forth onExhibit A hereto all of Debtor’s Deposit Accounts, as of the date hereof, andDebtor will give PFG five Business Days advance written notice beforeestablishing any new Deposit Accounts and will cause the institution where anysuch new Deposit Account is maintained to execute and deliver to PFG a controlagreement in form sufficient to perfect PFG’s security interest in the DepositAccount and otherwise satisfactory to PFG in its good faith business judgment. 

 

(c) In the event that Debtor shall at any time after the date hereofhave any commercial tort claims against others, which it is asserting or giveswritten notice of its intention to assert, and in which the potential recoveryexceeds $100,000, Debtor shall promptly notify PFG thereof in writing andprovide PFG with such information regarding the same as PFG shall request(unless providing such information would waive the Debtor’s attorney-clientprivilege).  Such notification to PFGshall constitute a grant of a security interest in the commercial tort claimand all proceeds thereof to PFG, and Debtor shall execute and deliver all suchdocuments and take all such actions as PFG shall request in connectiontherewith.

 

(d)   None of the Collateral nowis or will be affixed to any real property in such a manner, or with suchintent, as to become a fixture.  Debtoris not and will not become a lessee under any real property lease pursuant towhich the lessor may obtain any rights in any of the Collateral and no suchlease now prohibits, restrains, impairs or will prohibit, restrain or impairDebtor’s right to remove any Collateral from the leased premises.  Whenever any Collateral is located uponpremises in which any third party has an interest, Debtor shall, wheneverrequested by PFG, use commercially reasonable efforts to cause such third partyto execute and deliver to PFG, in form acceptable to PFG, such waivers andsubordinations as PFG shall specify in its good faith business judgment.  Debtor will keep in full force and effect,and will comply with all material terms of, any lease of real property whereany of the Collateral now or in the future may be located.

 

***3.5  Maintenance ofCollateral.*** Debtor will maintain the Collateral in good working condition(ordinary wear and tear excepted), and Debtor will not use the Collateral forany unlawful purpose.  Debtor willimmediately advise PFG in writing of any material loss or damage to theCollateral.

 

***3.6  Books andRecords.***  Debtorhas maintained and will maintain at Debtor’s Address complete and accuratebooks and records, comprising an accounting system such that its financialstatements can be prepared in accordance with GAAP.

 

***3.7  FinancialCondition, Statements and Reports.***  All financial statements now or in thefuture delivered to PFG have been, and will be, prepared in conformity withGAAP and now and in the future will fairly present, in all material respects,the results of operations and financial condition of Debtor, in accordance withGAAP, at the times and for the periods therein stated.  Between the last date covered by any suchstatement provided to PFG and the date hereof, there has been no MaterialAdverse Change.

 

***3.8  Tax Returns andPayments; Pension Contributions.***  Debtor has timely filed, and will timelyfile, all material required tax returns and reports, and Debtor has timelypaid, and will timely pay, all federal and state, and all material foreign andlocal taxes, assessments, deposits and contributions now or in the future owedby Debtor.  Debtor may, however, deferpayment of any contested taxes, assessments, deposits and contributions,provided that Debtor (i) in good faith contests Debtor’s obligation to pay thesame by appropriate proceedings promptly and diligently instituted andconducted, (ii) notifies PFG in writing of the commencement of, and anymaterial development in, the proceedings, and (iii) posts bonds or takes anyother steps required to keep the contested taxes from becoming a lien upon anyof the Collateral.  Debtor is unaware ofany claims or adjustments proposed for any of Debtor’s prior tax years whichcould result in additional taxes becoming due and payable by Debtor.  Debtor has paid, and shall continue to payall amounts necessary to fund all present and future pension, profit sharingand deferred compensation plans in accordance with their terms, and Debtor hasnot and will not withdraw from participation in, permit partial or completetermination of, or permit the occurrence of any other event with respect to,any such plan which could reasonably be expected to result in any liability ofDebtor, including any material liability to the Pension Benefit GuarantyCorporation or its successors or any other governmental agency. 

 

***3.9  Compliance withLaw.***  Debtor has,to the best of its knowledge, complied, and will comply, in all materialrespects, with all provisions of all foreign, federal, state and local laws andregulations applicable to Debtor, including, but not limited to, those relatingto Debtor’s ownership of real or personal property, the conduct and licensingof Debtor’s business, and all environmental matters.

 

***3.10  Litigation.***  There is no claim, suit, litigation,proceeding or investigation pending or (to best of Debtor’s knowledge)threatened against Debtor in any court or before any governmental agency (orany basis therefor known to Debtor) which

 

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could reasonably be expected to result, eitherseparately or in the aggregate, in any Material Adverse Change.  Debtor will promptly inform PFG in writingof any claim, proceeding, litigation or investigation in the future threatenedor instituted against Debtor involving any single claim of $50,000 or more, orinvolving $100,000  or more in theaggregate.

 

# ***4. REMITTANCE OF PROCEEDS.*** Subject tothe rights of the Senior Lender (if any), all proceeds arising from thedisposition of any Collateral shall be delivered, in kind, by Debtor to PFG inthe original form in which received by Debtor not later than the followingBusiness Day after receipt by Debtor, to be applied to the Obligations in suchorder as PFG shall determine; provided that, if no Default or Event of Defaulthas occurred and is continuing, Debtor shall not be obligated to remit to PFG(i) the proceeds of Accounts arising in the ordinary course of business, or(ii) the proceeds of the sale of worn out or obsolete Equipment disposed of byDebtor in good faith in an arm’s length transaction for an aggregate purchaseprice of $25,000 or less (for all such transactions in any fiscal year), and(iii) the proceeds of insurance if promptly used to replace or repair theproperty with respect to which the proceeds were paid.  Except as permitted above, Debtor agreesthat it will not commingle proceeds of Collateral with any of Debtor’s otherfunds or property, but will hold such proceeds separate and apart from suchother funds and property and in an express trust for PFG, except as set forthabove, and subject to the rights of the Senior Lender.  Nothing in this Section limits therestrictions on disposition of Collateral set forth elsewhere in thisAgreement.

# *** ***

# ***5.  ADDITIONAL DUTIES OF DEBTOR.***

# *** ***

***5.1 [intentionally omitted]***

 

***5.2  Insurance.***  Debtor shall, at all times insure all of thetangible personal property Collateral and carry such other business insurance,with insurers reasonably acceptable to PFG, in such form and amounts as PFG mayreasonably require and that are customary and in accordance with standardpractices for Debtor’s industry and locations, and Debtor shall provideevidence of such insurance to PFG.  Allsuch insurance policies shall name PFG as an additional loss payee, and shallcontain a lenders loss payee endorsement in form reasonably acceptable toPFG.  Upon receipt of the proceeds ofany such insurance, subject to the rights of the Senior Lender, provided noDefault or Event of Default has occurred and is continuing, PFG shall releaseto Debtor insurance proceeds with respect to Collateral, which shall beutilized by Debtor for the prompt repair or replacement of the Collateral withrespect to which the insurance proceeds were paid.  PFG may require reasonable assurance that the insurance proceedsso released will be so used.  If Debtorfails to provide or pay for any insurance, PFG may, but is not obligated to,obtain the same at Debtor’s expense. Debtor shall promptly deliver to PFG copies of all material reports madeto insurance companies.

 

***5.3  Reports.***  Debtor, at its expense, shall provide PFGwith such written reports with respect to Debtor, as PFG shall from time totime specify in its good faith business judgment, it being recognized by PFG that anyprojections and forecasts provided by Debtor in good faith and based uponreasonable assumptions are not to be viewed as facts and that actual resultsduring the period or periods covered by any such projections or forecasts maydiffer from the projected or forecast results.

 

***5.4  Access toCollateral, Books and Records.***  At reasonable times, and on one Business Day’s notice, PFG, orits agents, shall have the right to inspect the Collateral, and the right toaudit and copy Debtor’s books and records. All information obtained in any such inspection or audit shall besubject to the confidentiality agreement in Section 9.16 below.  The foregoing inspections and audits shallbe at Debtor’s expense and the charge therefor shall be $750 per person per day(or such higher amount as shall represent PFG’s then current standard chargefor the same), plus reasonable out-of-pocket expenses. Notwithstanding the foregoing, if noEvent of Default has occurred and is continuing, Debtor shall not be requiredto disclose, permit the inspection, examination or making of extracts, ordiscussion of, any document, information or other matter (i) in respect ofwhich disclosure is prohibited by law or any agreement binding on Debtor or anyof its Subsidiaries, or (ii) is subject to attorney-client or similar privilegeor constitutes attorney work product. If Debtor is withholding any information requested by Lender pursuant tothe preceding sentence, it shall so advise PFG in writing, giving PFG a generaldescription of the nature of the information withheld.

 

***5.5  NegativeCovenants.*** Debtor shall not, without PFG’s prior writtenconsent (which shall be a matter of its good faith business judgment), do anyof the following:  (i) merge orconsolidate with another corporation or entity, except that any wholly-owned Subsidiary of Debtor may be merged withDebtor so long as Debtor is the surviving corporation;(ii) acquire any assets, except in the ordinary course of business, or make anyInvestments other than Permitted Investments; (iii) consummate any othertransaction outside the ordinary course of business; (iv) sell or transfer anyCollateral, except for (A) the sale of finished Inventory in the ordinarycourse of Debtor’s business, (B) the sale of obsolete or unneeded Equipment inthe ordinary course of business, (C) the making of Permitted Investments, (D)the granting of Permitted Liens, and (E) the non-exclusive licensing ofIntellectual Property in the ordinary course of business ; (v) store anyInventory or other Collateral with any warehouseman or other third party,unless there is in place a bailee agreement in such form as PFG shall specifyin its good faith business judgment; (vi) sell any Inventory on a sale-or-return,guaranteed sale, consignment, or other contingent basis; (vii) make any loansof any money or other assets, other than Permitted Investments; (viii) incurany Indebtedness, other than Permitted Indebtedness; (ix) guarantee orotherwise become liable with respect to the obligations of another party

 

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or entity; (x) pay or declare any dividends onDebtor’s stock (except for dividends payable solely in stock of Debtor); (xi)redeem, retire, purchase or otherwise acquire, directly or indirectly, any ofDebtor’s stock; (xii) engage, directly or indirectly, in any business otherthan the businesses currently engaged in by Debtor or reasonably relatedthereto; or (xiii) dissolve or elect to dissolve.  Transactions permitted by the foregoing provisions of thisSection are only permitted if no Default or Event of Default would occur as aresult of such transaction.  

 

***5.6  LitigationCooperation.*** Should any third-party suit or proceeding be instituted by or againstPFG with respect to any Collateral or relating to Debtor, Debtor shall, withoutexpense to PFG, make available Debtor and its officers, employees and agentsand Debtor’s books and records, to the extent that PFG may deem them reasonablynecessary in order to prosecute or defend any such suit or proceeding.

 

***5.7  DepositAccounts. ***Concurrently,Debtor shall cause the banks and other institutions where its Deposit Accountsare maintained to enter into control agreements with PFG, in form and substancesatisfactory to PFG in its good faith business judgment and sufficient toperfect PFG’ security interest in said Deposit Accounts.  Said control agreements shall permit PFG, inits discretion (but subject to the rights of the Senior Lender), to withdrawfrom said Deposit Accounts accrued interest and any other Obligations due fromDebtor to PFG.

 

***5.8  FurtherAssurances.*** Debtor agrees, at its expense, on request by PFG, to execute alldocuments and take all actions, as PFG, may, in its good faith businessjudgment, deem necessary or useful in order to perfect and maintain PFG’sperfected security interest in the Collateral (subject only to PermittedLiens), and in order to fully consummate the transactions contemplated by thisAgreement.

 

# ***6.  TERM.*** This Agreement shall continue in effectuntil all Obligations have been paid and performed in full.

# *** ***

# ***7.  EVENTS OF DEFAULT AND REMEDIES.***

# *** ***

***7.1  Events ofDefault.***  Theoccurrence of any of the following events shall constitute an “Event ofDefault” under this Agreement, and Debtor shall give PFG immediate writtennotice thereof: 

 

(a) Any warranty, representation, statement, report or certificate madeor delivered to PFG by Debtor or any of Debtor’s officers, employees or agents,now or in the future, shall be untrue or misleading in a material respect whenmade or deemed to be made; or 

 

(b) Debtor shall fail to pay any monetary Obligation within threeBusiness Days after the date due; or 

 

(c) any event of default shall occur under any present or future document,instrument or agreement between Borrower and PFG; or 

 

(d) Debtor shall breach any of the provisions of Section 5.5 hereof, orshall fail to perform any other non-monetary Obligation which by its naturecannot be cured, or shall fail to permit PFG to conduct an inspection or auditas provided in Section 5.4 hereof; or 

 

(e) Debtor shall fail to perform any other non-monetary Obligation,which failure is not cured within ten Business Days after the date due; or 

 

(f) any levy, assessment, attachment, seizure, lien or encumbrance(other than a Permitted Lien) is made on the Collateral with a value of $25,000or more, which is not cured within 10 days after the occurrence of the same; or

 

(g) any default or event of default occurs under any obligation in anamount in excess of $25,000, secured by a Permitted Lien, which is not curedwithin any applicable cure period or waived in writing by the holder of thePermitted Lien; or 

 

(h) Debtor breaches any material contract or obligation, which hasresulted or may reasonably be expected to result in a Material Adverse Change;or 

 

(i) Dissolution, termination of existence, insolvency or businessfailure of Debtor; or appointment of a receiver, trustee or custodian, for allor any part of the property of, assignment for the benefit of creditors by, orthe commencement of any proceeding by Debtor under any reorganization,bankruptcy, insolvency, arrangement, readjustment of debt, dissolution orliquidation law or statute of any jurisdiction, now or in the future in effect;or 

 

(j) the commencement of any proceeding against Debtor or any guarantorof any of the Obligations under any reorganization, bankruptcy, insolvency,arrangement, readjustment of debt, dissolution or liquidation law or statute ofany jurisdiction, now or in the future in effect, which is not cured by thedismissal thereof within 45 days after the date commenced; or 

 

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(k) revocation or termination of, or limitation or denial of liabilityupon, any guaranty executed by Debtor in favor of PFG; or 

 

(l) Debtor makes any payment on account of any indebtedness orobligation which has been subordinated to the Obligations other than aspermitted in the applicable subordination agreement, or if any Person who hassubordinated such indebtedness or obligations terminates or in any way limitshis subordination agreement; or 

 

(m) Debtor shall cease to own 100% of the outstanding stock ofBorrower; or

 

(n) Debtor shall generally not pay its debts as they become due, orDebtor shall conceal, remove or transfer any part of its property, with intentto hinder, delay or defraud its creditors, or make or suffer any transfer ofany of its property which may be fraudulent under any bankruptcy, fraudulentconveyance or similar law; or 

 

(o) a Material Adverse Change shall occur.  

 

***7.2  Remedies.***  Upon the occurrence and during thecontinuance of any Event of Default, PFG, at its option, and without notice ordemand of any kind (all of which are hereby expressly waived by Debtor), may doany one or more of the following: (a) [intentionally omitted]; (b) Accelerateand declare all or any part of the Obligations to be immediately due, payable,and performable, notwithstanding any deferred or installment payments allowedby any instrument evidencing or relating to any Obligation; (c) Take possessionof any or all of the Collateral wherever it may be found, and for that purposeDebtor hereby authorizes PFG without judicial process to enter onto any ofDebtor’s premises without interference to search for, take possession of, keep,store, or remove any of the Collateral, and remain on the premises or cause acustodian to remain on the premises in exclusive control thereof, withoutcharge for so long as PFG deems it necessary, in its good faith businessjudgment, in order to complete the enforcement of its rights under thisAgreement or any other agreement; provided, however, that should PFG seek totake possession of any of the Collateral by court process, Debtor hereby irrevocablywaives: (i) any bond and any surety or security relating thereto required byany statute, court rule or otherwise as an incident to such possession; (ii)any demand for possession prior to the commencement of any suit or action torecover possession thereof; and (iii) any requirement that PFG retainpossession of, and not dispose of, any such Collateral until after trial orfinal judgment; (d) Require Debtor to assemble any or all of the Collateral andmake it available to PFG at places designated by PFG which are reasonablyconvenient to PFG and Debtor, and to remove the Collateral to such locations asPFG may deem advisable; (e) Complete the processing, manufacturing or repair ofany Collateral prior to a disposition thereof and, for such purpose and for thepurpose of removal, PFG shall have the right to use Debtor’s premises,vehicles, hoists, lifts, cranes, and other Equipment and all other propertywithout charge; (f) Sell, lease or otherwise dispose of any of the Collateral,in its condition at the time PFG obtains possession of it or after furthermanufacturing, processing or repair, at one or more public and/or privatesales, in lots or in bulk, for cash, exchange or other property, or on credit,and to adjourn any such sale from time to time without notice other than oralannouncement at the time scheduled for sale. PFG shall have the right to conduct such disposition on Debtor’spremises without charge, for such time or times as PFG deems reasonable, or onPFG’s premises, or elsewhere and the Collateral need not be located at theplace of disposition.  PFG may directlyor through any affiliated company purchase or lease any Collateral at any suchpublic disposition, and if permissible under applicable law, at any privatedisposition.  Any sale or otherdisposition of Collateral shall not relieve Debtor of any liability Debtor mayhave if any Collateral is defective as to title or physical condition orotherwise at the time of sale; (g) Demand payment of, and collect any Accountsand General Intangibles comprising Collateral and, in connection therewith,Debtor irrevocably authorizes PFG to endorse or sign Debtor’s name on allcollections, receipts, instruments and other documents, to take possession ofand open mail addressed to Debtor and remove therefrom payments made withrespect to any item of the Collateral or proceeds thereof, and, in PFG’s goodfaith business judgment, to grant extensions of time to pay, compromise claimsand settle Accounts and the like for less than face value; (h) Exercise any andall rights under any present or future control agreements relating to DepositAccounts or Investment Property; and (i) Demand and receive possession of anyof Debtor’s federal and state income tax returns and the books and recordsutilized in the preparation thereof or referring thereto.  All reasonable attorneys’ fees, expenses,costs, liabilities and obligations incurred by PFG with respect to theforegoing shall be added to and become part of the Obligations, shall be due ondemand, and shall bear interest at a rate equal to the highest interest rateapplicable to any of the Obligations. Without limiting any of PFG’s rights and remedies, from and after theoccurrence and during the continuance of any Event of Default, the interestrate applicable to the Obligations shall be the same interest rate applicableto loans to the Borrower after an Event of Default.

