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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>/in/edgar/work/20000814/0000912057-00-037224/0000912057-00-037224.txt : 20000921
<SEC-HEADER>0000912057-00-037224.hdr.sgml : 20000921
ACCESSION NUMBER:		0000912057-00-037224
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20000630
FILED AS OF DATE:		20000814

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			UTSTARCOM INC
		CENTRAL INDEX KEY:			0001030471
		STANDARD INDUSTRIAL CLASSIFICATION:	 [4812
]		IRS NUMBER:				521782500
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231
</COMPANY-DATA>

		FILING VALUES:
			FORM TYPE:		10-Q
			SEC ACT:		
			SEC FILE NUMBER:	000-29661
			FILM NUMBER:		698497
</FILING-VALUES>

			BUSINESS ADDRESS:	
				STREET 1:		1275 HARBOR BAY PARKWAY
				STREET 2:		STE 100
				CITY:			ALAMEDA
				STATE:			CA
				ZIP:			94502
				BUSINESS PHONE:		5108648800
</BUSINESS-ADDRESS>

				MAIL ADDRESS:	
					STREET 1:		1275 HARBOR BAY PARKWAY
					STREET 2:		STE 100
					CITY:			ALAMEDA
					STATE:			CA
					ZIP:			94502
</MAIL-ADDRESS>
</FILER>
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>a10-q.txt
<DESCRIPTION>10-Q
<TEXT>

<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  ------------

                                    FORM 10-Q


(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended June 30, 2000.

                                      OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from          to             .

                        COMMISSION FILE NUMBER 333-93069

                                 ---------------

                                 UTSTARCOM, INC.
             (Exact name of Registrant as specified in its charter)

                                 ---------------


                  DELAWARE                             52-1782500
         (State of Incorporation)         (I.R.S. Employer Identification No.)


  1275 HARBOR BAY PARKWAY, ALAMEDA, CALIFORNIA                    94502
    (Address of principal executive offices)                    (zip code)


       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510) 864-8800

                                 ---------------

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes [X] No [_]

         As of July 31, 2000, there were 93,927,105 shares of the Registrant's
Common Stock outstanding, par value $0.00125.

         This quarterly report on Form 10Q consists of 29 pages of which this is
page 1. The Exhibit Index appears on page 28.

<PAGE>

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
PART I.           FINANCIAL INFORMATION                                                                     PAGE

<S>             <C>                                                                                       <C>
   Item 1.        Condensed Consolidated Financial Statements                                                 3

                  Condensed Consolidated Balance Sheet as of June 30, 2000 (unaudited) and
                  December 31, 1999                                                                           3

                  Condensed Consolidated Statement of Operations for the three and six month
                  periods ended June 30, 2000 and June 30, 1999 (unaudited)                                   4

                  Condensed Consolidated Statement of Cash Flows for the six month periods ended              5
                  June 30, 2000 and June 30, 1999 (unaudited)

                  Notes to Condensed Consolidated Financial Statements (unaudited)                            6

   Item 2.        Management's Discussion and Analysis of Financial Condition and Results of
                  Operations                                                                                 10

   Item 3.        Quantitative and Qualitative Disclosure about Market Risk                                  26

PART II.          OTHER INFORMATION

   Item 2.        Changes in Securities and Use of Proceeds                                                  28

   Item 4.        Submission of Matters to a Vote of Security Holders                                        28

   Item 6.        Exhibits                                                                                   28

SIGNATURES                                                                                                   29
</TABLE>

                                       2
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 UTSTARCOM, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                 (in thousands, except share and per share data)


<TABLE>
<CAPTION>
                                                                                JUNE 30,            DECEMBER 31,
                                                                                  2000                 1999
                                                                          --------------------- --------------------
                                  ASSETS                                       (Unaudited)
<S>                                                                        <C>                   <C>
Current assets:
   Cash and cash equivalents                                                         $ 201,663             $ 87,364
   Short-term investment                                                                45,390                    -
   Accounts receivable, net                                                            106,200               77,823
   Receivable from related parties                                                         104                  339
   Inventories, net                                                                     86,360               55,204
   Other assets                                                                         15,045                8,326
                                                                          --------------------- --------------------
Total current assets                                                                   454,762              229,056
Property, plant and equipment, net                                                      10,469                8,168
Investment in affiliated companies                                                       9,056                4,460
Intangible assets, net                                                                  22,685               25,132
Deferred tax assets                                                                      6,590                4,352
Other long term assets                                                                   1,490                  620
                                                                          --------------------- --------------------
   Total assets                                                                      $ 505,052            $ 271,788
                                                                          ===================== ====================


                    LIABILITIES, MINORITY INTEREST AND
                           STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                   $ 22,616             $ 21,745
   Debt                                                                                 65,674               34,593
   Debt to shareholder and related parties                                                   -                8,745
   Income taxes payable                                                                      -                2,985
   Customer deposits                                                                    13,687                5,249
   Other liabilities                                                                    19,310               29,102
                                                                          --------------------- --------------------
Total current liabilities                                                              121,287              102,419
                                                                          --------------------- --------------------
Minority interest in consolidated subsidiaries                                           4,174                3,649
Stockholders' equity:
Convertible preferred stock: $.00125 par value; authorized: 99,200,000
   shares; issued and outstanding 70,377,322; liquidation value of
   $259,608 at December 31, 1999                                                             -                   88
Common stock: $.00125 par value; authorized: 250,000,000
   shares; issued and outstanding: 93,915,105 at June 30, 2000 and
   8,929,837 at December 31, 1999                                                          119                   13
Common stock warrant                                                                         -                  389
Additional paid-in capital                                                             422,134              218,303
Deferred stock compensation                                                            (10,244)             (17,792)
Accumulated deficit                                                                    (31,596)             (34,821)
Notes receivable from shareholders                                                        (841)                (555)
Unrealized losses on investments                                                           (66)                   -
Cumulative translation adjustment                                                           85                   95
                                                                          --------------------- --------------------
Total stockholders' equity                                                             379,591              165,720
                                                                          --------------------- --------------------
   Total liabilities, minority interest, and stockholders' equity                    $ 505,052            $ 271,788
                                                                          ===================== ====================
</TABLE>




     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                                 UTSTARCOM, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                                      -----------------------------    ---------------------------
                                                                           THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                                               JUNE 30,                           JUNE 30,
                                                                      -----------------------------    ---------------------------
                                                                          2000            1999             2000            1999
                                                                      --------------   ------------    ------------   ------------
                                                                                (Unaudited)                   (Unaudited)
<S>                                                                    <C>               <C>            <C>              <C>
Net sales                                                              $ 80,008          $ 42,131       $ 138,767        $ 69,682
Cost of sales (excludes stock compensation expense of $23,
    $4, $56 and $6)                                                      51,629            23,873          89,495          41,825
                                                                      --------------   ------------    ------------   ------------
Gross profit                                                             28,379            18,258          49,272          27,857

Operating expenses:
  Selling, general and administrative expenses (excludes stock
    compensation expense of $1,249, $324, $3,051 and $768)                9,680             8,292          18,942          13,879
  Research and development expenses (excludes stock compensation
    expense of $660, $346, $5,255 and $501)                               8,226             4,138          14,540           8,183
  Amortization of deferred stock compensation                             1,932               674           8,362           1,275
  Amortization of intangible assets                                       1,224                37           2,447              74
                                                                      --------------   ------------    ------------   ------------
Total operating expenses                                                 21,062            13,141          44,291          23,411
                                                                      --------------   ------------    ------------   ------------

Operating income                                                          7,317             5,117           4,981           4,446

Interest income                                                           3,685               399           5,039             982

Interest expenses                                                          (949)             (660)         (1,706)         (1,558)

Other income (expenses)                                                     303              (228)            478            (133)

Equity in net income (loss) of affiliated companies                         (87)              702            (327)            892

                                                                      --------------   ------------    ------------   ------------
Income before income taxes and minority interest                         10,269             5,330           8,465           4,629

Income tax expense (benefit)                                              3,797               213           4,715             185

                                                                      --------------   ------------    ------------   ------------
Income before minority interest                                           6,472             5,117           3,750           4,444

Minority interest in (earnings) of consolidated subsidiaries               (264)             (103)           (525)           (589)

                                                                      --------------   ------------    ------------   ------------
Income from continuing operations                                         6,208             5,014           3,225           3,855

Loss from discontinued operations                                             -            (1,389)              -          (1,656)

                                                                      --------------   ------------    ------------   ------------
Net income                                                              $ 6,208           $ 3,625         $ 3,225         $ 2,199
                                                                      ==============   ============    ============   ============
Basic earnings (loss) per share:
  Income from continuing operations                                     $  0.07           $  0.58         $  0.05         $  0.45
  Loss from discontinued operations                                     $     -           $ (0.16)        $     -         $ (0.19)
                                                                      --------------   ------------    ------------   ------------
  Net income - basic earnings per share                                 $  0.07           $  0.42         $  0.05          $ 0.26
                                                                      ==============   ============    ============   ============
Diluted earnings (loss) per share:
  Income from continuing operations                                     $  0.06           $  0.07         $  0.03         $  0.05
  Loss from discontinued operations                                     $     -           $ (0.02)        $     -         $ (0.02)
                                                                      --------------   ------------    ------------   ------------
  Net income - diluted earnings per share                               $  0.06           $  0.05         $  0.03         $  0.03
                                                                      ==============   ============    ============   ============
Weighted average shares used in per-share calculation:
  - Basic                                                                93,527             8,687          64,697           8,608
                                                                      ==============   ============    ============   ============
  - Diluted                                                             104,506            73,505          99,846          73,463
                                                                      ==============   ============    ============   ============
</TABLE>




     See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>


                                 UTSTARCOM, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                    SIX MONTHS ENDED
                                                                            ---------------------------------
                                                                               JUNE 30,          JUNE 30,
                                                                                 2000              1999
                                                                            ----------------  ---------------
                                                                                       (Unaudited)
<S>                                                                         <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                          $ 3,225          $ 2,199
Adjustments to reconcile net income to net cash used in operating
   activities:
   Loss from discontinued operations                                                      -            1,656
   Depreciation and amortization                                                      4,249            1,427
   Net loss on sale and disposal of assets                                              128               49
   Stock compensation expense                                                         8,362            1,275
   Equity in net (income) loss of affiliated companies                                  327             (892)
   Minority interest                                                                    525              589
   Changes in operating assets and liabilities:
     Accounts receivable and receivable from related parties                        (26,252)          (4,287)
     Inventories                                                                    (31,157)           1,350
     Other current and non-current assets                                            (7,021)          (5,810)
     Accounts payable and payable to related parties                                 (7,874)         (15,091)
     Income taxes payable                                                              (192)             (42)
     Other current liabilities                                                       (1,354)           9,417
                                                                            ----------------  ---------------
Net cash used in continuing operations                                              (57,034)          (8,160)
Net cash used in discontinued operations                                                  -             (357)
                                                                            ----------------  ---------------
Net cash used in operating activities                                               (57,034)          (8,517)
                                                                            ----------------  ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment                                           (4,335)            (887)
Investment in affiliates, net                                                        (4,923)               -
Proceeds from disposal of property                                                      103               14
Purchase of short-term investments                                                  (45,390)               -
                                                                            ----------------  ---------------
Net cash used in investing activities                                               (54,545)            (873)
                                                                            ----------------  ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of stock, net of expenses                                                  195,012               45
Proceeds from borrowing, net                                                         31,081            5,660
Proceeds (payments) from shareholder notes, net                                        (139)               3
Unrealized holding (loss)                                                               (66)               -
                                                                            ----------------  ---------------
Net cash provided by financing activities                                           225,888            5,708

Effects of exchange rates on cash                                                       (10)               1
                                                                            ----------------  ---------------
Net increase (decrease) in cash and cash equivalents                                114,299           (3,681)
Less cash used in discontinued operations                                                 -             (357)
                                                                            ----------------  ---------------
Net increase (decrease) in cash and cash equivalents                                114,299           (3,324)
Cash and cash equivalents at beginning of period                                     87,364           17,626
                                                                            ----------------  ---------------
Cash and cash equivalents at end of period                                        $ 201,663         $ 14,302
                                                                            ================  ===============
</TABLE>



     See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>

                                 UTSTARCOM, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

          (Information for the three and six months ended June 30, 2000
                        and June 30, 1999 is unaudited)

1.       BASIS OF PRESENTATION:

         UTStarcom, Inc. (the Company), a Delaware corporation, provides
communications equipment including network access systems, optical transmission
products and subscriber terminal products for service providers that operate
wireless and wireline networks. The Company's operations are conducted primarily
by its foreign subsidiaries that manufacture, distribute, and support the
Company's products in international markets, principally the People's Republic
of China (China).

         The accompanying consolidated financial statements include the accounts
of the Company and its wholly and majority (50 percent or more) owned
subsidiaries, except for the Guangdong manufacturing subsidiary (GUTS) which is
accounted for using the equity method as the Company does not have voting
control over all significant matters. All significant intercompany accounts and
transactions have been eliminated in preparation of the consolidated financial
statements. Minority interest in consolidated subsidiaries and equity in
affiliated companies are shown separately in the consolidated financial
statements. Investments in affiliated companies, of which none represent greater
than 20 percent ownership, are accounted for using the cost method.

         The accompanying financial data as of June 30, 2000 and for the three
and six months ended June 30, 2000 and June 30, 1999 have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The December 31, 1999 balance sheet was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. However, the Company believes that the
disclosures are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction with
the Company's audited December 31, 1999 financial statements including the notes
thereto, and the other information set forth therein included in the Company's
Registration Statement on Form S-1.

         In the opinion of management, the accompanying condensed consolidated
financial statements reflect all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair statement of the
Company's financial condition, the results of its operations and its cash flows
for the periods indicated. The results of operations for the three and six
months ended June 30, 2000 are not necessarily indicative of the operating
results for the full year.

2.       EARNINGS (LOSS) PER SHARE:

         Basic and diluted earnings per share are computed in accordance with
Statement of Financial Accounting Standards No. 128 ("SFAS 128"). Basic earnings
per share is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share is computed giving effect to all dilutive potential common
shares that were outstanding during the period. Dilutive potential common shares
consist of the incremental common shares issuable upon the conversion of
convertible preferred stock (using the "if converted" method) and exercise of
stock options and warrants for all periods. Dilutive potential common shares are
not included during periods in which the Company experienced a net loss, as the
impact would be anti-dilutive.

                                       6
<PAGE>

         The following table presents the calculation of basic and diluted
earnings (loss) per share:

<TABLE>
<CAPTION>
                                                           THREE MONTHS PERIOD ENDED                   SIX MONTHS PERIOD ENDED
                                                   -----------------------------------------  --------------------------------------
                                                      JUNE 30, 2000         JUNE 30, 1999        JUNE 30, 2000        JUNE 30, 1999
                                                      -------------         -------------        -------------        -------------
                                                                 (UNAUDITED)                                (UNAUDITED)
<S>                                                   <C>                    <C>                 <C>                  <C>
Numerator:
    Income from continuing operations                    $ 6,208               $  5,014             $ 3,225             $  3,855
    Loss from discontinued operations                    $     -               $ (1,389)            $     -             $ (1,656)
                                                   ----------------     --------------------  -----------------    -----------------
    Net income                                           $ 6,208               $  3,625             $ 3,225             $  2,199
                                                   ================     ====================  =================    =================

Denominator:
    Weighted-average shares outstanding - basic           93,527                  8,687              64,697                8,608
    Weighted-average shares outstanding - diluted        104,506                 73,505              99,846               73,463

Basic earnings (loss) per share:
    Income from continuing operations                    $  0.07               $   0.58             $  0.05             $   0.45
    (Loss) from discontinued operations                  $     -               $  (0.16)            $     -             $  (0.19)
                                                   ----------------     --------------------  -----------------    -----------------
                                                         $  0.07               $   0.42             $  0.05             $   0.26
                                                   ================     ====================  =================    =================

Diluted earnings (loss) per share:
    Income from continuing operations                    $  0.06               $   0.07             $  0.03             $   0.05
    (Loss) from discontinued operations                  $     -               $  (0.02)            $     -             $  (0.02)
                                                   ----------------     --------------------  -----------------    -----------------
                                                         $  0.06               $   0.05             $  0.03             $   0.03
                                                   ================     ====================  =================    =================
</TABLE>



3.       SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (IN THOUSANDS):

<TABLE>
<CAPTION>
                                                      SIX MONTHS PERIOD ENDED
                                                            JUNE 30,
                                                            --------
                                                       2000          1999
                                                       ----          ----
                                                           (UNAUDITED)

<S>                                             <C>                 <C>
Cash paid during the period for:
Interest                                          $   1,501            $ 2,179
Income taxes                                      $   4,779            $   331
</TABLE>


         Noncash investing and financing activities were as follows:

<TABLE>
<CAPTION>
                                                     SIX MONTHS PERIOD ENDED
                                                            JUNE 30,
                                                            --------
                                                      2000           1999
                                                      ----           ----
                                                          (UNAUDITED)
<S>                                               <C>             <C>
Distribution of net assets to shareholders          $    -          $ 369
Receivable from shareholders                        $  147          $   -
Non-qualified stock option exercise tax benefits    $7,737          $   -
</TABLE>

4.       CASH, CASH EQUIVALENTS AND INVESTMENTS

         The Company considers all highly liquid monetary instruments with an
original maturity of three months or less at the date of purchase to be cash
equivalents. Short-term investments consist primarily of investments with
original maturities of less than twelve months.

         Pursuant to Statement of Financial Accounting Standards No. 115 ("SFAS
No. 115"), "Accounting for Certain Investments in Debt and Equity Securities"
debt securities that the Company does not have the positive intent and ability
to hold to maturity and all marketable equity securities are classified as
available-for-sale and are carried at fair value. Unrealized holding gains and
losses on securities classified as available-for-sale are carried as a separate
component of stockholders' equity. Unrealized holdings gains and losses on
securities classified as available-for-sale are reported as earnings. The fair
value of investments is determined based upon

                                       7
<PAGE>

quoted market prices. The cost of debt securities is adjusted for amortization
of premiums and accretion of discounts to maturity. Such amortization, interest
income, realized gains and losses and declines in value judged to be other than
temporary are included in interest and other income. The cost of securities is
based on specific identification.

         All of the Company's cash equivalents and short-term investments are
classified as available-for-sale. At June 30, 2000, $157.4 million of
available-for-sale securities were included in cash equivalents and $45.4
million of available-for-sale securities were included in short-term
investments. These available-for-sale securities consisted of government
sponsored entities notes, commercial paper, floating rate corporate bonds and
fixed income corporate bonds.

5.       DEBT TO SHAREHOLDERS (IN THOUSANDS):

         Payable to related parties and debt to shareholder as of June 30, 2000
and December 31, 1999 consist of the following:


<TABLE>
<CAPTION>
                                          JUNE 30, 2000                    DECEMBER 31, 1999
                                      --------------------           -----------------------------
                                          (UNAUDITED)
<S>                                 <C>                              <C>
Debt to shareholder-SOFTBANK            $          --                    $             8,745
</TABLE>

6.       DEBT (IN THOUSANDS):

The following represents the outstanding borrowings at June 30, 2000 and
December 31, 1999:

<TABLE>
<CAPTION>
                                                                                           JUNE 30,         DECEMBER 31,
NOTE                                            RATE                  MATURITY               2000               1999
- ----                                            ----                  --------               ----               ----
                                                                                          (UNAUDITED)
<S>                                  <C>                        <C>                      <C>               <C>
Bank of China(1)                      From 5.58% to 5.86%        From 7/00 to 06/01         $33,134                $27,108
China Merchants Bank(2)               6.44%                      03/01                        3,614                      -
Commercial Bank of Hangzhou(3)        6.44%                      10/00                        6,024                  6,024
Commercial Bank of Hangzhou(4)        5.86%                      03/01                       12,048                      -
Industrial & Commercial Bank of       5.85%                      05/01                        6,024                  1,446
   China(5)
China Construction Bank (6)           6.44%                      06/01                        4,819                      -
Other                                 Various                    Various                         11                     15
                                      -------------------------------------------------------------------------------------
Total debt                                                                                  $65,674                $34,593
                                                                                     ======================================
</TABLE>


- -----------

(1)      Guaranteed by the Company and the minority shareholder of Zhejiang
         manufacturing subsidiary (HUTS). This represents drawings on the
         Company's line of credit with the bank. This line allows for borrowings
         of up to $90,361.

(2)      Collateralized by $1,500 deposited with the bank and guaranteed by
         HUTS. This line allows for borrowings of up to $3,614 and matures on
         March 1, 2001.

(3)      Guaranteed by HUTS. This line allows for borrowings of up to $6,024 and
         matures in October 2000.

(4)      Guaranteed by UTStarcom-China. This line allows for borrowings of up to
         $12,048 and matures in March 2001.

(5)      Guaranteed by HUTS. This line allows for borrowings of up to $6,024 and
         matures in May 2001.

(6)      Guaranteed by HUTS. This line allows for borrowings of up to $4,819 and
         matures in June 2001



7.       FORWARD FOREIGN EXCHANGE CONTRACT:

                                       8
<PAGE>

         The Company has contracts denominated in Japanese Yen to purchase
portions of its inventories and supplies. As such, it is exposed to adverse
movements in the currency exchange rate for Japanese Yen. The Company enters
into forward foreign exchange contracts to reduce such foreign exchange
exposures.

         The Company has adopted Statement of Financial Accounting Standard No.
52 ("SFAS 52"), "Accounting for Foreign Currency Translation" to account for its
forward foreign exchange contract transaction. SFAS 52 states that gains or
losses on forward contracts shall be deferred and included in the measurement of
the related foreign currency transactions. As of June 30, 2000, the Company had
a forward contract to hedge Japanese Yen valued at $3.8 million and deferred
gains and losses related to this forward contract were not material.

8.       COMPREHENSIVE INCOME (LOSS) :

         The Company's total comprehensive net income was as follows (in
thousands):

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED JUNE 30,      SIX MONTHS ENDED JUNE 30,

                                                     2000            1999            2000          1999
                                                     ----            ----            ----          ----
                                                         (Unaudited)                      (Unaudited)
<S>                                                <C>            <C>             <C>          <C>
Net income                                              $ 6,208        $ 3,625         $ 3,225      $ 2,199

Change in cumulative translation adjustments               (439)             -             (10)           -

Unrealized losses on investments                            (66)             -               -            -
                                                -------------------------------  ---------------------------
Total comprehensive income                              $ 5,703        $ 3,625         $ 3,215      $ 2,199
                                                ===============================  ===========================
</TABLE>


9.       INITIAL PUBLIC OFFERING:

         On March 3, 2000, the Company sold 11,500,000 shares of common stock
including the exercise of the underwriters' over-allotment option at $18.00 per
share. The sale of the shares of common stock generated aggregate gross proceeds
of approximately $207.0 million for the Company. The aggregate net proceeds were
approximately $189.4 million, after deducting underwriting discounts and
commissions and related expenses. As of the effective date of the offering, all
of the convertible preferred stock outstanding was converted into 70,377,322
shares of common stock. The net proceeds are expected to be used for general
corporate purposes, including working capital and capital expenditures. A
portion of the net proceeds may also be used to acquire or invest in
complementary businesses, technologies or product offerings; however, there are
no current material agreements or commitments with respect to any such
activities.


10.      RECENT ACCOUNTING PRONOUNCEMENTS:

         In April 2000, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an interpretation of APB Opinion No. 25". This Interpretation
clarifies the application of Opinion 25 for certain stock compensation issues
including the definition of employee for purposes of applying Opinion 25, the
criteria for determining whether a plan qualifies as a noncompensatory plan, the
accounting consequence of various modifications to the terms of a previously
fixed stock option, and the accounting for an exchange of stock compensation

                                       9
<PAGE>

awards in a business combination. This Interpretation is effective July 1, 2000.
UTStarcom does not expect the adoption of FASB Interpretation No. 44 to have a
significant effect on the financial condition or results of operations.


         In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on the recognition, presentation, and
disclosure of revenue in the financial statements. All registrants are expected
to apply the accounting and disclosures described in SAB 101. Implementation of
SAB101 has been delayed by the Securities and Exchange Commision until the
fourth fiscal quarter of fiscal years beginning after December 15, 1999. Because
the Company has complied with generally accepted accounting principles for its
historical revenue recognition, a change, if any, in its revenue recognition
policy resulting from SAB 101 will be reported as a change in accounting
principle in the quarter ended December 31, 2000 and may require a cumulative
adjustment as of the beginning of the first quarter of 2001. The Company is
waiting for further guidance from the Securities and Exchange Commission before
completing its assessment of the impact of SAB 101, as amended, on its financial
statements. The Company is in the process of revising its standard contracts so
that the impact of SAB101 on the timing of revenue recognition is minimized in
the future.


         In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivatives and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. In July 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133." SFAS No. 137 deferred the effective date of SFAS No.
133 until fiscal years beginning after June 15, 2000. UTStarcom will adopt SFAS
No. 133 during its year ending December 31, 2001. UTStarcom is unable to predict
the impact of adopting SFAS No. 133.

11.      COUNTRY RISKS:



         Almost 99% of our sales for the three and six months ended June 30,
2000 were made in China. Accordingly, our business, financial condition and
results of operations may be influenced by the political, economic and legal
environment in China, and by the general state of China's economy. Our
operations in China are subject to special considerations and significant risks
not typically associated with companies in the United States. These include
risks associated with, among others, the political, economic and legal
environments and foreign currency exchange. Our results may be adversely
affected by, among other things, changes in the political, economic and social
conditions in China, and by changes in governmental policies with respect to
laws and regulations, changes in China's telecommunications industry and
regulatory rules and policies, anti-inflationary measures, currency conversion
and remittance abroad, and rates and methods of taxation.

         Beginning in January 1, 1999, China's government required that all
manufacturers of telecommunications equipment connected to public or private
telecommunications networks within China obtain a network access license for
each of its products. Sellers are prohibited from selling or advertising for
sale equipment for which its manufacturer has not obtained a network access
license and may be liable for penalties in an amount up to three times revenue
from the sale of any equipment sold beginning January 1, 1999 without a license.
Failure to obtain the required licenses could permit the authorities to force
the Company to remove previously installed equipment and could preclude the
Company from making further sales of the unlicensed products in China, which
would substantially harm the Company's business.

         Management has applied for network access licenses for the Airstar
system and for other products which the Company is no longer manufacturing
but had previously sold. However, the Company has not yet received these
access licenses and has no any assurance that a license will be issued.
Management believes that no penalties or fines will be payable for
non-compliance with these licensing requirements and that there will be no
adverse effect on the Company's business or financial condition.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
         RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

                                       10
<PAGE>

         This report contains forward-looking statements, which reflect the
Company's current views with respect to future events, which may impact the
Company's results of operations and financial condition. In this report, the
words "anticipates", "believes", "expects", "intends", "future" and similar
expressions identify forward-looking statements. These forward-looking
statements are subject to risks and uncertainties and other factors, including
without limitation those set forth below under the caption "Factors Which May
Affect Future Results," which could cause actual future results to differ
materially from historical results or those described in the forward-looking
statements. The forward-looking statements contained in this report should be
considered in light of these and other factors. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof.

OVERVIEW

         We provide communications equipment for service providers that operate
wireless and wireline networks in rapidly growing communications markets. Our
integrated suite of network access systems, optical transmission products and
subscriber terminal products allows service providers to offer efficient and
scalable voice, data and Internet access services. Service providers can easily
integrate our standards-based systems into their existing networks and deploy
our systems in new broadband, IP-based and wireless network rollouts. To date,
substantially all of our sales have been to service providers in China.

         We incorporated in Delaware as Unitech Industries Inc. in 1991. Since
our incorporation, we have focused our resources on developing products for
China's communications market. We shipped our first network access products in
1993. In 1994, we changed our name to Unitech Telecom, Inc. In 1995, we acquired
StarCom Network Systems, Inc. and changed our name to UTStarcom, Inc. During
1996, we introduced our advanced, V5.1 and V5.2 compliant, multi-service network
access product, the AN-2000. Late in 1996, we introduced our Airstar wireless
access system. In December 1999, we completed the acquisition of Wacos, Inc., a
research and development subsidiary that develops IP-based switching systems. As
part of our business operations in China, we have established a wholly owned
subsidiary and three joint ventures in that country.

         To date, we have derived substantially all of our revenues from sales
of communications equipment to service providers in China. Each of the Posts and
Telecommunication Bureaus (PTBs) to whom we sell our equipment in China is part
of the China Telecom system and subject to its ultimate control. However,
equipment purchasing decisions are generally made at the individual PTB level.
Our customers often make a large initial purchase of our equipment followed by
supplemental purchases of enhancements and upgrades. As a result, our largest
revenue-producing customers typically vary from period-to-period.

         Almost 99% of our sales for the three months ended June 30, 2000 were
made in China. Accordingly, our business, financial condition and results of
operations may be influenced by the political, economic and legal environment in
China, and by the general state of China's economy. Our operations in China are
subject to special considerations and significant risks not typically associated
with companies in the United States. These include risks associated with, among
others, the political, economic and legal environments and foreign currency
exchange. Our results may be adversely affected by, among other things, changes
in the political, economic and social conditions in China, and by changes in
governmental policies with respect to laws and regulations, changes in China's
telecommunications industry and regulatory rules and policies, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of
taxation.

         Specifically, remittances from China which are of a capital nature,
such as the repayment of bank loans denominated in foreign currencies, require
approval from appropriate governmental authorities before Renminbi can be used
to purchase foreign currency. Although the payment of cash dividends is
permitted so long as our subsidiaries have sufficient reserves and adequate
amounts of Renminbi to purchase foreign currency, regulations restrict the
ability of our subsidiaries to transfer funds to us through intercompany loans
and advances.

         We sell our products in China through a direct sales force. The
evaluation period for our products may span a year or more. Revenue from product
sales is recognized when title is passed and all significant contractual
obligations have been satisfied and collection of the resulting receivable is
reasonably assured. Title passes on customer acceptance.

         Cost of sales consists primarily of material costs, third party
commissions, costs associated with assembly and testing of products, costs
associated with installation and customer training and overhead and warranty
costs. Cost of sales also includes import taxes on components.

         Our gross profit has been affected by material costs, product mix,
average selling prices, and the type of distribution channel through which we
sell our products. Our gross profit, as a percentage of net sales, varies among
our product families. The gross profits, as a percentage of net sales, on our
mobile phone handsets are very low. We expect that our overall gross profit, as
a percentage of net sales, will fluctuate from period to period as a result of
shifts in product mix, anticipated decreases in average selling prices and our
ability to reduce product costs.

                                       11
<PAGE>

         Selling, general and administrative expenses include compensation and
benefits, professional fees, sales commissions, provision for uncollectible
accounts receivable and travel and entertainment costs. We intend to pursue
aggressive selling and marketing campaigns and to expand our direct sales
organization and, as a result, our sales and marketing expenses will increase in
future periods. We also expect that in support of our continued growth and our
operations as a public company general and administrative expenses will continue
to increase for the foreseeable future.

         Research and development expenses consist primarily of salaries and
related costs of employees engaged in research, design and development
activities, the cost of parts for prototypes, equipment depreciation and third
party development expenses. We believe that continued investment in research and
development is critical to our long-term success. Accordingly, we expect that
our research and development expenses will increase in future periods.

         In connection with the grant of stock options to some of our
employees, we recorded net deferred compensation of $15.9 million during 1999
and $2.9 million during the six months ended June 30, 2000, representing the
difference between the deemed fair value of common stock for accounting
purposes and the option exercise price for these options at the date of
grant. In connection with grants to non-employees during 1999, we recorded
deferred compensation of $7.4 million. Deferred compensation is presented as
a reduction of stockholders' equity, with amortization recorded over the
vesting period of the option, which is generally four years. We recorded
stock compensation expense of approximately $5.6 million during 1999 and $8.4
million during the six months ended June 30, 2000. At June 30, 2000,
approximately $10.2 million remained to be amortized.

         Amortization of intangible assets consists primarily of the
amortization of intangible assets associated with acquisitions in China and our
acquisition of the minority interest in our Wacos, Inc. subsidiary.

         Consolidated equity in net income (loss) of affiliated companies
comprises our share of the earnings from our Guangdong manufacturing subsidiary.

