Exhibit 4.1
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 between the Company
and the Investor, 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.
BEIID
means Beijing E-town International
Investment and Development Co., Ltd. and any direct shareholder BEIID.
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 Companys 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 transferors 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
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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.
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
|
BEIID
Lock-Up
|
|
3.1(a)
|
Board
|
|
3.2(a)
|
Common
Stock
|
|
Recitals
|
Company
|
|
Preamble
|
Correspondence
|
|
4.4(a)
|
Effective
Date Percentage
|
|
3.2(b)
|
Investor
Nominee(s)
|
|
3.3(a)
|
Investors
|
|
Preamble
|
Nominating
Committee
|
|
3.3(c)
|
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(g)
|
SECTION 2
REGISTRATION RIGHTS.
2.1
Demand Registration
Rights
.
(a)
Registration
.
(1)
Subject to the
terms of this Agreement, following expiration of the BEIID Lock-Up, 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
Companys delivery of written notice, to become effective.
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(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).
(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 Companys 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.
(c)
Underwriting Requirements
.
(1)
If the Holders
requesting a registration pursuant to this Section 2.1 intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 2.1(a)(1) and the Company shall include such
information in the written notice given to the other Holders pursuant to such Section 2.1(a)(1). In such event, the Company shall not be
required to register the Registrable Securities of a Holder under this Section 2.1
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 2.1 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
4
from the registration and
underwriting after excluding any other securities from the underwriting, and
the number of securities and Registrable Securities that may be included in the
registration and the underwriting shall be allocated (i) first, 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, (ii) second, to Persons other
than Holders who, by virtue of agreements with the Company, are entitled to
include their shares of Common Stock in such registration and (iii) third,
to the Company, which the Company may allocate, at its discretion, for its own
account, or for the account of other holders or employees of the Company.
(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.
2.2
Piggyback Registration
.
(a)
Registration of the Companys 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 BEIID 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 BEIID Lock-Up.
(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 Companys 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
5
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 investors named therein (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 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
6
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;
(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
7
(j)
use commercially reasonable efforts to furnish, at the
request of the underwriters 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 under
writers.
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 Holders
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 Companys 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 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
8
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 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
Companys 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)
9
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
. Other than as set
forth in the Other Stockholders Agreement, 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.
SECTION 3
OTHER ITEMS
3.1
BEIID Lock-Up
.
(a)
For a period of nine (9) months from the Effective
Date, BEIID 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 (the
BEIID Lock-Up
).
(b)
Each Holder shall further refrain at all times (including
with respect to time periods after the expiration of the BEIID Lock-Up) from
selling Registrable Securities to any Person that in any manner, directly or
indirectly, is in competition with the
Company
,
10
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 Companys 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 arrangements
or understandings with any third party with respect to any of the foregoing, or
otherwise form, join or participate in, a group within the meaning of Section 13(d)(3) of
the Exchange Act, in connection with any of the foregoing, and
(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)
enter into any 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
,
11
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 this Section 3.2, nothing in this Section 3.2
shall prevent Holder from purchasing up to such number of shares of Common
Stock in the open market as would be required to enable Holder to maintain its
percentage ownership in the Company equal to Holders Effective Date
Percentage. For purposes of this
Agreement, the
Effective Date Percentage
with respect to Holder shall mean the quotient obtained by dividing (x) the
number of shares of Common Stock held by 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 by and among the Company
Ram Max Group Limited and
Shah Capital Management,
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
Board of Directors
.
(a)
As
of the Effective Date, the Board shall have an authorized size of seven (7) directors,
and Xiaoping Li shall have been appointed to the Board as the nominee of BEIID
(such member of the Board appointed pursuant to this Section 3.3, an
Investor Nominee
). Mr. Li shall be appointed as a Class II
director, with a term expiring 2011.
(b)
Subject
to the terms and conditions herein, BEIID shall, following the Effective Date,
continue to have the right to nominate an Investor Nominee to the Board, and
the Company shall, at any annual or special meeting of shareholders of the
Company at which directors are to be elected, nominate the Investor Nominee for
election to the Board and use all commercially reasonable efforts to cause the
Investor Nominee to be elected as a director of the Board; provided that BEIID
shall not be entitled under this Agreement to nominate any member of the Board
in the event that, at any time following the Effective Date, BEIID holds a
number of Registrable Securities that is less than five percent (5%) of the
number of outstanding shares of Common Stock, (it being understood that,
subject to the provisions of this Agreement (including Section 3.3(g)), (i) nothing
in this Section 3.3(b) shall prevent BEIID from exercising its voting
rights with respect to the election of directors generally as a stockholder of
the Company and (ii) nothing in this Section 3.3(b) shall
prevent any former Investor Nominee from serving on the Board henceforth if
such former Investor Nominee is otherwise elected in accordance with the
Companys then current certificate of incorporation and bylaws).
(c)
Notwithstanding
anything contained herein to the contrary: (i) the appointment of the
Investor Nominee shall be subject to compliance with the rules, regulations and
requirements of Nasdaq and applicable law (including, without limitation, the
Securities Act and the Exchange Act) applicable to service on a board of
directors; (ii) the Investor Nominee shall be independent under applicable
law (including, without limitation, the Securities Act and Exchange Act) and
Nasdaq rules and regulations applicable to service on a board of
directors; (iii) the Investor Nominee shall be reasonably acceptable to
the
12
Nominating
and Corporate Governance Committee of the Board (the
Nominating Committee
); and (iv) the
Investor Nominee shall comply in all respects with the Companys corporate
governance guidelines applicable to directors generally in effect from time to
time.
(d)
For
so long as an Investor Nominee serves on the Board pursuant to the terms of this
Agreement, such Investor Nominee shall be appointed to each committee of the
Board, subject in all cases to such appointment satisfying the rules,
regulations and requirements of Nasdaq and applicable law (including, without
limitation, the Securities Act and the Exchange Act) for service on such
committee.
(e)
So
long as BEIID has the right to nominate an Investor Nominee pursuant to Section 3.3(a) above,
the Board will not take any action to increase or decrease the authorized size
of the Board from seven (7) members.
(f)
The
Company shall obtain and maintain for the Investor Nominee third party
directors and officers insurance as is maintained for the other directors of
the Company.
(g)
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 Committee (provided that the
Governance Committee is consistent with 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;
provided
,
further
, that Voting Securities
held by BEIID (but only for so long as they are held by BEIID or a wholly-owned
subsidiary of BEIID) shall not be subject to the restrictions set forth in the
foregoing clauses (i), (ii) or (iii); and
provided
,
further
,
that notwithstanding the foregoing proviso, in no event shall BEIID propose,
recommend or nominate any alternative nominee for director.
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, provided that BEIID may assign its rights and
obligations hereunder (in whole and not in part) to any wholly-owned subsidiary
that holds all Registrable Securities owned by BEIID. Any such assignment shall not relieve the assignor
of any obligations hereunder and BEIID shall be treated as the Holder of such
Registrable Securities for purposes of Section 3.3 of this Agreement. For purposes of determining the number of
Registrable Securities held by BEIID as a Holder, the percent of BEIIDs
ownership of its subsidiary holding the
13
Registrable
Securities shall be multiplied by the number of Registrable Securities held by
such subsidiary.
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)
E
ach 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, shall 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
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 arbitrators 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.
(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
|
14
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 Investors 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 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
15
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
p
arties 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
)
16
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
|
|
|
|
|
|
Beijing
E-town International Investment and Development Co., Ltd.
|
|
|
|
|
|
By:
|
/s/ GUANGYI ZHAO
|
|
|
|
Name:
|
Guangyi
Zhao
|
|
Title:
|
President
|
|
|
|
|
SIGNATURE PAGE
TO STOCKHOLDER RIGHTS AGREEMENT
Schedule
A
SCHEDULE
OF INVESTORS
Name
|
|
Address
|
|
Purchase
Shares
|
|
Other
Shares
|
|
Total
Shares
|
|
Beijing
E-town International Investment and Development Co., Ltd.
|
|
Bldg
61, 2 JingYuanBeiJie
Beijing Development Area
Beijing 100176
China
Facsimile: +86 (10) 6786-2607
Attn: Xu Wei
|
|
11,363,636
|
|
0
|
|
11,363,636
|
|
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 Companys 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 transferors 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.
2
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
Companys 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).
3
(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 Companys 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 Companys 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.
4
(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 Companys 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 under
writers.
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 Holders
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 Companys 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 Companys
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 Companys 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 Holders 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)
E
ach 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 arbitrators 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 Investors 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
p
arties 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.
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COMPANY
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UTSTARCOM,
INC.
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By:
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/s/
PETER BLACKMORE
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Name:
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Peter
Blackmore
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Title:
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Chief Executive Officer
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SIGNATURE PAGE TO STOCKHOLDER RIGHTS
AGREEMENT
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.
