Document:

Exhibit 4.2

 

STOCKHOLDERS RIGHTS AGREEMENT

 

This
STOCKHOLDERS RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of February 1, 2010 by and among  UTStarcom, Inc.,
a Delaware corporation (the “Company”), and each of the entities listed on Schedule A
hereto (the “Investors”).

 

WHEREAS,
the Investors have agreed to purchase shares of common stock of the Company,
par value US$0.00125 per share (“Common Stock”),
pursuant to that certain Common Stock Purchase Agreement among the Company and
the Investors, dated as of even date hereof
(the “Purchase Agreement,” and the shares of
Common Stock purchased thereunder, the “Purchase Shares”).

 

WHEREAS,
the parties hereto desire to enter into this Agreement so that, as of the
Effective Date (as defined below) the Investors may (i) from time to time
register under the Securities Act (as defined below) the sale of the Purchase
Shares, and (ii) have the other rights and obligations provided for
hereunder.

 

NOW
THEREFORE, in consideration of the mutual agreements, representations,
warranties and covenants herein contained, as well as other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
accepted, and intending to be legally bound hereby, the parties hereto agree as
follows:

 

SECTION 1         INTERPRETATION

 

1.1          Definitions.  As used in this Agreement, the following
terms shall have the following respective meanings:

 

“Affiliate” means, with respect to any given
Person, a Person that Controls, is Controlled by, or is under common Control
with the given Person.

 

“Change of Control Transaction” means (i) the
acquisition of the Company by another entity by means of any transaction or
series of related transactions to which the Company is party (including,
without limitation, any stock acquisition, reorganization, merger or
consolidation but excluding any sale of stock for capital raising purposes and
any transaction or series of related transactions the sole purpose of which is
to change the state of the Company’s incorporation) other than a transaction or
series of related transactions in which the holders of the voting securities of
the Company outstanding immediately prior to such transaction or series of
related transactions retain, immediately after such transaction or series of
related transactions, as a result of shares in the Company held by such holders
prior to such transaction or series of related transactions, at least a
majority of the total voting power represented by the outstanding voting
securities of the Company or such other surviving or resulting entity (or if
the Company or such other surviving or resulting entity is a wholly-owned
subsidiary immediately following such acquisition, its parent); (ii) a
sale, lease or other disposition of all or substantially all of the assets of
the Company and its subsidiaries taken as a whole; or (iii) a transaction
constituting a change of control pursuant to Nasdaq Listing Rule 5635(b).

 

“Commission” means the U.S. Securities
and Exchange Commission.

 

 

“Control” means, when used with respect to
any Person, the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms “Controlling”
and “Controlled” have meanings
correlative to the foregoing.

 

“Effective Date” means the date upon which
the Purchase Shares are sold to the Investors pursuant to the Purchase
Agreement.

 

“Exchange Act” means the United States
Securities Exchange Act of 1934, as amended.

 

“Form S-1” means a registration
statement on Form S-1 promulgated by the Commission under the Securities
Act or any substantially similar form then in effect.

 

“Form S-3” means a registration
statement on Form S-3 promulgated by the Commission under the Securities
Act or any substantially similar form then in effect.

 

“GAAP” means United States generally
accepted accounting principles.

 

“Holders” means any Investor together with
any permitted transferees and assigns of such Investor.

 

“Nasdaq” means The Nasdaq Global Select
Market.

 

“Person” means any individual, corporation
(including any non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company), firm
or other enterprise, association, organization, entity or governmental entity.

 

The
terms “register,”
“registered”
and “registration”
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.

 

“Registrable Securities” means (i) the
Purchase Shares, and (ii) any Common Stock issued as a dividend or other
distribution with respect to or in exchange for or in replacement of the
Purchase Shares; provided, however, that Registrable Securities
shall not include any shares of Common Stock described in clause (i) or (ii) above
which have previously been registered or which have been sold to the public
either pursuant to a registration statement or Rule 144, or which have
been sold in a private transaction in which the transferor’s rights under this
Agreement are not validly assigned in accordance with this Agreement.

 

“Registration Expenses” shall mean all
expenses incurred in effecting any registration pursuant to this Agreement,
including, without limitation, all registration, qualification, and filing
fees, printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and expenses of any regular or special
audits incident to or required by any such registration, but shall not include
Selling Expenses and the compensation of regular employees of the Company
(which shall be paid in any event by the Company).

 

“Securities Act” means the United States
Securities Act of 1933, as amended.

 

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“Selling Expenses” shall mean all
underwriting discounts, selling commissions and stock transfer taxes applicable
to the sale of Registrable Securities and fees and disbursements of counsel for
any Holder.

 

1.2          Additional Definitions.  The following capitalized terms shall have
the respective meanings ascribed thereto in the respective sections of this
Agreement set forth opposite each of the capitalized terms below:

 

	
  Term

  	
   

  	
  Section Reference

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Board

  	
   

  	
  3.2(a)

  
	
  Common
  Stock

  	
   

  	
  Recitals

  
	
  Company

  	
   

  	
  Preamble

  
	
  Correspondence

  	
   

  	
  4.4(a)

  
	
  Effective
  Date Percentage

  	
   

  	
  3.2(b)

  
	
  Investors

  	
   

  	
  Preamble

  
	
  Lock-Up
  Period

  	
   

  	
  3.1(a)

  
	
  Nominating
  Committee

  	
   

  	
  3.3

  
	
  Other Stockholders Agreement

  	
   

  	
  2.2(c)(1)

  
	
  Purchase Agreement

  	
   

  	
  Recitals

  
	
  Purchase Shares

  	
   

  	
  Recitals

  
	
  Transfer

  	
   

  	
  3.1(a)

  
	
  Violation

  	
   

  	
  2.6(a)

  
	
  Voting
  Securities

  	
   

  	
  3.3

  

 

SECTION 2         REGISTRATION RIGHTS.

 

2.1          Demand
Registration Rights.

 

(a)           Registration.

 

(1)           Subject to the terms of this
Agreement, following the expiration of the Lock-Up Period, Holders holding at
least 1,000,000 Registrable Securities (as adjusted for any stock splits, stock
dividends, recapitalizations, reorganizations or similar events) may request
the Company in writing to register all or part of the Registrable
Securities.  Upon receipt of such a
request, the Company shall (i) promptly, and in any event within twenty
(20) business days after receipt of such written request, give written notice
of the proposed registration to all other Holders, and (ii) use
commercially reasonable efforts to cause, as soon as reasonably practicable,
the registration of the sale of the Registrable Securities specified in the
request, together with any Registrable Securities of any Holder who requests in
writing to join such registration within thirty (30) business days after the
Company’s delivery of written notice, to become effective.  Any registration pursuant to this Section 2.1
shall not be underwritten.

 

(2)           Notwithstanding anything to the
contrary contained herein, the Company shall not be obligated to effect more
than one (1) registration pursuant to this Section 2.1(a).

 

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(3)           The registration made pursuant to
this Section 2.1(a) shall be made: (i) on registration statement
on Form S-3 (or any successor to Form S-3) if such form is available
for use by the Company; or (ii) otherwise on Form S-1 (or any
successor to Form S-1) if such form is available for use by the Company.

 

(4)           The registration of the sale of the
Registrable Securities in accordance with this Section 2.1(a) shall,
irrespective of whether such Registrable Securities are distributed by the
Holder thereof, satisfy the Company’s obligations under this Section 2.1(a).

 

(b)           Right of Deferral. 
Notwithstanding anything to the contrary in this Section 2.1:

 

(1)           The Company shall not be obligated to
register the sale of Registrable Securities pursuant to Section 2.1(a) if,
within the six (6) month period preceding the date of such request, the
Company has already effected a registration in which Holders had an opportunity
to participate pursuant to the provisions of Section 2.2 and no
Registrable Securities of the Holders were excluded from such registration
pursuant to the provisions of Section 2.2(c).

 

(2)           The Company shall not be obligated to
register the sale of Registrable Securities pursuant to Section 2.1(a) if
the Company shall furnish to the Holders a certificate signed by the Chief
Executive Officer of the Company stating that, in the good faith judgment of
the Board of Directors of the Company, any registration of the sale of
Registrable Securities should not be made because it would be materially
detrimental to the Company and its shareholders for a registration statement to
be filed in the near future.  Following
delivery of such certificate, the Company shall have the right to defer such
filing for a period not to exceed ninety (90) days from the receipt of any
request duly submitted by Holders under Section 2.1(a) to register
Registrable Securities; provided, however, that the Company shall
not utilize this right more than twice in any twelve (12) month period.

 

2.2          Piggyback Registration.

 

(a)           Registration of the Company’s Securities.  Subject to Section 2.2(c), if the
Company proposes to register for its own account or for the account of any
Person that is not a Holder or that is a Holder holding both Registrable
Securities and other securities of the Company (unless such Person is
contractually entitled to exclude participation by the Holders in its
registration, and subject to any rights to partially exclude participation by
the Holder in its registration) the sale of any of its Common Stock in
connection with the public offering of such securities, the Company shall
promptly give each Holder written notice of such registration and, upon the
written request of any Holder given within ten (10) days after delivery of
such notice, the Company shall use its commercially reasonable efforts to
include in such registration any Registrable Securities thereby requested by
such Holder.  If a Holder decides not to
include all or any of its Registrable Securities in such registration by the
Company, such Holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its Common Stock, all upon the terms and conditions set forth herein.  Any Registrable Securities registered
pursuant to this Section 2.2 shall continue to be subject to the Lock-Up
and may only be Transferred in connection with such registration to the extent
that such registration is still effective upon expiration of the Lock-Up.

 

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(b)           Right to Terminate Registration.  The Company shall have the right to terminate
or withdraw any registration initiated by it under Section 2.2(a) prior
to the effectiveness of such registration, whether or not any Holder has
elected to participate therein.  The
expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.3.

 

(c)           Underwriting Requirements.

 

(1)           In connection with any offering
involving an underwriting of the Company’s Common Stock initiated by the
Company, the Company shall not be required to register the Registrable
Securities of a Holder under this Section 2.2 unless such Holder shall
include such Registrable Securities in the underwriting and such Holder enters
into an underwriting agreement in customary form with the underwriters selected
by the Company and setting forth such terms for the underwriting as have been agreed
upon between the Company and the underwriters. 
In the event the underwriters advise Holders seeking registration of the
sale of Registrable Securities pursuant to this Section 2.2 in writing
that market factors (including the aggregate number of Registrable Securities
requested to be registered, the general condition of the market, and the status
of the Persons proposing to sell securities pursuant to the registration)
require a limitation of the number of securities to be underwritten, the underwriters
may exclude some or all Registrable Securities from the registration and
underwriting after excluding any other securities from the underwriting (other
than any Securities which the Company may seek to include in the underwriting
for its own account), and the number of securities and Registrable Securities
that may be included in the registration and the underwriting shall be
allocated (i) first, to the Company, and (ii) thereafter, among the
Holders requesting inclusion of their Registrable Securities in such
registration statement in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities which the Holders would otherwise
be entitled to include in the registration (it being understood that solely for
purposes of determining the amount of securities that may be included in such
registration pursuant to the foregoing clause (ii) of this Section 2.2(c)(1),
the definitions of Holders and Registrable Securities shall be deemed to
include “Holders” and “Registrable Securities,” respectively, each as defined
in that certain Stockholders Rights Agreement dated on or around the date of
this Agreement, by and among the Company and the E-town International
Investment and Development Co., Ltd. (the “Other
Stockholders Agreement”)).

 

(2)           If any Holder disapproves of the
terms of any underwriting, the Holder may elect to withdraw therefrom by
written notice to the Company and the underwriters delivered at least seven (7) days
prior to the effective date of the registration statement.  Any Registrable Securities excluded or
withdrawn from the underwriting shall be withdrawn from the registration.