         Under current regulations in China, foreign investment enterprises that
have been accredited as technologically advanced enterprises are entitled to
additional tax incentives. These tax incentives vary in different locales and
could include preferential national enterprise income tax treatment at 50% of
the usual rates for different periods of time. All of our active subsidiaries in
China were accredited as technologically advanced enterprises.

         Minority interest in (earnings) loss of consolidated subsidiaries
represents the share of earnings in our Zhejiang manufacturing joint venture
that is owned by our subsidiary partner.





RESULTS OF OPERATIONS

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999

         NET SALES. Our net sales increased 89.9% from $42.1 million for the
three months ended June 30, 1999 to $80.0 million for the corresponding period
in 2000. This increase was primarily due to an increase in sales volume of our
Airstar system. For the three months ended June 30, 2000, sales to Hangzhou PTB
and Baoding PTB accounted for 17.1% and 11.5% of our net sales, respectively.
For the three months ended June 30, 1999, sales to Kunming PTB accounted for
41.8% of our net sales.

         GROSS PROFIT. Gross profit increased 55.4% from $18.3 million for the
three months ended June 30, 1999 to $28.4 million for the corresponding period
in 2000. Gross profit, as a percentage of net sales, decreased from 43.3% for
the three months ended June 30, 1999 to 35.5% for the three months ended June
30, 2000. The decrease in gross profit, as a percentage of net sales, was
primarily due to increases in sales of lower margin handsets.

         SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased 16.7% from $8.3 million for the three months
ended June 30, 1999 to $9.7 million for the corresponding period in 2000. The
increase in selling, general and administrative expenses was primarily due to
increased sales and administrative personnel and related expenses associated
with the growth in net sales and the expansion of our overall level of business
activities. Selling, general and administrative expenses as a percentage of net
sales decreased from 19.7% for the three months ended June 30, 1999 to 12.1% for
the corresponding period in 2000. The decrease in selling, general and
administrative expenses as a percentage of net sales was primarily due to
economies of scale associated with the significant increases in net sales. We
expect our selling, general and administrative expenses to increase in absolute
dollar amounts in future periods as sales and marketing activities increase and
we further invest in infrastructure and incur additional expenses related to
anticipated growth of our business and operation as a publicly held company.

                                       12
<PAGE>

         RESEARCH AND DEVELOPMENT Research and development expenses increased
98.8% from $4.1 million for the three months ended June 30, 1999 to $8.2 million
for the corresponding period in 2000. The increase in research and development
expenses was primarily due to the hiring of additional technical personnel and
increased prototype expenses and licensing fees to support our research and
development efforts. As a percentage of net sales, research and development
expenses increased from 9.8% for the three months ended June 30, 1999 to 10.3%
for the corresponding period in 2000. We expect our research and development
expenses to increase in absolute dollar amounts in future periods as we expand
our research and development organization to support new product development.

         STOCK COMPENSATION EXPENSE Stock compensation expense increased from
$0.7 million for the three months ended June 30, 1999 to $1.9 million for the
corresponding period in 2000. The expense is related to certain stock option
grants to employees and non-employees which we are amortizing over the vesting
periods of the applicable options.

         AMORTIZATION OF INTANGIBLE ASSETS Amortization of intangible assets
increased from $37,000 for the three months ended June 30, 1999 to $1.2 million
for the corresponding period in 2000. The increase in amortization of intangible
assets was due to the increase in amortization associated with our December 1999
acquisition of the portion of our Wacos, Inc. subsidiary owned by the minority
shareholders.

         INTEREST INCOME (EXPENSES), NET Net interest expenses were $0.3 million
for the three months ended June 30, 1999 and net interest income was $2.7
million for the corresponding period in 2000. The increase in interest income
was primarily due to increased interest income from higher average cash
balances.

         OTHER INCOME (EXPENSES), NET Other expense was $0.2 million for the
three months ended June 30, 1999 and other income was $0.3 million for the
corresponding period in 2000. The increase in other income was primarily due to
gain on settlement of forward foreign exchange contract.

         EQUITY IN INCOME (LOSS) OF AFFILIATED COMPANIES Consolidated equity in
net income of affiliated companies was $0.7 million for the three months ended
June 30, 1999 and consolidated equity in net loss of affiliated companies was
$0.1 million for the corresponding period in 2000. The change between the two
periods was primarily due to the decrease of net income at our Guangdong
manufacturing subsidiary.

         INCOME TAX EXPENSE Income tax expense was $213,000 for the three months
ended June 30, 1999 and income tax expenses were $3.8 million for the
corresponding period in 2000. The increase in the income tax expenses was due to
our increasing income.

         MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARIES Minority
interest in earnings of consolidated subsidiaries was $0.1 million for the three
months ended June 30, 1999 and $0.3 million for the corresponding period in
2000. The change between the two periods was primarily due to the increased
profitability at our Zhejiang subsidiary.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999

         NET SALES. Our net sales increased 99.1% from $69.7 million for the six
months ended June 30, 1999 to $138.8 million for the corresponding period in
2000. This increase was primarily due to an increase in sales volume of our
Airstar system. For the six months ended June 30, 2000, sales to Hangzhou PTB
accounted for 26.6% of our net sales. For the six months ended June 30, 1999,
sales to Kunming PTB and Baoding PTB accounted for 25.9% and 13.5% of our net
sales, respectively.

         GROSS PROFIT. Gross profit increased 76.9% from $27.9 million for the
six months ended June 30, 1999 to $49.3 million for the corresponding period in
2000. Gross profit, as a percentage of net sales, decreased from 40.0% for the
six months ended June 30, 1999 to 35.5% for the six months ended June 30, 2000.
The decrease in gross profit, as a percentage of net sales, was primarily due to
increases in sales of lower margin handsets.

         SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased 36.5% from $13.9 million for the six months
ended June 30, 1999 to $18.9 million for the corresponding period in 2000. The
increase in selling, general and administrative expenses was primarily due to
increased sales and administrative personnel and related expenses associated
with the growth in net sales and the expansion of our overall level of business
activities. Selling, general and administrative expenses as a percentage of net
sales decreased from 19.9% for the six months ended June 30, 1999 to 13.7% for
the corresponding period in 2000. The decrease in selling, general and
administrative expenses as a percentage of net sales was primarily due to
economies of scale associated with the significant increases in net sales. We
expect our selling, general and administrative expenses to increase in absolute
dollar amounts in future periods as sales and marketing activities increase and
we further invest in infrastructure and incur additional expenses related to
anticipated growth of our business and operation as a publicly held company.

                                       13
<PAGE>

         RESEARCH AND DEVELOPMENT Research and development expenses increased
77.7% from $8.2 million for the six months ended June 30, 1999 to $14.5 million
for the corresponding period in 2000. The increase in research and development
expenses was primarily due to the hiring of additional technical personnel and
increased prototype expenses and licensing fees to support our research and
development efforts. As a percentage of net sales, research and development
expenses decreased from 11.7% for the six months ended June 30, 1999 to 10.5%
for the corresponding period in 2000. We expect our research and development
expenses to increase in absolute dollar amounts in future periods as we expand
our research and development organization to support new product development.

         STOCK COMPENSATION EXPENSE Stock compensation expense increased from
$1.3 million for the six months ended June 30, 1999 to $8.4 million for the
corresponding period in 2000. The expense is related to certain stock option
grants to employees and non-employees which we are amortizing over the vesting
periods of the applicable options.

         AMORTIZATION OF INTANGIBLE ASSETS Amortization of intangible assets
increased from $74,000 for the six months ended June 30, 1999 to $2.4 million
for the corresponding period in 2000. The increase in amortization of intangible
assets was due to the increase in amortization associated with our December 1999
acquisition of the portion of our Wacos, Inc. subsidiary owned by the minority
shareholders.

         INTEREST INCOME (EXPENSES), NET Net interest expenses were $0.6 million
for the six months ended June 30, 1999 and net interest income was $3.3 million
for the corresponding period in 2000. The increase in interest income was
primarily due to increased interest income from higher average cash balances.

         OTHER INCOME (EXPENSES), NET Other expense was $0.1 million for the six
months ended June 30, 1999 and other income was $0.5 million for the
corresponding period in 2000. The increase in other income was primarily due to
gain on settlement of forward foreign exchange contract and dividend income from
our investment in affiliated companies.

         EQUITY IN INCOME (LOSS) OF AFFILIATED COMPANIES Consolidated equity in
net income of affiliated companies was $0.9 million for the six months ended
June 30, 1999 and consolidated equity in net loss of affiliated companies was
$0.3 million for the corresponding period in 2000. The change between the two
periods was primarily due to the decrease of net income at our Guangdong
manufacturing subsidiary.

         INCOME TAX EXPENSE Income tax expense was $185,000 for the six months
ended June 30, 1999 and income tax expenses were $4.7 million for the
corresponding period in 2000. The increase in the income tax expenses was due to
our increasing income.

         MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARIES Minority
interest in earnings of consolidated subsidiaries was $0.6 million for the six
months ended June 30, 1999 and $0.5 million for the corresponding period in
2000. The change between the two periods was primarily due to the decreased
profitability at our Zhejiang subsidiary.


LIQUIDITY AND CAPITAL RESOURCES

         We have financed our operations through the sales of preferred stock,
bank lines of credit and our initial public offering in March 2000. In November
and December 1999, we secured private equity financing totaling $55.0 million.
In March, 2000, we raised $189.4 million in net proceeds from our initial public
offering. As of June 30, 2000, we had working capital of $333.5 million,
including $201.7 million in cash and cash equivalents, $45.4 million of short
term investments and $65.7 million of Renminbi-denominated bank borrowings.

         We have invested $5.0 million and may invest up to an additional
$10.0 million in an investment fund to be established by SOFTBANK focused on
investments in Internet companies in China. Our investment will constitute
10% of the funding for the SOFTBANK investment fund, with SOFTBANK
contributing the remaining 90%. We will be a passive investor and have no
decision-making authority with respect to investments by the fund. The fund
will have a separate management team, and none of our employees will be
employed by the fund. One of our directors will serve as the Chief Executive
Officer of the fund, and our Chief Executive Officer will be chairman of the
board of the fund. We will not be obligated to pay, nor will we receive, any
fees in connection with services provided to the fund. We do not know what
material fees will be paid to or by SOFTBANK or any other parties in
connection with services provided to the fund.

         Net cash used in operations for the six months ended June 30, 2000 of
$57.0 million was primarily due to an increase in inventories, accounts
receivable and other current and non-current assets of $31.2 million, $26.3
million and $7.0 million, respectively, and a decrease in accounts payable of
$7.9 million. The uses of cash were partially offset by depreciation and
amortization expense of $4.2 million and amortization of deferred stock
compensation expense of $8.4 million.

                                       14
<PAGE>

         Net cash used in investing activities for the six months ended June 30,
2000 of $54.5 million was primarily due to acquisition of property, plant and
equipment of $4.3 million, our $5 million investment in SOFTBANK investment
fund, and the purchase of short-term investments of $45.4 million.

         Net cash provided by financing activities for the six months ended
June 30, 2000 of $225.9 million was primarily due to net proceeds of $189.4
million from the issuance of common stock through our initial public offering,
and net proceeds of $31.1 million from borrowing under our lines of credit.

         Our international sales are generally denominated in local currencies.
Due to the limitations on converting Renminbi, we are limited in our ability to
engage in currency hedging activities in China. Although the impact of currency
fluctuations to date has been insignificant, we cannot guarantee that
fluctuations in currency exchange rates in the future will not have a material
adverse effect on revenues from international sales and, correspondingly, on our
business, financial condition and results of operations. We also have contracts
negotiated in Japanese Yen for purchasing portions of our inventories and
supplies. We have entered into foreign currency hedging transactions to reduce
exposure to foreign exchange risks. As of June 30, 2000, we had a forward
contract to hedge Japanese Yen valued at $3.8 million. The contract was entered
into on February 22, 2000.

         We believe that our existing cash and cash equivalents, short-term
investments and cash from operations will be sufficient to finance our
operations through at least the next 12 months. If additional financing is
needed, there can be no assurance that such financing will be available to us
on commercially reasonable terms, or at all.

FACTORS AFFECTING FUTURE OPERATING RESULTS


OUR FUTURE SALES ARE UNPREDICTABLE, OUR OPERATING RESULTS ARE LIKELY TO
FLUCTUATE FROM QUARTER TO QUARTER, AND IF WE FAIL TO MEET THE EXPECTATIONS OF
SECURITIES ANALYSTS OR INVESTORS, OUR STOCK PRICE COULD DECLINE SIGNIFICANTLY

         Our quarterly and annual operating results have fluctuated in the past
and are likely to fluctuate in the future due to a variety of factors, some of
which are outside of our control. As a result, period to period comparisons of
our operating results are not necessarily meaningful or indicative of future
performance. Furthermore, it is likely that in some future quarters our
operating results will fall below the expectations of securities analysts or
investors. If this occurs, the trading price of our common stock could decline.

         Factors that may affect our future operating results include:


         -    the timing, number and size of orders for our products, as well as
              the relative mix of orders for each of our products, particularly
              the volume of lower margin telephone handsets;

         -    the evolving and unpredictable nature of the economic, regulatory
              and political environments in China and other countries in which
              we market or plan to market our products;

         -    aggressive price reductions by our competitors;

         -    currency fluctuations;

         -    market acceptance of our products and product enhancements;

         -    the lengthy and unpredictable sales cycles associated with sales
              of our products combined with the impact of this variability on
              our suppliers' ability to provide us with components on a timely
              basis; and

         -    longer collection periods of accounts receivable in China and
              other countries.

         The limited performance history of some of our products, our limited
forecasting experience and processes and the emerging nature of our target
markets make forecasting our future sales and operating results difficult. Our
expense levels are based, in part, on our expectations regarding future sales,
and these expenses are largely fixed, particularly in the short term. In
addition, to enable us to promptly fill orders, we maintain inventories of
finished goods, components and raw materials. As a result, we commit to
considerable costs in advance of anticipated sales. In the past, a substantial
portion of our sales in each quarter resulted from orders received and shipped
in that quarter, and we have operated with a limited backlog of unfilled orders.
Accordingly, we may not be

                                       15
<PAGE>

able to reduce our costs in a timely manner to compensate for any unexpected
shortfall between forecasted and actual sales. Any significant shortfall of
sales may require us to maintain higher levels of inventories of finished goods,
components and raw materials than we require, thereby increasing our risk of
inventory obsolescence and corresponding inventory write-downs and write-offs.
Although we have reserved against inventory obsolescence, we cannot guarantee
that these reserves will be adequate to offset all write-downs or write-offs.


WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT

         As of June 30, 2000, we had an accumulated deficit of approximately
$31.6 million. We anticipate continuing to incur significant sales and
marketing, research and development and general and administrative expenses and,
as a result, we will need to generate higher revenues to sustain profitability.
Numerous factors could negatively impact our results of operations, including a
decrease in sales, price pressures and a fixed cost structure which could limit
our ability to respond to declining revenues. Although our sales have grown in
recent quarters, our past results should not be relied on as indications of our
future performance. We cannot assure you that we will be able to remain
profitable in future periods.

COMPETITION IN OUR MARKETS MAY LEAD TO REDUCED PRICES, REVENUES AND MARKET SHARE

         We face intense competition in our target markets and expect
competition to increase. Increased competition in our target markets may result
in price reductions, reduced gross profit as a percentage of net sales and loss
of market share. Our principal competitors for our different product lines
include the following:

    -    AIRSTAR SYSTEM: Alcatel Alsthom CGE, S.A.; Ericsson LM Telephone Co.;
         Huawei Technology Co., Ltd.; Lucent Technologies, Inc.; Motorola, Inc.;
         NEC Corporation; Siemens AG; and Zhongxing Telecommunications
         Equipment.

    -    AN-2000 AND OMUX: Advanced Fibre Communications, Inc.; Alcatel; Bosch
         Telecom GmbH; ECI Telecom Ltd.; Ericsson; Fujitsu Limited; Huawei;
         Lucent; NEC; Nokia Corporation; Shanghai Bell Alcatel Mobile
         Communication; Siemens; and Zhongxing.

    -    WACOS SYSTEM: Alcatel; Cisco Systems, Inc.; Clarent Corporation;
         Ericsson; Huawei; Lucent; Motorola; Nokia; Nortel Networks Corporation;
         Nuera Communications, Inc.; Siemens; Tachion Networks, Inc.; and Vienna
         Systems Corp.

         We are increasingly facing competition from domestic companies in China
and believe that our strongest competition in the future may come from these
companies, many of which operate under lower cost structures and more favorable
governmental policies and with much larger sales forces than we do. Furthermore,
other companies not presently offering competing products may also enter our
target markets. Many of our competitors have significantly greater financial,
technical, product development, sales, marketing and other resources than we do.
Additionally, some competitors may be able to offer significant financing
arrangements to service providers, in some cases facilitated by favorable
government policies. Moreover, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties, including our current customers, to increase their ability to
produce products that address the needs of service providers in our target
markets.

THE SUCCESS OF OUR BUSINESS DEPENDS ON A RELATIVELY SMALL NUMBER OF LARGE SYSTEM
DEPLOYMENTS, AND ANY CANCELLATION, REDUCTION OR DELAY IN THESE DEPLOYMENTS COULD
HARM OUR BUSINESS

         Our business is characterized by large system deployments for a
relatively small number of service providers. In the three months ended June 30,
2000, one customer accounted for 17.1% of our net sales. Our dependence on large
system deployments makes our ability to provide systems in a timely and
cost-effective manner critically important to our business. We have in the past
experienced delays and encountered other difficulties in the installation and
implementation of our systems. Various factors could cause future delays,
including technical problems and the shortage of qualified technicians. Any
delays or difficulties in deploying our systems, or the cancellation of any
orders by service providers, could significantly harm our business.

WE DO NOT HAVE SOME OF THE LICENSES WE REQUIRE TO SELL OUR NETWORK ACCESS
PRODUCTS IN CHINA

         Beginning January 1, 1999, China's government required that all
telecommunications equipment connected to public or private telecommunications
networks within China be approved by the Ministry of Information Industry and
the manufacturer of the equipment obtain a network access license for each of
its products. Sellers are prohibited from selling or advertising for sale
equipment for which its manufacturer has not obtained a network access license
and may be liable for penalties in an amount up to three times earnings from the

                                       16
<PAGE>

sale of any equipment sold beginning January 1, 1999 without a license. In
addition, any unlicensed equipment may be required to be removed from the
network. Failure to obtain the required licenses could require us to remove
previously installed equipment and would prohibit us from making further sales
of the unlicensed products in China, which would substantially harm our
business.

         The regulations implementing these requirements are not very detailed,
have not been applied by a court and may be interpreted and enforced by
regulatory authorities in a number of different ways. Accordingly, we have
obtained an opinion from our counsel in China as to which licenses we are
required to obtain. Based upon this counsel's advice, we believe that we have
obtained the required network access licenses for our AN-2000 system, bundled
OMUX product and standard OMUX product. We have applied for a network access
license for our Airstar system. In June, 2000 the Ministry of Information
Industry issued an internal notice concluding its review of PHS-based equipment.
Our Airstar system will continue to be allowed in China's county-level cities
and counties, which are our primary markets for our Airstar system. In large and
medium-sized cities, our Airstar system may be used on a limited basis where
there is a high concentration of population, such as campuses, commercial
buildings and special development zones. New city-wide Airstar system
deployments will not be allowed in large and medium-size cities. The evaluation
group for access networks under the Ministry of Information Industry has
recommended that the Ministry of Information Industry issue a license for our
Airstar system. However, we do not yet have this network access license and we
cannot provide any assurance that such a license will be issued for our Airstar
system. We have also applied for network access licenses for other products
which we are no longer manufacturing but had previously sold to service
providers in China. Network access licenses will be required for any additional
products that we may develop for sale in China, including our WACOS system.
Based upon verbal inquiries made by our counsel in China to the Ministry of
Information Industry, we believe that for products which we sold before January
1, 1999, such as the Airstar system, no penalties will be imposed by the
Ministry of Information Industry for sales we have made or will make during the
period in which an application for a network access license is pending. However,
our counsel in China has advised us that China's governmental authorities may
interpret or apply the regulations with respect to which licenses are required
and the ability to sell a product while an application for a network access
license is pending in a manner that is inconsistent with the verbal
representation received by our counsel in China, either of which could have a
material adverse effect on our business and financial condition.

OUR BUSINESS MAY SUFFER IF WE ARE UNABLE TO COLLECT PAYMENTS FROM OUR CUSTOMERS
ON A TIMELY BASIS

         Our customers often must make a significant commitment of capital to
purchase our products. As a result, any downturn in a customer's business that
affected the customer's ability to pay us could harm our financial condition.
Moreover, accounts receivable collection cycles historically tend to be much
longer in China than in other markets. The failure of any of our customers to
make timely payments could require us to write-off accounts receivable or
increase our accounts receivable reserves, either of which could adversely
affect our financial condition.

A DECLINE IN BUSINESS ACTIVITY DURING CHINA'S LUNAR NEW YEAR MAY RESULT IN
DECREASED SALES DURING OUR FIRST QUARTER

         Business activity in China declines considerably during the first
quarter of each year in observance of the Lunar New Year. As a result, sales
during the first quarter of our fiscal year have in the past typically been
lower than sales during the fourth quarter of the preceding year and we expect
this trend to continue in the future. We will continue to face this seasonality
in the future and do not have the ability to forecast with any degree of
certainty the impact of the decreased business activity during the Lunar New
Year on our sales and operating results.

OUR MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE, AND TO COMPETE EFFECTIVELY,
WE MUST CONTINUALLY INTRODUCE NEW PRODUCTS THAT ACHIEVE MARKET ACCEPTANCE

         The emerging market for communications equipment in developing
countries is characterized by rapid technological developments, frequent new
product introductions and evolving industry and regulatory standards. Our
success will depend in large part on our ability to enhance our network access
and switching technologies and develop and introduce new products and product
enhancements that anticipate changing service provider requirements and
technological developments. We may need to make substantial capital expenditures
and incur significant research and development costs to develop and introduce
new products and enhancements. If we fail to timely develop and introduce new
products or enhancements to existing products that effectively respond to
technological change, our business, financial condition and results of
operations could be materially adversely affected.

         From time to time, we or our competitors may announce new products or
product enhancements, services or technologies that have the potential to
replace or shorten the life cycles of our products and that may cause customers
to defer purchasing our existing products, resulting in inventory obsolescence.
Future technological advances in the communications industry may diminish or
inhibit market acceptance of our existing or future products or render our
products obsolete.

         Even if we are able to develop and introduce new products, we cannot
assure you that they will gain market acceptance. Market

                                       17
<PAGE>

acceptance of our products will depend on various factors including:

    -    our ability to obtain necessary approvals from regulatory
         organizations;

    -    the perceived advantages of the new products over competing products;

    -    our ability to attract customers who have existing relationships with
         our competitors;

    -    product cost relative to performance; and

    -    the level of customer service available to support new products.

         Specifically, sales of our AN-2000 system outside of China depend,
in part, on the adoption of the V5.2 standard in these markets. Additionally,
sales of our Personal Access System, or PAS, the mobile component of our
Airstar wireless system, will depend in part upon consumer acceptance of the
mobility limitations of this service. The introduction of inexpensive
wireless telephone service or other competitive services in China may have a
material adverse effect on sales of our Airstar systems in China. If our
existing or new products fail to achieve market acceptance for any reason,
our business could be seriously harmed.

OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO DELIVER QUALITY PRODUCTS ON A
TIMELY AND COST EFFECTIVE BASIS

         Our operating results depend on our ability to manufacture products on
a timely and cost effective basis. In the past, we have experienced reductions
in yields as a result of various factors, including defects in component parts
and human error in assembly. If we experience a deterioration in manufacturing
performance or a delay in production of any of our products, we could experience
delays in shipments and cancellations of orders. Moreover, networking products
frequently contain undetected software or hardware defects when first introduced
or as new versions are released. In addition, our products are often embedded in
or deployed in conjunction with service providers' products which incorporate a
variety of components produced by third parties. As a result, when a problem
occurs, it may be difficult to identify the source of the problem. These
problems may cause us to incur significant warranty and repair costs, divert the
attention of our engineering personnel from our product development efforts and
cause significant customer relation problems or loss of customers, any one of
which could harm our business.

         If future demand for our products requires additional manufacturing
capacity, we may invest in and build additional manufacturing facilities, most
likely in China. However, we cannot assure you that the new manufacturing
facilities will attain the same quality or level of efficiencies as our existing
facilities. Alternatively, or in addition, we may contract with third party
manufacturing facilities over which we may be unable to exercise the same degree
of quality control as we can over our own facilities. We currently have no
arrangements with any independent manufacturing facility, and we may not be able
to obtain independent manufacturing sources on commercially attractive terms if
and when needed.

WE DEPEND ON SOME SOLE SOURCE AND OTHER KEY SUPPLIERS FOR HANDSETS, COMPONENTS
AND MATERIALS USED IN OUR PRODUCTS, AND IF THESE SUPPLIERS FAIL TO PROVIDE US
WITH ADEQUATE SUPPLIES OF HIGH QUALITY PRODUCTS, OUR COMPETITIVE POSITION,
REPUTATION AND BUSINESS COULD BE HARMED

         Some components and materials used in our products are purchased from a
single supplier or a limited group of suppliers. If any supplier is unwilling or
unable to provide us with high quality components and materials in the
quantities required and at the costs specified by us, we may not be able to find
alternative sources on favorable terms, in a timely manner, or at all. Our
inability to obtain or to develop alternative sources if and as required could
result in delays or reductions in manufacturing or product shipments. Moreover,
these suppliers may delay product shipments or supply us with inferior quality
products. If any of these events occur, our competitive position, reputation and
business could suffer.

OUR ABILITY TO SOURCE A SUFFICIENT QUANTITY OF HIGH QUALITY HANDSETS AND OTHER
COMPONENTS USED IN OUR PRODUCTS MAY BE LIMITED BY CHINA'S IMPORT RESTRICTIONS
AND DUTIES AS WELL AS OUR ABILITY TO OBTAIN SUFFICIENT DOMESTIC MANUFACTURING
CAPACITY

         We require a significant number of imported components to manufacture
our products in China. Imported electronic components and other imported goods
used in the operation of our business are subject to a variety of permit
requirements, approval procedures and import duties. Failure to obtain necessary
permits or approvals, administrative actions by China's government to limit
imports of certain components, or non-payment of required import duties could
subject us to penalties and fines and could adversely affect our ability to
manufacture and sell our products in China. In addition, import duties increase
the cost of our products and may make them less competitive.

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<PAGE>

         In particular, an integral component of our Airstar PAS system is the
handset used by subscribers to make and receive mobile telephone calls. Our
inability to obtain a sufficient number of high quality handsets could severely
harm our business. Currently, a worldwide shortage of handsets exists. Although
we have contracted with Japanese vendors to manufacture handsets under the
UTStarcom label, we cannot assure you that they will be able to supply adequate
quantities of handsets. Moreover, we must pay an import duty on each handset
that we import into China, which may result in a competitive cost advantage for
our competitors who produce handsets in China. As a result, we are evaluating
various manufacturing alternatives within China. Currently, we are in the early
stages of negotiations with third parties to manufacture handsets for us in
China. We may be unable to enter into arrangements with third parties who are
capable of producing adequate quantities of high-quality handsets. We also
intend to develop the capacity to manufacture our own handsets. However, we may
be unsuccessful in our efforts to do so. Additionally, to comply with
manufacturing regulations in China we will need to obtain components for our
handsets from local sources. These sources may not be able to produce adequate
quantities of components that meet our quality standards.

IF WE ARE UNABLE TO EXPAND OUR DIRECT SALES OPERATION IN CHINA AND INDIRECT
DISTRIBUTION CHANNELS ELSEWHERE OR SUCCESSFULLY MANAGE OUR EXPANDED SALES
ORGANIZATION, OUR OPERATING RESULTS MAY SUFFER

         Our distribution strategy focuses primarily on developing and expanding
our direct sales organization in China and our indirect distribution channels
outside of China. We may not be able to successfully expand our direct sales
organization in China and the cost of any expansion may exceed the revenue
generated from these efforts. Even if we are successful in expanding our direct
sales organization in China, we may not be able to compete successfully against
the significantly larger and better-funded sales and marketing operations of
current or potential competitors. In addition, if we fail to develop
relationships with significant international resellers or manufacturers'
representatives, or if these resellers or representatives are not successful in
their sales or marketing efforts, we may be unsuccessful in our expansion
efforts outside China.

WE EXPECT AVERAGE SELLING PRICES OF OUR PRODUCTS TO DECREASE WHICH MAY REDUCE
OUR REVENUES, AND, AS A RESULT, WE MUST INTRODUCE NEW PRODUCTS AND REDUCE OUR
COSTS IN ORDER TO MAINTAIN PROFITABILITY

         The average selling prices for communications access and switching
systems and subscriber terminal products, such as handsets, in China have been
declining as a result of a number of factors, including:

         -    increased competition;

         -    aggressive price reductions by competitors;

         -    rapid technological change; and

         -    price and performance enhancements.

         We have in the past experienced and expect in the future to experience
substantial period-to-period fluctuations in operating results due to declining
average selling prices. We anticipate that average selling prices of our
products will decrease in the future in response to product introductions by us
or our competitors or other factors, including price pressures from customers.
Therefore, we must continue to develop and introduce new products and
enhancements to existing products that incorporate features that can be sold at
higher average selling prices. Failure to do so could cause our revenues and
gross profit, as a percentage of net sales, to decline.

         Our cost reduction efforts may not allow us to keep pace with
competitive pricing pressures or lead to improved gross profit, as a percentage
of net sales. In order to be competitive, we must continually reduce the cost of
manufacturing our products through design and engineering changes. We may not be
successful in redesigning our products or delivering our products to market in a
timely manner. We cannot assure you that any redesign will result in sufficient
cost reductions to allow us to reduce the prices of our products to remain
competitive or to improve or maintain our gross profit, as a percentage of net
sales.

SHIFTS IN OUR PRODUCT MIX MAY RESULT IN DECLINES IN GROSS MARGIN PERCENTAGE OF
NET SALES

         Our gross profit margin percentage of net sales varies among our
product groups. Our gross margin percentage of net sales is generally higher on
our access network system products and our gross margin percentage of net sales
is significantly lower on our handset products. We also anticipate that the
gross margin percentage of net sales may be lower for our newly developed
products due to start-up costs and may improve as unit volumes increase and
efficiency can be realized. Our overall gross margin percentage of net sales has
fluctuated from period to period as a result of shifts in product mix, the
introduction of new products, decreases in average

                                       19
<PAGE>

selling prices for older products and our ability to reduce product costs. As a
result of a growth in sales of handset products over the past few quarters, we
have experienced a sustained product shift toward a greater percentage of
handset products resulting in a decline in overall gross margin percentage of
net sales. In addition, we expect to introduce new products in the future
periods. As a result of these recent trends, a potential decrease in overall
gross margin percentage of net sales may be experienced over the next few
quarters.

SERVICE PROVIDERS SOMETIMES EVALUATE OUR PRODUCTS FOR LONG AND UNPREDICTABLE
PERIODS WHICH CAUSES THE TIMING OF PURCHASES AND OUR RESULTS OF OPERATIONS TO BE
UNPREDICTABLE

         The period of time between our initial contact with a service provider
and the receipt of an actual purchase order may span a year or more. During this
time, service providers may subject our products to an extensive and lengthy
evaluation process before making a purchase. The length of these qualification
processes may vary substantially by product and service provider, making our
results of operations unpredictable. We may incur substantial sales and
marketing expenses and expend significant management effort during this process,
which ultimately may not result in a sale. These qualification processes often
make it difficult to obtain new customers, as service providers are reluctant to
expend the resources necessary to qualify a new supplier if they have one or
more existing qualified sources.

OUR INABILITY TO EXERCISE COMPLETE CONTROL OVER OUR SUBSIDIARIES MAY BE
DETRIMENTAL TO OUR BUSINESS

         A considerable portion of our operations is and will continue to be
conducted through direct and indirect subsidiaries. For example, we own an 88%
interest in a joint venture which operates the Zhejiang manufacturing facility
and a 51% interest in a joint venture which operates the Guangdong manufacturing
facility. Even though we may own a majority interest in these joint ventures, we
do not have sole power to control all of the policies and decisions of these
jointly-owned subsidiaries.