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INVESTORS
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ELITE
NOBLE LIMITED
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By:
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/s/
JINGCHUN SUN
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Name:
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Jingchun
Sun
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Title:
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Director
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SHAH
CAPITAL OPPORTUNITY FUND LP
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By:
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/s/
HIMANSHU H. SHAH
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Name:
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Himanshu
H. Shah
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Title:
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General Partner
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SIGNATURE PAGE TO STOCKHOLDER RIGHTS
AGREEMENT
Schedule
A
SCHEDULE
OF INVESTORS
Name
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Address
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Purchase
Shares
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Other
Shares
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Total
Shares
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Elite
Noble Limited
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Room 512,
5/F., Tower 1
Silvercord, 30 Canton Road
Tsimshatsui, Kowloon
Hong Kong
Facsimile: +852 2114 0183
Attn: Lee Kit Wah
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5,681,818
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0
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5,681,818
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Shah
Capital Opportunity Fund LP
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8601
Six Forks Road, Suite 630
Raleigh, NC 27615
USA
Facsimile: +1 (919) 719-6370
Attn: Himanshu H. Shah
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5,000,000
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8,004,957
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13,004,957
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Exhibit 10.1
UTSTARCOM, INC.
COMMON STOCK PURCHASE AGREEMENT
February 1, 2010
TABLE OF CONTENTS
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Page
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1.
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Definitions
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1
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2.
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Purchase and Sale of the Purchase Shares
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6
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2.1
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Purchase and Sale
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6
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2.2
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Closing
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6
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2.3
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Deliveries
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6
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3.
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Representations and Warranties of the Company
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6
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3.1
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Organization; Good Standing; Qualification
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6
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3.2
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Capitalization
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7
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3.3
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Authorization; Non-Contravention
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8
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3.4
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SEC Filings; Financial Statements; Internal Controls
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8
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3.5
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Governmental Consents
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9
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3.6
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Brokers or Finders
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10
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3.7
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Nasdaq
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10
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3.8
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Valid Issuance of the Purchase Shares
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10
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3.9
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Offering
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10
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3.10
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No Material Adverse Effect
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10
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3.11
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Intellectual Property
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10
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3.12
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Compliance; Permits
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11
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3.13
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Litigation
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12
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3.14
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Ownership of Assets
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12
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4.
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Representations, Warranties and Covenants of the Purchaser
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12
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4.1
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Authorization
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12
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4.2
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Purchase Entirely for Own Account
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12
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4.3
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Receipt of Information
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12
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4.4
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Accredited Investor
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13
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4.5
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Investment Experience
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13
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4.6
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Rule 144
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13
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4.7
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Reliance on Purchasers Representations
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13
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4.8
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Legends
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13
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4.9
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Investment Representations, Warranties and Covenants by Non-U.S. Persons
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15
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4.10
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Governmental Consents
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17
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4.11
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Sufficient Funds
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17
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4.12
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No Other Representations and Warranties
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17
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5.
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Conditions Precedent to Closing
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17
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5.1
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Conditions to the Obligation of the Purchaser to Consummate the Closing
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17
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5.2
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Conditions to the Obligation of the
Company to Consummate the Closing
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18
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i
TABLE OF
CONTENTS
(continued)
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Page
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6.
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Miscellaneous Provisions
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19
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6.1
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Public Statements or Releases
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19
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6.2
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Further Assurances; Exclusivity and Superior Offer; Covenants
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19
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6.3
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Rights Cumulative
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21
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6.4
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Notices
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21
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6.5
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Captions
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22
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6.6
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Severability
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22
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6.7
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Governing Law; Arbitration; Injunctive Relief
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22
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6.8
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Amendment
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23
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6.9
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Expenses
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23
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6.10
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Assignment
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23
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6.11
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Survival
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23
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6.12
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Entire Agreement
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24
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6.13
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Counterparts; Reproductions
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24
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6.14
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Termination
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24
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ii
Schedules
Schedule
4.10
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PRC
Approvals
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Exhibits
Exhibit A
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Stockholders
Rights Agreement
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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 Peoples 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 partys Intellectual Property
that is material to the operation of the Companys 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 entitys 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
Companys 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 Peoples 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
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Section where Defined
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Accredited
Investor
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4.4
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Acquisition Proposal
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6.2(b)(ii)
|
Agreement
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Preamble
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Board
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3.4(c)
|
Closing
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2.2
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Company
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Preamble
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Company Balance Sheet
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3.4(b)
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Company Financials
|
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3.4(b)
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Company
Permits
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3.11(b)
|
Company
SEC Reports
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3.4(a)
|
correspondence
|
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6.4(a)
|
Disclosure
Schedule
|
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3
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Exchange Act
|
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6.2(b)(i)
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Irreparable Breach
|
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6.7(c)
|
Non-U.S. Person
|
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4.9(d)
|
PRC
Approvals
|
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4.10
|
5
Term
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Section where Defined
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Preferred
Stock
|
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3.2(a)
|
Purchase
Shares
|
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2.1
|
Purchaser
|
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Preamble
|
Regulation
S
|
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Recitals
|
Restricted
Period
|
|
4.9(b)(iv)
|
Stockholders
Rights Agreement
|
|
Recitals
|
Superior Offer
|
|
6.2(b)(ii)(3)
|
Trade Secrets
|
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1(l)
|
U.S. Person
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4.9(c)
|
United States
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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 Companys
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 Companys 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 Companys
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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 Purchasers 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 Purchasers
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 Purchasers 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.
Persons 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. Persons
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. Persons order to purchase the
Purchase Shares and at the time of such Non-U.S. Persons execution of this
Agreement, the Non-U.S. Person or persons acting on Non-U.S. Persons 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 Companys 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 Companys 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 Companys
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 Companys plans 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 arbitrators
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 partys reasonable costs, including attorneys 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, a
ny 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
Exhibit 10.2
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
|
7
|
|
3.2
|
Capitalization
|
7
|
|
3.3
|
Authorization;
Non-Contravention
|
8
|
|
3.4
|
SEC Filings; Financial
Statements; Internal Controls
|
8
|
|
3.5
|
Governmental Consents
|
10
|
|
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
|
11
|
|
3.11
|
Intellectual Property
|
11
|
|
3.12
|
Compliance; Permits
|
11
|
|
3.13
|
Litigation
|
12
|
|
3.14
|
Ownership of Assets
|
12
|
|
|
|
|
4.
|
Representations,
Warranties and Covenants of the Purchasers
|
12
|
|
|
|
|
4.1
|
Authorization
|
12
|
|
4.2
|
Purchase Entirely for
Own Account
|
12
|
|
4.3
|
Receipt of Information
|
13
|
|
4.4
|
Accredited Investor
|
13
|
|
4.5
|
Investment Experience
|
13
|
|
4.6
|
Rule 144
|
13
|
|
4.7
|
Reliance on Purchasers
Representations
|
13
|
|
4.8
|
Legends
|
14
|
|
4.9
|
Investment
Representations, Warranties and Covenants by Non-U.S. Persons
|
15
|
|
4.10
|
Governmental Consents
|
17
|
|
4.11
|
Financing
|
17
|
|
4.12
|
No Other
Representations and Warranties
|
18
|
|
|
|
|
5.
|
Conditions Precedent to
Closing
|
18
|
|
|
|
|
|
5.1
|
Conditions to the
Obligation of the Purchasers to Consummate the Closing
|
18
|
|
5.2
|
Conditions to the
Obligation of the Company to Consummate the Closing
|
19
|
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
|
20
|
|
6.3
|
Rights Cumulative
|
22
|
|
6.4
|
Notices
|
23
|
|
6.5
|
Captions
|
23
|
|
6.6
|
Severability
|
23
|
|
6.7
|
Governing Law; Arbitration; Injunctive Relief
|
24
|
|
6.8
|
Amendment
|
24
|
|
6.9
|
Expenses
|
24
|
|
6.10
|
Assignment
|
24
|
|
6.11
|
Survival
|
25
|
|
6.12
|
Entire Agreement
|
25
|
|
6.13
|
Counterparts; Reproductions
|
25
|
|
6.14
|
Termination
|
25
|
ii
Schedules
Schedule 4.10
|
|
PRC Approvals
|
Schedule A
|
|
Schedule of Purchasers
|
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 among UTStarcom, Inc., a Delaware
corporation (the
Company
), and
the purchasers listed on
Schedule A
hereto (the
Schedule of Purchasers
), each of which is
herein referred to as a
Purchaser
and collectively, the
Purchasers
.
