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<SEC-DOCUMENT>/in/edgar/work/0000912057-00-049866/0000912057-00-049866.txt : 20001115
<SEC-HEADER>0000912057-00-049866.hdr.sgml : 20001115
ACCESSION NUMBER:		0000912057-00-049866
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20000930
FILED AS OF DATE:		20001114

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:		766120
</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>a2030832z10-q.txt
<DESCRIPTION>FORM 10-Q
<TEXT>

<PAGE>


                       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 September 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 October 26, 2000, there were 94,714,665 shares of the
Registrant's Common Stock outstanding, par value $0.00125.

         This quarterly report on Form 10-Q 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>
   Item 1.        Condensed Consolidated Financial Statements                                                 3

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

                  Condensed Consolidated Statements of Operations for the three and nine
                  month periods ended September 30, 2000 and September 30, 1999 (unaudited)                   4

                  Condensed Consolidated Statements of Cash Flows for the nine month
                  periods ended September 30, 2000 and September 30, 1999 (unaudited)                         5

                  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                                  27

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>
                                                                                   September 30,       December 31,
                                                                                       2000                  1999
                                                                               ---------------------- --------------------
                                     ASSETS                                         (Unaudited)
<S>                                                                                       <C>                  <C>
Current assets:
  Cash and cash equivalents                                                                $ 189,928            $  87,364
  Short-term investment                                                                       72,021                    -
  Accounts receivable, net                                                                   120,572               77,823
  Receivable from related parties                                                                  -                  339
  Inventories, net                                                                            89,687               55,204
  Other assets                                                                                15,798                8,326
                                                                               ---------------------- --------------------
Total current assets                                                                         488,006              229,056
Property, plant and equipment, net                                                            11,717                8,168
Investment in affiliated companies                                                            12,102                4,460
Intangible assets, net                                                                        21,461               25,132
Deferred tax assets                                                                            9,081                4,352
Other long term assets                                                                         1,945                  620
                                                                               ---------------------- --------------------
  Total assets                                                                             $ 544,312            $ 271,788
                                                                               ====================== ====================


                       LIABILITIES, MINORITY INTEREST AND
                              STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                                         $  35,106            $  21,745
  Debt                                                                                        39,768               34,593
  Debt to shareholder and related parties                                                          -                8,745
  Income taxes payable                                                                           936                2,985
  Customer deposits                                                                           26,971                5,249
  Other liabilities                                                                           26,967               29,102
                                                                               ---------------------- --------------------
Total current liabilities                                                                    129,748              102,419
                                                                               ---------------------- --------------------
Long-term debt                                                                                12,048                    -
Minority interest in consolidated subsidiaries                                                 5,012                3,649
Stockholders' equity:
Convertible preferred stock: $.00125 par value; authorized: 99,200,000
   shares; issued and outstanding: 70,377,322 at December 31, 1999; liquidation
   value of $259,608 at December 31, 1999                                                          -                   88
Common stock: $.00125 par value; authorized: 250,000,000
   shares; issued and outstanding: 94,677,001 at September 30, 2000 and 8,929,837
   at December 31, 1999                                                                          120                   13
Common stock warrant                                                                               -                  389
Additional paid-in capital                                                                   427,094              218,303
Deferred stock compensation                                                                   (8,306)             (17,792)
Accumulated deficit                                                                          (20,726)             (34,821)
Notes receivable from shareholders                                                              (723)                (555)
Unrealized losses on investments                                                                 (24)                   -
Cumulative translation adjustment                                                                 69                   95
                                                                               ---------------------- --------------------
Total stockholders' equity                                                                   397,504              165,720
                                                                               ---------------------- --------------------
   Total liabilities, minority interest, and stockholders' equity                          $ 544,312            $ 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           Nine months ended
                                                                                   September 30,               September 30,
                                                                              -------------------------   ------------------------
                                                                                2000            1999       2000             1999
                                                                              -------------------------   ------------------------
                                                                                   (Unaudited)                  (Unaudited)

<S>                                                                           <C>            <C>         <C>            <C>
Net sales                                                                     $ 103,812      $ 55,019    $ 242,579      $ 124,701
Cost of sales (excludes stock compensation expense of $19, $3, $75 and $9)       67,853        31,956      157,348         73,781
                                                                              ---------      --------    ---------      ---------
Gross profit                                                                     35,959        23,063       85,231         50,920

Operating expenses:
  Selling, general and administrative expenses (excludes amortization
    of deferred stock compensation of $1,034, $2,117, $4,085 and $2,885)         11,114         8,755       30,056         22,634
  Research and development expenses (excludes amortization of deferred stock
    compensation of $842, $364, $6,097 and $865)                                 10,356         4,307       24,896         12,490
  Amortization of deferred stock compensation                                     1,895         2,484       10,257          3,759
  Amortization of intangible assets                                               1,224            38        3,671            112
                                                                              ---------      --------    ---------      ---------
Total operating expenses                                                         24,589        15,584       68,880         38,995
                                                                              ---------      --------    ---------      ---------
Operating income                                                                 11,370         7,479       16,351         11,925

Interest income                                                                   3,685           402        8,724          1,384

Interest expenses                                                                  (795)         (711)      (2,501)        (2,269)

Other income                                                                      1,490           331        1,968            198

Equity in net income (loss) of affiliated companies                                (256)           92         (583)           984
                                                                              ---------      --------    ---------      ---------
Income before income taxes and minority interest                                 15,494         7,593       23,959         12,222

Income tax expense                                                                3,786           303        8,501            488
                                                                              ---------      --------    ---------      ---------
Income before minority interest                                                  11,708         7,290       15,458         11,734

Minority interest in (earnings) of consolidated subsidiaries                       (838)         (644)      (1,363)        (1,233)
                                                                              ---------      --------    ---------      ---------
Income from continuing operations                                                10,870         6,646       14,095         10,501

Loss from discontinued operations                                                     -             -            -         (1,656)
                                                                              ---------      --------    ---------      ---------
Net income                                                                     $ 10,870      $  6,646     $ 14,095        $ 8,845
                                                                              =========      ========    =========      =========
Basic earnings (loss) per share:
  Income from continuing operations                                            $   0.12      $   0.76     $   0.19        $  1.22
  Loss from discontinued operations                                            $      -      $      -     $      -        $ (0.20)
                                                                              ---------      --------    ---------      ---------
  Net income - basic earnings per share                                        $   0.12      $   0.76     $   0.19        $  1.02
                                                                              =========      ========    =========      =========
Diluted earnings (loss) per share:
  Income from continuing operations                                            $   0.11      $   0.09     $   0.14        $  0.14
  Loss from discontinued operations                                            $      -      $      -     $      -        $ (0.02)
                                                                              ---------      --------    ---------      ---------
  Net income - diluted earnings per share                                      $   0.11      $   0.09     $   0.14        $  0.12
                                                                              =========      ========    =========      =========
Weighted average shares used in per-share calculation:
  - Basic                                                                        94,153         8,701       74,587          8,639
                                                                              =========      ========    =========      =========
  - Diluted                                                                     103,517        73,859      100,959         73,880
                                                                              =========      ========    =========      =========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.



                                       4
<PAGE>


                                 UTSTARCOM, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                                  NINE MONTHS ENDED
                                                                                              SEPTEMBER 30,  SEPTEMBER 30,
                                                                                               2000                1999
                                                                                              ----------------------------
                                                                                                     (Unaudited)
<S>                                                                                         <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                                  $  14,095           $  8,845
Adjustments to reconcile net income to net cash used in operating activities:
   Loss from discontinued operations                                                                -              1,656
   Depreciation and amortization                                                                6,809              1,977
   Net loss on sale and disposal of assets                                                        761                470
   Amortization of deferred stock compensation                                                 10,257              3,759
   Equity in net (income) loss of affiliated companies                                            583               (984)
   Minority interest                                                                            1,363              1,233
   Changes in operating assets and liabilities:
     Accounts receivable and receivable from related parties                                  (40,520)            (6,666)
     Inventories                                                                              (34,483)            (7,744)
     Other current and non-current assets                                                      (8,229)            (5,665)
     Deferred tax assets                                                                            -             (2,699)
     Accounts payable and payable to related parties                                            4,616             (4,323)
     Income taxes payable                                                                       2,114              1,160
     Other current liabilities                                                                 19,587             11,681
                                                                                            ---------          ---------
Net cash (used in) provided by continuing operations                                          (23,047)             2,700
Net cash used in discontinued operations                                                            -               (530)
                                                                                            ---------          ---------
Net cash (used in) provided by operating activities                                           (23,047)             2,170
                                                                                            ---------          ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment                                                     (7,585)            (2,483)
Investment in affiliates, net                                                                  (8,225)              (719)
Proceeds from disposal of property                                                                136                997
Purchase of short-term investments                                                            (72,021)                 -
                                                                                            ---------          ---------
Net cash provided by continuing operations                                                    (87,695)            (2,205)
Net cash used in discontinued operations                                                            -                179
                                                                                            ---------          ---------
Net cash used in investing activities                                                         (87,695)            (2,026)

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of stock, net of expenses                                                            196,283                 50
Proceeds from borrowing, net                                                                   17,224             17,104
Payments on shareholder notes, net                                                               (150)                 -
Unrealized holding loss                                                                           (25)                 -
                                                                                            ---------          ---------
Net cash provided by financing activities                                                     213,332             17,154

Effects of exchange rates on cash                                                                 (26)                 -
                                                                                            ---------          ---------
Net increase in cash and cash equivalents                                                     102,564             17,298
Net cash provided by discontinued operations                                                        -               (351)
                                                                                            ---------          ---------
Net increase in cash and cash equivalents                                                     102,564             17,649
Cash and cash equivalents at beginning of period                                               87,364             17,626
                                                                                            ---------          ---------
Cash and cash equivalents at end of period                                                  $ 189,928           $ 35,275
                                                                                            =========          =========
</TABLE>



     See accompanying notes to condensed consolidated financial statements.



                                       5
<PAGE>




                                 UTSTARCOM, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     (Information for the three and nine months ended September 30, 2000 and
September 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 (more than 50 percent) 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 September 30, 2000 and for the
three and nine months ended September 30, 2000 and September 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 presentation 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 nine
months ended September 30, 2000 are not necessarily indicative of the operating
results for the full year.

2.        EARNINGS (LOSS) PER SHARE (IN THOUSANDS, EXCEPT IN PER SHARE DATA):

          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 ended                        Nine months ended
                                                    ---------------------------------------  --------------------------------------
                                                     September 30, 2000   September 30,1999   September 30, 2000  September 30,1999
                                                    -------------------   -----------------  -------------------  -----------------
                                                                   (Unaudited)                                (Unaudited)
<S>                                                      <C>                   <C>                <C>                  <C>
Numerator:
   Income from continuing operations                       $ 10,870              $ 6,646            $ 14,095             $ 10,501
   Loss from discontinued operations                       $      -              $     -            $      -             $ (1,656)
                                                          ---------             --------           ---------            ---------
   Net income                                              $ 10,870              $ 6,646            $ 14,095             $  8,845
                                                          =========             ========           =========            =========

Denominator:
   Weighted-average shares outstanding - basic               94,153                8,701              74,587                8,639
   Weighted-average shares outstanding - diluted            103,517               73,859             100,959               73,880

Basic earnings (loss) per share:
   Income from continuing operations                       $   0.12              $  0.76            $   0.19             $   1.22
   (Loss) from discontinued operations                     $      -              $     -            $      -             $  (0.20)
                                                          ---------             --------           ---------            ---------
                                                           $   0.12              $  0.76            $   0.19             $   1.02
                                                          =========             ========           =========            =========

Diluted earnings (loss) per share:
   Income from continuing operations                       $   0.11              $  0.09            $   0.14             $   0.14
   (Loss) from discontinued operations                     $      -              $     -            $      -             $  (0.02)
                                                          ---------             --------           ---------            ---------
                                                           $   0.11              $  0.09            $   0.14             $   0.12
                                                          =========             ========           =========            =========
</TABLE>


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

<TABLE>
<CAPTION>
                                                     Nine months period ended
                                                          September 30,
                                                          -------------
                                                        2000            1999
                                                        ----            ----
                                                             (Unaudited)

<S>                                                  <C>            <C>
Cash paid during the period for:
Interest                                              $   2,410      $  3,174
Income taxes                                          $   6,128      $  1,120
</TABLE>


         Noncash investing and financing activities were as follows:

<TABLE>
<CAPTION>
                                                     Nine months period ended
                                                           September 30,
                                                           -------------
                                                       2000           1999
                                                       ----           ----
                                                           (Unaudited)

<S>                                                    <C>            <C>
Distribution of net assets to shareholders             $      -       $ 4,956
Receivable from shareholders                           $     18       $     -
Non-qualified stock option exercise tax benefits       $  9,460       $     -
</TABLE>


4.       CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

         The Company considers all highly liquid debt and equity 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.

                                       7
<PAGE>



          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 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 September 30, 2000, $93.4 million of
available-for-sale securities were included in cash equivalents and $72.0
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 September 30,
2000 and December 31, 1999 consist of the following:

<TABLE>
<CAPTION>
                                      September 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 September 30, 2000 and
December 31, 1999:

<TABLE>
<CAPTION>
                                                                                        September 30,       December 31
Note                                            Rate                  Maturity               2000               1999
- ----                                            ----                  --------               ----               ----
                                                                                         (Unaudited)

<S>          <C>                           <C>                  <C>                        <C>                  <C>
Bank of China(1)                      From 5.56% to 5.85%        From 1/01 to 09/01        $ 19,278               $ 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)        6.21%                      06/10                       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                          9                     15
                                      -------------------------------------------------------------------------------------
Total debt                                                                                 $ 51,816               $ 34,593
Long-term debt                                                                               12,048                     -
                                                                                          --------------------------------
Short-term debt                                                                            $ 39,768               $ 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 $84,337.

(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 $24,096 and matures in June 2010.

(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.

                                       8
<PAGE>

7.        COMPREHENSIVE INCOME (LOSS):

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

<TABLE>
<CAPTION>
                                               Three months ended September 30,             Nine months ended September 30,

                                                      2000          1999                       2000          1999
                                                      ----          ----                       ----          ----
<S>                                                 <C>          <C>                          <C>          <C>
Net income                                           $ 10,870     $ 6,646                      $ 14,095     $ 8,845

Change in cumulative translation adjustments              (16)          -                           (26)          -

Unrealized gain (loss) on investments                      42           -                           (24)          -

                                                   -----------------------                    ----------------------
Total comprehensive income                           $ 10,896     $ 6,646                      $ 14,045     $ 8,845
                                                   =======================                    ======================
</TABLE>




8.        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.


9.        RECENT ACCOUNTING PRONOUNCEMENTS:

          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 for revenue recognition under certain
circumstances. Implementation of SAB 101 has been delayed by the Securities and
Exchange Commission until the fourth quarter of the fiscal years beginning after
December 15, 1999. The Securities and Exhange Commission issued a "Frequently
Asked Questions and Answers" document (the "FAQ") in October 2000. 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 2000. The Company is
continuing to evaluate the impact of SAB 101 and the FAQ on its financial
statements and related disclosures.

          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.


                                       9
<PAGE>

10.       COMMITMENTS AND CONTINGENCIES:

          We have entered into a purchase agreement totaling approximately
$10.7 million with Hainan Xinhuangpu Investment Co., Ltd., Hua You Starcom
Communication Co., Ltd and Stable Gain International Ltd. We agreed to
purchase software intellectual property from Hua You Starcom Communication
Co., Ltd and Stable Gain International Ltd, and the development employees and
certain related fixed assets from Hainan Xinhuangpu Investment Co. Ltd. The
transfer of the software intellectual property will be recorded upon the
completion of government approvals.

11.       COUNTRY RISKS:

          Almost 99% of our sales for the three and nine months ended September
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.

          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. In addition, there is no
assurance that the Ministry of Information Industry will not conduct any further
review/evaluation of PHS-based equipment or change its order regarding PHS-based
system in the future.

          Management has also applied for network access licenses 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 the licensing requirements for
both Airstar system and other products 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

          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



                                       10
<PAGE>

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 September 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.

          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.

                                       11
<PAGE>

          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 nine months ended September 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 $10.3 million during the
nine months ended September 30, 2000. At September 30, 2000, approximately $8.3
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 SEPTEMBER 30, 2000 AND 1999

          NET SALES. Our net sales increased 88.7% from $55.0 million for the
three months ended September 30, 1999 to $103.8 million for the corresponding
period in 2000. This increase was primarily due to an increase in sales volume
of our Airstar system. For the three months ended September 30, 2000, sales to
Jiangmen PTB and Xi An PTB accounted for 10.5% and 7.8% of our net sales,
respectively. For the three months ended September 30, 1999, sales to Xi An PTB
accounted for 48.8% of our net sales.

          GROSS PROFIT. Gross profit increased 55.9% from $23.1 million for the
three months ended September 30, 1999 to $36.0 million for the corresponding
period in 2000. Gross profit, as a percentage of net sales, decreased from 41.9%
for the three months ended September 30, 1999 to 34.6% for the three months
ended September 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 26.9% from $8.8 million for the three months
ended September 30, 1999 to $11.1 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 15.9% for the three months ended September 30, 1999 to
10.7% 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.

          RESEARCH AND DEVELOPMENT Research and development expenses increased
140.4% from $4.3 million for the three months ended September 30, 1999 to $10.4
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 7.8% for the three months ended September
30, 1999 to 10.0% 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.

          AMORTIZATION OF DEFERRED STOCK COMPENSATION Amortization of deferred
stock compensation decreased from $2.5 million for the three months ended
September 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.

                                       12
<PAGE>

          AMORTIZATION OF INTANGIBLE ASSETS Amortization of intangible assets
increased from $38,000 for the three months ended September 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 September 30, 1999 and net interest income
was $2.9 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 income was $0.3 million for the
three months ended September 30, 1999 and other income was $1.5 million for the
corresponding period in 2000. The increase in other income was primarily due to
a one-time non-cash gain on non-trade receivables.