 

(d)           Exempt Transactions.  The Company shall have no obligation to
register the sale of any Registrable Securities under this Section 2.2 in
connection with a registration by the Company (i) relating solely to the
sale of securities to participants in a Company share or option plan, or (ii) relating
to a corporate reorganization or other transaction under Rule 145 of the
Securities Act.

 

2.3          Expenses.  All Registration Expenses incurred in
connection with registrations pursuant to this Agreement shall be borne by the
Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 2.1 if the registration request is subsequently withdrawn at
the request of 

 

5

 

the Holders of
a majority of the Registrable Securities to be registered or because a
sufficient number of Holders shall have withdrawn so that the minimum offering
conditions set forth in Section 2.1 are no longer satisfied (in which case
all participating Holders shall bear such expenses pro rata among each other based on the number of Registrable
Securities requested to be so registered). 
All Selling Expenses relating to securities registered on behalf of the
Holders shall be borne by the holders of securities included in such
registration pro rata among each
other on the basis of the number of Registrable Securities so registered.

 

2.4          Obligations
of the Company.  Subject to the
provisions of Section 2.3 hereof, whenever required to effect the
registration of the sale of any Registrable Securities under this Agreement the
Company, shall as expeditiously as reasonably possible:

 

(a)           keep such registration effective for a period ending on
the earlier of the date which is ninety (90) days from the effective date of
the registration statement or such time as the Holder or Holders have completed
the distribution described in the registration statement relating thereto;

 

(b)           prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for the period set forth in
subsection (a) above;

 

(c)           furnish such number of prospectuses, including any
preliminary prospectuses, and other documents incident thereto, including any
amendment of or supplement to the prospectus, as a Holder from time to time may
reasonably request;

 

(d)           use its reasonable best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdiction as shall be reasonably
requested by the Holders; provided, that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do business
or to file a general consent to service of process in any such states or
jurisdictions;

 

(e)           notify each seller of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in light of the circumstances
then existing, and following such notification promptly prepare and furnish to
such seller a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
incomplete in light of the circumstances then existing;

 

(f)            provide a transfer agent and registrar for the sale of
all Registrable Securities registered pursuant to such registration statement
and a CUSIP number for all such Registrable Securities, in each case not later
than the effective date of such registration;

 

6

 

(g)           cause all such Registrable Securities sold pursuant
hereunder to be listed on Nasdaq;

 

(h)           notify each
seller of Registrable Securities covered by such registration statement (or if
they have appointed an attorney-in-fact, such attorney-in-fact), after it shall
receive notice thereof, of the time when such registration statement has become
effective;

 

(i)            notify each
seller of Registrable Securities covered by such registration statement (or if
they have appointed an attorney-in-fact, such attorney-in-fact), after it shall
receive notice, of the issuance of any stop order by the Commission suspending
the effectiveness of such registration statement or the initiation of any
proceeding for that purpose and use its commercially reasonable efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such stop
order should be issued; and

 

(j)            use
commercially reasonable efforts to furnish, at the request of the underwriters,
if any, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration (i) an opinion, dated
as of such date, of the counsel representing the Company, for purposes of such
registration, in form and substance as is customarily given by company counsel
to the underwriters in an underwritten public offering addressed to the
underwriters, if any, and (ii) a “comfort” letter dated as of such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the underwriters.

 

2.5          Obligations of Holders.  It shall be a condition precedent to the
obligations of the Company to register the sale of Registrable Securities of
any Holder pursuant to this Section 2 that the selling Holder shall furnish
to the Company such information regarding itself, the Registrable Securities
held thereby and the intended method of disposition of such securities as shall
be required to timely effect the registration of the sale of such Holder’s
Registrable Securities.

 

2.6          Indemnification.  In the event any Registrable Securities are
included in a registration statement under this Section 2:

 

(a)           Company
Indemnity.  To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, its partners, officers,
directors, shareholders, legal counsel, accountants, any underwriter (as
defined in the Securities Act) for such Holder and each Person, if any, who
controls (as defined in the Securities Act) such Holder or underwriter against
any losses, claims, damages, or liabilities (joint or several) to which they
may become subject under laws which are applicable in connection with any
registration, qualification, or compliance, of the Company’s securities insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a “Violation”):

 

(1)           any untrue statement (or alleged
untrue statement) of a material fact contained or incorporated by reference in
any registration statement, any prospectus included in the registration
statement, any issuer free writing prospectus (as defined in Rule 433 of
the Securities Act), any issuer information (as defined in Rule 433 of the
Securities Act) filed or required to be filed pursuant to Rule 433(d) under
the Securities Act or any other document incident to any such registration,
qualification or compliance prepared by or on behalf of the Company or used or
referred to by the Company, and any omission (or alleged omission) to 

 

7

 

state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or

 

(2)           any violation (or alleged violation)
by the Company of the Securities Act, any state securities laws or any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any offering covered by
such registration, qualification or compliance,

 

and
the Company will reimburse each such Holder, its partners, officers, directors,
legal counsel, accountants, underwriter or controlling Person for any legal or
other expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 2.6(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld or delayed), 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 based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished for use in connection with such registration by such
Holder, underwriter or controlling Person of such Holder.

 

(b)           Notice. 
Promptly after receipt by an indemnified party under this Section 2.6
of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.6, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually satisfactory to
the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of
liability to the indemnified party under this Section 2.6 to the extent
the indemnifying party is prejudiced as a result thereof, but the omission to
so deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this Section 2.6.

 

(c)           Contribution. 
If any indemnification provided for in this Section 2.6 is held by
a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party, on the one hand, and of the indemnified party, on the other, in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or 

 

8

 

by the indemnified party and the
parties’ relative intent, knowledge, access to information, and opportunity to
correct or prevent such statement or omission.

 

(d)           Survival. 
The obligations of the Company and Holders under this Section 2.6
shall survive the completion of any offering of Registrable Securities in a
registration statement for a period of twenty-four (24) months, regardless of
the expiration of any statutes of limitation or extensions of such statutes.

 

2.7          Termination of the Company’s
Obligations.  The registration rights
set forth in Section 2.1 and Section 2.2 of this Agreement shall
terminate upon the earlier of (i) when with respect to any Holder, in the
reasonable opinion of counsel to the Company, all Registrable Securities
proposed to be sold by such Holder may then be sold without registration in any
ninety (90) day period pursuant to Rule 144 under the Securities Act, (ii) the
date as of which all of the Registrable Securities have been sold pursuant to a
registration statement or (iii) thirty-six (36) months following the
Effective Date.

 

2.8          Rule 144 Reporting.  With a view to making available the benefits
of Rule 144 promulgated under the Securities Act which may at any time
permit the sale of the Registrable Securities to the public without
registration or pursuant to a registration, the Company agrees to:

 

(a)           use reasonable, diligent efforts to make and keep public
information available, as those terms are understood and defined in Rule 144,
at all times;

 

(b)           use reasonable, diligent efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and Exchange Act; and

 

(c)           so long as a Holder owns any Registrable Securities, to
furnish to such Holder forthwith upon request (1) a certificate by the
Company as to its compliance with the reporting requirements of the Securities
Act (including, without limitation, Rule 144) and the Exchange Act, (2) a
copy of the most recent annual report of the Company and such other reports and
documents as may be filed by the Company with the Commission, and (3) such
other reports, documents or information of the Company, as a Holder may
reasonably request in availing itself of any rule or regulation of the
Commission that permits the selling of any such securities without
registration.

 

2.9          Limitations on Subsequent
Registration Rights.  The Company
shall not, without the prior written consent of the Holders of at least a
majority of the Registrable Securities then outstanding, grant any rights to
any Persons to register any shares of capital stock or other securities of the
Company if such rights are on parity with or superior to the registration
rights of the Holders of Registrable Securities under this Agreement, other
than the rights grants pursuant to the Other Stockholders’ Agreement.

 

9

 

SECTION 3           OTHER ITEMS

 

3.1           Lock-Up.

 

(a)           For a period of nine (9) months from the Effective
Date (the “Lock-Up Period”), each
Holder shall not offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly (including, without limitation any of the foregoing
with respect to any holding company with recent ownership of the Registrable Securities,
any Registrable Securities or enter into any swap, hedging or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of any of such Registrable Securities (any of the
foregoing, a “Transfer”) without
the prior written consent of the Company.

 

(b)           Each Holder shall further refrain at all times (including
with respect to time periods after the expiration of the Lock-Up Period) from
selling Registrable Securities to any Person that in any manner, directly or
indirectly, is in competition with the Company, except in a genuine open market
sale where the identity of the purchaser of the Purchase Shares is not known to
the Holder or its agent effecting such sale.

 

3.2           Stand-Still.

 

(a)           Subject to the other provisions of this Section 3.2,
each Holder agrees that, for a period of twenty-four (24) months from the
Effective Date, such Holder and its Affiliates will not, without the prior
written consent of the Company or the approval of the Company’s Board of
Directors (the “Board”), directly
or indirectly:

 

(1)           make, effect, initiate, cause or in
any way participate in (i) any acquisition of beneficial ownership of any
securities of the Company or any securities of any subsidiary or other
affiliate of the Company, (ii) any acquisition of any assets of the
Company or any assets of any subsidiary or other affiliate of the Company, or (iii) any
tender offer, exchange offer, merger, business combination, recapitalization,
restructuring, liquidation, dissolution or extraordinary transaction involving
the Company or any subsidiary or other affiliate of the Company, or involving
any securities or assets of the Company or any securities or assets of any
subsidiary or other affiliate of the Company;

 

(2)           seek or propose to influence or
control the management or policies of the Company (other than as provided for
herein), make, effect, initiate, cause or in any way participate in any “solicitation”
of “proxies” (as such terms are used in the rules of the Commission) to
vote any voting securities of the Company or any subsidiary thereof, or seek to
advise or influence any Person with respect to the voting of any voting
securities of the Company or any subsidiary thereof;

 

(3)           make any public announcement with
respect to, or submit a proposal for or offer of (with or without conditions),
any merger, recapitalization, reorganization, business combination or other
extraordinary transaction involving the Company or any subsidiary thereof or
any of their securities or assets;

 

(4)           enter into any discussions,
negotiations, arrangements or understandings with any third party with respect
to any of the foregoing, or otherwise form, join or in any way engage in
discussions relating to the formation of, or participate in, a 

 

10

 

“group” within the meaning
of Section 13(d)(3) of the Exchange Act, in connection with any of
the foregoing;

 

(5)           take any action that might require
the Company to make a public announcement regarding any of the types of matters
set forth in clause (1), (2), or (3) above;

 

(6)           agree or offer to take, or encourage
or propose (publicly or otherwise) the taking of, any action referred to in
clause (1), (2), (3), (4) or (5) above;

 

(7)           assist, induce or encourage any other
Person to take any action of the type referred to in clause (1), (2), (3), (4),
(5) or (6) above;

 

(8)           with respect to all other Holders,
enter into any discussions, negotiations, arrangement or agreement with any
other Person relating to any of the foregoing; or

 

(9)           request the Company or any of its
Affiliates to amend or waive or consider the amendment or waiver of any
provision of this Section 3.2; provided, however, that the
Holders may make any such request if, and only if, such request is made on a
strictly confidential basis and does not require (in the opinion of counsel to
the Company) the Company or any third party to make public disclosure of the
same under applicable law or the rules and regulations of Nasdaq and the
Commission.

 

(b)           Notwithstanding anything to the contrary in Section 3.2,
nothing in  Section 3.2 shall
prevent a Holder from purchasing up to such number of shares of Common Stock in
the open market as would be required to enable such Holder to maintain its
percentage ownership in the Company equal to such Holder’s Effective Date
Percentage.  For purposes of this
Agreement, the “Effective Date Percentage”
with respect to a Holder shall mean the quotient obtained by dividing (x) the
number of shares of Common Stock held by such Holder as of the Effective Date
as listed under the column entitled “Total Shares” on Schedule A attached
hereto by (y) the total number of shares
of Common Stock outstanding as of the Effective Date (for the avoidance of
doubt, after giving effect to the transactions contemplated by the Purchase
Agreement and that certain Common Stock Purchase Agreement between the Company
and Beijing E-town International Investment and Development Co., Ltd., dated as
of the date hereof).