WHEREAS, the parties
desire that the Purchasers make an equity investment in the Company pursuant to
the terms and conditions of this Agreement;
WHEREAS, the Company and
the Purchasers 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 Purchasers 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
Purchasers (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 partys Intellectual Property
that is material to the operation of the Companys 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 entitys 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 Companys 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 Peoples 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
|
BEIID SPA
|
|
3.2(c)
|
Board
|
|
3.4(c)
|
Closing
|
|
2.2
|
Commitment Letter
|
|
4.11(a)
|
Company
|
|
Preamble
|
Company Balance Sheet
|
|
3.4(b)
|
Company Financials
|
|
3.4(b)
|
Company Permits
|
|
3.12(b)
|
Company SEC Reports
|
|
3.4(a)
|
correspondence
|
|
6.4(a)
|
Disclosure Schedule
|
|
3
|
Exchange Act
|
|
6.2(b)(i)
|
Financing
|
|
4.11(a)
|
5
Term
|
|
Section where
Defined
|
|
|
|
Irreparable Breach
|
|
6.7(c)
|
Non-U.S. Person
|
|
4.9(d)
|
PRC Approvals
|
|
4.10
|
Preferred Stock
|
|
3.2(a)
|
Purchase Shares
|
|
2.1
|
Purchaser
|
|
Preamble
|
Purchasers
|
|
Preamble
|
Ram Max Parent
|
|
4.11(a)
|
Ram Max Purchaser
|
|
4.11(a)
|
Regulation S
|
|
Recitals
|
Restricted Period
|
|
4.9(b)(iv)
|
Schedule of Purchasers
|
|
Preamble
|
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 Purchasers, and the
Purchasers hereby agree to purchase, for a purchase price of US$2.20 per share,
shares of Common Stock in the amounts listed on the Schedule of Purchasers (the
Purchase Shares
).
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 Purchasers as
indicated on the Schedule of Purchasers.
The Closing shall take place remotely through the exchange of signature pages and
documents electronically or by facsimile.
2.3
Deliveries
. At the Closing, each Purchaser shall pay to
the Company the purchase price for the Purchase Shares it is purchasing as
indicated in the Schedule of Purchasers.
Such payments shall be made by wire transfer of U.S Dollars to a bank
account of the Company in accordance with the Companys wire instructions. The Company shall, at the Closing, issue and
deliver to each Purchaser a certificate representing the Purchased Shares being
purchased by such Purchaser at the Closing, as set forth opposite such
Purchasers name in the Schedule of Purchasers, registered in the name of such
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
6
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
Purchasers 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 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 pursuant to a Common Stock Purchase Agreement between the Company and
Beijing E-town International Investment and Development Co., Ltd. dated as of
the date hereof (the
BEIID SPA
),
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
7
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.
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 each of the Purchasers, 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 Companys 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 Purchasers 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
8
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 Companys 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 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 Companys 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 Companys independent auditors, has identified or been made
aware of (A) any significant deficiency or material
9
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 Companys 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 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 Purchasers 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.
10
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,
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 Companys 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 Companys 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
11
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.
(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 Purchasers
. Each of the Purchasers,
severally and not jointly, 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 Purchasers 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
12
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 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 indicated on the Schedule of Purchasers, (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 such 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
Purchasers 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 Purchasers 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.
13
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:
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
. Each
Purchaser which has indicated that it is not an Accredited Investor on the
Schedule of Purchasers 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. Persons 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. Persons 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.
Persons order to purchase the Purchase Shares and at the time of such Non-U.S.
Persons execution of this Agreement, the Non-U.S. Person or persons acting on
Non-U.S. Persons 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
Financing
.
(a) The
Company has been provided a complete and accurate copy of an executed
commitment letter (the
Commitment Letter
)
from Ram Max Group Limited, a British Virgin Islands company (
Ram Max Parent
), pursuant to which Ram Max Parent has
committed, on the terms and subject solely and exclusively to the conditions
set forth therein, to invest prior to the Closing US$12,500,000 in Elite Noble
Limited, a British Virgin Islands company and one of the Purchasers (
Ram Max Purchaser
), so as to fund Ram Max Purchasers
purchase of Purchase Shares as provided for herein (the
Financing
).
(b)
The Commitment Letter has not been
amended or modified, and the commitment set forth therein has not been
withdrawn or rescinded in any respect.
The Commitment Letter, in the form so delivered to the Company, is in full
force and effect and is a legal, valid and binding obligation of Ram Max Parent
and Ram Max Purchaser. There are no
conditions precedent or other contingencies related to the funding of the full
amount of the Financing, other than as expressly set forth in the Commitment
Letter. Subject solely and exclusively
to the conditions set forth in the Commitment Letter, the aggregate proceeds of
the Financing will be sufficient to enable Ram Max Purchaser to purchase its
Purchase Shares upon the terms contemplated by this Agreement and to pay all
fees and expenses associated therewith.
17
(c) As
of the date hereof, each of the Purchasers other than Ram Max 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
, each 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 Purchasers to Consummate the Closing
. The
obligation of each of the Purchasers 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 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)
Investment by BEIID
. All of the
conditions to the consummation of the investment in the Company by
Beijing E-town
International Investment and Development Co., Ltd. set forth in the BEIID SPA
shall have been satisfied.
18
(f)
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 Purchasers 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 each 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) Each of the Purchasers 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.
(c)
Payment
. Each
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.
19
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 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 Companys behalf and (b) contemporaneously
with furnishing any such nonpublic information to such third party, the Company
furnishes such nonpublic information to the Purchasers (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 Purchasers written notice of the Companys intention to enter
into negotiations with such third party and during such negotiations provides
Purchasers with copies of all written proposals delivered by such third party,
keeps Purchasers updated regarding negotiations and discussions in a reasonably
timely manner and provides the Purchasers the opportunity to fully participate
as observers in all such negotiations and discussions.
20
(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 Companys 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, each 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, such 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. Each
Purchaser will notify the Company promptly upon the receipt of (i) any
comments from any officials of any Governmental Entity in connection with any
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,
each 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)
Financing
.
(i) Ram Max Purchaser shall take (or cause
to be taken) all actions, and do (or cause to be done) all things, necessary,
proper or advisable to obtain the Financing, including (i) satisfying on a
timely basis all conditions applicable to Ram Max Purchaser in the Commitment
Letter that are within its control, (ii) consummating the Financing at or
prior to the Closing, and (iii) subject to the immediately following
sentence, fully enforcing Ram Max Parents obligations (and the rights of Ram
Max Purchaser) under the Commitment Letter, including (at the request of the
Company) by filing one or more lawsuits against Ram Max Parent to fully enforce
Ram Max Parents obligations (and the rights of Ram Max Purchaser)
thereunder. In the event that the
Company shall file one or more lawsuits or take any other actions against Ram
Max Parent in order to fully enforce Ram Max Parents obligations (and the
rights of Ram Max Purchaser) under the Commitment Letter, then at all times
thereafter during the pendency of any such lawsuits or other actions, Ram Max
Parent shall consult, cooperate and coordinate with the Company (and take any
action reasonably requested by the Company in respect thereof) regarding any
lawsuits or other actions that the Company may file or take against Ram Max
Parent arising out
21
of this Agreement, the Commitment Letter, the
transactions contemplated hereby or thereby and/or any related matter, and
shall not take any action (or fail to take any action) that is intended to or
has (or would reasonably be expected to have) the effect of either (A) preventing,
impairing or otherwise adversely affecting any Company lawsuit or other action
against Ram Max Parent arising out of this Agreement, the Commitment Letter,
the transactions contemplated hereby or thereby and/or any related matter, or
any other efforts by the Company to fully enforce Ram Max Parents obligations
(and the rights of Ram Max Purchaser) under the Commitment Letter, or (B) preventing,
impairing or adversely affecting the consummation of the transactions
contemplated hereby.
(ii) Ram Max Purchaser shall not amend, alter,
or waive, or agree to amend, alter or waive (in any case whether by action or
inaction), any term of the Commitment Letter without the prior written consent
of the Company. Ram Max Purchaser shall
promptly (and in any event within one business day) notify the Company of (i) the
expiration or termination (or attempted or purported termination, whether or
not valid) of the Commitment Letter, or (ii) any refusal by Ram Max Parent
to provide, any stated intent by Ram Max Parent to refuse to provide, or any
expression of concern or reservation by Ram Max Parent regarding its obligation
and/or ability to provide, the full financing contemplated by the Commitment
Letter.
(e)
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, as disclosed in
the Disclosure Schedule or required to consummate the transaction contemplated
hereunder, or to the extent that the Purchasers
representing 75% of the
Purchase Shares purchasable hereunder
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 Companys plans 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 Purchasers
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.
22
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 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 any Purchaser shall be sent to such Purchaser at the address
set forth under such Purchasers name on the Schedule of Purchasers.
(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.
23
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.
(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 arbitrators
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 partys reasonable costs,
including attorneys 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 Purchasers
representing 75% of the Purchase Shares purchasable hereunder.
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.