 

**7.2A.  Bermuda Receiver Provisions. **

** **

(a)  At any time after thesecurity hereby constituted shall have become enforceable or if requested bythe Debtor, PFG may from time to time or appoint by writing under the hand of aduly authorised officer of PFG any person to be a receiver and/or manager(hereinafter called a “Receiver”) of the Collateral or any part thereof and mayfrom time to time in writing under the hand of a duly authorised officer of PFGremove any Receiver so appointed and appoint another or others in his or theirstead;

 

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(b)  PFG shall have power fromtime to time to fix the remuneration of any Receiver appointed by PFG and todirect payment thereof out of the Collateral or any part thereof, but theDebtor shall alone be liable for the payment of such remuneration; 

 

(c)  a Receiver so appointedshall be the agent of the Debtor and the Debtor shall be responsible for hisacts, defaults and remuneration;

 

(d)  a Receiver so appointedshall be entitled to exercise all of the powers in respect of the Collateralwhich are exercisable by PFG under or pursuant to this Agreement and shall haveall the powers of a receiver under Bermuda law;

 

(e)  PFG shall not nor shall anyReceiver appointed hereunder be liable to account as mortgagee or mortgagees inpossession in respect of the Collateral or any part thereof or be liable forany loss upon realisation or for any neglect or default of any naturewhatsoever in connection with the said property and assets or any part thereoffor which a mortgagee in possession might as such be liable and all costs,charges and expenses incurred by PFG or any Receiver appointed hereunder(including the cost of any proceedings to enforce security hereby given) shallbe paid by the Debtor on an indemnity basis and charged on the Collateral;

 

(f)  PFG shall not be liablefor: (i) any loss arising out of a sale or other disposal of any of theCollateral or the exercise of or failure to exercise any of PFG’s powers underthis Agreement, however caused and whether or not a better price could or mighthave been obtained by deferring or advancing the date of such sale or otherdisposal; or (ii) any neglect or default to pay any call or instalment or toaccept any offer or to notify the Debtor of any matter or for any other loss ofany nature whatsoever in connection with any of the Collateral; and

 

(g)               all the foregoingprovisions shall take effect as and by way of variation and extension of theprovisions of Section 35 of the Bermuda Conveyancing Act 1983, which provisionsso varied and extended shall be regarded as incorporated herein.  No purchaser or other person shall be boundor concerned to see or enquire whether the right of PFG or any Receiverappointed to exercise any of its powers has arisen or not or be concerned withnotice to the contrary.

 

***7.3  Standards forDetermining Commercial Reasonableness.***  Debtor and PFG agree that a sale or otherdisposition (collectively, “sale”) of any Collateral which complies with thefollowing standards will conclusively be deemed to be commerciallyreasonable:  (i) Notice of the sale isgiven to Debtor at least ten days prior to the sale, and, in the case of apublic sale, notice of the sale is published at least five days before the salein a newspaper of general circulation in the county where the sale is to beconducted; (ii) Notice of the sale describes the collateral in general,non-specific terms; (iii) The sale is conducted at a place designated by PFG,with or without the Collateral being present; (iv) The sale commences at anytime between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in cash or by cashier’s check or wiretransfer is required; (vi) With respect to any sale of any of the Collateral,PFG may (but is not obligated to) direct any prospective purchaser to ascertaindirectly from Debtor any and all information concerning the same.  PFG shall be free to employ other methods ofnoticing and selling the Collateral, in its discretion, if they arecommercially reasonable.

 

***7.4  Power ofAttorney.***  Uponthe occurrence and during the continuance of any Event of Default, withoutlimiting PFG’s other rights and remedies, Debtor grants to PFG an irrevocablepower of attorney coupled with an interest, authorizing and permitting PFG(acting through any of its employees, attorneys or agents) at any time, at itsoption, but without obligation, with or without notice to Debtor, and atDebtor’s expense, to do any or all of the following, in Debtor’s name orotherwise, but PFG agrees that if it exercises any right hereunder, it will doso in good faith and in a commercially reasonable manner:  (a) Execute on behalf of Debtor anydocuments that PFG may, in its good faith business judgment, deem advisable inorder to perfect and maintain PFG’s security interest in the Collateral, or inorder to exercise a right of Debtor or PFG, or in order to fully consummate allthe transactions contemplated under this Agreement, and all other DebtorDocuments; (b) Execute on behalf of Debtor, any invoices relating to anyAccount, any draft against any Account Debtor and any notice to any AccountDebtor, any proof of claim in bankruptcy, any Notice of Lien, claim ofmechanic’s, materialman’s or other lien, or assignment or satisfaction ofmechanic’s, materialman’s or other lien; (c) Take control in any manner of anycash or non-cash items of payment or proceeds of Collateral; endorse the nameof Debtor upon any instruments, or documents, evidence of payment or Collateralthat may come into PFG’s possession; (d) Endorse all checks and other forms ofremittances received by PFG; (e) Pay, contest or settle any lien, charge,encumbrance, security interest and adverse claim in or to any of theCollateral, or any judgment based thereon, or otherwise take any action toterminate or discharge the same; (f) Grant extensions of time to pay,compromise claims and settle Accounts and General Intangibles for less thanface value and execute all releases and other documents in connectiontherewith; (g) Pay any sums required on account of Debtor’s taxes or to securethe release of any liens therefor, or both; (h) Settle and adjust, and givereleases of, any insurance claim that relates to any of the Collateral andobtain payment therefor; (i) Instruct any third party having custody or controlof any books or records belonging to, or relating to, Debtor to give PFG thesame rights of access and other rights with respect thereto as PFG has underthis Agreement; and (j) Take any action or pay any sum required of Debtorpursuant to this Agreement and any other Debtor Documents.  Any and all reasonable sums paid and any andall reasonable costs, expenses, liabilities, obligations and attorneys’ feesincurred by PFG with respect to the foregoing shall be

 

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added to and become part of theObligations, shall be payable on demand, and shall bear interest at a rateequal to the highest interest rate applicable to any of the Obligations.  In no event shall PFG’s rights under theforegoing power of attorney or any of PFG’s other rights under this Agreementbe deemed to indicate that PFG is in control of the business, management orproperties of Debtor.

 

***7.5  Application ofProceeds.***  Allproceeds realized as the result of any sale of the Collateral shall be appliedby PFG first to the reasonable costs, expenses, liabilities, obligations andattorneys’ fees incurred by PFG in the exercise of its rights under thisAgreement, second to the interest due upon any of the Obligations, and third tothe principal of the Obligations, in such order as PFG shall determine in itssole discretion.  Any surplus shall bepaid to Debtor or other persons legally entitled thereto; Debtor shall remainliable to PFG for any deficiency.  If,PFG, in its good faith business judgment, directly or indirectly enters into adeferred payment or other credit transaction with any purchaser at any sale ofCollateral, PFG shall have the option, exercisable at any time, in its goodfaith business judgment, of either reducing the Obligations by the principalamount of purchase price or deferring the reduction of the Obligations untilthe actual receipt by PFG of the cash therefor.

 

***7.6  RemediesCumulative.***  Inaddition to the rights and remedies set forth in this Agreement, PFG shall haveall the other rights and remedies accorded a secured party under the Code andunder all other applicable laws, and under any other instrument or agreementnow or in the future entered into between PFG and Debtor, and all of suchrights and remedies are cumulative and none is exclusive.  Exercise or partial exercise by PFG of oneor more of its rights or remedies shall not be deemed an election, nor bar PFGfrom subsequent exercise or partial exercise of any other rights orremedies.  The failure or delay of PFGto exercise any rights or remedies shall not operate as a waiver thereof, butall rights and remedies shall continue in full force and effect until all ofthe Obligations have been fully paid and performed.

 

# ***8.     DEFINITIONS. ***As used inthis Agreement, the following terms have the following meanings:

# *** ***

“Account Debtor”means the obligor on an Account.

 

“Accounts”means all present and future “accounts” as defined in the California UniformCommercial Code in effect on the date hereof with such additions to such termas may hereafter be made, and includes without limitation all accountsreceivable and other sums owing to Debtor.

 

“Advanced”means INTERWAVE ADVANCED COMMUNICATIONS, INC., a Delaware corporation, awholly-owned subsidiary of Debtor.

 

“Borrower”means INTERWAVE COMMUNICATIONS, INC., a Delaware corporation and itssuccessors.

 

“Business Day”means a day on which PFG is open for business.

 

“Code”means the Uniform Commercial Code as adopted and in effect in the State ofCalifornia from time to time. 

 

“Collateral”has the meaning set forth in Section 2 above.

 

“continuing”and “during the continuance of” when used with reference to a Default orEvent of Default means that the Default or Event of Default has occurred andhas not been either waived in writing by PFG or cured within any applicablecure period.

 

“DebtorDocuments” means, collectively, this Agreement, and all other present andfuture documents, instruments and agreements between PFG and Debtor, including,but not limited to those relating to this Agreement, the Continuing Guaranty ofsubstantially even date executed and delivered by Debtor in favor of PFG withrespect to Borrower  (with allextensions and renewal thereof, the “Guaranty”), and all amendments andmodifications thereto and replacements therefor.

 

 “Default” means any event which withnotice or passage of time or both, would constitute an Event of Default.

 

 “Deposit Accounts” means all presentand future “deposit accounts” as defined in the California Uniform CommercialCode in effect on the date hereof with such additions to such term as mayhereafter be made, and includes without limitation all general and special bankaccounts, demand accounts, checking accounts, savings accounts and certificatesof deposit.

 

“Equipment”means all present and future “equipment” as defined in the California UniformCommercial Code in effect on the date hereof with such additions to such termas may hereafter be made, and includes without limitation all machinery,fixtures, goods, vehicles (including motor vehicles and trailers), and anyinterest in any of the foregoing.

 

“Event ofDefault” means any of the events set forth in Section 7.1 of thisAgreement.

 

“GAAP”means generally accepted accounting principles consistently applied.

 

“GeneralIntangibles” means all present and future “general intangibles” as definedin the California Uniform Commercial Code in effect on the date hereof withsuch additions to such term as may hereafter be made, and includes withoutlimitation all Intellectual Property, payment intangibles, royalties, contractrights, goodwill, franchise agreements, purchase orders,

 

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customer lists, route lists, telephone numbers, domainnames, claims, income tax refunds, security and other deposits, options topurchase or sell real or personal property, rights in all litigation presentlyor hereafter pending (whether in contract, tort or otherwise), insurancepolicies (including without limitation key man, property damage, and businessinterruption insurance), payments of insurance and rights to payment of anykind.

 

“good faithbusiness judgment” means honesty in fact and good faith (as defined inSection 1201 of the Code) in the exercise of PFG’s business judgment.

 

“including”means including (but not limited to).

 

“Indebtedness”means as to any Person, (a) indebtedness for borrowed money or the deferredpurchase price of property or services, (b) obligations evidenced by bonds,notes, debentures or other similar instruments, (c) reimbursement obligationswith respect to letters of credit and (d) capital lease obligations.

 

 “Intellectual Property” means allpresent and future (a) copyrights, copyright rights, copyright applications,copyright registrations and like protections in each work of authorship andderivative work thereof, whether published or unpublished, (b) trade secretrights, including all rights to unpatented inventions and know-how, andconfidential information; (c) mask work or similar rights available for theprotection of semiconductor chips; (d) patents, patent applications and likeprotections including without limitation improvements, divisions,continuations, renewals, reissues, extensions and continuations-in-part of thesame; (e) trademarks, servicemarks, trade styles, and trade names, whether ornot any of the foregoing are registered, and all applications to register andregistrations of the same and like protections, and the entire goodwill of thebusiness of Debtor connected with and symbolized by any such trademarks; (f)computer software and computer software products; (g) designs and designrights; (h) technology; (i) all claims for damages by way of past, present andfuture infringement of any of the rights included above; (j) all licenses orother rights to use any property or rights of a type described above.

 

“Inventory”means all present and future “inventory” as defined in the California UniformCommercial Code in effect on the date hereof with such additions to such termas may hereafter be made, and includes without limitation all merchandise, rawmaterials, parts, supplies, packing and shipping materials, work in process andfinished products, including without limitation such inventory as istemporarily out of Debtor’s custody or possession or in transit and includingany returned goods and any documents of title representing any of the above.

 

“Investment”means any beneficial ownership interest in any Person (including any stock,partnership interest or other equity or debt securities issued by any Person),and any loan, advance or capital contribution to any Person.

 

“InvestmentProperty” means all present and future investment property, securities,stocks, bonds, debentures, debt securities, partnership interests, limitedliability company interests, options, security entitlements, securitiesaccounts, commodity contracts, commodity accounts, and all financial assetsheld in any securities account or otherwise, and all options and warrants topurchase any of the foregoing, wherever located, and all other securities ofevery kind, whether certificated or uncertificated.

 

“MaterialAdverse Change” means any of the following: (i) a material adverse changein the business, operations, or financial or other condition of the Debtor, or(ii) a material impairment of the prospect of repayment of any portion of theObligations; or (iii) a material impairment of the value or priority (subjectto Permitted Liens) of PFG’s security interests in the Collateral.

 

“Obligations”means all present and future advances, debts, liabilities, obligations,guaranties, covenants, duties and indebtedness at any time owing by Debtor toPFG, whether evidenced by this Agreement or any note or other instrument ordocument, or otherwise, whether arising from an extension of credit, opening ofa letter of credit, banker’s acceptance, loan, guaranty, indemnification orotherwise, whether direct or indirect (including, without limitation, thoseacquired by assignment and any participation by PFG in Debtor’s debts owing toothers), absolute or contingent, due or to become due, including, withoutlimitation, all indebtedness, liabilities and obligations of Debtor under theContinuing Guaranty of substantially even date executed and delivered by Debtorin favor of PFG with respect to Borrower.

 

“Other Property”means the following as defined in the California Uniform Commercial Code ineffect on the date hereof with such additions to such term as may hereafter bemade, and all rights relating thereto: all present and future “commercial tortclaims” (including without limitation any commercial tort claims), “documents”,“instruments”, “promissory notes”, “chattel paper”, “letters of credit”,“letter-of-credit rights”, “fixtures”, “farm products” and “money”; and allother goods and personal property of every kind, tangible and intangible,whether or not governed by the California Uniform Commercial Code.

 

“PermittedIndebtedness” means (a) a guaranty in favor of Senior Lender with respectto Borrower, provided Senior Debt does not exceed the Senior Debt Limit; and(b) Indebtedness existing on the date hereof and shown on Exhibit C hereto; (c)indebtedness secured by Permitted Liens; and (d) Indebtedness owing to Borroweror to Advanced.

 

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 “Permitted Investments” are: (a)  Investments (if any) shown on Exhibit C andexisting on the date hereof; (b) marketable direct obligations issued orunconditionally guaranteed by the United States or its agency or any Statematuring within 1 year from its acquisition; (c) commercial paper maturingno more than 1 year after its creation and having the highest rating fromeither Standard & Poor’s Corporation or Moody’s Investors Service,Inc; (d) bank’s certificates of deposit issued maturing no more than 1year after issue; (e) Investments consisting of deposit accounts and investment accounts; (f)Investments consisting of extensions of credit to Debtor’s customers in theordinary course of business, in the nature of accounts receivable, prepaidroyalties or notes receivable arising from the sale or lease of goods,provision of services or licensing activities of Debtor; (g) Investmentsreceived in satisfaction or partial satisfaction of obligations owed byfinancially troubled obligors or acquired as a result of a foreclosure withrespect to any secured Investment; (h) Investments acquired in exchange for anyother Investments in connection with or as a result of any bankruptcy, workout,reorganization or recapitalization; (i) deposits, prepayments and other creditsto suppliers made in the ordinary course of business; (j) Indebtedness of anywholly-owned Subsidiary of Debtor, which is now or hereafter owing to Debtor,and which is incurred to fund such Subsidiary’s operating expenses, prepaymentsand purchases, all in the ordinary course of business; and (k) otherInvestments in an aggregate amount at any time not to exceed $250,000 combinedfor all such Investments of Debtor, Advanced and Borrower.

 

“PermittedLiens” means the following:  (i)purchase money security interests in specific items of Equipment (includingaccessions, additions, parts, replacements, fixtures, improvements andattachments thereto and the proceeds thereof); (ii) leases of specific items ofEquipment (including accessions, additions, parts, replacements, fixtures,improvements and attachments thereto and the proceeds thereof); (iii) liens fortaxes, fees, assessments or other governmental charges or levies not yetpayable or being contested in good faith by appropriate proceedings, for whichDebtor has maintained reserves in accordance with GAAP, and which do not resultin a lien on any Collateral; (iv) additional security interests and liensconsented to in writing by PFG, which consent may be withheld in its good faithbusiness judgment; (v) security interests being terminated substantiallyconcurrently with this Agreement; (vi) liens of materialmen, mechanics,warehousemen, carriers, or other similar liens arising in the ordinary courseof business and securing obligations which are not delinquent; (vii) liensincurred in connection with the extension, renewal or refinancing of the indebtednesssecured by liens of the type described above in clauses (i) or (ii) above,provided that any extension, renewal or replacement lien is limited to theproperty encumbered by the existing lien and the principal amount of theindebtedness being extended, renewed or refinanced does not increase; (viii)Liens in favor of customs and revenue authorities which secure payment ofcustoms duties in connection with the importation of goods; and (ix) Liens infavor of Senior Lender securing an amount not in excess of the Senior DebtLimit; (x) Liens listed on Exhibit C hereto; (xi) non-exclusive licenses andnon-exclusive sublicenses granted in the ordinary course of business; (xii)leases and subleases granted in the ordinary course of business consisting of(A) short-term rental of Inventory, or (B) leases or subleases of Equipmentwith an aggregate value for all such leases and subleases not in excess of$10,000; (xiii) pledges or deposits in the ordinary course of business inconnection with workers’ compensation, unemployment insurance and socialsecurity legislation, in an aggregate amount not to exceed $25,000 or asotherwise required by law; (xiv) cash deposits to secure the performance ofbids, trade contracts (other than for borrowed money), contracts for the purchaseof property, leases, statutory obligations, surety and appeal bonds,performance bonds and other obligations of a like nature, in each case,incurred in the ordinary course of business and not representing an obligationfor borrowed money; (xv) statutory, common law or contractual liens ofdepository institutions or institutions holding securities accounts (includingrights of set-off), securing only customary charges and fees in connection withsuch accounts; and (xvi) Liens on insurance proceeds securing the payment offinanced insurance premiums.  PFG willhave the right to require, as a condition to its consent under subparagraph(iv) above, that the holder of the additional security interest or lien sign anintercreditor agreement on PFG’s then standard form, acknowledge that thesecurity interest is subordinate to the security interest in favor of PFG, andagree not to take any action to enforce its subordinate security interest solong as any Obligations remain outstanding, and that Debtor agree that anyuncured default in any obligation secured by the subordinate security interestshall also constitute an Event of Default under this Agreement.  

 

“Person”means any individual, sole proprietorship, partnership, joint venture, trust,unincorporated organization, association, corporation, government, or anyagency or political division thereof, or any other entity. .