         Under the law of China governing Sino-foreign joint ventures, equity
holders exercise rights primarily through the board of directors, which
constitutes the highest authority of the joint venture. Although we own a
majority of the Guangdong joint venture, we are only entitled to appoint a
minority of the directors to the joint venture's board of directors, which
prevents us from controlling the actions of the board. Moreover, even though we
hold a majority of the board seats in the Zhejiang joint venture, China law
requires unanimous approval of the board of directors for some significant
corporate actions, including:

         -    amendment of the Articles of Association of the joint venture;

         -    liquidation or dissolution of the joint venture;

         -    any increase, decrease or transfer of equity interests of any
              party to the joint venture; and

         -    a merger of the joint venture with another economic entity.

         Our operating results and cash flow depend on the operating results and
cash flow of our subsidiaries and the payment of funds by those subsidiaries to
us. These subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay dividends or otherwise provide
financial benefits to us. Moreover, with respect to our Guangdong manufacturing
joint venture, any payment of dividends to us must be agreed to by our joint
venture partner, whose interests in receiving dividend distributions may not
coincide with ours. In addition, applicable law in some countries including
China limits the ability of a subsidiary to pay dividends for various reasons
including the absence of sufficient distributable reserves. In the event of any
insolvency, bankruptcy or similar proceedings, creditors of the subsidiaries
would generally be entitled to priority over us with respect to assets of the
affected subsidiary. In addition, because our joint venture partners in both
Zhejiang and Guangdong provinces are affiliated with the provincial Posts and
Telecommunications Administrations that operate the telecommunication networks
in these areas, if we fail to maintain these joint ventures, sales to our
customers located in these areas may decrease.

OUR MULTI-NATIONAL OPERATIONS SUBJECT US TO VARIOUS ECONOMIC, POLITICAL,
REGULATORY AND LEGAL RISKS

         We market and sell our products in China and other markets. The
expansion of our existing multi-national operations and entry into additional
international markets will require significant management attention and
financial resources. Multi-national operations are subject to inherent risks,
including:

         -    difficulties in designing products that are compatible with
              varying international communications standards;

         -    longer accounts receivable collection periods and greater
              difficulty in accounts receivable collection;

         -    unexpected changes in regulatory requirements;

                                       20
<PAGE>

         -    changes to import and export regulations, including quotas,
              tariffs and other trade barriers;

         -    delays or difficulties in obtaining export and import licenses;

         -    potential foreign exchange controls and repatriation controls on
              foreign earnings;

         -    exchange rate fluctuations and currency conversion restrictions;

         -    the burdens of complying with a variety of foreign laws and
              regulations;

         -    difficulties and costs of staffing and managing multi-national
              operations;

         -    reduced protection for intellectual property rights in some
              countries;

         -    potentially adverse tax consequences; and

         -    political and economic instability.

         Multinational companies are required to establish intercompany pricing
for transactions between their separate legal entities operating in different
taxing jurisdictions. These intercompany transactions are subject to audit by
taxing authorities in the jurisdictions in which multinational companies
operate. An additional tax liability may be incurred if it is determined that
intercompany pricing was not done at arm's length. We believe we have adequately
estimated and recorded our liability arising from intercompany pricing, but we
cannot assure you that an additional tax liability will not result from audits
of our intercompany pricing policies.

         In markets outside of China, we rely on a number of original equipment
manufacturers, or OEMs, and third-party distributors and agents to market and
sell our network access products. If these OEMs, distributors or agents fail to
provide the support and effort necessary to service developing markets
effectively, our ability to maintain or expand our operations outside of China
will be negatively impacted. We cannot assure you that we will successfully
compete in these markets, that our products will be accepted or that we will
successfully overcome the risks associated with international operations.

         Our international sales are generally denominated in local currencies.
Due to the limitations on converting Renminbi, we are limited in our ability to
engage in currency hedging activities in China. Although the impact of currency
fluctuations to date has been insignificant, fluctuations in currency exchange
rates in the future may have a material adverse effect on our results of
operations. We have contracts negotiated in Japanese Yen for purchasing portions
of our inventories and supplies. We have entered into foreign currency hedging
transactions to reduce exposure to foreign exchange risks. As of June 30, 2000,
we had a forward contract to hedge Japanese Yen valued at $3.8 million.

OUR FAILURE TO MEET INTERNATIONAL AND GOVERNMENTAL PRODUCT STANDARDS COULD BE
DETRIMENTAL TO OUR BUSINESS

         Many of our products are required to comply with numerous government
regulations and standards, which vary by market. As standards for products
continue to evolve, we will need to modify our products or develop and support
new versions of our products to meet emerging industry standards, comply with
government regulations and satisfy the requirements necessary to obtain
approvals. Our inability to obtain regulatory approval and meet established
standards could delay or prevent our entrance into or force our departure from
markets.

OUR RECENT GROWTH HAS STRAINED OUR RESOURCES, AND IF WE ARE UNABLE TO MANAGE AND
SUSTAIN OUR GROWTH, OUR OPERATING RESULTS WILL BE NEGATIVELY AFFECTED

         We have recently experienced a period of rapid growth and anticipate
that we must continue to expand our operations to address potential market
opportunities. If we fail to implement or improve systems or controls or to
manage any future growth and expansion effectively, our business could suffer.

         Our expansion has placed and will continue to place a significant
strain on our management, operational, financial and other resources. Many of
the members of our management team have limited experience in the management of
rapidly growing companies. To manage our growth effectively, we will need to
take various actions, including:

         -    enhancing management information systems and forecasting
              procedures;

                                       21
<PAGE>

         -    further developing our operating, administrative, financial and
              accounting systems and controls;

         -    maintaining close coordination among our engineering, accounting,
              finance, marketing, sales and operations organizations;

         -    expanding, training and managing our employee base; and

         -    expanding our finance, administrative and operations staff.

OUR SUCCESS IS DEPENDENT ON CONTINUING TO HIRE AND RETAIN QUALIFIED PERSONNEL,
AND IF WE ARE NOT SUCCESSFUL IN ATTRACTING AND RETAINING THESE PERSONNEL, OUR
BUSINESS WOULD BE HARMED

         The success of our business depends in significant part upon the
continued contributions of key technical and senior management personnel, many
of whom would be difficult to replace. In particular, our success depends in
large part on the knowledge, expertise and services of Hong Liang Lu, our
President and Chief Executive Officer, and Ying Wu, our Executive Vice President
and Chief Executive Officer of China Operations. The loss of any key employee,
the failure of any key employee to perform satisfactorily in his or her current
position or our failure to attract and retain other key technical and senior
management employees could have a significant negative impact on our operations.

         To effectively manage our recent growth as well as any future growth,
we will need to recruit, train, assimilate, motivate and retain qualified
employees. Competition for qualified employees is intense, and the process of
recruiting personnel with the combination of skills and attributes required to
execute our business strategy can be difficult, time-consuming and expensive. We
are actively searching for research and development engineers and sales and
marketing personnel, who are in short supply. Additionally, we have a need for
and have experienced difficulty in finding qualified accounting personnel
knowledgeable in U.S. and China accounting standards. If we fail to attract,
hire, assimilate or retain qualified personnel, our business would be harmed.

         Competitors and others have in the past and may in the future attempt
to recruit our employees. In addition, companies in the communications industry
whose employees accept positions with competitors frequently claim that the
competitors have engaged in unfair hiring practices. We may be the subject of
these types of claims in the future as we seek to hire qualified personnel. Some
of these claims may result in material litigation and disruption to our
operations. We could incur substantial costs in defending ourselves against
these claims, regardless of their merits.

ANY ACQUISITIONS THAT WE UNDERTAKE COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR
BUSINESS, DILUTE OUR STOCKHOLDERS AND HARM OUR OPERATING RESULTS

         We recently acquired Wacos, Inc., a research and development
subsidiary, through a merger. We continually evaluate additional acquisition
prospects that would complement our existing product offerings, augment our
market coverage, enhance our technological capabilities, or that may otherwise
offer growth opportunities. Acquisitions of other companies may result in
dilutive issuances of equity securities, the incurrence of debt and the
amortization of expenses related to goodwill and other intangible assets. In
addition, acquisitions involve numerous risks, including difficulties in the
assimilation of operations, technologies, products and personnel of the acquired
company, diversion of management's attention from other business concerns, risks
of entering markets in which we have no direct or limited prior experience, and
the potential loss of key employees of ours and the acquired company.

WE MAY EXPERIENCE DIFFICULTY IN IDENTIFYING, FORMING AND MAINTAINING NEW
BUSINESS VENTURES THAT ARE IMPORTANT TO THE DEVELOPMENT OF OUR BUSINESS

         We have invested, and expect to continue to invest, significant capital
in new business ventures. We cannot assure you that we will be able to continue
to identify suitable parties for new ventures in the future. The failure to form
or maintain new ventures could significantly limit our ability to expand our
operations. Moreover, these new ventures or investments require significant
management time, involve a high degree of risk and will present significant
challenges. We cannot assure you that these activities will be successful or
that we will realize appropriate returns on these activities. Additionally, if
any venture or investment fails, our business could be negatively impacted.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY AND MAY BE
SUBJECT TO CLAIMS THAT WE INFRINGE THE INTELLECTUAL PROPERTY OF OTHERS, EITHER
OF WHICH COULD SUBSTANTIALLY HARM OUR BUSINESS

         We rely on a combination of patents, copyrights, trade secret laws
and contractual obligations to protect our technology. Although we have
applied for several patents in the United States, one of which has been
issued, as well as in other countries, we cannot assure you that any
additional patents will be issued as a result of pending patent applications
or that our issued patents will be upheld. Moreover, we

                                       22
<PAGE>

have not yet obtained patents in China. We can give no assurance that we will be
able to obtain patents in China on our products or the technology that we use to
manufacture our products. Our subsidiaries and joint ventures in China rely upon
our trademarks, technology and know-how to manufacture and sell our products. We
cannot guarantee that these and other intellectual property protection measures
will be sufficient to prevent misappropriation of our technology or that our
competitors will not independently develop technologies that are substantially
equivalent or superior to ours. In addition, the legal systems of many foreign
countries, including China, do not protect intellectual property rights to the
same extent as the legal system of the United States. If we are unable to
adequately protect our proprietary information, our business, financial
condition and results of operations could be materially adversely affected.

         The increasing dependence of the communications industry on proprietary
technology has resulted in frequent litigation based on allegations of the
infringement of patents and other intellectual property. In the future we may be
subject to litigation to defend against claimed infringements of the rights of
others or to determine the scope and validity of the proprietary rights of
others. Future litigation also may be necessary to enforce and protect our trade
secrets and other intellectual property rights. Any intellectual property
litigation could be costly and could cause diversion of management's attention
from the operation of our business. Adverse determinations in any litigation
could result in the loss of our proprietary rights, subject us to significant
liabilities or require us to seek licenses from third parties which may not be
available on commercially reasonable terms, if at all. We could also be subject
to court orders preventing us from manufacturing or selling our products.

RISKS RELATING TO CHINA

         Sales in China account for substantially all of our sales.
Approximately $102.9 million, or 97.9%, of our sales in 1998, $186.1 million, or
99.3% of our sales in 1999, and $79.1 million, or 98.8% of our sales in the
second quarter of 2000 occurred in China. Additionally, a substantial portion of
our fixed assets are located in China. Of our total fixed assets, approximately
46.4% as of December 31, 1998, 53.7% as of December 31, 1999 and 48.0% as of
June 30, 2000 were in China. We expect to make further investments in China in
the future. Therefore, our business, financial condition and results of
operations are to a significant degree subject to economic, political and social
events in China.

DEVALUATION IN THE VALUE OF THE RENMINBI AND FLUCTUATIONS IN EXCHANGE RATES
COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS

         Exchange rate fluctuations could have a substantial negative impact on
our financial condition and results of operations. We purchase substantially all
of our materials in the United States and Japan and a significant portion of our
cost of goods sold is incurred in U.S. dollars and Japanese yen. A significant
portion of our operating expenses are incurred in U.S. dollars. At the same
time, most of our sales are denominated in Renminbi. The value of the Renminbi
is subject to changes in China's governmental policies and to international
economic and political developments. Although the official exchange rate for the
conversion of Renminbi to U.S. dollars has remained stable, with the Renminbi
appreciating slightly against the U.S. dollar since 1994, the exchange rate
experienced significant volatility prior to 1994 including periods of sharp
devaluation. There can be no assurance that exchange rates will not become
volatile or that the Renminbi will not devalue again against the U.S. dollar.

         In the past, financial markets in many Asian countries have experienced
severe volatility and, as a result, some Asian currencies have experienced
significant devaluation from time to time. The devaluation of some Asian
currencies may have the effect of rendering exports from China more expensive
and less competitive and therefore place pressure on China's government to
devalue the Renminbi. Any devaluation of the Renminbi could result in an
increase in volatility of Asian currency and capital markets. Future volatility
of Asian financial markets could have an adverse impact on our ability to expand
our product sales into Asian markets outside of China. Moreover, due to the
limitations on the convertibility of Renminbi, we are limited in our ability to
engage in currency hedging activities in China and do not currently engage in
currency hedging activities with respect to international sales outside of
China.


CURRENCY RESTRICTIONS IN CHINA MAY LIMIT THE ABILITY OF OUR SUBSIDIARIES AND
JOINT VENTURES IN CHINA TO OBTAIN AND REMIT FOREIGN CURRENCY NECESSARY FOR THE
PURCHASE OF IMPORTED COMPONENTS AND MAY LIMIT OUR ABILITY TO OBTAIN AND REMIT
FOREIGN CURRENCY IN EXCHANGE FOR RENMINBI EARNINGS

         China's government imposes controls on the convertibility of Renminbi
into foreign currencies and, in certain cases, the remittance of currency out of
China. Under the current foreign exchange control system, sufficient foreign
currency may not be available to satisfy our currency needs. Shortages in the
availability of foreign currency may restrict the ability of our Chinese
subsidiaries to obtain and remit sufficient foreign currency to pay dividends to
us, or otherwise satisfy their foreign currency denominated obligations such as
payments to us for components which we export to them and for technology
licensing fees. We may also experience difficulties in completing the
administrative procedures necessary to obtain and remit needed foreign currency.
Moreover, we cannot assure you that China's government will continue the policy
of making the Renminbi convertible under current accounts. Our inability to
convert and remit our sales received in Renminbi into U.S. dollars and make
necessary remittances could have a material adverse effect on our

                                       23
<PAGE>

business, financial condition and results of operations.

         Our business could be substantially harmed if we are unable to convert
our sales received in Renminbi into U.S. dollars. Under existing foreign
exchange laws, Renminbi held by our China subsidiaries can be converted into
foreign currencies and remitted out of China to pay current account items such
as payments to suppliers for imports, labor services, payment of interest on
foreign exchange loans and distributions of dividends so long as the
subsidiaries have adequate amounts of Renminbi to purchase the foreign currency.
Expenses of a capital nature such as the repayment of bank loans denominated in
foreign currencies, however, require approval from appropriate governmental
authorities before Renminbi can be used to purchase foreign currency and then
remitted out of China. This system could be changed at any time by executive
decision of the State Council to impose limits on current account convertibility
of the Renminbi or other similar restrictions. Moreover, even though the
Renminbi is intended to be freely convertible under the current account, the
State Administration of Foreign Exchange, which is responsible for administering
China's foreign currency market, has a significant degree of administrative
discretion in implementing the laws. From time to time, the State Administration
of Foreign Exchange has used this discretion in ways which effectively limit the
convertibility of current account payments and restrict remittances out of
China. Furthermore, in many circumstances the State Administration of Foreign
Exchange must approve foreign currency conversions and remittances. Under the
current foreign exchange control system, sufficient foreign currency may not be
available at a given exchange rate to satisfy our currency demands.

CHANGES WITHIN CHINA'S COMMUNICATIONS MARKET COULD HARM OUR BUSINESS

         We derive substantially all of our sales from local telecommunications
service providers in China which utilize network access equipment in the
continued expansion and upgrading of China's communications infrastructure. The
continued development of the communications infrastructure in China
correspondingly depends, in part, on the demand for voice and data services in
China and China's governmental policy. Although this industry has grown rapidly
in the past, we cannot assure you that it will continue to grow in the future.

         Any reduced demand for voice and data services, any other downturn or
other adverse changes in the China communications industry or the adoption or
enforcement of government policies that limit or prohibit our ability to
manufacture, market or sell our products could severely harm our business.

CHINA'S TELECOMMUNICATIONS INDUSTRY IS SUBJECT TO EXTENSIVE GOVERNMENT
REGULATION AND HAS RECENTLY BEEN RESTRUCTURED, WHICH HAS LED TO UNCERTAINTY

         China's telecommunications industry is heavily regulated by the
Ministry of Information Industry. The Ministry of Information Industry controls
the 33 provincial Posts and Telecommunications Administrations that exercise
regulatory responsibility over the telecommunications industries in their
respective provinces. The Ministry of Information Industry has broad discretion
and authority to regulate all aspects of the telecommunications and information
technology industry in China including managing spectrum bandwidths, setting
network equipment specifications and standards and drafting laws and regulations
related to the electronics and telecommunications industries.

         As part of the Chinese government's industry restructuring initiatives,
the regulatory functions of the Ministry of Information Industry and the Posts
and Telecommunications Administrations will be separated from the operational
functions of the state-owned companies under their control. Following this
separation, it is expected that the Ministry of Information Industry will act
exclusively as the industry regulator and will no longer manage the day-to-day
operations of telecommunications service providers in China. The separation of
the regulatory and operational functions of the Ministry of Information Industry
and the Posts and Telecommunications Administrations has not been completed. As
a result, the Ministry of Information Industry continues to exercise
administrative control over the operational goals and policies of
telecommunications service providers formerly under the control of the China
Telecom system. In addition, the provincial Posts and Telecommunications
Administrations continue to operate the fixed line telephone systems in their
respective provinces. We cannot predict when complete separation of the
regulatory and operational functions of the Ministry of Information Industry and
the provincial Posts and Telecommunications Administrations will be achieved.

         China does not yet have a national telecommunications law. The Ministry
of Information Industry, under the direction of the State Council, is currently
preparing a draft of the Telecommunications Law of the People's Republic of
China for ultimate submission to the National People's Congress for review and
adoption. It is unclear if and when the Telecommunications Law will be adopted.
If the Telecommunications Law is adopted, we expect it to become the basic
telecommunications statute and the source of telecommunications regulations in
China. Although we expect that a Telecommunications Law would have a positive
effect on the overall development of the telecommunications industry in China,
we do not know the nature and scope of regulation that it would create.
Accordingly, we cannot predict whether it will have a positive or negative
effect on us or on some or all aspects of our business.

         The Ministry of Information Industry has broad discretion to apply
standards in deciding what types of equipment may be connected to the national
telecommunications networks, the forms and types of services that may be offered
to the public and the content of material available in China over the Internet.
If the Ministry of Information Industry sets standards with which we are unable
to

                                       24
<PAGE>

comply, our ability to sell product in China may be limited, resulting in
substantial harm to our operations. For example, at the end of May 2000, we
became aware of an internal notice, circulated within the Ministry of
Information Industry, announcing a review of PHS-based telecommunications
equipment for future installation into China's telecommunications
infrastructure in which the Ministry of Information Industry requested
service providers to temporarily halt new deployments of PHS-based
telecommunications equipment, including our Airstar system, pending
conclusion of the Ministry of Information Industry review. Subsequently, at
the end of June 2000, we learned that the Ministry of Information Industry had
issued an internal notice concluding its review of PHS-based equipment and
allowing the continued deployment of our Airstar system in China's
county-level cities and counties, the primary markets for our Airstar system.
In addition, deployments in large and medium-sized cities will be allowed on
a limited basis where there is a high concentration of population, such as
campuses, commercial buildings and special development zones, however, new
city-wide deployments of our Airstar system will not be allowed in such large
and medium-sized cities. Failure of the Ministry of Information Industry to
allow the deployment of our Airstar system in the future could have a
material adverse effect on our business and financial condition.

CHINA CLOSELY RESTRICTS ACTIVITIES OF FOREIGN INVESTORS IN THE
TELECOMMUNICATIONS INDUSTRY

         China's government and its agencies, including the Ministry of
Information Industry and the State Council, regulate foreign investment in the
telecommunications industry through the promulgation of various laws and
regulations and the issuance of various administrative orders and decisions.
Foreign investment enterprises, companies and individuals are prohibited from
investing and participating in the operation and management of
telecommunications networks without special approval by the State Council. In
addition, they are restricted from manufacturing analog mobile communications
systems, including wireless telephones. We cannot assure you that China will not
promulgate new laws or regulations, or issue administrative or judicial
decisions or interpretations, which would further restrict or bar foreigners
from engaging in telecommunications-related activities. The promulgation of laws
or regulations or the issuance of administrative orders or judicial decisions or
interpretations restricting or prohibiting telecommunications activities by
foreigners could have a substantial impact on our ongoing operations.

OUR CUSTOMERS IN CHINA ARE PART OF THE CHINA TELECOM SYSTEM AND ARE SUBJECT TO
ITS ULTIMATE CONTROL. WE UNDERSTAND THAT CHINA TELECOM RECENTLY PROHIBITED ALL
POSTS AND TELECOMMUNICATIONS BUREAUS IN CHINA FROM PURCHASING LOW-MOBILITY
WIRELESS ACCESS SYSTEMS, SUCH AS OUR PAS SYSTEM, FOR IMPLEMENTATION IN LARGE
CITIES

         Each of the local Posts and Telecommunications Bureaus in China which
comprise our existing or potential customers is part of the China Telecom system
and subject to its ultimate control. Accordingly, China Telecom may issue policy
statements or make other decisions which govern the equipment purchasing
decisions of all of our customers in China. For example, we understand that
China Telecom recently prohibited all Posts and Telecommunications Bureaus from
purchasing PHS systems, such as our PAS systems, which are classified as
low-mobility wireless access systems for implementation in large cities. While
to date we have not marketed or sold our PAS systems in large cities, we may
wish to do so in the future. As the majority of our sales are generated from our
operations in China, this decision of China Telecom or other decisions by China
Telecom could cause substantial harm to our business.

CHINA'S GOVERNMENT POLICIES COULD IMPACT OUR BUSINESS

         Since 1978, China's government has been and is expected to continue
reforming its economic and political systems. These reforms have resulted in and
are expected to continue to result in significant economic and social
development in China. Many of the reforms are unprecedented or experimental and
may be subject to change or readjustment due to a number of political, economic
and social factors. We believe that the basic principles underlying the
political and economic reforms will continue to be implemented and provide the
framework for China's political and economic system. New reforms or the
readjustment of previously implemented reforms could have a significant negative
effect on our operations. Changes in China's political, economic and social
conditions and governmental policies which could have a substantial impact on
our business include:

         -    new laws and regulations or the interpretation of those laws and
              regulations;

         -    the introduction of measures to control inflation or stimulate
              growth;

         -    changes in the rate or method of taxation;

         -    the imposition of additional restrictions on currency conversion
              and remittances abroad; and

         -    any actions which limit our ability to develop, manufacture,
              import or sell our products in China, or to finance and operate
              our business in China.

CHINA'S ECONOMIC POLICIES COULD IMPACT OUR BUSINESS

         The economy of China differs from the economies of most countries
belonging to the Organization for Economic Cooperation and Development in
various respects such as structure, government involvement, level of
development, growth rate, capital reinvestment, allocation of resources,
self-sufficiency, rate of inflation and balance of payments position. In the
past, the economy of China has been primarily a planned economy subject to
one-and five-year state plans adopted by central government authorities and
largely implemented by provincial and local authorities which set production and
development targets.

         Since 1978, increasing emphasis had been placed on decentralization and
the utilization of market forces in the development of China's economy. Economic
reform measures adopted by China's government may be inconsistent or
ineffectual, and we may not in all cases be able to capitalize on any reforms.
Further, these measures may be adjusted or modified in ways which could result
in economic liberalization measures that are inconsistent from time to time or
from industry to industry or across different regions of the country.

                                       25
<PAGE>

China's economy has experienced significant growth in the past decade. This
growth, however, has been accompanied by imbalances in China's economy and has
resulted in significant fluctuations in general price levels, including periods
of inflation. China's government has implemented policies from time to time to
increase or restrain the rate of economic growth, control periods of inflation
or otherwise regulate economic expansion. While we may be able to benefit from
the effects of some of these policies, these policies and other measures taken
by China's government to regulate the economy could also have a significant
overall impact on economic conditions in China with a resulting negative impact
on our business.

CHINA'S EXPECTED ENTRY INTO THE WTO CREATES UNCERTAINTY AS TO THE FUTURE
ECONOMIC AND BUSINESS ENVIRONMENTS IN CHINA

         China has been attempting to join the World Trade Organization and
recently signed bilateral trade agreements with the United States and European
Union which have enabled China to gain the support of the United States and
European Union in China's attempt to enter the WTO. With these agreements
concluded, China is expected to enter into the WTO as early as some time in
2000. Although China has been reducing tariff levels over the past several
years, entry into the WTO will require China to further reduce tariffs and
eliminate other trade restrictions. While China's entry into the WTO and related
relaxation of trade restrictions may lead to increased foreign investment, it
may also lead to increased competition in China's markets from international
companies. Whether or not China is accepted into the WTO, the impact on China's
economy and our business is uncertain.

IF TAX BENEFITS AVAILABLE TO OUR SUBSIDIARIES LOCATED IN CHINA ARE REDUCED OR
REPEALED, OUR BUSINESS COULD SUFFER

         Our subsidiaries and joint ventures located in China enjoy tax benefits
in China which are generally available to foreign investment enterprises,
including full exemption from national enterprise income tax for two years
starting from the first profit-making year and/or a 50% reduction in national
income tax rate for the following three years. In addition, local enterprise
income tax is often waived or reduced during this tax holiday/incentive period.
Under current regulations in China, foreign investment enterprises that have
been accredited as technologically advanced enterprises are entitled to
additional tax incentives. These tax incentives vary in different locales and
could include preferential national enterprise income tax treatment at 50% of
the usual rates for different periods of time. All of our active subsidiaries in
China were accredited as technologically advanced enterprises. These tax
incentives may be repealed or reduced in the future. If these tax incentives are
abolished before our subsidiaries in China can take full advantage of them, the
tax liability of these subsidiaries will increase, which will negatively impact
our financial condition and results of operations.

CHINA'S LEGAL SYSTEM EMBODIES UNCERTAINTIES THAT COULD NEGATIVELY IMPACT OUR
BUSINESS

         China has a civil law legal system. Although often used by judges for
guidance, decided court cases do not have binding legal effect on future
decisions. Since 1979, many new laws and regulations covering general economic
matters have been promulgated in China. Despite this activity to develop the
legal system, China's system of laws is not yet complete. Even where adequate
law exists in China, enforcement of existing laws or contracts based on existing
law may be uncertain and sporadic and it may be difficult to obtain swift and
equitable enforcement, or to obtain enforcement of a judgment by a court of
another jurisdiction. The relative inexperience of China's judiciary in many
cases creates additional uncertainty as to the outcome of any litigation.
Further, interpretation of statutes and regulations may be subject to government
policies reflecting domestic political changes.

         China has adopted a broad range of related laws, administrative rules
and regulations that govern the conduct and operations of foreign investment
enterprises and restrict the ability of foreign companies to conduct business in
China. These laws, rules and regulations provide some incentives to encourage
the flow of investment into China, but also subject foreign companies, and
foreign investment enterprises including our subsidiaries in China, to a set of
restrictions which may not always apply to domestic companies in China. Although
China is increasingly according foreign companies and foreign investment
enterprises established in China the same rights and privileges as Chinese
domestic companies in anticipation of China's entry into the WTO, these special
laws, administrative rules and regulations governing foreign companies and
foreign investment enterprises may still place us and our subsidiaries at a
disadvantage in relation to Chinese domestic companies and may adversely affect
our competitive position. Moreover, as China's legal system develops, the
promulgation of new laws, changes to existing laws and the pre-emption of local
regulations by national laws may adversely affect foreign investors and
companies.

         Many of our activities and products in China are subject to
administrative review and approval by various national and local agencies of
China's government. Because of the changes occurring in China's legal and
regulatory structure, there can be no assurance that we will be able to secure
the requisite governmental approval for our activities and products. Failure to
obtain the requisite government approval for any of our activities or products
could substantially harm our business.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         UTStarcom is exposed to the impact of interest rate changes and changes
in foreign currency exchange rates.

                                       26
<PAGE>

         Interest Rate Risk. Our exposure to market risk for changes in interest
rates relates primarily to our investment portfolio. The fair value of our
investment portfolio or related income would not be significantly affected by
either a 10% increase or decrease in interest rates due mainly to the short term
nature of our investment portfolio. Our interest income is sensitive to changes
in the general level of U.S. interest rates, particularly since the majority of
our funds are invested instruments with maturities less than one year.
UTStarcom's policy is to limit the risk of principal loss and ensure the safety
of invested funds by limiting market risk. Funds in excess of current operating
requirements are invested in government sponsored entities notes, commercial
paper, floating rate corporate bonds and fixed income corporate bonds.

         The table below represents carrying amounts and related
weighted-average interest rates of maturity of UTStarcom's investment portfolio
at June 30, 2000:

<TABLE>
<CAPTION>
                                                                                    2000
<S>                                                                        <C>
         (In thousands, except interest rates)

         Cash and cash equivalents                                               201,663

         Average interest rate                                                      5.4%

         Short-term investments                                                   45,390

         Average interest rate                                                      6.7%

         Total investment securities                                             247,053

                Average interest rate                                               5.6%
</TABLE>

         Foreign Exchange Rate Risk. We are exposed to foreign exchange rate
risk because our sales to China are denominated in Renminbi and portions of our
accounts payable are denominated in Japanese Yen. Due to the limitations on
converting Renminbi, we are limited in our ability to engage in currency hedging
activities in China. Although the impact of currency fluctuations of Renminbi to
date has been insignificant, fluctuations in currency exchange rates in the
future may have a material adverse effect on our results of operations. We have
contracts negotiated in Japanese Yen for purchasing portions of our inventories
and supplies. We have entered into foreign currency hedging transactions to
reduce exposure to foreign exchange risks. As of June 30, 2000, we had a forward
contract to hedge Japanese Yen valued at $3.8 million. The contract was entered
into on February 22, 2000.

                                       27
<PAGE>

         PART II - OTHER INFORMATION


ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

         The Company commenced its initial public offering ("IPO") on March 3,
2000 pursuant to a Registration Statement on Form S-1 (File No. 333-93069). In
the IPO, the Company sold an aggregate of 11,500,000 shares of common stock
(including an over-allotment option of 1,500,000 shares) at $18.00 per share,
after which the IPO terminated.

         The managing underwriters of the offering were Merrill Lynch & Co.,
Banc of America Securities LLC, U.S. Bancorp Piper Jaffray, Merrill Lynch Japan
Inc., and E-TRADE Securities Co., Ltd. The sale of the shares of common stock
generated aggregate gross proceeds of approximately $207.0 million for the
Company. The aggregate net proceeds were approximately $189.4 million, after
deducting underwriting discounts and commissions of approximately $14.5 million
and expenses of the offering of approximately $3.1million. None of such amounts
were direct or indirect payments to directors or officers of the Company or
their associates, to persons owning 10 percent or more of any class of equity
securities of the Company or to affiliates of the Company.

         As of the effective date of the offering, all of the convertible
preferred stock outstanding was converted into 70,377,322 shares of common
stock. The net proceeds are expected to be used for general corporate purposes,
including working capital and capital expenditures. The amounts actually
expended for such purposes may vary significantly and will depend on a number of
factors, including the Company's future revenues and cash generated by
operations and the other factors described under "Factors Affecting Future
Operating Results". Accordingly, the Company retains broad discretion in the
allocation of the net proceeds of the offering. A portion of the net proceeds
may also be used to acquire or invest in complementary businesses, technologies
or product offerings. As of June 30, 2000, the Company has not used any of the
net proceeds and the entire amounts of net proceeds remains in our cash and cash
equivalents and short-term investments accounts. In addition, at June 30, 2000,
there are no material agreements or commitments with respect to any acquisition
or investment activities.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits:

<TABLE>
<CAPTION>
         NUMBER   EXHIBIT DESCRIPTION
         ------   -------------------
<S>              <C>
         10.1(1)  Joint Venture Agreement between SOFTBANK Corporation and
                  UTStarcom, Inc., dated May 29, 2000.