 

(c)           Each Holder shall promptly advise the Company in writing
of any inquiry or proposal made to it with respect to any item listed in Section 3.2(a).

 

3.3           Voting Matters. 
In connection with any proposal submitted for Company shareholder approval (at
any annual or special meeting called, or in connection with any other action
(including the execution of written consents)) related to the election or
removal of directors of the Board or any business or proposal involving the
Company, each Holder will (1) cause all of its respective shares of
Company capital stock that are entitled to vote, whether now owned or hereafter
acquired (collectively, the “Voting Securities”),
to be present in person or represented by proxy at all meetings of shareholders
of the Company, so that all such shares shall be counted as present for
determining the presence of a quorum at such meetings and (2) vote all of
their Voting Securities: (i) in favor of any nominee or director nominated
by the Nominating and Corporate Governance Committee of the Board (the “Nominating Committee”) (provided that the Nominating
Committee is consistent with

 

11

 

the
terms of this Section 3.3); (ii) against the removal of any director
nominated by the Nominating Committee; and (iii) with respect to any other
business or proposal, in accordance with the recommendation of the Board; provided,
however, that the foregoing clause (iii) shall not apply to any
proposal constituting a Change of Control Transaction that is submitted to the
shareholders of the Company for approval.

 

SECTION 4           MISCELLANEOUS

 

4.1           Binding Effect;
Assignment.  This Agreement shall be binding upon and shall be
enforceable by each party, its successors and permitted assigns.  No party may assign any of its rights or obligations
hereunder without the prior written approval of the other parties.

 

4.2           Governing Law;
Arbitration.

 

(a)           This Agreement shall be governed by and construed in
accordance with the internal and substantive laws of the State of California
and without regard to any conflicts of laws concepts which would apply the
substantive law of some other jurisdiction.

 

(b)           Each of the
parties hereto irrevocably (i) agrees that any dispute or controversy
arising out of, relating to, or concerning any interpretation, construction,
performance or breach of this Agreement, may be settled by arbitration to be
held in County of Santa Clara, State of California, in accordance with the rules then
in effect of the American Arbitration Association, (ii) waives, to the
fullest extent it may effectively do so, any objection which it may now or
hereafter have to the laying of venue of any such arbitration, and (iii) submits
to the non-exclusive jurisdiction of the State of California in any such
arbitration.  If submitted to arbitration
in any jurisdiction, the decision of the arbitrator shall be final, conclusive
and binding on the parties to the arbitration. 
Judgment may be entered on the arbitrator’s decision in any court having
jurisdiction.  The parties to the
arbitration shall each pay an equal share of the costs and expenses of such
arbitration, and each party shall separately pay for its respective counsel
fees and expenses; provided, however, that the prevailing party
in any such arbitration shall be entitled to recover from the non-prevailing
party its reasonable costs and attorney fees.

 

4.3           Amendment.  This Agreement may not be amended, modified or terminated,
and no rights or provisions may be waived, except with the written consent of
the Company and Holders holding 75% of the Registrable Securities then held by
all Holders.

 

4.4           Notices.

 

(a)           Any
notices, reports or other correspondence (hereinafter collectively referred to
as “correspondence”) required or
permitted to be given hereunder shall be sent by international courier,
facsimile, electronic mail or delivered by hand to the party to whom such
correspondence is required or permitted to be given hereunder.  Where
a notice is sent by overnight courier, service of the notice shall be deemed to
be effected by properly addressing, and sending such notice through an
internationally recognized express courier service, delivery fees pre-paid, and
to have been effected three (3) business days following the day the same
is sent as aforesaid.  Where a notice is
delivered by facsimile, electronic mail, by hand or by messenger, service of
the notice shall be deemed to be effected upon delivery.

 

12

 

(b)           All
correspondence to the Company shall be addressed as follows:

 

UTStarcom, Inc.

1275 Harbor Bay Parkway

Alameda, CA 94502

Facsimile: (510) 864-8802

Email: legal.notice@utstar.com

Attention:
General Counsel

 

with a copy to:

 

Wilson Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, California  94304

Facsimile: (650)
493-6811

Attention: Carmen Chang
and Scott Anthony

 

(c)           All
correspondence to any Investor shall be sent to such Investor at the address
set forth under such Investor’s name on Schedule A hereto.

 

(d)           Any entity may change the address to which correspondence to
it is to be addressed by notification as provided for herein.

 

4.5           Further Assurances.  Each party agrees to act in good faith and
cooperate fully with the other parties and to execute such further instruments,
documents and agreements and to give such further written assurances, as may be
reasonably requested by the other parties to better evidence and reflect the
transactions described herein and contemplated hereby, and to carry into effect
the intents and purposes of this Agreement.

 

4.6           Entire Agreement.  This Agreement constitutes the entire
agreement between the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, negotiations, understandings, representations
and statements respecting the subject matter hereof, whether written or
oral.  No modification, alteration,
waiver or change in any of the terms of this Agreement shall be valid or
binding upon the parties hereto unless made in writing and in accordance with
the provisions of Section 4.3 hereof.

 

4.7           Captions.  The captions
and paragraph headings of this Agreement are solely for the convenience of
reference and shall not affect its interpretation.

 

4.8           Severability.  Should any
part or provision of this Agreement be held unenforceable or in conflict with
the applicable laws or regulations of any jurisdiction, the invalid or
unenforceable part or provisions shall be replaced with a provision which
accomplishes, to the extent possible, the original business purpose of such
part or provision in a valid and enforceable manner, and the remainder of this
Agreement shall remain binding upon the parties hereto.

 

4.9           Remedies Cumulative.  Each and all of the various rights, powers and remedies of
the parties shall be considered to be cumulative with and in addition to any
other rights, powers and remedies which such parties may have at law or in
equity in the event of the breach of any of the terms of this Agreement.  The exercise of any right, power or remedy

 

13

 

shall neither constitute
the exclusive election thereof nor the waiver of any other right, power or
remedy available to such party.

 

4.10         Counterparts; Reproductions. 
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one
instrument.  A facsimile, portable
document file (PDF) or other reproduction of this Agreement may be executed by
one or more parties and delivered by such party by facsimile, electronic mail
or any similar electronic transmission pursuant to which the signature of or on
behalf of such party can be seen.  Such
execution and delivery shall be considered valid, binding and effective for all
purposes.

 

4.11         No Third Party Beneficiary.  Except as contemplated in Section 2.6,
nothing in this Agreement is intended to confer upon any Person other than the parties hereto and their respective
successors and permitted assigns any rights, benefits, or obligations
hereunder.

 

4.12         Effectiveness and Termination.

 

(a)           The rights and obligations of the parties hereto shall
become effective only upon the Effective Date.

 

(b)           This Agreement shall automatically terminate upon
termination of the Purchase Agreement in accordance with the terms thereof.

 

(Remainder of Page Intentionally Blank)

 

14

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.

 

 

	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UTSTARCOM,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  PETER BLACKMORE

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Peter
  Blackmore

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
				

 

SIGNATURE PAGE TO STOCKHOLDER RIGHTS
AGREEMENT

 

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.

 

 

	
   

  	
  INVESTORS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ELITE
  NOBLE LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  JINGCHUN SUN

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Jingchun
  Sun

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SHAH
  CAPITAL OPPORTUNITY FUND LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  HIMANSHU H. SHAH

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Himanshu
  H. Shah

  
	
   

  	
  Title:

  	
  General Partner

  
				

 

SIGNATURE PAGE TO STOCKHOLDER RIGHTS
AGREEMENT

 

 

Schedule
A

 

SCHEDULE
OF INVESTORS

 

	
  Name

  	
   

  	
  Address

  	
   

  	
  Purchase

  Shares

  	
   

  	
  Other

  Shares

  	
   

  	
  Total

  Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Elite
  Noble Limited

  	
   

  	
  Room 512,
  5/F., Tower 1

  Silvercord, 30 Canton Road

  Tsimshatsui, Kowloon

  Hong Kong

  Facsimile: +852 2114 0183

  Attn: Lee Kit Wah

  	
   

  	
  5,681,818

  	
   

  	
  0

  	
   

  	
  5,681,818

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Shah
  Capital Opportunity Fund LP

  	
   

  	
  8601
  Six Forks Road, Suite 630

  Raleigh, NC  27615

  USA

  Facsimile: +1 (919) 719-6370

  Attn: Himanshu H. Shah

  	
   

  	
  5,000,000

  	
   

  	
  8,004,957

  	
   

  	
  13,004,957Exhibit 10.1

 

 

UTSTARCOM, INC.

 

COMMON STOCK PURCHASE AGREEMENT

 

February 1, 2010

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Purchase and Sale of the Purchase Shares

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Purchase and Sale

  	
  6

  
	
   

  	
  2.2

  	
  Closing

  	
  6

  
	
   

  	
  2.3

  	
  Deliveries

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Representations and Warranties of the Company

  	
  6

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Organization; Good Standing; Qualification

  	
  6

  
	
   

  	
  3.2

  	
  Capitalization

  	
  7

  
	
   

  	
  3.3

  	
  Authorization; Non-Contravention

  	
  8

  
	
   

  	
  3.4

  	
  SEC Filings; Financial Statements; Internal Controls

  	
  8

  
	
   

  	
  3.5

  	
  Governmental Consents

  	
  9

  
	
   

  	
  3.6

  	
  Brokers or Finders

  	
  10

  
	
   

  	
  3.7

  	
  Nasdaq

  	
  10

  
	
   

  	
  3.8

  	
  Valid Issuance of the Purchase Shares

  	
  10

  
	
   

  	
  3.9

  	
  Offering

  	
  10

  
	
   

  	
  3.10

  	
  No Material Adverse Effect

  	
  10

  
	
   

  	
  3.11

  	
  Intellectual Property

  	
  10

  
	
   

  	
  3.12

  	
  Compliance; Permits

  	
  11

  
	
   

  	
  3.13

  	
  Litigation

  	
  12

  
	
   

  	
  3.14

  	
  Ownership of Assets

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Representations, Warranties and Covenants of the Purchaser

  	
  12

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Authorization

  	
  12

  
	
   

  	
  4.2

  	
  Purchase Entirely for Own Account

  	
  12

  
	
   

  	
  4.3

  	
  Receipt of Information

  	
  12

  
	
   

  	
  4.4

  	
  Accredited Investor

  	
  13

  
	
   

  	
  4.5

  	
  Investment Experience

  	
  13

  
	
   

  	
  4.6

  	
  Rule 144

  	
  13

  
	
   

  	
  4.7

  	
  Reliance on Purchaser’s Representations

  	
  13

  
	
   

  	
  4.8

  	
  Legends

  	
  13

  
	
   

  	
  4.9

  	
  Investment Representations, Warranties and Covenants by Non-U.S. Persons

  	
  15

  
	
   

  	
  4.10

  	
  Governmental Consents

  	
  17

  
	
   

  	
  4.11

  	
  Sufficient Funds

  	
  17

  
	
   

  	
  4.12

  	
  No Other Representations and Warranties

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Conditions Precedent to Closing

  	
  17

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Conditions to the Obligation of the Purchaser to Consummate the Closing

  	
  17

  
	
   

  	
  5.2

  	
  Conditions to the Obligation of the
  Company to Consummate the Closing

  	
  18

  

 

i

 

TABLE OF
CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Miscellaneous Provisions

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Public Statements or Releases

  	
  19

  
	
   

  	
  6.2

  	
  Further Assurances; Exclusivity and Superior Offer; Covenants

  	
  19

  
	
   

  	
  6.3

  	
  Rights Cumulative

  	
  21

  
	
   

  	
  6.4

  	
  Notices

  	
  21

  
	
   

  	
  6.5

  	
  Captions

  	
  22

  
	
   

  	
  6.6

  	
  Severability

  	
  22

  
	
   

  	
  6.7

  	
  Governing Law; Arbitration; Injunctive Relief

  	
  22

  
	
   

  	
  6.8

  	
  Amendment

  	
  23

  
	
   

  	
  6.9

  	
  Expenses

  	
  23

  
	
   

  	
  6.10

  	
  Assignment

  	
  23

  
	
   

  	
  6.11

  	
  Survival

  	
  23

  
	
   

  	
  6.12

  	
  Entire Agreement

  	
  24

  
	
   

  	
  6.13

  	
  Counterparts; Reproductions

  	
  24

  
	
   

  	
  6.14

  	
  Termination

  	
  24

  

 

ii

 

Schedules

 

	
  Schedule
  4.10 

  	
  —

  	
   

  	
  PRC
  Approvals

  

 

Exhibits

 

	
  Exhibit A

  	
  —

  	
   

  	
  Stockholders
  Rights Agreement

  

 

iii

 

COMMON STOCK PURCHASE AGREEMENT

 

This
COMMON STOCK PURCHASE AGREEMENT (the “Agreement”) is
made as of February 1, 2010 by and between UTStarcom, Inc., a Delaware
corporation (the “Company”), and Beijing E-Town
International Investment and Development Co., Ltd., a company incorporated under the laws of
the People’s Republic of China (the “Purchaser”).