 

“Senior Lender”means**Silicon Valley Bank.**

 

“Senior Debt”means total combined Indebtedness of Debtor, Borrower and Advanced to SeniorLender, including, but not limited to, monies borrowed, interest on loans, feesand expenses, sums due in connection with issuance of commercial letters ofcredit, issuance of forward contracts for foreign exchange reserve, and anyother direct or indirect financial accommodation Senior Lender may provide toDebtor, Borrower or Advanced.

 

 “Senior Debt Limit” means **$2,500,000**at any time outstanding.

 

 “Subsidiary” means (a) anycorporation of which more than 50% of the issued and outstanding equitysecurities having ordinary voting power to elect a majority of the Board ofDirectors of such corporation is at the time directly or indirectly owned orcontrolled by Debtor, (b) any partnership, joint venture, or otherassociation of which more than 50% of the equity

 

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interest having the power to vote, direct or controlthe management of such partnership, joint venture or other association is atthe time directly or indirectly owned and controlled by Debtor, (c) anyother entity included in the financial statements of Debtor on a consolidatedbasis.

 

Other Terms.  All accounting terms used in this Agreement,unless otherwise indicated, shall have the meanings given to such terms inaccordance with GAAP, consistently applied. All other terms contained in this Agreement, unless otherwise indicated,shall have the meanings provided by the Code, to the extent such terms aredefined therein. 

 

# ***9.     GENERAL PROVISIONS.***

# *** ***

***9.1  [intentionallyomitted]*** 

 

***9.2  Application ofPayments. ***Allpayments with respect to the Obligations may be applied, and in PFG’s goodfaith business judgment reversed and re-applied, to the Obligations, in suchorder and manner as PFG shall determine in its good faith business judgment.

 

***9.3  [intentionallyomitted]*** 

 

***9.4  [intentionallyomitted]***

 

***9.5  Notices.***  All notices to be given under this Agreementshall be in writing and shall be given either personally or by reputableprivate delivery service or by regular first-class mail, or certified mailreturn receipt requested, addressed to PFG or Debtor at the addresses shown inthe heading to this Agreement, or at any other address designated in writing byone party to the other party. All notices shall be deemed to have been givenupon delivery in the case of notices personally delivered, or at the expirationof one Business Day following delivery to the private delivery service, or twoBusiness Days following the deposit thereof in the United States mail, withpostage prepaid.  

 

***9.6  Severability.***  Should any provision of this Agreement beheld by any court of competent jurisdiction to be void or unenforceable, suchdefect shall not affect the remainder of this Agreement, which shall continuein full force and effect.

 

***9.7  Integration.***  This Agreement and such other writtenagreements, documents and instruments as may be executed in connection herewithare the final, entire and complete agreement between Debtor and PFG andsupersede all prior and contemporaneous negotiations and oral representationsand agreements, all of which are merged and integrated in this Agreement.  There are no oral understandings,representations or agreements between the parties which are not set forth inthis Agreement or in other written agreements signed by the parties inconnection herewith.

 

***9.8  Waivers;Indemnity.***  Thefailure of PFG at any time or times to require Debtor to strictly comply withany of the provisions of this Agreement or any other Debtor Document shall notwaive or diminish any right of PFG later to demand and receive strictcompliance therewith.  Any waiver of anydefault shall not waive or affect any other default, whether prior orsubsequent, and whether or not similar. None of the provisions of this Agreement or any other Debtor Document shallbe deemed to have been waived by any act or knowledge of PFG or its agents oremployees, but only by a specific written waiver signed by an authorizedofficer of PFG and delivered to Debtor. To the extent permitted by law, Debtor waives the benefit of allstatutes of limitations relating to any of the Obligations or this Agreement orany other Debtor Document, and Debtor waives demand, protest, notice of protestand notice of default or dishonor, notice of payment and nonpayment, release,compromise, settlement, extension or renewal of any commercial paper,instrument, account, General Intangible, document or guaranty at any time heldby PFG on which Debtor is or may in any way be liable, and notice of any actiontaken by PFG, unless expressly required by this Agreement. Debtor hereby agreesto indemnify PFG and its affiliates, subsidiaries, parent, directors, officers,employees, agents, and attorneys, and to hold them harmless from and againstany and all claims, debts, liabilities, demands, obligations, actions, causesof action, penalties, costs and expenses (including reasonable attorneys’fees), of every kind, which they may sustain or incur based upon or arising outof any of the Obligations, or any relationship or agreement between PFG andDebtor, or any other matter, relating to Debtor or the Obligations; providedthat this indemnity shall not extend to damages proximately caused by theindemnitee’s own gross negligence or willful misconduct.  Notwithstanding any provision in thisAgreement to the contrary, the indemnity agreement set forth in this Sectionshall survive any termination of this Agreement and shall for all purposescontinue in full force and effect.

 

***9.9 [intentionally omitted]***

 

***9.10  Amendment.***  The terms and provisions of this Agreementmay not be waived or amended, except in a writing executed by Debtor and a dulyauthorized officer of PFG.

 

***9.11  Time ofEssence.***  Time isof the essence in the performance by Debtor of each and every obligation underthis Agreement.

 

***9.12  Attorneys Feesand Costs.***  Debtorshall reimburse PFG for all reasonable attorneys’ fees and all filing,recording, search, title insurance, appraisal, audit, and other reasonablecosts incurred by PFG, pursuant to, or in connection with, or

 

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relating to this Agreement (whether or not a lawsuitis filed), including, but not limited to, any reasonable attorneys’ fees andcosts PFG incurs in order to do the following: prepare and negotiate thisAgreement and all present and future documents relating to this Agreement;obtain legal advice in connection with this Agreement or Debtor; enforce, orseek to enforce, any of its rights; prosecute actions against, or defendactions by, Account Debtors; commence, intervene in, or defend any action orproceeding; initiate any complaint to be relieved of the automatic stay inbankruptcy; file or prosecute any probate claim, bankruptcy claim, third-partyclaim, or other claim; examine, audit, copy, and inspect any of the Collateralor any of Debtor’s books and records; protect, obtain possession of, lease,dispose of, or otherwise enforce PFG’s security interest in, the Collateral;and otherwise represent PFG in any litigation relating to Debtor. If either PFGor Debtor files any lawsuit against the other predicated on a breach of thisAgreement, the prevailing party in such action shall be entitled to recover itsreasonable costs and attorneys’ fees, including (but not limited to) reasonableattorneys’ fees and costs incurred in the enforcement of, execution upon ordefense of any order, decree, award or judgment.  All attorneys’ fees and costs to which PFG may be entitledpursuant to this Paragraph shall immediately become part of Debtor’sObligations, shall be due on demand, and shall bear interest at a rate equal tothe highest interest rate applicable to any of the Obligations.

 

***9.13  Benefit ofAgreement.***  Theprovisions of this Agreement shall be binding upon and inure to the benefit ofthe respective successors, assigns, heirs, beneficiaries and representatives ofDebtor and PFG; provided, however, that Debtor may not assign or transfer anyof its rights under this Agreement without the prior written consent of PFG,and any prohibited assignment shall be void. No consent by PFG to any assignment shall release Debtor from itsliability for the Obligations.

 

***9.14  [intentionallyomitted]***

 

***9.15 [intentionally omitted]***

 

***9.16 Confidentiality.*** In handling any confidential information (including withoutlimitation confidential information provided pursuant to this Agreement orpursuant to the Guaranty), PFG and all employees and agents of PFG shallexercise the same degree of care that PFG exercises with respect to its ownproprietary information of the same types to maintain the confidentiality ofany non-public information thereby received or received pursuant to thisAgreement, except that disclosure of such information may be made (i) to thesubsidiaries or affiliates of PFG in connection with their present orprospective business relations with Debtor or PFG provided that they haveentered into a comparable confidentiality agreement in favor of Debtor, (ii) toprospective transferees or purchasers of any interest in the Obligations,provided that they have entered into a comparable confidentiality agreement infavor of Debtor, (iii) as required by law, regulations, rule or order,subpoena, judicial order or similar order, or (iv) as may be required inconnection with the examination, audit or similar investigation of PFG, (iv) asmay be necessary in PFG’s good faith business judgment in connection with theenforcement of its rights or remedies after an Event of Default..  Confidential information hereunder shall notinclude information that either:  (a) isin the public domain or in the knowledge or possession of PFG when disclosed toPFG, or becomes part of the public domain after disclosure to PFG through nofault of PFG; or (b) is disclosed to PFG by a third party, provided PFG doesnot have actual knowledge that such third party is prohibited from disclosingsuch information.

 

***9.17  ParagraphHeadings; Construction.*** Paragraph headings are only used in this Agreement for convenience.  Debtor and PFG acknowledge that the headingsmay not describe completely the subject matter of the applicable paragraph, andthe headings shall not be used in any manner to construe, limit, define orinterpret any term or provision of this Agreement. This Agreement has beenfully reviewed and negotiated between the parties and no uncertainty or ambiguityin any term or provision of this Agreement shall be construed strictly againstPFG or Debtor under any rule of construction or otherwise.

 

***9.18  Governing Law;Jurisdiction; Venue.*** This Agreement and all acts and transactions hereunder and all rightsand obligations of PFG and Debtor shall be governed by the laws of the State ofCalifornia.  As a material part of theconsideration to PFG to enter into this Agreement, Debtor (i) agrees that allactions and proceedings relating directly or indirectly to this Agreementshall, at PFG’s option, be litigated in courts located within California, andthat the exclusive venue therefor shall be San Francisco County; (ii) consentsto the jurisdiction and venue of any such court and consents to service of processin any such action or proceeding by personal delivery or any other methodpermitted by law; and (iii) waives any and all rights Debtor may have to objectto the jurisdiction of any such court, or to transfer or change the venue ofany such action or proceeding.

 

***9.19  Mutual Waiverof Jury Trial.*  DEBTORAND PFG EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION ORPROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THISAGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN PFGAND DEBTOR, OR ANY CONDUCT, ACTS OR OMISSIONS OF PFG OR DEBTOR OR ANY OF THEIRDIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONSAFFILIATED WITH PFG OR DEBTOR, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDINGIN CONTRACT OR TORT OR OTHERWISE.**

 

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IN WITNESSWHEREOF, the undersigned have caused this Security Agreement to be dutyexecuted and delivered as of the date first above written.

 

 
|   Debtor:                                        | PFG:                 |
|-----------------------------------------------------------------|---------------------------|
|                                                            | PARTNERS FOR GROWTH, L.P. |
| The common seal of INTERWAVE  COMMUNICATIONS INTERNATIONAL LTD. |                      |
|                                                            | By                        | /s/ Andrew Kahn |   |
| was hereunto affixed in the presence of:                   | Title                     | Manager, Partners for Growth, LLC |   |
|                                                            |                      | Its General Partner |   |
|                                                            |                      |
| /s/ Erwin Leichtle                                              |                      |   |
|                                                            |                      |   |
| Director                                                   |                      |   |
|                                                            |                      |   |
| /s/ Cal R. Hoagland                                             |                      |   |
|                                                            |                      |   |
| Director/Secretary                                              |                      |   |
|                                                                 |                           |  |  |  |  |

 

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***Partners for Growth***

 

**SecurityAgreement**

 
| **Debtor:**  |   | **INTERWAVE ADVANCED  COMMUNICATIONS, INC.**             |
|--------------|--------|----------------------------------------------------------|
|         |   |                                                     |
| **Address:** |   | **2495 Leghorn,  Mountain View, California  94043** |
|         |   |                                                     |
| **Date:**    |   | **June 4, 2004**                                    |

 

**THISSECURITY AGREEMENT** is entered into on the above date betweenPARTNERS FOR GROWTH, L.P. (“PFG”), whose address is 560 Mission Street, 3rdfloor, San Francisco, CA 94105 and the Debtor named above (the “Debtor”), whosechief executive office is located at the above address (“Debtor’s Address”). 

 

# ***1.  [INTENTIONALLY OMITTED]***

# *** ***

# ***2.  SECURITY INTEREST.***To secure thepayment and performance of all of the Obligations when due, Debtor herebygrants to PFG a security interest in all of the following (collectively, the“Collateral”):  all right, title andinterest of Debtor in and to all of the following, whether now owned orhereafter arising or acquired and wherever located: all Accounts; allInventory; all Equipment; all Deposit Accounts; all General Intangibles(including without limitation all Intellectual Property); all Investment Property;all Other Property; and any and all claims, rights and interests in any of theabove, and all guaranties and security for any of the above, and allsubstitutions and replacements for, additions, accessions, attachments,accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds andclaims against third parties) of, any and all of the above, and all Debtor’sbooks relating to any and all of the above. Notwithstanding anything herein tothe contrary, in no event shall the security interest granted under thisSection 2 attach to any (“Specified Contracts”):  anylease, license, contract, property rights or agreement to which Debtor is aparty or any of its rights (including property rights with respect toequipment) or interests thereunder if and for so long as the grant of suchsecurity interest shall constitute or result in (i) the abandonment,invalidation or unenforceability of any right, title or interest of Debtortherein, or (ii) in a breach or termination pursuant to the terms of, or adefault under, any such lease, license, contract property rights or agreement(other than to the extent that any such term would be rendered ineffectivepursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Code (or any successorprovision or provisions) of any relevant jurisdiction or any other applicablelaw or principles of equity); provided however that such security interestshall attach immediately at such time as the condition causing such abandonment,invalidation or unenforceability shall be remedied and to the extent severable,shall attach immediately to any portion of such lease, license, contract,property rights or agreement that does not result in any of the consequencesspecified in (i) or (ii) above. Except as disclosed on Exhibit A hereto, Debtorrepresents and warrants to PFG that there are no Specified Contracts which arematerial to Debtor’s business.  Debtorshall not, hereafter, without PFG’s prior written consent, enter into any SpecifiedContract which is material to Debtor’s business. In addition, notwithstandinganything herein to the contrary, in no event shall the security interestgranted under this Section 2 attach to any of the outstanding capital stock of a controlled foreign corporation(as such term is defined in the Internal Revenue Code of 1986, as amended)  in excess of 65% of the voting power of allclasses of capital stock of such controlled foreign corporation entitled tovote.

# *** ***

# ***3.  REPRESENTATIONS, WARRANTIES AND COVENANTS OFDEBTOR.***

# *** ***

In order to induce PFG to enter into a loan agreement with the Borrowerand make loans to the Borrower, subject to the exceptions set forth on theDisclosure Schedule attached hereto as Exhibit B, Debtor represents andwarrants to PFG as follows, and Debtor covenants that the followingrepresentations will continue to be true, and that Debtor will at all timescomply with all of the following covenants, throughout the term of thisAgreement and until all Obligations have been paid and performed in full:

 

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***3.1 Corporate Existence and Authority.***  Debtor is and will continue to be, dulyorganized, validly existing and in good standing under the laws of thejurisdiction of its incorporation.  Debtoris and will continue to be qualified and licensed to do business in alljurisdictions in which any failure to do so would result in a Material AdverseChange.  The execution, delivery andperformance by Debtor of this Agreement, and all other documents contemplatedhereby (i) have been duly and validly authorized, (ii) are enforceable againstDebtor in accordance with their terms (except as enforcement may be limited byequitable principles and by bankruptcy, insolvency, reorganization, moratoriumor similar laws relating to creditors’ rights generally), and (iii) do notviolate Debtor’s articles or certificate of incorporation, or Debtor’s by-laws,or any law or any material agreement or instrument which is binding upon Debtoror its property, and (iv) do not constitute grounds for acceleration of anymaterial indebtedness or obligation under any agreement or instrument which isbinding upon Debtor or its property.

 

***3.2 Name; Trade Names and Styles.***  As of the date hereof, the name of Debtorset forth in the heading to this Agreement is its name as presently set forthin its certificate of incorporation. Listed on Exhibit A hereto are, as of the date hereof, all prior namesof Debtor and all of Debtor’s present and prior trade names.  Debtor shall give PFG 30 days’ prior writtennotice before changing its name or doing business under any other name.  Debtor has complied, and will in the futurecomply, in all material respects, with all laws relating to the conduct ofbusiness under a fictitious business name, if applicable to Debtor.

 

***3.3 Place of Business; Location of Collateral.***As ofthe date hereof, the address set forth in the heading to this Agreement isDebtor’s chief executive office.  Inaddition, as of the date hereof, Debtor has places of business and Collateralis located only at the locations set forth on Exhibit A hereto.  Debtor will give PFG at least 30 days priorwritten notice before opening any additional place of business, changing itschief executive office, or moving any of the Collateral to a location otherthan Debtor’s Address or one of the locations set forth on Exhibit A hereto,except that Debtor may maintain sales offices in the ordinary course ofbusiness at which not more than a total of $10,000 fair market value of Equipmentis located.

 

***3.4 Title to Collateral; Perfection; Permitted Liens.***  

 

(a)  Debtor isnow, and will at all times in the future be, the sole owner of all theCollateral, except for items of Equipment which are leased to Debtor and exceptfor Permitted Liens.  The Collateral nowis and will remain free and clear of any and all liens, charges, securityinterests, encumbrances and adverse claims, except for Permitted Liens.  PFG now has, and will continue to have, anenforceable security interest in all of the Collateral, subject only to thePermitted Liens, and Debtor will at all times defend PFG and the Collateralagainst all claims of others.  

 

(b)         Setforth on Exhibit A hereto are all of Debtor’s Deposit Accounts, as of the datehereof, and Debtor will give PFG five Business Days advance written noticebefore establishing any new Deposit Accounts and will cause the institutionwhere any such new Deposit Account is maintained to execute and deliver to PFGa control agreement in form sufficient to perfect PFG’s security interest inthe Deposit Account and otherwise satisfactory to PFG in its good faithbusiness judgment. 

 

(c) In the event that Debtor shall at any time afterthe date hereof have any commercial tort claims against others, which it isasserting or gives written notice of its intention to assert, and in which thepotential recovery exceeds $100,000, Debtor shall promptly notify PFG thereofin writing and provide PFG with such information regarding the same as PFGshall request (unless providing such information would waive the Debtor’sattorney-client privilege).  Suchnotification to PFG shall constitute a grant of a security interest in thecommercial tort claim and all proceeds thereof to PFG, and Debtor shall executeand deliver all such documents and take all such actions as PFG shall requestin connection therewith.

 

(d)         Noneof the Collateral now is or will be affixed to any real property in such amanner, or with such intent, as to become a fixture.  Debtor is not and will not become a lessee under any realproperty lease pursuant to which the lessor may obtain any rights in any of theCollateral and no such lease now prohibits, restrains, impairs or willprohibit, restrain or impair Debtor’s right to remove any Collateral from theleased premises.  Whenever anyCollateral is located upon premises in which any third party has an interest,Debtor shall, whenever requested by PFG, use commercially reasonable efforts tocause such third party to execute and deliver to PFG, in form acceptable toPFG, such waivers and subordinations as PFG shall specify in its good faithbusiness judgment.  Debtor will keep infull force and effect, and will comply with all material terms of, any lease ofreal property where any of the Collateral now or in the future may be located.