         10.2(2)  Land Use Right Assignment Agreement between the Administration
                  Committee of Hangzhou Hi-Tech Industry Development Zone of
                  Zhejiang Province of the People's Republic of China and
                  UTStarcom, Inc., dated May 18, 2000.

         10.3(3)  Supply Agreement between Matsushita Electric Industrial Co.,
                  Ltd., Matsushita Communications Industrial Co., Ltd., and
                  UTStarcom, Inc., dated April 1, 2000.

         27.1     Financial Data Schedule.
</TABLE>

(b) Reports on Form 8-K:

    No reports on Form 8-K were filed during the quarter.

- -----------------------

         1 Certain information in this Exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.

         2 See Footnote 1.

         3 See Footnote 1.


                                       28
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date: August 14, 2000

                                        UTSTARCOM, INC.
                                         (Registrant)

                                        BY

                                        /s/ Hong Liang Lu
                                        --------------------------------
                                        Hong Liang Lu
                                        President, Chief Executive Officer
                                        and Director



                                        /s/ Michael J. Sophie
                                        --------------------------------
                                        Michael J. Sophie
                                        Vice President of Finance, Chief
                                        Financial Officer
                                        and Assistant Secretary

                                       29
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>ex-10_1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>

<PAGE>

CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTTED PORTIONS.

                                                                    Exhibit 10.1

                             JOINT VENTURE AGREEMENT

                                 by and between

                                 SOFTBANK CORP.

                                       and

                                UT STARCOM, INC.

                                  May 29, 2000

<PAGE>

                             JOINT VENTURE AGREEMENT

      This JOINT VENTURE AGREEMENT ("Agreement") is made as o f May 29, 2000, by
and between UT Starcom, Inc., a Delaware corporation ("UT Starcom"), and
SOFTBANK Corp., a Japanese corporation ("SOFTBANK"). UT Starcom and SOFTBANK are
hereinafter also referred to collectively as the "Parties" and individually as a
"Party."

                                    RECITALS

      A. SOFTBANK is a leading provider of information and distribution services
in Japan and worldwide as infrastructure for the digital information industry.

      B. UT Starcom is a leading provider of voice and data access equipment for
wired and wireless telephone services in the Peoples Republic of China including
Hong Kong and Macao ("TRC").

      C. The Parties desire to form a joint venture to pursue the Business, as
hereafter defined.

        NOW THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Parties hereby agree as follows:

                                    AGREEMENT
      1. Definitions

            1.1 "Affiliate" means any Person, other than the Company, that: (a)
is controlled by, controls, or is under common control with a Party
(collectively, a "Controlled Person"); or (b) is controlled by, controls, or is
under common control with any such Controlled Person, in each case for so long
as such control continues.

            1.2 "Annual Plan" means a business operations plan detailing the
Company's goals and procedures for technical, financial, and administrative
activities for the Company's next succeeding fiscal year, as approved each year
and revised from time to time by the Board.

            1.3 "Applicable Law" means, as to any Person, any statute, law,
rule, regulation, directive, treaty, judgment, order, decree or injunction of
any Governmental Authority that is applicable to or binding upon such Person or
any of its properties.

            1.4 "Articles" means the articles of association of the Company
substantially in the form of attached Exhibit 1.4, as amended from time to time.

            1.5 "Board" means the board of directors of the Company.

            1.6 "Business" means the business of the Company as described in
Section 2, as amended from time to time.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

<PAGE>

            1.7 "Business Day" means a day on which commercial banks in Tokyo,
Japan are generally open to conduct their regular banking business.

            1.8 "Closing Date" is defined in Section 3.2(a).

            1.9 "Companies Act" means the Companies Act, Chapter 50 of
Singapore, as amended and in effect from time to time.

            1.10 "Company" is defined in Section 3.1.

            1.11 "Company Interest" means, as to any Person, the percentage
interest of the total capital stock of the Company represented by the Securities
then held by such Person divided by all then outstanding Securities (on an
as-converted to Ordinary Shares basis and, to the extent warrants or options to
purchase stock have vested, as exercised for Ordinary Shares basis).

            1.12 "Confidential Information" is defined in Section 5. 1 (a).

            1.13 "Director" means a director of the Company with the powers and
duties as specified in the Companies Act and the Articles.

            1.14 "Disclosing Party" is defined in Section 5.1 (a).

            1.15 "Effective Date" means the date of this Agreement.

            1.16 "Establishment Date" is defined in Section 3.1.

            1.17 "Governmental Authority" means any domestic or foreign
government, governmental authority, court, tribunal, agency or other regulatory,
administrative or judicial agency, commission or organization, and any
subdivision, branch or department of any of the foregoing.

            1.18 "Management Agreement" is defined in Section 4.7.

            1.19 "Memorandum" means the memorandum of association of the
Company substantially in the form of the attached Exhibit 1.19, as amended from
time to time.

            1.20 "Ordinary Shares" means Ordinary shares of the Company as
authorized by the Memorandum.

            1.21 "Party" and "Parties" are defined in the opening paragraph of
this Agreement.

            1.22 "Person" means a natural individual, Governmental Authority,
partnership, firm, corporation, or other business association.

            1.23 "Receiving Party" is defined in Section 5.1(a).

            1.24 "Securities" means all outstanding Ordinary Shares, and any
other equity securities of the Company or instruments exercisable for or
convertible into Ordinary Shares.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -2-

<PAGE>

            1.25 "Territory" means the [* * *].

            1.26 "Term" is defined in Section 7.1.

            1.27 "Transaction Documents" means this Agreement, the Articles and
the Memorandum and the Management Agreement.

      2. Purpose of Joint Venture

            The Parties hereby associate themselves in a joint venture
relationship which shall have as its principal purpose: (1) identifying,
investigating and investing in companies involved in Internet or E-commerce
based activities in the Territory; (2) developing, marketing and providing an
Internet incubator for early stage companies involved in Internet or E-commerce
based activities focused on regions in the Territory; and (3) activities
incidental thereto.

      3. Establishment and Capitalization of the Company

           3.1  Establishment. The Parties agree that the joint venture
contemplated by this Agreement shall be carried out exclusively through a
newly-formed Singapore corporation (the "Company"). The Company's corporate name
shall be "SB China Holdings Pte., Ltd." The Parties shall use commercially
reasonable efforts to cause the Establishment Date to occur on or before [* *
*]. For the purposes of this Agreement, "Establishment Date" means the date on
which the Company is established in accordance with the Companies Act.

           3.2   Capitalization.

                 (a)   Initial Capitalization. The Company shall, as of the
Establishment Date, have authorized capital stock consisting of one class of
shares designated as Ordinary Shares with the rights set forth in the Memorandum
and the Articles. The Memorandum and the Articles shall initially provide for
100,000 authorized shares of Ordinary Shares with par value of Singapore $1.00
per share. The Company's initial equity shall be funded as follows:

                       (i) SOFTBANK Initial Subscription. [* * *] following the
Establishment Date (the "Closing Date"), SOFTBANK shall subscribe for [* * *]
shares of Ordinary Shares, representing a ninety percent (90%) Company Interest,
for an aggregate purchase price of [* * *].

                      (ii) UT Starcom Initial Subscription. On the Closing Date,
UT Starcom shall subscribe for [* * *] shares of Ordinary Shares, representing a
ten percent (10%) Company Interest for an aggregate purchase price of [* * *].

                 (b) Certain Deliveries. On or before the Closing Date, and as
a condition to the purchase and sale of the Ordinary Shares:

                       (i) the Establishment Date shall have occurred; and

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -3-
<PAGE>

                       (ii) each Party shall have received one original of each
of the fully executed Transaction Documents (except for the Management
Agreement).

                 (c) Acknowledgment of Agreement, Delivery of Share
Certificates. Promptly after the Closing Date, the Parties shall cause the
Company (i) to deliver to each Party its written acknowledgment of, and
agreement to abide by, the terms of this Agreement, and (ii) at the request of
either SOFTBANK or UT Starcom, to promptly issue and deliver to each of SOFTBANK
and UT Starcom share certificates representing the shares of Ordinary Shares
purchased pursuant to this Section 3.2.

                 (d) Additional Investors. The Parties acknowledge that
including additional strategic investors with expertise or strategic positions
relevant to the Company's Business may be beneficial to the Company and,
accordingly, agree that [* * *] may, in its discretion, introduce [* * *]
additional parties to acquire Ordinary Shares, in the form of newly issued
shares, for an aggregate Company Interest of up to [* * *]. The selection of the
strategic investors, and the terms and conditions of any such investors'
purchase of Company shares shall be documented based upon the form of investment
letter agreement attached as Exhibit 3.2 (d) hereto unless the Parties otherwise
agree. Each additional investor and its Company Interest will be set forth on
Schedule 3.2(d), as amended from time to time.

            3.3 Financial Assistance.

                  (a) Each Party shall at all times have the preemptive right to
purchase Ordinary Shares or other equity interests as set forth in the Articles.
The preemptive rights granted pursuant to this Section 3.3(a) shall cease to be
of any further force or effect upon the closing of an initial public offering of
Securities.

                  (b) At the request of the Company, the Parties shall invest
additional funds in the Company. Each Party shall make such additional
investment in the Company [* * *]; provided that the Parties shall have no
obligation to invest such in funds in excess of [* * *] for the Parties in the
aggregate.

                  (c) From time to time, the Parties may mutually agree to
provide additional financial assistance to the Company, including in the form of
[* * *], and, in such event, each Party shall make such financial assistance
available to the Company [* * *].

            3.4 Incentive Stock Option Plan. The Parties agree that an
incentive stock option plan, or other agreed to method, providing for reasonable
incentive to the employees of the Company and the Management Company (as defined
below) and such employees of UT Starcom and SOFTBANK as are directly involved in
the Business would be beneficial to the Company, and agree to cooperate in good
faith with a view towards establishing such a plan within [* * *] after the
Closing Date on terms mutually agreed by the Parties.

      4. Operation and Management of the Company

            4.1 Operation of the Company. Each Party agrees to take all actions
necessary to ensure that the Company shall be operated in accordance with the
terms of this Agreement and the

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -4-
<PAGE>

other Transaction Documents, including, without limitation, to vote all
Securities held by it (and to cause all Securities held by its permitted
transferees under Section 8 to be voted) and to cause the Directors nominated by
it to vote to effect the terms hereof.

            4.2 Board of Directors. The Company will be managed by the Board in
accordance with the terms of this Agreement and Applicable Law. The Board shall
initially consist of six (6) Directors, [* * *] of whom shall be appointed by
SOFTBANK and [* * *] of whom shall be appointed by UT Starcom. At all times,
unless no longer required by the Companies Act, one of the Directors appointed
by SOFTBANK shall be a resident of Singapore. If UT Starcom's Company Interest
at any time decreases to [* * *], the Parties shall cause the Board constituency
to be adjusted within [* * *] of such decrease so that [* * *] Director is
appointed by UT Starcom. The Chairman of the Board and President of the Company
shall be appointed by Directors appointed by [* * *]. Initially, Mr. Hong-Liang
Liu shall serve as Chairman of the Board and Mr. Chauncey Shey shall serve as
President. The Directors appointed by SOFTBANK shall have the authority, [* * *]
to remove the Chairman of the Board and President and appoint a successor at any
time.

            4.3 Removal; Reappointment of Directors. Any Director may be
removed for cause in accordance with Applicable Law. In addition, each Party
having the right to appoint a Director pursuant to this Section 4 shall also
have the right, in its sole discretion, to remove such Director at any time,
effective upon delivery of written notice to the Company, the Director to be
removed and to the other Party. In the case of a vacancy in the office of a
Director for any reason (including removal pursuant to the preceding sentence),
the vacancy shall be filled by the Party that appointed the Director in
question.

            4.4 Board Meetings. The Chairman of the Board shall have the
authority to convene Board meetings, including the authority to specify the time
and place of such meetings. Directors may attend Board meetings in person or by
any other means of attendance permitted under the Companies Act, provided,
however, that (a) the Board shall meet at least [* * *] during each semi-annual
fiscal period and (b) written notice of all Board meetings shall be given not
less than [* * *] in advance of each meeting (which [* * *] period may be
shortened by written waiver of Directors or actual attendance by Directors,
without objection, at a Board meeting). Board meetings shall be conducted in the
English language and minutes of such meetings shall be prepared by the Company
in English and distributed to each Director promptly following each meeting.
Proposals or reports brought before any Board meeting for information or action
(including without limitation the Company's annual and semi-annual financial
statements) shall be prepared in English.

            4.5 Board Quorum, Resolutions. The quorum necessary for the
transaction of business at a meeting of the Board shall be [* * *] Directors.
Any action, determination or resolution of the Board shall require the
affirmative vote of a majority of Directors present at a meeting at which a
valid quorum pursuant to this Section 4.5 is present.

            4.6 Other Offices. In addition to the President, senior management
of the Company will consist of such other officers as are deemed to be necessary
or appropriate by the Board.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -5-
<PAGE>

            4.7 Management Agreement. [* * *] following the Closing Date, the
Company and Softbank China Venture Capital (the "Management Company"), will
negotiate and execute a management agreement (the "Management Agreement")
pursuant to which, the Management Company, on behalf of the Company, will
source, evaluate, initiate and monitor investments to be made by the Company.
The Management Company will report to the Board on a periodic basis but no less
than monthly. The terms and provisions of the Management Agreement will be
subject to the approval of [* * *].

            4.8 Shareholders' Meetings. Shareholders of the Company shall
receive notice of each shareholders' meeting at least [* * *] before the
scheduled date of such meeting. The Company shall have at least one
shareholders' meeting each calendar year. Such meeting will take place at such
time and place as is determined by the Board. Meetings shall be conducted in the
English language, and minutes of such meetings shall be prepared by the Company
in English.

            4.9 Annual Plan. The President shall prepare, and the Board shall
approve, an Annual Plan with respect to each fiscal year of the Company no later
than [* * *] prior to the commencement of the fiscal year.

            4.10 Financial Statements and Accounting Records. Financial
statements for the Company, including, without limitation, a balance sheet,
income statement, statement of cash flows and statement of shareholders' equity,
shall be submitted by the Company to each of the Parties (a) within [* * *]
after the end of the [* * *] of each fiscal year for such [* * *] period, and
(b) within [* * *] after the end of each fiscal year for such year. Each of the
annual financial statements shall be audited and certified by
PriceWaterhouseCoopers or another internationally recognized accounting firm
retained by the Company, selected by [* * *]. All financial statements shall be
prepared in accordance with generally accepted accounting principles in Japan
and in reasonable detail, and shall contain such financial data as [* * *] may
deem necessary in order to keep the Parties advised of the Company's financial
status (although [* * *] statements need not include footnotes and may be
subject to year-end adjustments). The Company shall, at UT Starcom's request,
provide UT Starcom with such financial information as UT Starcom may reasonably
deem necessary for purposes of complying with its periodic reporting obligations
under U.S. securities law and shall cooperate with UT Starcom in connection
therewith, including in the preparation of quarterly financial statements if
required by UT Starcom; provided, that [* * *] shall bear any costs incurred in
preparing or providing such information, including, without limitation, in
preparing additional financial statements and reconciling the Company's
financial statements with U.S. generally accepted accounting principles for such
purposes.

      5. Additional Covenants

            5.1 Confidentiality.

                  (a) The Parties recognize that, in connection with the
performance of this Agreement, each Party (in such capacity, the "Disclosing
Party") may disclose "Confidential Information" (as defined below) to the other
Party (the "Receiving Party"). For purposes of this Agreement, the term
"Confidential Information" means (i) proprietary information (whether owned by
the Disclosing Party or a third party to whom the Disclosing Party owes a
non-disclosure

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -6-
<PAGE>

obligation) regarding the Disclosing Party's business or (ii) information which
is marked as confidential at the time of disclosure to the Receiving Party, or
if in oral form, is identified as confidential at the time of oral disclosure
and reduced in writing or other tangible (including electronic) form including a
prominent confidentiality notice and delivered to the Receiving Party within [*
* *] of disclosure "Confidential Information" shall not include information
which: (A) was known to the Receiving Party at the time of the disclosure by the
Disclosing Party; (B) has become publicly known through no wrongful act of the
Receiving Party; (C) has rightfully been received by the Receiving Party from a
third party without breach of this provision; or (D) has been independently
developed by the Receiving Party without using any Confidential Information of
the other Party. The Receiving Party agrees (x) not to use any such Confidential
Information for any purpose other than in the performance of its obligations
under this Agreement or any Transaction Document and (y) not to disclose any
such Confidential Information, except (1) to its employees (and in the case of
SOFTBANK, employees of other members of the SOFTBANK Group) who are reasonably
required to have the Confidential Information in connection herewith or with any
of the other Transaction Documents, (2) to its agents, representatives, lawyers
and other advisers that have a need to know such Confidential Information and
(3) pursuant to, and to the extent of, a request or order by a Governmental
Authority. The Receiving Party agrees to take all reasonable measures to protect
the secrecy and confidentiality of, and avoid disclosure or unauthorized use of,
the Disclosing Party's Confidential Information.

                  (b) Each Party acknowledges and agrees that (i) its
obligations under this Section 5.1 are necessary and reasonable to protect the
other Party and its business, (ii) any violation of these provisions could cause
irreparable injury to the other Party for which money damages would be
inadequate, and (iii) as a result, the other Party shall be entitled to obtain
injunctive relief against the threatened breach of the provisions of this
Section 5.1 without the necessity of proving actual damages. The Parties agree
that the remedies set forth in this Section 5.1 are in addition to and in no way
preclude any other remedies or actions that may be available at law or under
this Agreement.

            5.2 Confidentiality of Agreement, Publicity. Each Party agrees
that the terms and conditions of this Agreement and the Transaction Documents
shall be treated as confidential information and that no reference thereto shall
be made thereto without the prior written consent of the other Party (which
consent shall not be unreasonably withheld) except (a) as required by Applicable
Law including, without limitation, by the U.S. Securities and Exchange
Commission and Japanese Governmental Authorities, (b) to its accountants, banks,
financing sources, lawyers and other professional advisors, provided that such
parties undertake in writing (or are otherwise bound by rules of professional
conduct) to keep such information strictly confidential, (c) in connection with
the enforcement of this Agreement, (d) in connection with a merger, acquisition
or proposed merger or acquisition, or (e) pursuant to joint press releases
prepared in good faith. The Parties will consult with each other, in advance,
with regard to the terms of all proposed press releases, public announcements
and other public statements with respect to the transactions contemplated
hereby.

            5.3 Additional Investments in the Territory. SOFTBANK will [* * *]
to coordinate its activities and those of its Affiliates to ensure that
investments in companies involved in Internet or e-commerce based activities
focused on regions within the Territory are made by the Company (or any
investment fund through which the Company makes its investments) and not by
SOFTBANK or its Affiliates (other than the Company or any such investment fund);
provided, that

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -7-
<PAGE>

SOFTBANK or its Affiliates may, in [* * *] discretion, make such investments
directly, if (i) such investment is or series of related investments are made in
an amount exceeding [* * *], (ii) such investment is approved by the Board,
(iii) such investment is in an entity whose principal business is to provide
financial products or services, or (iv) such investment is in a non-Internet
entity that is or will be in the process of adapting its business model to
accommodate Internet or e-commerce business.

      6. Warranties of the Parties

            6.1 Warranties of SOFTBANK. SOFTBANK hereby represents and
warrants to UT Starcom that, as of the Effective Date and as of the Closing
Date, the following statements are and shall be true and correct:

                  (a) Organization. SOFTBANK is a corporation duly organized
and validly existing under the laws of Japan, and has the corporate power and
authority to enter into and perform this Agreement.

                  (b) Authorization. All corporate action on the part of
SOFTBANK necessary for the authorization, execution and delivery of this
Agreement and for the performance of all of its obligations hereunder and
thereunder has been taken, and this Agreement when fully executed and delivered,
shall each constitute a valid, legally binding and enforceable obligation of
SOFTBANK.

                  (c) Government and Other Consents. Other than any licenses,
permits, certifications or authorizations which may be required in connection
with the Business, as to which SOFTBANK makes no representation, no consent,
authorization, license, permit, registration or approval of, or exemption or
other action by, any Governmental Authority, or any other Person, is required in
connection with SOFTBANK's execution, delivery and performance of this
Agreement, or if any such consent is required, SOFTBANK has satisfied the
applicable requirements.

                  (d) Effect of Agreement. SOFTBANK's execution, delivery and
performance of this Agreement will not (i) violate the Articles of Incorporation
of SOFTBANK or any provision of Applicable Law, (ii) violate any judgment,
order, writ, injunction or decree of any court applicable to SOFTBANK, (iii)
have any effect on the compliance of SOFTBANK with any applicable licenses,
permits or authorizations which would materially and adversely affect SOFTBANK,
(iv) result in the breach of, give rise to a right of termination, cancellation
or acceleration of any obligation with respect to (presently or with the passage
of time), or otherwise be in conflict with any term of, or affect the validity
or enforceability of, any agreement or other commitment to which SOFTBANK is a
party and which would materially and adversely effect SOFTBANK, or (v) result in
the creation of any lien, pledge, mortgage, claim, charge or encumbrance upon
any assets of SOFTBANK; provide, however, that regulatory approval may be
required in connection with conducting the Business and SOFTBANK makes no
representation with respect to any such approvals.

                  (e) Litigation. There are no actions, suits or proceedings
pending or, to SOFTBANK's knowledge, threatened, against SOFTBANK before any
Governmental Authority

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -8-
<PAGE>

which question SOFTBANK's right to enter into or perform this Agreement, or
which question the validity of this Agreement or any of the other Transaction
Documents.

            6.2 Warranties of UT Starcom. UT Starcom hereby represents and
warrants to SOFTBANK that, as of the Effective Date and as of the Closing Date,
the following statements are and shall be true and correct:

                  (a) Organization. UT Starcom is a corporation duly organized
and validly existing under the laws of Delaware. LTT Starcom has the corporate
power and authority to enter into and perform this Agreement.

                  (b) Authorization. All corporate action on the part of UT
Starcom necessary for the authorization, execution and delivery of this
Agreement and for the performance of all of its obligations hereunder and
thereunder has been taken, and this Agreement and the License Agreement, when
fully executed and delivered, shall each constitute a valid, legally binding and
enforceable obligation of UT Starcom.

                  (c) Government and Other Consents. Other than any licenses,
permits or authorizations which may be required in connection with the Business,
as to which UT Starcom makes no representation, no consent, authorization,
license, permit, registration or approval of, or exemption or other action by,
any Governmental Authority, or any other Person, is required in connection with
UT Starcom's execution, delivery and performance of this Agreement, or if any
such consent is required, UT Starcom has satisfied any applicable requirements.

                  (d) Effect of Agreement. UT Starcom's execution, delivery
and performance of this Agreement will not (i) violate the Certificate of
Incorporation of UT Starcom or any provision of Applicable Law, (ii) violate any
judgment, order, writ, injunction or decree of any court applicable to UT
Starcom, (iii) have any effect on the compliance of LTT Starcom with any
applicable licenses, permits or authorizations which would materially and
adversely affect LTT Starcom, (iv) result in the breach of, give rise to a right
of termination, cancellation or acceleration of any obligation with respect to
(presently or with the passage of time), or otherwise be in conflict with, any
term of, or affect the validity or enforceability of any agreement or other
commitment to which UT Starcom is a party and which would materially and
adversely affect UT Starcom, or (v) result in the creation of any lien, pledge,
mortgage, claim, charge or encumbrance upon any assets of UT Starcom; provide ,
however, that regulatory approvals may be required in connection with conducting
the Business and UT Starcom makes no representation with respect to any such
approvals.

                  (e) Litigation. There are no actions, suits or proceedings
pending or, to UT Starcom's knowledge, threatened, against LTT Starcom before
any Governmental Authority which question UT Starcom's right to enter into or
perform this Agreement, or which question the validity of this Agreement or any
of the other Transaction Documents.

      7. Term and Termination

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -9-
<PAGE>

            7.1 Term. This Agreement shall be effective as of the Effective
Date, and shall continue in effect until terminated pursuant to Section 7.2 (the
"Term").

            7.2 Termination. This Agreement may be terminated as follows:

                  (a) Upon the mutual written agreement of SOFTBANK and UT
Starcom.

                  (b) By either SOFTBANK or UT Starcom, effective immediately
upon written notice to the other Party, if the other Party breaches any material
provision of this Agreement or of any of the other Transaction Documents and
such breach continues for a period of [* * *] after the delivery of written
notice of the default, describing the default in reasonable detail.

                  (c) By either SOFTBANK or UT Starcom, effective immediately
upon written notice to the other Party and the Company, in the event that the
other Party is dissolved, liquidated or declared bankrupt or a voluntary or
involuntary bankruptcy filing is made by such Party.

            7.3 Effect. Upon termination of this Agreement, the Parties shall
negotiate in good faith a possible purchase by one or more Parties of all
outstanding Securities held by the other Parties or the sale of the Company to a
third party. In the event that, notwithstanding their good faith negotiations,
the Parties are unable to agree upon such a purchase or sale within [* * *] of
the notice of termination, the Parties shall cooperate to cause the Company to
be liquidated as promptly as practical in accordance with Applicable Law. The
rights and obligations of the Parties under Sections 5.1, 5.2, this Section 7.3,
and Sections 7.4, 7.5 and 9 shall survive any termination of this Agreement.

            7.4 Return of Confidential Information. Upon the termination of
this Agreement, each Party, at its own cost, shall promptly return to the
Disclosing Party any and all documents and materials constituting or containing
Confidential Information of the Disclosing Party which are in its possession or
control, or at its option, shall destroy such documents and materials and
certify such destruction in writing to the Disclosing Party.

            7.5 Continuing Liability. Termination of this Agreement for any
reason shall not release any Party from any liability or obligation which has
already accrued as of the effective date of such termination, and shall not
constitute a waiver or release of, or otherwise be deemed to prejudice or
adversely affect, any rights, remedies or claims, whether for damages or
otherwise, which a Party may have hereunder, at law, equity or otherwise or
which may arise out of or in connection with such termination.

      8. Transfer Restrictions

            8.1 General Restriction. Each Party agrees to hold its Securities
during the Term and, except as otherwise specifically provided in this
Agreement or agreed to in writing by the other Party, not to sell, transfer,
assign, hypothecate or in any way alienate any of such Party's Securities or any
right or interest therein except to an Affiliate of such Party in accordance
with the Articles. In the case of any transfer permitted hereunder, the
transferring Party shall deliver to the other Party (a) at least [* * *] prior
to such transfer, a written notice stating its intention to transfer the
Securities to

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -10-
<PAGE>

be transferred, the name of the transferee, whether such transferee is an
Affiliate, the number of Securities to be transferred, and the price and other
material terms and conditions of the transfer, and (b) except as otherwise
specifically provided herein, on or prior to the effective date of the transfer
and in a form reasonably acceptable to the other Party and its counsel, the
transferee's written acknowledgement of and agreement to be bound by, and to
vote the transferred Securities at all times in accordance with, the terms of
this Agreement.

            8.2 Legends. Each share certificate of the Company shall bear a
legend, consistent with Applicable Law, providing that any transfer of the
Securities evidenced by such certificate is subject to approval by the Board.

            8.3 Initial Public Offering. The foregoing restrictions shall
cease to be of any further force or effect upon the closing date of an initial
public offering of Securities.

            8.4 Board Approval. Each Party shall cause each Director that it
has appointed pursuant hereto to vote to approve any transfer of Securities that
complies with the terms of this Section 8.

      9. General Provisions

            9.1 Governing Law, Dispute Resolution. The validity, construction
and enforceability of this Agreement shall be governed by and construed in
accordance with the laws of Delaware. All disputes between the Parties arising
out of this Agreement shall be settled by the Parties amicably through good
faith discussions upon the written request of either Party. In the event that
any such dispute cannot be resolved thereby within a period of [* * *] after
such notice has been given, such dispute shall be finally settled by arbitration
in Tokyo, Japan, using the English language, and in accordance with the rules
then in effect of the Japan Commercial Arbitration Association. The
arbitrator(s) shall have the authority to grant specific performance, and to
allocate between the Parties the costs of arbitration in such equitable manner
as the arbitrator(s) may determine. The prevailing Party in the arbitration
shall be entitled to receive reimbursement of its reasonable expenses incurred
in connection therewith. Judgement upon the award so rendered may be entered in
any court having jurisdiction or application may be made to such court for
judicial acceptance of any award and an order of enforcement, as the case may
be. Notwithstanding the foregoing, either Party shall have the right to
institute a legal action in a court of proper jurisdiction for injunctive relief
and/or a decree for specific performance pending final settlement by
arbitration.

            9.2 Notices and Other Communications. Any and all notices,
requests, demands and other communications required or otherwise contemplated to
be made under this Agreement shall be in writing and in English and shall be
provided by one or more of the following means and shall be deemed to have been
duly given (a) if delivered personally, when received, (b) if transmitted by
facsimile originating in Japan, on the date of transmission with receipt of a
transmittal confirmation, (c) if transmitted by facsimile originating in the
United States, on the [* * *] Business Day following receipt of a transmittal
confirmation, or (d) if by international courier service, on the [* * *]
Business Day following the date of deposit with such courier service, or such
earlier delivery date as may be confirmed in writing to the sender by such
courier service. All such notices, requests, demands and other communications
shall be addressed as follows:

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -11-
<PAGE>

                  If to SOFTBANK:

                        SOFTBANK CORP.
                        24-1 Nihonbashi-Hakozakicho
                        Chuo-ku, Tokyo 103-8501
                        Attention: Mr. Masayoshi Son
                        Telephone: 81-3-5642-8020
                        Facsimile: 81-3-5641-3400

                  with a copy (which copy shall not constitute notice) to:

                        Morrison & Foerster LLP
                        AIG Building, 7th Floor
                        1-1-3 Marunouchi,
                        Chiyoda-ku, Tokyo 100-0005, Japan
                        Attention:  Hitoshi Hasegawa, Esq.
                        Telephone: 81-3-3214-6522
                        Facsimile: 81-3-3214-6512

                  If to UT Starcom:

                        UT Starcom, Inc.
                        1275 Harbor Bay Parkway, 100
                        Alameda, California 95110 U.S.A.
                        Attention: Mr. Hong-Liang Lu
                        Telephone: 01-510-864-8800
                        Facsimile: 01-510-864-8802

or to such other address or facsimile number as a Party may have specified to
the other Party in writing delivered in accordance with this Section 9.2.

            9.3 Language. This Agreement is in the English language only,
which language shall be controlling in all respects, and all versions hereof in
any other language shall be for accommodation only and shall not be binding upon
the Parties. All communications and notices to be made or given pursuant to this
Agreement shall be in the English language.

            9.4 Severability. If any provision in this Agreement shall be
found or be held to be invalid or unenforceable then the meaning of said
provision shall be construed, to the extent feasible, so as to render the
provision enforceable, and if no feasible interpretation would save such
provision, it shall be severed from the remainder of this Agreement which shall
remain in full force and effect unless the severed provision is essential and
material to the rights or benefits received by any Party. In such event, the
Parties shall use best efforts to negotiate, in good faith, a substitute, valid
and enforceable provision or agreement which most nearly affects the Parties'
intent in entering into this Agreement.

            9.5 References, Subject Headings. Unless otherwise indicated,
references to Sections and Exhibits herein are to Sections of, and Exhibits to,
this Agreement. The subject

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -12-
<PAGE>

headings of the Sections of this Agreement are included for the purpose of
convenience of reference only, and shall not affect the construction or
interpretation of any of its provisions.

            9.6 Further Assurances. The Parties shall each perform such acts,
execute and deliver such instruments and documents, and do all such other things
as may be reasonably necessary to accomplish the transactions contemplated in
this Agreement.

            9.7 Expenses. Each of the Parties will bear its own costs and
expenses, including, without limitation, fees and expenses of legal counsel,
accountants, brokers, consultants and other representatives used or hired in
connection with the negotiation and preparation of this Agreement and
consummation of the transactions contemplated hereby. All such expenses incurred
by the Company shall be borne by [* * *] to the maximum extent permitted by
Applicable Law including, without limitation, expenses relating to the formation
of the Company, any transfer taxes for transfer of the Company stock to the
Parties, registration charges, taxes, fees and expenses relating to required
governmental or regulatory approvals, notary fees and legal fees and expenses.