          EQUITY IN INCOME (LOSS) OF AFFILIATED COMPANIES Consolidated equity in
net income of affiliated companies was $92,000 for the three months ended
September 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 $0.3 million for the three
months ended September 30, 1999 and income tax expense was $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 $0.6 million for the three
months ended September 30, 1999 and $0.8 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 NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

          NET SALES. Our net sales increased 94.5% from $124.7 million for the
nine months ended September 30, 1999 to $242.6 million for the corresponding
period in 2000. This increase was primarily due to an increase in sales volume
of our Airstar system. For the nine months ended September 30, 2000, sales to
Hangzhou PTB accounted for 17.6% of our net sales. For the nine months ended
September 30, 1999, sales to Xi An PTB and Kun Ming PTB accounted for 21.5% and
15.9% of our net sales, respectively.

          GROSS PROFIT. Gross profit increased 67.4% from $50.9 million for the
nine months ended September 30, 1999 to $85.2 million for the corresponding
period in 2000. Gross profit, as a percentage of net sales, decreased from 40.8%
for the nine months ended September 30, 1999 to 35.1% for the nine months ended
September 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 32.8% from $22.6 million for the nine months
ended September 30, 1999 to $30.1 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 18.2% for the nine months ended September 30, 1999 to 12.4%
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.

          RESEARCH AND DEVELOPMENT Research and development expenses increased
99.3% from $12.5 million for the nine months ended September 30, 1999 to $24.9
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 10.0% for the nine months ended September
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.

          AMORTIZATION OF DEFERRED STOCK COMPENSATION Amortization of deferred
stock compensation increased from $3.8 million for the nine months ended
September 30, 1999 to $10.3 million for the corresponding period in 2000. The
expense

                                       13
<PAGE>
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 $0.1 million for the nine months ended September 30, 1999 to $3.7
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 $0.9
million for the nine months ended September 30, 1999 and net interest income was
$6.2 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 income was $0.2 million for the
nine months ended September 30, 1999 and other income was $2.0 million for the
corresponding period in 2000. The increase in other income was primarily due to
gain on settlement of forward foreign exchange contract, dividend income from
our investment in affiliated companies, and a one-time non-cash gain on
non-trade receivables.

          EQUITY IN INCOME (LOSS) OF AFFILIATED COMPANIES Consolidated equity in
net income of affiliated companies was $1.0 million for the nine months ended
September 30, 1999 and consolidated equity in net loss of affiliated companies
was $0.6 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 $0.5 million for the nine
months ended September 30, 1999 and income tax expense was $8.5 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 $1.2 million for the nine
months ended September 30, 1999 and $1.4 million for the corresponding period in
2000. The change between the two periods was primarily due to the increased
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. In April 2000, we have made a payment of $8.7M to SOFTBANK to repay
the shareholder loan. In July 2000, we established a line of credit with
Commercial Bank of Hangzhou to borrow up to $24.1 million. As of September 30,
2000, we have borrowed $12.0 million under this line of credit and classified
this $12.0 million borrowings as long-term debt. As of September 30, 2000, we
had working capital of $358.3 million, including $189.9 million in cash and cash
equivalents, $72.0 million of short term investments and $51.8 million of
Renminbi-denominated bank borrowings.

          We have invested $8.0 million and may invest up to an additional
$7.0 million in an investment fund 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 nine months ended September 30,
2000 of $23.0 million was primarily due to an increase in inventories, accounts
receivable and other current and non-current assets of $34.5 million, $40.5
million and $8.2 million. The uses of cash were partially offset by depreciation
and amortization expense of $6.8 million, amortization of deferred stock
compensation expense of $10.3 million, and an increase in other current
liabilities of $19.6 million.

          Net cash used in investing activities for the nine months ended
September 30, 2000 of $87.7 million was primarily due to acquisition of
property, plant and equipment of $7.6 million, our $8 million investment in
SOFTBANK investment fund, and the purchase of short-term investments of $72.0
million.

          Net cash provided by financing activities for the nine months ended
September 30, 2000 of $213.3 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 $17.2 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 a multi-currency bank account in Japanese Yen for purchasing
portions of our inventories and supplies. The balance of this Japanese Yen
account as of September 30, 2000 is approximately $7.2 million.

          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.

                                       14
<PAGE>


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 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 September 30, 2000, we had an accumulated deficit of
approximately $20.7 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:



                                       15
<PAGE>

          -         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
September 30, 2000, one customer accounted for 10.5% 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
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 communities, 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. In addition, there is no assurance that the Ministry of Information
Industry will not conduct any further review/evaluation of PHS-based equipment
or change its order regarding PHS-based system in the future. 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



                                       16
<PAGE>

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 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.

                                       17
<PAGE>

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.

          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



                                       18
<PAGE>

          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 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

                                       19
<PAGE>

          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;

          -         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;

                                       20
<PAGE>


          -         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 a multi-cash bank account in Japanese Yen for purchasing
portions of our inventories and supplies. As of September 30, 2000, this
Japanese Yen bank account is valued at $7.2 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;

          -         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



                                       21
<PAGE>

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 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



                                       22
<PAGE>

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 $240.1 million, or 99.0% of our sales for the
nine months ended in September 30, 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 50.6% as of September 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 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



                                       23
<PAGE>

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 wereseparated from the
operational functions of the state-owned companies under their control.
Following this separation, the Ministry of Information Industry acts exclusively
as the industry regulator and will no longer manage the day-to-day operations of
telecommunications service providers in China.

          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 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

                                       24
<PAGE>

          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. 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. New city-wide Airstar system deployments will not be allowed in
large and medium-size cities. As the majority of our sales are generated from
our operations in China, a change of this decision of China Telecom and the
Ministry of Information Industry or other decisions by China Telecom and the
Minstry of Information Industry 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

                                       25
<PAGE>




liberalization measures that are inconsistent from time to time or from industry
to industry or across different regions of the country. 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.


                                       26
<PAGE>

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.

          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 September 30, 2000:


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

<S>                                                                                          <C>
         Cash and cash equivalents                                                           189,928

         Average interest rate                                                                   4.8%

         Short-term investments                                                               72,021

         Average interest rate                                                                   6.7%

         Total investment securities                                                         261,949

                Average interest rate                                                            5.3%
</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
a multi-currency bank account in Japanese Yen for purchasing portions of our
inventories and supplies. The balance of this Japanese Yen account as of
September 30, 2000 is approximately $7.2 million.




                                       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 $3.1 million. 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 September 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 September
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)  OEM Agreement between UTStarcom, Inc. and Zaffire, Inc.,
                   dated August 10, 2000.
         10.2 (2)  Development Agreement between UTStarcom, Inc. and Matsushita
                   Communication Industrial Co., Ltd., dated September 26,
                   2000.
         10.3 (3)  OEM Agreement between UTStarcom, Inc. and Interweave
                   Communications International, Ltd., dated July 14, 2000.
         10.4 (4)  OEM Agreement between UTStarcom, Inc. and Foundry
                   Networks, Inc., dated August 24, 2000.
         10.5 (5)  Loan Contract between UTSC Co., Ltd. and Bank of China
                   Beijing Branch, dated August 29, 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.

                                       28
<PAGE>

          (3) See Footnote 1.

          (4) See Footnote 1.

          (5) See Footnote 1.

                                   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: November 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>a2030832zex-10_1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>

<PAGE>

                                  OEM AGREEMENT

                          (International/Asia Pacific)




                           Zaffire, Inc., as Supplier




                          UTStarcom, Inc., as Purchaser




                         Effective Date: August 10, 2000




UTStarcom, Inc.                                      Zaffire Inc.
1275 Harbor Bay Parkway                              2630 Orchard Parkway
Alameda, CA 94502, USA                               San Jose, CA 95134, USA
Telephone:  510-864-8800                             Telephone:  408-894-7200
Facsimile:  510-864-8802                             Facsimile:  408-894-7201


<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                    PAGE
                                                                                                                    ----
<S>                                                                                                               <C>
ARTICLE I TERM OF AGREEMENT; DEFINED TERMS............................................................................1

         1.01     General Relationship................................................................................1
         1.02     Term of Agreement...................................................................................1
         1.03     Definitions.........................................................................................1

ARTICLE II PURCHASE ORDERS; REPORTS...................................................................................2

         2.01     Issuance and Acceptance of Purchase Orders..........................................................2
         2.02     Invoices............................................................................................3
         2.03     Rolling [***] Forecast..............................................................................3
         2.04     Purchase Order Modifications or Cancellations.......................................................3
         2.05     Customization Requirements..........................................................................4
         2.06     Hardware and Software Enhancements..................................................................4
         2.07     Cost Reduction Program..............................................................................4
         2.08     Initial Order.......................................................................................4

ARTICLE III DELIVERY AND ACCEPTANCE OF PRODUCTS.......................................................................4

         3.01     Title and Risk of Loss..............................................................................4
         3.02     Acceptance of Products..............................................................................5
         3.03     Defective Products..................................................................................5

ARTICLE IV PRICES; PAYMENT TO THE SUPPLIER............................................................................5

         4.01     Prices for Products.................................................................................5
         4.02     Payment.............................................................................................5
         4.03     Taxes...............................................................................................5
         4.04     Place of Payment....................................................................................6

ARTICLE V PROMOTION AND SALE OF PRODUCTS..............................................................................6

         5.01     Purchaser Trademarks................................................................................6
         5.02     Product Labeling....................................................................................6
         5.03     Supplier Materials..................................................................................6
         5.04     Adaptation of Documentation and Promotion Literature................................................7
         5.05     Technical and Sales Training........................................................................7
         5.06     Technical Support...................................................................................8

ARTICLE VI WARRANTIES.................................................................................................8

         6.01     Product Warranties..................................................................................8
         6.02     Proprietary Rights Warranties.......................................................................9
         6.03     Proprietary Rights Indemnification..................................................................9
         6.04     Disclaimer of Warranties............................................................................9
</TABLE>


                                      -i-
<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)
<TABLE>
<CAPTION>
                                                                                                                    PAGE
                                                                                                                    ----
<S>                                                                                                               <C>
ARTICLE VII TERMINATION...............................................................................................9

         7.01     Termination.........................................................................................9
         7.02     Termination for Insolvency or Bankruptcy...........................................................10
         7.03     Rights Upon Termination............................................................................10
         7.04     Return of Materials................................................................................10
         7.05     No Liability.......................................................................................10

ARTICLE VIII MISCELLANEOUS...........................................................................................11

         8.01     Limitation of Liability............................................................................11
         8.02     Entire Agreement...................................................................................11
         8.03     Relationship of Parties............................................................................11
         8.04     Confidentiality....................................................................................11
         8.05     Survival of Maintenance Obligations................................................................12
         8.06     Notices............................................................................................12
         8.07     Force Majeure......................................................................................12
         8.08     Governing Law......................................................................................13
         8.09     Binding Effect.....................................................................................13
         8.10     Exhibits...........................................................................................13
         8.11     Severability.......................................................................................13
         8.12     Headings...........................................................................................13
         8.13     Remedies Cumulative................................................................................13
         8.14     Delays or Omissions................................................................................13
         8.15     Survival of Terms..................................................................................14
         8.16     Nonexclusive Market and Purchase Rights............................................................14
         8.17     Software Licenses..................................................................................14
         8.18     Choice of Language.................................................................................14
         8.19     Export Control and Related Provisions..............................................................14

EXHIBITS
Exhibit 1         Description of Products
Exhibit 2         International Price List
Exhibit 3         Initial Forecasted Volumes
Exhibit 4         Time Schedule
Exhibit 5         Zaffire Service Guide
Exhibit 6         Customization
Exhibit 7         Return Material Authorization Procedure
</TABLE>


                                      -ii-

<PAGE>


                                  OEM AGREEMENT

       THIS OEM AGREEMENT (the "Agreement") is made and entered into as of the
date set forth on the cover page hereof (the Effective Date"), between Zaffire,
Inc. (the "Supplier"), and UTStarcom, Inc. a Delaware corporation and on behalf
of its subsidiaries (the "Purchaser").

       The Supplier develops, manufactures, produces and/or supplies wide area
optical internetworking devices and products and desires to grant to the
Purchaser the right to sell and market certain of such products, and combine
same with other products manufactured, produced or supplied by the Supplier, all
upon the terms and conditions set forth in this Agreement. The Purchaser
develops, manufactures and/or sells and distributes networking products and
services and desires to have the right to sell and market the Supplies products
upon the terms and conditions in this Agreement within [***].

       NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

                                    ARTICLE I

                        TERM OF AGREEMENT; DEFINED TERMS

       1.01   General Relationship. During the term of this Agreement, the
Supplier agrees to make available and sell to the Purchaser the Products set
forth in Exhibit 1 in accordance with the terms and conditions set forth herein.

       1.02   TERM OF AGREEMENT. The term of this Agreement shall commence on
the Effective Date and shall remain in full force and effect until terminated by
either party as set forth herein.

       1.03   DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings indicated, unless the context clearly indicates otherwise:

              (a)    "APPLICABLE SPECIFICATIONS" means the functional
performance, operational and compatibility characteristics of a Product agreed
upon in writing by the parties or, by mutual agreement of the parties, as
described in applicable Documentation.

              (b)    "CUSTOMERS" means distributors, dealers, resellers,
value-added resellers, system integrators and other similar customers of the
Purchaser, including End Users.

              (c)    References to "dollars" and "$" refer to United States
currency.

<PAGE>

              (d)    "DOCUMENTATION" means user manuals, training materials,
product descriptions and specifications, technical manuals, license agreements,
supporting materials and other printed information relating to the Products,
whether distributed in print, electronic or video format, in effect as of the
date of the applicable purchase order relating thereto.

              (e)    "END USERS" means final retail purchasers or licenses who
acquire Products for their own use and not for resale, re-marketing or
redistribution.

              (f)    "PRODUCTS" means, individually or collectively as
appropriate, the hardware, licensed software, Documentation, supplies,
accessories and other commodities related to any of the foregoing as set forth
in Exhibit 1 and customized in accordance with the requirements set forth in
Exhibit 6 and which are to be provided by the Supplier pursuant to this
Agreement.

              (g)    "PURCHASE ORDER" means an official document, signed by an
authorized employee of the Purchaser, which is used to place product orders with
the Supplier.

              (h)    "PURCHASER TRADEMARKS" means any existing or future
trademarks that are registered by the Purchaser in the US or other countries.

              (i)    "SERVICES" means any warranty, maintenance, advertising,
marketing or technical support and training and any other services performed or
to be performed by the Supplier.

                                   ARTICLE II

                            PURCHASE ORDERS; REPORTS

       2.01   ISSUANCE AND ACCEPTANCE OF PURCHASE ORDERS. The Purchaser may
purchase, and the Supplier shall sell to the Purchaser, Products as described
below:

              (a)    The Purchaser may issue to the Supplier Purchase Orders
based on the prices listed in Exhibit 2 identifying the Products that the
Purchaser desires to purchase from the Supplier.

                     (i)    Each Purchase Order for Products shall be signed by
an authorized representative of the Purchaser, and shall clearly state the
following: the Purchase Order number, the purchase order date, a description of
the Product(s) ordered, the Purchaser's Product number, the number of units of
Product ordered, the agreed cost per unit, the total price for the Purchase
Order, the delivery date(s) requested for each Product included in the Purchase
Order (which delivery dates may not be later than [***] after the date on which
the Purchase Order is submitted by the Purchaser), the address to which the
Products described in the Purchase Order are to be shipped, and the address to
which the Products described in the Purchase Order are to be invoiced.

                     (ii)   A Purchase Order may include other terms and
conditions which are consistent with the terms and conditions of this Agreement
or which are necessary to place a Purchase Order. Purchase Orders may be placed
by the Purchaser by facsimile or electronically

                                      -2-
<PAGE>

transferred to the Supplier. Terms and conditions on Purchase Orders which
differ from those contained in this Agreement shall not be valid unless
specifically agreed in writing by an authorized representative of the Supplier.

              (b)    All Purchase Orders shall be transmitted to the address set
forth in Section 8.06.

              (c)    A Purchase Order shall be deemed accepted by the Supplier
only after a written confirmation thereof has been issued by the Supplier and
delivered to the Purchaser. The Supplier shall issue such written confirmation
within [***] after receipt of the Purchase Order. If such confirmation has not
been issued within the [***] period, the Purchase Order shall be deemed to be
accepted by the Supplier. Without limiting the generality of the foregoing, the
Supplier may reject any Purchase Order that fails to contain any of the
information required to be set forth by Section 2.01(a)(i). In the event of a
conflict between the provisions of this Agreement and the terms and conditions
of a Purchase Order or the Supplies confirmation or other written
communications, the provisions of this Agreement shall prevail and be
controlling.

              (d)    Upon the termination of this Agreement, the Supplier agrees
to accept Purchase Orders from the Purchaser for additional Products which, at
the time of such termination, the Purchaser is contractually obligated to
furnish to its Customers and does not have in its inventory, provided that the
Purchaser notifies the Supplier of all such obligations in writing within [***]
of such date of termination.

              (e)    This Agreement shall not obligate the Purchaser to purchase
any Products or Services, except as specifically set forth in a written Purchase
Order from the Purchaser or as otherwise set forth herein.

       2.02   INVOICES. For each shipment of Products to the Purchaser, the
Supplier shall transmit to the Purchaser an invoice which sets forth the
Purchases Purchase Order number, the Products shipped, the Supplier's and the
Purchaser's Product number and the price therefore.

       2.03   ROLLING [***] FORECAST. No later than [***] after the end of each
[***], the Purchaser shall deliver to the Supplier an updated, non-binding,
forward-looking rolling unit order forecast (each, a "Rolling [***] Forecast")
for each Product for the subsequent [***] period, to enable the Supplier to plan
production to meet the lead times anticipated. The Rolling [***] Forecast is not
an order or a commitment by the Purchaser to purchase Products. Rolling [***]
Forecasts shall be transmitted to the Supplier via electronic mail or by such
other means as may be agreed between the Supplier and the Purchaser. Exhibit 3
sets forth the initial forecasted volumes.

       2.04   PURCHASE ORDER MODIFICATIONS OR CANCELLATIONS.

              (a)    Prior to shipment of Products, the Supplier shall accept a
modification to a Purchase Order in order to: (i) change a location for
delivery, (ii) change dates for delivery of Products provided that said new
delivery dates remain within the Suppliers fiscal quarter of the original
shipment date, or (iii) correct typographical or clerical errors; provided,
however that


                                      -3-
<PAGE>

notices of modification must be received by the Supplier at least
[***] prior to the original shipment date.