 

***3.5 Maintenance of Collateral.*** Debtor will maintain the Collateral in goodworking condition (ordinary wear and tear excepted), and Debtor will not usethe Collateral for any unlawful purpose. Debtor will immediately advise PFG in writing of any material loss ordamage to the Collateral.

 

***3.6 Books and Records.***  Debtor has maintained and will maintain at Debtor’s Addresscomplete and accurate books and records, comprising an accounting system suchthat its financial statements can be prepared in accordance with GAAP.

 

***3.7 Financial Condition, Statements and Reports.***  All financial statements now or in thefuture delivered to PFG have been, and will be, prepared in conformity withGAAP and now and in the future will fairly present, in all material respects,the results of operations and financial condition of Debtor, in accordance withGAAP, at the times and for the periods therein

 

2

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stated.  Between the last datecovered by any such statement provided to PFG and the date hereof, there hasbeen no Material Adverse Change.

 

***3.8 Tax Returns and Payments; Pension Contributions.***  Debtor has timely filed, and will timelyfile, all material required tax returns and reports, and Debtor has timelypaid, and will timely pay, all federal and state, and all material foreign andlocal taxes, assessments, deposits and contributions now or in the future owedby Debtor.  Debtor may, however, deferpayment of any contested taxes, assessments, deposits and contributions,provided that Debtor (i) in good faith contests Debtor’s obligation to pay thesame by appropriate proceedings promptly and diligently instituted andconducted, (ii) notifies PFG in writing of the commencement of, and anymaterial development in, the proceedings, and (iii) posts bonds or takes anyother steps required to keep the contested taxes from becoming a lien upon anyof the Collateral.  Debtor is unaware ofany claims or adjustments proposed for any of Debtor’s prior tax years whichcould result in additional taxes becoming due and payable by Debtor.  Debtor has paid, and shall continue to payall amounts necessary to fund all present and future pension, profit sharingand deferred compensation plans in accordance with their terms, and Debtor hasnot and will not withdraw from participation in, permit partial or completetermination of, or permit the occurrence of any other event with respect to,any such plan which could reasonably be expected to result in any liability ofDebtor, including any material liability to the Pension Benefit GuarantyCorporation or its successors or any other governmental agency. 

 

***3.9 Compliance with Law.***  Debtor has, to the best of its knowledge, complied, and willcomply, in all material respects, with all provisions of all foreign, federal,state and local laws and regulations applicable to Debtor, including, but notlimited to, those relating to Debtor’s ownership of real or personal property,the conduct and licensing of Debtor’s business, and all environmental matters.

 

***3.10 Litigation.*** There is no claim, suit, litigation, proceeding or investigation pendingor (to best of Debtor’s knowledge) threatened against Debtor in any court orbefore any governmental agency (or any basis therefor known to Debtor) whichcould reasonably be expected to result, either separately or in the aggregate,in any Material Adverse Change.  Debtorwill promptly inform PFG in writing of any claim, proceeding, litigation orinvestigation in the future threatened or instituted against Debtor involvingany single claim of $50,000 or more, or involving $100,000  or more in the aggregate.

 

# ***4.REMITTANCE OF PROCEEDS.*** Subject to the rights of the SeniorLender (if any), all proceeds arising from the disposition of any Collateralshall be delivered, in kind, by Debtor to PFG in the original form in whichreceived by Debtor not later than the following Business Day after receipt byDebtor, to be applied to the Obligations in such order as PFG shall determine;provided that, if no Default or Event of Default has occurred and iscontinuing, Debtor shall not be obligated to remit to PFG (i) the proceeds ofAccounts arising in the ordinary course of business, or (ii) the proceeds ofthe sale of worn out or obsolete Equipment disposed of by Debtor in good faithin an arm’s length transaction for an aggregate purchase price of $25,000 orless (for all such transactions in any fiscal year), and (iii) the proceeds ofinsurance if promptly used to replace or repair the property with respect towhich the proceeds were paid.  Except aspermitted above, Debtor agrees that it will not commingle proceeds ofCollateral with any of Debtor’s other funds or property, but will hold suchproceeds separate and apart from such other funds and property and in anexpress trust for PFG, except as set forth above, and subject to the rights ofthe Senior Lender.  Nothing in thisSection limits the restrictions on disposition of Collateral set forthelsewhere in this Agreement.

# *** ***

# ***5.  ADDITIONAL DUTIES OF DEBTOR.***

# *** ***

***5.1 [intentionally omitted]***

 

***5.2 Insurance.*** Debtor shall, at all times insure all of the tangible personal propertyCollateral and carry such other business insurance, with insurers reasonablyacceptable to PFG, in such form and amounts as PFG may reasonably require andthat are customary and in accordance with standard practices for Debtor’sindustry and locations, and Debtor shall provide evidence of such insurance toPFG.  All such insurance policies shallname PFG as an additional loss payee, and shall contain a lenders loss payeeendorsement in form reasonably acceptable to PFG.  Upon receipt of the proceeds of any such insurance, subject tothe rights of the Senior Lender, provided no Default or Event of Default hasoccurred and is continuing, PFG shall release to Debtor insurance proceeds withrespect to Collateral, which shall be utilized by Debtor for the prompt repairor replacement of the Collateral with respect to which the insurance proceedswere paid.  PFG may require reasonableassurance that the insurance proceeds so released will be so used.  If Debtor fails to provide or pay for anyinsurance, PFG may, but is not obligated to, obtain the same at Debtor’sexpense.  Debtor shall promptly deliverto PFG copies of all material reports made to insurance companies.

 

***5.3 Reports.*** Debtor, at its expense, shall provide PFG with such written reports withrespect to Debtor, as PFG shall from time to time specify in its good faithbusiness judgment, it beingrecognized by PFG that any projections and forecasts provided by Debtor in goodfaith and based upon reasonable assumptions are not to be viewed as facts andthat actual results during the period or periods covered by any suchprojections or forecasts may differ from the projected or forecast results.

 

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***5.4 Access to Collateral, Books and Records.***  At reasonable times, and on one BusinessDay’s notice, PFG, or its agents, shall have the right to inspect theCollateral, and the right to audit and copy Debtor’s books and records.  All information obtained in any suchinspection or audit shall be subject to the confidentiality agreement inSection 9.16 below.  The foregoinginspections and audits shall be at Debtor’s expense and the charge therefor shallbe $750 per person per day (or such higher amount as shall represent PFG’s thencurrent standard charge for the same), plus reasonable out-of-pocket expenses. Notwithstanding the foregoing, if noEvent of Default has occurred and is continuing, Debtor shall not be requiredto disclose, permit the inspection, examination or making of extracts, ordiscussion of, any document, information or other matter (i) in respect ofwhich disclosure is prohibited by law or any agreement binding on Debtor or anyof its Subsidiaries, or (ii) is subject to attorney-client or similar privilegeor constitutes attorney work product. If Debtor is withholding any information requested by Lender pursuant tothe preceding sentence, it shall so advise PFG in writing, giving PFG a generaldescription of the nature of the information withheld.

 

***5.5 Negative Covenants.*** Debtor shall not, withoutPFG’s prior written consent (which shall be a matter of its good faith businessjudgment), do any of the following:  (i)merge or consolidate with another corporation or entity, except that any wholly-ownedSubsidiary of Debtor may be merged with Debtor so long as Debtor is thesurviving corporation; (ii) acquire any assets, except inthe ordinary course of business, or make any Investments other than PermittedInvestments; (iii) consummate any other transaction outside the ordinary courseof business; (iv) sell or transfer any Collateral, except for (A) the sale offinished Inventory in the ordinary course of Debtor’s business, (B) the sale ofobsolete or unneeded Equipment in the ordinary course of business, (C) themaking of Permitted Investments, (D) the granting of Permitted Liens, and (E)the non-exclusive licensing of Intellectual Property in the ordinary course ofbusiness; (v) store any Inventory or other Collateral with any warehouseman orother third party, unless there is in place a bailee agreement in such form asPFG shall specify in its good faith business judgment; (vi) sell any Inventoryon a sale-or-return, guaranteed sale, consignment, or other contingent basis;(vii) make any loans of any money or other assets, other than PermittedInvestments; (viii) incur any Indebtedness, other than Permitted Indebtedness;(ix) guarantee or otherwise become liable with respect to the obligations ofanother party or entity; (x) pay or declare any dividends on Debtor’s stock(except for dividends payable solely in stock of Debtor); (xi) redeem, retire,purchase or otherwise acquire, directly or indirectly, any of Debtor’s stock;(xii) engage, directly or indirectly, in any business other than the businessescurrently engaged in by Debtor or reasonably related thereto; or (xiii)dissolve or elect to dissolve. Transactions permitted by the foregoing provisions of thisSection are only permitted if no Default or Event of Default would occuras a result of such transaction.  

 

***5.6 Litigation Cooperation.***  Should any third-party suit or proceeding be instituted by oragainst PFG with respect to any Collateral or relating to Debtor, Debtor shall,without expense to PFG, make available Debtor and its officers, employees andagents and Debtor’s books and records, to the extent that PFG may deem themreasonably necessary in order to prosecute or defend any such suit orproceeding.

 

***5.7 Deposit Accounts. ***Concurrently,Debtor shall cause the banks and other institutions where its Deposit Accountsare maintained to enter into control agreements with PFG, in form and substancesatisfactory to PFG in its good faith business judgment and sufficient to perfectPFG’ security interest in said Deposit Accounts.  Said control agreements shall permit PFG, in its discretion (butsubject to the rights of the Senior Lender), to withdraw from said DepositAccounts accrued interest and any other Obligations due from Debtor to PFG.

 

***5.8 Further Assurances.***  Debtor agrees, at its expense, on request by PFG, to execute alldocuments and take all actions, as PFG, may, in its good faith businessjudgment, deem necessary or useful in order to perfect and maintain PFG’s perfectedsecurity interest in the Collateral (subject only to Permitted Liens), and inorder to fully consummate the transactions contemplated by this Agreement.

 

# ***6.   TERM.*** ThisAgreement shall continue in effect until all Obligations have been paid and performedin full.

# *** ***

# ***7.  EVENTS OF DEFAULT AND REMEDIES.***

# *** ***

***7.1 Events of Default.***  The occurrence of any of the following events shall constitute an“Event of Default” under this Agreement, and Debtor shall give PFG immediatewritten notice thereof: 

 

(a) Any warranty, representation, statement, report orcertificate made or delivered to PFG by Debtor or any of Debtor’s officers,employees or agents, now or in the future, shall be untrue or misleading in amaterial respect when made or deemed to be made; or 

 

(b) Debtor shall fail to pay any monetary Obligationwithin three Business Days after the date due; or 

 

(c) any event of default shall occur under any presentor future document, instrument or agreement between Borrower and PFG; or 

 

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(d) Debtor shall breach any of the provisions ofSection 5.5 hereof, or shall fail to perform any other non-monetaryObligation which by its nature cannot be cured, or shall fail to permit PFG toconduct an inspection or audit as provided in Section 5.4 hereof; or 

 

(e) Debtor shall fail to perform any othernon-monetary Obligation, which failure is not cured within ten Business Daysafter the date due; or 

 

(f) any levy, assessment, attachment, seizure, lien orencumbrance (other than a Permitted Lien) is made on the Collateral with avalue of $25,000 or more, which is not cured within 10 days after theoccurrence of the same; or 

 

(g) any default or event of default occurs under anyobligation in an amount in excess of $25,000, secured by a Permitted Lien,which is not cured within any applicable cure period or waived in writing bythe holder of the Permitted Lien; or 

 

(h) Debtor breaches any material contract orobligation, which has resulted or may reasonably be expected to result in aMaterial Adverse Change; or 

 

(i) Dissolution, termination of existence, insolvencyor business failure of Debtor; or appointment of a receiver, trustee orcustodian, for all or any part of the property of, assignment for the benefitof creditors by, or the commencement of any proceeding by Debtor under anyreorganization, bankruptcy, insolvency, arrangement, readjustment of debt,dissolution or liquidation law or statute of any jurisdiction, now or in thefuture in effect; or 

 

(j) the commencement of any proceeding against Debtoror any guarantor of any of the Obligations under any reorganization,bankruptcy, insolvency, arrangement, readjustment of debt, dissolution orliquidation law or statute of any jurisdiction, now or in the future in effect,which is not cured by the dismissal thereof within 45 days after the datecommenced; or 

 

(k) revocation or termination of, or limitation ordenial of liability upon, any guaranty executed by Debtor in favor of PFG; or 

 

(l) Debtor makes any payment on account of anyindebtedness or obligation which has been subordinated to the Obligations otherthan as permitted in the applicable subordination agreement, or if any Personwho has subordinated such indebtedness or obligations terminates or in any way limitshis subordination agreement; or 

 

(m) Parent shall cease to own 100% of the outstandingstock of Debtor; or

 

(n) Debtor shall generally not pay its debts as theybecome due, or Debtor shall conceal, remove or transfer any part of itsproperty, with intent to hinder, delay or defraud its creditors, or make orsuffer any transfer of any of its property which may be fraudulent under anybankruptcy, fraudulent conveyance or similar law; or 

 

(o) a Material Adverse Change shall occur.  

 

***7.2 Remedies.*** Upon the occurrence and during the continuance of any Event of Default,PFG, at its option, and without notice or demand of any kind (all of which arehereby expressly waived by Debtor), may do any one or more of the following:(a) [intentionally omitted]; (b) Accelerate and declare all or any part of theObligations to be immediately due, payable, and performable, notwithstandingany deferred or installment payments allowed by any instrument evidencing orrelating to any Obligation; (c) Take possession of any or all of the Collateralwherever it may be found, and for that purpose Debtor hereby authorizes PFGwithout judicial process to enter onto any of Debtor’s premises withoutinterference to search for, take possession of, keep, store, or remove any ofthe Collateral, and remain on the premises or cause a custodian to remain onthe premises in exclusive control thereof, without charge for so long as PFGdeems it necessary, in its good faith business judgment, in order to completethe enforcement of its rights under this Agreement or any other agreement;provided, however, that should PFG seek to take possession of any of theCollateral by court process, Debtor hereby irrevocably waives: (i) any bond andany surety or security relating thereto required by any statute, court rule orotherwise as an incident to such possession; (ii) any demand for possessionprior to the commencement of any suit or action to recover possession thereof;and (iii) any requirement that PFG retain possession of, and not dispose of, anysuch Collateral until after trial or final judgment; (d) Require Debtor toassemble any or all of the Collateral and make it available to PFG at placesdesignated by PFG which are reasonably convenient to PFG and Debtor, and toremove the Collateral to such locations as PFG may deem advisable; (e) Completethe processing, manufacturing or repair of any Collateral prior to adisposition thereof and, for such purpose and for the purpose of removal, PFGshall have the right to use Debtor’s premises, vehicles, hoists, lifts, cranes,and other Equipment and all other property without charge; (f) Sell, lease orotherwise dispose of any of the Collateral, in its condition at the time PFGobtains possession of it or after further manufacturing, processing or repair,at one or more public and/or private sales, in lots or in bulk, for cash,exchange or other property, or on credit, and to adjourn any such sale fromtime to time without notice other than oral announcement at the time scheduledfor sale.  PFG shall have the right toconduct such disposition on Debtor’s premises without charge, for such time ortimes as PFG deems reasonable, or on PFG’s premises, or elsewhere and

 

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the Collateral need not be located at the place ofdisposition.  PFG may directly orthrough any affiliated company purchase or lease any Collateral at any suchpublic disposition, and if permissible under applicable law, at any privatedisposition.  Any sale or otherdisposition of Collateral shall not relieve Debtor of any liability Debtor mayhave if any Collateral is defective as to title or physical condition orotherwise at the time of sale; (g) Demand payment of, and collect any Accountsand General Intangibles comprising Collateral and, in connection therewith,Debtor irrevocably authorizes PFG to endorse or sign Debtor’s name on allcollections, receipts, instruments and other documents, to take possession ofand open mail addressed to Debtor and remove therefrom payments made with respectto any item of the Collateral or proceeds thereof, and, in PFG’s good faithbusiness judgment, to grant extensions of time to pay, compromise claims andsettle Accounts and the like for less than face value; (h) Exercise any and allrights under any present or future control agreements relating to DepositAccounts or Investment Property; and (i) Demand and receive possession of anyof Debtor’s federal and state income tax returns and the books and recordsutilized in the preparation thereof or referring thereto.  All reasonable attorneys’ fees, expenses,costs, liabilities and obligations incurred by PFG with respect to theforegoing shall be added to and become part of the Obligations, shall be due ondemand, and shall bear interest at a rate equal to the highest interest rateapplicable to any of the Obligations. Without limiting any of PFG’s rights and remedies, from and after theoccurrence and during the continuance of any Event of Default, the interestrate applicable to the Obligations shall be the same interest rate applicableto loans to the Borrower after an Event of Default.

 

***7.3 Standards for Determining Commercial Reasonableness.***  Debtor and PFG agree that a sale or otherdisposition (collectively, “sale”) of any Collateral which complies with thefollowing standards will conclusively be deemed to be commerciallyreasonable:  (i) Notice of the sale isgiven to Debtor at least ten days prior to the sale, and, in the case of apublic sale, notice of the sale is published at least five days before the salein a newspaper of general circulation in the county where the sale is to beconducted; (ii) Notice of the sale describes the collateral in general,non-specific terms; (iii) The sale is conducted at a place designated by PFG,with or without the Collateral being present; (iv) The sale commences at anytime between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in cash or by cashier’s check or wiretransfer is required; (vi) With respect to any sale of any of the Collateral,PFG may (but is not obligated to) direct any prospective purchaser to ascertaindirectly from Debtor any and all information concerning the same.  PFG shall be free to employ other methods ofnoticing and selling the Collateral, in its discretion, if they are commerciallyreasonable.