            9.8 No Waiver. No waiver of any term or condition of this
Agreement shall be valid or binding on a Party unless the same shall have been
set forth in a written document, specifically referring to this Agreement and
duly signed by the waiving Party. The failure of a Party to enforce at any time
any of the provisions of this Agreement, or the failure to require at any time
performance by one or both of the other Parties of any of the provisions of this
Agreement, shall in no way be construed to be a present or future waiver of such
provisions, nor in any way affect the ability of a Party to enforce each and
every such provision thereafter.

            9.9 Entire Agreement; Amendments. The terms and conditions
contained in this Agreement (including the Exhibits hereto) and the Transaction
Documents constitute the entire agreement between the Parties and supersede all
previous agreements and understandings, whether oral or written, between the
Parties with respect to the subject matter hereof. No agreement or understanding
amending this Agreement shall be binding upon any Party unless set forth in a
written document which expressly refers to this Agreement and which is signed
and delivered by duly authorized representatives of each Party.

            9.10 Assignment. [* * *] shall have the right to assign its rights
or obligations under this Agreement except in connection with a transfer of all
of such Party's Securities in a manner permitted hereunder, under terms
reasonably acceptable to the non-assigning Party and providing for the assignee
to be bound by the terms hereof, and for the assigning Party to remain liable
for the assignee's performance of its obligations hereunder. This Agreement
shall inure to the benefit of, and shall be binding upon, the Parties and their
respective successors and permitted assigns.

            9.11 No Agency. The Parties are independent contractors. Nothing
contained herein or done in pursuance of this Agreement shall constitute any
Party the agent of any other Party for any purpose or in any sense whatsoever.

            9.12 No Beneficiaries. Nothing herein express or implied, is
intended to or shall be construed to confer upon or give to any person, firm,
corporation or legal entity, other than the

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -13-
<PAGE>

Parties and their Affiliates who hold Securities, any interests, rights,
remedies or other benefits with respect to or in connection with any agreement
or provision contained herein or contemplated hereby.

            9.13 Effective Date of Transaction Documents. The Transaction
Documents (other than this Agreement and the Articles) shall become effective
concurrently with consummation, on the Closing Date, of the transactions
described in Section 3.2(a).

            9.14 Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute only one and the same
instrument.

            9.15 Incidental and Consequential Damages. [* * *] will be liable
to the other Party under any contract, negligence, strict liability or other
theory for any indirect, incidental or consequential damages (including without
limitation lost profits) with respect to a breach of this Agreement or any
Transaction Document.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -14-
<PAGE>

      IN WITNESS WHEREOF, the Parties have caused their respective duly
authorized representatives to execute this Agreement as of the Effective Date.

SOFTBANK CORP.                          UT STARCOM, INC.


By:                                     By:
    -------------------------               ------------------------------
    Masayoshi Son                           Hong-Liang Lu
    President and CEO                       President and CEO

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                   EXHIBIT 1.4

                         Company Articles of Association
<PAGE>

                           THE COMPANIES ACT (CAP.50)

                        PRIVATE COMPANY LIMITED BY SHARES

                             ARTICLES OF ASSOCIATION

                                       OF

                            SB CHINA HOLDINGS PTE LTD

- --------------------------------------------------------------------------------

                                   PRELIMINARY

      10. TABLE A EXCLUDED. The regulations in Table A in the Fourth Schedule
to the Act shall not apply to the Company except so far as the same are repeated
or contained in these Articles.

      11. INTERPRETATION. In these Articles, unless the context otherwise
requires:

                  "the Act"            means the Companies Act (Cap. 50) or any
                                       statutory modification thereof for the
                                       time  being in force;

                  "the Articles"       means these Articles of Association in
                                       their original form or as amended from
                                       time to time;

                  "Directors" or the   means the Directors for the time being of
                  "the Board"          the Company as a body or a quorum of the
                                       Directors present at a meeting of the
                                       Directors;

                  "dividend"           includes bonus;

                  "member"             means a member of the Company;

                  "month"              means a calendar month;

                  "office"             means the registered office of the
                                       Company;

                  "seal"               means the common seal of the Company;

                  "Secretary"          means any person appointed to perform the
                                       duties of a secretary of the Company and
                                       includes a Deputy Secretary or an
                                       Assistant Secretary;

                  "Statutes"           means the Act and every other Act being
                                       in force concerning companies and
                                       affecting the Company;


                                      -2-
<PAGE>

                  "$" refers to the lawful currency of Singapore;

expressions referring to writing shall, unless the contrary intention appears,
be construed to include references to printing, lithography, photography and
other modes of representing or reproducing words in a visible form;

words or expressions contained in these Articles shall be interpreted in
accordance with the provisions of the Interpretation Act (Cap. 1) and of the
Act;

words denoting the singular number only shall include the plural number and vice
versa; words denoting the masculine gender only shall include the feminine and
neuter genders; and words denoting persons shall include corporations and other
bodies of persons; and

the headings in these Articles are inserted for convenience and reference only
and are in no way designed to limit or circumscribe the scope of these Articles.

                                 PRIVATE COMPANY

      12. PRIVATE COMPANY. The Company is a private company, and accordingly:

            12.1 no invitation shall be issued to the public to subscribe for
any shares or debentures of the Company;

            12.2 the number of the members of the Company (not including persons
who are in the employment of the Company, and persons who, having been formerly
in the employment of the Company, were while in that employment and have
continued after the determination of that employment to be, members of the
Company) shall be limited to 50, provided that where two or more persons hold
one or more shares in the Company jointly they shall, for the purposes of this
Article, be treated as a single member;

            12.3 the right to transfer the shares of the Company shall be
restricted in the manner hereinafter appearing; and

            12.4 no invitation shall be issued to the public to deposit money
with the Company for fixed periods or payable at call, whether bearing or not
bearing interest.

                                    BUSINESS

      13. BUSINESS OF COMPANY. Any branch or kind of business which by the
Memorandum of Association of the Company or these Articles is either expressly
or by implication authorised to be undertaken by the Company may be undertaken
by the Directors at such time or times as they shall think fit and further may
be suffered by them to be in abeyance whether such branch or kind of business
may have been actually commenced or not, so long as the Directors may deem it
expedient not to commence or proceed with such branch or kind of business.


                                      -3-
<PAGE>

      14. OFFICE OF THE COMPANY. The office shall be at such place in the
Republic of Singapore as the Directors shall from time to time determine.

                                     SHARES

      15. ISSUE OF SHARES. (1) No shares shall be issued by the Directors
without the prior approval of the Company in general meeting.

            (2) Unless otherwise determined by the Company by special resolution
or otherwise, agreed by the holders of all the shares for the time being issued,
all unissued shares shall before issue be offered for subscription to the
members in proportion as nearly as the circumstances will admit to the number of
shares then held by them. Any such offer shall be made by notice specifying the
number and class of shares and the price at which the same are offered and
limiting the time (not being less than 29 days, unless the member to whom the
offer is to be made otherwise agrees) within which the offer if not accepted
will be deemed to be declined.

            (3) Subject as aforesaid, all unissued shares shall be at the
disposal of the Directors and they may allot, grant options over or otherwise
deal with or dispose of the same to such persons, at such times, and generally
on such terms as they think proper, but so that no shares shall be issued at a
discount except in accordance with the Act.

            (4) Without prejudice to any special rights or privileges attached
to any then existing shares in the capital of the Company, any new shares may be
issued upon such terms and conditions, and with such rights and privileges
attached thereto, as the Company by special resolution may direct or, if no such
direction be given, as the Directors shall determine, and in particular such
shares may be issued with preferential, qualified or deferred right to dividends
and in the distribution of assets of the Company, and with a special or
restricted right of voting, and any preference share may be issued on the terms
that it is, or at the option of the Company liable to be redeemed.

      16. VARIATION OF RIGHTS. If at any time the share capital is divided into
different classes of shares, the rights attached to any class (unless otherwise
provided by the terms of issue of the shares of that class) may, whether or not
the Company is being wound up, be varied with the consent in writing of the
holders of three-fourths of the issued shares of that class, or with the
sanction of a special resolution passed at a separate general meeting of the
holders of the shares of the class. To every such separate general meeting the
provisions of these Articles relating to general meetings shall mutatis mutandis
apply, but so that the necessary quorum shall be two persons at least holding or
representing by proxy one-third of the issued shares of that class and that any
holder of shares of that class present in person or by proxy may demand a poll,
Provided always that where the necessary majority for such a special resolution
is not obtained at the meeting, consent in writing if obtained from the holders
of three-fourths of the issued shares of the class concerned within two months
of the meeting shall be as valid and effectual as a special resolution carried
at the meeting.

      17. PROHIBITION OF DEALING IN ITS OWN SHARES. Except as is otherwise
expressly permitted by the Act, the Company shall not give, WHETHER directly or
indirectly and whether by means of a loan, guarantee or the provision of
security or otherwise, any financial


                                      -4-
<PAGE>

assistance for the purpose of or in connection with the purchase of or
subscription for the shares of the Company or its holding company from time to
time if any or in any way purchase, deal in or lend money on their shares.

      18. POWER TO CHARGE INTEREST ON CAPITAL. Where any shares are issued for
the purpose of raising money to defray the expenses of the construction of any
works or buildings, or the provision of any plant which cannot be made
profitable for a lengthened period, the Company may pay interest on so much of
that share capital as is for the time being paid for the period and subject to
the conditions and restrictions mentioned in the Act and may charge the same to
capital as part of the cost of the construction of the works or buildings or the
provision of the plant.

      19. POWER TO PAY COMMISSION AND BROKERAGE. The Company may exercise the
powers of paying commissions conferred by the Act provided that the rate per
cent or the amount of the commission paid or agreed to be paid shall be
disclosed in the manner required by the Act and the commission shall not exceed
the rate of 10 per cent, of the price at which the shares in respect whereof the
same is paid are issued or an amount equal to 10 per cent of that price (as the
case may be). Such commission may be satisfied by the payment of cash or the
allotment of fully or partly paid shares or partly in one way and partly in the
other. The Company may also on any issue of shares pay such brokerage as may be
lawful.

      20. EXCLUSION OF EQUITIES. Except as required by law, no person shall be
recognised by the Company as holding any share upon any trust, and the Company
shall not be bound by or be compelled in any way to recognise (even when having
notice thereof) any equitable, contingent, future or partial interest in any
share or unit of a share or (except only as by these Articles or by law
otherwise provided) any other rights in respect of any share except an absolute
right to the entirety thereof in the registered holder.

                               SHARE CERTIFICATES

      21. ENTITLEMENT TO CERTIFICATE Every person whose name is entered as a
member in the Register of Members shall be entitled without charge to receive
within two months after allotment or one month after the lodgement of transfer
one certificate for all his shares of any one class, or upon payment of $2.00
(or such lesser sum as the Directors may from time to time determine) several
certificates in reasonable denominations in respect of shares of any one class.
Where a member transfers part only of the shares comprised in a certificate, one
new certificate for the balance of such shares shall be issued in lieu of the
old certificate without charge. In the case of a share held jointly by several
persons the Company shall not be bound to issue more than one certificate and
delivery thereof to one of several joint holders shall be sufficient delivery to
all such holders.

      22. FORM OF SHARE CERTIFICATE. Every certificate of title to shares shall
be issued under the seal in such form as the Directors shall from time to time
prescribe, shall bear the autographic or facsimile signatures of either two
Directors or one Director and the Secretary or some other person appointed by
the Directors and shall specify the number and class of shares to which it
relates and the amounts paid thereon. Every certificate of title to debentures
shall bear the autographic or facsimile signature of a Director.


                                      -5-
<PAGE>

      23. REPLACEMENT OF CERTIFICATE. Subject to the provisions of the Act, if
any share certificate shall be defaced, worn out, destroyed lost or stolen, it
may be renewed on such evidence being produced and such letter of indemnity (if
any) being given as the Directors of the Company may require, and in the case of
defacement or wearing out on delivery of the old certificate and in any case on
payment of such sum not exceeding $1.00 as the Directors may from time to time
require. In the case of the certificate being destroyed, lost or stolen a
shareholder or person entitled to whom such renewed certificate is given shall
also bear the loss and pay to the Company all expenses incidental to the
investigations by the Company of the evidence of such destruction or loss.

                             JOINT HOLDERS OF SHARES

      24. RIGHTS AND LIABILITIES OF JOINT HOLDERS. Where two or more persons are
registered as the holders of any share they shall be deemed to hold the same as
joint tenants with benefit of survivorship subject to the following provisions:

            24.1 the Company shall not be bound to register more than three
persons as the holders of any share, except in the case of executors or trustees
of a deceased shareholder;

            24.2 the joint holders of a share shall be liable severally as well
as jointly in respect of all payments which ought to be made in respect of such
share;

            24.3 on the death of any one of such joint holders the survivor or
survivors shall be the only person or Persons recognised by the Company as
having any title to such share but the Directors may require such evidence of
death as they may deem fit;

            24.4 any one of such joint holders may give effectual receipts for
any dividend payable to such joint holders; and

            24.5 only the person whose name stands first in the Register as one
of the joint holders of any share shall be entitled to delivery of the
certificate relating to such share or to receive notices from the Company and
any notice given to such person shall be deemed notice to all the joint holders.

                                      LIEN

      25. COMPANY'S LIEN. The Company shall have a first and paramount lien on
shares registered in the name of a member (whether fully paid or not) and on
dividends from time to time declared in respect of such shares for all moneys
due to the Company from him or his estate either alone or jointly with any other
person whether a member or not and whether such moneys are presently payable or
not.

      26. SALE OF SHARES SUBJECT TO LIEN. The Company may sell, in such manner
as the Directors think fit, any shares on which the Company has a lien, but no
sale shall be made unless a sum in respect of which the lien exists is presently
payable, nor until the expiration of 14 days after a notice in writing, stating
and demanding payment of such part of the amount in respect of which the lien
exists as is presently payable, has been given to the registered holder for the
time being of the share, or the person entitled thereto by reason of his death
or bankruptcy.


                                      -6-
<PAGE>

      27. RIGHTS OF PURCHASER OF SUCH SHARES. To give effect to any such sale
the Directors may authorise some person to transfer the shares sold to the
purchaser thereof. The purchaser shall be registered as the holder of the shares
comprised in any such transfer, and he shall not be bound to see to the
application of the purchase money, nor shall his title to the shares be affected
by any irregularity or invalidity in the proceedings in reference to the sale.

      28. APPLICATION OF PROCEEDS OF SUCH SALE. The proceeds of the sale shall
be received by the Company and applied in payment of such pan of the amount in
respect of which the lien exists as is presently payable and accrued interest
and expenses, and the residue, if any, shall be paid to the person entitled to
the shares at the date of the sale, or, his executors, administrators or
assignees or as he may direct.

                                 CALLS ON SHARES

      29. CALLS ON SHARES. The Directors may from time to time make calls upon
the members in respect of any money unpaid on their shares (whether on account
of the nominal value of the shares or by way of premium) and not by the
conditions of allotment thereof made payable at fixed times, provided that no
call shall exceed one fourth of the nominal value of the share or be payable at
less than one month from the date fixed for the payment of the, last preceding
call, and each member shall (subject to receiving at least 14 days' notice
specifying the time or times and place of payment) pay to the Company at the
time or times and place so specified the amount called on his shares. A call may
be revoked or postponed as the Directors may determine.

      30. TIME WHEN MADE. A call shall be deemed to have been made at the time
when the resolution of the Directors authorising the call was passed and may be
required to be paid by instalments.

      31. INTEREST ON CALLS. If a sum called in respect of a share is not paid
before or on the day appointed for payment thereof, the person from whom the sum
is due, shall pay interest on the sum from the day appointed for payment thereof
to the time of actual payment at such rate not exceeding eight per cent per
annum as the Directors may determine, but the Directors shall be at liberty to
waive payment of that interest wholly or in part.

      32. SUM DUE ON ALLOTMENT. Any sum which by the terms of issue of a share
becomes payable on allotment or at any fixed date, whether on account of the
nominal value, of the share or by way of premium, shall for the purposes of
those Articles be deemed to be a call duly made and payable on the date on which
by the terms of issue the same becomes payable, and in case of non-payment all
the relevant provisions of these Articles as to payment of interest and
expenses, forfeiture, or otherwise shall apply as if the sum had become payable
by virtue of a call duly made and notified.

      33. RIGHTS OF MEMBER SUSPENDED UNTIL CALLS ARE DULY PAID. No member shall
be entitled to receive any dividend or to be present or vote at any meeting or
upon a poll, or to exercise any privilege as a member until he shall have paid
all calls for the time being due and payable on every share hold by him, whether
alone or jointly with any other person, together with interest and expenses (if
any).


                                      -7-
<PAGE>

      34. POWER TO DIFFERENTIATE. The Directors may, on the issue of shares,
differentiate between the holders as to the amount of calls to be paid and the
times of payment.

      35. PAYMENT IN ADVANCE OF CALLS. The Directors may, if they think fit,
receive from any member willing to advance the same all or any part of the money
uncalled and unpaid upon any shares held by him, and upon all or any part of the
money so advanced may (until the same would, but for the advance, become
payable) pay interest at such rate not exceeding (unless the Company in general
meeting shall otherwise direct) eight per cent per annum as may be agreed upon
between the Directors and the member paying the sum in advance. Capital paid on
shares in advance of calls shall not, whilst carrying interest, confer a right
to participate in profits.

                              FORFEITURE OF SHARES

      36. NOTICE REQUIRING PAYMENT OF CALLS. If a member fails to pay any call
or installment of a call on the day appointed for payment thereof, the Directors
may, at any time thereafter during such time as any part of the call or
installment remains unpaid serve a notice on him requiring payment of so much of
the call or installment as is unpaid, together with any interest which may have
accrued.

      37. NOTICE TO STATE TIME AND PLACE. The notice shall name a further day
(not earlier than the expiration of 14 days from the date of service of the
notice) on or before which the payment required by the notice is to be made, and
shall state that in the event of non-payment at or before the time appointed the
shares in respect of which the call was made will be liable to be made forfeit.

      38. FORFEITURE ON NON-COMPLIANCE WITH NOTICE. If the requirements of any
such notice as aforesaid are not complied with, any share in respect of which
the notice has been given may at any time thereafter, before the payment
required by the notice has been made, be made forfeit by a resolution of the
Directors to that effect. Such forfeiture shall include all dividends declared
in respect of the forfeit share and not actually paid before the forfeiture.

      39. SALE OR DISPOSITION OF FORFEIT SHARES. A forfeit share may be sold or
otherwise disposed of on such terms and in such manner as the Directors think
fit, and at any time before a sale or disposition the forfeiture may be
cancelled on such terms as the Directors think fit.

      40. RIGHTS AND liabilities of PERSONS WHOSE SHARES HAVE BEEN MADE FORFEIT.
A person whose shares have been made forfeit shall cease to be a member in
respect of the forfeit shares, but shall, notwithstanding, remain liable to pay
to the Company all money which, at the date of forfeiture, was payable by him to
the Company in respect of the shares (together with interest at the rate of
eight per cent per annum from the date of forfeiture, on the money for the time
being unpaid if the Directors think fit to enforce payment of such interest),
but his liability shall cease if and when the Company receives payment in full
of all such money in respect of the shares.

      41. TITLE TO FORFEIT SHARES. A statutory declaration in writing that the
declarant is a Director or the Secretary of the Company, and that a share in the
Company has been duly made


                                      -8-
<PAGE>

forfeit on a date stated in the declaration, shall be conclusive evidence of the
facts therein stated as against all persons claiming to be entitled to the
share.

      42. POWERS OF COMPANY ON SALE OR DISPOSITION OF FORFEIT SHARES. Any share
so made forfeit shall be deemed to be the property of the Company. The Company
may receive the consideration, if any, given for a forfeit share on any sale or
disposition thereof and may execute a transfer of the share in favour of the
person to whom the share is sold or disposed of and he shall thereupon be
registered as the holder of the share, and shall not be bound to see to the
application of the purchase money, if any, nor shall his title to the share be
affected by any irregularity or invalidity in the proceeding in reference to the
forfeiture, sale, or disposal of the share.

      43. ARTICLES AS TO FORFEITURE APPLICABLE TO NON-PAYMENT ON SHARES. The
provisions of these Articles as to forfeiture shall apply in the case of
non-payment of any sum which, by the terms of issue of a share, becomes payable
at a fixed time, whether an account of the nominal value of the share or by way
of premium, as if the same had been payable by virtue of a call duly made and
notified.

                               TRANSFER OF SHARES

      44. FORM OF TRANSFER. Subject to these Articles any member may transfer
all or any of his shares. Every transfer must be in writing and in the usual
form or in any form approved by the Directors in lieu thereof. The instrument of
transfer of a share shall in any case be signed both by the transferor and by
the transferee and be witnessed. The transferor shall be deemed to remain the
holder of the share until the name of the transferee is entered in the Register
of Members in respect thereof. Shares of different classes shall not be
comprised in the same instrument of transfer.

      45. RETENTION OF TRANSFERS. All instruments of transfer which shall be
registered shall be retained by the Company but any instrument of transfer which
the Directors may refuse to register shall (except in any case of fraud) be
returned to the party presenting the same.

      46. RIGHT TO DECLINE TO ACCEPT TRANSFER. The Directors may decline to
accept any instrument of transfer unless:

            46.1 such fee not exceeding $2.00 as the Directors may from time to
time determine is paid to the Company in respect thereof;

            46.2 the instrument of transfer is duly stamped in accordance with
any law for the time being in force relating to stamp duty;

            46.3 the instrument of transfer is deposited at the office or at
such other place (if any) as the Directors may appoint accompanied by the
certificates of the shares to which it relates and such other evidence as the
Directors may reasonably require to show the right of the transferor to make the
transfer and, if the instrument of transfer is executed by some other person on
his behalf, the authority of the person so to do; and

            46.4 such fee not exceeding $1.00 as the Directors may from time to
time determine is paid to the Company in respect of the registration of any
probate, letters of


                                      -9-
<PAGE>

administration, certificate of marriage or death, power of attorney or any
document relating to or affecting the title to the shares.

      47. INFANT, BANKRUPT OR PERSON OF UNSOUND MIND. No share shall in any
circumstance be transferred to any infant or bankrupt or person of unsound mind.

      48. PRE-EMPTION RIGHTS. (1) Any person proposing to transfer a share
(hereinafter called "the proposing transferor") shall give notice in writing
(hereinafter called "a transfer notice") to the Company that he desires to
transfer same. A transfer notice may include several shares and in such a case
shall operate as if it were a separate notice in respect of each. The transfer
notice shall specify the sum the proposing transfer fixes as the fair value of
each share and shall constitute the Company his agent for the sale of the shares
comprised in the transfer notice to the other members (each hereinafter called
"the purchasing member") as nearly as practicable in proportion to their
shareholdings in the Company or (where the number of shares is less than the
number of purchasing members) as a bloc to any of them, at the price fixed in
the transfer notice or at the option of the relevant purchasing member at the
fair value to be fixed by the auditors of the Company in accordance with Article
39(4) hereof,

            (2) A transfer notice once given shall not be revocable except with
the sanction of the Directors.

            (3) If the Company shall within 28 days after being served with a
transfer notice find a purchasing member willing to purchase any of the shares
as aforesaid and shall give, notice thereof to the proposing transferor, the
proposing transferor shall be bound upon payment of the fair value as fixed in
accordance with paragraph (1) or (4) of this Article 39 to transfer the relevant
shares to the purchasing member.

            (4) The auditors shall on the application of either the proposing
transferor or any purchasing member certify in writing the sum which in their
opinion is the fair value of a share and such sum shall be deemed to be the fair
value and in so certifying the auditors shall be considered to be acting as
experts and not as arbitrators and accordingly the Arbitration Act (Cap. 10)
shall not apply. The interval between the date of the application to the
auditors and the date of their certificate shall not be taken into consideration
in calculating the period referred to in the preceding paragraph.

            (5) If in any case the proposing transferor after having become
bound as aforesaid makes default in transferring any share, the Company may
receive the purchase money and the proposing transferor shall be deemed to have
appointed any one Director or the Secretary of the Company as his agent to
execute a transfer of the share to the purchasing member, and upon the execution
of such transfer the Company shall hold the purchase money in trust for the,
proposing transferor. The receipt of the Company for the purchase money shall be
a good discharge to the purchasing member, and after his name has been entered
in the Register in purported exercise of the aforesaid power the validity of the
proceedings shall not be questioned by any person.

            (6) If the Company shall not within the period referred to in
paragraph (3) of this Article 39 find a purchasing member or give notice in the
manner aforesaid in respect of any shares


                                      -10-
<PAGE>

comprised in the transfer notice the proposing transferor shall at any time
within three months after the expiration of such period be at liberty to sell
and transfer the shares to any person at a price which is not less than that
specified by him in the transfer notice.

            (7) This Article 39 shall not apply to a proposed transfer of shares
if the holders of all the shares for the time being issued shall so agree.

      49. DIRECTORS' RIGHT TO REFUSE TRANSFER OF SHARES. The Directors may
refuse to register the transfer of any share:

            49.1 if the share has not been fully paid or is subject to a lien;
or

            49.2 if the provisions of these Articles relating to the transfer of
shares have not been complied with.

      50. DIRECTORS TO GIVE REASONS FOR REFUSAL TO TRANSFER. If the Directors
Shall refuse to register the transfer of any share they shall within one month
of the date on which the application for transfer was made serve on the
transferor and transferee a notice in writing stating the reasons justifying the
refusal to transfer and a notice of refusal as required by the Act.

      51. REGISTER OF TRANSFERS. The Company shall maintain a Register of
Transfers which shall be kept under the control of the Directors, and in which
shall be entered the particulars of every transfer of shares. The Register of
Transfers may be closed at such times and for such periods as the Directors may
from time to time determine provided always that it shall not be closed for more
than 30 days in the aggregate in any one year.

                             TRANSMISSION OF SHARES

      52. TRANSMISSION ON DEATH. In case of the death of a member the survivor
or survivors where the deceased was a joint holder, and the legal personal
representatives of the deceased where he was a sole holder, shall be the only
persons recognised by the Company as having any title to this interest in the
shares; but nothing herein contained shall release the estate of a deceased
joint holder from any liability in respect of any share which had been jointly
held by him with other persons.

      53. PERSONS BECOMING ENTITLED ON DEATH OR BANKRUPTCY OF MEMBER MAY BE
REGISTERED. Any person becoming entitled to a share in consequence of the death
or bankruptcy of a member may, upon such evidence being produced as may from
time to time properly be required by the Directors and subject as hereinafter
provided, elect either to be registered himself as holder of the share or to
have some, person nominated by him registered as the transferee thereof, but the
Directors shall, in either case, have the same right to decline to accept a
transfer or refuse registration as they would have had in the case of a transfer
of the share by that member before his death or bankruptcy.

      54. RIGHTS OF PERSONS BECOMING ENTITLED ON DEATH OR BANKRUPTCY OF MEMBER.
If the person so becoming entitled elects to be registered himself, he shall
deliver or send to the Company a notice in writing signed by him stating that he
so elects. If he elects to have


                                      -11-
<PAGE>

another person registered he shall testify his election by executing to that
person a transfer of the share. All the limitations, restrictions, and
provisions of these Articles relating to the transfer of shares by members shall
be applicable to any such notice or transfer as aforesaid as if the death or
bankruptcy or the member had not occurred and the notice or transfer were a
transfer signed by that member.

      55. RIGHTS OF UNREGISTERED EXECUTORS AND TRUSTEES. Where the registered
holder of any share dies or becomes bankrupt his legal personal representative
or the assignee of his estate, as the case may be, shall, upon the production of
such evidence as may from time to time be properly required by the Directors in
that behalf, be entitled to the same dividends and other advantages, and to the
same rights (whether in relation to meetings of the Company, or to voting, or
otherwise), as the registered holder would have been entitled to if he had not
died or become bankrupt; and where two or more persons are jointly entitled to
any share in consequence of the death of the registered holder they shall, for
the purposes of these Articles be deemed to be joint holders of the share.

                         CONVERSION OF SHARES INTO STOCK

      56. POWER TO CONVERT INTO STOCK. The Company may be ordinary resolution
passed at a general meeting convert any paid-up shares into stock and reconvert
any stock into paid-up shares of any denomination.

      57. TRANSFER OF STOCK. The holders of stock may transfer the same or any
part thereof in the same manner and subject to the same Articles as the shares
from which the stock arose might previously to conversion have been transferred
or as near thereto as circumstances admit; but the Directors may from time to
time fix the minimum amount of stock transferable and restrict or forbid the
transfer of fractions of that minimum, but the minimum shall not exceed the
nominal amount of the shares from which the stock arose.

      58. RIGHTS OF STOCK-HOLDERS. The holders of stock shall according to the
amount of the stock held by them have the same rights, privileges and advantages
as regards dividends, voting at meetings of the Company and other matters as if
they held the shares from which the stock arose, but no such rights, privilege
or advantage (except participation in the dividends and profits of the Company
and in the assets on winding up) shall be conferred by any aliquot part of stock
which would not if existing in shares have conferred that right, privilege or
advantage.

      59. INTERPRETATION. Such of the Articles of the Company as are applicable
to paid-up shares shall apply to stock, and the words "share" and "shareholder"
therein shall include "stock" and "stockholder."

                              ALTERATION OF CAPITAL

      60. The Company may from time to time by ordinary resolution:

            60.1 increase the share capital by such sum to be divided into
shares of such amount as the resolution shall prescribe;


                                      -12-
<PAGE>

            60.2 consolidate and divide all or any of its share capital into
shares of larger amount than its existing shares;

            60.3 subdivide its shares or any of them into shares of smaller
amount than is fixed by the Memorandum of Association of the Company; so however
that in the subdivision the proportion between the amount (if any) unpaid on
each reduced share shall be the same as it was in the case of the share from
which the reduced share is derived;

            60.4 cancel shares which at the date of the passing of the
resolution in that behalf have not been taken or agreed to be taken by any
person or which have been made forfeit and diminish the amount of its share
capital by the amount of the shares so cancelled.

      61. POWER TO REDUCE SHARE CAPITAL. The Company may by special resolution
reduce its share capital, any capital redemption reserve fund or any share
premium account in any manner, with and subject to such sanction as may be
required by law.

                                GENERAL MEETINGS

      62. ANNUAL GENERAL MEETING. An annual general meeting of the Company shall
be held once in each calendar year or at such times as may be permitted by the
Act. All general meetings other than the annual general meetings shall be called
extraordinary general meetings.

      63. CALLING EXTRAORDINARY GENERAL MEETINGS. Any Director may whenever he
thinks fit convene an extraordinary general meeting, and an extraordinary
general meeting shall be convened on such requisition or in default may be
convened by such requisitionists as provided by the Act.

      64. TIME AND PLACE OF MEETING. The time and place of any general meeting
shall be determined by the convenors of the meeting.

                           NOTICE OF GENERAL MEETINGS

      65. NOTICE OF MEETINGS. (1) Subject to the provisions of the Act as to
special resolutions, special notice and agreement for shorter notice, a general
meeting of the Company shall be called by 14 days' notice in writing at the
least.

            (2) The notice shall be exclusive of the day on which it is served
or deemed to be served and of the day for which it is given, and shall specify
the place, the day and the hour of meeting and in case of special business the
general nature of the business.

            (3) In every notice calling a meeting there shall appear with
reasonable prominence a statement that a member entitled to attend and vote is
entitled to appoint not more than two proxies to attend and vote instead of him
and that a proxy need not also be a member.

      66. SPECIAL BUSINESS. All business shall be special that is transacted at
an extraordinary general meeting, and also all that is transacted at an annual
general meeting, with the exception of


                                      -13-
<PAGE>

declaring a dividend, the consideration of the accounts, balance sheets and the
reports of the Directors and auditors and the appointment and fixing of the
remuneration of the auditors.

      67. PERSONS WHO SHOULD BE GIVEN NOTICE. (1) Notice of every general
meeting shall be given in any manner authorised by these Articles to:

            67.1 every member holding shares conferring the right to attend and
vote at the meeting;

            67.2 the Directors (including alternate Directors) of the Company;
and

            67.3 the auditors of the Company.