24
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, a
ny claim with respect to the failure of a
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 any Purchaser that has sold all the Purchased Shares it
purchased hereunder and with respect to any Purchased Shares that have been
sold by any 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
Purchasers
representing 75% of the Purchase Shares purchasable hereunder
; or
(ii) by either the Company or Purchasers representing 75% of
the Purchase Shares purchasable hereunder 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 (in the case of the Purchasers, any Purchasers)
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
25
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
)
26
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.
|
PURCHASERS
|
|
|
|
|
|
SHAH CAPITAL OPPORTUNITY
FUND LP
|
|
|
|
|
|
By:
|
/s/ HIMANSHU H. SHAH
|
|
|
|
|
Name:
|
Himanshu H. Shah
|
|
Title:
|
General Partner
|
|
|
|
|
SIGNATURE PAGE TO COMMON STOCK PURCHASE
AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first written above.
|
PURCHASERS
|
|
|
|
|
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ELITE NOBLE LIMITED
|
|
|
|
|
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By:
|
/s/ JINGCHUN SUN
|
|
|
|
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Name:
|
Jingchun Sun
|
|
Title:
|
Director
|
|
|
|
|
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.
Schedule A
SCHEDULE OF PURCHASERS
Name and Address
|
|
Investment Amount (US$)
|
|
Number of Purchase
Shares
|
|
Elite Noble Limited
Address:
Room 512, 5/F., Tower 1
Silvercord, 30 Canton Road
Tsimshatsui, Kowloon
Hong Kong
Facsimile: +852 2114 0183
Attn: Lee Kit Wah
|
|
12,499,999.60
|
|
5,681,818
|
|
|
|
|
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Shah Capital Opportunity Fund
LP
Address:
8601 Six Forks Road, Suite 630
Raleigh, NC 27615
USA
Facsimile: +1 (919) 719-6370
Attn: Himanshu H. Shah
|
|
11,000,000.00
|
|
5,000,000
|
|
Exhibit A
STOCKHOLDERS RIGHTS AGREEMENT
Exhibit 10.3
Agreement of Entry into the Zone
No.: 09BDA/SDK-R075
This
Agreement (this
Agreement
) is made in Beijing by
and between the Management Committee of Beijing Economic and Technology
Development Zone (the
Zone
) of the
Peoples Republic of China (the
PRC
) and
UTStarcom, Inc., after amicable negotiation and based on the principles of
equality and mutual benefits in accordance with the relevant laws, rules and
regulations of the PRC.
Section 1 Parties to the Agreement
The
Parties to this Agreement are:
Management
Committee of
Beijing
Economic
and Technology Development Zone (hereinafter referred to as
Party A
)
Address:
Boda Building, No.15 Ronghuazhong Road
Beijing
Economic and Technology Development Zone
Legal
representative: Zhang Boxu
Title:
Chief Officer of the Committee
Nationality:
PRC
UTStarcom,
Inc (hereinafter referred to as
Party B
)
Address:
1275 Harbor Bay Parkway, Alameda, CA 94502 USA
Legal
representative: Thomas Toy
Title:
Chairman of the Board
Nationality:
United States
Section 2
Contents of the Agreement
I. Project contents:
UTStarcom is mainly engaged in the business
of IP-based telecommunications with products and technologies covering areas
including wireless, broadband, next generation networks and end-to-end networking,
providing a variety of products and system solutions including
TMRollingStream®IPTV and IP video information publishing solutions, Interactive
iDTV, Mobile TV and OpticalXpressEPON system solutions that can be applied to
broadcast and television industries, broadband integration and industry
application solutions such as PTN/MSTP comprehensive solutions, NetRing next
generation optical network systems, AN/iAN series new generation multi-service
access platforms, EBox enterprise telecommunication systems, PDSN and
CDMA,CMMB, TD-SCDMA and WiFi mobile phone terminals.
1
UTStarcom
is planning to set up a wholly foreign-owned enterprise (the New WFOE) in the
Zone and authorize the New WFOE as its operational headquarters.
II. Party As support to Party B.
1. As a newly registered foreign investment enterprise in the Mobile
Silicon Valley Park, If New WFOEs contracted foreign investment amount is more
than US$15 million, then after it starts production and generating taxes within
the first year from the date of its registration in the Zone, the New WFOE may
apply for a financial support in an amount equal to 3% of the paid-in
registered capital (as converted into RMB) up to a maximum amount of RMB 20
million.
2. As a newly introduced enterprise in the Mobile Silicon Valley Park, if
the New WFOE leases the office facilities or real properties developed by the
Head Company for its research, development and production, after it starts
generating taxes, the New WFOE may apply for rent support. The term and amount
of such support shall be based on the relevant encouraging policies of of
Mobile Silicon Valley Park in Beijing Economic And Technology Development Zone
(the
Silicon Valley Encouraging Policies
).
If the New WFOE meets both the conditions set forth in the subsections 1
and 2 above, it may choose to apply for only one of the two financial supports.
3.
If the New WFOE qualifies for the support under the relevant provisions of
thebn
Management Measures for the Special Funds for
Science and Innovation of Beijing Economic and Technology Development Zone
,
it may apply for the relevant monetary support.
4.
The New WFOE may apply for the benefits of the support and financial
encouragement policies applicable to the senior management and senior under the
Silicon Valley Encouraging Policies.
5.
As an enterprise registered in the Mobile Silicon Valley Park, the New WFOE may
apply for the benefits of the relevant preferential policies according to the
relevant Silicon Valley Encouraging Policies.
Party A agrees to use its best efforts to help the New WFOE obtain the
benefits of relevant preferential policies.
6.
Party A may help Party B in developing markets in Beijing, coordinate with
Party B regarding any issues relating to export credit, bank financing etc. and
support Party B in obtaining the high-tech enterprise certificate.
7.
Party A will render continuous support for the growth of Party Bs project, and
provide high-quality services for the entry of Party Bs project into the Zone.
2
III.
Party Bs Commitments
Party
B agrees to make the following commitments:
1.
Party B commits to initiate the application process for the incorporation of
the New WFOE in the Zone within one month after the closing of the investment
by Beijing Yizhuang International Investment and Development Corporation in
Party B and register or move its operational headquarters in or to the Zone
within three months following the completion of all procedures of various
governmental approvals, registrations and filings related to the formation and
funding of the New WFOE. The registered capital of the project shall reach
US$15 million by the end of the six months after Party B completes the
registration of the New WFOE.
2.
Party B commits that, after establishing its operational headquarters in the
Zone and approximately 5 years of such date (and shall take reasonable measures
to ensure that such date is no later than the end of 2015), its accumulated
sales revenue contribution to the Zone will reach approximately US$2.3 billion,
and its accumulated paid taxes will
reach approximately US$34.5 million (limited to various national and local
taxes excluding customs duties).
3.
Party B commits that its operation term in the Zone shall be no less than six (6) years
from the date of registration.
Section 3 Special Agreement Between the Parties
To
protect the interest of the state, Party B commits that, if Party B has
received the benefits of the preferential policies, all the leased facilities,
offices and other ancillary facilities shall only be used by itself and Party B
shall not sublease or use them for other purposes.
Section 4 Liability for Breach
1.
If this Agreement cannot be performed or completely performed due to the fault
of one Party, such breaching Party shall bear the liabilities for breach by
compensating the other Partys actual losses.
If both Parties breach this Agreement, the Parties shall bear respective
liabilities depending on the factual circumstances thereof.
2.
If Party A has received the benefits of the industry-support fund, the rent
support or the other preferential policies from Party A, Party A has the right
to terminate such support and recover all the funds provided if Party B , due
to its own fault:
(i)
|
fails
to register or move the project company in the Zone within the contemplated
term set forth in this Agreement;
|
(ii)
|
fails
to start its production within the contemplated term set forth in this Agreement;
|
3
(iii)
|
fails
to reach the targets with respect to the total investment amount, the annual
revenue, the annual amount of taxes paid etc. as set forth in this Agreement;
|
(iv)
|
intentionally
and illegally withdraws the registered capital; and
|
(v)
|
commits
other breaches of the Agreement.
|
Section 5 Confidentiality
All
provisions in this Agreement are for the purpose of promoting the subject
project under the specified conditions. The Parties agree to keep the contents
of this Agreement confidential and will not use the information herein other
than for the purpose of this Agreement. However, Party B, for the approval of
this Agreement, may disclose the contents of this Agreement to its
shareholders, or as required by the relevant governmental and regulatory
authorities and stock exchanges.
Section 6 Dispute Resolution
The
Parties shall settle any dispute arising out of or related to this Agreement by
amicable discussions. If such
discussions fail, the dispute shall be submitted to the China International
Economic and Trade Arbitration Commission for arbitration in Beijing in
accordance with its then applicable arbitration rules. The arbitration awards shall be final and
binding on both Parties..
Section 7 Language and Effectiveness
1.
This Agreement is written in Chinese.