 

***7.4 Power of Attorney.***  Upon the occurrence and during the continuance of any Event ofDefault, without limiting PFG’s other rights and remedies, Debtor grants to PFGan irrevocable power of attorney coupled with an interest, authorizing andpermitting PFG (acting through any of its employees, attorneys or agents) atany time, at its option, but without obligation, with or without notice toDebtor, and at Debtor’s expense, to do any or all of the following, in Debtor’sname or otherwise, but PFG agrees that if it exercises any right hereunder, itwill do so in good faith and in a commercially reasonable manner:  (a) Execute on behalf of Debtor anydocuments that PFG may, in its good faith business judgment, deem advisable inorder to perfect and maintain PFG’s security interest in the Collateral, or inorder to exercise a right of Debtor or PFG, or in order to fully consummate allthe transactions contemplated under this Agreement, and all other DebtorDocuments; (b) Execute on behalf of Debtor, any invoices relating to anyAccount, any draft against any Account Debtor and any notice to any AccountDebtor, any proof of claim in bankruptcy, any Notice of Lien, claim ofmechanic’s, materialman’s or other lien, or assignment or satisfaction ofmechanic’s, materialman’s or other lien; (c) Take control in any manner of anycash or non-cash items of payment or proceeds of Collateral; endorse the nameof Debtor upon any instruments, or documents, evidence of payment or Collateralthat may come into PFG’s possession; (d) Endorse all checks and other forms ofremittances received by PFG; (e) Pay, contest or settle any lien, charge,encumbrance, security interest and adverse claim in or to any of theCollateral, or any judgment based thereon, or otherwise take any action toterminate or discharge the same; (f) Grant extensions of time to pay,compromise claims and settle Accounts and General Intangibles for less thanface value and execute all releases and other documents in connectiontherewith; (g) Pay any sums required on account of Debtor’s taxes or to securethe release of any liens therefor, or both; (h) Settle and adjust, and givereleases of, any insurance claim that relates to any of the Collateral andobtain payment therefor; (i) Instruct any third party having custody or controlof any books or records belonging to, or relating to, Debtor to give PFG thesame rights of access and other rights with respect thereto as PFG has underthis Agreement; and (j) Take any action or pay any sum required of Debtorpursuant to this Agreement and any other Debtor Documents.  Any and all reasonable sums paid and any andall reasonable costs, expenses, liabilities, obligations and attorneys’ feesincurred by PFG with respect to the foregoing shall be added to and become partof the Obligations, shall be payable on demand, and shall bear interest at arate equal to the highest interest rate applicable to any of theObligations.  In no event shall PFG’srights under the foregoing power of attorney or any of PFG’s other rights underthis Agreement be deemed to indicate that PFG is in control of the business,management or properties of Debtor.

 

***7.5 Application of Proceeds.***  All proceeds realized as the result of any sale of the Collateralshall be applied by PFG first to the reasonable costs, expenses, liabilities,obligations and attorneys’ fees incurred by PFG in the exercise of its rightsunder this Agreement, second to the interest due upon any of the Obligations,and third to the principal of the Obligations, in such order as PFG shalldetermine in its sole discretion.  Anysurplus shall be paid to Debtor or other persons legally entitled thereto;Debtor shall remain liable to PFG for any deficiency.  If, PFG, in its good faith business judgment, directly or

 

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indirectly enters into a deferred payment or othercredit transaction with any purchaser at any sale of Collateral, PFG shall havethe option, exercisable at any time, in its good faith business judgment, ofeither reducing the Obligations by the principal amount of purchase price ordeferring the reduction of the Obligations until the actual receipt by PFG ofthe cash therefor.

 

***7.6 Remedies Cumulative.***  In addition to the rights and remedies set forth in thisAgreement, PFG shall have all the other rights and remedies accorded a securedparty under the Code and under all other applicable laws, and under any otherinstrument or agreement now or in the future entered into between PFG andDebtor, and all of such rights and remedies are cumulative and none isexclusive.  Exercise or partial exerciseby PFG of one or more of its rights or remedies shall not be deemed anelection, nor bar PFG from subsequent exercise or partial exercise of any otherrights or remedies.  The failure ordelay of PFG to exercise any rights or remedies shall not operate as a waiverthereof, but all rights and remedies shall continue in full force and effectuntil all of the Obligations have been fully paid and performed.

 

# ***8.***              DEFINITIONS. As used in this Agreement, the following terms have the followingmeanings:

# *** ***

“Account Debtor” means the obligor on an Account.

 

“Accounts” means all present and future “accounts” as defined inthe California Uniform Commercial Code in effect on the date hereof with suchadditions to such term as may hereafter be made, and includes withoutlimitation all accounts receivable and other sums owing to Debtor.

 

“Borrower” means INTERWAVE COMMUNICATIONS, INC., a Delawarecorporation and its successors.

 

“Business Day” means a day on which PFG is open for business.

 

“Code” means the Uniform Commercial Code as adopted and ineffect in the State of California from time to time. 

 

“Collateral” has the meaning set forth in Section 2 above.

 

“continuing” and “during the continuance of” when usedwith reference to a Default or Event of Default means that the Default or Eventof Default has occurred and has not been either waived in writing by PFG orcured within any applicable cure period.

 

“Debtor Documents” means, collectively, this Agreement, and allother present and future documents, instruments and agreements between PFG andDebtor, including, but not limited to those relating to this Agreement, theContinuing Guaranty of substantially even date executed and delivered by Debtorin favor of PFG with respect to Borrower (with all extensions and renewalthereof, the “Guaranty”), and all amendments and modifications thereto andreplacements therefor.

 

 “Default” means anyevent which with notice or passage of time or both, would constitute an Eventof Default.

 

 “Deposit Accounts” meansall present and future “deposit accounts” as defined in the California UniformCommercial Code in effect on the date hereof with such additions to such termas may hereafter be made, and includes without limitation all general andspecial bank accounts, demand accounts, checking accounts, savings accounts andcertificates of deposit.

 

“Equipment” means all present and future “equipment” as definedin the California Uniform Commercial Code in effect on the date hereof withsuch additions to such term as may hereafter be made, and includes withoutlimitation all machinery, fixtures, goods, vehicles (including motor vehiclesand trailers), and any interest in any of the foregoing.

 

“Event of Default” means any of the events set forth inSection 7.1 of this Agreement.

 

“GAAP” means generally accepted accounting principlesconsistently applied.

 

“General Intangibles” means all present and future “generalintangibles” as defined in the California Uniform Commercial Code in effect onthe date hereof with such additions to such term as may hereafter be made, andincludes without limitation all Intellectual Property, payment intangibles,royalties, contract rights, goodwill, franchise agreements, purchase orders,customer lists, route lists, telephone numbers, domain names, claims, incometax refunds, security and other deposits, options to purchase or sell real orpersonal property, rights in all litigation presently or hereafter pending(whether in contract, tort or otherwise), insurance policies (including withoutlimitation key man, property damage, and business interruption insurance),payments of insurance and rights to payment of any kind.

 

“good faith business judgment” means honesty in fact and goodfaith (as defined in Section 1201 of the Code) in the exercise of PFG’sbusiness judgment.

 

“including” means including (but not limited to).

 

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“Indebtedness” means as to any Person, (a) indebtedness forborrowed money or the deferred purchase price of property or services, (b)obligations evidenced by bonds, notes, debentures or other similar instruments,(c) reimbursement obligations with respect to letters of credit and (d) capitallease obligations.

 

“Intellectual Property” means all present and future (a)copyrights, copyright rights, copyright applications, copyright registrationsand like protections in each work of authorship and derivative work thereof,whether published or unpublished, (b) trade secret rights, including all rightsto unpatented inventions and know-how, and confidential information; (c) maskwork or similar rights available for the protection of semiconductor chips; (d)patents, patent applications and like protections including without limitationimprovements, divisions, continuations, renewals, reissues, extensions andcontinuations-in-part of the same; (e) trademarks, servicemarks, trade styles,and trade names, whether or not any of the foregoing are registered, and all applicationsto register and registrations of the same and like protections, and the entiregoodwill of the business of Debtor connected with and symbolized by any suchtrademarks; (f) computer software and computer software products; (g) designsand design rights; (h) technology; (i) all claims for damages by way of past,present and future infringement of any of the rights included above; (j) alllicenses or other rights to use any property or rights of a type describedabove.

 

“Inventory” means all present and future “inventory” as definedin the California Uniform Commercial Code in effect on the date hereof withsuch additions to such term as may hereafter be made, and includes withoutlimitation all merchandise, raw materials, parts, supplies, packing andshipping materials, work in process and finished products, including withoutlimitation such inventory as is temporarily out of Debtor’s custody orpossession or in transit and including any returned goods and any documents oftitle representing any of the above.

 

“Investment” means any beneficial ownership interest in anyPerson (including any stock, partnership interest or other equity or debtsecurities issued by any Person), and any loan, advance or capital contributionto any Person.

 

“Investment Property” means all present and future investmentproperty, securities, stocks, bonds, debentures, debt securities, partnershipinterests, limited liability company interests, options, security entitlements,securities accounts, commodity contracts, commodity accounts, and all financialassets held in any securities account or otherwise, and all options andwarrants to purchase any of the foregoing, wherever located, and all othersecurities of every kind, whether certificated or uncertificated.

 

“Material Adverse Change” means any of the following: (i) amaterial adverse change in the business, operations, or financial or othercondition of the Debtor, or (ii) a material impairment of the prospect ofrepayment of any portion of the Obligations; or (iii) a material impairment ofthe value or priority (subject to Permitted Liens) of PFG’s security interestsin the Collateral.

 

“Obligations” means all present and future advances, debts,liabilities, obligations, guaranties, covenants, duties and indebtedness at anytime owing by Debtor to PFG, whether evidenced by this Agreement or any note orother instrument or document, or otherwise, whether arising from an extensionof credit, opening of a letter of credit, banker’s acceptance, loan, guaranty,indemnification or otherwise, whether direct or indirect (including, withoutlimitation, those acquired by assignment and any participation by PFG inDebtor’s debts owing to others), absolute or contingent, due or to become due,including, without limitation, all indebtedness, liabilities and obligations ofDebtor under the Continuing Guaranty of substantially even date executed anddelivered by Debtor in favor of PFG with respect to Borrower.

 

“Other Property” means the following as defined in theCalifornia Uniform Commercial Code in effect on the date hereof with suchadditions to such term as may hereafter be made, and all rights relatingthereto: all present and future “commercial tort claims” (including withoutlimitation any commercial tort claims), “documents”, “instruments”, “promissorynotes”, “chattel paper”, “letters of credit”, “letter-of-credit rights”,“fixtures”, “farm products” and “money”; and all other goods and personalproperty of every kind, tangible and intangible, whether or not governed by theCalifornia Uniform Commercial Code.

 

“Parent” means INTERWAVE COMMUNICATIONS INTERNATIONAL LTD., aBermuda corporation.

 

 “Permitted Indebtedness”means (a) a guaranty in favor of Senior Lender with respect to Borrower,provided Senior Debt does not exceed the Senior Debt Limit; (b) Indebtednessexisting on the date hereof and shown on Exhibit B hereto; (c) indebtednesssecured by Permitted Liens; and (d) Indebtedness owing to Borrower or toParent.

 

“Permitted Investments” are: (a)          Investments (if any) shown on Exhibit B andexisting on the date hereof; (b) marketable direct obligations issued orunconditionally guaranteed by the United States or its agency or any Statematuring within 1 year from its acquisition; (c) commercial paper maturingno more than 1 year after its creation and having the highest rating fromeither Standard & Poor’s Corporation or Moody’s Investors Service,Inc; (d) bank’s certificates of deposit issued maturing no more than 1year after issue; (e) Investments consisting of deposit accounts and investment accounts; (f)Investments consisting of extensions of credit to Debtor’s customers in theordinary course of business, in the nature of accounts receivable, prepaidroyalties or notes receivable arising from the sale or lease of goods, provisionof services or licensing

 

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activities of Debtor; (g) Investmentsreceived in satisfaction or partial satisfaction of obligations owed byfinancially troubled obligors or acquired as a result of a foreclosure withrespect to any secured Investment; (h) Investments acquired in exchange for anyother Investments in connection with or as a result of any bankruptcy, workout,reorganization or recapitalization; (i) deposits, prepayments and other creditsto suppliers made in the ordinary course of business; (j) Indebtedness of anywholly-owned Subsidiary of Debtor or any wholly-owned Subsidiary of Parent,which is now or hereafter owing to Debtor, and which is incurred to fund suchSubsidiary’s operating expenses, prepayments and purchases, all in the ordinarycourse of business, and (j) other Investments in an aggregate amount at anytime not to exceed $250,000 combined for all such Investments of Debtor, Parentand Borrower.

 

“Permitted Liens” means the following:  (i) purchase money security interests in specific items ofEquipment (including accessions, additions, parts, replacements, fixtures,improvements and attachments thereto and the proceeds thereof); (ii) leases ofspecific items of Equipment (including accessions, additions, parts,replacements, fixtures, improvements and attachments thereto and the proceedsthereof); (iii) liens for taxes, fees, assessments or other governmentalcharges or levies not yet payable or being contested in good faith byappropriate proceedings, for which Debtor has maintained reserves in accordancewith GAAP, and which do not result in a lien on any Collateral; (iv) additionalsecurity interests and liens consented to in writing by PFG, which consent maybe withheld in its good faith business judgment; (v) security interests beingterminated substantially concurrently with this Agreement; (vi) liens ofmaterialmen, mechanics, warehousemen, carriers, or other similar liens arisingin the ordinary course of business and securing obligations which are notdelinquent; (vii) liens incurred in connection with the extension, renewalor refinancing of the indebtedness secured by liens of the type described abovein clauses (i) or (ii) above, provided that any extension, renewal orreplacement lien is limited to the property encumbered by the existing lien andthe principal amount of the indebtedness being extended, renewed or refinanceddoes not increase; (viii) Liens in favor of customs and revenue authoritieswhich secure payment of customs duties in connection with the importation ofgoods; and (ix) Liens in favor of Senior Lender securing an amount not inexcess of the Senior Debt Limit; (x) Liens listed on Exhibit B hereto; (xi)non-exclusive licenses and non-exclusive sublicenses granted in the ordinarycourse of business; (xii) leases and subleases granted in the ordinary courseof business consisting of (A) short-term rental of Inventory, or (B) leases orsubleases of Equipment with an aggregate value for all such leases andsubleases not in excess of $10,000; (xiii) pledges or deposits in the ordinarycourse of business in connection with workers’ compensation, unemploymentinsurance and social security legislation, in an aggregate amount not to exceed$25,000 or as otherwise required by law; (xiv) cash deposits to secure theperformance of bids, trade contracts (other than for borrowed money), contractsfor the purchase of property, leases, statutory obligations, surety and appealbonds, performance bonds and other obligations of a like nature, in each case,incurred in the ordinary course of business and not representing an obligationfor borrowed money; (xv) statutory, common law or contractual liens ofdepository institutions or institutions holding securities accounts (includingrights of set-off), securing only customary charges and fees in connection withsuch accounts; and (xvi) Liens on insurance proceeds securing the payment offinanced insurance premiums.  PFG willhave the right to require, as a condition to its consent under subparagraph(iv) above, that the holder of the additional security interest or lien sign anintercreditor agreement on PFG’s then standard form, acknowledge that thesecurity interest is subordinate to the security interest in favor of PFG, andagree not to take any action to enforce its subordinate security interest solong as any Obligations remain outstanding, and that Debtor agree that anyuncured default in any obligation secured by the subordinate security interestshall also constitute an Event of Default under this Agreement.  

 

“Person” means any individual, sole proprietorship, partnership,joint venture, trust, unincorporated organization, association, corporation,government, or any agency or political division thereof, or any other entity. 

 

“Senior Lender” means**Silicon Valley Bank.**

 

“Senior Debt” means total combined Indebtedness of Debtor,Borrower and Parent to Senior Lender, including, but not limited to, moniesborrowed, interest on loans, fees and expenses, sums due in connection withissuance of commercial letters of credit, issuance of forward contracts forforeign exchange reserve, and any other direct or indirect financialaccommodation Senior Lender may provide to Debtor, Borrower or Parent.

 

 “Senior Debt Limit”means **$2,500,000**at any time outstanding.

 

 “Subsidiary” means(a) any corporation of which more than 50% of the issued andoutstanding equity securities having ordinary voting power to elect a majorityof the Board of Directors of such corporation is at the time directly orindirectly owned or controlled by Debtor, (b) any partnership, jointventure, or other association of which more than 50% of the equityinterest having the power to vote, direct or control the management of suchpartnership, joint venture or other association is at the time directly orindirectly owned and controlled by Debtor, (c) any other entity includedin the financial statements of Debtor on a consolidated basis.

 

Other Terms. All accounting terms used in this Agreement, unless otherwise indicated,shall have the meanings given to such terms in accordance with GAAP,consistently applied.  All other termscontained in this Agreement, unless otherwise indicated, shall have themeanings provided by the Code, to the extent such terms are defined therein. 

 

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# ***9.***              GENERAL PROVISIONS.

# *** ***

***9.1 [intentionally omitted]*** 

 

***9.2 Application of Payments. ***Allpayments with respect to the Obligations may be applied, and in PFG’s goodfaith business judgment reversed and re-applied, to the Obligations, in suchorder and manner as PFG shall determine in its good faith business judgment.

 

***9.3 [intentionally omitted]*** 

 

***9.4 [intentionally omitted]***

 

***9.5 Notices.*** All notices to be given under this Agreement shall be in writing andshall be given either personally or by reputable private delivery service or byregular first-class mail, or certified mail return receipt requested, addressedto PFG or Debtor at the addresses shown in the heading to this Agreement, or atany other address designated in writing by one party to the other party. Allnotices shall be deemed to have been given upon delivery in the case of noticespersonally delivered, or at the expiration of one Business Day followingdelivery to the private delivery service, or two Business Days following thedeposit thereof in the United States mail, with postage prepaid.  

 

***9.6 Severability.*** Should any provision of this Agreement be held by any court of competentjurisdiction to be void or unenforceable, such defect shall not affect theremainder of this Agreement, which shall continue in full force and effect.

 

***9.7 Integration.*** This Agreement and such other written agreements, documents andinstruments as may be executed in connection herewith are the final, entire andcomplete agreement between Debtor and PFG and supersede all prior andcontemporaneous negotiations and oral representations and agreements, all ofwhich are merged and integrated in this Agreement.  There are no oral understandings, representations or agreementsbetween the parties which are not set forth in this Agreement or in otherwritten agreements signed by the parties in connection herewith.

 

***9.8 Waivers; Indemnity.***  The failure of PFG at any time or times to require Debtor to strictlycomply with any of the provisions of this Agreement or any other DebtorDocument shall not waive or diminish any right of PFG later to demand andreceive strict compliance therewith. Any waiver of any default shall not waive or affect any other default,whether prior or subsequent, and whether or not similar.  None of the provisions of this Agreement orany other Debtor Document shall be deemed to have been waived by any act orknowledge of PFG or its agents or employees, but only by a specific writtenwaiver signed by an authorized officer of PFG and delivered to Debtor.  To the extent permitted by law, Debtorwaives the benefit of all statutes of limitations relating to any of theObligations or this Agreement or any other Debtor Document, and Debtor waivesdemand, protest, notice of protest and notice of default or dishonor, notice ofpayment and nonpayment, release, compromise, settlement, extension or renewalof any commercial paper, instrument, account, General Intangible, document orguaranty at any time held by PFG on which Debtor is or may in any way beliable, and notice of any action taken by PFG, unless expressly required bythis Agreement. Debtor hereby agrees to indemnify PFG and its affiliates,subsidiaries, parent, directors, officers, employees, agents, and attorneys,and to hold them harmless from and against any and all claims, debts,liabilities, demands, obligations, actions, causes of action, penalties, costsand expenses (including reasonable attorneys’ fees), of every kind, which theymay sustain or incur based upon or arising out of any of the Obligations, orany relationship or agreement between PFG and Debtor, or any other matter,relating to Debtor or the Obligations; provided that this indemnity shall notextend to damages proximately caused by the indemnitee’s own gross negligenceor willful misconduct.  Notwithstandingany provision in this Agreement to the contrary, the indemnity agreement setforth in this Section shall survive any termination of this Agreement andshall for all purposes continue in full force and effect.