 

WHEREAS,
the parties desire that the Purchaser makes an equity investment in the Company
pursuant to the terms and conditions of this Agreement;

 

WHEREAS,
the Company and the Purchaser are executing and delivering this Agreement (i) in
reliance upon the exemption from securities registration afforded by the rules and
regulations as promulgated by the SEC (as defined below) under Section 4(2) of
the Securities Act (as defined below), or (ii) pursuant to Regulation S
promulgated under the Securities Act (“Regulation S”);
and

 

WHEREAS,
the shares of Common Stock (as defined below) issued to the Purchaser pursuant
to this Agreement shall have the registration and other rights as evidenced by
the Stockholders Rights Agreement in the form attached hereto as Exhibit A,
dated as of the date hereof and entered into among the Company and the
Purchaser (the “Stockholders Rights Agreement”).

 

NOW
THEREFORE, in consideration of the mutual agreements, representations,
warranties and covenants herein contained, as well as other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
accepted, and intending to be legally bound hereby, the parties hereto agree as
follows:

 

1.             Definitions.

 

1.1           As used in this
Agreement, the following terms shall have the following respective meanings:

 

(a)           “CFIUS”
shall mean the Committee on Foreign Investment in the United States.

 

(b)           “Common Stock”
shall mean the common stock of the Company, par value US$0.00125 per share.

 

(c)           “Company
Intellectual Property” shall mean all of the Intellectual Property
owned by the Company or any of its Subsidiaries.

 

(d)           “Company
Intellectual Property Agreements” shall mean the contracts in effect
as of the date of this Agreement: (i) under which the Company or any of
its Subsidiaries is granted a right to any third party’s Intellectual Property
that is material to the operation of the Company’s business as a whole, other
than licenses and related services agreements for commercially available
technology or Intellectual Property, or (ii) under which the Company or
any of its Subsidiaries has licensed to third parties rights under any material
Company Intellectual Property, other than customer, developer and reseller
licenses and other agreements entered into in 

 

 

the ordinary course of
business or in connection with the sale or licensing of Company products or
services.

 

(e)           “Company
Options” shall mean options to purchase Common Stock under any of
the Company Options Plans.

 

(f)            “Company
Purchase Plan” shall mean the Company Employee Stock Purchase Plan.

 

(g)           “Company
Restricted Stock Unit” shall mean restricted stock units,
performance units, performance shares and restricted shares of Common Stock
under any of the Company Option Plans.

 

(h)           “Company Stock Option Plan”
shall mean each stock option plan, stock award plan, stock appreciation
right plan, phantom stock plan, stock option, other equity or equity-based
compensation plan, equity or other equity
based award to any employee, whether payable in cash, shares or otherwise, (to
the extent not issued pursuant to any of the foregoing plans) or other plan or
contract of any nature with any employee pursuant to which any stock, option,
warrant or other right to purchase or acquire capital stock of the Company or
right to payment based on the value of Company capital stock has been granted
or otherwise issued, but, in any case excluding the Company Purchase Plans.

 

(i)            “Exchange Act”
shall mean the U.S. Securities Exchange Act of 1934, as amended.

 

(j)            “GAAP”
shall mean United States generally accepted accounting principles.

 

(k)           “Governmental Entity” shall mean any national, provincial,
state, municipal, local government, any instrumentality, subdivision, court,
administrative agency or commission or other governmental authority or instrumentality, or any
quasi-governmental or private body exercising any regulatory, taxing, importing
or other governmental or quasi-governmental authority.

 

(l)            “Intellectual Property” shall mean the
rights associated with or arising under any of the following anywhere in the
world: (i) patents and applications therefor; (ii) copyrights,
copyrights registrations and applications therefor, and all other rights
corresponding rights in works of authorship, however denominated; (iii) rights
in industrial designs and any registrations and applications therefor; (iv) trademark
rights and corresponding rights in trade names, logos and service marks,
trademark or service mark, and registrations and applications therefor; (v) trade
secrets rights and corresponding rights in confidential business and technical
information and know-how (“Trade Secrets”);
and (vi) any similar or equivalent rights to any of the foregoing anywhere
in the world (as applicable).

 

(m)          “Knowledge” shall mean, with respect to a party hereto, with
respect to any matter in question, that any of the Chief Executive Officer,
Chief Financial Officer or General 

 

2

 

Counsel of such party,
has actual
knowledge (and not constructive or imputed knowledge) of such matter.

 

(n)           “Legal Requirements” shall mean any national, provincial,
state, municipal, local or other law, statute, constitution, principle of
common law, resolution, ordinance, code, order, edict, decree, rule,
regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Entity.

 

(o)           “Lien” shall mean any pledge, claim, lien, charge,
encumbrance, option and security interest of any kind or nature whatsoever.

 

(p)           “Material
Adverse Effect” shall mean, when used in connection with an entity,
any change, event, violation, inaccuracy, circumstance or effect (any such
item, an “Effect”), that is materially adverse to
the business, assets, financial condition or results of operations of such
entity taken as a whole with its Subsidiaries; provided, however,
that in no event shall any of the following, alone or in combination, be deemed
to constitute, nor shall any of the following be taken into account in
determining whether there has been, a Material Adverse Effect on any entity:

 

(i)            any Effect resulting
from compliance with the terms and conditions of this Agreement;

 

(ii)           any change in such entity’s stock price or
trading volume;

 

(iii)          any Effect resulting from any failure to meet
any published analyst estimates or expectations of revenue, earnings or other
financial performance or results of operations for any period, in and of
itself, or any failure to meet internal budgets, plans or forecasts of its
revenues, earnings or other financial performance or results of operations, in
and of itself (it being understood that the facts or occurrences giving rise or
contributing to such failure that are not otherwise excluded from the
definition of a Material Adverse Effect may be deemed to constitute, or be
taken into account in determining whether there has been, is or would be a
Material Adverse Effect);

 

(iv)          any Effect that results from changes
affecting any of the industries in which such entity operates generally or the
economies of the United States or the PRC, or any other region in the world
(only to the extent such Effect does not have a substantially disproportionate
impact on the entity relative to other companies of comparable size or larger
operating in the same industries and geographies in which the entity operates);

 

(v)           any Effect that results from changes in
political conditions in the United States or the PRC, or any other region in
the world (only to the extent such Effect does not have a substantially
disproportionate impact on the entity relative to other companies of comparable
size or larger operating in the same industries and geographies in the world);

 

(vi)          any Effect that results from an act of war,
sabotage or terrorism (including any escalation or general worsening of any
such acts of war, sabotage or terrorism) in the 

 

3

 

United
States or the PRC, or any other region in the world (only to the extent such
Effect does not have a substantially disproportionate impact on the entity
relative to other companies of comparable size or larger operating in the same
industries and geographies in the world);

 

(vii)         any Effect that results from an earthquake,
hurricane, tsunami, tornado, flood, mudslide, wild fire or other natural
disaster, weather condition or other force majeure event in the United States
or the PRC, or any other region in the world (only to the extent such Effect
does not have a substantially disproportionate impact on the entity relative to
other companies of comparable size or larger operating in the same industries
and geographies in the world);

 

(viii)        any Effect that results from changes
affecting general worldwide economic or capital market conditions;

 

(ix)           the availability or cost of equity, debt or
other financing;

 

(x)            any Effect related to the announcement or
pendency of this Agreement and actions announced concurrent with the
announcement of this Agreement, including (A) actions by competitors, (B) actions
taken by or losses of executives, employees, customer and suppliers, (C) delays
or cancellations of orders for products or services, or (D) any
litigation;

 

(xi)           any Effect arising out
of or related to any legal claims or other proceedings made by any of the
Company’s stockholders arising out of or related to this Agreement;

 

(xii)          any action required to be taken under
applicable Legal Requirements;

 

(xiii)         any changes in applicable Legal Requirements
or in GAAP (or in the interpretations thereof); or

 

(xiv)        any matters expressly set forth in the
Disclosure Schedule.

 

(q)           “MOFCOM”
shall mean the Ministry of Commerce of the PRC.

 

(r)            “Nasdaq”
shall mean the Nasdaq Global Select Market.

 

(s)           “NDRC”
shall mean the National Development and Reform Commission of the PRC.

 

(t)            “Permits” shall mean all permits, licenses, variances,
exemptions, orders and approvals from Governmental Entities.

 

(u)           “Permitted Liens” shall mean (i) statutory liens for
Taxes that are not yet due and payable, (ii) statutory liens to secure
obligations to landlords, lessors or renters under leases or rental agreements,
(iii) deposits or pledges made in connection with, or to secure payment
of, workers’ compensation, unemployment
insurance or similar programs mandated by applicable Law, (iv) statutory
liens in favor of carriers, warehousemen, mechanics and materialmen, to secure
claims for labor, materials or supplies and other like liens, (v) liens in
the ordinary course of 

 

4

 

business, and (vi) liens
in favor of customs and revenue authorities arising as a matter of an
applicable Legal Requirement to secure payments of customs duties in connection
with the importation of goods.

 

(v)           “Person” shall mean any individual, corporation (including
any non-profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company (including any
limited liability company or joint stock company), firm or other enterprise,
association, organization, entity or Governmental Entity.

 

(w)          “PRC”
shall mean the People’s Republic of China.

 

(x)            “SAFE”
shall mean the State Administration of Foreign Exchange of the PRC.

 

(y)           “SEC”
shall mean the U.S. Securities and Exchange Commission.

 

(z)            “Securities
Act” shall mean the Securities Act of 1933, as amended.

 

(aa)         “Subsidiaries” shall mean, when used with respect to any
party, any corporation or other organization, whether incorporated or unincorporated,
at least a majority of the securities or other interests of which having by
their terms ordinary voting power to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.