            (2) NOTICE GIVEN TO DEBENTURE HOLDERS WHEN NECESSARY. No other
person shall be entitled to receive notices of general meetings; provided that
if the meeting be called for the alteration of the Company's objects, the
provisions of the Act regarding notices to debenture holders shall be complied
with.

            (3) ACCIDENTAL OMISSION TO GIVE AND NON-RECEIPT OF NOTICE. The
accidental omission to give notice of a meeting to or the non-receipt of notice
of a meeting by any person entitled to receive notice shall not invalidate the
proceedings at the meeting.

                         PROCEEDINGS AT GENERAL MEETINGS

      68. QUORUM. No business shall be transacted at any general meeting unless
a quorum of members is present at the time when the meeting proceeds to
business. Save as herein otherwise provided, two members shall form a quorum.
For the purposes of this Article "member" includes a person attending as a proxy
or as representing a corporation which is a member, and joint holders of any
share shall be treated as one member.

      69. ADJOURNMENT IF QUORUM NOT PRESENT. If within half an hour from the
time appointed for the meeting a quorum is not present, the meeting, if convened
upon the requisition of members, shall be dissolved; in any other case it shall
stand adjourned to the same day in the next week at the same time and place as
the original meeting, or to such other day and at such other time and place as
the Directors may determine.

      70. CHAIRMAN. The Chairman, if any, of the Board of Directors shall
preside as Chairman at every general meeting of the Company, or if there is no
such Chairman, or if he is not present within 10 minutes after the time
appointed for the holding of the meeting or is unwilling to act, the Deputy
Chairman shall preside as Chairman of the meeting. If there is no such Deputy
Chairman present at the meeting and willing to act as Chairman the members
present shall appoint a Director as Chairman of the meeting or if no Director is
present or if all Directors present are unwilling to act, the members present
shall elect one of their number to be Chairman of the meeting.

      71. ADJOURNMENT. The Chairman may, with the consent of any meeting at
which a quorum is present (and shall if so directed by the meeting), adjourn the
meeting from time to time and from place to place, but no business shall be
transacted at any adjourned meeting other than the


                                      -14-
<PAGE>

business left unfinished at the meeting from which the adjournment took place.
When a meeting is adjourned for 30 days or more, notice of the adjourned meeting
shall be given as in the case of an original meeting. Save as aforesaid it shall
not be necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.

      72. METHOD OF VOTING. At any general meeting a resolution put to the vote
of the Meeting shall be decided on a show of hands unless before or on the
declaration of the result of the show of hands a poll is demanded:

            72.1 by the Chairman;

            72.2 by at least three members present in person or by proxy;

            72.3 by any member or members present in person or by proxy and
representing not less than one-tenth of the total voting rights of all the
members having the right to vote at the meeting; or

            72.4 by a member or members holding shares in the Company conferring
a right to vote at the meeting being shares on which an aggregate sum has been
paid up equal to not less than one-tenth of the total sum paid up on all the
shares conferring that right.

Unless a poll is so demanded a declaration by the Chairman that a resolution has
on a show of hands been carried or carried unanimously, or by a particular
majority, or lost, and an entry to that effect in the book containing the
minutes of the proceedings of the Company shall be conclusive evidence of the
fact without proof of the number or proportion of the votes recorded in favour
of or against the resolution. The demand for a poll may be withdrawn.

      73. TAKING A POLL. If a poll is duly demanded it shall be taken in such
manner and either at once or after an interval or adjournment or otherwise as
the Chairman directs, and the result of the poll shall be the resolution of the
meeting at which the poll was demanded. No poll shall be demanded on the
election of a Chairman of a meeting and a poll demanded on a question of
adjournment shall be taken at the meeting and without adjournment.

      74. OTHER BUSINESS TO PROCEED. The demand of a poll shall not prevent the
continuance of a meeting for the transaction of any business other than the
question on which a poll has been demanded.

      75. ERROR IN COUNTING OF VOTES. If at any general meeting any votes shall
be counted which ought not to have been counted or might have been rejected, the
error shall not vitiate the result of the voting unless it be pointed out at the
same meeting, and be of sufficient magnitude to vitiate the result of the
voting.

      76. RESOLUTION BY CIRCULAR. Any resolution signed in writing by all
members for the time being of the Company entitled to attend and vote at general
meetings of the Company shall be as valid as if it had been passed at a general
meeting of the Company duly convened and held.

                                VOTES OF MEMBERS


                                      -15-
<PAGE>

      77. VOTING RIGHTS OF MEMBERS. Subject to any rights or restrictions for
the time being attached to any class or classes of shares, at a meeting of
members or classes of members each member entitled to vote may vote in person or
by proxy or by attorney. On a show of hands every member present in person or by
proxy shall have one vote, and on a poll every member present in person or by
proxy shall have one vote for each share he holds.

      78. CHAIRMAN'S CASTING VOTE. In the case of an equality of votes, whether
on a show of hands or on a poll, the Chairman of the meeting at which the show
of hands takes place or at which the poll is demanded shall be entitled to a
second or casting vote in addition to the vote or votes to which he may be
entitled as a member.

      79. VOTING RIGHTS OF JOINT HOLDERS. In the case of joint holders the vote
of the senior who tenders a vote, whether in person or by proxy, shall be
accepted to the exclusion of the votes of the other joint holders; and for this
purpose seniority shall be determined by the order in which the names stand in
the Register of Members.

      80. CORPORATIONS ACTING BY REPRESENTATIVES. Any corporation which is a
member of the Company may by resolution of its directors or other governing body
authorise any person to act as its representative at any general meeting of the
Company or of any class of members of the Company and the persons so authorised
shall be entitled to exercise the same powers on behalf of the corporation as a
corporation would exercise if it were personally present at the meeting.

      81. RIGHT TO VOTE. Every member shall be entitled to be present and to
vote at any general meeting either personally or by proxy in respect of any
shares upon which all calls due to the Company have been paid.

      82. OBJECTIONS. No objection shall be raised to the qualification of any
voter except at the meeting or adjourned meeting at which the vote objected to
is given or tendered, and every vote not disallowed at such meeting shall be
valid for all purpose. Any such objection made in due time shall be referred to
the Chairman of the meeting, whose decision shall be final and conclusive.

      83. APPOINTMENT OF PROXIES. A member may appoint not more than two proxies
to attend at the same meeting. Where a member appoints more than one proxy, he
shall specify the proportion of his shareholdings to be represented by each
proxy. The instrument appointing a proxy or representative shall be in writing
under the hand of the appointor or of his attorney duly authorised in writing
or, if the appointor is a corporation, either under seal or under the hand of an
officer or attorney duly authorised. A proxy or representative may but need not
be a member of the Company. The instrument appointing a proxy shall be deemed to
confer authority to demand or join in demanding a poll. The instrument
appointing a proxy shall be in the common form or in such other form as the
Directors may from time to time approve.

      84. DEPOSIT OF INSTRUMENT APPOINTING A PROXY. The instrument appointing a
proxy and the power of attorney or other authority, if any, under which it is
signed or a notarially certified copy of that power or authority shall be
deposited at the office, or at such other place in Singapore as is specified for
that purpose in the notice convening the meeting, not less than 48 hours before
the time for holding the meeting or adjourned meeting at which the person named
in the


                                      -16-
<PAGE>

instrument proposes to vote, or, in the case of a poll, not less than 24 hours
before the time appointed for the taking of the poll, and in default the
instrument of proxy shall not be treated as valid.

      85. INTERVENING DEATH OR INSANITY OF PRINCIPAL NOT TO REVOKE PROXY. A vote
given in accordance with the terms of an instrument of proxy or attorney shall
be valid not withstanding the previous death or unsoundness of mind of the
principal or revocation of the instrument or of the authority under which the
instrument was executed, or the transfer of the share in respect of which the
instrument is given, if no intimation in writing of such death, unsoundness of
mind, revocation, or transfer as aforesaid has been received by the Company at
the office before the commencement of the meeting or adjourned meeting at which
the instrument is used.

                                    DIRECTORS

      86. NUMBER OF DIRECTORS. The number of Directors shall not be less than
two. ALL the Directors of the Company shall be natural persons. The first
Directors shall be ONG KIAN MIN and YONG WEI LING IVY.

      87. DIRECTOR NEED NOT BE MEMBER OF COMPANY. A Director need not be a
member of the Company, but shall be entitled to receive notice of and to attend
all general meetings of the Company.

      88. DIRECTORS' FEES. The fees payable to Directors shall from time to time
be determined by the Company in general meeting. Such fees shall be divided
amongst the Directors in such proportions and in such manner as they may agree
and in default of agreement equally, except that in the latter event any
Director who shall hold office for part only of the period in respect of which
such fees are payable shall be entitled to rank in such division for the
proportion of the fees related to the period during which he has held office.

      89. EXPENSES. The Directors may be paid all travelling, hotel and other
expenses properly incurred by them in attending and returning from meetings of
the Directors or any committee of the Directors or general meetings of the
Company or in connection with the business of the Company.

      90. EXTRA REMUNERATION. Any Director who is appointed to any executive
office or serves on any committee or who otherwise performs or renders services,
which in the opinion of the Directors, are outside his ordinary duties as a
Director, may be paid such remuneration as the Directors may determine.

      91. DECLARATION OF DIRECTORS' INTEREST IN CONTRACT WITH COMPANY. (1) A
Director who is in any way whether directly or indirectly interested in a
contract or proposed contract with the Company shall declare the nature of his
interest at a meeting of the Directors in accordance with the Act, but
notwithstanding his interest he may vote and be counted in the quorum present at
any meeting of the Directors.

            (2) DECLARATION OF DIRECTORS' CONFLICT OF INTEREST. A Director
who holds any office or possesses any property whereby directly or indirectly
duties or interests might be created in conflict with his duties or interests as
Director shall declare the fact and the


                                      -17-
<PAGE>

nature, character and extent of the conflict at a meeting of the Directors of
the Company in accordance with the Act.

            (3) POWER OF DIRECTORS TO HOLD OFFICE OF PROFIT AND TO CONTRACT
WITH COMPANY. A Director may hold any other office or place of profit under the
Company (other than the office of auditor) in conjunction with his office of
Director for such period and on such terms (as to remuneration and otherwise) as
the Directors may determine. No Director or intending Director shall be
disqualified by his office from contracting with the Company either with regard
to his tenure of any such other office or place of profit or as a vendor,
purchaser or otherwise. No such contract and no contract or arrangement entered
into by or on behalf of the Company in which any Director is in any way
interested shall be liable to be avoided nor shall any Director so contracting
or being so interested be liable to account to the Company for any profit
realised by any such contract or arrangement by reason of such Director holding
that office or of the fiduciary relationship thereby established.

            (4) HOLDING OF OFFICE IN OTHER COMPANIES. A Director of the
Company may become or continue to be a Director or other officer of or otherwise
be interested in any company whether or not the Company is interested as a
shareholder or otherwise and no such Director shall be accountable to the
Company for any remuneration or other benefits received by him as a Director or
officer of or from his interests in such other company.

      92. DIRECTORS SHALL KEEP registers. The Directors shall keep registers as
required by the Act.

                      APPOINTMENT AND REMOVAL OF DIRECTORS

      93. DIRECTORS' POWER TO FILL CASUAL VACANCIES AND TO APPOINT ADDITIONAL
DIRECTORS. The Directors may at any time, and from time to time, appoint any
person to be a Director, either to fill a casual vacancy or as an addition to
their number.

      94. REMOVAL OF DIRECTOR. The Company may by ordinary resolution remove any
Director before the expiration of his period of office, and may by an ordinary
resolution appoint another person as Director in his stead.

      95. VACATION OF OFFICE OF DIRECTORS. The office of Director shall become
vacant if the Director

            95.1 ceases to be a Director by virtue of the Act;

            95.2 becomes bankrupt or makes any arrangement or composition with
his creditors generally;

            95.3 becomes prohibited by law from continuing to be a Director;

            95.4 becomes of unsound mind or a person whose person or estate is
liable to be dealt with in any way under the law relating to mental disorder;


                                      -18-
<PAGE>

            95.5 resigns his office by notice in writing to the Company; or

            95.6 is removed from office pursuant to a resolution passed by the
Company in general meeting.

                         POWERS AND DUTIES OF DIRECTORS

      96. GENERAL POWER OF DIRECTORS TO MANAGE COMPANY'S BUSINESS. The business
of the Company shall be managed by the Directors who may exercise all powers of
the Company as are not, by the Act or by these Articles, required to be
exercised by the Company in general meeting. The exercise of such powers of the
Company by the Directors shall be subject to these Articles, the Act and such
regulations being not inconsistent with these Articles or the Act as may be
prescribed by the Company in general meeting, but no regulation made by the
Company in general meeting shall invalidate any prior act of the Directors which
would have been valid if that regulation had not been made.

      97. POWER OF SALE OR DISPOSAL OF COMPANY'S PROPERTY. Without prejudice to
the generality of the preceding Article, any sale or disposal by the Directors
of the whole or substantially the whole of the undertaking or property of the
Company shall be subject to the prior approval of the Company in general
meeting.

      98. DIRECTORS' BORROWING POWERS. The Directors may exercise all the powers
of the Company to borrow money and to mortgage or charge its undertaking,
property and uncalled capital, or any part thereof, and to issue debentures and
other securities whether outright or as security for any debt, liability, or
obligation of the Company or of any third party.

      99. DELEGATION OF DIRECTORS' POWERS. The Directors may delegate any of
their powers other than the powers to borrow and make calls to committees
consisting of such persons (whether Directors or not) as they think fit. Any
committee so formed shall in the exercise of the power so delegated conform to
any regulations that may from time to time be imposed upon them by the Board.

      100. POWER TO ESTABLISH LOCAL BOARDS. The Directors from time to time and
at any time may establish any local boards or agencies for managing any of the
affairs of the Company either in the Republic of Singapore or elsewhere and may
appoint any persons to be members of such local boards or any managers,
inspectors or agents and may fix their remuneration and may delegate to any
local board, manager, inspector or agent any of the powers, authorities and
discretions vested in the Directors with power to sub-delegate and may authorise
the members of any local board or any of them to fill any vacancies therein and
to act notwithstanding vacancies and any such appointment or delegation may be
made upon such terms and subject to such conditions as the Directors may think
fit and the Directors may remove any person so appointed and may annul or vary
such delegation but no person dealing in good faith and without notice of any
such annulment or variation shall be affected thereby. Every Director while
present in the country or territory in which any such local board or any
committee thereof shall have been established shall be ex-officio a member
thereof and entitled to attend and vote at all meetings thereof held while he is
present in such country or territory.


                                      -19-
<PAGE>

      101. POWER TO APPOINT ATTORNEY. The Directors may from time to time by
power of attorney appoint any corporation, firm, or person or body of persons,
whether nominated directly or indirectly by the Directors, to be the attorney or
attorneys of the Company for such purposes and with such powers, authorities and
discretions (not exceeding those vested in or exercisable by the Directors under
these Articles) and for such period and subject to such conditions as they may
think fit and any such powers of attorney may contain such provisions for the
protection and convenience of persons dealing with any such attorney as the
Directors may think fit and may also authorise any such attorney to delegate all
or any of the powers, authorities and discretions vested in him.

      102. EXECUTION OF NEGOTIABLE INSTRUMENTS AND RECEIPTS FOR MONEY PAID. All
cheques, promissory notes, drafts, bills of exchange and other negotiable
instruments, and all receipts for money paid to the Company shall be signed,
drawn, accepted, endorsed, or otherwise executed, as the case may be, by any two
Directors or in such other manner as the Directors from time to time determine.

                            PROCEEDINGS OF DIRECTORS

      103. POWER TO KEEP A BRANCH REGISTER. The Directors may exercise the
powers conferred upon the Company by the Act with regard to the keeping of a
branch register, and the Directors may (subject to the provisions of the Act)
make and vary such regulations as they may think fit respecting the keeping of
any such register.

      104. MEETING OF DIRECTORS. The Directors may meet together for the
despatch of business, adjourn and otherwise regulate their meetings as they
think fit. A Director may at any time and the Secretary shall at the request of
a Director summon a meeting of the Directors.

      105. QUESTIONS TO BE DECIDED AT MEETINGS. Subject to these Articles
questions arising at any meeting of Directors shall be decided by a majority of
votes and a determination by a majority of Directors shall for all purposes be
deemed a determination of the Directors. In cast of an equality of votes the
Chairman of the meeting shall have a second casting vote.

      106. QUORUM. The quorum necessary for the transaction of the business of
the Directors may be fixed by the Directors, and unless so fixed shall be two.

      107. PROCEEDINGS IN CASE OF VACANCIES. The continuing Directors may act
notwithstanding any vacancy in their body, but if and so long as their number is
reduced below the number fixed by or pursuant to the Articles of the Company as
the necessary quorum of Directors, the continuing Directors or Director may act
for the purpose of increasing the number of Directors to that number or of
summoning a general meeting of the Company, but for no other purpose.

      108. CHAIRMAN OF DIRECTORS. The Directors may elect a Chairman and a
Deputy Chairman. The Chairman shall preside at all meetings of the Board but if
at any time there is no Chairman or if at any meeting the Chairman is not
present within 10 minutes after the time appointed for holding the meeting the
Deputy Chairman shall preside at the meeting. If there is no


                                      -20-
<PAGE>

Deputy Chairman or the Deputy Chairman is not present at the meeting the
Directors present may choose one of their number to be Chairman of the meeting.

      109. CHAIRMAN OF COMMITTEE. A committee formed by the Directors to
exercise powers delegated by them may elect a Chairman of its meetings; if no
such Chairman is elected, or if at any meeting the Chairman is not present
within 10 minutes after the time appointed for holding the meeting, the members
present may choose one of their number to be Chairman of the meeting.

      110. MEETING OF COMMITTEE. A committee may meet and adjourn its meeting as
it thinks proper. Questions arising at any meeting shall be determined by a
majority of votes of the members present, and in the case of an equality of
votes the Chairman shall have a second or casting vote.

      111. VALIDITY OF ACTS OF DIRECTORS IN SPITE OF SOME FORMAL DEFECTS. All
acts done by any meeting of the Directors or of a committee of Directors or by
any person acting as a Director shall, notwithstanding that it is afterwards
discovered that there was some defect in the appointment of any such Director or
person acting as aforesaid, or that they or any of them were disqualified, be as
valid as if every such person had been duly appointed and was qualified to be a
Director.

      112. RESOLUTIONS IN WRITING. A resolution in writing signed by all the
Directors shall be as valid and effectual as if it had been passed at a meeting
of the Directors duly convened and held. Any such resolution may consist of
several documents in like form, each signed by one or more Directors.

      113. MINUTES OF MEETING. The Directors shall cause minutes to be made:

            113.1 of names of Directors present at all meetings of the Company
and of the Directors; and

            113.2 of all proceedings at all meetings of the Company and of the
Directors.

Such minutes shall be signed by the Chairman of the meeting at which the
proceedings were held or by the Chairman of the next succeeding meeting.

                               ALTERNATE DIRECTORS

      114. APPOINTMENT OF ALTERNATE DIRECTORS. Any Director may appoint a person
approved by the majority of the other Directors to be an alternate Director in
his place during such period as he thinks fit. An alternate Director need not be
a member of the Company. Any person while he so holds office as an alternate
Director shall be entitled to notice of meetings of the Directors and to attend
and vote thereat accordingly, and to exercise all the rights and powers of the
appointer in his place. An alternate Director shall ipso facto vacate office if
the appointor vacates office as a Director or removes the appointee from office.
Any appointment or removal under this Article shall be effected by notice in
writing under the hand of the Director making the same. Any fee paid by the
Company to the alternate Director shall be deducted from the remuneration
payable to his appointor.


                                      -21-
<PAGE>

                               MANAGING DIRECTORS

      115. APPOINTMENT OF MANAGING DIRECTOR. The Directors may from time to time
appoint one or more of their body to the office of Managing Director for such
period and on such terms as they think fit and, subject to the terms of any
agreement entered into in any particular case, may revoke any such appointment.
The appointment of a Director so appointed shall be automatically terminated if
he ceases for any cause to be a Director.

      116. REMUNERATION OF MANAGING DIRECTOR. A Managing Director shall, subject
to the terms of any agreement entered into in any particular case, receive such
remuneration (whether by way of salary, commission, or participation in profits,
or partly in one way and partly in another) as the Directors may determine.

      117. POWERS OF MANAGING DIRECTOR. A Managing Director shall be subject to
the control of the Directors. The Directors may entrust to and confer upon a
Managing Director any of the powers exercisable by them upon such terms and
conditions and with such restrictions as they may think fit and either
collaterally with or to the exclusion of their own powers, and may from time to
time revoke, withdraw, alter, or vary all or any of those powers.

                                    SECRETARY

      118. APPOINTMENT OF SECRETARY. The Secretary shall in accordance with the
Act be appointed by the Directors for such term, at such remuneration, and upon
such conditions as they may think fit and any Secretary so appointed may be
removed by them.

      119. SAME PERSON CANNOT ACT AS DIRECTOR AND SECRETARY. A provision of the
Act or these Articles requiring or authorising a thing to be done by or in
relation to a Director and the Secretary shall not be satisfied by its being
done by or in relation to the same person acting both as Directors and as, or in
place of, the Secretary.

                                      SEAL

      120. SEAL. The Directors shall provide for the safe custody of the seal
which shall only be used by the authority of the Directors or of a committee of
the Directors authorised by the Directors in that behalf. Every instrument to
which the seal is affixed shall bear the autographic or facsimile signatures of
a Director and the Secretary or a second Director or some other person appointed
by the Directors for the purpose. Any facsimile signature may be reproduced by
mechanical, electronic or other method approved by the Directors.

      121. OFFICIAL SEAL. The Company may exercise all the powers conferred by
the Act to have an official seal for use abroad and such official seal shall be
affixed by the authority and in the presence of and the instruments sealed
therewith shall be signed by such person as the Directors shall from time to
time by writing under the seal appoint.

      122. DUPLICATE COMMON SEAL. The Company may have a duplicate common seal
which shall be a facsimile of the common seal of the Company with the addition
of its face of the


                                      -22-
<PAGE>

words "Share Seal" and a share certificate under such duplicate seal
shall be deemed to be sealed with the seal of the Company.

                                    ACCOUNTS

      123. DIRECTORS TO KEEP PROPER ACCOUNTS. The Directors shall cause proper
accounting and other records to be kept and shall distribute copies of
balance-sheets and other documents as required by the Act and shall from time to
time determine whether and to what extent and at what times and places and under
what conditions or regulations the accounting and other records of the Company
or any of them shall be open to the inspection of members not being Directors,
and no member (not being a Director) shall have any right of inspecting any
account or paper of the Company except as conferred by Statute or authorised by
the Directors or by the Company in general meeting.

      124. PRESENTATION OF ACCOUNTS. The Directors shall from time to time in
accordance with the Act cause to be prepared and to be laid before the Company
in general meeting such profit and loss accounts, balance-sheets and reports as
are required under the Act.

      125. COPIES OF ACCOUNTS. A copy of every balance-sheet (including every
document required by law to be annexed thereto) which is to be laid before the
Company in general meeting together with a copy of the Auditor's report shall
not less than 14 days before the date of the meeting be delivered or sent by
post to every member of and every holder of debentures of the Company, provided
that this Article shall not require a copy of those documents to be sent to any
person of whose address the Company is not aware or to more than one of the
joint holders of any shares or debentures.

                                      AUDIT

      126. APPOINTMENT OF AUDITORS. Auditors shall be appointed and their duties
regulated in accordance with the Act.

                             DIVIDENDS AND RESERVES

      127. DIVIDENDS. The Company in general meeting may declare dividends, but
no dividend shall exceed the amount recommended by the Directors.

      128. INTERIM DIVIDEND. The Directors may from time to time pay to the
members such interim dividends as appear to the Directors to be justified by the
profits of the Company.

      129. PAYMENT OF DIVIDENDS. No dividend shall be paid otherwise than out of
profits or shall bear interest against the Company.

      130. POWER TO CARRY PROFIT TO RESERVE. The Directors may, before
recommending any dividend, set aside out of the profits of the Company such sums
as they think proper as reserves which shall, at the discretion of the
Directors, be applicable for any purpose to which the profits of the Company may
be properly applied, and pending any such application may, at the like
discretion, either be employed in the business of the Company or be invested in
such


                                      -23-
<PAGE>

investments (other than shares in the Company) as the Directors may from
time to time think fit. The Directors may also without placing the same to
reserve carry forward any profits which they may think prudent not to divide.

      131. APPORTIONMENT OF DIVIDENDS. Subject to the rights of persons, if any,
entitled to shares with special rights as to dividend, all dividends shall be
declared and paid according to the amounts paid or credited as paid on the
shares in respect of which the dividend is paid, but no amount paid or credited
as paid on a share in advance of calls shall be treated for the purposes of this
Article as paid on the share. All dividends shall be apportioned and paid
proportionately to the amounts paid or credited as paid on the shares during any
portion or portions of the period in respect of which the dividend is paid, but
if any share is issued on term providing that it shall rank for dividend as from
a particular date that share shall rank for dividend accordingly.

      132. DEDUCTION OF DEBTS DUE TO COMPANY. The Directors may deduct from any
dividend payable to any member all sums of money, if any, presently payable by
him to the Company on account of calls or otherwise in relation to the shares of
the Company.

      133. PAYMENT OF DIVIDEND IN SPECIE. Any general meeting declaring a
dividend or bonus may direct payment of such dividend or bonus wholly or partly
by the distribution of specific assets and in particular of paid-up shares,
debentures or debenture stock of any other company or in any one or more of such
ways and the Directors shall give effect to such resolution, and where any
difficulty arises in regard to such distribution, the Directors may settle the
same as they think expedient, and fix the value for distribution of such
specific assets or any part thereof and may determine that cash payments shall
be made to any members upon the footing of the value so fixed in order to adjust
the rights of all parties, and may vest any such specific assets in trustees as
may seem expedient to the Directors.

      134. DIVIDENDS PAYABLE BY CHEQUE. Any dividend, interest, or other money
payable in cash in respect of shares may be paid by cheque or warrant sent
through the post directed to the registered address of the holder or, in the
case of joint holders, to the registered address of that one of the joint
holders who is first named on the Register of Members or to such person and to
such address as the holder or joint holders may in writing direct. Every such
cheque or warrant shall be made payable to the order of the person to whom it is
sent. Any one of two or more joint holders may give effectual receipts for any
dividends, bonuses, or other money payable in respect of the shares held by them
as joint holders.

      135. EFFECT OF TRANSFER. A transfer of a share shall not pass the right to
any dividend declared in respect thereof before the transfer has been
registered.

                            CAPITALISATION OF PROFITS

      136. POWER TO CAPITALISE PROFITS. The Company in general meeting may upon
the recommendation of the Directors by ordinary resolution resolve that it is
desirable to capitalise any part of the amount for the time being standing to
the credit of any of the Company's reserve accounts or to the credit of the
profit and loss account or otherwise available for distribution, and accordingly
that such sum be set free for distribution amongst the members who would have
been


                                      -24-
<PAGE>

entitled thereto if distributed by way of dividend and in the same
proportions on condition that the same be not paid in cash but be applied either
in or towards paying up any amounts for the time being unpaid on any shares held
by such members respectively or paying up in full unissued shares or debentures
of the Company to be allotted, distributed and credited as fully paid up to and
amongst such members in the proportion aforesaid, or partly in the one way and
partly in the other, and the Directors shall give effect to such resolution. A
share premium account and a capital redemption reserve may, for the purposes of
this Article, be applied only in the paying up of unissued shares to be issued
to members of the Company as fully paid bonus shares.

      137. IMPLEMENTATION OF RESOLUTION TO CAPITALISE PROFITS. Whenever such a
resolution as aforesaid shall have been passed the Directors shall make all
appropriations and applications of the undivided profits resolved to be
capitalised thereby, and all allotments and issues of fully paid shares or
debentures, if any, and generally shall do all acts and things required to give
effect thereto, with full power to the Directors to make such provision by the
issue of fractional certificates or by payment in cash or otherwise as they
think fit for the case of shares or debentures becoming distributable in
fractions, and also to authorise any person to enter on behalf of all the
members entitled thereto into an agreement with the Company providing for the
allotment to them respectively, credited as fully paid up, of any further shares
or debentures to which they may be entitled upon such capitalisation, or (as the
case may require) for the payment tip by the Company on their behalf, by the
application thereto of their respective proportions of the profits resolved to
be capitalised, of the amounts or any part of the amounts remaining unpaid on
their existing shares, and any agreement made under such authority shall be
effective and binding on all such members.

                                     NOTICES

      138. SERVICE OF NOTICES. A notice may be given by the Company to any
member either personally or by sending it by post to him at his registered
address, or such other address supplied by him to the Company for the giving
notices to him. Any notice to be sent to a member at an address outside
Singapore shall be sent by airmail. Where a notice is sent by post, service of
the notice shall be deemed to be effected by properly addressing, pre-paying and
posting a letter containing the notice, and to have been effected in the case of
a notice of a meeting and of a notice pursuant to Article 134 on the day after
the date of its posting, and in any other case at the time at which the letter
would be delivered in the ordinary course of post.

      139. SERVICE OF NOTICES IN RESPECT OF JOINT HOLDERS. A notice may be given
by the Company to the joint holders of a share by giving the notice to the joint
holder first named in the Register of Members in respect of the share.

      140. SERVICE OF NOTICES AFTER DEATH OR BANKRUPTCY OF A MEMBER. A notice
may be given by the Company to the persons entitled to a share in consequence of
the death or bankruptcy of a member by sending it through the post in a pre-paid
letter addressed to them by name, or by the title of representatives of the
deceased, or assignee of the bankrupt, or by any like description, at the
address, if any, supplied for the purpose by the persons claiming to be so
entitled or (until such an address has been so supplied) by giving the notice in
any manner in which the same might have been given if the death or bankruptcy
had not occurred.


                                      -25-
<PAGE>

                                   WINDING UP

      141. DISTRIBUTION OF SURPLUS ASSETS. If the Company shall be wound up,
subject to due provision being made satisfying the claims of any holders of
shares having attached thereto any special rights in regard to the repayment of
capital, the surplus assets shall be applied in repayment of the capital paid up
or credited as paid up on the shares at the commencement of the winding up. If
the surplus assets shall be insufficient to repay the, whole of the capital paid
up or credited as paid up on the shares, such assets shall be distributed (as
nearly as practicable) in proportion to the capital paid up or credited as paid
up on the shares at the commencement of the winding up.

      142. DISTRIBUTION OF ASSETS IN SPECIE. If the Company shall be wound up,
the liquidators may, with the sanction of a special resolution, divide among the
members in specie any part of the assets of the Company and any such division
may be otherwise than in accordance with the existing rights of the members, but
so that if any division is resolved or otherwise than in accordance with such
rights, the members shall have the same right of dissent and consequential
rights as if such resolution were a special resolution passed pursuant to
Section 306 of the Act. A special resolution sanctioning a transfer or sale to
another company duly passed pursuant to the said Section may in like manner
authorise the distribution of any shares or other consideration receivable by
the liquidators amongst the members otherwise than in accordance with their
existing rights; and any such determination shall be binding upon all the
members subject to the right of dissent and consequential rights conferred by
the said Section.

      143. SERVICE OF NOTICE BY LIQUIDATOR. In the event of a winding up of the
Company every member of the Company who is not for the time being in Singapore
shall be bound, within 14 days after the passing of an effective resolution to
wind up the Company voluntarily, or within the like period after the making of
an order for the winding up of the Company, to serve notice in writing on the
Company appointing some householder in Singapore upon whom all summonses,
notices, processes, orders and judgments in relation to or under the winding up
of the Company may be served, and in default of such nomination the liquidator
of the Company shall be at liberty on behalf of such member to appoint some such
person, and service upon any such appointee shall be deemed to be a good
personal service on such member for all purposes, and where the liquidator makes
any such appointment he shall, with all convenient speed, give notice thereof to
such member by a registered letter sent through the post and addressed to such
member at his address as appearing in the Register, and such notice shall be
deemed to be served on the day following that on which the letter is posted.