 

***9.9 [intentionally omitted]***

 

***9.10 Amendment.*** The terms and provisions of this Agreement may not be waived or amended,except in a writing executed by Debtor and a duly authorized officer of PFG.

 

***9.11  Time of Essence.***  Time is of the essence in the performance by Debtor of each andevery obligation under this Agreement.

 

***9.12 Attorneys Fees and Costs.***  Debtor shall reimburse PFG for allreasonable attorneys’ fees and all filing, recording, search, title insurance,appraisal, audit, and other reasonable costs incurred by PFG, pursuant to, orin connection with, or relating to this Agreement (whether or not a lawsuit isfiled), including, but not limited to, any reasonable attorneys’ fees and costsPFG incurs in order to do the following: prepare and negotiate this Agreementand all present and future documents relating to this Agreement; obtain legaladvice in connection with this Agreement or Debtor; enforce, or seek toenforce, any of its rights; prosecute actions against, or defend actions by,Account Debtors; commence, intervene in, or defend any action or proceeding;initiate any complaint to be relieved of the automatic stay in bankruptcy; fileor prosecute any probate claim, bankruptcy claim, third-party claim, or otherclaim; examine, audit, copy, and inspect any of the Collateral or any ofDebtor’s books and records; protect, obtain possession of, lease, dispose of,or otherwise enforce PFG’s security interest in, the

 

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Collateral; and otherwise represent PFG in anylitigation relating to Debtor. If either PFG or Debtor files any lawsuitagainst the other predicated on a breach of this Agreement, the prevailingparty in such action shall be entitled to recover its reasonable costs andattorneys’ fees, including (but not limited to) reasonable attorneys’ fees andcosts incurred in the enforcement of, execution upon or defense of any order,decree, award or judgment.  Allattorneys’ fees and costs to which PFG may be entitled pursuant to thisParagraph shall immediately become part of Debtor’s Obligations, shall be dueon demand, and shall bear interest at a rate equal to the highest interest rateapplicable to any of the Obligations.

 

***9.13 Benefit of Agreement.***  The provisions of this Agreement shall be binding upon and inureto the benefit of the respective successors, assigns, heirs, beneficiaries andrepresentatives of Debtor and PFG; provided, however, that Debtor may notassign or transfer any of its rights under this Agreement without the priorwritten consent of PFG, and any prohibited assignment shall be void.  No consent by PFG to any assignment shallrelease Debtor from its liability for the Obligations.

 

***9.14 [intentionally omitted]***

 

***9.15 [intentionally omitted]***

 

***9.16 Confidentiality.*** In handling any confidential information (including withoutlimitation confidential information provided pursuant to this Agreement orpursuant to the Guaranty), PFG and all employees and agents of PFG shallexercise the same degree of care that PFG exercises with respect to its ownproprietary information of the same types to maintain the confidentiality ofany non-public information thereby received or received pursuant to thisAgreement, except that disclosure of such information may be made (i) to thesubsidiaries or affiliates of PFG in connection with their present orprospective business relations with Debtor or PFG provided that they haveentered into a comparable confidentiality agreement in favor of Debtor, (ii) toprospective transferees or purchasers of any interest in the Obligations,provided that they have entered into a comparable confidentiality agreement infavor of Debtor, (iii) as required by law, regulations, rule or order,subpoena, judicial order or similar order, or (iv) as may be required inconnection with the examination, audit or similar investigation of PFG, (iv) asmay be necessary in PFG’s good faith business judgment in connection with theenforcement of its rights or remedies after an Event of Default.  Confidential information hereunder shall notinclude information that either:  (a) isin the public domain or in the knowledge or possession of PFG when disclosed toPFG, or becomes part of the public domain after disclosure to PFG through nofault of PFG; or (b) is disclosed to PFG by a third party, provided PFG doesnot have actual knowledge that such third party is prohibited from disclosingsuch information.

 

***9.17 Paragraph Headings; Construction.***  Paragraph headings are only used in thisAgreement for convenience.  Debtor andPFG acknowledge that the headings may not describe completely the subjectmatter of the applicable paragraph, and the headings shall not be used in anymanner to construe, limit, define or interpret any term or provision of thisAgreement. This Agreement has been fully reviewed and negotiated between theparties and no uncertainty or ambiguity in any term or provision of thisAgreement shall be construed strictly against PFG or Debtor under any rule of constructionor otherwise.

 

***9.18 Governing Law; Jurisdiction; Venue.***  This Agreement and all acts and transactionshereunder and all rights and obligations of PFG and Debtor shall be governed bythe laws of the State of California.  Asa material part of the consideration to PFG to enter into this Agreement,Debtor (i) agrees that all actions and proceedings relating directly orindirectly to this Agreement shall, at PFG’s option, be litigated in courtslocated within California, and that the exclusive venue therefor shall be SanFrancisco County; (ii) consents to the jurisdiction and venue of any such courtand consents to service of process in any such action or proceeding by personaldelivery or any other method permitted by law; and (iii) waives any and allrights Debtor may have to object to the jurisdiction of any such court, or totransfer or change the venue of any such action or proceeding.

 

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***9.19 Mutual Waiver of Jury Trial.*  DEBTOR AND PFG EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY INANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO,THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEENPFG AND DEBTOR, OR ANY CONDUCT, ACTS OR OMISSIONS OF PFG OR DEBTOR OR ANY OFTHEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONSAFFILIATED WITH PFG OR DEBTOR, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDINGIN CONTRACT OR TORT OR OTHERWISE.**

 
| **Debtor:**                                                                             | **PFG:**                             |
|-----------------------------------------------------------------------------------------|--------------------------------------|
|                                                                                    |                                 |
| **   INTERWAVE  ADVANCED COMMUNICATIONS,     INC. ** | **PARTNERS  FOR GROWTH, L.P. ** |
|                                                                                    |                                 |
| **   By**                                                                | /s/ Cal R. Hoagland                  |   | **By** | /s/ Andrew Kahn |   |
|                                                                                    | **President  or Vice President**     |   | **Title** | Manager, Partners for Growth, LLC |   |
|                                                                                    |                                 |   |   | Its General Partner |   |
|                                                                                         |                                      |  |  |  |  |  |

 

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***Partners for Growth***

 

**Continuing Guaranty**

** **
| **Borrower:**  |   | **INTERWAVE  COMMUNICATIONS, INC.**               |
|----------------|--------|---------------------------------------------------|
|           |   |                                              |
| **Guarantor:** |   | **INTERWAVE  COMMUNICATIONS INTERNATIONAL LTD.,** |
|           |   | **a Bermuda  corporation**                        |
|           |   |                                              |
| **Date:**      |   | **June 4, 2004**                             |

 

**ThisContinuing Guaranty**is executed by the above-named guarantor(s)(jointly and severally, the “Guarantor”), as of the above date, in favor ofPARTNERS FOR GROWTH, L.P. (“PFG”), whose address is 560 Mission Street, 3rdfloor, San Francisco, CA 94105, with respect to the Indebtedness of theabove-named borrower (“Borrower”)

 

**1.**              **Continuing Guaranty**.  Guarantor hereby unconditionally guaranteesand promises to pay on demand to PFG, in lawful money of the United States, allIndebtedness of Borrower now or hereafter owing to PFG.  As used herein, the term “Indebtedness” isused in its most comprehensive sense and shall mean and include withoutlimitation:  (a) any and all debts,duties, obligations, liabilities, representations, warranties and guaranties ofBorrower or any one or more of them, heretofore, now, or hereafter made,incurred, or created  (including,without limitation, any interest, charges, and other sums accruing after thefiling of a petition by or against Borrower under the Bankruptcy Code), whethervoluntary or involuntary, due or not due, absolute or contingent, liquidated orunliquidated, certain or uncertain, determined or undetermined, monetary ornonmonetary, written or oral, and whether Borrower may be liable individuallyor jointly with others, and regardless of whether recovery thereon may be or hereafterbecome barred by any statute of limitations, discharged or uncollectible in anybankruptcy, insolvency or other proceeding, or otherwise unenforceable; and(b) any and all amendments, modifications, renewals and extensions of anyor all of the foregoing, including without limitation amendments,modifications, renewals and extensions which are evidenced by any new oradditional instrument, document or agreement; and (c) any and allreasonable attorneys’ fees, court costs, and collection charges incurred inendeavoring to collect or enforce any of the foregoing against Borrower,Guarantor, or any other person liable thereon (whether or not suit be brought)and any other reasonable expenses of, for or incidental to collection thereof.This Guaranty is given in consideration for credit and other financialaccommodations which may, from time to time, be given by PFG to Borrower inPFG’s sole discretion, but Guarantor acknowledges and agrees that acceptance byPFG of this Guaranty shall not constitute a commitment of any kind by PFG toextend such credit or other financial accommodation to Borrower or to permitBorrower to incur Indebtedness to PFG. All sums due under this Guaranty shall bear interest from the date****dueuntil the date paid at the highest rate charged with respect to any of theIndebtedness.

 

**2.**              **Waivers**. Guarantor hereby waives: (a) presentment for payment, notice of dishonor, demand, protest,and notice thereof as to any instrument, and all other notices and demands towhich Guarantor might be entitled, including without limitation notice of allof the following:  the acceptancehereof; the creation, existence, or acquisition of any Indebtedness; the amountof the Indebtedness from time to time outstanding; any foreclosure sale orother disposition of any property which secures any or all of the Indebtednessor which secures the obligations of any other guarantor of any or all of theIndebtedness; any adverse change in Borrower’s financial position; any otherfact which might increase Guarantor’s risk; any default, partial payment ornon-payment of all or any part of the Indebtedness; the occurrence of any otherEvent of Default (as hereinafter defined); any and all agreements andarrangements between PFG and Borrower and any changes, modifications, orextensions thereof, and any revocation, modification or release of any guarantyof any or all of the Indebtedness by any person (including without limitationany other person signing this Guaranty); (b) any right to require PFG toinstitute suit against, or to exhaust its rights and remedies against, Borroweror any other person, or to proceed against any property of any kind whichsecures all or any part of the Indebtedness, or to exercise any right of offsetor other right with respect to any reserves, credits or deposit accounts heldby or maintained with PFG or any indebtedness of PFG to Borrower, or toexercise any other right or power, or pursue any other remedy PFG may have;(c) other than payment of the

 

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Indebtedness, any defense arising by reason of any disability or otherdefense of Borrower or any other guarantor or any endorser, co-maker or otherperson, or by reason of the cessation from any cause whatsoever of anyliability of Borrower or any other guarantor or any endorser, co-maker or otherperson, with respect to all or any part of the Indebtedness, or by reason ofany act or omission of PFG or others which directly or indirectly results inthe discharge or release of Borrower or any other guarantor or any other personor any Indebtedness or any security therefor, whether by operation of law orotherwise; (d) any defense arising by reason of any failure of PFG toobtain, perfect, maintain or keep in force any security interest in, or lien orencumbrance upon, any property of Borrower or any other person; (e) anydefense based upon any failure of PFG to give Guarantor notice of any sale orother disposition of any property securing any or all of the Indebtedness, orany defects in any such notice that may be given, or any failure of PFG tocomply with any provision of applicable law in enforcing any security interestin or lien upon any property securing any or all of the Indebtedness including,but not limited to, any failure by PFG to dispose of any property securing anyor all of the Indebtedness in a commercially reasonable manner; (f) anydefense based upon or arising out of any bankruptcy, insolvency,reorganization, arrangement, readjustment of debt, liquidation or dissolutionproceeding commenced by or against Borrower or any other guarantor or anyendorser, co-maker or other person, including without limitation any dischargeof, or bar against collecting, any of the Indebtedness (including withoutlimitation any interest thereon), in or as a result of any such proceeding; and(g) the benefit of any and all statutes of limitation with respect to anyaction based upon, arising out of or related to this Guaranty.  Until all of the Indebtedness has been paid,performed, and discharged in full, nothing shall discharge or satisfy theliability of Guarantor hereunder except the full performance and payment of allof the Indebtedness.  If any claim isever made upon PFG for repayment or recovery of any amount or amounts receivedby PFG in payment of or on account of any of the Indebtedness, because of anyclaim that any such payment constituted a preferential transfer or fraudulentconveyance, or for any other reason whatsoever, and PFG repays all or part ofsaid amount by reason of any judgment, decree or order of any court oradministrative body having jurisdiction over PFG or any of its property, or byreason of any settlement or compromise of any such claim effected by PFG withany such claimant (including without limitation the Borrower), then and in anysuch event, Guarantor agrees that any such judgment, decree, order, settlementand compromise shall be binding upon Guarantor, notwithstanding any revocationor release of this Guaranty or the cancellation of any note or other instrumentevidencing any of the Indebtedness, or any release of any of the Indebtedness,and the Guarantor shall be and remain liable to PFG under this Guaranty for theamount so repaid or recovered, to the same extent as if such amount had neveroriginally been received by PFG, and the provisions of this sentence shallsurvive, and continue in effect, notwithstanding any revocation or release ofthis Guaranty.  Until all of theIndebtedness has been irrevocably paid and performed in full, Guarantor herebyexpressly and unconditionally waives all rights of subrogation, reimbursementand indemnity of every kind against Borrower, and all rights of recourse to anyassets or property of Borrower, and all rights to any collateral or securityheld for the payment and performance of any Indebtedness, including (but notlimited to) any of the foregoing rights which Guarantor may have under anypresent or future document or agreement with any Borrower or other person, andincluding (but not limited to) any of the foregoing rights which Guarantor mayhave under any equitable doctrine of subrogation, implied contract, or unjustenrichment, or any other equitable or legal doctrine.

 

**3.**              **Consents**. Guarantor hereby consents and agrees that, without notice to or byGuarantor and without affecting or impairing in any way the obligations orliability of Guarantor hereunder, PFG may, from time to time before or afterrevocation of this Guaranty, do any one or more of the following in PFG’s soleand absolute discretion: (a) accelerate, accept partial payments of, compromise or settle,renew, extend the time for the payment, discharge, or performance of, refuse toenforce, and release all or any parties to, any or all of the Indebtedness;(b) grant any other indulgence to Borrower or any other person in respectof any or all of the Indebtedness or any other matter; (c) accept,release, waive, surrender, enforce, exchange, modify, impair, or extend thetime for the performance, discharge, or payment of, any and all property of anykind securing any or all of the Indebtedness or any guaranty of any or all ofthe Indebtedness, or on which PFG at any time may have a lien, or refuse toenforce its rights or make any compromise or settlement or agreement thereforin respect of any or all of such property; (d) substitute or add, or takeany action or omit to take any action which results in the release of, any oneor more endorsers or guarantors of all or any part of the Indebtedness,including, without limitation one or more parties to this Guaranty, regardlessof any destruction or impairment of any right of contribution or other right ofGuarantor; (e) amend, alter or change in any respect whatsoever any termor provision relating to any or all of the Indebtedness, including the rate ofinterest thereon; (f) apply any sums received from Borrower, any otherguarantor, endorser, or co-signer, or from the disposition of any collateral orsecurity, to any indebtedness whatsoever owing from such person or secured bysuch collateral or security, in such manner and order as PFG determines in itssole discretion, and regardless of whether such indebtedness is part of theIndebtedness, is secured, or is due and payable; (g) apply any sumsreceived from Guarantor or from the disposition of any collateral or securitysecuring the obligations of Guarantor, to any of the

 

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Indebtedness in such manner and order as PFG determines in its solediscretion, regardless of whether or not such Indebtedness is secured or is dueand payable.  Guarantor consents andagrees that PFG shall be under no obligation to marshal any assets in favor ofGuarantor, or against or in payment of any or all of the Indebtedness.  Guarantor further consents and agrees thatPFG shall have no duties or responsibilities whatsoever with respect to anyproperty securing any or all of the Indebtedness.  Without limiting the generality of the foregoing, PFG shall haveno obligation to monitor, verify, audit, examine, or obtain or maintain anyinsurance with respect to, any property securing any or all of theIndebtedness.

 

**4.**              **Exercise of Rights and Remedies; Foreclosure of TrustDeeds**.    Guarantor herebywaives all rights of subrogation, reimbursement, indemnification, andcontribution and any other rights and defenses that are or may become availableto the Guarantor or other surety by reason of California Civil Code Sections2787 to 2855, inclusive.  The Guarantorwaives all rights and defenses that the Guarantor may have because theBorrower’s Indebtedness is secured by real property.  This means, among other things: (1) PFG may collect from the Guarantor without first foreclosing on anyreal or personal property collateral pledged by the Borrower.  (2) If PFG forecloses on any real propertycollateral pledged by the Borrower:  (A)The amount of the Indebtedness may be reduced only by the price for which thatcollateral is sold at the foreclosure sale, even if the collateral is worthmore than the sale price.  (B) PFG maycollect from the Guarantor even if PFG, by foreclosing on the real propertycollateral, has destroyed any right the Guarantor may have to collect from theBorrower.  This is an unconditional andirrevocable waiver of any rights and defenses the Guarantor may have becausethe Borrower’s Indebtedness is secured by real property.  These rights and defenses include, but arenot limited to, any rights or defenses based upon Section 580a, 580b,580d, or 726 of the Code of Civil Procedure. The Guarantor waives all rights and defenses arising out of an electionof remedies by PFG, even though that election of remedies, such as anonjudicial foreclosure with respect to security for a guaranteed obligation,has destroyed the Guarantor’s rights of subrogation and reimbursement againstthe principal by the operation of Section 580d of the Code of CivilProcedure or otherwise.

 

**5.**              **Acceleration**.  Notwithstanding the terms of all or any part of the Indebtedness,the obligations of the Guarantor hereunder to pay and perform all of theIndebtedness shall, at the option of PFG, immediately become due and payable,without notice, and without regard to the expressed maturity of any of theIndebtedness, in the event: Borrower shall fail to pay or perform when due(after giving effect to any applicable grace period) all or any part of theIndebtedness, or any “event of default” (as defined in any present or futureagreement between Borrower and PFG or between Guarantor and PFG) shalloccur.  All of the foregoing are hereinafterreferred to as “Events of Default”.