 

1.2           The following capitalized
terms shall have the respective meanings ascribed thereto in the respective
sections of this Agreement set forth opposite each of the capitalized terms
below:

 

	
  Term

  	
   

  	
  Section where Defined

  
	
   

  	
   

  	
   

  
	
  Accredited
  Investor

  	
   

  	
  4.4

  
	
  Acquisition Proposal

  	
   

  	
  6.2(b)(ii)

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Board

  	
   

  	
  3.4(c)

  
	
  Closing

  	
   

  	
  2.2

  
	
  Company

  	
   

  	
  Preamble

  
	
  Company Balance Sheet

  	
   

  	
  3.4(b)

  
	
  Company Financials

  	
   

  	
  3.4(b)

  
	
  Company
  Permits

  	
   

  	
  3.11(b)

  
	
  Company
  SEC Reports

  	
   

  	
  3.4(a)

  
	
  correspondence

  	
   

  	
  6.4(a)

  
	
  Disclosure
  Schedule

  	
   

  	
  3

  
	
  Exchange Act

  	
   

  	
  6.2(b)(i)

  
	
  Irreparable Breach

  	
   

  	
  6.7(c)

  
	
  Non-U.S. Person

  	
   

  	
  4.9(d)

  
	
  PRC
  Approvals

  	
   

  	
  4.10

  

 

5

 

	
  Term

  	
   

  	
  Section where Defined

  
	
   

  	
   

  	
   

  
	
  Preferred
  Stock

  	
   

  	
  3.2(a)

  
	
  Purchase
  Shares

  	
   

  	
  2.1

  
	
  Purchaser

  	
   

  	
  Preamble

  
	
  Regulation
  S

  	
   

  	
  Recitals

  
	
  Restricted
  Period

  	
   

  	
  4.9(b)(iv)

  
	
  Stockholders
  Rights Agreement

  	
   

  	
  Recitals

  
	
  Superior Offer

  	
   

  	
  6.2(b)(ii)(3)

  
	
  Trade Secrets

  	
   

  	
  1(l)

  
	
  U.S. Person

  	
   

  	
  4.9(c)

  
	
  United States

  	
   

  	
  4.9(c)

  

 

2.             Purchase and Sale of the Purchase Shares.

 

2.1           Purchase and Sale. 
At the Closing, the Company hereby agrees to sell to the Purchaser, and the
Purchaser hereby agrees to purchase, for a purchase price of US$2.20 per share,
11,363,636 shares of Common Stock (the “Purchase Shares”)
for an aggregate purchase price of US$24,999,99.20.

 

2.2           Closing. 
As soon as practicable following satisfaction or waiver (to the extent
permitted hereunder) of all the conditions precedent set forth in Section 5.1
and Section 5.2 below (other than those conditions that by their terms are
to be satisfied at the Closing, but subject to the satisfaction or waiver (to
the extent permitted hereunder) of such conditions), at the closing (the “Closing”), the Company shall issue and sell the Purchase
Shares to the Purchaser.  The Closing
shall take place remotely through the exchange of signature pages and
documents electronically or by facsimile.

 

2.3           Deliveries.  At the Closing, the Purchaser shall pay to
the Company the aggregate purchase price for the Purchase Shares.  Such payments shall be made by wire transfer
of U.S Dollars to a bank account of the Company in accordance with the Company’s
wire instructions.  The Company shall, at
the Closing, issue and deliver to the Purchaser a certificate representing the
Purchased Shares, registered in the name of the Purchaser.

 

3.             Representations  and Warranties of the Company.  Except as set forth in (i) the Company SEC Reports
(excluding disclosures of non-specific risks faced by the Company included in
any forward-looking statement, disclaimer, risk factor disclosure or other
similarly non-specific statements that are similarly predictive or forward-looking
in nature; provided, however that (1) any historical facts related to the
Company and (2) any specific exposure or effect faced by the Company
emanating from specifically disclosed facts contained within any such
disclosure shall be deemed disclosed for purposes of the representations and
warranties set forth in this Section 3), and (ii) in the Disclosure
Schedule delivered in connection with this Agreement (the “Disclosure
Schedule”), which qualify the following representations and
warranties in their entirety, the Company hereby represents and warrants to the
Purchaser as follows:

 

3.1           Organization; Good
Standing; Qualification.  The Company and each of its Subsidiaries is a
corporation or other organization duly organized, validly existing and in good 

 

6

 

standing
(when such concept is applicable) under the laws of the jurisdiction of its
incorporation or organization, has the requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted.  The Company is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where the failure to
be so qualified and in good standing, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on the Company.

 

3.2           Capitalization.

 

(a)           Capital
Stock.  The authorized capital
stock of the Company consists of 750,000,000 shares of Common Stock and
5,000,000 shares of preferred stock, par value $0.00125 per share (“Preferred Stock”).  At
the close of business on December 31, 2009: (i) 130,094,989 shares of
Common Stock were issued and outstanding; (ii) no shares of Common Stock
were issued and held by the Company in its treasury; and (iii) no shares
of Preferred Stock were issued and outstanding. 
All of the outstanding shares of capital stock of Company are duly
authorized and validly issued, fully paid and nonassessable and not subject to
any preemptive rights.

 

(b)           Stock Options; Restricted Stock Units.  As of the close of business on December 31,
2009: (i) 9,779,242 shares of Common Stock are subject to issuance or have
been issued and subject to release pursuant to Company Options and Company
Restricted Stock Units; and (ii) 906,440
shares of Common Stock are reserved for future issuance under the Company
Purchase Plan.  All shares of Common
Stock subject to issuance under the Company Stock Option Plans and the Company
Purchase Plan, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized and
validly issued, fully paid and nonassessable. 
Except for outstanding Company Options and Company Restricted Stock
Units, there are no outstanding or authorized stock appreciation, phantom
stock, profit participation or other similar rights with respect to Company.

 

(c)           Other
Securities.  Except as
otherwise set forth in this Section 3.2 and in that Common Stock Purchase
Agreement between the Company and the investors set forth therein dated as of
the date hereof, as of December 31, 2009, there are no securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of the
Company or any of its Subsidiaries, or obligating the Company or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. All
outstanding shares of Common Stock, all outstanding Company Options, all
Company Restricted Stock Units and all outstanding shares of capital stock of
each Subsidiary of the Company have been issued and granted in compliance in
all material respects with all applicable securities laws and other material
Legal Requirements.

 

7

 

3.3           Authorization; Non-Contravention.

 

(a)           Authorization. 
All corporate action on the part of the Company necessary for the
authorization, execution and delivery of this Agreement and the Stockholders
Rights Agreement, the performance of all obligations of the Company hereunder
and thereunder, and the authorization, issuance, sale and delivery of the
Purchase Shares has been taken prior to the date hereof, and each of this
Agreement and the Stockholders Rights Agreement, when validly executed by the
Purchaser, constitutes a valid and legally binding obligation of the Company,
enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Stockholders Rights Agreement may
be limited by applicable federal or state securities laws.

 

(b)           Non-Contravention. 
The execution, delivery and performance of this Agreement and the
Stockholders Rights Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Purchase Shares) will not (i) result in a
violation of the Company’s Certificate of Incorporation or Bylaws (each as
amended to date), (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any Subsidiary is a party, or (iii) subject to the consents set forth in Section 3.5,
result in a violation of any Legal Requirement applicable to the Company or by
which any property or asset of the Company or any Subsidiary is bound or
affected, except in the case of clauses (ii) and (iii) above, for
such conflicts, defaults, rights or violations which would not reasonably be
expected to result in a Material Adverse Effect on the Company.

 

3.4           SEC Filings; Financial Statements; Internal Controls.

 

(a)           SEC Filings. 
As of the date hereof, the Company has filed all required registration
statements, prospectuses, reports, schedules, forms, statements and other
documents (including exhibits and all other information incorporated by
reference) required to be filed by it with the SEC since December 31,
2007.  All such registration statements,
prospectuses, reports, schedules, forms, statements and other documents in the
form filed with the SEC have been made available to the Purchaser or are
publicly available in the Interactive Data Electronic Applications database of
the SEC.  All such required registration
statements, prospectuses, reports, schedules, forms, statements and other
documents, as amended, are referred to herein as the “Company SEC
Reports.”  As of their
respective dates (or if subsequently amended or supplemented, on the date of
such amendment or supplement), the Company SEC Reports (i) were prepared
in accordance and complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC Reports, and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  None of the Company’s
Subsidiaries is required to file any forms, reports or other documents with the
SEC.  No executive officer of the Company
has failed to make the certifications required of him or her under Section 302
or 906 of the Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations promulgated thereunder, with respect to any Company SEC Report,
except as disclosed in certifications filed with 

 

8

 

the Company SEC Reports.  Neither the Company nor any of its executive
officers has received notice from any Governmental Entity challenging or
questioning the accuracy, completeness, form or manner of filing of such
certifications.

 

(b)           Financial Statements. 
Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports (the “Company Financials”): (i) complied in all material
respects with the published rules and regulations of the SEC with respect
thereto; (ii) was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited interim financial statements, for normal
and recurring year-end adjustments and as may be permitted by the SEC on Form 10-Q,
8-K or any successor or like form under the Exchange Act); and (iii) fairly
presented in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as at the respective dates thereof
and the consolidated results of the Company’s operations and cash flows for the
periods indicated.  The balance sheet of
the Company as of September 30, 2009 contained in the Company SEC Reports
is hereinafter referred to as the “Company Balance Sheet.”  Except as disclosed in the Company
Financials, since the date of the Company Balance Sheet and through the date
hereof, neither the Company nor any of its Subsidiaries has any liabilities
required under GAAP to be set forth on a consolidated balance sheet which,
individually or in the aggregate, would have a Material Adverse Effect on the
Company, except for (A) liabilities set forth, recognized or disclosed on
the Company Balance Sheet, (B) liabilities incurred since the date of the
Company Balance Sheet in the ordinary course of business, and (C) liabilities
incurred pursuant to this Agreement.

 

(c)           Internal Controls. 
The Company has established and maintains, adheres to and enforces a
system of internal accounting controls which are effective in providing
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements in accordance with GAAP, including policies
and procedures that (i) require the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Company and its Subsidiaries, (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and that receipts
and expenditures of the Company and its Subsidiaries are being made 

only in accordance with appropriate authorizations of
management and the board of directors of the Company (the “Board”),
and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the assets of the
Company and its Subsidiaries.  Neither
the Company nor, to the Knowledge of the Company, the Company’s independent
auditors, has identified or been made aware of (A) any significant
deficiency or material weakness, in each case which has not been subsequently
remediated, in the system of internal accounting controls utilized by the
Company and its Subsidiaries, taken as a whole, or (B) any fraud that
involves the Company’s management or other employees who have a role in the
preparation of financial statements or the internal accounting controls
utilized by the Company.

 

3.5           Governmental Consents.  No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required to
be obtained or made by the Company in connection with the execution and
delivery of this Agreement and the transactions contemplated hereby, except
for: (i) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable U.S. federal and
state 

 

9

 

securities; (ii) such clearance and approvals as
may be required from CFIUS with respect to the transaction, such clearance and
approval obtained as of the date hereof; (iii) such filings, registrations
and qualifications as may be required by Nasdaq in connection with the issuance
of the Purchase Shares; and (iv) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made (A) would
not reasonably be expected have a Material Adverse Effect on the Company, or (B) would
not prevent consummation of the transactions contemplated hereunder or
otherwise substantially impair the parties hereto from performing their
respective obligations hereunder.

 

3.6           Brokers or Finders.  The
Company has not incurred, and shall not incur, directly or indirectly, any
liability for any brokerage or finders’ fees or agents commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby other than with respect to arrangements with Merrill Lynch, Pierce, Fenner &
Smith Incorporated relating to services provided in connection with
the financing of the Company consummated by this Agreement.

 

3.7           Nasdaq.  The
Common Stock is listed on Nasdaq, there are no proceedings to revoke or suspend
such listing and the Company has not received any notice from Nasdaq, nor does
the Company have Knowledge of any reason that the Company does not meet the
listing or maintenance requirements for continuing listing on such exchange.

 

3.8           Valid Issuance of the
Purchase Shares.  The Purchase Shares, when issued, sold and
delivered in accordance with the terms of this Agreement and upon payment of
the purchase price therefor, will be duly authorized and validly issued, fully
paid and nonassessable, and free and clear of all Liens (other than
restrictions on transfer imposed by U.S. law (both state and federal) or other
applicable securities laws and as set forth in the Stockholders Rights
Agreement).