              (b)    The Purchaser will confirm [***] before end of [***] the
forecasting of the following [***] by PO for delivery of orders consistent with
the Suppliers then current lead times. In the case that the PO quantity is less
than the forecasting quantity, the over-forecasted quantity will be shifted to
the [***] following. In the case that the PO is larger than the forecasted
quantity, Zaffire will make reasonable efforts to satisfy the demand for
non-forecasted units.

       2.05   CUSTOMIZATION REQUIREMENTS. In accordance with the time schedule
in Exhibit 4, the Supplier will modify the Products to fulfill the customization
requirements in Exhibit 6. Due to the TBD" in Exhibit 4 and Exhibit 6, both
parties shall mutually agree upon the customization to be done and both parties
shall use reasonable efforts to complete such customization no later than [***]
after the signing of this agreement.

       2.06   HARDWARE AND SOFTWARE ENHANCEMENTS. Should the Supplier change,
improve or add any enhancements to a Product at any time during the term of this
Agreement, the Supplier shall provide at least [***] notice to the Purchaser of
same prior to the implementation thereof. The Supplier will make available to
the Purchaser each new version of software made available by the Supplier from
time to time to its customers generally. With respect to modifications in
software and the rendition of other services that may be requested of the
Supplier by the Purchaser, the provision of same shall be as mutually agreed by
the parties, and without limiting the generality of the foregoing, the Supplier
may charge for such modifications or other services at [***]. Modifications to
software and changes in product features which are not part of the Suppliers
standard releases are not part of this Agreement, except to the extent set forth
in Exhibit 6 and as the Supplier may otherwise agree in writing. At the request
of the Purchaser and upon the agreement of the Supplier, such modifications or
other services may be provided at a pre-determined price.

       2.07   COST REDUCTION PROGRAM. The Parties agree to cooperate to ensure
that the Supplier's manufacturing of the Products at any time is performed in
the most cost efficient way hereunder on [***] basis to evaluate the possibility
of conducting a cost reduction program. The parties agree that all cost
reductions should be to the benefit of both Parties and as such reflected in the
prices for the Products.

       2.08   INITIAL ORDER. The Purchaser will place an initial order for [***]
to be used as a Test/Demonstration System ("TDS") in accordance with the time
schedule of Exhibit 4.

                                   ARTICLE III

                       DELIVERY AND ACCEPTANCE OF PRODUCTS

       3.01   TITLE AND RISK OF LOSS. Title to Products shall pass to the
Purchaser at the time that the Products are delivered to the [***]. Products
shall be shipped [***]. All risk of loss or damage to the products shall be
borne by the Supplier until delivery to the [***].


                                      -4-
<PAGE>

       3.02   ACCEPTANCE OF PRODUCTS. Acceptance of the TDS by Purchaser will be
based upon mutually agreed tests and success criteria. Each Product shipment
thereafter will be deemed accepted by Purchaser upon delivery to the [***].

       3.03   DEFECTIVE PRODUCTS. In the event that any Products are received by
the Purchaser in a defective condition or not in accordance with the Applicable
Specifications, including the Purchaser's customization requirements therefor or
the Documentation relating to such Products (collectively, "Defective
Products"), the Purchaser may return such Defective Products to the Supplier in
the manner set forth in Section 6.01(b). The Purchaser shall have the right to
return any such Defective Products within [***] after delivery and in accordance
with any applicable warranty with respect thereto.

                                   ARTICLE IV

                         PRICES; PAYMENT TO THE SUPPLIER

       4.01   PRICES FOR PRODUCTS. The price for each Product purchased by the
Purchaser pursuant hereto shall be with the agreed discount on the Suppliers
list price for such Product, as set forth in Exhibit 2.

              (a)    The prices set forth in Exhibit 2 are based on the
forecasted volumes of Exhibit 3. The Parties will on [***] basis negotiate the
prices based on the previous actual volume purchased and the expectations for
the coming [***]. Furthermore, the Parties agree to reevaluate prices if
significant changes in market conditions occur, and as Supplier's cost of
manufacturing permits.

       4.02   PAYMENT. The Supplier shall invoice the Purchaser no earlier than
the applicable shipping date for the Products covered by such invoice.

              (a)    The Purchaser shall submit to Supplier payment for any
Purchase Order: (i) within [***] of the date of shipment of the Products on such
Purchase Order paid by [***]; or (ii) within [***] of shipment of the Products
on such Purchase Order, with a [***] discount.

              (b)    Invoices that are unpaid at their due date, shall bear
interest at a rate of [***] or the maximum rate allowed by law, whichever is
less, until paid by Purchaser.

              (c)    If deliveries are made in installments, the invoice with
respect to each shipment shall be paid when due without regard to the other
scheduled deliveries.

       4.03   TAXES. All payments to the Supplier hereunder shall be made free
and clear of and without reduction by reason of any taxes, levies, costs or
charges whatsoever imposed, assessed, levied or collected by any government,
political subdivision, jurisdiction or taxing authority, all of which shall be
for the account of the Purchaser and paid when due by the Purchaser, unless the
Purchaser shall have provided the Supplier with a valid resale exemption
certificate with respect


                                      -5-
<PAGE>

thereto. Notwithstanding the foregoing, if, under any applicable law, the
Purchaser is required to withhold tax or any other amount from any payment to
the Supplier, the amount due from the Purchaser to the Supplier shall be
increased to the amount that the Supplier would have received if no withholding
had been required.

       4.04   PLACE OF PAYMENT. The Purchaser shall pay all amounts due to the
Supplier into such account as the Supplier may designate in U.S. dollars.
Payment shall be deemed to have been made only upon receipt of full payment in
the account specified pursuant hereto.

                                    ARTICLE V

                         PROMOTION AND SALE OF PRODUCTS

       5.01   PURCHASER TRADEMARKS. The Purchaser authorizes the Supplier to
apply the Purchaser's name or Purchaser Trademarks to the Products, as directed
by the Purchaser, for the sole purpose of supplying Products pursuant to this
Agreement. The Supplier shall acquire no right to the Purchaser Trademarks by
its use thereof, and may use the Purchaser Trademark for the duration of this
Agreement only to the extent specified herein. Any such use of Purchaser
Trademarks by the Supplier shall be to the Purchases benefit.

              (a)    The Purchaser shall retain the sole and exclusive right, in
its discretion, to bring legal action for trademark infringement with respect to
any of the Purchaser Trademarks.

              (b)    The Purchaser agrees to indemnify and hold the Supplier
harmless from and against an and all actions, claims, losses and damages
(including reasonable attorneys' fees and court costs) arising out of or in
connection with the use of any Purchaser Trademark by the Supplier pursuant to
the terms of this Agreement.

              (c)    The Purchaser agrees that it will not use any trade names
and trademarks of or licensed to the Supplier, all of which shall remain the
property of the Supplier. The Purchaser agrees not to contest any trade names or
trademarks of or licensed to the Supplier, or make application for registration
of any trade names or trademarks of or licensed to the Supplier, without the
Suppliers prior written consent. The Purchaser agrees not to use, employ or
attempt to register any trade names or trademarks that are confusingly similar
to the trade names or trademarks of or licensed to the Supplier.

       5.02   PRODUCT LABELING. All Products will be shipped to the Purchaser as
set forth in Exhibit 6.

       5.03   SUPPLIER MATERIALS. The Supplier agrees to provide upon the
Purchaser request, [***] the following materials in media form with respect to
the Products: (i) the specifications, (ii) published user instructions, manuals
and other training materials, (iii) current manuals covering installation,
operation and maintenance of the Products, and (iv) software. (v) Sales Tools
such as presentation slides, competition analysis and demonstration software,
etc. The Purchaser shall have


                                      -6-
<PAGE>

the right to copy or reproduce the foregoing materials for use in connection
with the Purchasers use, sale or support of the Products, or its support thereof
pursuant to Section 5.06, provided that the Purchaser makes no modifications in
such copied or reproduced materials without the prior written consent of the
Supplier and all designations or references therein of or relating to the
intellectual property rights of the Supplier shall be maintained (including,
without limitation, all references to the Supplier copyright and other
intellectual property rights. The Purchaser shall include with each Product
delivered to a Customer a license agreement - if so required by the Supplier -
and warranty in the form promulgated by the Supplier (with appropriate changes
to reflect the OEM relationship between the Supplier and the Purchaser).

       5.04   ADAPTATION OF DOCUMENTATION AND PROMOTION LITERATURE. The
Purchaser may translate into languages other than the English language such of
the Suppliers user manuals, product descriptions and specifications, technical
manuals, license agreements and other printed information relating to the
Products as shall be determined to be appropriate by the Purchaser. The
Purchaser shall own all rights in all such translated adaptations to promotional
materials, including, without limitation, rights to all local language
translations of the Supplier user manuals, product descriptions and
specifications, technical manuals, license agreements and other printed
information relating to the Products. In connection therewith, the Purchaser
shall take appropriate action to secure copyrights with respect to all such
translated adaptations. The Supplier will review any translated materials for
correctness if so requested by the Purchaser but will not be bound by any
documents not printed by Supplier. The Supplier shall execute any and all
documents and/or instruments deemed by the Purchaser to be necessary or
appropriate to effect the assignments hereinabove described.

       5.05   TECHNICAL AND SALES TRAINING.

              (a)    TRAINING SERVICES. During the term of this Agreement,
Supplier shall, at [***] expense, provide Purchaser at such location as
designated by Purchaser, with one day of training for the Purchaser Sales Force,
one day of training for Purchaser Field Sales Engineers and one day of training
per Product of engineering level training for Purchasers employees engaged in
tier two technical support of the Products, to be conducted one day each at
Purchaser premises in [***] or another location if agreed upon between the
Parties.

       Sales training will cover the [***] market, competition and product
features and benefits. The other training modules shall cover in detail, the
installation, configuration, operation, trouble shooting, adjustment, test and
maintenance of the product.

              (b)    TRAINING MATERIALS. During the term of this Agreement,
Supplier shall, at [***] expense, provide Purchaser with all materials utilized
to provide training in connection with the Product(s), materials as they become
available. Such training shall include, but is not limited to, Purchaser sales,
Purchaser Field Sales Engineers, and Technical Support courses. Training
materials shall include, but are not limited to, instructor guides, overheads,
student workbooks, and manual/guides. Purchaser shall have the right to
reproduce and distribute copies of all training materials, related documents and
recordings under Purchaser name to trainees in training courses offered by
Purchaser. All training material shall be provided electronically.


                                      -7-
<PAGE>

              (c)    The Supplier shall provide electronic mail access or access
to a private web account for software updates and bulletins, which include known
problems, work arounds, expected fixes and matters of a similar nature.

              (d)    In connection with the technical and sales training and
assistance described in this Section 5.05, the cost and expense of the Purchaser
personnel in attending same shall be borne by the [***].

       5.06   TECHNICAL SUPPORT. During the term of this Agreement, the Supplier
shall provide technical support as set forth in Exhibit 5.

                                   ARTICLE VI

                                   WARRANTIES

       6.01   PRODUCT WARRANTIES. The Supplier warrants that each Product will
be free from defects in design, materials and workmanship and will perform in
conformance with the Applicable Specifications and Documentation with respect to
such Product, including the customization requirements set forth in Exhibit 6.
The period of warranty shall be [***] from the date of delivery of such Product
to the Purchaser.

              (a)    During the warranty period set forth in this Section 6.01,
the Purchaser [***] and [***] remedy in the event of such defect or failure to
perform is expressly limited to the correction of the defect or failure by
repair, refurbishment or replacement, at the Supplier's [***] option and
expense. During the warranty period, change orders and maintenance revision
upgrades will be provided upon request and as may be needed for proper operation
of Products. The Supplier reserves the right, in connection with the replacement
of returned Products or the repair of Products returned for repair, to use parts
and components (including refurbished parts and components) that are like new or
equivalent in performance to the original part or component. Replaced products,
parts or components shall become the property of the Supplier.

              (b)    Claims by the Purchaser with respect to Defective Products
shall be made as follows: (i) claims shall be made in accordance with the Return
Material Authorization procedure of the Supplier set forth in Exhibit 7 as same
may be amended from time to time on at least [***] notice to the Purchaser.

              (c)    Notwithstanding the foregoing, the Supplier shall have no
liability pursuant to Section 6.01 with respect to defects arising in Products
through: (i) normal wear and tear or obsolescence, (ii) causes external to the
Products (such as, for example, unusual physical stress, power failure or
unusual environmental conditions), and (iii) any cause other than ordinary use
(such as, for example, accident, fire, lightning, water damage, neglect, misuse,
improper installation or testing, or unauthorized attempts to repair, alter or
modify).


                                      -8-
<PAGE>

       6.02   PROPRIETARY RIGHTS WARRANTIES. The Supplier warrants that, to the
best of its knowledge, it has all right, title, ownership interest and/or
marketing rights necessary to provide the Products to the Purchaser, and the
Products and their sale and use hereunder do not infringe upon any copyright,
patent, trademark, trade secret or other proprietary or intellectual property
right of any third party.

       6.03   PROPRIETARY RIGHTS INDEMNIFICATION. The Supplier agrees to
indemnify and hold the Purchaser harmless from and against any and all actions,
claims, losses and damages (including reasonable attorneys' fees and court
costs) arising out of or in connection with any breach or alleged breach of the
warranties set forth in Section 6.02, provided that the Supplier is notified
promptly in writing thereof and is given complete authority and information
required for the defense thereof. The Purchaser shall have the right to
participate in the defense of any such suit or proceeding at the Purchaser's
expense and through counsel of its choosing. In the event that an injunction is
sought or obtained against the use of a Product, the Supplier shall, within
[***] of its receipt of notice thereof, at [***] option and expense: (i) procure
for the Purchaser and its Customers the right to continue to use the infringing
Product as set forth in this Agreement, or (ii) replace the Product with a
non-infringing alternative, or (iii) modify the infringing Product to make its
use non-infringing. The Supplier shall have no liability under Section 6.02 or
under this Section 6.03 for any infringement based on the use of any Product
(including, without limitation, software), if the Product (or software) is used
in a manner or with equipment for which it was not reasonably intended, or if
the Product (or software) is used in an infringing process.

       6.04   DISCLAIMER OF WARRANTIES. THE WARRANTIES SET FORTH IN THIS ARTICLE
VI ARE THE ONLY WARRANTIES MADE BY THE SUPPLIER PURSUANT TO THIS AGREEMENT.
EXCEPT FOR SUCH WARRANTIES, THE SUPPLIER MAKES, AND THE PURCHASER, ITS CUSTOMERS
AND END USERS OF PRODUCTS RECEIVE, NO OTHER WARRANTY, EXPRESS OR IMPLIED, AND
THE SUPPLIER EXPRESSLY DISCLAIMS AND EXCLUDES ALL OTHER WARRANTIES. NO
REPRESENTATION OR OTHER AFFIRMATION OF FACT, INCLUDING, WITHOUT LIMITATION,
STATEMENTS REGARDING CAPACITY, SUITABILITY FOR USE OR PERFORMANCE OF THE
PRODUCTS PROVIDED HEREUNDER, WHETHER MADE BY THE SUPPLIER EMPLOYEES OR
OTHERWISE, WHICH IS NOT CONTAINED IN THIS AGREEMENT, SHALL BE DEEMED TO BE A
WARRANTY BY THE SUPPLIER FOR ANY PURPOSE, OR GIVE RISE TO ANY LIABILITY OF THE
SUPPLIER WHATSOEVER.

                                   ARTICLE VII

                                   TERMINATION

       7.01   TERMINATION. Either party may terminate this Agreement, with or
without cause, upon giving the other party at least [***] prior written notice,
or immediately by mutual agreement of the parties in writing. In case of
termination by Supplier, Purchaser may in the [***] notice period


                                      -9-
<PAGE>

place a non-cancelable last-time-buy order for such Products at [***], for
delivery within [***] after the expiration of the [***] notice period.

       In the event that either party materially defaults in the performance of
any of its duties or obligations set forth herein this Agreement, and such
default is not substantially cured within [***] after written notice is given to
the defaulting party specifying the default in reasonable detail, then the party
not in default may, by giving written notice thereof to the defaulting party,
terminate this Agreement or the applicable Purchase Order relating to such
default as of the date specified in such notice of termination.

       7.02   TERMINATION FOR INSOLVENCY OR BANKRUPTCY. Either party may
immediately terminate this Agreement and any Purchase Order by giving written
notice to the other party in the event of any of the following: (i) the
liquidation or insolvency of the other party; (ii) the appointment of a receiver
or similar officer for the other party; (iii) an assignment by the other party
for the benefit of all or substantially all of its creditors; (iv) the entry by
the other party into an agreement for the composition; (v) extension or
readjustment of all or substantially all of its obligations; or (vi) the filing
of a meritorious petition in bankruptcy by or against the other party under any
bankruptcy or debtors law for its relief or reorganization.

       7.03   RIGHTS UPON TERMINATION. The termination of this Agreement or any
Purchase Order shall not affect the Suppliers right to be paid for Products
previously shipped. The termination of this Agreement shall not affect any of
the Suppliers warranties, indemnifications or obligations relating to returns,
credits or any other matters set forth in this Agreement that by their nature
are to survive termination in order to carry out their intended purpose, all of
which shall survive the termination of this Agreement. The termination of this
Agreement shall not affect the obligations of either party to the other party
pursuant to any Purchase Order previously accepted and confirmed by the
Supplier.

       7.04   RETURN OF MATERIALS. In the event of the termination of this
Agreement, the Purchaser shall promptly return to the Supplier all sales
materials, specifications, drawings and other technical documents (including all
copies thereof received from the Supplier under this Agreement as directed by
the Supplier. The provisions of Section 7.04 shall survive the termination of
this Agreement.