 

**6.**              **Revocation**.  This is a Continuing Guaranty relating to all of theIndebtedness, including Indebtedness arising under successive transactionswhich from time to time continue the Indebtedness or renew it after it has beensatisfied.  Guarantor waives allbenefits of California Civil Code Section 2815, and agrees that theobligations of Guarantor hereunder may not be terminated or revoked in anymanner except by giving 90 days’ advance written notice of revocation toPFG at its address above by registered first-class U.S. mail, postage prepaid,return receipt requested, and only as to new loans made by PFG to Borrower morethan 90 days after actual receipt of such written notice by PFG.  No termination or revocation of thisGuaranty shall be effective until 90 days following the date of actualreceipt of said written notice of revocation by PFG.  Notwithstanding such written notice of revocation or any otheract of Guarantor or any other event or circumstance, Guarantor agrees that thisGuaranty and all consents, waivers and other provisions hereof shall continuein full force and effect as to any and all Indebtedness which is outstanding onor before the 90th day following actual receipt of said written notice ofrevocation by PFG, and all extensions, renewals and modifications of saidIndebtedness (including without limitation amendments, extensions, renewals andmodifications which are evidenced by new or additional instruments, documentsor agreements executed before or after expiration of said 90-day period), andall interest thereon, accruing before or after expiration of said 90-dayperiod, and all attorneys’ fees, court costs and collection charges, incurredbefore or after expiration of said 90-day period, in endeavoring to collect orenforce any of the foregoing against Borrower, Guarantor or any other personliable thereon (whether or not suit be brought) and any other expenses of, foror incidental to collection thereof.

 

**7.**              **Independent Liability**.  Guarantor hereby agrees that one or moresuccessive or concurrent actions may be brought hereon against Guarantor, inthe same action in which Borrower may be sued or in separate actions, as oftenas deemed advisable by PFG.  Theliability of Guarantor hereunder is exclusive and independent of any otherguaranty of any or all of the Indebtedness whether executed by Guarantor or byany other guarantor (including without limitation any other persons signingthis Guaranty).  The liability ofGuarantor hereunder shall not be affected, revoked, impaired, or reduced by anyone or more of the following: (a) the fact that the Indebtedness exceeds the maximum amount ofGuarantor’s liability, if any, specified herein or elsewhere (and no agreementspecifying a maximum amount of Guarantor’s liability shall be enforceableunless set forth in a writing signed by PFG or set forth in this Guaranty); or(b) any direction as to the application of payment by Borrower or by anyother party; or (c) any other continuing or restrictive guaranty or

 

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undertaking or any limitation on the liability of any other guarantor(whether under this Guaranty or under any other agreement); or (d) anyreduction of any such other guaranty or undertaking; or (e) anyrevocation, amendment, modification or release of any such other guaranty orundertaking.  Guarantor hereby expresslyrepresents that it was not induced to give this Guaranty by the fact that thereare or may be other guarantors either under this Guaranty or otherwise, andGuarantor agrees that any release of any one or more of such other guarantorsshall not release Guarantor from its obligations hereunder either in full or toany lesser extent.

 

**8.**              **Financial Condition of Borrower**.  Guarantor is fully aware of the financialcondition of Borrower and is executing and delivering this Guaranty atBorrower’s request and based solely upon its own independent investigation ofall matters pertinent hereto, and Guarantor is not relying in any manner uponany representation or statement of PFG with respect thereto.  Guarantor represents and warrants that it isin a position to obtain, and Guarantor hereby assumes full responsibility forobtaining, any additional information concerning Borrower’s financial conditionand any other matter pertinent hereto as Guarantor may desire, and Guarantor isnot relying upon or expecting PFG to furnish to it any information now orhereafter in PFG’s possession concerning the same or any other matter.  By executing this Guaranty, Guarantorknowingly accepts the full range of risks encompassed within a contract ofcontinuing guaranty, which risks Guarantor acknowledges include withoutlimitation the possibility that Borrower will incur additional Indebtedness forwhich Guarantor will be liable hereunder after Borrower’s financial conditionor ability to pay such Indebtedness has deteriorated and/or after bankruptcy orinsolvency proceedings have been commenced by or against Borrower.  Guarantor shall have no right to require PFGto obtain or disclose any information with respect to the Indebtedness, thefinancial condition or character of Borrower, the existence of any collateralor security for any or all of the Indebtedness, the filing by or againstBorrower of any bankruptcy or insolvency proceeding, the existence of any otherguaranties of all or any part of the Indebtedness, any action or non-action onthe part of PFG, Borrower, or any other person, or any other matter, fact, oroccurrence.

 

**9.**              **Reports and Financial Statements of Guarantor**.  Guarantor shall, at its sole cost andexpense, from time to time, prepare or cause to be prepared, and provide to PFGupon PFG’s request (i) such financial statements and reports concerningGuarantor for such periods of time as PFG may designate in its good faith businessjudgment, (ii) such other information concerning Guarantor’s business,financial condition or affairs as PFG may request in its good faith businessjudgment. Guarantor further agrees to give prompt written notice to PFG of anymaterial adverse change in Guarantor’s financial condition and of any conditionor event which constitutes an Event of Default under this Guaranty.  All reports and information furnished to PFGhereunder shall be accurate and correct in all material respects and will notomit information needed to make the same not misleading. The condentialityagreement in Section 9.16 of the Security Agreement of even date betweenGuarantor and PDF shall be applicable to all confidential information providedby Guarantor pursuant to this Guaranty.

 

**10.**       **Representations and Warranties**.  Guarantor hereby represents and warrantsthat (i) it is in Guarantor’s direct interest to assist Borrower inprocuring credit, because Borrower is an affiliate of Guarantor, furnishesgoods or services to Guarantor, purchases or acquires goods or services fromGuarantor, and/or otherwise has a direct or indirect corporate or businessrelationship with Guarantor, (ii) this Guaranty has been duly and validlyauthorized, executed and delivered and constitutes the valid and bindingobligation of Guarantor, enforceable in accordance with its terms except asenforceability may be limited by bankruptcy, insolvency and other similar lawsaffecting creditors generally and by equitable principles (regardless ofwhether enforcement is sought in equity or at law), and (iii) theexecution and delivery of this Guaranty does not violate or constitute adefault under (with or without the giving of notice, the passage of time, orboth) any order, judgment, decree, or any material instrument or agreement towhich Guarantor is a party or by which it or its assets are affected or bound.

 

**11.**       **Costs**. Whether or not suit be instituted, Guarantor agrees to reimburse PFG ondemand for all reasonable attorneys’ fees and all other reasonable costs andexpenses incurred by PFG in enforcing this Guaranty, or arising out of orrelating in any way to this Guaranty. In the event either PFG or Guarantorfiles any lawsuit against the other predicated on a breach of this Guaranty,the prevailing party in such action shall be entitled to recover its attorneys’fees and costs of suit from the non-prevailing party.

 

**12.**       **Notices**. Any notice which a party shall be required or shall desire to give tothe other hereunder (except for notice of revocation, which shall be governedby Section 6 of this Guaranty) shall be given by personal delivery,reputable overnight courier service, or by telecopier or by depositing the samein the United States mail, first class postage pre-paid, addressed to PFG atits address set forth in the heading of this Guaranty and to Guarantor at itsaddress set forth under its signature hereon, and such notices shall be deemedduly given on the date of personal delivery, or one business day after sent byreputable overnight courier service, or one day after the date telecopied or 3business days after the date of mailing as aforesaid.  PFG and Guarantor may change their address for purposes ofreceiving notices hereunder by giving written notice thereof to the other partyin accordance

 

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herewith.  Guarantor shall givePFG immediate written notice of any change in its address.

 

**13.**       **Construction; Severability**. As used inthis Guaranty, the term “property” is used in its most comprehensive sense andshall mean all property of every kind and nature whatsoever, including withoutlimitation real property, personal property, mixed property, tangible propertyand intangible property.  Words usedherein in the masculine gender shall include the neuter and feminine gender,words used herein in the neuter gender shall include the masculine andfeminine, words used herein in the singular shall include the plural and wordsused in the plural shall include the singular, wherever the context soreasonably requires.  If any provisionof this Guaranty or the application thereof to any party or circumstance isheld invalid, void, inoperative or unenforceable, the remainder of thisGuaranty and the application of such provision to other parties orcircumstances shall not be affected thereby, the provisions of this Guarantybeing severable in any such instance.

 

**14.**       **General Provisions. ** PFG shall have theright to seek recourse against Guarantor to the full extent provided for hereinand in any other instrument or agreement evidencing obligations of Guarantor toPFG, and against Borrower to the full extent of the Indebtedness.  No election in one form of action orproceeding, or against any party, or on any obligation, shall constitute awaiver of PFG’s right to proceed in any other form of action or proceeding oragainst any other party.  The failure ofPFG to enforce any of the provisions of this Guaranty at any time or for anyperiod of time shall not be construed to be a waiver of any such provision orthe right thereafter to enforce the same. All remedies hereunder shall be cumulative and shall be in addition toall rights, powers and remedies given to PFG by law or under any otherinstrument or agreement.   Time is ofthe essence in the performance by Guarantor of each and every obligation underthis Guaranty.  If Borrower is acorporation, partnership or other entity, Guarantor hereby agrees that PFGshall have no obligation to inquire into the power or authority of Borrower orany of its officers, directors, partners, or agents acting or purporting to acton its behalf, and any Indebtedness made or created in reliance upon theprofessed exercise of any such power or authority shall be included in theIndebtedness guaranteed hereby.  ThisGuaranty is the entire and only agreement between Guarantor and PFG withrespect to the guaranty of the Indebtedness of Borrower by Guarantor, and allrepresentations, warranties, agreements, or undertakings heretofore orcontemporaneously made, which are not set forth herein, are supersededhereby.  No course of dealings betweenthe parties, no usage of the trade, and no parol or extrinsic evidence of anynature shall be used or be relevant to supplement or explain or modify any termor provision of this Guaranty.  Thereare no conditions to the full effectiveness of this Guaranty.  The terms and provisions hereof may not bewaived, altered, modified, or amended except in a writing executed by Guarantorand a duly authorized officer of PFG. All rights, benefits and privileges hereunder shall inure to the benefitof and be enforceable by PFG and its successors and assigns and shall bebinding upon Guarantor and its successors and assigns. Section headingsare used herein for convenience only. Guarantor acknowledges that the same may not describe completely thesubject matter of the applicable Section, and the same shall not be used in anymanner to construe, limit, define or interpret any term or provision hereof.

 

**15.**                   **Governing Law; Venue and Jurisdiction**.  This instrument and all acts andtransactions pursuant or relating hereto and all rights and obligations of theparties hereto shall be governed, construed, and interpreted in accordance withthe internal laws of the State of California. In order to induce PFG to accept this Guaranty, and as a material partof the consideration therefor, Guarantor (i) agrees that all actions orproceedings relating directly or indirectly hereto shall, at the option of PFG,be litigated in courts located within Santa Clara County, California, (ii) consentsto the jurisdiction of any such court and consents to the service of process inany such action or proceeding by personal delivery or any other methodpermitted by law; and (iii) waives any and all rights Guarantor may haveto transfer or change the venue of any such action or proceeding.

 

**16.**       **Mutual Waiver of Right to Jury Trial**.  **PFG AND GUARANTOR HEREBY WAIVE THE RIGHT TO TRIAL BYJURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING BASED UPON, ARISING OUT OF, ORIN ANY WAY RELATING TO: (i) THIS GUARANTY OR ANY SUPPLEMENT OR AMENDMENTTHERETO; OR (ii) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEENPFG AND GUARANTOR; OR (iii) ANY BREACH, CONDUCT, ACTS OR OMISSIONS OF PFG ORGUARANTOR OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,ATTORNEYS OR ANY OTHER PERSON AFFILIATED WITH OR REPRESENTING PFG OR GUARANTOR;IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OROTHERWISE.**

 

**17.**       **Receipt of Copy**.  Guarantor acknowledges receipt of a copy of this Guaranty.

 

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GuarantorSignature:

 
|   | **INTERWAVE COMMUNICATIONS  INTERNATIONAL LTD.** |
|--------|--------------------------------------------------|
|   |                                             |
|   |                                             |
|   | By                                               | /s/ Cal R. Hoagland |   |
|   | Title                                            | SVP and CFO |   |
|        |                                                  |  |  |  |  |

 

Address:

 

ClarendonHouse

2 Church Street

P.O. Box HM 1022

Hamilton, HM DX, Bermuda

 

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***Partners for Growth***

 

**ContinuingGuaranty**

 

**Borrower:     InterwaveCommunications, Inc.**

 

**Guarantor:   InterwaveAdvanced Communications, Inc.**

 

**Date:****                                      June 4,2004**

 

**ThisContinuing Guaranty**is executed by the above-namedguarantor(s) (jointly and severally, the “Guarantor”), as of the above date, infavor of PARTNERS FOR GROWTH, L.P. (“PFG”), whose address is 560 MissionStreet, 3rd floor, San Francisco, CA 94105, with respect to the Indebtedness ofthe above-named borrower (“Borrower”)

 

**1.****              Continuing Guaranty**.  Guarantor hereby unconditionally guaranteesand promises to pay on demand to PFG, in lawful money of the United States, allIndebtedness of Borrower now or hereafter owing to PFG.  As used herein, the term “Indebtedness” isused in its most comprehensive sense and shall mean and include withoutlimitation:  (a) any and all debts,duties, obligations, liabilities, representations, warranties and guaranties ofBorrower or any one or more of them, heretofore, now, or hereafter made,incurred, or created (including, without limitation, any interest, charges, andother sums accruing after the filing of a petition by or against Borrower underthe Bankruptcy Code), whether voluntary or involuntary, due or not due,absolute or contingent, liquidated or unliquidated, certain or uncertain,determined or undetermined, monetary or nonmonetary, written or oral, andwhether Borrower may be liable individually or jointly with others, andregardless of whether recovery thereon may be or hereafter become barred by anystatute of limitations, discharged or uncollectible in any bankruptcy,insolvency or other proceeding, or otherwise unenforceable; and (b) anyand all amendments, modifications, renewals and extensions of any or all of theforegoing, including without limitation amendments, modifications, renewals andextensions which are evidenced by any new or additional instrument, document oragreement; and (c) any and all reasonable attorneys’ fees, court costs,and collection charges incurred in endeavoring to collect or enforce any of theforegoing against Borrower, Guarantor, or any other person liable thereon(whether or not suit be brought) and any other reasonable expenses of, for orincidental to collection thereof. This Guaranty is given in consideration forcredit and other financial accommodations which may, from time to time, begiven by PFG to Borrower in PFG’s sole discretion, but Guarantor acknowledgesand agrees that acceptance by PFG of this Guaranty shall not constitute acommitment of any kind by PFG to extend such credit or other financialaccommodation to Borrower or to permit Borrower to incur Indebtedness toPFG.  All sums due under this Guarantyshall bear interest from the date****due until the date paid at the highestrate charged with respect to any of the Indebtedness.

 

**2.****              Waivers**.  Guarantor hereby waives:  (a) presentment for payment, notice ofdishonor, demand, protest, and notice thereof as to any instrument, and allother notices and demands to which Guarantor might be entitled, includingwithout limitation notice of all of the following:  the acceptance hereof; the creation, existence, or acquisition ofany Indebtedness; the amount of the Indebtedness from time to time outstanding;any foreclosure sale or other disposition of any property which secures any orall of the Indebtedness or which secures the obligations of any other guarantorof any or all of the Indebtedness; any adverse change in Borrower’s financialposition; any other fact which might increase Guarantor’s risk; any default,partial payment or non-payment of all or any part of the Indebtedness; theoccurrence of any other Event of Default (as hereinafter defined); any and allagreements and arrangements between PFG and Borrower and any changes,modifications, or extensions thereof, and any revocation, modification orrelease of any guaranty of any or all of the Indebtedness by any person(including without limitation any other person signing this Guaranty);(b) any right to require PFG to institute suit against, or to exhaust itsrights and remedies against, Borrower or any other person, or to proceedagainst any property of any kind which secures all or any part of theIndebtedness, or to exercise any right of offset or other right with respect toany reserves, credits or deposit accounts held by or maintained with PFG or anyindebtedness of PFG to Borrower, or to exercise any other right or power, orpursue any other remedy PFG may have; (c) other than payment of theIndebtedness, any defense arising by reason of any disability or other defenseof Borrower or any other guarantor or any endorser, co-maker or other person,or by

 

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reason of the cessation from any cause whatsoever of any liability ofBorrower or any other guarantor or any endorser, co-maker or other person, withrespect to all or any part of the Indebtedness, or by reason of any act oromission of PFG or others which directly or indirectly results in the dischargeor release of Borrower or any other guarantor or any other person or anyIndebtedness or any security therefor, whether by operation of law orotherwise; (d) any defense arising by reason of any failure of PFG toobtain, perfect, maintain or keep in force any security interest in, or lien orencumbrance upon, any property of Borrower or any other person; (e) anydefense based upon any failure of PFG to give Guarantor notice of any sale orother disposition of any property securing any or all of the Indebtedness, orany defects in any such notice that may be given, or any failure of PFG tocomply with any provision of applicable law in enforcing any security interestin or lien upon any property securing any or all of the Indebtedness including,but not limited to, any failure by PFG to dispose of any property securing anyor all of the Indebtedness in a commercially reasonable manner; (f) anydefense based upon or arising out of any bankruptcy, insolvency,reorganization, arrangement, readjustment of debt, liquidation or dissolutionproceeding commenced by or against Borrower or any other guarantor or anyendorser, co-maker or other person, including without limitation any dischargeof, or bar against collecting, any of the Indebtedness (including withoutlimitation any interest thereon), in or as a result of any such proceeding; and(g) the benefit of any and all statutes of limitation with respect to anyaction based upon, arising out of or related to this Guaranty.  Until all of the Indebtedness has been paid,performed, and discharged in full, nothing shall discharge or satisfy theliability of Guarantor hereunder except the full performance and payment of allof the Indebtedness.  If any claim isever made upon PFG for repayment or recovery of any amount or amounts receivedby PFG in payment of or on account of any of the Indebtedness, because of anyclaim that any such payment constituted a preferential transfer or fraudulentconveyance, or for any other reason whatsoever, and PFG repays all or part ofsaid amount by reason of any judgment, decree or order of any court oradministrative body having jurisdiction over PFG or any of its property, or byreason of any settlement or compromise of any such claim effected by PFG withany such claimant (including without limitation the Borrower), then and in anysuch event, Guarantor agrees that any such judgment, decree, order, settlementand compromise shall be binding upon Guarantor, notwithstanding any revocationor release of this Guaranty or the cancellation of any note or other instrumentevidencing any of the Indebtedness, or any release of any of the Indebtedness,and the Guarantor shall be and remain liable to PFG under this Guaranty for theamount so repaid or recovered, to the same extent as if such amount had neveroriginally been received by PFG, and the provisions of this sentence shallsurvive, and continue in effect, notwithstanding any revocation or release ofthis Guaranty.  Until all of theIndebtedness has been irrevocably paid and performed in full, Guarantor herebyexpressly and unconditionally waives all rights of subrogation, reimbursementand indemnity of every kind against Borrower, and all rights of recourse to anyassets or property of Borrower, and all rights to any collateral or securityheld for the payment and performance of any Indebtedness, including (but notlimited to) any of the foregoing rights which Guarantor may have under anypresent or future document or agreement with any Borrower or other person, andincluding (but not limited to) any of the foregoing rights which Guarantor mayhave under any equitable doctrine of subrogation, implied contract, or unjustenrichment, or any other equitable or legal doctrine.