 

3.9           Offering. 
Provided that the representations and warranties made by the Purchaser herein
are complete, true and accurate, then the offer, issuance and sale of the
Purchase Shares pursuant hereto will be exempt from the registration
requirements of Section 5 of the Securities Act, and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
U.S. state securities laws.  Neither the
Company nor any agent on its behalf has solicited any offers to sell or has
offered to sell all or any part of the Purchase Shares to any person or persons
so as to bring the sale of such securities within the registration and/or
qualification provisions of the Securities Act or any applicable U.S. state
securities laws.

 

3.10         No Material Adverse Effect. 
Since September 30, 2009, no event or circumstance has occurred
that, individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect on the Company.

 

3.11         Intellectual Property.

 

(a)               The Company Intellectual
Property is owned by the Company or its Subsidiaries free and clear of Liens,
other than (i) Permitted Liens, (ii) encumbrances, 

 

10

 

restriction or other
obligations arising under any6 of the Company Intellectual Property
Agreements,  or (iii) Liens that
would not have a Material Adverse Effect on the Company.

 

(b)               The Company and each of its
Subsidiaries has taken reasonable steps consistent with applicable industry
practice to protect and preserve the confidentiality of material confidential
information that they wish to, or are obligated by third parties to, protect as
Trade Secrets, and, to the Knowledge of the Company, there is no
misappropriation from the Company of such Trade Secrets by any Person, except
where such misappropriation would not have a Material Adverse Effect on the
Company.

 

(c)               To the Knowledge of the
Company, none of the Company or any of its Subsidiaries or any of its or their
current products or services is infringing upon or otherwise violating the
Intellectual Property of any third party, except where such infringement would
not have a Material Adverse Effect on the Company.

 

(d)               As of the date of this Agreement,
the Company has not received notice of any suit, claim, action, investigation
or proceeding made, conducted or brought by a third party that has been served
upon or, to the Knowledge of the Company, filed or threatened in writing with
respect to any alleged infringement or other violation in any material respect
by the Company or any of its Subsidiaries or any of its or their current
products or services or other operation of the Company’s or its Subsidiaries’
business of the Intellectual Property of such third party.  As of the date of this Agreement, to the
Knowledge of the Company, there is no pending or threatened claim challenging
the validity or enforceability of, or contesting the Company’s or any of its
Subsidiaries’ rights with respect to, any of the material Company Intellectual
Property.

 

(e)               The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
will not result in (i) the Company or its Subsidiaries granting to any
third party any rights or licenses to any Company Intellectual Property, (ii) any
right of termination or cancellation under any Company Intellectual Property
Agreement, or (iii) the imposition of any Lien on any Company Intellectual
Property, except where any of the foregoing (in clauses (i) through (iii))
would not have a Company Material Adverse Effect.

 

3.12         Compliance; Permits.

 

(a)               Compliance.  Neither the Company nor any of its
Subsidiaries is in conflict with, or in default or in violation of any Legal
Requirement applicable to the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries or any of their respective businesses or
properties is bound or affected, except for conflicts, violations and defaults
that would not have a Material Adverse Effect on the Company.  As of the date hereof, no material
investigation or review by any Governmental Entity is pending or, to the
Knowledge of the Company, has been threatened in a writing delivered to the
Company or any of its Subsidiaries, against the Company or any of its
Subsidiaries.  There is no material
judgment, injunction, order or decree binding upon the Company or any of its
Subsidiaries which has or would reasonably be expected to have a Material
Adverse Effect on the Company.

 

11

 

(b)               Permits.  The Company and its Subsidiaries hold, to the
extent legally required, all Permits that are required for the operation of the
business of the Company, as currently conducted, the failure to hold which
would reasonably be expected to have a Material Adverse Effect on the Company
(collectively, “Company  Permits”).  As of the date hereof, no suspension or
cancellation of any of the Company Permits is pending or, to the Knowledge of
Company, threatened.  The Company and its
Subsidiaries are in compliance in all material respects with the terms of the
Company Permits.

 

3.13         Litigation.  As of the date hereof, there are
no claims, suits, actions or proceedings or, to the Knowledge of the Company,
pending or overtly threatened in writing against the Company or any of its
Subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seeks to restrain or
enjoin the consummation of the transactions contemplated hereby or which would
reasonably be expected, either singularly or in the aggregate with all such
claims, actions or proceedings, to have a Material Adverse Effect on the
Company.

 

3.14         Ownership of Assets.  Other than
Permitted Liens and other than with respect to any Company Intellectual
Property, to the Knowledge of the Company, there are no Liens over or affecting
the whole or any part of the material assets of the Company.

 

4.             Representations, Warranties
and Covenants of the Purchaser.  The Purchaser
represents and warrants to the Company as follows:

 

4.1           Authorization.  All corporate action on the part of the
Purchaser necessary for the authorization, execution and delivery of this
Agreement and the Stockholders Rights Agreement, the performance of all
obligations of the Purchaser hereunder and thereunder has been taken prior to
the date hereof, and each of this Agreement and the Stockholders Rights
Agreement, when validly executed by the Company, constitutes a valid and
legally binding obligation of the Purchaser, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies, and (iii) to the extent the indemnification
provisions contained in the Stockholders Rights Agreement may be limited by
applicable federal or state securities laws.

 

4.2           Purchase Entirely for Own
Account.  The Purchase Shares to be purchased by the Purchaser will be
acquired for investment for the Purchaser’s own account, and not as a nominee
or agent, and not with a view to the resale or distribution of any part
thereof, and the Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same.  The Purchaser is not a party to any contract,
understanding, agreement or arrangement with any person to sell, transfer or
otherwise dispose of any of the Purchase Shares purchased by it.

 

4.3           Receipt of Information.  The
Purchaser has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the issuance and sale of the
Purchase Shares and the business, properties, prospects and financial condition
of the Company and obtain additional information (to the extent the Company
possessed such information 

 

12

 

or could acquire such
information without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access.  The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 3 of
this Agreement or the  right of the
Purchaser to rely thereon. The Purchaser acknowledges and understands that no
Person other than the Company has been authorized to give any representations
not contained in this Agreement in connection with the issuance and sale of the
Purchase Shares and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company.

 

4.4           Accredited Investor.  Unless otherwise
expressly indicated to the Company, (a) the Purchaser is an “accredited
investor” as such term is defined in Rule 501 of Regulation D promulgated
under the Securities Act (an “Accredited Investor)”,
or (b) if the Purchaser was formed for the specific purpose of acquiring
the Purchaser Shares, then each shareholder or member of the Purchaser is an
Accredited Investor.

 

4.5           Investment Experience.  The Purchaser is
experienced in evaluating and investing in securities of companies and
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment, and has such knowledge and experience in financial and business
matters that is capable of evaluating the merits and risks of the investment in
the Purchase Shares.

 

4.6           Rule 144.  The
Purchaser understands that the Purchase Shares may not be sold, transferred or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering the Purchase Shares or on an available exemption from
registration under the Securities Act, the Purchase Shares must be held
indefinitely.  In particular, the
Purchaser is aware that the Purchase Shares may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that rule are
met.  Among the conditions for use of Rule 144
is the availability of current information to the public about the Company.

 

4.7           Reliance on Purchaser’s
Representations.  The Purchaser understands that the Purchase
Shares being offered and sold to it will not be registered under the Securities
Act or any other applicable securities laws on the ground that such issuance
will be exempt from the registration requirements of U.S. federal, state and
other applicable securities laws, and that the Company is relying upon the
truth and accuracy of, and the Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of the Purchaser to acquire the Purchase Shares.

 

4.8           Legends.  Each
certificate representing any of the Purchase Shares shall be endorsed with the
applicable legend set forth below and any other legends required by applicable
law, and the Purchaser covenants that, except to the extent such restrictions
are waived in writing by the Company, it shall not transfer the shares
represented by any such certificate without complying with the restrictions on
transfer described in this Agreement and the legends endorsed on such
certificate:

 

13

 

THE SHARES OF COMMON STOCK REPRESENTED BY
THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED UNLESS (I) THERE
IS AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH OFFER, SALE OR TRANSFER OR
(II) THERE IS AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO UTSTARCOM,
INC., THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OR ANY APPLICABLE STATE SECURITIES LAWS FOR SUCH OFFER, SALE OR TRANSFER IS
AVAILABLE. HEDGING TRANSACTIONS INVOLVING THE SHARES REPRESENTED HEREBY MAY NOT
BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.  THIS CERTIFICATE MUST BE SURRENDERED TO THE COMPANY OR
ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE, PLEDGE, HYPOTHECATION
OR ANY OTHER TRANSFER OF ANY INTEREST IN ANY OF THE SHARES REPRESENTED BY THIS
CERTIFICATE.

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE
SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS INVOLVING THE
SHARES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE SECURITIES ACT. THIS CERTIFICATE MUST BE SURRENDERED TO THE COMPANY OR ITS
TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE, PLEDGE, HYPOTHECATION OR
ANY OTHER TRANSFER OF ANY INTEREST IN ANY OF THE SHARES REPRESENTED BY THIS
CERTIFICATE.

 

14

 

4.9           Investment Representations, Warranties and Covenants
by Non-U.S. Persons. 
The Purchaser, if it has indicated that it is not an Accredited Investor,
hereby represents and warrants to the Company as follows:

 

(a)           This Agreement is made by the Company
with the Purchaser, who is a Non-U.S. Person, in reliance upon such Non-U.S.
Person’s representations, warranties and covenants made in this Section 4.9.

 

(b)           Such Non-U.S. Person has been advised and acknowledges
that:

 

(i)            the Purchase Shares have not
been registered under the Securities Act, the securities laws of any state of
the United States or the securities laws of any other country;

 

(ii)           in issuing and selling the Purchase
Shares to such Non-U.S. Person pursuant hereto, the Company is relying upon the
“safe harbor” provided by Regulation S and/or on Section 4(2) under
the Securities Act;

 

(iii)          it is a condition to the availability of the
Regulation S “safe harbor” that the Purchase Shares not be offered or sold
in the United States or to a U.S. Person until the expiration of a one-year “distribution
compliance period” (or a six-month “distribution compliance period,” if the
issuer is a “reporting issuer,” as defined in Regulation S) following the
date of the applicable Closing; and

 

(iv)          notwithstanding the foregoing, prior to the
expiration of the one-year “distribution compliance period” after the
applicable Closing (the “Restricted Period”),
the Purchase Shares may be offered and sold by the holder thereof only if such
offer and sale is made in compliance with the terms of this Agreement and
either: (A) if the offer or sale is within the United States or to or for
the account of a U.S. Person (as such terms are defined in Regulation S),
the securities are offered and sold pursuant to an effective registration
statement or pursuant to Rule 144 under the Securities Act or pursuant to
an exemption from the registration requirements of the Securities Act; or (B) the
offer and sale is outside the United States and to other than a U.S. Person.

 

(c)           As used herein, the term “United States” means the United States of America, its
territories and possessions, any State of the United States, and the District
of Columbia, and the term “U.S. Person”
(as defined in Regulation S) means:

 

(i)            a natural person resident in
the United States;

 

(ii)           any partnership or
corporation organized or incorporated under the laws of the United States;

 

(iii)          any estate of which any
executor or administrator is a U.S. Person;

 

(iv)          any trust of which any
trustee is a U.S. Person;

 

15

 

(v)           any agency or branch of a
foreign entity located in the United States;

 

(vi)          any nondiscretionary account
or similar account (other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. Person;

 

(vii)         any discretionary account or
similar account (other than an estate or trust) held by a dealer or other
fiduciary organized, incorporated and (if an individual) resident in the United
States; and

 

(viii)        a corporation or partnership
organized under the laws of any foreign jurisdiction and formed by a U.S.
Person principally for the purpose of investing in securities not registered
under the Securities Act, unless it is organized or incorporated, and owned, by
accredited investors (as defined in Rule 501(a) under the Securities
Act) who are not natural persons, estates or trusts.