2. Issues not covered in this Agreement may be stipulated in
supplements upon the Parties mutual agreement. Such supplements shall have the
same legal effect as this Agreement.
3.
This Agreement shall be executed in duplicates with each Party retaining one
copy and it shall become effective upon signing and applying the stamps by the
Parties. The Agreement shall be executed and become effective at the same time
with Common Stock Purchase Agreement by and between Party B and Beijing
Yizhuang International Investment and Development Corporation (the
SPA
). However, if the SPA is not performed, or properly
performed or the closing thereof cannot be consummated, then this Agreement
shall terminate automatically without any Party being liable and will be of no
further force and effect.
Section 8 Miscellaneous
Contact
Persons of the Parties
Party
A: Li He Dept.: Office of Business
Development
Contact
Phone No.: 86-10-67887323
Fax
No.: 86-10-67889610 Email Address:
ailey624@yahoo.com.cn
Party
B: KP Lim Dept.: Administrative Department
4
Contact
Phone No.: 0571-81926649
Fax
No.: 0571-81921999 Email Address:
kp.lim@ustar.com
Party
A (Stamp):
|
Party
B (Stamp):
|
Management
Committee of
|
UTStarcom, Inc.
|
Beijing
Economic and Technology
|
|
Development
Zone
|
|
Signature:
|
/s/
XINXIN ZHAO
|
|
Signature:
|
/s/ THOMAS J.
TOY
|
Title:
|
Vice
Chief Officer of the Committee
|
Title:
|
Chairman
of the Board
|
Date:
|
February
1, 2010
|
Date:
|
February
1, 2010
|
|
|
|
|
|
|
|
5
Exhibit
10.4
February 1, 2010
Jack Lu
(Delivery by email)
Dear Jack:
On behalf of UTStarcom, Inc.
(UTStarcom and together with its subsidiaries, the Company), we are pleased
to offer you the position of
Chief Executive Officer
of UTStarcom effective on the later of June 30, 2010 or three months
following the closing of the sale of common stock by UTStarcom to Beijing
E-Town International Investment and Development Co., Ltd., Ram Max Group
Limited and Shah Capital Management for an aggregate consideration of
approximately $48.5 million in cash (the Investment). You will commence employment on the date the
Investment closes (your Start Date) and will serve as UTStarcoms
Senior Vice President and Chief Operating Officer
until you
become the Chief Executive Officer.
The key elements of your
employment terms are as follows:
Location
:
You
will primarily perform your services in
Beijing, China
,
though you will be expected to travel as necessary to perform your duties.
At-Will Employment
: You and UTStarcom agree that your employment
with the Company will be at-will employment and may be terminated at any time
with or without cause or notice. You
understand and agree that neither your job performance nor promotions,
commendations, bonuses or the like from the Company will give rise to or in any
way serve as the basis for modification, amendment, or extension, by
implication or otherwise, of your employment term with the Company. However, as described in this offer letter,
you may be entitled to severance benefits depending on the circumstances of
Executives termination of employment with the Company pursuant to the
Severance Agreement (as defined below).
Base Salary:
Your
starting annual base salary will be
RMB
2,726,653
(pre-tax),
with a 12 month pay schedule per year. Your base salary will be reviewed on an
annual basis. Such reviews will not automatically result in an adjustment
to your base salary. Once you have
become the Chief Executive Officer, your annual base salary will be increased
to
RMB 3,067,485
(pre-tax)
.
The decision to
make any subsequent adjust
ment to
your base salary will be in the full discretion of the Compensation Committee
of the Board of Directors of UTStarcom (the Compensation Committee).
Signing Bonus
: You will
receive a one-time bonus of
US$20,000.00
,
less applicable tax withholding, payable upon the first payroll period
following your Start Date.
Annual Performance Bonus:
On an annual basis, you will be eligible for a performance target bonus
of 80% of your base salary (the Annual Bonus) based upon achievement of
Company and individual performance objectives determined by the Compensation
Committee. Once you
become the Chief Executive Officer, your target Annual
Bonus will increase to 100% of your base salary.
Equity Award:
At its next meeting after your Start Date at which equity grants are considered
for approval, that you be granted an award of
300,000
shares of restricted UTStarcom common stock (the Initial Restricted Stock Award),
which will vest over a four (4) year period. One quarter of the shares
will vest on the first anniversary of the date of grant, and then one-quarter
of the shares will vest annually thereafter, subject to your continuing to
provide services to the Company through each applicable vesting date. In all other respects, the Initial Restricted
Stock Award will be subject to the terms and conditions of UTStarcoms 2006
Equity Incentive Plan (the Plan) and form of agreement approved by the
Compensation Committee for restricted stock grants under the Plan.
After you become the Chief Executive Officer, we
will recommend to the Compensation Committee in January 2011 that you be
granted additional equity awards covering 1,000,000 shares of UTStarcom common
stock in January 2011, subject to you continuing to provide services to
the Company through that time. The
additional equity awards would be granted pursuant to the Plan and subject to
the form of applicable award agreements adopted by UTStarcom for use under the
Plan as follows:
·
300,000
shares of Restricted Stock. One quarter
of the shares would vest on the first anniversary of the date of grant, and
then one-quarter of the shares would vest annually thereafter, subject to your
continuing to provide services to the Company through each applicable vesting
date.
·
300,000
Restricted Stock Units (RSUs). One
quarter of the RSUs would vest on the first anniversary of the date of grant,
and then one-quarter of the RSUs would vest annually thereafter, subject to
your continuing to provide services to the Company through each applicable
vesting date.
·
400,000
Stock Options. One quarter of the shares
subject to the option would vest on the first anniversary of the date of grant,
and then 1/36 of the remaining shares subject to the option would vest monthly
thereafter, subject to your continuing to provide services to the Company
through each applicable vesting date.
The decision to make any equity grant, as well
as the terms of any such award, will be in the full discretion of the
Compensation Committee.
Involuntary Termination
Agreement:
Upon commencing your employment
hereunder, you and the Company will execute the Involuntary Termination
Severance Agreement attached hereto as Exhibit A (the Severance Agreement). The terms of the Severance Agreement will be
inclusive of, and satisfy all the Companys severance obligations after the
termination of your contract of employment, including, without limitation, any
severance to which you may be entitled pursuant to applicable law.
Financial
Planning benefit:
The Company will cover up to
RMB 34,100 per year
of costs incurred by you in obtaining
comprehensive financial planning and investment management
services to assist you in
understanding your financial picture and estate planning and insurance
needs. Covered services include retirement planning, education funding,
portfolio risk management, concentrated stock and employee stock option
management, 10b5-1 design, income and asset protection, estate planning and
philanthropic gifting. While we have made special arrangements for these
services to be provided by Merrill Lynch, you can use any provider of your
choice. This is considered a taxable
benefit.
Car and Driver
:
You will be provided a car and driver in Beijing through the Companys
car fleet.
Other Benefits:
During the term of your employment, you will be
entitled to participate in the employee benefit plans currently and hereafter
maintained by the Company of general applicability to other senior executives
of the Company. The Company reserves the
right to cancel or change the benefit plans and programs it offers to its
employees at any time.
Taxes:
You
wi
ll be responsible for the payment of
the individual income
taxes
and the Company will
deduct all taxes as is required by applicable law
.
Confidentiality Agreement:
You will be required to execute
UTStarcoms Employment, Confidential Information and Invention Assignment
Agreement attached hereto as Exhibit B (the Confidentiality Agreement).
Non-Competition:
You agree that during the course of your
employment, and for a period of twelve (12) months immediately following the
termination of your
employment
with
the Company (Restricted Period)
for whatever
reason (whether
you
resign voluntarily or are terminated by the Company involuntarily
)
, you will
not, without the prior written consent of the Company, whether paid or not: (i) serve
as a partner, principal, licensor, licensee, employee, consultant, officer,
director, manager, agent, affiliate, representative, advisor, promoter,
associate, investor, or otherwise for, (ii) directly or indirectly, own,
purchase, organize or take preparatory steps for the organization of, or (iii) build,
design, finance, acquire, lease, operate, manage, control, invest in, work or
consult for or otherwise join, participate in or affiliate yourself with (a) any
business that is a competitor of the Company at the time of your termination or
was a competitor of the Company during the course of your employment or (b) any
business that competes for any of the same customers of the Company that you
had direct interaction with during the course of your employment with the
Company (
Competitive Business
). During the Restricted Period, the Company
will pay you an amount equal to 30% of your base salary as in effect on the
date of your termination in accordance with the Companys normal payroll
practices.
The foregoing covenant
shall cover your activities in every part of the Territory.