 

**3.****              Consents**.  Guarantor hereby consents and agrees that,without notice to or by Guarantor and without affecting or impairing in any waythe obligations or liability of Guarantor hereunder, PFG may, from time to timebefore or after revocation of this Guaranty, do any one or more of thefollowing in PFG’s sole and absolute discretion:  (a) accelerate, accept partial payments of, compromise orsettle, renew, extend the time for the payment, discharge, or performance of,refuse to enforce, and release all or any parties to, any or all of theIndebtedness; (b) grant any other indulgence to Borrower or any otherperson in respect of any or all of the Indebtedness or any other matter;(c) accept, release, waive, surrender, enforce, exchange, modify, impair,or extend the time for the performance, discharge, or payment of, any and allproperty of any kind securing any or all of the Indebtedness or any guaranty ofany or all of the Indebtedness, or on which PFG at any time may have a lien, orrefuse to enforce its rights or make any compromise or settlement or agreementtherefor in respect of any or all of such property; (d) substitute or add,or take any action or omit to take any action which results in the release of,any one or more endorsers or guarantors of all or any part of the Indebtedness,including, without limitation one or more parties to this Guaranty, regardlessof any destruction or impairment of any right of contribution or other right ofGuarantor; (e) amend, alter or change in any respect whatsoever any termor provision relating to any or all of the Indebtedness, including the rate ofinterest thereon; (f) apply any sums received from Borrower, any otherguarantor, endorser, or co-signer, or from the disposition of any collateral orsecurity, to any indebtedness whatsoever owing from such person or secured bysuch collateral or security, in such manner and order as PFG determines in itssole discretion, and regardless of whether such indebtedness is part of theIndebtedness, is secured, or is due and payable; (g) apply any sumsreceived from Guarantor or from the disposition of any collateral or securitysecuring the obligations of Guarantor, to any of the Indebtedness in suchmanner and order as PFG determines in its sole discretion, regardless ofwhether or not such Indebtedness is secured or is due and payable.  Guarantor

 

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consents and agrees that PFG shall be under no obligation to marshalany assets in favor of Guarantor, or against or in payment of any or all of theIndebtedness.  Guarantor furtherconsents and agrees that PFG shall have no duties or responsibilities whatsoeverwith respect to any property securing any or all of the Indebtedness.  Without limiting the generality of theforegoing, PFG shall have no obligation to monitor, verify, audit, examine, orobtain or maintain any insurance with respect to, any property securing any orall of the Indebtedness.

 

**4.****              Exerciseof Rights and Remedies; Foreclosure of Trust Deeds**.  Guarantor hereby waives all rights ofsubrogation, reimbursement, indemnification, and contribution and any otherrights and defenses that are or may become available to the Guarantor or othersurety by reason of California Civil Code Sections 2787 to 2855,inclusive.  The Guarantor waives allrights and defenses that the Guarantor may have because the Borrower’sIndebtedness is secured by real property. This means, among other things: (1) PFG may collect from the Guarantor without first foreclosing on anyreal or personal property collateral pledged by the Borrower.  (2) If PFG forecloses on any real propertycollateral pledged by the Borrower:  (A)The amount of the Indebtedness may be reduced only by the price for which thatcollateral is sold at the foreclosure sale, even if the collateral is worthmore than the sale price.  (B) PFG maycollect from the Guarantor even if PFG, by foreclosing on the real propertycollateral, has destroyed any right the Guarantor may have to collect from theBorrower.  This is an unconditional andirrevocable waiver of any rights and defenses the Guarantor may have becausethe Borrower’s Indebtedness is secured by real property.  These rights and defenses include, but arenot limited to, any rights or defenses based upon Section 580a, 580b,580d, or 726 of the Code of Civil Procedure. The Guarantor waives all rights and defenses arising out of an electionof remedies by PFG, even though that election of remedies, such as anonjudicial foreclosure with respect to security for a guaranteed obligation,has destroyed the Guarantor’s rights of subrogation and reimbursement againstthe principal by the operation of Section 580d of the Code of CivilProcedure or otherwise.

 

**5.****              Acceleration**.  Notwithstanding the terms of all or any partof the Indebtedness, the obligations of the Guarantor hereunder to pay andperform all of the Indebtedness shall, at the option of PFG, immediately becomedue and payable, without notice, and without regard to the expressed maturityof any of the Indebtedness, in the event: Borrower shall fail to pay or performwhen due (after giving effect to any applicable grace period) all or any partof the Indebtedness, or any “event of default” (as defined in any present orfuture agreement between Borrower and PFG or between Guarantor and PFG) shalloccur.  All of the foregoing arehereinafter referred to as “Events of Default”.

 

**6.****              Revocation**.  This is a Continuing Guaranty relating toall of the Indebtedness, including Indebtedness arising under successivetransactions which from time to time continue the Indebtedness or renew itafter it has been satisfied.  Guarantorwaives all benefits of California Civil Code Section 2815, and agrees thatthe obligations of Guarantor hereunder may not be terminated or revoked in anymanner except by giving 90 days’ advance written notice of revocation toPFG at its address above by registered first-class U.S. mail, postage prepaid,return receipt requested, and only as to new loans made by PFG to Borrower morethan 90 days after actual receipt of such written notice by PFG.  No termination or revocation of thisGuaranty shall be effective until 90 days following the date of actualreceipt of said written notice of revocation by PFG.  Notwithstanding such written notice of revocation or any otheract of Guarantor or any other event or circumstance, Guarantor agrees that thisGuaranty and all consents, waivers and other provisions hereof shall continuein full force and effect as to any and all Indebtedness which is outstanding onor before the 90th day following actual receipt of said written notice ofrevocation by PFG, and all extensions, renewals and modifications of saidIndebtedness (including without limitation amendments, extensions, renewals andmodifications which are evidenced by new or additional instruments, documentsor agreements executed before or after expiration of said 90-day period), andall interest thereon, accruing before or after expiration of said 90-dayperiod, and all attorneys’ fees, court costs and collection charges, incurredbefore or after expiration of said 90-day period, in endeavoring to collect orenforce any of the foregoing against Borrower, Guarantor or any other personliable thereon (whether or not suit be brought) and any other expenses of, foror incidental to collection thereof.

 

**7.****              Independent Liability**.  Guarantor hereby agrees that one or moresuccessive or concurrent actions may be brought hereon against Guarantor, inthe same action in which Borrower may be sued or in separate actions, as oftenas deemed advisable by PFG.  Theliability of Guarantor hereunder is exclusive and independent of any otherguaranty of any or all of the Indebtedness whether executed by Guarantor or byany other guarantor (including without limitation any other persons signingthis Guaranty).  The liability ofGuarantor hereunder shall not be affected, revoked, impaired, or reduced by anyone or more of the following: (a) the fact that the Indebtedness exceeds the maximum amount ofGuarantor’s liability, if any, specified herein or elsewhere (and no agreementspecifying a maximum amount of Guarantor’s liability shall be enforceableunless set forth in a writing signed by PFG or set forth in this Guaranty); or(b) any direction as to the application of payment by Borrower or by anyother party; or (c) any other continuing or restrictive guaranty orundertaking or any limitation on the liability of any other guarantor (whetherunder this Guaranty or under any other

 

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agreement); or (d) any reduction of any such other guaranty orundertaking; or (e) any revocation, amendment, modification or release ofany such other guaranty or undertaking. Guarantor hereby expressly represents that it was not induced to givethis Guaranty by the fact that there are or may be other guarantors eitherunder this Guaranty or otherwise, and Guarantor agrees that any release of any oneor more of such other guarantors shall not release Guarantor from itsobligations hereunder either in full or to any lesser extent.

 

**8.****              Financial Condition of Borrower**.  Guarantor is fully aware of the financialcondition of Borrower and is executing and delivering this Guaranty atBorrower’s request and based solely upon its own independent investigation ofall matters pertinent hereto, and Guarantor is not relying in any manner uponany representation or statement of PFG with respect thereto.  Guarantor represents and warrants that it isin a position to obtain, and Guarantor hereby assumes full responsibility forobtaining, any additional information concerning Borrower’s financial conditionand any other matter pertinent hereto as Guarantor may desire, and Guarantor isnot relying upon or expecting PFG to furnish to it any information now orhereafter in PFG’s possession concerning the same or any other matter.  By executing this Guaranty, Guarantorknowingly accepts the full range of risks encompassed within a contract ofcontinuing guaranty, which risks Guarantor acknowledges include withoutlimitation the possibility that Borrower will incur additional Indebtedness forwhich Guarantor will be liable hereunder after Borrower’s financial condition orability to pay such Indebtedness has deteriorated and/or after bankruptcy orinsolvency proceedings have been commenced by or against Borrower.  Guarantor shall have no right to require PFGto obtain or disclose any information with respect to the Indebtedness, thefinancial condition or character of Borrower, the existence of any collateralor security for any or all of the Indebtedness, the filing by or againstBorrower of any bankruptcy or insolvency proceeding, the existence of any otherguaranties of all or any part of the Indebtedness, any action or non-action onthe part of PFG, Borrower, or any other person, or any other matter, fact, oroccurrence.

 

**9.****              Reportsand Financial Statements of Guarantor**. Guarantor shall, at its sole cost and expense, from time to time,prepare or cause to be prepared, and provide to PFG upon PFG’s request(i) such financial statements and reports concerning Guarantor for suchperiods of time as PFG may designate in its good faith business judgment,(ii) such other information concerning Guarantor’s business, financialcondition or affairs as PFG may request in its good faith business judgment.Guarantor further agrees to give prompt written notice to PFG of any materialadverse change in Guarantor’s financial condition and of any condition or eventwhich constitutes an Event of Default under this Guaranty.  All reports and information furnished to PFGhereunder shall be accurate and correct in all material respects and will notomit information needed to make the same not misleading. The condentialityagreement in Section 9.16 of the Security Agreement of even date betweenGuarantor and PDF shall be applicable to all confidential information providedby Guarantor pursuant to this Guaranty.

 

**10.****       Representations and Warranties**.  Guarantor hereby represents and warrantsthat (i) it is in Guarantor’s direct interest to assist Borrower inprocuring credit, because Borrower is an affiliate of Guarantor, furnishesgoods or services to Guarantor, purchases or acquires goods or services fromGuarantor, and/or otherwise has a direct or indirect corporate or businessrelationship with Guarantor, (ii) this Guaranty has been duly and validlyauthorized, executed and delivered and constitutes the valid and bindingobligation of Guarantor, enforceable in accordance with its terms except asenforceability may be limited by bankruptcy, insolvency and other similar lawsaffecting creditors generally and by equitable principles (regardless ofwhether enforcement is sought in equity or at law), and (iii) theexecution and delivery of this Guaranty does not violate or constitute adefault under (with or without the giving of notice, the passage of time, orboth) any order, judgment, decree, or any material instrument or agreement towhich Guarantor is a party or by which it or its assets are affected or bound.

 

**11.****       Costs**.  Whether or not suit be instituted, Guarantoragrees to reimburse PFG on demand for all reasonable attorneys’ fees and allother reasonable costs and expenses incurred by PFG in enforcing this Guaranty,or arising out of or relating in any way to this Guaranty. In the event eitherPFG or Guarantor files any lawsuit against the other predicated on a breach ofthis Guaranty, the prevailing party in such action shall be entitled to recoverits attorneys’ fees and costs of suit from the non-prevailing party.

 

**12.****       Notices**.  Any notice which a party shall be requiredor shall desire to give to the other hereunder (except for notice ofrevocation, which shall be governed by Section 6 of this Guaranty) shallbe given by personal delivery, reputable overnight courier service, or bytelecopier or by depositing the same in the United States mail, first classpostage pre-paid, addressed to PFG at its address set forth in the heading ofthis Guaranty and to Guarantor at its address set forth under its signaturehereon, and such notices shall be deemed duly given on the date of personaldelivery, or one business day after sent by reputable overnight courierservice, or one day after the date telecopied or 3 business days after the dateof mailing as aforesaid.  PFG andGuarantor may change their address for purposes of receiving notices hereunderby giving written notice thereof to the other party in accordanceherewith.  Guarantor shall give PFG immediatewritten notice of any change in its address.

 

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**13.****       Construction; Severability**.As used in this Guaranty, the term “property” is used in its most comprehensivesense and shall mean all property of every kind and nature whatsoever,including without limitation real property, personal property, mixed property,tangible property and intangible property. Words used herein in the masculine gender shall include the neuter andfeminine gender, words used herein in the neuter gender shall include themasculine and feminine, words used herein in the singular shall include theplural and words used in the plural shall include the singular, wherever thecontext so reasonably requires.  If anyprovision of this Guaranty or the application thereof to any party orcircumstance is held invalid, void, inoperative or unenforceable, the remainderof this Guaranty and the application of such provision to other parties orcircumstances shall not be affected thereby, the provisions of this Guarantybeing severable in any such instance.

 

**14.****       GeneralProvisions. **PFG shall have theright to seek recourse against Guarantor to the full extent provided for hereinand in any other instrument or agreement evidencing obligations of Guarantor toPFG, and against Borrower to the full extent of the Indebtedness.  No election in one form of action orproceeding, or against any party, or on any obligation, shall constitute awaiver of PFG’s right to proceed in any other form of action or proceeding oragainst any other party.  The failure ofPFG to enforce any of the provisions of this Guaranty at any time or for anyperiod of time shall not be construed to be a waiver of any such provision orthe right thereafter to enforce the same. All remedies hereunder shall be cumulative and shall be in addition toall rights, powers and remedies given to PFG by law or under any otherinstrument or agreement.  Time is of theessence in the performance by Guarantor of each and every obligation under thisGuaranty.  If Borrower is a corporation,partnership or other entity, Guarantor hereby agrees that PFG shall have noobligation to inquire into the power or authority of Borrower or any of itsofficers, directors, partners, or agents acting or purporting to act on itsbehalf, and any Indebtedness made or created in reliance upon the professedexercise of any such power or authority shall be included in the Indebtednessguaranteed hereby.  This Guaranty is theentire and only agreement between Guarantor and PFG with respect to theguaranty of the Indebtedness of Borrower by Guarantor, and all representations,warranties, agreements, or undertakings heretofore or contemporaneously made,which are not set forth herein, are superseded hereby.  No course of dealings between the parties,no usage of the trade, and no parol or extrinsic evidence of any nature shallbe used or be relevant to supplement or explain or modify any term or provisionof this Guaranty.  There are noconditions to the full effectiveness of this Guaranty.  The terms and provisions hereof may not bewaived, altered, modified, or amended except in a writing executed by Guarantorand a duly authorized officer of PFG. All rights, benefits and privileges hereunder shall inure to the benefitof and be enforceable by PFG and its successors and assigns and shall bebinding upon Guarantor and its successors and assigns. Section headingsare used herein for convenience only. Guarantor acknowledges that the same may not describe completely thesubject matter of the applicable Section, and the same shall not be used in anymanner to construe, limit, define or interpret any term or provision hereof.

 

**15.****       Governing Law; Venue and Jurisdiction**.  This instrument and all acts andtransactions pursuant or relating hereto and all rights and obligations of theparties hereto shall be governed, construed, and interpreted in accordance withthe internal laws of the State of California. In order to induce PFG to accept this Guaranty, and as a material partof the consideration therefor, Guarantor (i) agrees that all actions orproceedings relating directly or indirectly hereto shall, at the option of PFG,be litigated in courts located within Santa Clara County, California,(ii) consents to the jurisdiction of any such court and consents to theservice of process in any such action or proceeding by personal delivery or anyother method permitted by law; and (iii) waives any and all rightsGuarantor may have to transfer or change the venue of any such action or proceeding.

 

**16.****       MutualWaiver of Right to Jury Trial**.  **PFG ANDGUARANTOR HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUITOR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THISGUARANTY OR ANY SUPPLEMENT OR AMENDMENT THERETO; OR (ii) ANY OTHER PRESENT ORFUTURE INSTRUMENT OR AGREEMENT BETWEEN PFG AND GUARANTOR; OR (iii) ANY BREACH,CONDUCT, ACTS OR OMISSIONS OF PFG OR GUARANTOR OR ANY OF THEIR RESPECTIVEDIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONAFFILIATED WITH OR REPRESENTING PFG OR GUARANTOR; IN EACH OF THE FOREGOINGCASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.**

 

**17.****       Receiptof Copy**.  Guarantor acknowledgesreceipt of a copy of this Guaranty.

 

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software, computerprograms or other works of authorship being registered and confirming the grantof a security interest therein in favor of Secured Party

 

4.                                       This Agreement is being executed anddelivered pursuant to the Security Agreement; nothing herein limits any of theterms or provisions of the Security Agreement, and PFG’s rights hereunder andunder the Security Agreement are cumulative. This Agreement, the SecurityAgreement and the other Debtor Documents set forth in full all of therepresentations and agreements of the parties with respect to the subjectmatter hereof and supersede all prior discussions, oral representations, oralagreements and oral understandings between the parties.  This Agreement may not be modified or amended,nor may any rights hereunder be waived, except in a writing signed by theparties hereto.  In the event of anylitigation between the parties based upon, arising out of, or in any wayrelating to this Agreement, the prevailing party shall be entitled to recoverall of his costs and expenses (including without limitation attorneys’ fees)from the non-prevailing party. This Agreement and all acts, transactions,disputes and controversies arising hereunder or relating hereto, and all rightsand obligations of PFG and Grantor shall be governed by, and construed inaccordance with the internal laws (and not the conflict of laws rules) of theState of California.

 
| Address of Grantor:                                    | INTERWAVE ADVANCED  COMMUNICATIONS, INC. |
|--------------------------------------------------------|------------------------------------------|
| 2495 Leghorn  Mountain View, California 94043          |                                     |
|                                                   |                                     |
|                                                   | By                                       |    /s/ Cal R. Hoagland |   |
|                                                   | Title                                    | SVP and CFO |   |
|                                                   |                                     |
| Address of PFG:                                        |                                     | PARTNERS FOR GROWTH, L.P. |
|                                                   |                                     |
| 560 Mission Street, 3rd floor  San Francisco, CA 94105 |                                     |
|                                                   |                                     |   |
|                                                   | By                                       |    /s/ Andrew Kahn |   |
|                                                   | Title                                    | Manager, Partners for Growth, LLC |   |
|                                                   |                                     | Its General Partner |   |
|                                                        |                                          |  |  |  |  |  |  |

 

Form:  Version-0

 

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