                                    INDEMNITY

      144. INDEMNITY OF DIRECTORS AND OFFICERS. Every Director, Managing
Director, agent, auditor, Secretary and other officer for the time being of the
Company shall be indemnified out of the assets of the Company, against any
liability incurred by him in defending any proceedings whether civil or criminal
in which judgement is given in his favour or in which he is acquitted or in
connection with any application under Section 391 of the Act in which relief is
granted to him by the Court in respect of any negligence, default, breach of
duty or breach of trust.


                                      -26-
<PAGE>


                                      -27-
<PAGE>

Names, Addresses and Occupations of Subscribers


/s/ Ong Kian Min
- ----------------------------------------
ONG KIAN MIN
16-D Chatsworth Road
Singapore 249778

Advocate & Solicitor


/s/ Yong Wei Ling Ivy
- ----------------------------------------
YONG WEI LING IVY
Blk 667A Jurong West Street 65
#13-119
Singapore 641667

Advocate & Solicitor


Dated this 14th day of January, 2000


Witness to the above signatories:         /s/ Wendy Lee Su Lin
                                          -----------------------------
                                          WENDY LEE SU LIN
                                          Advocate & Solicitor
                                          1 Robinson Road #18-00
                                          AIA Tower
                                          Singapore 048542

<PAGE>


                                  EXHIBIT 1.19

                        Company Memorandum of Association
<PAGE>

                           THE COMPANIES ACT (CAP.50)

                        PRIVATE COMPANY LIMITED BY SHARES

                            MEMORANDUM OF ASSOCIATION

                                       OF

                            SB CHINA HOLDINGS PTE LTD


      145. The name of the Company is "SB CHINA HOLDINGS PTE LTD".

      146. The registered office of the Company will be situate in the Republic
of Singapore.

      147. The objects for which the Company is established are:

      (1) To carry on business of an investment company and to act as
investors, promoters and entrepreneurs and to carry on business as venture
capitalists, financiers, concessionaires, managers, advisers, brokers, traders,
dealers, agents and to undertake and carry on and execute all kinds of
investment, financial, commercial, trading and other operations.

      (2) To carry on whether as principals, agents or otherwise howsoever the
business of lessors, estate agents or managers, realtors, developers,
consultants, builders, contractors, engineers, dealers in or vendors of all
types of property including services.

      (3) To carry on business as consultants and advisers in connection with
all phases of industry and commerce, including general management, costing,
industrial relations, personnel, marketing distribution, manufacture, research,
finance, design, factory layouts, plant selection and all other related
subjects.

      (4) To promote establish and carry on business as general merchants
manufacturers importers exporters commission agents del credere agents removers
packers storekeepers factors and brokers of and dealers in and to promote the
sales of all kinds of products commodities goods articles produce materials and
substances and general merchandise and to import buy prepare manufacture render
marketable sell barter exchange pledge charge make advances on and otherwise
deal in or turn to account such products commodities goods articles produce
materials and substances and general merchandise in their prepared manufactured
or raw state and to undertake carry on and execute all kinds of commercial
trading and other manufacturing operations and all business whether wholesale or
retail.


                                       1-
<PAGE>

      (5) To carry on business as capitalists and concessionaires, and to
undertake carry on and execute all kinds of commercial trading and other
operations.

      (6) To carry on any other trade or business whatsoever which can, in the
opinion of the Company, be advantageously or conveniently carried on by the
Company by way of extension of or in connection with, or is calculated directly
or indirectly to develop any branch of, the Company's business or to increase
the value of or turn to account any of the Company's assets, property or rights.

      (7) To invest the capital and other moneys, including without
limitation, funds obtained from outside borrowings, of the Company in the
purchase or upon the security of shares, stocks, debentures, debenture stocks,
bonds, mortgages, obligations and securities of any kind issued or guaranteed by
any company, corporation or undertaking of whatever nature, whether constituted
or carrying on business in Singapore or elsewhere wheresoever, any shares,
stocks, bonds, warrants, rights, coupons, talons, mortgages, obligations, and
other securities issued or guaranteed by any government, sovereign, ruler,
commissioners, trust, municipal, local or other authority or body of whatever
nature, whether in Singapore or elsewhere wheresoever.

      (8) To subscribe for, conditionally or unconditionally to take, hold,
sell, tender for, exchange and convert stocks, shares, debentures, debenture
stocks, bonds, warrants, rights, coupons, talons, mortgages, obligations and
other securities issued or guaranteed by any company, corporation or undertaking
of whatever nature or by any government, sovereign, ruler, commissioners, trust,
municipal, local or other authority or body of whatever nature, whether in
Singapore or elsewhere wheresoever.

      (9) To purchase, take on lease, exchange or acquire any lands, buildings
and property of any tenure or description in Singapore and elsewhere and any
estate or interest therein and any rights over or connected with any such lands,
buildings and property, whether or not subject to any charge or incumbrance and
to hold or to sell lease let alienate, mortgage, charge or otherwise deal with
all or any part or parts of such lands, buildings or property or any estate or
interest or rights therein.

      (10) To develop and turn to account any land acquired by or in which the
Company is interested, and in particular by laying out and preparing the same
for building purposes, constructing, altering, pulling down, decorating,
maintaining, furnishing, fitting up and improving buildings and by planting,
paying, draining, farming, cultivating, letting on a building lease or agreement
and by advancing money to and entering into contracts and arrangements of all
kinds with builders, tenants, purchasers and others.

      (11) To purchase or otherwise acquire for investment or resale or as
security lands, houses, building, tenements, premises, plantations and all
immovable property of any tenure or any interest therein, and any movable
property of any description or any interest therein and to hold, lease,
sublease, exchange or otherwise deal with property of every description, whether
immovable or movable and whether for valuable consideration or not.

      (12) To carry on all or any of the business or proprietors of flats,
maisonettes, dwelling-houses, shops, warehouses, stores and offices and for
these purposes to purchase, take on lease, or


                                       2-
<PAGE>

otherwise acquire and hold any lands or buildings of any tenure or description
wherever situate, or rights or interest therein or connected therewith; to
prepare building sites, and to construct, reconstruct, pull down, alter,
improve, decorate, furnish and maintain flats, maisonettes, dwelling-houses,
shops, warehouses, stores, offices, buildings, works and conveniences of all
kinds; to lay out roads and pleasure gardens and recreation grounds; to plant
drain or otherwise improve the land or any part thereof.

      (13) To carry on business as builders and contractors and to construct,
execute, carry out, equip, improve, work, develop, administer, maintain, manage
or control buildings and works of all kinds or to dismantle or demolish any such
buildings and works.

      (14) To act as nominees, managers, receivers, stewards or agents in any
capacity and undertake or direct the management of property, lands, and estates
of any tenure or kind of any persons whether members of the Company or not in
the capacity of stewards or receivers or otherwise, and to undertake and execute
any trusts the undertaking of which may seem desirable and either gratuitously
or otherwise and for any person, firm, company or authority whatsoever.

      (15) To undertake and execute any contracts for works involving the
supply or use of plant and machinery and equipment of every description and for
that purpose to sell or let on hire the same and to carry out any ancillary or
other works comprised in such contracts.

      (16) To buy, sell, manufacture, repair, alter, improve, exchange, let out
on hire, import, export and deal in all works, plant, machinery tools, utensils,
appliances, apparatus, products, materials, substances, articles and things
capable of being used in any business which the Company is competent to carry on
or required by any customers of our persons having dealings with the Company or
commonly dealt in by persons engaged in any such business or which may seem
capable of being profitably dealt with in connection therewith and to
manufacture, experiment with, render marketable and deal in all residual
products and by-products incidental to or obtained in any of the businesses
carried on by the Company.

      (17) To consolidate, connect or sub-divide any of the properties of the
Company and to lease or dispose of the same in any manner and on such terms as
the Company may determine.

      (18) To sell, improve, manage, develop, enfranchise, let on lease,
mortgage, grant licenses or other rights or options over, exchange, dispose of
or turn to account, all or any part of the lands, securities, assets,
undertaking or property, movable or immovable, of the Company or any part
thereof for such consideration as the Company may think fit, and in particular
for shares, stock, debentures, debenture stock, securities or obligations of any
other company having objects altogether, or in part, similar to those of the
Company.

      (19) To guarantee the payment or performance of any debts, contracts or
obligations, or become surety for any person, firm or company for any purpose
whatsoever whether with or without security and whether or not the Company
derives any benefit from doing so.


                                       3-
<PAGE>

      (20) To act as agents for the collection, receipt or payment of money,
and generally to act as agents for and render services to customers and others,
and generally to give guarantees and indemnities.

      (21) To purchase, charter, take in exchange, or otherwise acquire and
hold ships, vessels and crafts of any kind or interests therein and to maintain,
repair, improve, alter, sell exchange or let out on hire or charter or otherwise
deal with and dispose of any ships or vessels aforesaid.

      (22) To carry on all or any of the businesses of ship-owners, managers of
shipping property, omnibus owners or managers, passengers or freight
contractors, carriers by land and sea, barge owners, lightermen, forwarding
agents, ice merchants, refrigerating agents, storekeepers, warehousemen,
wharfingers and general traders.

      (23) To apply for, purchase or otherwise acquire any patents, brevets
d'invention, licences, concessions and the like, conferring any exclusive or
non-exclusive or limited right to use any secret or other information as to any
invention or preparation which may seem capable of being used for any of the
purposes of the Company or the acquisition of which may seem calculated directly
or indirectly to benefit the Company and to use, exercise, develop or grant
licences in respect of or otherwise turn to account the property rights or
information so acquired.

      (24) To sell, exchange, dispose of, turn to account or otherwise deal
with the whole or any part of the undertaking, property, assets and rights of
the Company, either together or in portions for such consideration as may be
agreed including stocks, shares, debentures, debenture stocks or other
securities of any company purchasing the same.

      (25) To acquire the whole or any part of the undertaking, property,
assets, rights and liabilities of any person or company possessed of property
suitable for the purposes of the Company or carrying on any business which this
Company is authorised to carry on for such consideration as may be agreed
including stocks shares debentures debenture stocks or other securities of the
Company.

      (26) To enter into any partnership or joint-purse arrangement or
arrangement for sharing profits, union of interest or co-operation with any
company, firm or person carrying on or proposing to carry on any business within
the objects of the Company, and to acquire and hold, sell, deal with or dispose
of shares, stock or securities of any such company, and to guarantee the
contracts or liabilities of, or the payment of dividends, interest or capital on
any shares, stock or securities of and to subsidise or otherwise assist any such
company.

      (27) To establish or promote or concur in establishing or promoting any
other company whose objects shall include the acquisition and taking over of all
or any of the assets and liabilities of the Company or the promotion of which
shall be any manner calculated to advance directly or indirectly the objects or
interests of the Company, and to acquire and hold or dispose of shares, stocks
or securities of and guarantee the payment of dividends, interest or capital on
any shares, stock or securities issued by or any other obligations of any such
company.


                                       4-
<PAGE>

      (28) To amalgamate with any other company whose objects are or include
objects similar to those of the Company, whether by sale or purchase, for fully
or partly paid up shares or otherwise, of the undertaking, subject to the
liabilities of this or any such other company as aforesaid, with or without
winding up, or by sale or purchase (for fully or partly paid-up shares or
otherwise) of all or a controlling interest in the shares or stock of this or
any such other company as aforesaid, or by partnership, or any arrangement of
the nature of partnership, or in any other manner.

      (29) To borrow or raise or secure the payment of money for the purposes
of or in connection with the Company's business in such manner and on such terms
as the Company may think fit.

      (30) To mortgage and charge the undertaking and all or any of the movable
and immovable property and assets, present or future, and all or any of the
uncalled capital for the time being of the Company, and to issue at par or at a
premium or discount and for such consideration and with and subject to such
rights, powers, privileges and conditions as may be thought fit, debentures or
debenture stocks and further to secure any securities of the Company by a trust
deed or other assurance.

      (31) To receive money on deposit or loan upon such terms as the Company
may approve.

      (32) To do all or any of the above things in any part of the world and
either as principals, agents, contractors or otherwise and either alone or in
conjunction with others and either by or through local managers, agents,
trustees or otherwise.

      (33) To make donations for patriotic or for charitable purposes.

      (34) To provide for the welfare of employees or ex-employees of the
Company and the wives and families or the dependants or relatives of such
persons in such manner as the Company shall think fit and in particular by
building or contributing to the building of houses or dwellings or by grants of
money, pensions, allowances, bonuses or other payments or by creating and from
time to time subscribing or contributing to provident and other associations,
institutions, funds or trusts and by providing, subscribing for, or contributing
towards places of instruction and recreation, hospitals and dispensaries,
medical and other attendances and other assistance as the Company shall think
fit.

      (35) To do all such other things as in the opinion of the Company are
incidental to or conducive to the attainment of any of the above objects or any
objects of a like or similar nature.

The objects specified in each paragraph of this clause shall, unless otherwise
expressed in such paragraph, be in no wise limited or restricted by reference to
or inference from the terms of any other paragraph or group of paragraphs and
shall be capable of being pursued as an independent object and either alone or
in conjunction with all or any one or more of the other objects specified in the
same or in any other paragraph or group of paragraphs and the discontinuance or
abandonment of all of any of the businesses or objects hereinbefore referred to
shall not prevent the Company from carrying on any other business authorised to
be carried on by the Company and it is hereby expressly declared that in the
interpretation of this clause the meaning of any of the Company's objects shall


                                       5-
<PAGE>

not be restricted by reference to any other object or by the juxtaposition of
two or more of them and that in the event of any ambiguity this clause shall be
construed in such a way as to widen and not to restrict the powers of the
Company.

And it is hereby further declared that the word "company" in this clause except
where used in reference to the Company shall wherever the context so permits be
deemed to include any corporation (wherever incorporated) partnership or other
body of persons whether incorporated or not, and whether domiciled in the
Republic of Singapore or elsewhere.

      148. The liability of the members of the Company is limited.

149.        The authorised share capital of the Company is $100,000.00 divided
      into 100,000 shares of $1.00 each. The shares in the original or any
      increased capital may be divided into several classes and there may be
      attached thereto respectively any preferential deferred qualified or other
      special rights, privileges, conditions or restrictions as to dividend,
      capital, voting or otherwise.



                                       6-
<PAGE>

      WE, the several persons whose names and addresses are subscribed, are
desirous of being formed into a company in pursuance of this Memorandum of
Association, and we respectively agree to take the number of shares in the
capital of the Company set opposite our respective names.

- --------------------------------------------------------------------------------

Names, Addresses and                               Number of
Occupations of                                     Shares taken
Subscribers                                        by each Subscriber

- --------------------------------------------------------------------------------

ONG KIAN MIN                                       One
16-D Chatsworth Road
Singapore 249778

Advocate & Solicitor


YONG WEI LING IVY                                  One
Blk 667A Jurong West St 65
#13-119
Singapore 641667

Advocate & Solicitor


- --------------------------------------------------------------------------------
Total number of shares taken                       Two

- --------------------------------------------------------------------------------

Dated this 14th day of January 2000



Witness to the above signatories:                  WENDY LEE SU LIN
                                                   Advocate & Solicitor
                                                   1 Robinson Road #18-00
                                                   AIA Tower
                                                   Singapore  048542


                                       7-

<PAGE>

                                 EXHIBIT 3.2(d)

                       Form of Additional Investor Letter

                                __________, 2000

[Name of Investor]
[Address]

Attention:     [Mr./Ms. _____________]
               [Title]

               Re:  Softbank China Holdings Pte., Ltd.

Dear_________________________:


      This is to confirm our agreement regarding the issuance by Softbank China
Holdings Pte., Ltd. (the "Company")] of _______ ordinary shares (the "Shares")
representing a ___% equity ownership interest in the Company to __________
("Investor"). All capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in the Joint Venture Agreement with
respect to the Company dated as of May _, 2000 between SOFTBANK Corp. and UT
Starcom, Inc.

      1. Purchase and Sale. Subject to the terms and conditions set forth in
this agreement (the "Agreement"), Investor hereby agrees to purchase from the
Company and the Company hereby agrees to issue to Investor at the Closing
(defined below), the Shares for the aggregate amount of $__________ (the
"Purchase Price"), representing a per Share price of $__________.

      2. Closing. The closing of the purchase and sale of the Shares (the
"Closing") shall take place at the offices of Morrison & Foerster LLP, AIG
Building, 1lth Floor, 1-1-3 Marunouchi, Chiyoda-ku, Tokyo, Japan, at 10:00 a.m.
on ________, 2000, or at such other time and place as the Company and Investor
shall agree (the "Closing Date").

      3. Delivery. Subject to the terms and conditions of this Agreement, at
the Closing, the Company shall deliver to Investor share certificates
representing the Shares, against Investor's delivery of written confirmation of
Investor's payment of the Purchase Price to the Company by wire transfer of
Japanese yen in immediately available funds to the following account:

        Bank name and branch:___________________
        Bank address:___________________________
        Bank telephone:_________________________
        Account number:_________________________
        Account name:___________________________
        Swift #:________________________________

<PAGE>

      Promptly following the Closing Date, Company shall issue share
certificates representing the Shares to Investor.

      4. Representations and Warranties.

            (a) Representations and Warranties of the Company. The Company
hereby represents and warrants to Investor that as of the date hereof and as of
the Closing Date, that the following statements are and shall be true and
correct:

                  (i) Organization. The Company is a corporation duly
organized and validly existing under the laws of Singapore, and has the
corporate power and authority to enter into and perform this Agreement.

                  (ii) Authorization. All corporate action on the part of the
Company necessary for the authorization, execution and delivery of this
Agreement and for the performance of all of its obligations hereunder has been
taken, and this Agreement when fully executed and delivered, shall constitute a
valid, legally binding and enforceable obligation of the Company.

                  (iii) Government and Other Consents. No consent,
authorization, license, permit, registration or approval of, or exemption or
other action by, any domestic or foreign government, governmental authority,
court, tribunal, agency or other regulatory, administrative or judicial agency,
commission or organization, and any subdivision, branch or department of any of
the foregoing (a "Governmental Authority"), or any natural individual,
Governmental Authority, partnership, firm, corporation or other business
association (a "Person"), is required in connection with the Company's
execution, delivery and performance of this Agreement, or if any such consent is
required, the Company has satisfied the applicable requirements.

                  (iv) Effect of Agreement. The Company's execution, delivery
and performance of this Agreement will not (A) violate the articles of
incorporation of the Company or any provision of any applicable statute, rule,
law, rule, regulation, directive, treaty, judgment, order, decree or injunction
of any Governmental Authority ("Applicable Law"), (B) violate any judgment,
order, writ, injunction or decree of any court applicable to the Company, (C)
have any effect on the compliance of the Company with any applicable licenses,
permits or authorizations which would materially and adversely affect the
Company, (D) result in the breach of, give rise to a right of termination,
cancellation or acceleration of any obligation with respect to (presently or
with the passage of time), or otherwise be in conflict with any term of, or
affect the validity or enforceability of, any agreement or other commitment to
which the Company is a party and which would materially and adversely effect the
Company, or (E) result in the creation of any lien, pledge, mortgage, claim,
charge or encumbrance upon any assets of the Company.

                  (v) Litigation. There are no actions, suits or proceedings
pending or, to the Company's knowledge, threatened, against the Company before
any Governmental Authority which question the Company's right to enter into or
perform this Agreement, or which question the validity of this Agreement.


                                      -2-
<PAGE>

                  (vi) Valid Issuance of the Shares. The Shares, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, and upon
Investor's payment of the Purchase Price, will be fully paid and nonassessable,
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and under Applicable Law.

            (b) Representations and Warranties of Investor. Investor hereby
represents and warrants to the Company that as of the date hereof and as of the
Closing Date, that the following statements are and shall be true and correct:

                  (i) Organization. Investor is duly organized and validly
existing under the laws of [__________] and has the requisite power and
authority to enter into and perform this Agreement.

                  (ii) Authorization. All corporate or other action on the part
of Investor necessary for the authorization, execution and delivery of this
Agreement and for the performance of all of its obligations hereunder has been
taken, and this Agreement, when fully executed and delivered, shall constitute a
valid, legally binding and enforceable obligation of Investor.

                  (iii) Government and Other Consents. No consent,
authorization, license, permit, registration or approval of, or exemption or
other action by, any Governmental Authority, or any other Person, is required in
connection with Investor's execution, delivery and performance of this
Agreement, or if any such consent is required, Investor has satisfied any
applicable requirements.

                  (iv) Effect of Agreement. Investor's execution, delivery and
performance of this Agreement will not (A) violate its organizational documents
or any provision of Applicable Law, (B) violate any judgment, order, writ,
injunction or decree of any court applicable to Investor, (C) have any effect on
the compliance of Investor with any applicable licenses, permits or
authorizations which would materially and adversely affect Investor, (D) result
in the breach of, give rise to a right of termination, cancellation or
acceleration of any obligation with respect to (presently or with the passage of
time), or otherwise be in conflict with, any term of, or affect the validity or
enforceability of any agreement or other commitment to which Investor is a party
and which would materially and adversely affect Investor, or (E) result in the
creation of any lien, pledge, mortgage, claim, charge or encumbrance upon any
assets of Investor.

                  (v) Litigation. There are no actions, suits or proceedings
pending or, to Investor's knowledge, threatened, against Investor before any
Governmental Authority which question Investor's right to enter into or perform
this Agreement, or which question the validity of this Agreement.

                  (vi) Investment Intent, Investment Experience. The Shares will
be acquired solely for investment purposes, for Investor's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, except as expressly permitted hereby. Investor believes it has acquired
sufficient information about the Company to reach an informed decision to
purchase the Shares. Investor has such business and financial experience as is
required


                                      -3-
<PAGE>

to give it the capacity to protect its own interest in connection with the
purchase of the Shares. Investor acknowledges and agrees that the Shares are
being offered in a transaction not involving any public offering in Japan or the
United States.

      5. Closing Conditions.

            (a) Investor's obligation to purchase the Shares at the Closing
are subject to the fulfillment or waiver by the Company of the following
conditions: (i) the representations and warranties made by the Company above
shall be true and correct in all material respects when made and on the Closing
Date with the same force and effect as if they had been made on and as of such
date, and (ii) all covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed in accordance with the terms hereof.

            (b) The Company's obligation to issue the Shares to Investor at
the Closing are subject to the fulfillment or waiver by Investor of the
following conditions: (i) the representations and warranties made by Investor
above shall be true and correct in all material respects when made and on the
Closing Date with the same force and effect as if they had been made on and as
of such date, and (ii) all covenants, agreements and conditions contained in
this Agreement to be performed by Investor on or prior to the Closing Date shall
have been performed in accordance with the terms hereof.

      6. Additional Agreements.

            (a) Investor agrees that it will vote all of the Shares, and all
other shares of ordinary shares and other securities of the Company
("Securities") now or hereafter owned by it, as directed by SOFTBANK Corp.
("SOFTBANK") from time to time. Investor's obligations pursuant to this
paragraph shall terminate upon the closing of the Company's initial public
offering.

            (b) Investor agrees to hold its Securities and, except as
permitted pursuant to this paragraph, not to sell, transfer, assign, hypothecate
or in any way alienate any of its Securities or any right or interest therein
except a sale to a wholly-owned subsidiary of Investor (in which case Investor
shall forward a written notice (a "Notice") to SOFTBANK at least 30 days in
advance of the proposed sale and provide such information relating thereto
SOFTBANK may reasonably request). In the event that SOFTBANK proposes to sell
all of its Securities, it may elect, by forwarding a Notice to Investor, to
require Investor to include all of its Securities in the proposed sale, on the
same terms and conditions applicable to the sale by SOFTBANK. The rights granted
pursuant to this paragraph shall terminate upon the closing of Company's initial
public offering.

            (c) Investor agrees that, if it commits a material breach of this
Agreement, and such breach continues for a period of thirty (30) days after the
delivery of written notice of the default, SOFTBANK shall have the right, but
not the obligation, to purchase all of the Shares and all other Securities then
owned by Investor for the purchase price at which Investor acquired such
Securities. SOFTBANK may exercise such right by forwarding a written notice of
election to Investor. Such right shall be assignable by SOFTBANK in its
discretion and shall be in addition to, and shall not limit in any respect, any
remedies available under Applicable Law.


                                      -4-
<PAGE>

      7. Miscellaneous. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of Japan. (b) The representations,
warranties, covenants and agreements made herein shall survive the Closing. (c)
The rights and obligations hereunder may not be assigned or delegated by
Investor without SOFTBANK's prior written consent, except by Investor to a
wholly-owned subsidiary in connection with a sale of Securities in accordance
with paragraph 6(b). The provisions hereof shall inure to the benefit of, and be
binding upon, the successors and permitted assigns of the parties hereto. (d)
This Agreement constitutes the full and entire understanding and agreement
between the parties with regard to the subject matter hereof. Any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived, only with the written consent of SOFTBANK and Investor. (e) Investor
agrees to maintain in confidence and not to disclose the existence. and terms of
this Agreement and of discussions regarding the transactions contemplated
hereby, except for disclosure to its employees, financial or legal advisors on a
"need to know" basis. (f) In the event that any provision of this Agreement is
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
(g) 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.
Execution and delivery of this Agreement by exchange of facsimile copies bearing
the facsimile signature of a party hereto shall constitute a valid and binding
execution and delivery of this Agreement by such party.


                                      -5-
<PAGE>

      If the foregoing is consistent with the Investor's understanding, please
sign this Agreement where indicated below and return to SOFTBANK the Company a
fully-executed original.

      Very truly yours,
      SOFTBANK CHINA HOLDINGS PTE., LTD.


      By:____________________________
      Name:__________________________
      Title:_________________________


      [INVESTOR]


      _______________________________


      By:____________________________
      Name:__________________________
      Title:_________________________
      Date:_______________, 2000


      acknowledged:

      SOFTBANK CORP.


      By:____________________________
      Name:__________________________
      Title:_________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>ex-10_2.txt
<DESCRIPTION>EXHIBIT 10.2
<TEXT>

<PAGE>

CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                                                    Exhibit 10.2

       The Contract ( Draft) of Assigning the State-owned Land Using Right

                  of Hangzhou Hi-tech Industry Development Zone

Article 1 Parties of the contract:

Assignor:

The Administration Committee of Hangzhou Hi-tech Industry Development Zone of
Zhejiang Province of the People's Republic of China(Hereinafter referred to
Party A);

The legal address: 199 Wensan Road, Hangzhou City, P.C. 310012

Legal Representative: Wu Yipena, Title: Director of Administration Committee.

Assignee:

UTStarcom (Hangzhou) Telecommunication Co. Ltd. (Hereinafter referred to Party
B) Legal Address:

               Building 3, Yile Industry Garden,
               129 Wenyi Road, Hangzhou P.R.C. 310012.

Legal Representative: Wu Ying. Title: Chairman of the Board of Directors.

In Accordance with Urban Real Estate Administration Law of the People's Republic
of China, Provisional Regulation of Urban State-owned Land Using Right
Transferring and Assigning of the People's Republic of China, Urban State-owned
Land Using Right Assigning and Transferring Implementation Procedures of
Zhejiang Province, Hangzhou Hi-tech Industry Development Zone Regulation and the
related state and local law and regulations, both parties conclude this contract
(draft) on the principle of equality and voluntaries.

Article 2 Party A assigns the land using right according to this contract
(draft). The land is owned by the People's Republic of China. The state and
government is authorized jurisdiction by the law and exercise the power based on
public interest. The resource underground, the treasure-trove and the municipal
engineering and public utility facilities [* * *] in the scope of assigning.

Article 3 The land, assigned by Party A to Party B is located in Zhijiang
Science and Technology Industry Garden of Hangzhou Hi-tech Industry Development
Zone, the land No. is E4. The total area of the land is [* * *]. Among them
there is not over [* * *] of the land sharing area ( Land area is subject to the
area on the Land Use Certificate ). The location and scope are illustrated in
the attached blueprint of the contract (draft). The attached blueprint has been
signed and confirmed by Party A and Party B.

Article 4 The term of assigning of the land using right under the contract
(draft) is [* * *]. It is effective from the date of issuing the State-owned
Land Use Certificate of the People's Republic of China.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


<PAGE>

Article 5 The land under the contract (draft) is approved for building
telecommunication product research, development and manufacture workshop.

During the assignment term, if Party B needs to change the land using purpose
and land using condition specified in this contract (draft), approval shall be
required by Party A's Plan Administration Authorization, and make amendments to
the assignment contract (draft) of the land using right accordingly, adjust the
land price and handle the registration procedure for the land using right.

Article 6 Party B agrees to make payment for land according to this contract, [*
* *].

Article 7 Party B's construction in the land must meet the conditions of the
Plan.

During the term of assignment, if the total construction area is added, Party B
should pay for additional land price according to [* * *]. While the
construction area is reduced, it will be [* * *] (Except the related
authorizations of the government require to lower the volume rate and reduce the
total construction area).

Article 8 The price of the land is [* * *] per square meter. The total amount is
[* * *].

Article 9 Party B should pay the total amount of the land price [* * *] within
[* * *] days after signing the contract(draft). Party B must pay the [* * *] of
the total amount of the land price, which is [* * *] within [* * *] after
signing this contract (draft). The [* * *] should be [* * *] of the total amount
of the land price which is [* * *] within [* * *] after signing this contract;
the [* * *] should be [* * *] within [* * *] after signing the contract (draft).

      The above-mentioned payment should be made by Party B on time. If Party B
fails to pay within [* * *] after due date, Party A has the [* * *] to terminate
this contract (draft), Party B shall compensate the losses caused by its breach
of the contract. If Party A fails to offer Party B the relevant planning and
land commencement conditions over [* * *] according to the project schedule,
Party B shall have [* * *] to terminate this contract and Party A shall be
obliged to refund all the payment made by Party B and compensate the losses
caused by Party A's breach of the contract.

      The compensation and the expenses arising in the demolishing and removing
the building on the land and the attached objects will be responsed by [* * *].
Party A should offer Party B the relevant planning and land commencement
conditions according to the project schedule.

Article 10 Within [* * *] after Party B pays the full amount of the land price
to party A [* * *], Party B shall handle the registration procedure for land
using right and obtain the land using right certification in accordance with the
regulation on the State-owned Land Use Certificate of the People's Republic of
China.

Article 11 Except other provisions in the contract (draft) , Party B should
remit the payment to the bank account of Party A [* * *] due date specified in
the contract (draft). If Party A need to return the amount of the land to Party
B, Party A shall remit the money to the bank account of Party B which is
specified in this contract(draft).

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -2-
<PAGE>

      A written notice shall be sent to the other party within [* * *] after
Party A or Party B's bank account is changed. The liability for delaying of
payment shall be exempted if changes of bank accounts is not informed timely.

Article 12 Upon the expiration of the land use right pursuant to the
provision of this contract (draft), Party A has the right to withdraw the land
using right. Party A shall acquire the building and other attached objects on
the land in accordance with the law. The land user will handle revoking
registration procedure for the land using right according to the regulations and
return the land use certificate.

      If Party B continues to use the land, Party B should submit the renewed
application to Party A within the [* * *] before the expiration. Upon the
approval for the renewal term and land price or other conditions, the parties
sign a renewal assignment agreement. After going through the land using right
registration, the building and the other attached objects shall be owned by the
Party B according to law.

Article 13 During the [* * *], Party A shall not withdraw the land using right
due to adjustment of the city plan. However, in the special situation as in the
light of social public interest, Party A could withdraw the land using right [*
* *] according to the legal procedure, and give party B the relevant
compensation according to the time used and the status of developing and using
the land.

Article 14 Party B should invest and develop the land according to this contract
(draft) and Land Using provisions. Party B [* * *] transfer or lease the total
or partial land using right for the remained term except [* * *] of the total
investment have been paid by Party B (or have already completed the basic
construction ) (not including the amount of the land value).

      The land using right could be mortgaged but the mortgaged loan must be
used in the land's construction. The mortgagor and mortgage's interests will be
protected by the law.

Article 15 The governmental land administration authority has the right to
supervise and examine for the land developing and using, transferring, leasing,
and the termination of mortgaging during the land using term.

Article 16 Party B shall be charged [* * *] of the total outstanding [* * *] as
an overdue fine, in the event that Party B fails to make the payment on time.
When Party B uses the land delayed due to Party A, Party A shall make a
compensate to Party B for [* * *] of the total price of the land [* * *].