       7.05   NO LIABILITY. Upon the termination of this Agreement, the Supplier
shall not be liable or obligated to the Purchaser with respect to any payments,
future profits, exemplary, special or consequential damages, indemnification or
other compensation regarding such termination, irrespective of whether such
obligations or liabilities may be contemplated by the law(s) of the governments
of any jurisdiction in which Products of the Supplier are sold or marketed by
the Purchaser, and the Purchaser hereby waives and relinquishes any rights,
pursuant to law or otherwise, to any such payments, indemnifications or
compensation.



                                      -10-
<PAGE>

                                  ARTICLE VIII

                                  MISCELLANEOUS

       8.01   LIMITATION OF LIABILITY. THE SUPPLIER SHALL HAVE NO LIABILITY FOR
ANY LOSS OF PROFIT OR OTHER COMMERCIAL DAMAGE, INCLUDING, WITHOUT LIMITATION:
INCIDENTAL, CONSEQUENTIAL, INDIRECT, SPECIAL OR PUNITIVE DAMAGES OF ANY KIND;
LOSS OF, OR DAMAGE TO, THE PURCHASER OR ANY END USER'S RECORDS OR DATA; THIRD
PARTY CLAIMS AGAINST THE PURCHASER; OR LOSS OF REVENUE, LOSS OF BUSINESS OR
OTHER FINANCIAL LOSS ARISING OUT OF OR IN CONNECTION WITH ANY PRODUCTS SOLD OR
LICENSED BY THE SUPPLIER TO THE PURCHASER OR TO ANY END USER OF PRODUCTS, EVEN
IF THE SUPPLIER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

       8.02   ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties relating to the subject matter contained herein and supersedes
all prior agreements and understandings, written or oral, relating to the
subject matter hereof. This Agreement shall not be modified, amended or
terminated except in a writing signed by both parties.

       8.03   RELATIONSHIP OF PARTIES. The relationship of the parties under
this Agreement shall be, and at all times remain, that of independent
contractors, and the Purchaser is neither an employee nor an agent of the
Supplier nor is the Purchaser authorized to represent itself, directly or by
implication, as such.

       8.04   CONFIDENTIALITY. Each party acknowledges that in the course of
performance of its obligations pursuant to this Agreement, it may obtain certain
Confidential Information (as defined herein in Section 8.04(a)) of the other
party. Each party hereby agrees that all Confidential Information communicated
to it by the other party, its subsidiaries or Customers, whether before or after
the Effective Date, shall be and was received in strict confidence, shall be
used only for purposes of this Agreement, and shall not be disclosed without the
prior written consent of the other party.

              (a)    As used herein this Agreement, the term Confidential
Information" refers to all information proprietary to a party and not generally
known in the industry that is disclosed to or learned by the recipient party in
connection with this Agreement and clearly marked or identified as confidential
or proprietary, whether or not reduced to writing, including, without
limitation: (a) information not generally known in the industry which relates to
the business, products or work of a party: (x) of a technical nature, such as
trade secrets, methods, know-how, formulas, compositions, designs, processes,
information regarding product development and other similar information and
materials, and (y) of a business or commercial nature, such as information or
compilation of data about costs, pricing, profits, compensation, sales, product
plans, markets, marketing plans and strategies, equipment and operational
requirements, operating policies or plans, finances, financial records, methods
of operation and competition, management organization, customers and suppliers,
and other similar information and materials of a party; and (b) any other
technical business or


                                      -11-
<PAGE>

commercial information designated as confidential or proprietary that a party
may receive belonging to any supplier, customer or others who do business with a
party. The foregoing limitations on use and disclosure shall not apply to
information that: (i) was lawfully known to the receiving party before its
receipt thereof; (ii) is learned by the receiving party from a third party
entitled to disclose same; (iii) becomes publicly known other than through the
actions of the receiving party, or (iv) is required by law or court order to be
disclosed by the receiving party.

              (b)    Upon the termination of this Agreement, each party that has
received Confidential Information shall immediately surrender to the other party
all Confidential Information in a receiving party's possession of or relating to
the other party, or in the possession of any person or entity under the
receiving party's control, including all copies thereof, relating directly or
indirectly to any Confidential Information of the other party, or otherwise
relating directly or indirectly to the business of the other party. All
Confidential Information obtained by either party shall remain confidential for
a period of [***] after the termination of this Agreement.

              (c)    The provisions of this Section 8.04 shall survive the
termination of this Agreement.

              (d)    The parties will agree in advance to the content and timing
of any Press Releases and SEC filings and also to the existance of this
contract.

       8.05   SURVIVAL OF MAINTENANCE OBLIGATIONS. The Supplier warrants for a
period of [***] after the expiration of the Agreement to provide Purchaser with
new software updates/versions.

       8.06   NOTICES. Any notice, request, instruction or other document to be
given under this Agreement by a party hereto to the other party shall be in
writing and shall be deemed to have been duly given on the date of service if
delivered personally, or on the third day after mailing if sent by certified
mail, postage prepaid, at the addresses set forth below, or to such other
address or person as a party may designate by written notice to the other:

       In the case of the Supplier:               In the case of the Purchaser:
       ---------------------------                ----------------------------
       Zaffire, Inc.                              UTStarcom, Inc.
       2630 Orchard Parkway                       1275 Harbor Bay Parkway
       San Jose, CA 95134, USA                    Alameda, CA 94502, USA
       Attn.: OEM Contract Administration         Attn.: Russell Boltwood
                                                    Corporate Counsel

       8.07   FORCE MAJEURE. The term "FORCE MAJEURE" shall be defined to
include fires or other casualties or accidents, acts of God, fire, flood,
typhoon, peril or accident on the sea, other severe weather conditions, strikes
or other labor disputes (whether lawful or not), war, revolution, riot or other
violence, lack of energy, or any other law, order, proclamation, regulation,
ordinance, demand or requirement of any governmental agency, or any other cause
beyond the control of a party.

              (a)    A party whose performance is prevented, restricted or
interfered with by reason of a Force Majeure condition shall be excused from
such performance to the extent of such


                                      -12-
<PAGE>

Force Majeure condition so long as such party provides the other party with
prompt written notice describing the Force Majeure condition and the causes of
nonperformance and immediately continues performance whenever and to the extent
such conditions and causes of nonperformance cease to exist. Without limitation,
obligations with respect to the payment of monies or other consideration shall
not be excused due to the occurrence of a Force Majeure condition.

              (b)    If, due to a Force Majeure condition, the scheduled time of
delivery or performance is or will be delayed for more than [***] after the
scheduled date thereof, the party not relying upon the Force Majeure condition
may terminate, without liability to the other party, any Purchase Order or
portion thereof covering the Products for which delivery has been delayed by the
occurrence of the Force Majeure condition.

       8.08   GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws, other than choice of law rules, of the State of
California and the parties hereby consent to the exclusive jurisdiction of the
courts of the State of California.

       8.09   BINDING EFFECT. This Agreement shall be binding on, and inure to
the benefit of the parties hereto and their respective representatives,
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either of the
parties hereto, whether by operation of law or otherwise, without the prior
written consent of the other party.

       8.10   EXHIBITS. All exhibits attached hereto are incorporated herein by
reference.

       8.11   SEVERABILITY. In the event that any provision contained herein
shall be held to be invalid, illegal or unenforceable for any reason, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.

       8.12   HEADINGS. The headings of the sections and articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof nor affect in any way the meaning or interpretation of this Agreement.

       8.13   REMEDIES CUMULATIVE. Except as herein expressly provided, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by any party of any other rights or the seeking of any other remedies
against any other party, as the case may be.

       8.14   DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing upon any breach or default under this Agreement shall
impair any such right, power or remedy nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or in any similar
breach or default thereafter occurring, nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character of any breach or default under this Agreement, or any waiver of any
provisions or conditions of this Agreement, shall be in writing and shall be
effective only to the extent specifically set forth in such writing.


                                      -13-
<PAGE>

       8.15   SURVIVAL OF TERMS. Termination of this Agreement for any reason
shall not release either party from any liabilities or obligations set forth in
this Agreement which (i) the parties have expressly agreed shall survive any
such termination, or (ii) remain to be performed or by their nature would be
intended to be applicable following any such termination.

       8.16   NONEXCLUSIVE MARKET AND PURCHASE RIGHTS. It is expressly
understood and agreed that this Agreement does not grant to the Supplier or the
Purchaser an exclusive right to purchase or sell products and shall not prevent
either party from developing relationships with other vendors or customers.

       8.17   SOFTWARE LICENSES. Whenever the Products described in this
Agreement shall include software, the Supplier hereby grants to the Purchaser a
nonexclusive license to market, demonstrate and distribute through its normal
channels of distribution such software, in object code only, to Customers of the
Purchaser. The Purchaser agrees to comply with the Supplier reasonable software
license agreements, and agrees to use reasonable efforts to protect the
Supplier's software, including using reasonable efforts to avoid allowing
Customers, individuals or employees: (i) to make any unauthorized copies of the
Supplies licensed software; (ii) to modify, disassemble or decompile any
software; (iii) to remove, obscure or alter any notice of patent, trademark,
copyright or trade name; or (iv) to authorize any person to do anything that the
Purchaser is prohibited from doing under this Agreement.

              (a)    The Purchaser acknowledges that no title or ownership of
the proprietary rights to any software is or will be transferred by virtue of
this Agreement. The Supplier and its licensors retain all title to and, except
as expressly licensed herein, all rights to any software contained in the
Products, all copies and derivative works thereof, related Documentation and
materials and all of their service marks, trademarks, trade names or any other
designations. Any invoices of the Supplier purporting to cover such items do not
convey title to, or patent rights, copyrights or any other proprietary interest
in, such items to the Purchaser.

              (b)    The Purchaser shall use reasonable efforts to protect the
Supplies rights under this section, but the Purchaser is not authorized and
shall not be required to instigate legal action on behalf of the Supplier or its
suppliers against any third parties for infringement. The Purchaser shall notify
the Supplier of any infringement of which it obtains actual knowledge.

       8.18   CHOICE OF LANGUAGE. The original of this Agreement has been
written in the English language, and the English language version of this
Agreement shall be considered controlling for all purposes.

       8.19   EXPORT CONTROL AND RELATED PROVISIONS. The Purchaser hereby agrees
that it shall not, directly or indirectly, re-export, resell or otherwise ship
or transfer any of the Products, related Documentation, any technology related
thereto, any direct products of such technology, or any products of which any of
the Products is a component (collectively, "CONTROLLED Products") in violation
of any prohibitions of the Export Administration Regulations of the United
States Department of Commerce, as amended from time to time (the "BXA
REGULATIONS"), whether such prohibitions are based on the type of product, the
country of destination, the end-user or end-use of


                                      -14-
<PAGE>

the product or otherwise. The Purchaser shall obtain appropriate licenses,
comply with applicable license exceptions and/or obtain appropriate written
assurances from purchasers or importers as may be necessary for its activities
with respect to the Controlled Products to comply with the BXA Regulations. The
Purchaser further agrees that it shall not, directly or indirectly, export,
re-export, resell or otherwise ship or transfer any Controlled Products to any
countries listed as "embargoed countries" in the Foreign Assets Control
Regulations of the United States Department of the Treasury, as amended from
time to time (the "FOREIGN ASSETS CONTROL REGULATIONS"), without compliance with
the Foreign Assets Control Regulations, including, without limitation, obtaining
any required prior written consent of the United States Office of Foreign Assets
Control.

              (a)    The Purchaser warrants that it has not been, and is not
currently, debarred or suspended from or otherwise prohibited or impaired from
exporting, re-exporting, receiving, purchasing, procuring or otherwise obtaining
any item, product, article, commodity or technical data regulated by any agency
of the government of the United States.

              (b)    In all of its activities hereunder or otherwise with
respect to Controlled Products, the Purchaser shall comply with (i) the
anti-boycott provisions of the BXA Regulations and of Section 999 of the United
States Internal Revenue Code and any regulations promulgated thereunder, as
amended from time to time (collectively, the "ANTI-BOYCOTT PROVISIONS"), and
(ii) the United States Foreign Corrupt Practices Act (the FCPA").

              (c)    The Purchaser's obligations to comply with the BXA
Regulations, Foreign Assets Control Regulations, Anti-boycott Provisions and
FCPA shall apply to the extent that (i) such laws, rules and regulations are
applicable to the Purchaser, or (ii) the Purchaser's noncompliance would cause
the Supplier to be in violation of such laws, rules or regulations.

                           [SIGNATURE PAGE TO FOLLOW]



                                      -15-
<PAGE>


       IN WITNESS WHEREOF, the parties have been caused this Agreement to be
signed and delivered by its duly authorized officer or representative as of the
Effective Date.

SUPPLIER:                                     PURCHASER:

Zaffire, Inc.                                 UTStarcom, Inc.



By: /s/ Signature Illegible                   By: /s/ Signature Illegible

Title: VICE PRESIDENT                         Title: EVP C00 China Operation

Aug. 25, 2000                                 Aug. 10, 2000



<PAGE>


                                    EXHIBIT 1

                             DESCRIPTION OF PRODUCTS

       The Products relevant to this Agreement include the following list which
can be restated upon mutual agreement of both parties in an Amendment when new
products become available.

       [***]

       A detailed parts list of the [***], accurate as of the Effective Date, is
included on the following two pages for reference.


<PAGE>

                      DETAILED DESCRIPTION OF PRODUCTS (1)

       Release 1.2 Model Numbers

       [***]



<PAGE>



                      DETAILED DESCRIPTION OF PRODUCTS (2)

       [***]



<PAGE>



                                    EXHIBIT 2

                   INTERNATIONAL PRICE LIST (IN U.S. DOLLARS)

       1.     Minimum Sales Volume. Reseller agrees to achieve Minimum Sales net
to Zaffire of [***] during the first [***] period of the Term beginning on the
Agreement date. The Minimum Sales volume for the second and each subsequent
[***]period will be mutually agreed upon between Reseller and Zaffire within
[***] of the end of the previous [***] period. Sales are calculated based upon
the Purchase Price of Zaffire Products shipped to Reseller during the period.

       2.     DISCOUNT SCHEDULE. The following percentage discounts from
Zaffire's List Prices will apply for Zaffire Products shipped to Reseller during
the [***] period beginning on the Agreement date, and for each subsequent [***]
period during the Term of the Agreement.

              (a)    [***] discount will be applied for the [***] PO regarding
the TDS (Test and Demo System)

              (b)    [***] discount will be applied for the [***] PO

              (c)    Zaffire and UTStarcom will review the prices & discount
regularly to meet the market and competition requirement

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
                                             ZAFFIRE INTERNATIONAL PRICE LIST
- ---------------------------------------------------------------------------------------------------------------------------
   PART NUMBER                                     PART DESCRIPTION                                       LIST VALUE
- ------------------ --------------------------------------------------------------------------------- ----------------------
<S>                <C>                                                                              <C>
[***]
</TABLE>

<PAGE>


                                    EXHIBIT 3

                           INITIAL FORECASTED VOLUMES

         Forecasts within [***]:

         [***]



<PAGE>


                                    EXHIBIT 4

                                  TIME SCHEDULE

         1.       Submit Purchase Orders for TDS and Support System        [***]

         [***]

         2.       Shipment of the TDS and Support System                   [***]

         3.       Training for UTStarcom, Inc. Sales/Support                tbd

         4.       Install TDS                                               tbd


<PAGE>



                                    EXHIBIT 5

                              ZAFFIRE SERVICE GUIDE

Introduction

         This Exhibit outlines the service and support requirements for the
Zaffire International Service and Support Program. Specifically, this document
outlines Partner requirements with respect to providing maintenance and support
services including technical support, hardware replacement and software upgrades
to its End-Users. For purposes of this document, defined terms are set forth
below.

Definitions

         "Partner" - shall mean any party who purchases Zaffire products for
resale or sublicense to End-Users. Partners to include but not be limited to:
Systems Integrators, VARs, OEM's and Distributors.

         "End-User" - shall mean any party who purchases Zaffire products from
Partner for their own internal use and not for redistribution.

         "TAC" - shall mean each party's telephone technical support center that
provides support in the configuration, operation and diagnosis of Zaffire
Products.

         "1st - Level Support" - shall mean Partner's 24x7 telephone technical
support to directly assist End-Users in the configuration, operation and
diagnosis of Zaffire products.

         "2nd - Level Support" - shall mean the Partner's second level of
support including the engineers in the Partners support organization
certified on Zaffire products. These individuals will perform advanced
troubleshooting and diagnosis of the End-User's issues as well as on-site
visits when necessary.

         "3rd - Level Support" - shall mean Zaffire TAC Level 3 Engineering
department which is staffed with individuals with many years of industry
experience. These engineers are capable of the highest level of support. This
department has direct access to Zaffire Development Engineering and can solve
extremely difficult or unusual problems.

<PAGE>


Commitments and Deliverables

         The following table sets the agreed upon Zaffire and Partner
commitments for the Partners Service and Support Program.

<TABLE>
<CAPTION>
- ------------------------------------------ --------------------------------------- ----------------------------------------
Support Service                            Zaffire Commitments                     Partner Commitments
- ------------------------------------------ --------------------------------------- ----------------------------------------
<S>                                        <C>                                     <C>
[***]
</TABLE>



<PAGE>

Zaffire Technical Assistance Center (TAC)

         The Zaffire TAC is the focal point of Zaffire support services. Network
Support Engineers (NSEs), who possess detailed knowledge of the complete product
family and all aspects of [***] staff our global TAC located in San Jose,
California. In addition to the TAC personnel, Zaffire also has field-based
Network Support Engineers and Systems Engineers available to assist with pre-and
post-sales issues.

The TAC consists of three groups:

TIER ONE SUPPORT GROUP

         The Tier One Support Group is the first point of contact into Zaffire's
TAC. These individuals take the first call, and ensure that the proper
information is entered into the Call Tracking System (CTS"). In addition, the
FLS staff assists the Partner with simple configuration and problem resolution.

TIER TWO SUPPORT GROUP

         Once a case has been entered into the CTS, a Zaffire NSE handles the
case. The NSEs are grouped according to product type and it is their job to work
a case to closure or escalate to the Tier Three Support Group. This strong
teaming aspect within the TAC, and within the product groups, develops
additional experience and leadership.