Territory
means (i) the province in China where you are employed by the Company; (ii) all
states of the United States of America from which the Company derived revenue
at any time during the three-year period prior to the date of the termination
of your relationship with the Company, and (iii) all other province,
state, city or other political subdivision of each country from which the
Company derived revenue at any time during the three-year period prior to the
date of the termination of your relationship with the Company. Notwithstanding the foregoing, you may still
acquire an ownership interest, directly or indirectly, of not more than 1% of
the outstanding securities of any corporation that is a Competitive Business
and which is listed on any recognized securities exchange or traded in the over
the counter market in the United States; provided, that such
investment is completely
passive and you are not involved in the management or operations of such
corporation. Should you obtain other
employment, whether or not competitive with the business of the Company, within
twelve (12) months immediately following the termination of your relationship
with the Company, you agree to provide written notification to the Company as
to the name and address of your new employer, the position you expect to hold,
and a general description of your duties and
responsibilities,
at least three (3) business days prior to starting such employment
.
You
acknowledge that you will derive significant value from the Companys agreement
to provide you with the Confidential Information (as defined in the
Confidentiality Agreement) to enable you to perform your duties for the Company
successfully and that but for your commitments, the Company would not have
disclosed such Confidential Information to you.
You further acknowledge that your fulfillment of the obligations
contained in this offer letter, including, but not limited to, your obligation
neither to disclose nor to use the Companys Confidential Information other
than for the Companys exclusive benefit and your obligations not to compete
and not to solicit contained herein and in the Confidentiality Agreement
provide no more protection than is reasonable and necessary to protect the
Companys Confidential Information, and to preserve the value and goodwill of
the Company. You also acknowledge that the time, geographic and scope
limitations of your obligations under these covenants not to compete and not to
solicit are fair and reasonable in all respects, especially in light of the
Companys need to protect its Confidential Information and the international
scope and nature of the Companys business, and that you will not be precluded
from gainful employment if you are obligated not to compete with the Company or
solicit its customers, employees or others during the period and within the
Territory as described above.
These covenants not to compete and not to
solicit will be construed as a series of separate covenants, one for each
country, province, state, city or other political subdivision in which the Company
currently engages in its business or, during the term of your employment,
becomes engaged in its business. Except
for geographic coverage, each such separate covenant will be deemed identical
in terms to the covenant contained in this section and the Confidentiality
Agreement. If, in any judicial
proceeding, a court refuses to enforce any of such separate covenants (or any
part thereof), then such unenforceable covenant (or such part) shall be
eliminated from this offer letter and/or the Confidentiality Agreement to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced. In the event
that the provisions of the covenant not to compete or not to solicit are deemed
to exceed the time, geographic or scope limitations permitted by applicable
law, then such provisions shall be reformed to the maximum time, geographic or
scope limitations, as the case may be, permitted by applicable law.
Governing
Law
: This offer letter will be governed by the
laws of Hong Kong, with the exception of its conflict of laws provisions.
Miscellaneous:
This offer is contingent upon the
signing the Severance Agreement and Confidentiality Agreement. The foregoing terms supersede any prior
discussions, oral or written, which we have had relating to your employment and
the other matters discussed in this letter.
We ask that you indicate
your consent and approval of the provisions of your offer letter by signing the
acknowledgment below.
We are pleased that you
have chosen to become part of the UTStarcom team, and wish you the very best as
you begin your employment with UTStarcom.
If you have any
questions, please feel free to contact me at 1-510-864-8800.
Yours
Sincerely,
Peter
Blackmore
Chief
Executive Officer and President
I accept
the terms and conditions of this offer letter, and I understand that it
replaces those of any earlier offers of employment (if any), including without
limitation, prior versions of this offer letter.
Signed:
|
/s/ JACK LU
|
|
|
|
Print Name: Jack Lu
|
|
Exhibit
10.5
UTSTARCOM,
INC.
INVOLUNTARY
TERMINATION SEVERANCE AGREEMENT
This Involuntary Termination Severance Agreement (the Agreement) is
made and entered into effective as of February 1, 2010 (the Effective Date),
by and between Jack Lu (the Employee) and UTStarcom, Inc., a Delaware
corporation (the Company). Certain
capitalized terms used in this Agreement are defined in Section 1 below.
RECITALS
A.
The Company
desires to retain the services of the Employee, and the Employee desires to be
employed by the Company, on the terms and subject to the conditions set forth
in this Agreement and the offer letter dated February 1, 2010 (the Offer
Letter).
B.
The Board of
Directors of the Company (the Board) believes that it is in the best
interests of the Company and its shareholders to provide the Employee with
enhanced financial security and sufficient encouragement to remain with the
Company.
AGREEMENT
In consideration of the mutual covenants herein contained and the employment
of Employee by the Company, the parties agree as follows:
1.
Definition of Terms
. The
following terms referred to in this Agreement shall have the following
meanings:
(a)
Cause
.
Cause shall mean (i) any act of personal dishonesty taken by the
Employee in connection with his responsibilities as an employee which is
intended to result in substantial personal enrichment of the Employee, (ii) Employees
conviction of a felony which the Board reasonably believes has had or will have
a material detrimental effect on the Companys reputation or business, (iii) a
willful act by the Employee which constitutes misconduct and is injurious to
the Company, and (iv) continued willful violations by the Employee of the
Employees obligations to the Company after there has been delivered to the
Employee a written demand for performance from the Company which describes the
basis for the Companys belief that the Employee has not substantially
performed his duties.
(b)
Good Reason
. Good Reason shall mean, without
the Employees express written consent, (i) a significant reduction of the
Employees duties, position or responsibilities relative to the Employees
duties, position or responsibilities in effect immediately prior to such
reduction, or the removal of the Employee from such position, duties and
responsibilities, unless the Employee is provided with comparable duties,
position and responsibilities; provided, however, that the sole occurrence of
the Company being acquired and made part of a larger entity shall not
constitute a Good Reason; (ii) a reduction by the Company of the
Employees base salary as in effect immediately prior to such reduction; (iii) a
material reduction by the Company in the kind or level of employee compensation
or benefits to which the Employee is entitled immediately prior to such
reduction with the result that the Employees overall benefits package is
significantly reduced; (iv) the relocation of the Employee to a facility
or a location where such relocation increases the distance the Employee must
travel to work by more than thirty (30) miles from the Employees commute prior
to the relocation; (v) any purported termination of the Employee by the
Company which is not effected for Cause or for
which the grounds relied upon are not valid; or (vi) the
failure of the Company to obtain the assumption of this Agreement by any
successors contemplated in Section 8 below. For purposes of clarification, if the
Employee does not become CEO within the time period set forth in the Offer
Letter, then that will be considered a significant reduction of the Employees
duties, position or responsibilities under clause (i), unless prior to that
time the Employees employment with the Company is terminated for Cause or he
resigns without Good Reason.
(c
)
Involuntary Termination
. Involuntary
Termination shall mean any termination (other than a termination for Cause) of
the Employee by the Company.
(d)
Termination Date
. Termination Date shall
mean the effective date of any notice of termination delivered by one party to
the other hereunder.
2.
At-Will Employment
. The
Company and the Employee acknowledge that subject to the provisions of this
Agreement, the Employees employment is and shall continue to be at-will, as
defined under applicable law. If the Employees employment terminates for any
reason, the Employee shall not be entitled to any payments, benefits, damages,
awards or compensation other than as provided by this Agreement, or as may
otherwise be established under the Companys then existing employee benefit
plans or policies at the time of termination, unless otherwise required by
applicable laws and regulations.
3.
Severance Benefits
. If
the Employees employment with the Company terminates as a result of a Good
Reason or an Involuntary Termination during the term of this Agreement, then
the Employee shall be entitled to the following severance benefits:
(a)
an amount equal to 70% of twelve (12) months of the Employees
base salary as in effect as of the Termination Date, less applicable
withholding, payable in a lump sum within thirty (30) days of the
Termination Date;
(b)
an amount equal to one hundred percent (100%) of Employees full annual
performance target bonus for the year in which the termination occurs, payable
in a lump sum within thirty (30) days of the Termination Date;
(c)
all equity awards, including without limitation stock option grants,
restricted stock and stock purchase rights, granted by the Company to the
Employee shall become fully vested or released from the Companys repurchase
right (if any shares of stock purchased by or granted to the Employee remain
subject to such repurchase right) and exercisable as of the date of the
termination to the extent such equity awards are outstanding and unexercisable or
unreleased at the time of such termination.
The Employees equity
awards shall be exercisable until the earliest of (a) twelve (12) months
from the Termination Date, (b) the latest date the equity award could have
expired by its original terms under any circumstances, (c) the tenth (10
th
) anniversary of the original date of grant
of the equity award, or (d) the date provided for under the equity plan
under which the award was granted
;
(d)
all Employees outstanding restricted cash awards, if any, shall become
fully vested, payable in a lump sum within thirty (30) days of the Termination
Date; and
(e)
an amount equal to twelve (12) months of health insurance premiums at
the same level of health (i.e., medical, vision and dental) coverage and
benefits as in effect for the Employee on the day immediately preceding the day
of the Employees termination of employment, payable within thirty (30) days of
the date of termination.