 

(d)           As used herein, the term “Non-U.S. Person” means any person who is not a U.S. Person
or is deemed not to be a U.S. Person under Rule 902(k)(2) of the
Securities Act.

 

(e)           Such Non-U.S. Person agrees that with respect to the
Purchase Shares, until the expiration of the Restricted Period:

 

(i)            such Non-U.S. Person, its
agents or its representatives have not and will not solicit offers to buy,
offer for sale or sell any of the Purchase Shares, or any beneficial interest
therein in the United States or to or for the account of a U.S. Person;

 

(ii)           notwithstanding the
foregoing, the Purchase Shares may be offered and sold by the holder thereof
only if such offer and sale is made in compliance with the terms of this
Agreement and either: (A) if the offer or sale is within the United States
or to or for the account of a U.S. Person (as such terms are defined in
Regulation S), the securities are offered and sold pursuant to an
effective registration statement or pursuant to Rule 144 under the
Securities Act or pursuant to an exemption from the registration requirements
of the Securities Act; or (B) the offer and sale is outside the United
States and to other than a U.S. Person; and

 

(iii)          such Non-U.S. Person shall
not engage in hedging transactions with regard to the Purchase Shares unless in
compliance with the Securities Act.

 

The foregoing restrictions
are binding upon subsequent transferees of the Purchase Share, except for
transferees pursuant to an effective registration statement. Such Non-U.S.
Person agrees that after the Restricted Period, the Purchase Shares may be
offered or sold within the United States or to or for the account of a U.S.
Person only pursuant to applicable securities laws.

 

(f)            Such Non-U.S. Person has not engaged, nor
is it aware that any party has engaged, and such Non-U.S. Person will not
engage or cause any third party to engage, in any directed selling efforts (as
such term is defined in Regulation S) in the United States with respect to
the Purchase Shares.

 

16

 

(g)           Such Non-U.S. Person: (i) is
domiciled and has its principal place of business outside the United States; (ii) certifies
it is not a U.S. Person and is not acquiring the Purchase Shares for the
account or benefit of any U.S. Person; and (iii) at the time of the
applicable Closing, the Non-U.S. Person or persons acting on Non-U.S. Person’s
behalf in connection therewith will be located outside the United States.

 

(h)           At the time of offering to such Non-U.S.
Person and communication of such Non-U.S. Person’s order to purchase the
Purchase Shares and at the time of such Non-U.S. Person’s execution of this
Agreement, the Non-U.S. Person or persons acting on Non-U.S. Person’s behalf in
connection therewith were located outside the United States.

 

(i)            Such Non-U.S. Person is not a “distributor”
(as defined in Regulation S) or a “dealer” (as defined in the Securities
Act).

 

(j)            Such Non-U.S. Person acknowledges that
the Company shall make a notation in its stock books regarding the restrictions
on transfer set forth in this Section 4.9 and shall transfer such shares
on the books of the Company only to the extent consistent therewith. In
particular, such Non-U.S. Person acknowledges that the Company shall refuse to
register any transfer of the Purchase Shares not made in accordance with the
provisions of Regulation S, pursuant to registration under the Securities
Act or pursuant to an available exemption from registration.

 

4.10         Governmental
Consents.  Other than the approvals as set forth in
Schedule 4.10 attached hereto (the “PRC Approvals”),
no consent, approval,
order or authorization of, or registration, declaration or filing with any
Governmental Entity is required to be obtained or made by the Purchaser in
connection with the execution and delivery of this Agreement and the transactions
contemplated hereby.

 

4.11         Sufficient Funds.  As of the date hereof, the Purchaser has, and will have at all
times until the Closing, sufficient accessible funds to purchase its Purchase
Shares upon the terms contemplated by this Agreement and to pay all fees and
expenses associated therewith.

 

4.12         No Other Representations and Warranties.  Except for the representations and
warranties contained in Article III, the Purchaser acknowledges and
agrees that the Company makes no other express or implied representation
or warranty with respect to the Company, its business or the transaction
contemplated hereby.

 

5.             Conditions Precedent to
Closing.

 

5.1           Conditions to the Obligation of the Purchaser to Consummate the Closing.  The obligation of the Purchaser
to consummate the Closing and to purchase and pay for the Purchase Shares being
purchased by it pursuant to this Agreement is subject to the satisfaction of
the following conditions precedent:

 

(a)           Representations and Warranties;
Covenants.

 

(i)    Each of the representations and
warranties of the Company in Section 3 shall be true and correct in all
material respects (except for those representations and

 

17

 

warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct to such extent) as of the date of this Agreement and as of the date of
the Closing as though made at that time (except for representations and warranties
that speak as of a specific date, which shall be true and correct as of such
specified date).

 

(ii)          The Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement prior to the date of Closing.

 

(b)                                 Qualifications. 
All authorizations, approvals or permits, if any, of any Governmental
Entity, including, but not limited to, the PRC Approvals, that are required in
connection with the lawful issuance, sale and purchase of the Purchase Shares,
and the purchase and the procurement of foreign exchange for payment of the
Purchase Price, pursuant to this Agreement shall have been duly obtained and
effective as of the Closing.

 

(c)                                  Stockholders Rights Agreement. 
The Stockholders Rights Agreement shall remain in full force and effect.

 

(d)                                 Board Composition. 
Effective as of the Closing, the Board shall include (but not be limited
to) the following individuals (unless any such individual is unable or
unwilling to serve on the Board):  Peter
Blackmore, Baichuan Du, Xiaoping Li, Hong Liang Lu, Bruce J. Ryan, Thomas J.
Toy and William Wong.

 

(e)                                  Chief Executive Officer.  The Board shall have approved the appointment of Jack
Lu as Chief Executive Officer of the Company pursuant to the terms of the offer
letter between Mr. Lu and the Company, dated as of the date of this
Agreement, offering him the position of Chief Executive Officer of the Company
and such appointment and offer letter shall not have been revoked, amended or
superseded.

 

5.2                                 Conditions to
the Obligation of the Company to Consummate the Closing.  The
obligation of the Company to consummate the Closing and to issue and sell the
Purchase Shares to the Purchaser at the Closing is subject to the satisfaction
of the following conditions precedent:

 

(a)                                  Representations
and Warranties; Covenants.

 

(i)             Each of the representations and warranties of the
Purchaser in Section 4 shall be true and correct as of the date of this
Agreement and as of the date of the Closing as though made at that time.

 

(ii)          The Purchaser shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement prior to the date of Closing.

 

(b)                                 Qualifications.  All authorizations, approvals or permits, if
any, of any Governmental Entity that are required in connection with the lawful
issuance and sale of the Purchase Shares pursuant to this Agreement shall be
duly obtained and effective as of the Closing.

 

18

 

(c)                                  Payment. 
The Purchaser shall have paid the purchase price to the Company as set
forth in the Section 2.3(a).

 

(d)                                 Stockholders Rights Agreement. 
The Stockholders Rights Agreement shall remain in full force and effect.

 

6.                                       Miscellaneous
Provisions.

 

6.1                                 Public
Statements or Releases.  None of the parties to this Agreement
shall make, issue, or release any announcement, whether to the public
generally, or to any of its suppliers or customers, with respect to this
Agreement or the transactions provided for herein, or make any statement or
acknowledgment of the existence of, or reveal the status of, this Agreement or
the transactions provided for herein, without the prior consent of the other
parties, which shall not be unreasonably withheld or delayed, provided,
that nothing in this Section 6.1 shall prevent any of the parties hereto
from making such public announcements as it may consider necessary in order to
satisfy any Legal Requirements applicable to it, but to the extent not
inconsistent with such Legal Requirements, it shall provide the other parties
with an opportunity to review and comment on any proposed public announcement
before it is made.  Notwithstanding the
foregoing, prior written consent of the other parties will not be required for
the Company to issue press releases or make governmental filings relating to
the sale and issuance of the Purchase Shares pursuant to this Agreement and the
Company hereby agrees to make public announcement of such sale and issuance upon
the signing of this Agreement.

 

6.2                                 Further
Assurances; Exclusivity and Superior Offer; Covenants.

 

(a)                                  Further Assurances. 
Each party agrees to act in good faith and use commercially reasonable
efforts to cooperate fully with the other parties and to execute such further
instruments, documents and agreements and to give such further written
assurances, as may be reasonably requested by the other parties to better
evidence and reflect the transactions described herein and contemplated hereby,
and to carry into effect the intents and purposes of this Agreement.

 

(b)                                 Exclusivity and Superior Offer.

 

(i)             Exclusivity.  From the date
hereof until the Closing, and unless this Agreement is terminated in accordance
with Section 6.14, the Company, its subsidiaries and their respective
directors, officers and representatives shall not, directly or indirectly,
enter into, or commence, any discussions with any third party for the sale and
issue of a material number of shares of Common Stock or a material portion of the
business of the Company.  Nothing in this
Agreement shall prohibit the Company from issuing a “stop-look-listen”
communication pursuant to Rule 14d-9(f) promulgated under the United
States Securities Exchange Act of 1934, as amended (the “Exchange Act”),
or taking and disclosing to its stockholders a position as required by Rule 14d-9
or 14e-12 promulgated under the Exchange Act.

 

(ii)          Superior Offers. 
Notwithstanding anything to the contrary contained in Section 6.2(b)(i), in the event that the Company
receives an unsolicited, bona fide offer for the acquisition of 100% of the
equity or assets of the Company (an “Acquisition Proposal”)
from a third party that the Board has in good faith concluded (following the
receipt of the advice of 

 

19

 

its outside legal counsel
and its financial advisor) is, or is reasonably likely to result in, a Superior
Offer (as defined below), the Company may then take the following actions
provided that the Board concludes in good faith (after consultation with their
outside legal advisors) that failure to do so could be inconsistent with their
fiduciary duties under applicable law:

 

(1)                                  Furnish nonpublic information to the
third party making such Acquisition Proposal, provided that (a) (1) concurrently
with furnishing any such nonpublic information to such party, the Company gives
the Purchaser written notice of its intention to furnish such nonpublic
information and (2) the Company receives from the third party an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all nonpublic written and oral information furnished to such
third party on the Company’s behalf and (b) contemporaneously with
furnishing any such nonpublic information to such third party, the Company
furnishes such nonpublic information to the Purchaser (to the extent such
nonpublic information has not been previously so furnished).

 

(2)                                  Engage in negotiations with the third
party with respect to the Acquisition Proposal, provided that
concurrently with entering into negotiations with such third party, the Company
gives the Purchaser written notice of the Company’s intention to enter into
negotiations with such third party and during such negotiations provides
Purchaser with copies of all written proposals delivered by such third party,
keeps Purchaser updated regarding negotiations and discussions in a reasonably
timely manner and provides the Purchaser the opportunity to fully participate
as an observer in all such negotiations and discussions.

 

(3)                                  In the case of a Superior Offer that is a
tender or exchange offer made directly to the stockholders of the Company, may
recommend that the stockholders of the Company accept the tender or exchange
offer.

 

For purposes of this Agreement,
“Superior Offer,” shall mean an
Acquisition Proposal by a third party with terms that the Board has in good
faith concluded (following the receipt of advice of its outside legal counsel
and its financial adviser), taking into account, among other things, all legal,
financial, regulatory and other aspects of the offer and the Person making the
Acquisition Proposal, including without limitation any proposed conditions to
consummation, to be more favorable, from a financial point of view, to the Company’s
stockholders (in their capacities as stockholders) than the terms of the
transaction contemplated hereunder, is reasonably likely to be consummated and
for which financing, to the extent required, is then fully committed or
reasonably determined to be available by the Board.