         The NSEs have access to labs with Zaffire equipment, as well as
equipment from other vendors, to assist in recreating whatever problem the
Partner may be experiencing. In addition to the equipment in the labs, the
engineers have access to the most modern analysis tools.

TIER THREE SUPPORT GROUP

         This team is the escalation point from the Tier Two Support Group to
ensure that problems are solved in an expeditious time frame and Partner
satisfaction is maintained.

         This is a group of senior Network Analysts, Program Managers and
Development Engineers dedicated to working on the critical network problems.
This organization is responsible for ensuring all available resources are
applied to the problem so that a resolution can be reached as quickly as
possible for all escalated cases.

FIELD NETWORK SUPPORT ENGINEERING

         In the event that on-site support is required, Zaffire has post-sales
field resources available to assist Partnersfield resources in restoring an
End-User's network to an operational state. These network engineering resources
are deployed by Zaffire's support management.

         4.1      TAC Process


                                       -2-
<PAGE>

                  Partner and End-User work on case.
                  Case resolution requires participation by Zaffire's TAC.
                  Partner accesses the TAC via methods listed above. A case is
                  opened in Zaffire's Call Tracking System (CTS). The call is
                  assigned a customer case tracking number The Partner is
                  advised of the case tracking number for their query. A NSE is
                  assigned to the case and the priority set.
                  The NSE, working with the Partner, is responsible for the case
                  until it is closed.

         4.2      Accessing the TAC

         Zaffire offers multiple access methods to reach the 24x7 TAC:

                  7x24x365 telephone at +1 408 894-7580
                  Email to SUPPORT@ZAFFIRE.COM
                  Fax to +1 408 894-7200

         4.3      Site ID

         The site ID is a very important piece of the support model. All
Partners under a support services plan will have a site ID that must be used
when calling the TAC. This will ensure the following occurs:

         All information for a particular Partner is consistent in Zaffire
         database. Partner will see cases that are opened to Partners site ID on
         the TACtics Online system. Proper escalation and notification of
         problems can occur to proper account management. Any network drawings
         or site specific information are linked and available at time of call.
         Partner receives the proper level of service.

         If the site ID is unknown, an email should be sent to
support@zaffire.com that provides detailed company information and the Zaffire
Service group will provide the correct site ID.

         4.4      Case Priority Matrix

         Cases opened in the TAC are given a severity level agreed upon between
the NSE and the Partner as follows:

<TABLE>
<CAPTION>
- ------------------- --------------------------------------------------- ---------------------------------------------------
SEVERITY LEVEL      PRODUCTION NETWORK                                  COMMITMENT
- ------------------- --------------------------------------------------- ---------------------------------------------------
<S>                <C>                                                 <C>
Critical                     [***]                                               [***]
- ------------------- --------------------------------------------------- ---------------------------------------------------
High                         [***]                                               [***]
- ------------------- --------------------------------------------------- ---------------------------------------------------
Medium                       [***]                                               [***]
- ------------------- --------------------------------------------------- ---------------------------------------------------
Low                          [***]                                               [***]
- ------------------- --------------------------------------------------- ---------------------------------------------------
</TABLE>


                                      -3-

<PAGE>

         Based on the level of severity of the case (i.e., critical, high,
medium, low), the appropriate NSE is assigned to the case.

         For problems of a critical and/or high nature, automatic notifications
are sent out to notify appropriate Zaffire management (both field and internal)
of problem severity and status.

HARDWARE SUPPORT

         The following describes hardware replacement via a Return Material
Authorization (RMA). The process for submitting an RMA is described in Section
9.

         5.1      Advance Replacement

         Parts (serial number based) covered under this option will be shipped
out for advance replacement once the RMA is received and issued by the RMA
department, Monday through Friday. The part can be shipped to either the Partner
or the End-User and this be will determined at time of the RMA. Zaffire may, at
[***] option, issue a new or reconditioned, good-as-new part.

         It is the responsibility of the Partner to retrieve the defective part
and return the same to Zaffire within [***] of the receipt of the replacement
part. Equipment not received by Zaffire within [***] will be invoiced to the
Partner at [***].

         5.2      Return Material Authorization (RMA) Process

                  1. Partner calls TAC and establishes a Customer Case number.
                  2. TAC will assist where necessary in initial fault
                     information.
                  3. TAC/Partner will determine what part needs to be replaced
                     and obtain serial number.
                  4. Case is transferred to the RMA department.
                  5. RMA department will check for hardware support option and
                     issue Partner an RMA number.

         Equipment returned without a valid RMA number will be rejected by
Zaffire's receiving department.

         5.3      Return of Defective Product

         Defective product must be returned to Zaffire within [***] of receipt
of the advance replacement. Partner will be billed the full value of the product
if not returned within [***].

         The product must be properly packaged, with the RMA number clearly
marked on the outside of the box, and shipped prepaid to the following address:


                                      -4-
<PAGE>

         Zaffire, Inc.
         2630 Orchard Parkway
         San Jose, CA 95134
         United States of America

         Equipment returned without a valid RMA number will be rejected by
Zaffire's receiving department.

         Telephone: +1 408 894-7580

         Facsimile: +1 408 894-7200

         Only the affected part needs to be returned.

         Zaffire product repairs in process or en route prior to the inception
of this support plan shall be repaired according to the terms and conditions in
place at the time the Zaffire product was submitted for repair.

         Per customs regulations, Zaffire is required to list fair market value
(i.e. what Partner originally paid for the product) on the commercial invoice
for customs purposes only. Zaffire cannot alter these prices. All duties and
taxes are the sole responsibility of [***]. [***]is responsible for registering
the defective product with their country prior to exporting in order to apply
for duty drawback after the product is re-imported. If special verbiage or
documentation is required to facilitate entry of a Zaffire product into a
particular country, it is [***] responsibility to provide such verbiage or
documentation prior to the shipment of a Zaffire product. Zaffire reserves the
right to refuse special requests if it is felt to be in violation of standard
customs regulations. Pricing

         Zaffire will provide support services [***] for the [***] period of
this agreement. At the end of this [***] period, support services pricing will
be jointly re-evaluated between UTStarcom and Zaffire.

         The support services fee must be included as a separate item on all
Partner purchase orders. Orders that do not include support services fees will
be rejected.

         Additional Pricing for Support Services Rendered to Partner by Zaffire
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------------------------------------------------------
ADDITIONAL ZAFFIRE SERVICE                                     PRICE AS SPECIFIED
- -------------------------------------------------------------- ------------------------------------------------------------
<S>                                                            <C>
On-site assistance for non-Zaffire problem:                    [***]
- -------------------------------------------------------------- ------------------------------------------------------------
Assistance with modem configuration or delay caused by         [***]
improper modem configuration [***] delay maximum before
charge is applied:
- -------------------------------------------------------------- ------------------------------------------------------------
</TABLE>

End-of-life Support

                                      -5-
<PAGE>

         Partner will be notified when Zaffire announces end-of-life on a
product. At that time, Partner will be authorized to procure Zaffire product for
a last-buy to satisfy the requirements of their End-Users.

         Zaffire will support a particular product for a period of [***] after
announced end-of-life. The support will only include critical bug fixes as well
as hardware (or functionally equivalent hardware) RMA support during this time
period.


                                      -6-
<PAGE>

                                    EXHIBIT 6

                                  CUSTOMIZATION

       Both parties should make sure that the product delivered with all
modification is done no later than [***] after the signature date of this
agreement.

       The Zaffire system will be modified to reflect UTStarcom, Inc.
requirements as listed below.

CUSTOMIZED HARDWARE DELIVERABLES:

       The following is an overview of the customization requirement to be done
by Zaffire on every product and shipped to UTStarcom, Inc.:

       [***]

CUSTOMIZED SOFTWARE DELIVERABLES:

       The following is an overview of the customization requirement to be done
by Zaffire on every software or management product and shipped to UTStarcom,
Inc.:

       [***]

CUSTOMIZATION SCHEDULE:

         "[***] Drawings (including Modules)
         Date:    TBD Send Zaffire Mechanical and label drawings to UTStarcom,
                  Inc.
         Date:    TBD UTStarcom, Inc. returns drawings to Zaffire with [***]
                  specification.

         "[***] User Manual
         Date:    TBD Send Zaffire User Manual in Word/ASCII format to
                  UTStarcom, Inc.
         Date:    TBD UTStarcom, Inc. returns finished UTStarcom, Inc. User
                  Manual with production specifications.


<PAGE>



                                    EXHIBIT 7

                 RETURN MATERIAL AUTHORIZATION (RMA) PROCEDURES

       1.     The Purchaser fills in a RMA problem form (see attachment below)
              which describes the particular problem and the serial number of
              the Product. The form is faxed or e-mailed to the contact person
              (for RMA) at the Supplier.

       2.     The Supplier responds to the RMA request providing an RMA number
              (based on need).

       3.     The Product is shipped to the Suppliers facility (San Jose,
              California) with the RMA problem form so that the Supplier can
              quickly trace out the related problem for each Product and
              test/verify the problem.

       4.     The Supplier uses an RMA form (see attachment below) as a travel
              form, which travels with the Product through the various entities
              in the production/RMA/QA loop for processing. Each party fills in
              additional details until the form is cleared (all details are
              complete) and signed.

       5.     The Product is fixed during its travel and is then shipped with
              the RMA form back to the Purchaser.


<PAGE>

                  PROBLEM REPORT FORM / UTSTARCOM, INC.-REPORT

1.  Problem Number:__________________   2.  Status:   OPEN    CLOSED

3.  RMA Requested:    YES      NO

4.       Serial#:____________________   5.  Date Sent:__________________________

6.       Sent By:____________________   7.  Received Date:______________________

Short Summary:__________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________


Test Details
Configuration:__________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________


Zaffire Contact Person:____________________
RMA No:_________________ (Only if RMA)         Date Promised:___________________
Responsible Person__________________________   Phone#:__________________________
Results:________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________


<PAGE>

                                     ZAFFIRE

                        RMA REPORT FORM - UTSTARCOM, INC.

RMA#:_________________________            SERIAL#:______________________________

Reason specified by
Customer:_______________________________________________________________________

Received Date:_____________________       Due Date:________________

VERIFICATION DETAILS: Verified on: ________________        By: _________________

Result:    NPF      VERIFIED    OTHER    Type: PRODUCTION    COMPONENT DESIGN

Verification Method:____________________________________________________________

CAUSE IDENTIFICATION: Problem Identified on: ________________________ By: ______

Cause:__________________________________________________________________________

________________________________________________________________________________

RESOLUTION DETAILS: Resolution Provided on:_________________      By:___________

Method:_________________________________________________________________________

________________________________________________________________________________

Final Test: PASS FAIL (Perform Validation Test + Standard Test) Date: __________

PREVENTION PROCEDURE: Advised on: ____________________    By: __________________

Method:_________________________________________________________________________

________________________________________________________________________________

LABELING INFORMATION: Signed on: ______________________ By: ____________________

Main Board Ser#: _________Ver: ____ Management Assembly Ser#: ________ Ver: ____

Return Date: ____________________ By: _________________________

________________________________________________________________________________
VP OPERATIONS                       RM PROGRAM MANAGER

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>a2030832zex-10_2.txt
<DESCRIPTION>EXHIBIT 10.2
<TEXT>

<PAGE>
                                                                   EXHIBIT 10.2


                              DEVELOPMENT AGREEMENT

         This development agreement (the "Agreement") effective as of March 1,
2000 (the "Effective Date") is made and entered into by and between:

         UTStarcom Inc., a Delaware corporation having its principal place of
business at 1275 Harbor Bay Parkway, Suit 100, Alameda, California 94502, U.S.A.
(hereinafter called "UTS"), and Matsushita Communication Industrial Co., Ltd., a
Japanese corporation having its place of business at 3-1 Tsunashima-higashi
4-chome, Kohoku-ku, Yokohama 223-8639, Japan, acting through its Communication
Systems Division (hereinafter called "MCI")

                                   WITNESSETH

         Whereas, both MCI and UTS are engaged in the sale and distribution
of telephone systems;

         Whereas, UTS is engaged in the development and manufacture of the next
generation PBX system called Internet Protocol Telephony Switch ("IPTS"); and

         Whereas, the parties hereto desire that UTS perform, and UTS is willing
to undertake, development of the Product (as hereinafter defined) for commercial
resale.

         Now, therefore, in consideration of the mutual premises and covenants
set forth herein, the parties hereto agree as follows:

         1.       DEFINITIONS

                  1.1 "Affiliate" shall mean any company or other entity
controlling, controlled by, or under common control with either MCI or UTS. As
used in this provision, "control" means the direct or indirect ownership or
control of the majority of the outstanding shares representing the right to vote
for election of directors or other managing authority or ownership interest of a
company or other entity.

                  1.2 "Deliverables" shall mean the samples, prototypes, source
code, test report, Product Documentation (as hereinafter defined), and all other
materials, and any part or copy of the foregoing, to be provided by UTS to MCI
in any form, method or media, as set forth in the Milestone Schedule (as
hereinafter defined).

                  1.3 "Intellectual Property Rights" shall mean any and all
rights under any patents, utility models, designs, copyrights, moral rights,
tradedress, trademarks, tradenames, trade secrets, know-how, mask works,
confidential information and any other intellectual property or proprietary

rights owned by either of the parties hereto.

                  1.4 "Milestone Schedule" shall mean the schedule attached
hereto as Appendix A setting forth the milestones for the development
contemplated herein, including, but not limited to descriptions of all
Development Services (as hereinafter defined), the scheduled completion dates
thereof, descriptions of each Deliverable and delivery dates therefor.

<PAGE>

                  1.5 "Product" shall mean the Internet Protocol Telephony
Switch called [***] that satisfies the Requirement Specification (as defined
below) in all respects.

                  1.6 "Product Documentation" shall mean any and all material
that describes the design, functions, operation or use of the Deliverables and
Product, including, but not limited to the specifications, flow charts,
schematics, and other information and data that is reasonably necessary for the
use and understanding of the Product by MCI as contemplated by MCI, and mutually
agreed to by the parties hereto.

                  1.7 "Requirement Specification" shall mean the design,
quality, reliability, specifications, functions, features, operations, operation
environment and/or all other requirements of the Product and Deliverables as
mutually agreed to by the parties hereto as set forth in Appendix B, and as may
be amended from time to time pursuant to Section 3.

                  1.8 "Business Regulations" shall mean MCI's business
regulations on the new product development, which is attached hereto as Appendix
C.

                  1.9 "Development Plan" shall mean the structure, staffing,
skill set, location and quality plan (including staged test case specification
and system test operation planning), that has been mutually agreed to by the
parties hereto, which is attached hereto as Appendix D.

                  1.10 "Materials" shall mean the software provided by MCI to
UTS for use in developing, operating or testing the Product.

         2.       DEVELOPMENT

                  2.1 For the purpose of the development of the Products, and
subject to the provision of Materials by MCI pursuant to the Milestone Schedule,
UTS shall perform the following services (the "Development Services"), for the
consideration set forth in the Payment Schedule attached as Appendix E:

                           (a)      to develop Deliverables conforming with
the applicable Requirement Specification, and delivery, testing, evaluation
and correction of the Deliverables in accordance with the Milestone Schedule,
Business Regulations, Development Plan, and Section 4 hereof; and

                           (b)      to test and evaluate the Deliverables in
accordance with the standard practices of the industry (including standard
diagnostic practices), to the maximum extent reasonably possible to insure
that the Deliverables conform to the Requirement Specification, Business
Regulations, and Development Plan without exhibiting errors, under a wide
variety of testing conditions that reasonably reflect the actual environments
in which the Product is likely to be used.

                           (c)      to facilitate timeliness and cooperation
with respect to Product Development, providing MCI with [***] written reports
specifying the progress achieved in the development of the Deliverables in
each [***] period within [***] after such [***] period, which report shall
include, without limitation, information regarding (i) the Development
Services and/or delivery of each Deliverable completed or remaining to be
completed at the end of such calendar [***], (ii) actual or potential delay
in meeting the Milestone Schedule with the reason for any such


                                      -2-
<PAGE>

delay, measures to be taken to resolve the delay, (iii) an estimated date of
completion of each Development Service and/or delivery of each Deliverable,
and (iv) information that would assist MCI in tracing or determining the
cause or source of technical problems in the Deliverables.

                  2.2 The parties agree to discuss and determine before [***]
the subset of the MCI Business Requirement for Product Reliability Durability as
Business Regulation that apply to the Product, and to which UTS shall comply in
the development, testing and evaluation of the Product.

                  2.3 In the event UTS desires to incorporate into any third
party software into the Deliverables or otherwise use any third party software
in connection with the Deliverables, UTS shall obtain the prior written approval
of MCI. MCI shall provide such approval within [***] of the request for approval
made by UTS. In any case, the absence of such approval or disapproval shall not
unreasonably withhold progress of Product development Notwithstanding the
provisions of this Section 2.3, the third party software listed in Appendix F
has, as of the Effective Date of this Development Agreement, been already
approved by MCI for use by UTS for the Deliverables.

                  2.4 MCI shall provide to UTS Materials as described in
Appendix H. Materials provided hereunder, the software approved hereunder, and
the software and hardware reimbursed hereunder is only for use for the
Deliverables or the Product to be supplied to MCI, and no other use is permitted
or licensed hereunder.

         3.       MODIFICATION OF DEVELOPMENT SERVICES

                  3.1 Each party recognizes and acknowledges that changes or
modifications to the Development Services, Milestone Schedule, Requirement
Specification, Business Regulations, Development Plan, and/or any other
activities hereunder (a "Change") may be necessary. In the event that either MCI
or UTS determines that a Change is necessary, the determining party shall issue
a written order specifying such Change (a "Change Order"). UTS and MCI shall
negotiate in good faith with respect to each Change Order (including without
limitation completion dates and additional or reduced costs resulting from such
Change Order), and, upon agreeing to the Change Order, amend this Agreement to
reflect such agreed upon Change Order.

                  3.2 If the Change Order is rejected by the receiving party,
both UTS and MCI shall negotiate in good faith for a period of no longer than
[***] immediately following the determining party's receipt of the written
rejection of the Change Order, with respect to the proposed Change Order
(including without limitation completion dates and additional or reduced costs
resulting from such Change Order). If the parties fail to reach agreement on the
Change Order, the disagreement shall be submitted to an executive panel
consisting of 2 senior executives of MCI, and 2 senior executives of UTS for
further negotiation, and, upon agreeing to the Change Order, UTS and MCI shall
amend this Agreement to reflect such agreed upon Change Order.