Article 17 After obtaining the land using right, Party B does not construct the
building as stipulated in this contract (draft), or does not commence, develop
and construct in [* * *], Party B shall pay [* * *] of the total amount of the
land price as the land unused fund. If Party B does not make the investment in
[* * *], Party A has the [* * *] to withdraw the land using right [* * *]. If
Party B declare that it can not to perform the contract (draft), the [* * *]
will not be returned to Party B. Party A can also request it to make
compensation for breach of the Contract to Party B.

Article 18 The establishment, effect, interpretation, performance and the
resolution of the dispute of the contract will be protected and governed by the
law of the People's Republic of China.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -3-
<PAGE>

Article 19 The disputes arising from performing the contract (draft) should be
settled through negotiation. In case no settlement can not be reached, the
parties agree to send the disputes to Hangzhou People's Medium Court for
judgment.

Article 20 The contract (draft) will be effective after signing and affixing the
seal by the legal representative (the entrusted person).

Article 21 The contract (draft) is made in 6 original , Party A holds 4 copies,
and Party B holds 2 copies.

Article 22 The Contract (draft) is signed at Hangzhou city, Zhejiang, Province,
P.R.China on May, 2000.

Article 23 The parties could reach supplemental agreements for the matters not
included in the contract. The supplemental agreements shall have equal effects
with the contract (draft)

Party A:  The Administration Committee of Hangzhou Hi-tech Industry Development
Zone

Legal representative: Wu Yipeng

Signature:

Party B: UT Starcom(Hangzhou)Telecommunication Co.Ltd.

Legal Representative: Wu Ying (or the entrusted person)

Signature:


May 18, 2000

Appendix

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -4-
<PAGE>

                              Land Using Provisions

I.    The landmark point

1.1   After signing the The Assigning Contract(draft) of the State-owned Land
      Using Right (hereinafter referred to the contract(draft)), Party A assigns
      the land to Party B, both parties will illustrate the coordinate in the
      real land to check the landmark. The landmark shall be protected carefully
      by [* * *], it shall not be changed individually, when the landmark is
      destroyed or moved, [* * *] shall report to the local land administration
      authority in written and apply for remeasure and resume the original
      landmark.

II.   The requirement of the land using

2.1   Party B will meet the following requirement when Party B are building
      the houses or workshops in the scope of transferring the land.

(1)   The land is used for contraction researching & developing and
manufacturing telecommunication product workshop;

(2)   The volume rate of the building is below [*  *  *]

(3)   The building density (cover rate) is not over [*  *  *].

(4)   The green cover rate is not over [*  *  *].

(5)   The related plan parameter will be determined as the standard by the
documents approved by the Plan Construction Bureau.

2.2   The building of the land shall be strictly constructed according to the
      designed blueprint of the above mentioned regulation and ratification.
      Party B shall report one set of the construction blueprint to Party A
      [* * *] before commencing the project.

III.  City Construction Administration Requirements

3.1   In city construction administration aspects related to the green, city
      appearance, sanitary, environmental protection, fire-fighting safety,
      traffic administration and design. Administration, Party B should meet the
      related regulations of the Development Zone Hangzhou City, Zhejiang
      Province, and the State.

3.2   Party B shall allow the government to lay the various kinds of channels
      and pipes lines, inputting and outputting, passing, going through the
      green area and other area on the transferred land.

3.3   Party B shall guarantee the people of the government administration,
      public security, fire fighting and medical aid and other emergency
      facilities, vehicle smoothly enter into the land in the emergency risk or
      carrying out a task.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -5-
<PAGE>

3.4   If any of Party B's activities damage or break the environment or the
      facilities and causes the loss to the state or individual, [* * *] should
      be responsible for the compensation.

IV.   Construction Requirement

4.1   Party B shall commence the construction before [*  *  *]

4.2   Party B shall finish the work before [* * *] (except for the events of
      the Force Majeur). Party B shall send application for the delayed of work
      before [* * *] before the expiration, and the extension of time will not
      be over [* * *].

      Except the approval by Party A, Party A will withdraw the land using right
      and all the buildings and other attached objects on the land if the
      construction is delay [* * *].

V.    The Requirement of Municipal Construction Facilities

5.1   Party B shall handle the application procedure and pay the relevant
      expenses for construction for the related water, electric, gas, limber
      hole and other facilities, other main pipe line, transformer substation
      introducing project,

5.2   [* * *] will timely repair or bear the relevant expenses for the
      destroys to the related open drain, water channel , cable and other pipe
      line facilities of the adjacent section.

5.3   During the time of using the land, [* * *] shall carefully protect the
      municipal engineering facilities, shall not destroy them, otherwise
      [* * *] shall bear all the cost of repairing the facilities.

VI.   Assigning of the land using right

6.1   The land user shall not transfer the land using right to any third party
      before the land user makes full payment for the land price, taxes and
      fees.

6.2   Besides the [* * *] payment for total amount of the land using right,
      The land user shall not transfer the land using right if the investment is
      not reached the [* * *] of the total investment.

6.3   The building and attached objects on the land shall be transferred with
      the land, the Assignor and Assignee should sign the transferring contract,
      which should not violate the state law, regulation and the stipulation in
      the contract (draft). The [* * *] shall handle the changed registration
      procedure, and pay the value-added tax due to transferring according to
      the regulation, then change the land use certificate.

6.4   After transferring the land using right, new land user will be bound by
      the contract (draft).

      (The following is blank)

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -6-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>ex-10_3.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>

<PAGE>

CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                                                    Exhibit 10.3

                                SUPPLY AGREEMENT

      THIS AGREEMENT, made and entered into as of this 1st day of April, 2000,
by and among Matsushita Electric Industrial Co., Ltd., acting through its
Corporate Management Division for China, a Japanese Corporation, having its
principal office at 3-2 Minami-Semba 4-chome, Chuo-ku, Osaka, Osaka 542-8588,
Japan (hereinafter "MEI"), Matsushita Communication Industrial Co., Ltd., acting
through its Personal Communication Division, a Japanese corporation, having its
principal office at 3-1 Tsunashima-Higashi 4-chome, Kohoku-ku, Yokohama,
Kanagawa 223-8639, Japan (hereinafter "MCI") ("MEI" and "MCI" are collectively
called "Seller") and UTStarcom Inc., a Delaware corporation, having its
principal office at 1275 Harbor Bay Parkway, Suite 100, Alameda, California
94502, U.S.A. (hereinafter "Buyer").

                                   WITNESSETH:

      WHEREAS, Buyer is desirous of purchasing from Seller certain Components of
wireless local loop system (hereinafter defined) to have its affiliate in P. R.
China assemble those Components into complete sets for sale thereof in P. R.
China except for Hong Kong, and

      WHEREAS, Seller is willing to supply such components to Buyer under the
terms and conditions herein contained,

        NOW, THEREFORE, in consideration of the mutual promises set forth herein
and the mutual covenants herein contained, both parties hereto agree as follows:

                                    CLAUSE 1

                                   DEFINITIONS

      1.01  The term "Products" means personal stations (hereinafter "PS") with
Buyer's brand name of which model numbers are described in SCHEDULE A attached
hereto as an integral part hereof. The parties hereto also agree that even
during the term of this Agreement, models of the Products may be, in writing,
added to and/or removed from the SCHEDULE A upon mutual agreement. The diagrams
of the Products shall be mutually discussed and agreed by the parties hereto in
written instruments to be attached hereto as an integral part hereof, SCHEDULE
B.

      1.02  The term "Components" means such electric, electronic and/or
mechanical components, parts, pieces or sub-assemblies including packaging
comprising Products, as will be from time to time so identified by Seller. The
specifications of the Components shall be separately agreed by the parties
hereto in writing.

      1.03  The term "Buyer's Affiliate" means UTStarcom (Hangzhou) Telecom
Co., Ltd., a Chinese corporation, having its principal office at 3 Yile
Industrial Park, Bldg. 2/3 129 Wen Yi Road, Hangzhou 310012, P. R. China,
which purchases the Components from Buyer and assembles the Components into
complete sets for the sale thereof in [* * *] under the terms and conditions
hereof.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

<PAGE>

                                    CLAUSE 2

                               BUYER'S AFFILIATES

      2.01  Seller hereby agrees and acknowledges that Buyer's Affiliate
purchases the Components through Buyer and assembles them into complete sets of
Products for the resale [* * *], provided that Buyer shall have Buyer's
Affiliate assume the same obligation of Buyer herein and [* * *] shall obtain
import license, type approval or any other necessary governmental or
administrative license or approval and taking any procedures and steps necessary
to comply with the laws and regulations of the [* * *] and resale of the
Components in the form of the Products shall be at the responsibility and cost
of [* * *].

                                    CLAUSE 3

                              SUPPLY OF COMPONENTS

      3.01  For the effective term of this Agreement and subject to the terms
and conditions herein contained, Seller agrees to sell to Buyer and Buyer agrees
to purchase from Seller on [* * *] basis certain Components only for the purpose
of the assemble of the Components and the sale of the Products by Buyer's
Affiliate [* * *], solely in the manner set forth in Clause 4 hereof.

                                    CLAUSE 4

                                MANNER OF SUPPLY

      4.01  Firm (non-cancelable) orders for the Components shall be placed by
Buyer to Seller, in writing and in accordance with this Clause 4 hereof, [* *
*]. Such orders shall be placed to Seller in writing at least [* * *] prior to
the shipment date requested therein. Seller will consider the purchase orders
from Buyer, and shall have [* * *] to accept such orders. In case of acceptance,
Seller shall notify Buyer of the delivery date within [* * *] of Seller after
the receipt of the relative firm order, and until such notification is made, no
order shall be binding on [* * *].

      4.02  All deliveries of the Components shall be made on basis of [* * *],
which shall be interpreted in accordance with the latest [* * *].

      4.03  The parties hereto agree that the contracted minimum quantities
shall be [* * *] units of the Components to be assembled into Products during
the term of this Agreement.

      4.04  The payment for the Components shall be made by Buyer to Seller by
means of telegraphic transfer of funds to the bank account designated by MEI, to
be made at least [* * *] prior to the scheduled shipment date of relative
Components, provided that any shipment of Components should be made by [* * *].
Notwithstanding the foregoing, in case Buyer desires and

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -2-
<PAGE>

Seller agrees, the payment for the Components may be made by Buyer to Seller by
means of [* * *], negotiable [* * *] after the date of Bill of Lading, to be
opened in favor of MEI.

      4.05  The prices of the Components shall be separately discussed and
mutually agreed from time to time by the parties hereto based on the following
conditions:

            (a)   that prices of all items of the Components shall be quoted on
basis of [* * *];

            (b)   that the prices of all items of the Components shall be
quoted in the currency of US dollars; and

            (c)   that any price change, if any is agreed by the parties during
its validity, shall be applied only to such individual contracts as are made
after the date of such price change.

      4.06  The minimum quantities of each order shall be [* * *] of the
Components.

                                    CLAUSE 5

                        USE OF COMPONENTS AND TRADEMARK

      5.01 Seller shall Affix Buyer's brand name and/or its trade name
designated by Buyer ("Buyer's Mark") on such items of the Components as mutually
agreed.

      5.02 Seller acknowledges that Buyer has appropriate interest in the
Buyer's Mark and that no right, interest, ownership or privilege of use of such
Buyer's Mark is accorded to Seller by reason of the relationship herein
established. Buyer warrants and represents that Buyer is a sole and exclusive
owner of Buyer's Mark as applied to the Components/Products. Buyer agrees to
indemnify and hold harmless Seller from and against any claim of trademark
infringement by reason of the use of Buyer's brand on or in connection with the
Components/Products hereunder.

                                    CLAUSE 6

                                    WARRANTY

      6.01 Buyer shall submit to Seller a [* * *] report detailing the quality
problem of the Components occurring in the market during the term hereof and [*
* *] periods after the last delivery of the Components hereunder. Further, Buyer
shall submit to Seller samples of the Components alleged to be defective upon
request of Seller.

      6.02 Buyer shall be responsible for warranty/servicing of the Products and
any claims made by any third party against the Products once Buyer distributes
or has distributed the Products in the market.

      6.03 Buyer shall inspect, pursuant to Military Standard 105E in effect as
of the date of this Agreement attached hereto as SCHEDULE C and made a part
hereof, the Components delivered by

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -3-
<PAGE>

Seller as set forth in CLAUSE 4.02 hereof within [* * *] after the delivery to
Buyer and notify Seller of its result within [* * *] after Buyer's finding
[* * *] shortage in the quantities of the Components delivered or [* * *]
Components which do not meet [* * *] of the specifications of the Components
agreed by both parties hereto. Unless Seller received a notice from Buyer within
such a period, the Components shall be deemed to be accepted by Buyer. Upon the
request by Seller, Buyer shall submit the allegedly non-conforming Components to
Seller for Seller's inspection. Seller shall provide Buyer with the analysis
report for such allegedly non-conforming Components within one (1) week after
receipt of the notice by Buyer hereof. In case such shortage in quantities or
such non-conforming Components is solely attributable to Seller, Seller shall
arrange to deliver the missing or replacing Components within [* * *] after the
production of Seller's analysis report.

      6.04 Even after Buyer's inspection set forth in CLAUSE 6.03 above, if
non-conforming Components are found in the assembling line of Buyer's Affiliate
within [* * *] after the delivery of the Components, Buyer shall notify Seller
of such non-conforming within [* * *] after Buyer's finding [* * *]
non-conformance of the Components. Upon the request by Seller, Buyer shall
submit the allegedly non-conforming Components to Seller for Seller's
inspection. Seller shall provide Buyer with the analysis report for such
allegedly non-conforming Components within [* * *] after receipt of the notice
by Buyer hereof. In such non-conformance is solely attributable to Seller,
Seller shall arrange to deliver the replacing Components within [* * *] after
the production of Seller's analysis report.

      6.05 In the event that any large quantity malfunction or defects of the
Components are found during the inspection or assembling line at Buyer's
Affiliate premise, Seller shall dispatch its engineers to the Buyer's Affiliate
premise within [* * *] after the receipt of the notice from Buyer for
investigating and remedying such large quantity malfunction or defects of the
Components. If Seller's dispatched engineers recognize that those malfunction or
defects are solely attributable to Seller and cannot establish their remedy
within [* * *] from their dispatch, Seller shall promptly arrange, at its own
cost and responsibility, the shipment of the replacing Components. The
definition of "large quantity" referred in this CLAUSE 6.05 shall mean [* * *]
defective rates for major defects and minor defects as set forth in SCHEDULE C.

      6.06 Seller shall supply the Components of the Products to Buyer and
Buyer shall purchase such Components from Seller, in the manner set forth in
CLAUSE 4 hereof, without any warranty by Seller and/or any of its affiliates
that (i) the complete sets of Products assembled by Buyer's Affiliate from
Components hereunder and (ii) the assembling process or method of the Components
into the Products. Licenses or permissions if any necessary to assemble, sell or
otherwise dispose of the complete sets of Products under any right owned or
controlled by third parties shall be acquired by Buyer at its own risk and
account.

      6.07 (a) Seller agrees to indemnify and hold harmless Buyer from and
against any claim made by any third party that the Component supplied hereunder
infringe the rights of such third party in respect to patent, design, copyright
or any other intellectual property right in [* * *] (hereinafter "Intellectual
Property Right"), and Seller shall assume the defense of any action, suit or
proceeding against Buyer relating thereto and shall pay any damages assessed
against or otherwise payable by Buyer as a result of the final disposition of
any such claim, action, suit or proceeding,

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -4-
<PAGE>

provided, that Buyer promptly notifies Seller of the commencement of any action,
suit or proceeding, or threats thereof, and furnished to Seller all documents
relating thereto, and further provided, that Seller is afforded the opportunity,
in its sole and absolute discretion, to determine the manner in which such
action, suit or proceeding shall be handled or otherwise disposed of. Buyer
shall give Seller the cooperation Seller reasonably required, at Seller's sole
cost and expense for reasonable out-of-pocket expenses incurred by Buyer and
paid to third parties (except for salaries for Buyer's employees and fees and
expenses of any counsel retained by Buyer in the defense of such claim, suit,
action or proceeding). Notwithstanding the foregoing, Buyer may be represented
in any suit by its own counsel at its own cost and expense; provided, however,
that Buyer shall not consent to any settlement, judgment or decree in any such
suit or pay or agree to pay any sum of money or agree to do any other act in
compromise of such claim of a third party without first obtaining Seller's
consent thereto in writing.

      (b) In the event that the use or sale of the Components as a part of
Products is preliminary or permanently enjoined by reason of any third party
Intellectual Property Right, Seller shall use its best effort, at Seller's sole
cost and expense, take any of the following actions, in Seller's sole and
absolute discretion: (i) procure for Buyer the right to continue the use and/or
sale of the Components as part of Products; or (ii) provide Components which do
not infringe such Intellectual Property Right and upon Seller's fulfillment of
(i) or (ii) above, Seller shall thereafter be relieved of any further obligation
or liability to Buyer as the result of or in connection with such infringement;
provided, however, that if Seller elects either (i) or (ii) above, then to the
extent that Seller is required to incur additional costs, the prices for the
affected Components shall be renegotiated in good faith by the parties to take
into such increased costs,

      (c) Notwithstanding anything herein to the contrary, the provisions of
this CLAUSE 6.07 shall not apply to (i) any designs, specifications, or
modifications supplied by Buyer or any items incorporated into the Components by
Seller at Buyer's request (whether or not such items are manufactured by Seller
or supplied by Buyer or third parties) or (ii) any combination or use of the
Components by Buyer or its customer(s) with other equipment or devices; but,
rather, in such cases, Buyer shall indemnify, defend and hold harmless Seller
from and against any and all liabilities, costs, expenses, losses and damages of
any nature, including counsel fees and expenses arising out of or relating to
all claims that the same infringe on any Intellectual Property Right of any
third parties.

      (d) In any event, Seller's responsibility stipulated in this CLAUSE
shall be limited to the total amount of the payment by Buyer for the Components.

      6.08 Business operations of Buyer (including assembly, sale or other
disposition, quality guarantee to customers, product liability, servicing and
advertising of complete set of any Product assembled by Buyer's Affiliate) shall
be entirely for Buyer's own account and at Buyer's sole responsibility, and
Seller (including Seller's affiliates and subsidiaries) shall not be responsible
to Buyer, Buyer's Affiliate and any third party. Buyer shall indemnify for and
hold Seller (including Seller's affiliated companies and subsidiaries) harmless
from any losses, damages, costs and expenses arising out of or connection with
business operations as provided in this CLAUSE.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -5-
<PAGE>

      6.09 EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTY, SELLER MAKES AND
BUYER RECEIVES NO WARRANTY ON THE COMPONENTS, EXPRESS OR IMPLIED, STATUTORY, OR
IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION WITH BUYER, AND SELLER
SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, INCLUDING, WITHOUT LIMITATION, FITNESS FOR COMBINATION WITH
ANY INTERFACE DEVICES TO BUILD UP ANY SYSTEM.

                                    CLAUSE 7

                  SERVICE, INFORMATION, INSTRUCTION AND ADVICE

      7.01 In case Buyer expects Seller to disclose and Seller deems it
appropriate or in case Seller deems it necessary, Seller may, furnish or may
have a Seller's subsidiary or affiliates furnish Buyer with a certain technical
service, information, instruction and/or advice including, but not limited to,
dispatching Seller's engineers or engineers designated by Seller to Buyer's
Affiliate factory for the quality assurance of the Components and the
installation/commissioning of certain production equipment which are necessary
for assembling Components, to be used by Buyer or Buyer's Affiliate only for the
purpose of the assembly of the complete sets of the Products from the Components
by Buyer's Affiliate.

                                    CLAUSE 8

                               SERVICE AFTER SALE

      8.01 Repair and other service after sale for the users of the Components
as Products shall be at the cost and responsibility of Buyer. Seller will
provide Buyer with replacement parts for the Components on terms and conditions
to be mutually agreed upon by the parties from time to time during the retention
period provided for in Schedule D attached hereto as an integral part hereof.

      8.02 If the parties agree on a service training for the Products, Seller
will provide that in accordance with the agreed terms and conditions, provided
that Buyer shall reimburse Seller for [* * *].

                                    CLAUSE 9

                               TERM & TERMINATION

      9.01 This Agreement shall become effective as of the date first above
written (herein referred to as Effective Date), and thereafter shall remain in
force and effect until the end of [* * *], unless earlier terminated in
accordance with any other provisions of this Agreement.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -6-
<PAGE>

      By mutual agreement at least [* * *] prior to expiration hereof, this
Agreement may be extended for the duration mutually agreed to in writing.

      9.02 Either party hereto has the right to terminate this Agreement by
giving a written notice to the other party in case such other party shall have
been in a breach and/or default of the provisions of this Agreement, and such
breach and/or default shall not have been corrected within [* * *] after receipt
of notice specifying the nature of such breach and/or default.

      9.03 Seller may at any time terminate this Agreement immediately by
giving a written notice to Buyer upon any of the following events:

                  1) Any arrangement with direction or any application for
bankruptcy, receivership, winding up or other similar proceeding against Buyer
and/or Buyer's Affiliate shall be made by Buyer, Buyer's Affiliate or any other
person;

                  2) All of or, in the opinion of [* * *], substantial part of
the assets of Buyer and/or Buyer's Affiliate shall be seized or attached in
conjunction with any action against Buyer and/or Buyer's Affiliate by any third
party;

                  3) A sale of all of or in the opinion of [* * *]
substantially all of the assets of Buyer is made, or this Agreement is assigned
by Buyer and/or Buyer's Affiliate without the prior written consent of Seller;

                  4) There occurs any such change in the capital ownership
and/or management control of Buyer and/or Buyer's Affiliate as, in the opinion
of [* * *], may adversely affect the performance of this Agreement and/or the
benefits or rights of Seller in this Agreement;

                  5) There occurs any difficulties, in [* * *] opinion, to
perform the obligation under this Agreement due to any of significant changes of
the political, economic or taxation policy by the governmental or
quasi-governmental organization or agencies in the [* * *];

                  6) [* * *] judges that the quality of the Products assembled
by Buyer's Affiliate hereunder is found to be insufficient and such
insufficiency seems not to be corrected within [* * *]; and

                  7) An import license of the Components into the [* * *]
and/or an import license of the Components from Buyer to Buyer's Affiliate is
not obtained from the competent authority of the Government of the [* * *] (to
the extent that such license is required by law) within [* * *] from the
Effective Date hereof.

      9.04 Termination or expiration of this Agreement shall not affect the
right of Seller or Buyer which shall have accrued hereunder including, without
limitation, the Seller's right to receive payment of the Components and the
Buyer's right to receive the Components ordered but not delivered yet. However,
if this Agreement is terminated due to any breach of this Agreement by either
party, the other party shall have the right to cancel any firm order accepted by
Seller without any liability to the breaching party.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -7-
<PAGE>

      9.05 No failure or delay on the part of either party hereto to exercise
its right of termination of this Agreement for any one or more of the causes
specified herein, shall be construed to prejudice its rights of termination
hereof for any other or subsequent reason.

                                   CLAUSE 10

                               GENERAL PROVISIONS

      10.01 EXCEPT FOR THE EXPRESS LIMITED WARRANTY IN CLAUSE 6 HEREOF AND THE
EXPRESS WARRANTY IN CLAUSE 11.05 HEREOF, EACH PARTY'S LIABILITY FOR ANY LOSS OR
DAMAGE ARISING OUT OF OR RESULTING FROM THESE TERMS AND CONDITIONS OR FROM ITS
PERFORMANCE OR BREACH, OR IN CONNECTION WITH THE COMPONENTS PURCHASED HEREUNDER
SHALL IN NO CASE EXCEED THE PURCHASE PRICE FOR THE SPECIFIC COMPONENT WHICH GIVE
RISE TO THE CLAIM. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES (WHETHER FORESEEABLE OR NOT), NOR
FOR DAMAGES FOR LOSS OF BUSINESS, LOSS OF PROFITS, LOSS OF CONTRACTS, OR
ANTICIPATED SAVINGS (WHETHER FORESEEABLE OR NOT), IN CONTRACT, TORT, (INCLUDING
NEGLIGENCE), BREACH OF STATUTORY DUTY, PRODUCT LIABILITY OR OTHERWISE, ARISING
FROM THIS AGREEMENT OR INDIVIDUAL CONTRACTS HEREUNDER, EVEN IF IT HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.

      10.02 Neither this Agreement nor any rights or obligations hereunder shall
be assignable or otherwise transferable by either party hereto, voluntarily or
by operation of law or otherwise, without the prior written consent of the other
party, and any assignment or transfer without such consent shall be null and
void.

      10.03 Neither party hereto shall be liable for delay or failure in the
performance of this Agreement and/or individual purchase orders under this
Agreement arising from any of the following matters: (i) acts of God or public
enemy or war (declared or undeclared); (ii) acts of persons engaged in
subversive activities or sabotage; (iii) fires, floods, explosions, or other
catastrophes; (iv) epidemics or quarantine restrictions; (v) strikes, slowdowns,
lockouts or labor stoppage or disputes of any kind; (vi) freight embargo or
interruption of transportation; (vii) unusually severe weather; (viii) delays of
a supplier of Seller due to any the above causes or events; and the time for
performance by such party shall be extended by the period of any such delay.

      Notwithstanding the foregoing, should any delay resulting from such an
event of Force Majeure set forth above exceed [* * *], either party may
terminate this Agreement or the portion of this Agreement so delayed.

      10.04 Any confidential information owned by Seller prior to this Agreement
or developed by Seller (or its parent, subsidiaries affiliates) during the term
hereof and disclosed to Buyer in connection with subject matter hereof and the
contents and existence of this Agreement shall not be

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -8-
<PAGE>

disclosed by Buyer to any third party. The parties agree that the contents of
this Agreement shall be prohibited unless required by any governmental or
regulatory agency, including, but not limited to the Limited States Securities
and Exchange Commission (SEC). The parties agree that if such disclosure is so
required by any governmental or regulatory agency, the parties shall seek to
keep confidential all material terms of the contract, as may be allowed by said
agency's provisions for confidential treatment of this Agreement.

      10.05 This Agreement shall be governed and construed in accordance with
the laws of Japan without reference to its conflict of law principles.

      10.06 Any and all disputes, controversies or differences which may arise
between the parties hereto out of or in relation to this Agreement shall be
settled between the parties hereto by their amicable endeavors.

      However, if in spite of such amicable endeavors of the parties hereto, no
such solution can be reached within [* * *] after occurrence of such disputes,
controversies or differences, then, they shall be finally settled (without being
submitted to any court), except as otherwise expressly provided herein. In case
Seller initiates the arbitration, the arbitration shall take place in San
Francisco, California, U.S.A., in accordance with the arbitration rules of
American Arbitration Association. In case Buyer initiates the arbitration, the
arbitration shall take place in Tokyo, Japan in accordance with the arbitration
rules of Japan Commercial Arbitration Association. Judgment upon the award
rendered may be entered in any court having jurisdiction or application may be
made to such court for a judicial acceptance of the award and an order of
enforcement, as the case may be.

      10.07 The CLAUSES 2.01, 3.01, 5.02, 6.02, 6.03, 6.04, 6.05, 6.06, 6.07,
6.08, 6.09, 8.01, 9.04, 9.05, 10.01, 10.04, 10.05, 10.06, 10.07 and 11 hereof
shall survive the expiration or the termination of this Agreement.

      10.08 This Agreement contains the entire and only agreement between the
parties hereto with respect to the subject matter herein contained, and this
Agreement supersedes and cancels all previous agreements, negotiations,
commitments and writings with respect thereto, and may not be released,
discharged, abandoned, changed or modified in any manner, orally or otherwise,
except by an instrument in writing signed by a duly authorized officer or
representative of the parties hereto.

                                   CLAUSE 11

                                 EXPORT CONTROL

      11.01 In no event shall Seller be bound by any terms and conditions that
contravene any export laws, regulations or other restraints of any relevant
countries including but not limited to Japan and the U.S.A. All orders are
subject to the obtaining of any required licenses under the said relevant laws.
Buyer shall, upon Seller's request, furnish Seller with all information and
documentation necessary for Seller in obtaining and complying with the required
licenses.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -9-
<PAGE>

      11.02 In the event that any and all the Products including replacement
parts thereto to be purchased by Buyer from Seller and any technical documents
or technical services to be supplied by Seller to Buyer relating thereto
(hereinafter collectively called "GOODS") are included in and remain the
"restricted subject" whose export is controlled under the Foreign Exchange and
Foreign Trade Law and its relevant governmental/administrative regulations of
Japan, Buyer shall provide Seller with the "End-Use Statement" supplied by
Seller and signed by Buyer, which is required for Seller to obtain approvals of
the Japanese Government, and Buyer shall strictly comply with any and all
provisions set forth therein. Specifically, Buyer shall not change the end-use
of GOODS set forth therein nor transfer the GOODS to any country other than the
countries set forth therein. In the event that Buyer is not the end-user of
GOODS, Buyer shall, upon request of Seller, make Buyer's customer(s) sign such
End-Use Statement and make such customer(s) understand and comply with any and
all the provisions therein. Buyer further agrees, upon request of Seller, to
render the assistance necessary for Seller to check and verify the compliance
with provisions of End-Use Statement by Buyer or its customer(s).

      11.03 During and after the term of this Agreement, Buyer shall not sell,
lease or otherwise dispose of GOODS, directly or indirectly, to any customer who
makes use of, is likely to or intends to make use of GOODS for "Military
Purposes." In this Clause, "Military Purposes" means the design, development,
manufacture or use of any weapon including without limitation nuclear weapon,
biological weapon, chemical weapon and missiles.

      11.04 Buyer shall not export GOODS directly or indirectly through any
third party to any of the countries against which any economic sanction is
imposed under resolutions approved by the Security Council of the United
Nations, as long as such resolutions remain valid and effective and so far as
GOODS remain the "prohibited subject" of which export to such countries is
prohibited thereunder.

      11.05 In the case of any breach of this Clause, Buyer shall be liable to
Seller for any all direct and indirect damages incurred by Seller arising from
such breach, and Seller may cancel all existing individual contracts hereunder
and this Agreement immediately without any liability to Buyer. Further, Seller
shall not be obliged to fulfill any individual contracts which are accepted by
Seller but subsequently discovered to be an improper end-use, Military Purpose,
and the like, or sale to improper end-user or intermediary.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                      -10-
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement in three
(3) original instruments, to be executed and delivered in the English language
as of the date first above written, in a manner legally binding upon them, by
their duly authorized officers, each of which shall be retained by Seller and
Buyer respectively.


Seller:  Matsushita Electric Industrial Co., Ltd.
         Corporate Management Division for China


         By: /s/ Yukio Shotoku
            -------------------------------------
            Name:  Yukio Shotoku
            Title: Managing Director, Member of the Board


         Matsushita Communication Industrial Co., Ltd.
         Personal Communication Division


         By: /s/ Osamu Waki
            -------------------------------------
            Name:  Osamu Waki
            Title: Director


Buyer:   UTStarcom Inc.


         By: /s/ Hong Liang Lu
            -------------------------------------
            Name:  Hong Liang Lu
            Title: President & CEO

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>5
<FILENAME>ex-27_1.txt
<DESCRIPTION>EXHIBIT 27.1
<TEXT>

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5

<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-2000
<PERIOD-START>                             APR-01-2000
<PERIOD-END>                               JUN-30-2000
<CASH>                                         201,663
<SECURITIES>                                    45,390
<RECEIVABLES>                                  116,327
<ALLOWANCES>                                  (10,127)
<INVENTORY>                                     86,360
<CURRENT-ASSETS>                               454,762
<PP&E>                                          18,301
<DEPRECIATION>                                 (7,832)
<TOTAL-ASSETS>                                 505,052
<CURRENT-LIABILITIES>                          121,287
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           119
<OTHER-SE>                                     379,591
<TOTAL-LIABILITY-AND-EQUITY>                   505,502
<SALES>                                         80,008
<TOTAL-REVENUES>                                80,008
<CGS>                                           51,629
<TOTAL-COSTS>                                   21,062
<OTHER-EXPENSES>                                 (303)
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 949
<INCOME-PRETAX>                                 10,005
<INCOME-TAX>                                     3,797
<INCOME-CONTINUING>                              6,208
<DISCONTINUED>                                       0
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</TEXT>
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