 

(c)                                  Government Consents. Notwithstanding the generality of Section 6.2(a) above,
to the extent applicable, the Purchaser covenants to use its commercially
reasonable efforts to obtain all necessary government approvals, including
without limitation, the PRC Approvals, required for it to complete the
transactions contemplated by this Agreement and, as promptly as practicable
after the date hereof, the Purchaser shall make all filings, notices,
petitions, statements, registrations, submissions of information, application
or submission of other documents required by any Governmental Entity  required in connection with this Agreement and the
transactions contemplated hereby.  The
Purchaser will notify the Company promptly upon the receipt of (i) any
comments from any officials of any Governmental Entity in connection with any 

 

20

 

filings made pursuant
hereto, and (ii) any requests by any officials of any Governmental Entity
for amendments or supplements to, or additional information in connection with,
any filings made pursuant hereto.  In
addition,  the Purchaser shall use best
endeavors to furnish such information, supply such documents, give such
undertakings and do all such acts and things may be reasonably required by any
other Governmental Entity in relation to or arising out of the transactions
contemplated hereby.

 

(d)                                 Conduct of Business by the
Company.  During the period from the date hereof and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Closing, the Company and each of its Subsidiaries shall,
except as otherwise expressly contemplated by this Agreement, Disclosure
Schedule or required to consummate the transaction contemplated hereunder, or
to the extent that the Purchaser shall otherwise consent in writing, (i) carry
on its business in the usual, regular and ordinary course, in substantially the
same manner as heretofore conducted and consistent with the Company’s plan’s  for managing its business and other
operations and in material compliance with all applicable laws and regulations,
(ii) pay its debts and Taxes when due, pay or perform other material
obligations when due, (iii) make no material change to the compensation
arrangement or agreement with the Chief Executive Officer and other key
employees of the Company, (iv) not sell, assign or transfer any material
Company Intellectual
Property other than in the ordinary course of business, (iv) not initiate
and shall use commercially reasonable efforts to not allow, any material change
or amendment to, or termination of, a material contract to which the Company or
a Subsidiary is a party (other than termination through ordinary course
expiration of its terms), (v) not declare or pay any dividends, and (vi) use
commercially reasonable efforts consistent with past practices and policies and
its existing restructuring plans to (x) preserve substantially intact its
present business organization, (y) keep available the services of its present
executive officers and employees, and (z) preserve its relationships with
customers, suppliers, licensors, licensees, and others with which it has
significant business dealings.  In
addition, the Company shall promptly notify in writing the Purchaser of any
event that it believes could reasonably be expected to lead to a Material
Adverse Effect on the Company.

 

6.3                                 Rights
Cumulative.  Each and all of the various rights, powers
and remedies of the parties shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have
at law or in equity in the event of the breach of any of the terms of this
Agreement.  The exercise of any right,
power or remedy shall neither constitute the exclusive election thereof nor the
waiver of any other right, power or remedy available to such party.

 

6.4                                 Notices.

 

(a)                                  Any notices, reports or other
correspondence (hereinafter collectively referred to as “correspondence”)
required or permitted to be given hereunder shall be sent by international
courier, facsimile, electronic mail or delivered by hand to the party to whom
such correspondence is required or permitted to be given hereunder.  Where a notice is sent by
overnight courier, service of the notice shall be deemed to be effected by
properly addressing, and sending such notice through an internationally
recognized express courier service, delivery fees pre-paid, and to have been
effected three (3) business days following the day the same is sent as
aforesaid.  Where a notice is delivered
by facsimile, electronic mail, by hand or by messenger, service of the notice 

 

21

 

shall
be deemed to be effected upon delivery; provided that facsimile or electronic
mail alone does not constitute an effective notice.

 

(b)                                 All
correspondence to the Company shall be addressed as follows:

 

	
  UTStarcom, Inc.

  
	
  1275
  Harbor Bay Parkway

  
	
  Alameda,
  CA 94502

  
	
  Facsimile:
  (510) 864-8802

  
	
  Email:
  legal.notice@utstar.com

  
	
  Attention:
  General Counsel

  
	
   

  
	
  with
  a copy to:

  
	
   

  
	
  Wilson
  Sonsini Goodrich & Rosati

  
	
  650
  Page Mill Road

  
	
  Palo
  Alto, California 94304

  
	
  Facsimile: (650)
  493-6811

  
	
  Attention: Carmen
  Chang and Scott Anthony

  

 

(c)                                  All correspondence to the Purchaser shall
be addressed as follows:

 

Beijing
E-town International Investment and Development Co., Ltd

Bldg
61, 2 JingYuanBeiJie, Beijing Development Area

Beijing
100176

P.
R. China

Facsimile:
+86 (10) 6786-2607

Attn:
Xu Wei

 

(d)                                 Any entity may change the address to
which correspondence to it is to be addressed by notification as provided for
herein.

 

6.5                                 Captions.  The
captions and paragraph headings of this Agreement are solely for the
convenience of reference and shall not affect its interpretation.

 

6.6                                 Severability.  Should
any part or provision of this Agreement be held unenforceable or in conflict
with the applicable laws or regulations of any jurisdiction, the invalid or
unenforceable part or provisions shall be replaced with a provision which
accomplishes, to the extent possible, the original business purpose of such
part or provision in a valid and enforceable manner, and the remainder of this
Agreement shall remain binding upon the parties hereto.

 

6.7                                 Governing Law;
Arbitration; Injunctive Relief.

 

(a)                                  This Agreement shall be governed by and construed
in accordance with the internal and substantive laws of the State of California
and without regard to any conflicts of laws concepts which would apply the
substantive law of some other jurisdiction.

 

22

 

(b)                                 Other than as
set forth in Section 6.7(c), each of the parties hereto irrevocably (i) agrees
that any dispute or controversy arising out of, relating to, or concerning any
interpretation, construction, performance or breach of this Agreement, may be
settled by arbitration to be held in County of Santa Clara, State of
California, in accordance with the rules then in effect of the American
Arbitration Association, (ii) waives, to the fullest extent it may
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such arbitration, and (iii) submits to the
non-exclusive jurisdiction of the State of California in any such arbitration
or to the jurisdiction of state of federal courts in the state of California in
any of the legal actions or claims.  If
submitted to arbitration in any jurisdiction, the decision of the arbitrator
shall be final, conclusive and binding on the parties to the arbitration.  Judgment may be entered on the arbitrator’s
decision in any court having jurisdiction. 
The parties to the arbitration shall each pay an equal share of the
costs and expenses of such arbitration, and each party shall separately pay for
its respective counsel fees and expenses; provided, however, that
the prevailing party in any such arbitration shall be entitled to recover from
the non-prevailing party its reasonable costs and attorney fees.

 

(c)                                  Each of the parties hereto acknowledges
and agrees that damages will not be an adequate remedy for any material breach
or violation of this Agreement if such material breach or violation would cause
immediate and irreparable harm (an “Irreparable Breach”).  Accordingly, in the event of a threatened or
ongoing Irreparable Breach, each party hereto shall be entitled to seek, in any
court of law of competent jurisdiction, equitable relief of a kind appropriate
in light of the nature of the ongoing or threatened Irreparable Breach, which
relief may include, without limitation, specific performance or injunctive
relief; provided, however, that if the party bringing such action
is unsuccessful in obtaining the relief sought, the moving party shall pay the
non-moving party’s reasonable costs, including attorney’s fees, incurred in
connection with defending such action. 
Such remedies shall not be the parties’ exclusive remedies, but shall be
in addition to all other remedies provided in this Agreement.

 

6.8                                 Amendment.  This
Agreement may not be amended, modified or terminated, and no rights or
provisions may be waived, except with the written consent of the Company and
the Purchaser.

 

6.9                                 Expenses.  Each
party will bear its own costs and expenses in connection with the drafting and
negotiation of this Agreement and the Stockholders Rights Agreement.

 

6.10                           Assignment.  No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties.  Any
purported assignment in violation of this Section 6.10 shall be void.  Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.  Notwithstanding the preceding, the Purchaser
may assign its rights herein to any wholly-owned subsidiary without the consent
of the Company provided that any such assignment shall not relieve the
Purchaser of any liability hereunder.

 

6.11                           Survival.  The
respective representations and warranties given by the parties hereto shall
terminate upon the earlier of (i) the first anniversary of the Closing,
and (ii) the date on which this Agreement is terminated in accordance with
Section 6.14 of this Agreement. 
Notwithstanding any applicable statute of limitations, any claim with respect to the failure of a

 

23

 

representation or
warranty to be true and correct (other than as a result of fraud or willful
misconduct) that is not asserted within such timeframes may not be pursued and
is hereby irrevocably waived after such time. 
Notwithstanding the preceding, the representations and warranties given
by the Company shall terminate immediately with respect to the Purchaser  if it has sold all the Purchased Shares it
purchased hereunder and with respect to any Purchased Shares that have been
sold by the Purchaser.  Each party hereby
agrees that, before bringing any claim with respect to the failure of a
representation or warranty to be true and correct, it shall give the other
party or parties reasonable notice of such failure and reasonable time to cure
such failure.

 

6.12                           Entire
Agreement.  This Agreement constitutes the entire
agreement between the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, negotiations, understandings, representations
and statements respecting the subject matter hereof, whether written or
oral.  No modification, alteration,
waiver or change in any of the terms of this Agreement shall be valid or
binding upon the parties hereto unless made in writing and in accordance with
the provisions of Section 6.8 hereof.

 

6.13                           Counterparts; Reproductions.  This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of
which together shall constitute one instrument. 
A facsimile, portable document file (PDF) or other reproduction of this
Agreement may be executed by one or more parties and delivered by such party by
facsimile, electronic mail or any similar electronic transmission pursuant to
which the signature of or on behalf of such party can be seen.  Such execution and delivery shall be
considered valid, binding and effective for all purposes.

 

6.14                           Termination.

 

(a)                                  This Agreement may be terminated and the
transactions contemplated hereby abandoned as follows:

 

(i)                                     at any time by
mutual consent of the Company and the Purchaser; or

 

(ii)                                  by either the
Company or the Purchaser if the Closing has not occurred within 90 days of the
date hereof; provided, however, that the right to terminate this Agreement
under this Section 6.14(a)(ii) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Closing to occur on or before such date and such action or
failure or failure to act constitutes a material breach of this Agreement.

 

(b)                                 If terminated, this Agreement shall
become void and there shall be no liability or obligation on the part of any
party hereto or their respective officers, directors or affiliates; provided,
however, that (1) each party shall remain liable for any breach of this
Agreement prior to its termination (subject to the limitations set forth
herein, including, without limitation, Section 6.11), and (2) the
provisions of this Section 6 (other than Section 6.2) shall remain in
full force and effect and survive any termination.

 

(Remainder of Page Intentionally Blank)

 

24

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.

 

 

	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UTSTARCOM,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ PETER BLACKMORE

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Peter Blackmore

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
				

 

SIGNATURE PAGE TO COMMON STOCK PURCHASE
AGREEMENT

 

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BEIJING E-TOWN
  INTERNATIONAL INVESTMENT AND DEVELOPMENT CO., LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ GUANGYI ZHAO

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Guangyi Zhao

  
	
   

  	
  Title:

  	
  President

  
				

 

SIGNATURE PAGE TO COMMON STOCK PURCHASE
AGREEMENT

 

 

Schedule
4.10

PRC APPROVALS

 

1.                                       Confirmation  letter issued by the National Development
Reform Commission (“NDRC”) for the
project information report;

 

2.                                       Approval issued
by the relevant State-owned Assets Supervision and Management Commission;

 

3.                                       Verification
and approval issued by NDRC Beijing Branch for the outbound investment project;

 

4.                                       Verification
and approval issued by NDRC for the outbound investment project;

 

5.                                       Approval issued
by the State Administration of Foreign Exchange (“SAFE”)
Beijing Branch for the prior phase report form regarding outbound investment;

 

6.                                       Verification
and approval issued by the Ministry of Commerce Beijing Branch for the
application form for outbound investment; and

 

7.                                       Foreign
exchange registration certificate of the outbound direct investment issued by
the SAFE Beijing Branch for foreign exchange registration application form of
the outbound direct investment.

 

 

Exhibit A

 

STOCKHOLDERS RIGHTS AGREEMENT

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