                  3.3 If the disagreement cannot be resolved by the executive
panel within [***] of the date of the written rejection of the proposed Change
Order, MCI determines whether the relevant Change Order ("Disputed Change
Order") should be made or not, and UTS shall provide the Development Services
according to such MCI's determination. UTS shall, as applicable, (a) notify MCI
in writing of any additional or reduced costs and revised completion dates for
the Development


                                      -3-
<PAGE>

Services and/or other issues it believes in good faith should reasonably be
reflected in the Disputed Change Order; and (b) maintain itemized records of
the times, labor, expense and other cots factors it spends relating to the
Development Services performed under the Disputed Change Order. The parties
shall continue good faith negotiation with respect to appropriate additional
or reduced costs under the Disputed Change Order. If no agreement is reached
between the parties hereto with respect to the Disputed Change Order within
[***] after the date on which the Disputed Change Order is issued, the
parties may resort to the dispute resolution mechanism set forth in Section
17 herein.

         4.       TESTING AND ACCEPTANCE

                  4.1 UTS shall deliver to MCI an initial proposal of the
acceptance criteria of each of the Deliverables at least [***] prior to the
relevant Deliverables, and MCI shall then respond in writing to the proposed
acceptance criteria within [***] of receipt of UTS' initial acceptance criteria
proposal. MCI may, upon negotiation in good faith with UTS, define acceptance
criteria ("Acceptance Criteria").

                  4.2 UTS shall deliver to MCI each of the Deliverables in
accordance with the Milestone Schedule and Development Plan, such that testing
and acceptance by MCI may be completed on a timely basis consistent with the
Milestone Schedule and Development Plan.

                  4.3 MCI shall test and evaluate each Deliverable delivered by
UTS in accordance with the applicable Acceptance Criteria, and issue to UTS a
notice of acceptance or rejection of such Deliverable within [***] after MCI's
receipt of such Deliverable.

                  4.4 If MCI determines that any Deliverable (or any portion
thereof) fails to satisfy the applicable Acceptance Criteria (a
"Non-Conformity"), MCI shall provide UTS with a written notice of such
Non-Conformity (a "Non-Conformity Notice"), identifying such Non-Conformity in
detail reasonably sufficient to enable UTS to duplicate or observe such
Non-Conformity.

                  4.5 Upon receiving a Non-Conformity Notice, UTS shall provide
to MCI a report describing the cause of such Non-Conformity and the correction
thereto within [***] after the date of receipt of the Non-Conformity Notice, and
shall correct the Non-Conformity and deliver the corrected Deliverable to MCI
within [***] after the date of receipt of the Non-Conformity Notice. Such notice
shall be acceptable in either written or e-mail form.

                  4.6 If, after receipt of a corrected Deliverable under Section
4.5, MCI determines that the Non-Conformity reported by MCI in the applicable
Non-Conformity Notice has not been corrected, or discovers other
Non-Conformities in such Deliverable, MCI may, at its option:

                           (a)      reject such corrected Deliverables, and
repeat the procedure described in Sections 4.3, 4.4, 4.5 and 4.6 of this
Agreement, in which case UTS will deliver a revised Deliverable to MCI for
evaluation under Section 4.3 no later than [***]after the date of receipt of
such rejection by UTS; or

                           (b)      correct such Non-Conformity itself or
have its designee correct such Non-Conformity, charging to UTS or deducting
from any payment due to the UTS an amount equal to the reasonable cost of
correcting such Non-Conformity.


                                      -4-
<PAGE>

         5.       OWNERSHIP

                  5.1 All inventions, designs, works of authorship and other
works made or created by either party, whether or not incorporated into the
Requirement Specification, and all associated Intellectual Property Rights, both
before and after the Effective Date of this Agreement, and whether or not
pertaining to the activities contemplated in this Agreement, shall remain the
exclusive property of the party making or creating the same. Those inventions,
designs, works of authorship and other works made or created by the parties
before the Effective Date of this Agreement are memorialized in Appendix G to
this Agreement ("Prior Intellectual Property Inventory"), and such appendix is
hereby incorporated into this Agreement by reference.

                  5.2 All inventions, designs, works of authorship and other
works made or created jointly by the parties pertaining to the activities
contemplated in this Agreement ("Joint Property"), whether or not incorporated
into the Requirement Specification, and all associated Intellectual Property
Rights, shall be jointly owned by the parties hereto. Any application for the
Intellectual Property Right of Joint Property, and any associated costs for such
application shall be mutually agreed upon by the parties in the form of a
separate written agreement in advance of attempt of the application. Each party
hereto and its Affiliate may use such Joint Property and all associated
Intellectual Property Rights for the purpose of its own use, and each party may
assign and transfer such Joint Property and all associated Intellectual Property
Rights to its Affiliate, without the consent of the other party and without any
compensation or accounting to the other party, provided that such assignment and
transfer shall be made subject to this Section 5.2. The having-used, license,
and assignment of Joint Property to any third party other than its Affiliate
shall be the subject of a separate licensing agreement that is mutually agreed
to by the parties.

         6.       SALES AND PURCHASE OF THE PRODUCT

                  6.1 Subject to MCI's written acceptance of all the
Deliverables, UTS agrees to supply to MCI (and/or its Affiliate) the Product for
at least [***], the detailed terms and conditions of which shall be specified in
a separate agreement (the "Purchase Agreement") to be negotiated by UTS and MCI
(and/or its Affiliate) in good faith. Such Purchase Agreement is expected to
include terms and conditions including, without limitation, provisions regarding
the following issues:

                           (a)      ordering, lead time, shipping, delivery,
payment, and pricing (including royalties, if any, exchange fluctuation);

                           (b)      warranties concerning quality,
performance, product liability, Intellectual Property Rights, and the
remedies and indemnification related thereto;

                           (c)      maintenance and support of the Products;

                           (d)      notification and other procedure in the
event of the proposed discontinuance of the manufacture or supply of the
Product;

                           (e)      the parties negotiate in good faith to
reach agreement on a marketing agreement by no later than [***]; and


                                      -5-
<PAGE>

                           (f)      when UTS discontinues the manufacture of
the Products, UTS shall, at the option of MCI (and/or its Affiliate), grant
to MCI (and/or its Affiliate) a [***] license under all Intellectual Property
Rights of the UTS to manufacture or have manufactured the Product and to use,
offer for sale, sell, distribute, import, lease, transfer, service, support,
maintain and/or otherwise dispose of the Product. The parties agree to
discuss and document possible royalty payment, if any, by MCI to UTS under
the abovementioned circumstances.

                  6.2 Subject to the prior written approval of MCI, UTS may sell
the Product to a third party, provided that such sale is at the UTS's sole risk
and peril, that such MCI's approval shall not mean any license, express, implied
or by estoppel, under any Intellectual Property Rights of MCI or its Affiliate,
and that MCI MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH
RESPECT TO SUCH SALE OF THE PRODUCT, INCLUDING, BUT NOT LIMITED TO,
MERCHANTABILITY, NON-INFRINGEMENT, PRODUCT LIABILITY, OR FITNESS FOR A
PARTICULAR PURPOSE.

         7.       LICENSE AND TECHNICAL ASSISTANCE

                  7.1 The parties agree to discuss an arrangement under which
UTS grants to MCI a license under its Intellectual Property Rights and provide
technical services, including the modification of the Products design, for the
purpose of the manufacture of the IPTS by MCI or its Affiliate. The parties
understand and agree that this Section 7.1 is intended solely as an expression
of the parties' potential intent to enter into a future agreement and such
future agreement, if agreed, shall be reduced to a written contract between the
parties. Neither party is obligated by virtue of this Section 7.1 to enter into
an agreement.

         8.       FUTURE IPTS DEVELOPMENT

                  8.1 The parties agree to discuss an arrangement under which
UTS enhances the Products and/or develops a new IPTS. The parties understand and
agree that this Section 8.1 is intended solely as an expression of the parties'
potential intent to enter into a future agreement and such future agreement, if
agreed, shall be reduced to a written contract between the parties. Neither
party is obligated by virtue of this Section 8.1 to enter into an agreement.

         9.       MCI'S PAYMENT

                  9.1 In consideration for the Development Services performed by
UTS hereunder, MCI shall pay UTS in United States dollars a total amount of
[***], in accordance with the payment schedule set forth in Appendix E.

                  9.2 Payments made in accordance with Section 9.1 are not
refundable, as they represent payments for completed Deliverables.

                  9.3 MCI shall also reimburse UTS for all software and hardware
purchased by UTS for the Development Services (including software and hardware
purchased prior to the effective date of this Agreement, and which was
authorized by MCI for purchase), where in the reasonable judgment of UTS, such
software and/or hardware is used by UTS primarily for the Development Services
to be provided under this Agreement and provided that the purchase of such


                                      -6-
<PAGE>

software and hardware is communicated by UTS to MCI in advance and approved
by MCI. A partial list of software and hardware purchased through [***] and
approved by MCI is entitled Prior Expenses and is attached as Appendix I. MCI
shall provide such reimbursement to UTS in United States dollars, and within
[***] of receipt of any invoice from UTS for reimbursement.

                  9.4 UTS shall provide [***] Product samples to MCI at no
charge; however, MCI shall pay UTS for any chargeable Product samples provided
by UTS. In keeping with the Deliverables identified in Appendix A, MCI shall
provide details of the configurations of the approximately [***] to be supplied
by UTS to MCI as part of this Section by [***]. These details shall include a
breakdown in terms of the number and types of daughter cards to be provided with
a motherboard so as to constitute a unit. For all chargeable Product samples
provided by UTS, MCI shall provide payment to UTS in United States dollars
according to the following schedule: [***] of the cost of the total number of
units covered by this Section by [***]; [***] of the cost of the total number of
units covered by this contract by [***]; and the balance of the cost of the
total number of units covered by this section, within [***] of receipt of any
invoice for the said units from UTS for payment. The cost of a unit may be
approximated from the costs of the boards and chassis that make up the unit;
these costs are provided in Appendix D, as part of the Development Plan.

                  9.5 Unless otherwise expressly provided in this Agreement,
[***] shall be solely liable for any transportation, services, equipment,
utilities, facilities, and other costs incurred in connection with UTS's
performance of this Agreement.

                  9.6 [***] shall be responsible for paying all taxes and duties
imposed by any governmental body or authority in connection with the execution
and performance of this Agreement.

                  9.7 If any amount is required by any governmental body or
authority to be deducted from any MCI payment to UTS, MCI shall deduct such
amount from the payment to UTS and send to UTS a copy of any receipt issued to
MCI by such governmental body or authority documenting such deducted amount (a
"Tax Receipt").

         10.      MCI'S REPRESENTATIONS AND WARRANTIES

         MCI represents and warrants as follows:

                  10.1 MCI has the corporate power and authority to execute and
deliver this Agreement, and perform its obligations hereunder. The execution,
delivery and performance of this Agreement has been duly and validly authorized
by MCI, and upon execution and delivery by UTS, this Agreement constitutes the
valid and binding agreement of MCI enforceable against it in accordance with its
terms.

                  10.2 Neither MCI's execution and delivery of this Agreement
nor its performance hereunder will result in a breach of any agreement or
contract to which MCI is a party. MCI will not enter into any agreement or take
any action that would restrict its performance under this Agreement.

                  10.3 MCI is not relying on any representation, warranties or
agreements not expressly set forth herein in entering into this Agreement.


                                      -7-
<PAGE>

         11.      UTS'S REPRESENTATIONS AND WARRANTIES

         UTS represents and warrants as follows:

                  11.1 UTS has the corporate power and authority to execute and
deliver this Agreement, and perform its obligations hereunder. UTS has procured
all licenses and has received all governmental approvals and permits necessary
for UTS to enter into this Agreement and perform its obligations hereunder. The
execution, delivery and performance of this Agreement has been duly and validly
authorized by UTS, and upon execution and delivery by MCI, this Agreement
constitutes the valid and binding agreement of UTS enforceable against it in
accordance with its terms.

                  11.2 Neither UTS's execution and delivery of this Agreement
nor its performance hereunder will result in a breach of any agreement or
contract to which UTS is a party. UTS will not enter into any agreement or take
any action that would restrict its performance under this Agreement.

                  11.3 UTS has not and shall not assign, transfer, convey or
otherwise encumber any right, title, or interest in or to any Deliverables or
any Intellectual Property Rights therein.

                  11.4 Except for the case described Section 5.2 hereof, UTS is
and shall be the sole and exclusive owner of all the Deliverables (and all
Intellectual Property Rights therein) and no other person or entity has or shall
have any claim of ownership with respect to any Deliverables (or any
Intellectual Property Rights therein) whatsoever.

                  11.5 No person, entity or association has made or threatened
to make, any demand or claim asserting that the Deliverables as such exist as of
the date of UTS's signature hereof, infringes any rights under any Intellectual
Property Right. UTS has not and will not misappropriate or intentionally
infringe any Intellectual Property Right of MCI, and Affiliate or of any third
party in the course of the performing any obligation of UTS hereunder and will
not incorporate into the Deliverables any material incorporating Intellectual
Property Rights owned by any third party, without the prior written agreement of
MCI.

                  11.6 UTS is not relying on any representation, warranties or
agreements not expressly set forth herein in entering into this Agreement.

                  11.7     For the period of [***] after MCI's acceptance of
all the Deliverables, UTS warrants that

                           (a)      The Deliverables shall be free from
defect in materials and workmanship and conform to the Requirement
Specification and Product Documentation,

                           (b)      The Deliverables shall perform and
function as contemplated in the Requirement Specification and Product
Documentation when combined with any hardware and/or software designated by
UTS, and

                           (c)      The software in the Deliverables operates
in accordance with the Requirement Specification and Product Documentation
without defects and bugs.


                                      -8-
<PAGE>

                  11.8  The software in the Deliverables does not and shall not
contain any "back door," "time bomb," "drop door" or other software routine
designed to disable the software automatically with the passage of time or under
the positive control of any person; or virus, "Trojan horse," "worm" or other
software routines or hardware components designed to permit unauthorized access,
to disable, erase or otherwise harm the software, hardware, or data, or to
perform any other similar actions.

                  11.9  The software in the Deliverables shall operate
accurately in the manner in which it was intended as it relates to time
related operations when given a valid date containing century, year, month
and day. For purposes of this Section 11.9, the accurate operation of the
software shall require (a) that calculations using dates must execute using a
four digit year; (b) that all functions, including but not limited to entry,
inquiry, maintenance, storage, update and transmission of information, must
support four digit year date processing; (c) that interfaces and reports must
support four digit year processing; (d) successful translation into year 2000
with the correct system date (e.g., 1/1/2000) without human intervention; (e)
processing with a four digit year after transition to and beyond the year
2000 without human intervention; and (f) providing correct results in forward
and backward date calculations spanning century boundaries.

                  11.10 UTS shall have, or have available to it, and shall
devote, the resources, skill, expertise and experience necessary to provide MCI
with the Product Documentation and all Deliverables in conformity with the
Requirement Specification, Business Regulations and in accordance with the
Milestone Schedule, and to otherwise perform the obligations of UTS hereunder.

         12.      INDEMNIFICATION

         UTS shall defend, indemnify and hold harmless MCI, its Affiliates and
their respective employees, agents, officers and directors from and against any
claims, losses, liabilities, damages, costs and expenses (including reasonable
attorneys' fees) incurred by MCI or its Affiliates arising out of or in
connection with any claims, suits, actions or proceedings ("Claim") brought
against MCI or any Affiliate by any third party (a) asserting that any
Deliverable or any portion thereof infringes any Intellectual Property of any
third party or (b) arising out of any breach of any representation or warranty
made by UTS under this Agreement, subject to the condition that MCI and/or its
Affiliate shall provide the UTS notice of any such Claim promptly after MCI
and/or its Affiliate shall receive notice or obtain knowledge thereof, and
provide to UTS such reasonably available and disclosable information and
assistance as is reasonably requested by UTS in connection with such Claim. Upon
MCI's request, UTS agrees to inform MCI of the status of any such Claim, and to
consult with MCI before agreeing to any settlement of any such Claim. In no
event shall MCI agree to any settlement or compromise of a Claim involving any
remedy other than the payment of monetary damages without obtaining the prior
written approval of MCI. MCI shall have the right to assume or participate in
the defense of a Claim, at any time, at its own expense. If an injunction is
issued in such action or agreed in the settlement barring the use by MCI or any
Affiliate of any allegedly infringing Deliverable, or in MCI's opinion, any
Deliverable is likely to become the subject of a claim of infringement, MCI
shall at its option and expense either (i) procure for MCI and its Affiliates
the right to continue to use such Deliverable; and/or (ii) replace or modify
such


                                      -9-
<PAGE>

Deliverables so that it becomes non-infringing, while still complying with
the applicable Requirement Specification.

         13.      DISCLAIMER

         EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY WARRANTY
OR REPRESENTATION AND EACH PARTY SPECIFICALLY DISCLAIMS ALL EXPRESS AND IMPLIED
WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.

         INDEPENDENTLY OF ANY OTHER LIMITATION AND REGARDLESS OF WHETHER THE
PURPOSE OF ANY REMEDY SET FORTH HEREIN IS SERVED, NEITHER PARTY SHALL BE LIABLE
UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR ANY
INCIDENTAL, SPECIAL, CONSEQUENTIAL, INDIRECT, EXEMPLARY OR PUNITIVE DAMAGES WITH
RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT INCLUDING DAMAGES RESULTING FROM
LOSS OF BUSINESS, PROFITS, OPPORTUNITY OR GOODWILL, EVEN IF PREVIOUSLY ADVISED
OF THE POSSIBILITY THEREOF.

         14.      TERM AND TERMINATION

                  14.1 This Agreement shall come into effect on the Effective
Date, and unless sooner terminated as set forth herein, shall remain effective
until the completion date of the Development Services set forth in the Milestone
Schedule, provided however that in no event shall the term of this Agreement
exceed [***].