It is the intent of the parties that the terms of
this Agreement will be inclusive of, and satisfy all the Companys (and its
affiliates) severance obligations after the termination of the Employees
employment with the Company, including, without limitation, any severance to
which the Employee may be entitled pursuant to applicable law. In this respect, any amounts due and owing
hereunder will first be used to offset any amounts that the Company (or its
affiliates) may otherwise owe to the Employee under applicable laws in
connection with his termination.
4.
Other Terminations
. For
avoidance of doubt, if the Employees employment with the Company terminates as
a result of Cause or the Employee resigns without Good Reason, then the
Employee shall not be entitled to receive severance or other benefits
hereunder, except those benefits required to be provided by law.
5.
Accrued Wages and Vacation; Expenses
. Without
regard to the reason for, or the timing of, Employees termination of
employment: (i) the Company shall pay the Employee any unpaid base salary
due for periods prior to the Termination Date; (ii) the Company shall pay
the Employee all of the Employees accrued and unused vacation through the
Termination Date; and (iii) following submission of proper expense reports
by the Employee, the Company shall reimburse the Employee for all expenses
reasonably and necessarily incurred by the Employee in connection with the
business of the Company prior to the Termination Date. These payments shall be
made promptly upon termination and within the period of time mandated by law.
6.
Release and Non-Disparagement Agreement
. As a
condition to receiving severance or other benefits under this Agreement,
Employee will be required to sign a waiver and release of all claims arising
out of his Involuntary Termination or separation for Good Reason and an
agreement not to disparage the Company, its directors, or its executive
officers, in a reasonable form satisfactory to the Company; provided, however,
Employee will not be required to waive or release any rights related to the
Companys indemnification obligations or that arise under the Companys D&O
insurance coverage.
7.
Successors
.
(a)
Companys Successors
. Any
successor to the Company (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Companys business and/or assets shall assume the Companys
obligations under this Agreement and agree expressly to perform the Companys
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term Company shall
include any successor to the Companys business and/or assets which executes
and delivers the assumption agreement described in this subsection (a) or
which becomes bound by the terms of this Agreement by operation of law.
(b)
Employees Successors
. Without
the written consent of the Company, Employee shall not assign or transfer this
Agreement or any right or obligation under this Agreement to any other person
or entity. Notwithstanding the foregoing, the terms of this Agreement and all
rights of Employee hereunder shall inure to the benefit of, and be enforceable
by, Employees personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
8.
Notices
.
(a)
General
. Notices and all other
communications contemplated by this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or when mailed by U.S.
registered or certified mail, return receipt requested and postage prepaid. In
the case of the Employee, mailed notices shall be addressed to him at the home
address which he most recently communicated to the Company in writing. In the
case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.
(b)
Notice of Termination
. Any
termination by the Company for Cause or by the Employee as a result of a
voluntary resignation or an Involuntary Termination shall be communicated by a
notice of termination to the other party hereto given in accordance with this
Section. Such notice shall indicate the
specific termination provision in this Agreement relied upon, shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the Termination
Date (which shall be not more than thirty (30) days after the giving of such
notice). The Company may, in its
discretion, pay Employee in lieu of notice.
The failure by the Employee to include in the notice any fact or
circumstance which contributes to a showing of Involuntary Termination shall
not waive any right of the Employee hereunder or preclude the Employee from
asserting such fact or circumstance in enforcing his rights hereunder.
9.
Arbitration
.
(a)
Arbitration
. In
consideration of Employees employment with the Company, its promise to arbitrate
all employment-related disputes, and Employees receipt of the compensation,
pay raises, and other benefits paid to Employee by the Company, at present and
in the future, Employee agrees that any and all controversies, claims, or
disputes with anyone (including the Company and any employee, officer,
director, shareholder, or benefit plan of the Company, in their capacity as
such or otherwise), arising out of, relating to, or resulting from Employees
employment with the Company or the termination of Employees employment with
the Company, including any breach of this Agreement, shall be subject to
binding arbitration under the arbitration rules set forth in applicable
law of Hong Kong. Disputes that Employee
agree to arbitrate, and thereby agree to waive any right to a trial by jury,
include any statutory claims under local, state, or federal law, including, but
not limited to, claims under Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act of 1990, the Age Discrimination in Employment
Act of 1967, the Older Workers Benefit Protection Act, the Sarbanes-Oxley Act,
the Worker Adjustment and Retraining Notification Act, the California Fair
Employment and Housing Act, the Family and Medical Leave Act, the California
Family Rights Act, the California Labor Code, claims of harassment,
discrimination, and wrongful termination, and any statutory or common law
claims, as well as all such statutes and decrees under the laws of Hong
Kong. Employee further understands that
this Agreement to arbitrate also applies to any disputes that the Company may
have with Employee.
(b)
Procedure
. Employee
agrees that any arbitration will be administered by Judicial Arbitration &
Mediation Services, Inc. (JAMS), pursuant to its employment arbitration rules &
procedures (the JAMS rules). Employee
agrees that the arbitrator shall have the power to decide any motions brought
by any party to the arbitration, including motions for summary judgment and/or
adjudication, and motions to dismiss and demurrers, prior to any arbitration
hearing. Employee agrees that the
arbitrator shall issue a written decision on the merits. Employee also agrees that the arbitrator
shall have the power to award any remedies available under applicable law, and
that the arbitrator shall award attorneys fees and costs to the prevailing
party, except as prohibited by law. Employee agrees that the decree or award
rendered by the
arbitrator
may be entered as a final and binding judgment in any court having jurisdiction
thereof. Employee understands that the
Company will pay for any administrative or hearing fees charged by the
arbitrator or JAMS except that Employee shall pay any initial filing fees
associated with any arbitration that Employee initiates, but only so much of the
filing fees as Employee would have instead paid had Employee filed a complaint
in a court of law. Employee agrees that
the arbitrator shall administer and conduct any arbitration in accordance with
Hong Kong procedural and substantive law, without reference to rules of
conflict of law. To the extent that the
JAMS rules conflict with Hong Kong law, Hong Kong law shall take
precedence. Employee agree that any
arbitration under this Agreement shall be conducted in Hong Kong.
(c)
Remedy
. Except as
provided by applicable law and this Agreement, arbitration shall be the sole,
exclusive, and final remedy for any dispute between Employee and the
Company. Accordingly, except as provided
by applicable law and this Agreement, neither Employee nor the Company will be
permitted to pursue court action regarding claims that are subject to
arbitration.
(d)
Administrative Relief
. Employee understands that this Agreement does
not prohibit Employee from pursuing an administrative claim with a local,
state, or federal administrative body or government agency that is authorized
to enforce or administer laws related to employment, including, but not limited
to, the Department of Fair Employment and Housing, the Equal Employment
Opportunity Commission, the National Labor Relations Board, or the Workers
Compensation Board. This Agreement does,
however, preclude Employee from pursuing court action regarding any such claim,
except as permitted by law.
(e)
Voluntary Nature of Agreement
. Employee
acknowledges and agrees that Employee is executing this Agreement voluntarily
and without any duress or undue influence by the Company or anyone else. Employee further acknowledges and agrees that
Employee has carefully read this Agreement and has asked any questions needed
to understand the terms, consequences, and binding effect of this Agreement and
fully understand it, including that Employee is
waiving Employees right to a jury trial
. Finally, Employee agrees that he has been
provided an opportunity to seek the advice of an attorney of Employees choice
before signing this Agreement.
10.
Miscellaneous Provisions
.
(a)
No Duty to Mitigate
. The
Employee shall not be required to mitigate the amount of any payment
contemplated by this Agreement, nor shall any such payment be reduced by any
earnings that the Employee may receive from any other source.
(b)
Waiver
.
No provision of this Agreement may be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed
by the Employee and by an authorized officer of the Company (other than the
Employee). No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c)
Integration
. This Agreement, together with
the Offer Letter between Employee and the Company and any outstanding
restricted cash agreements and equity award agreements referenced herein represent
the entire agreement and understanding between the parties as to the subject
matter herein and supersede all prior or contemporaneous agreements,
whether written or oral, with respect to this Agreement,
any restricted cash agreement and equity award agreements.
(d)
Choice of Law
. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of Hong Kong
, with the exception of its conflict of laws
provisions
.
(e)
Severability
. The invalidity or unenforceability
of any provision or provisions of this Agreement shall not affect the validity
or enforceability of any other provision hereof, which shall remain in full
force and effect.
(f)
Employment Taxes
. All payments made
pursuant to this Agreement shall be subject to withholding of applicable
income, employment and other taxes required to be withheld by the Company (or
any of its affiliates) pursuant to applicable laws.