                  14.2     Either party may terminate this Agreement by
written notice:

                           (a) immediately, in the event the other party
falls into bankruptcy, insolvency, reorganization, liquidation, or ceases to
function as a going concern;

                           (b) if a Force Majeure Event under Section 16
prevents performance of the other party's obligations hereunder for a period
of [***] or longer; or

                           (c) in the event the other party breaches any
material term hereof and fails to cure such breach within [***] after
delivery of written notice thereof from the non-breaching party.

                  14.3 The provisions of Sections 1, 5, 6, 7, 8, 9, 10, 11, 12,
13, 14.3, 15, 16, 17, and 18 shall survive the expiration or termination hereof.

         15.      GENERAL

                  15.1 This Agreement and the Mutual Confidential Disclosure
Agreement concluded on July 5, 1999 as amended constitute the entire agreement
between the parties with respect to the subject matter hereof, and supersede and
replace all prior or contemporaneous


                                      -10-
<PAGE>

understandings, communications, or agreements, written, oral or otherwise
regarding the subject matter hereof, including any letter of intent or
memorandum of understanding.

                  15.2 No alteration, amendment or modification of this
Agreement shall be binding on the parties unless made in writing and signed by
the duly authorized representatives of both parties.

                  15.3 Failure by either party to enforce any provision of this
Agreement shall not be deemed a waiver of future enforcement of that or any
other provision.

                  15.4 Except as expressly set forth herein, this Agreement and
its rights and obligations may not be assigned, transferred or delegated by
either party without obtaining the prior written consent of the other party, and
any attempted assignment, transfer or delegation without such consent shall not
be effective.

                  Notwithstanding the foregoing, MCI may have Matsushita
Communication R&D Center U.S. ("MCRDC") of Panasonic Technologies, Inc. exercise
MCI's rights herein, perform MCI's obligation herein, and/or participate in the
activities contemplated herein, provided MCRDC observes the terms and conditions
herein.

                  15.5 If for any reason a court of competent jurisdiction finds
any provision of this Agreement, or any portion thereof, to be unenforceable,
that provision or portion shall be enforced to the maximum extent permissible so
as to effect the intent of the parties, and the remainder of this Agreement
shall continue in full force and effect.

                  15.6 The legal and equitable remedies available to the parties
hereunder are all independent of one another, and are intended to be cumulative
so as not to limit a party's other available remedies.

                  15.7 The parties are independent contractors and nothing
herein will be construed to create a partnership, joint venture, employment or
agency relationship between the parties. Neither party shall have the power or
authority to enter into any agreement of any kind on behalf of the other party,
or to bind or obligate the other party in any manner.

                  15.8 All notices required or permitted under this Agreement
shall be in writing, shall reference this Agreement and shall be deemed given:
when personally delivered, when sent by confirmed facsimile, five days after
having been sent by registered or certified air mail, return receipt requested,
postage prepaid; or one day after deposit with a commercial overnight carrier,
with written verification of receipt. All communications shall be sent to the
addresses set forth below or to such other address as may be designated by a
party by giving written notice to the other party pursuant to this Section 15.8;


                                      -11-
<PAGE>

         To UTS
         Russell L. Boltwood
         Corporate Counsel
         UTStarcom, Inc.
         1275 Harbor Bay Parkway
         Alameda, CA 94502

         To MCI
         General Manager, Overseas Department
         Communication Systems Division
         Matsushita Communication Industrial Co., Ltd.
         3-1 Tsunashima-higashi 4-chome, Kohoku-ku,
         Yokohama 223-8639, Japan

                  15.9  This Agreement shall be governed by and construed in
accordance with the laws of Japan, irrespective of its conflict of laws rules.

                  15.10 This Agreement has been freely negotiated by the
parties, and shall be interpreted and construed fairly without any strict
construction favoring or disfavoring either party regardless of which party
drafted this Agreement or any portion thereof.

                  15.11 The headings and captions used in this Agreement are
used for convenience only are not to be considered in construing or interpreting
this Agreement.

                  15.12 Rules of Construction

         As used herein, neutral pronouns and any variations thereof will be
deemed to include the feminine as well as the masculine. All terms in the
singular will be deemed to include the plural, and vice versa. The words
"herein," "hereof" and "hereunder" and other words of similar import shall refer
to this Agreement as a whole, including any attachments, as from time to time
may be amended or modified, and do not refer to any subdivision of this
Agreement. The word "including" when used herein is not intended to be
exclusive, and shall mean "including, but not limited to." References herein to
Article and Section shall refer to the appropriate Article or Section of this
Agreement.

         16.      FORCE MAJEURE

         Neither party shall be liable for delay or failure in the performance
hereof arising from any of the following matters; acts of God or public enemy or
war (declared or undeclared); acts of governmental or quasi-governmental
authorities or any subdivision, department or agency thereof, or regulations or
restrictions imposed by law or by court action; acts of persons engaged in
subversive activities or sabotage; fires, floods, explosions or other
catastrophes; epidemics or quarantine restrictions; strikes, slowdowns, lockouts
or labor stoppage or dispute of any kind; freight embargoes, or interruption of
transportation; unusually severe weather; any other causes, similar or
dissimilar, beyond the control of the party concerned (collectively, "Force
Majeure Events").


                                      -12-
<PAGE>

         17.      DISPUTE RESOLUTION

         Any disputes or disagreement which may arise out of or in connection
with this Agreement or the breach thereof, shall be finally settled by
arbitration. If the arbitration is initiated by UTS, the arbitration shall be
held in Tokyo, Japan in accordance with the rules of Japan Commercial
Arbitration Association. If the arbitration is initiated by MCI, the arbitration
shall be held in San Francisco, California in accordance with the International
Arbitration rules of the American Arbitration Association. The arbitration shall
be conducted by one arbitrator and in the English language. The cost of
arbitrator and the said Association shall be shared equally by the parties.

         18.      EXPORT CONTROL

         Each party understands and acknowledges that export administration laws
and regulations including the U.S. Export Administration Regulations, restrict
the export or diversion of certain products and technology. UTS shall notify MCI
in writing and obtain MCI's written approval before incorporating any item or
technology restricted under such laws and regulations into the Product
Documentation or any Deliverable. UTS shall obtain all export licenses or
exemptions necessary to deliver to MCI Product Documentation and other
Deliverables, and shall cooperate with MCI in order to obtain licenses or
exemptions permitting the export and re-export of the same.


                                      -13-
<PAGE>


         IN WITNESS WHEREOF, the parties have, by their duly authorized
representatives, executed this Agreement as of the date shown below.

UTS:                                       MCI:

UTStarcom Inc.                             Matsushita Communication Industrial
                                           Co., Ltd. acting through its
                                           Communication Systems Division


Signature                                  Signature

/s/ Signature Illegible                    /s/ Signature Illegible
Name: Gerald S. Soloway                    Name: Yasuo Katsura
Title: VP Engineering                      Title: Director of CSD/MCI

Date: Sept 19, 2000                        Date: 26.09.2000





                                      -14-
<PAGE>

Appendix A
Milestone Schedule

Appendix B
Requirement Specification

Appendix C
MCI Business Regulation
(MCI Business Requirement for Product Reliability Durability)

Appendix D
Development Plan

Appendix E
MCI Payment Schedule

Appendix F
Third Party Software

Appendix G
Prior Intellectual Property Right List

Appendix H
Materials

Appendix I
Prior Expenses



<PAGE>

                          APPENDIX A

<TABLE>
<CAPTION>
MILESTONE SCHEDULE

Milestones                          Date
- ----------                          ----
<S>                                 <C>
Contract Signing                    [***] September 22, 2000

[***]

MILESTONES AND RESPECTIVE PROPOSED CONTENT AND DELIVERABLES:
- -----------------------------------------------------------
</TABLE>

CONTRACT SIGNING

[***]

DETAILED SCHEDULE AND DEVELOPMENT SERVICES





<PAGE>





                                   IPTS [***]

                        PRODUCT TECHNICAL SPECIFICATIONS

                                     [***]








                                      -2-
<PAGE>



[***]






                                      -3-


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>a2030832zex-10_3.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>

<PAGE>
                                                                    EXHIBIT 10.3

                                  OEM AGREEMENT

       This OEM Agreement ("Agreement"), effective as of the ____ day of July,
2000 (the "Effective Date"), is entered into by and between Interwave
Communications International, Ltd., a Bermuda company, having offices at 312
Constitution Drive, Menlo Park, CA 94025 ("IWAV"), and UTStarcom, Inc., a
Delaware corporation, having offices at 1275 Harbor Bay Parkway, Suite 100,
Alameda, California 94502, United States of America ("UTStarcom").

                                   BACKGROUND

       A.     UTStarcom is in the business of designing and marketing
telecommunications access products in markets outside of the United States,
primarily in the People's Republic of China (PRC), and desires to distribute
certain of IWAV's Products (as defined below) [***], on the terms and conditions
set forth below.

       B.     IWAV is in the business of designing and marketing GSM wireless
cellular base station transceivers, controllers, and associated software. IWAV
desires to have certain of its Products (as defined below) distributed by
UTStarcom in [***] on the terms and conditions set forth below.

       1.     DEFINITIONS

              1.1    "CUSTOMERS" shall mean end-user customers solicited by
UTStarcom within the Territory.

              1.2    "DOCUMENTATION" means the documentation or user manuals
provided by IWAV for the Product.

              1.3    "PRODUCT" or "PRODUCTS" means the products listed on the
attached EXHIBIT A, a copy of which is attached hereto and incorporated by
reference. IWAV may change or abandon the Products from time to time during the
term of this Agreement, upon 60 days written notice to UTStarcom, and by
providing a new EXHIBIT A to UTStarcom.

              1.4    "SOFTWARE" means the computer software or firmware that is
incorporated into or otherwise generally accompanies a Product, or that IWAV
makes available to UTStarcom and its customers generally, without additional
charge, for use with the Products. Software is provided in object code form
only.

              1.5    "TERRITORY" means the [***].

              1.6    "UPDATE" means error corrections and bug fixes that IWAV
generally makes available to Customers free of charge, but excluding new
versions of the Software that contains significant new features or
functionality, as determined by IWAV in IWAV's sole discretion.

<PAGE>

       2.     APPOINTMENT

              2.1    GRANT. IWAV hereby appoints UTStarcom, and UTStarcom hereby
accepts the appointment, as a non-exclusive distributor of IWAV to distribute
IWAV Products to Customers in the Territory. UTStarcom shall distribute the IWAV
Product(s) under the UTStarcom trademark and product label, as provided pursuant
to Section 18 of this Agreement. To further as rapidly as possible the purposes
of this grant, the parties hereto shall apply their best efforts to undertake
and complete within schedule the Agreement activities listed in EXHIBIT B, which
is attached hereto and incorporated by reference into this Agreement.

              2.2    NO OTHER RIGHTS. Except as expressly provided herein, no
right, title or interest is granted by IWAV to UTStarcom. IWAV may distribute
the Products, or products other than the Products, in the Territory, either
directly, or indirectly, for any and all uses, and no right, title or interest
is granted by IWAV to UTStarcom relating to either the Products, or products
other than the Products. Further, notwithstanding the rights granted in Section
2.1 above, IWAV reserves the right to market, distribute and sublicense,
directly or indirectly, the Products and products other than the Products, and
nothing in this Agreement will prevent IWAV from using the Products or
intellectual property therein to make, have made, develop, sell, license,
distribute and/or market products other than the Products. IWAV further reserves
the right under all intellectual property rights to make, have made, use, copy,
modify, have modified, create derivative works of, have created derivative works
of, demonstrate, maintain and support the Products and the right to sublicense
the foregoing rights.

              2.3    SOFTWARE LICENSE. Prior to providing any Customer with any
Software, UTStarcom shall ensure that each Customer has read and agreed to the
terms and conditions of the Software license agreement contained in each
Software package, as may be provided by IWAV ("Software License Agreement"). In
the event that any Software is installed by UTStarcom and not by the Customer,
UTStarcom agrees that prior to the use of any such Software by such Customer,
UTStarcom will ensure that such Customer has read and agreed to the Software
License Agreement. UTStarcom shall diligently enforce Software License
Agreements and use its best efforts to ensure that Customers abide by the terms
of Software License Agreements. To the extent permitted by law, UTStarcom shall
not, and shall not authorize any third party to, copy, modify, alter, reverse
engineer, disassemble or decompile the Products, and UTStarcom shall not
distribute or market any Software or Product containing any Software
electronically, or by interactive cable, remote processing services, online
services, linkups or multi-user local or area networks. Software provided to
UTStarcom hereunder is subject to license and not sale.

              2.4    CONFLICTS. The parties acknowledge and agree that any
efforts by UTStarcom to sell, license, or distribute other products in the
Territory which are derived from sources other than IWAV, and which are
commercially or technically similar to the Product(s), or which are commercially
reasonable substitutes for the Product(s) ("Competing Products") would
constitute a conflict of interest with respect to UTStarcom's obligation to
market and distribute the Products, and UTStarcom represents and warrants that
as of the Effective Date of the Agreement, it does not represent any Competing
Products. If UTStarcom chooses to market, promote or distribute Competing
Products, it shall notify IWAV of its intent at least [***] prior to commencing
such activity without any liability to IWAV.


                                      -2-
<PAGE>

       3.     OBLIGATIONS OF UTSTARCOM

              3.1    DILIGENCE. UTStarcom shall use its best efforts to promote
the marketing and distribution of the Products to realize the sales potential
for the Products in the Territory. Except as expressly set forth herein,
UTStarcom shall be [***] responsible for all costs and expenses related to the
advertising, marketing, promotion, and distribution of the Products and for
performing its obligations hereunder.

              3.2    REPORTS.

                     3.2.1  UTStarcom shall provide IWAV, on a calendar [***]
basis, a written sales activity report indicating quantities of Products
purchased and total dollar amounts invoiced to all purchasers. UTStarcom also
shall maintain records sufficient to create the foregoing reports.

                     3.2.2  UTStarcom shall make available its Customer shipment
records to IWAV and permit IWAV's inspection of UTStarcom's books and records
(including computer database records) as IWAV may from time to time reasonably
request.

              3.3    SOURCE. In order to assure the authenticity and quality of
the Products, UTStarcom shall obtain any and all of the Products solely from
IWAV or IWAV's designee. UTStarcom shall not obtain the Products from any other
source without the IWAV's prior written approval.

              3.4    PRODUCT SUPPORT.

                     3.4.1  UTStarcom shall be [***] responsible for supporting
all Products distributed hereunder. UTStarcom shall provide reasonable technical
support to Customers, including without limitation (1) maintaining trained and
competent technical and engineering support personnel for the Products who are
sufficiently knowledgeable with respect to the Products to answer Customer
questions regarding the use and operation of Products, (2) designating a
technical liaison to coordinate UTStarcom's technical support provided to
Customers, (3) responding promptly to requests for technical support from
Customers, and (4) providing technical support services to address and resolve
Customers' support requests with respect to the Products. UTStarcom shall ensure
that UTStarcom's technical and engineering support personnel attend any training
provided by IWAV with respect to the Products.

                     3.4.2  UTStarcom shall ensure that all Customer questions
regarding the use or operation of Products are initially addressed to and
answered by UTStarcom. Unless otherwise agreed in writing by IWAV, UTStarcom
shall not represent to any third party that IWAV is available to answer
questions from any Customer directly.

                     3.4.3  Without limiting the foregoing and in addition to
any other obligations set forth in IWAV's then current support terms and
conditions, UTStarcom also shall be responsible for (1) providing sufficient
information to IWAV for IWAV to duplicate any reported error in the Products;
(2) incorporating Updates into the Products promptly upon receipt thereof; (3)
reporting errors promptly in English and in writing in accordance with IWAV's
standard support procedures;


                                      -3-
<PAGE>

and (4) providing reasonable cooperation and full information to IWAV in the
furnishing of support for the Products.

                     3.4.4  IWAV agrees upon signing this Agreement to promptly
arrange an appropriate training course for UTStarcom's personnel to be
adequately trained in the installation and maintenance of IWAV's Products, by
arranging for IWAV to train UTStarcom's personnel at the UTStarcom's site in the
[***]. [***] shall be responsible for the travel, lodging, and meal expenses of
its training personnel.

                     3.4.5  PRODUCTS FOR UTSTARCOM USE. UTStarcom may order and
use Products for demonstration and internal purposes, provided UTStarcom shall
pay [***] for any such Products and use of any Software shall be governed by the
terms of the Software License Agreement. UTStarcom agrees to purchase and
maintain at least [***] demonstration unit of the Product(s) upon execution of
this Agreement.

       4.     OBLIGATIONS OF IWAV

              4.1    INFORMATION AND SUPPORT.

                     4.1.1  IWAV shall use reasonable efforts to provide to
UTStarcom such back-up telephone or electronic-mail technical support as IWAV
makes generally available to its distributors other than UTStarcom. Such
telephone support shall be provided during UTStarcom's normal business hours for
its offices located within the [***]. With respect to Software, during the term
of this Agreement, IWAV will provide support only for the then-current version
of the Software which incorporates all Updates to the Software.

                     4.1.2  Additionally, IWAV shall use reasonable efforts to
extend the technical support described in Paragraph 4.1.1 above to 24 hours a
day, 7 days a week for urgent matters. UTStarcom agrees that this extended
coverage should only be used under urgent circumstances, as determined by [***].

                     4.1.3  Upon terms to be mutually agreed upon, IWAV will
dispatch qualified engineers and other necessary personnel within a reasonable
time to UTStarcom to enable UTStarcom to provide the necessary technical support
to its clients in the Territory, [***] may deem reasonably necessary.

                     4.1.4  IWAV, [***] will consider maintaining a
representative stock level of spare parts in the Territory in order to meet
Customer's requirements for quick response time to system failures during the
Warranty Period. [***] agrees to provide storage facilities and take full
responsibility for keeping the spare parts in good condition.

                     4.1.5  In order to ensure the success of this Agreement,
and in addition to any other obligation of IWAV contained within this Agreement,
IWAV will provide technical support services relating to the initiation of the
terms and conditions of this Agreement, including but not limited to the
following: a) project bid proposal support; b) technical training; and c)
technical assistance with respect to the modification of Product network
interfaces, as may be mutually agreed


                                      -4-
<PAGE>

upon by the parties hereto. [***] shall be responsible for the expenses related
to technical support services provided pursuant to this Section 4.1.5.