(g)
Counterparts
. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
(h)
No Representations
. The
Employee represents that he has had the opportunity to consult with his
attorneys and tax advisors, and has carefully read and understands the scope,
effect and potential tax consequences of the provisions of this Agreement. The
Employee represents that he is not relying on the Company for any tax advice.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
COMPANY:
|
UTSTARCOM,
INC.
|
|
|
|
By:
|
/s/
PETER BLACKMORE
|
|
|
|
|
Title:
|
Chief
Executive Officer
|
EMPLOYEE:
|
/s/
JACK LU
|
|
Signature
|
|
|
|
Jack
Lu
|
|
Printed
Name
|
SIGNATURE
PAGE TO
INVOLUNTARY
TERMINATION SEVERANCE AGREEMENT
Exhibit 99.1
UTStarcom Announces Strategic
Investment by Beijing E-town International Investment and Development Co., Ltd
- Strategic Additions to the Board
of Directors - CEO Succession Plan - Moving Headquarters to Beijing
ALAMEDA,
Calif., Feb 01, 2010 /PRNewswire via COMTEX News Network/ UTStarcom, Inc.
(Nasdaq: UTSI) today announced that it has entered into agreements for a
strategic relationship with Beijing E-town International Investment and
Development Co., Ltd (BEIID), an investment company established by the Beijing
Municipality which includes an investment of $48.5 million by BEIID and two
unrelated investment funds, Ram Max Group Limited and Shah Capital Management.
The three investment parties are advised by Yellowstone Capital. As part of the
investment, UTStarcom will issue approximately 22 million shares of common
stock at a price of $2.20 per share, with BEIID investing $25 million, Ram Max
Group Limited investing $12.5 million and Shah Capital investing $11 million.
(Logo:
http://www.newscom.com/cgi-bin/prnh/20051013/SFTH063LOGO)
Upon
closing of the transaction, Mr. Baichuan Du, a former Deputy Chief
Engineer of Chinas State Administration of Radio, Film and Television, will
join the board of directors of the Company. Mr. Xiaoping Li, Executive
Deputy General Manager of BEIID, and Mr. William Wong, a Managing Director
at Yellowstone Capital, will also join UTStarcoms board of directors upon
closing of the transaction. Mr. Li and Mr. Wong will replace Mr. Allen
Lenzmeier and Mr. Jeff Clarke, who will resign from UTStarcoms board of
directors at that time. The total number of directors on the board will be
increased from six to seven in connection with the transaction.
We
are very pleased to announce this relationship with and commitment from the
Beijing Development Area and the investment from Ram Max and Shah Capital,
said Peter Blackmore, Chief Executive Officer and President of UTStarcom. The
relationship with Beijing Development Area is consistent with UTStarcoms
growth strategy of focusing on selective IP-based infrastructure products and
services in high growth regions of Asia, particularly China. UTStarcoms growth
strategy is in good alignment with the series of guidelines recently issued by
Chinas State Council to push forward network convergence among telecom, cable
television, and internet companies. This relationship will contribute
significant financial and strategic value to UTStarcom, including strengthening
our relationships and presence in China, and better positioning UTStarcom to
achieve profitable growth in the future.
In
connection with the transaction and in furtherance of UTStarcoms strategic
goals in China, Mr. Jack Lu has been appointed the new Chief Executive
Officer and President of the Company effective the later date of three months
after the closing of the investment or June 30, 2010. From the closing of
the transaction until he assumes the CEO position, he will be the Companys
Chief Operations Officer. Mr. Peter Blackmore will retire as CEO and President
of UTStarcom upon Mr. Lus assumption of the CEO position.
The
UTStarcom team has expended a tremendous amount of effort in refocusing our
business strategy, simplifying our business lines, strengthening our balance
sheet, rightsizing the company, resolving a number of past legal issues that
the Company had faced, and developing a strong relationship with the Beijing
Municipal Government entities, said Thomas Toy, Chairman of the Board of
Directors for UTStarcom. In particular, I would like to thank our CEO, Peter
Blackmore, for his dedication to these actions. In addition, I would like to
thank Yellowstone Capital for its strategic guidance as we sought to strengthen
our relationships in China. We all look forward to working with Jack Lu as CEO
and we are confident he will build on the work that Peter has done.
Mr. Lu
most recently served as Co-Chief Operating Officer and General Manager, China
at Source Photonics, a leading global opto-electronic component company. Prior
to Source Photonics he held numerous positions at Fiberxon, which was sold to
MRV Communications Inc. in July 2007, including Chief Executive Officer,
Chief Operations Officer and Vice President of Marketing and Sales. Prior to
joining Fiberxon in September 2001, Mr. Lu worked for US Business
Networks Inc. (MeetChina.com) as Director of Business Strategy Development from
March 2000 to May 2001, and China National Technical Import and
Export Corporation as Senior Manager from May 1988 to July 1998. Mr. Lu
holds a Bachelor of Science degree in Electronic Engineering from Huazhong
University of Science and Technology and an M.B.A. from the University of
Southern California.
Consistent
with its previously announced plans, UTStarcom will move its headquarters to
Beijing, China as part of an agreement with Beijing Development Area, which is
also related to Beijing Municipality. That agreement will be effective upon
closing of the investment. As part of the agreement, UTStarcom will be able to
apply to Beijing Development Area for tax incentives and other financial and
non-financial assistance to the Company. The Company plans to retain all its
operations in Hangzhou and Shenzhen.
The
transaction is subject to certain customary closing conditions including
receipt of regulatory approval in China. The Company anticipates closing the
transaction prior to March 31, 2010.
Yellowstone
Capital initiated the investment transaction, advised and coordinated amongst
BEIID, Ram Max and Shah Capital in connection with the transaction. BofA Merrill
Lynch is acting as financial advisor to UTStarcom. Wilson Sonsini Goodrich &
Rosati, Professional Corporation is serving as outside counsel to UTStarcom and
King & Wood LLP is acting as legal counsel for BEIID.
Conference Call Information
UTStarcom
will host a conference call today at 8:00 a.m. EDT/ 5:00 a.m. PDT to
discuss details of the strategic investment. Following the prepared remarks,
there will be a question and answer session.
The
conference call dial-in numbers are: United States and Canada 877-405-3429;
International 702-928-6906. The conference ID number is 5366-5007.
A
replay of the call will be available for 7 days. The conference call replay
numbers are as follows: United States 800-642-1687; International 706-
645-9291. The conference ID number is 5366-5007.
Investors
will also have the opportunity to listen to the conference call and the replay
over the Internet through the investor relations section of UTStarcoms Web
site at:
http://www.utstar.com
.
To
listen to the live call, please go to the Web site at least 15 minutes early to
register, and to download and install any necessary audio software. For those
who cannot listen to the live broadcast, a replay will also be available on
this site.
About UTStarcom, Inc.
UTStarcom
is a global leader in IP-based, end-to-end networking solutions and
international service and support. The Company sells its solutions to operators
in both emerging and established telecommunications markets around the world.
UTStarcom enables its customers to rapidly deploy revenue-generating access
services using their existing infrastructure, while providing a migration path
to cost-efficient, end-to-end IP networks. The Company was founded in 1991 and
is headquartered in Alameda, California. For more information about UTStarcom,
visit the Companys Web site at
http://www.utstar.com
.
Forward Looking Statements
This
release contains forward-looking statements that involve risks, uncertainties
and assumptions. All statements other than statements of historical fact are
statements that could be deemed forward-looking statements, which include those
regarding UTStarcoms future plans and strategies for the telecommunications
business and market, the anticipated closing date of the transaction, the
ability to complete the transaction considering the various closing conditions,
including the conditions related to the regulatory approvals, the planned
additions to the board of directors and change to the management team, and the
expectations as to the added value and growth opportunities from the strategic
relationship with the
Beijing
Municipal Government Entities. These statements are based on the current
expectations or beliefs of management of UTStarcom and are subject to
uncertainties and changes in circumstances. Actual results may vary materially
from those expressed or implied by the statements herein due to (1) changes
in economic, business, competitive, technological and regulatory factors, (2) failure
to receive the required regulatory approvals for the transaction, (3) lack
of comprehensive understanding of the new operating environment, (4) failure
to retain key employees after moving the headquarters to Beijing, (5) failure
to compete successfully in the highly competitive and rapidly changing marketplace,
and (6) other factors affecting the transaction and operations of
UTStarcom. More detailed information about these factors may be found in
filings by UTStarcom, as applicable, with the Securities and Exchange
Commission, including the most recent Annual Report on 10-K and Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, as filed with
the Securities and Exchange Commission. UTStarcom assumes no obligation and
does not intend to update these forward-looking statements.
http://www.utstar.com
Copyright
(C) 2009 PR Newswire. All rights reserved
SOURCE
UTStarcom, Inc.
Copyright
(C) 2010 PR Newswire. All rights reserved