              4.2    MARKETING MATERIALS. IWAV, at [***] expense, shall
periodically provide UTStarcom with reasonable quantities of IWAV's advertising
and promotional materials, pricing information and technical data related to the
Products in English, in each case to the extent IWAV in its discretion makes
such materials generally available to its distributors other than UTStarcom;
provided that [***] shall pay the freight costs and other taxes and duties
applicable to any such items provided or the delivery thereof. UTStarcom shall
modify the materials described in this Section 4 only with IWAV's prior written
approval.

              4.3    TRANSLATION. UTStarcom may translate the Documentation for
use within the Territory, it being understood that UTStarcom hereby assigns to
IWAV all ownership rights in and to translated versions of the Documentation and
agrees to, or cause its employees, agents and consultants to, execute such
documents and perform such acts as may be reasonably necessary to perfect such
assignment.

              4.4    TYPE APPROVAL; HOMOLOGATION/CERTIFICATION. IWAV will
provide its prompt and best efforts to assist UTStarcom, as it may reasonably
request, with all type approval, homologation, and/or certification processes
that may be required for commercial distribution of the Products, including but
not limited to UTStarcom's use of existing type approval certifications that
IWAV may then currently have access to. The parties shall equally share any
expenses directly related to any type approval, homologation and/or
certification processes.

              4.5    JOINT PRODUCT DEVELOPMENT. As may be mutually agreed to
from time to time by the parties hereto, IWAV and UTStarcom agree to jointly
cooperate in the design and development of products other than the Products,
and/or new features for the Products. UTStarcom and IWAV agree that any such
joint product development shall be the subject of a separate agreement, the
terms and conditions of which to be mutually agreed to by the parties.

              4.6    PRODUCT DEVELOPMENT VISIBILITY. In order to facilitate the
development of Products and Product features that may be best suited for
marketability in the Territory, IWAV agrees to provide UTStarcom with access to
technical information relating to IWAV's design and development of new products
other than the Products, and/or new features being developed for the Products.
Such technical information shall include but not limited to information
regarding the following: [***]. UTStarcom represents and warrants that is shall
keep such technical information confidential as required by Section 16 of this
Agreement.

       5.     PRICE/PRICE CHANGE

              5.1    PRICE. The prices and fees to be paid by UTStarcom to IWAV
for Products are as set forth in price purchase schedules or bulletins issued by
IWAV from time to time during the term of this Agreement ("Prices"). The Prices
of Products as of the Effective Date are as set forth in Exhibit A attached
hereto, a copy of which is attached hereto and incorporated by reference. Prices
are [***]. The difference between the Price and UTStarcom's price to its
Customers shall be UTStarcom's sole remuneration from IWAV for the distribution
and sale of Products.


                                      -5-
<PAGE>

              5.2    PRICE CHANGES. Prices are subject to change by IWAV [***].
IWAV shall forward to UTStarcom written notice of any price change at least
[***] prior to its effective date. Price changes will only apply to orders
received by IWAV after the effective date of the price change. IWAV will
maintain prices for Products on any existing customer contracts or bid
proposals, which contain price assurances for which it had given prior approval.

              5.3    SPECIAL DISCOUNTS. UTStarcom [***] may offer special
discounts for certain projects in order to win business over competition.
Special Discounts are effective immediately and applicable only to the intended
projects.

       6.     TAXES AND OTHER CHARGES

              6.1    TAXES GENERALLY. Prices do not include and are net of any
foreign or domestic governmental taxes or charges of any kind that may be
applicable to the sale, licensing, marketing or distribution of the Products,
including without limitation excise, sales, use, or value-added taxes; customs
or other import duties; or other taxes, tariffs or duties. UTStarcom shall be
responsible for and shall pay all such taxes and charges levied against IWAV in
a timely manner. When IWAV has the legal obligation to pay or collect such
taxes, excluding taxes on the income of IWAV, the appropriate amount shall be
invoiced to UTStarcom and paid by UTStarcom within [***] of the date of invoice
unless UTStarcom provides IWAV with a valid tax exemption certificate authorized
by the appropriate taxing authority.

              6.2    WITHHOLDING TAXES. All payments by UTStarcom must be made
free and clear of, and without reduction for, any withholding taxes. Any such
taxes which are otherwise imposed on payments to IWAV are the sole
responsibility of UTStarcom. UTStarcom shall provide IWAV with official receipts
issued by the appropriate taxing authority or such other evidence as is
reasonably requested by IWAV to establish that such taxes have been paid.

       7.     PAYMENT

              7.1    PAYMENT TERMS. Payment shall be in U.S. Dollars. UTStarcom
shall pay [***] for Products by either check or wire transfer (at UTStarcom's
discretion) to IWAV's designated account within [***] of receipt of invoice.

              7.2    BOOKS AND RECORDS; AUDIT. UTStarcom agrees to maintain,
until [***] after expiration of this Agreement, complete books, records and
accounts relevant to computation and accounting for amounts payable under
Section 5 above. UTStarcom agrees to allow an independent certified public
accountant the right to audit and examine such books, records and accounts
during UTStarcom's normal business hours no more than once per [***] upon
reasonable notice to verify the accuracy of the reports and payments made to
IWAV under this Section 7. In the event such examination leads to a
determination that UTStarcom has not paid all amounts payable under this
Agreement, UTStarcom agrees to pay, in addition to any damages to which IWAV
might be entitled, the amount of such shortfall.

       8.     ORDERS


                                      -6-
<PAGE>

              8.1    ORDER AND ACCEPTANCE. All orders for Products submitted by
UTStarcom shall be initiated by written purchase order sent to IWAV and
requesting a shipment date during the term of this Agreement; provided, however,
that an order may be initially placed orally, by telecopy or fax if a
confirmational written purchase order is received by IWAV within [***] of an
oral, telecopy or fax order. All orders for Products are subject to acceptance
by IWAV in writing, and IWAV has no liability to UTStarcom with respect to
purchase orders that are not accepted. No partial acceptance of a purchase order
constitutes the acceptance of an entire order, unless IWAV explicitly accepts
the entire order. To facilitate IWAV's production scheduling, UTStarcom shall
submit purchase orders to IWAV in accordance with IWAV's lead times then in
effect which shall be communicated to UTStarcom upon UTStarcom's request.
Notwithstanding the foregoing, UTStarcom acknowledges and agrees that the
shipment and delivery dates are estimates only.

       9.     SHIPMENT/RISK OF LOSS

       Products delivered pursuant to the terms of this Agreement shall be
suitably packed for shipment in IWAV's standard shipping cartons, marked for
shipment to the destination specified in UTStarcom's purchase order, and
delivered to the carrier agent [***]. Unless otherwise instructed in writing by
UTStarcom in UTStarcom's purchase order, IWAV shall select the carrier. All
freight, insurance, and other shipping expenses, excepting expenses for any
special packing requested by UTStarcom and provided by IWAV, shall be paid by
[***].

       10.    REJECTION

       UTStarcom shall inspect all Products promptly upon receipt thereof and
may reject any defective Product, provided that UTStarcom shall (i) within the
earlier of [***] after receipt of such alleged defective Product or [***] after
discovery of such alleged defect, notify IWAV of its rejection and request a
Return Material Authorization ("RMA") number, and (ii) within [***] of receipt
of the RMA number from IWAV return such rejected Product to IWAV, freight
prepaid and properly insured. Products not rejected within the foregoing time
periods shall be deemed accepted by UTStarcom. In the event that IWAV determines
that the returned Product is defective and properly rejected by UTStarcom, IWAV
shall [***], repair or replace such defective Product, or accept return for
credit of such defective Product. IWAV shall return to UTStarcom, freight
prepaid, all repaired or replaced Products properly rejected by UTStarcom. In
the event that any rejected Product is determined by IWAV to not be defective or
to have been modified or subjected to unusual electrical or physical stress,
misuse, abuse or unauthorized repair, UTStarcom shall reimburse IWAV for all
costs and expenses related to the inspection, repair, if any, and return of such
Product to UTStarcom.

       11.    PRODUCT CHANGES

       IWAV reserves the right, after fulfillment of any outstanding Product
orders from UTStarcom, to discontinue or to limit its production of any Product
upon [***] prior written notice to UTStarcom; to allocate, terminate or limit
deliveries of any Product in time of shortage, provided however that UTStarcom's
Product orders shall be given priority over the orders of other distributors in
times of Product shortage; to alter the design or construction of any Product;
to add new and


                                      -7-
<PAGE>

additional products to the "Products;" and upon reasonable notice to UTStarcom,
to change its sales and distribution policies, not inconsistent with the terms
of this Agreement.

       12.    FORECASTS

       By the end of each calendar [***], UTStarcom shall provide IWAV with a
good faith [***] rolling forecast, commencing with the next calendar [***], that
shows UTStarcom's prospective requirements for the Products and anticipated
purchase order submittal dates, including all sales and business prospects, in
such format as specified by IWAV ("Forecast"). Forecasts shall commence on the
first day of the calendar [***] following submission of the Forecast to IWAV.
Such Forecasts are for IWAV's planning purposes only and shall not constitute a
binding obligation on the part of IWAV to supply Products in accordance with
such Forecasts. Notwithstanding the foregoing, UTStarcom will use its best
efforts to make each Forecast as accurate as possible. In the event UTStarcom
believes, in good faith, that the results forecast by UTStarcom in UTStarcom's
Forecast are inaccurate, UTStarcom will notify IWAV promptly and provide IWAV
with a revised Forecast.

       13.    RETURNED PRODUCT

       Any Product returned to IWAV by UTStarcom as authorized under this
Agreement shall be shipped, [***], and shall be packed in its original packing
material. IWAV may refuse to accept any Product not packed and shipped as herein
provided.

       14.    LIMITED WARRANTY

              14.1   LIMITED WARRANTY. Subject to the provisions of this Section
14, IWAV warrants to UTStarcom that the non-Software Products, as delivered,
will be free from defects in materials and workmanship for a period of [***]
from the date of delivery ("Warranty Period"). IWAV, at its sole discretion, may
extend the Warranty Period if expressly required by the Customer, in which case
the extended Warranty Period shall be specified by IWAV in writing. The
foregoing warranty is contingent upon proper use of the Products in the
applications for which they were intended and shall not apply to Products that
are modified or subjected to unusual physical or electrical stress, misuse,
abuse, or unauthorized repair. IWAV's [***] liability and UTStarcom's [***]
remedy shall be limited to repair, replacement, credit or refund, at [***] sole
option and election. [***] shall pay all freight charges for shipment of any
replacement Product to UTStarcom during the Warranty Period. Replacement or
repair of a Product shall not extend the original warranty for that unit, and
UTStarcom may return Product only during the original Warranty Period. All
Software is provided "AS IS" and IWAV makes no warranty that Software operation
will be uninterrupted or error-free in case of misuse or improper installation
by a party other than IWAV or UTStarcom's trained staff. UTStarcom is [***]
responsible for any other warranty or product liability claims arising from the
suitability of the Products for a specific purpose or incorrect Product
application. Under no circumstances shall IWAV have any liability in respect of
any Product except to the extent set forth in this Section 14.1.

       14.2   DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN SECTION
14.1 ABOVE, IWAV MAKES NO WARRANTIES OR CONDITIONS, EXPRESS, STATUTORY, IMPLIED,
OR OTHERWISE, AND IWAV SPECIFICALLY DISCLAIMS THE


                                      -8-
<PAGE>

IMPLIED WARRANTIES AND CONDITIONS OF NONINFRINGEMENT, MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. NOTWITHSTANDING THE FOREGOING, IWAV DOES NOT
EXCLUDE LIABILITY TO THE EXTENT THAT SUCH LIABILITY MAY NOT BE EXCLUDED OR
LIMITED BY LAW.

              14.3   INHERENTLY DANGEROUS APPLICATIONS. THE PRODUCTS ARE NOT
AUTHORIZED FOR USE AS CRITICAL COMPONENTS IN LIFE SUPPORT DEVICES OR SYSTEMS
OR FOR USE IN AVIATION, NUCLEAR OR ANY OTHER INHERENTLY DANGEROUS APPLICATION
WITHOUT THE EXPRESS WRITTEN APPROVAL OF THE MANAGING DIRECTOR OF IWAV. LIFE
SUPPORT DEVICES OR SYSTEMS ARE THOSE WHICH ARE INTENDED TO SUPPORT OR SUSTAIN
LIFE AND WHOSE FAILURE TO PERFORM CAN REASONABLY BE EXPECTED TO RESULT IN A
SIGNIFICANT INJURY TO THE USER. CRITICAL COMPONENTS ARE THOSE COMPONENTS
WHOSE FAILURE TO PERFORM CAN REASONABLY BE EXPECTED TO CAUSE FAILURE OF A
LIFE SUPPORT DEVICE OR SYSTEM OR AFFECT ITS SAFETY OR EFFECTIVENESS.

              14.4   UTSTARCOM LIMITATIONS. Except to the extent required by
applicable law, UTStarcom shall not pass on to its Customers a warranty of
greater scope or protection than the warranty (including the limited remedy,
exclusions, and limitation of liability) set forth in this Section 14 and
Section 19 below. UTStarcom shall indemnify, defend and hold harmless IWAV
from any claim or liability arising out of or relating to breach of the
foregoing provisions of this Section 14 or representations or warranties
which exceed IWAV's express warranties set forth in this Section 14.

              14.5   PRODUCT RETURNS. In order to return Product that fails
to conform to the foregoing warranty set forth in this Section 14, UTStarcom
shall (i) notify IWAV in writing that such Product failed to conform with the
warranty set forth in this Section 14 and furnish a detailed explanation of
any alleged nonconformity; (ii) obtain a RMA number for the nonconforming
Product from IWAV; and (iii) within [***] of receipt of the RMA number,
return such Product to IWAV, [***], with the RMA number prominently attached
[***].

              14.6   CUSTOMER CLAIMS. UTStarcom shall ensure that all
Customer warranty claims are addressed to UTStarcom and not to IWAV.
UTStarcom shall, promptly upon being given notice by a Customer of a claim
covered by IWAV's warranty, provide to IWAV written notice of such claim, and
shall include in that notice sufficient information that IWAV can determine
the source of the problem. If resolving the problem requires replacement
parts, then IWAV will provide those replacement parts to UTStarcom and
UTStarcom will install those parts according to IWAV's instructions. If
resolving the problem requires modifications to the setup of the Products,
then UTStarcom shall make such modifications at IWAV's request and according
to IWAV's instructions. In any event, UTStarcom shall notify IWAV promptly
when any warranty services under this Agreement are completed.

       15.    TERM AND TERMINATION

              15.1   TERM. This Agreement shall commence upon the Effective Date
and continue in full force and effect for a fixed term of [***], unless earlier
terminated in accordance with the


                                      -9-
<PAGE>

provisions of this Agreement. This Agreement may be renewed for subsequent
one-year terms only by written agreement of the parties.

       15.2   TERMINATION FOR CAUSE. Either party hereto may terminate this
Agreement effective upon written notice to the other party stating its intention
to terminate in the event (i) the opposite party breaches any of the provisions
of Sections 2 or 16; (ii) any current legislation or exchange controls under
applicable law preclude UTStarcom from making payments to IWAV in United States
currency for a period of [***]; provided, however, that termination under this
subsection shall not relieve UTStarcom of its payment obligations under this
Agreement; or (iii) any law, decree, or regulation is enacted by the government
of the Territory which would impair or restrict (1) the right of either party to
terminate or elect not to renew this Agreement as herein provided, (2) IWAV's
right, title or interest in the Products or the intellectual property rights
therein, or (3) IWAV's rights to receive the payments under this Agreement.
Without limiting the foregoing, either party may terminate this Agreement
effective upon written notice to the other party stating such party's intention
to terminate, in the event the other party:

              15.2.1 ceases to function as a going concern or to conduct
operations in the normal course of business, or


              15.2.2 has a petition filed by or against it under any state or
federal bankruptcy or insolvency law which petition has not been dismissed or
set aside within [***] of its filing; or

              15.2.3 fails to perform any of its obligations under this
Agreement so as to be in default hereunder and fails to cure such default within
[***] after written notice of such default.

       15.3   PURCHASE ORDERS; NO WAIVER: UTStarcom shall be obligated to accept
deliveries of Products for which purchase orders were accepted by IWAV prior to
the effective date of termination. After any notice of termination has been
delivered by either party hereunder, deliveries of Product from IWAV to
UTStarcom, unless otherwise agreed by IWAV [***], shall require prepayment by
[***] (at [***] option) by UTStarcom to IWAV. The acceptance of any purchase
order from or the sale or license of any Product to UTStarcom after the
termination or expiration of this Agreement shall not be construed as a renewal
or extension of this Agreement nor as a waiver of termination of this Agreement.

       15.4   NO LIABILITY FOR TERMINATION. Except as expressly required by law,
in the event of termination of this Agreement by either party in accordance with
any of the provisions of this Agreement, neither party shall be liable to the
other, because of such termination, for compensation, reimbursement or damages
on account of the loss of prospective profits or anticipated sales or on account
of expenditures, inventory, investments, leases or commitments in connection
with the business or goodwill of IWAV or UTStarcom. Termination shall not,
however, relieve either party of obligations incurred prior to the termination.

       15.5   SURVIVAL. UTStarcom may sell Products existing in its inventory as
of the effective date of termination of this Agreement for a period of [***]
after the effective date of such termination ("Wind-Down Period"). During the
Wind-Down Period, the provisions of Sections 6, 7


                                      -10-
<PAGE>

and 9 shall survive. In addition to the provisions set forth in this Section
15.5, the following provisions shall survive expiration or any termination of
this Agreement: Sections 14, 16, 17, 19, 21 and the last sentence of Section
18.2.

              15.6   RETURN OF MATERIALS. All Products, trademarks, marks, trade
names, patents, copyrights, designs, drawings, formulas or other data,
photographs, samples, literature, and sales and promotional aids of every kind
shall remain the property of IWAV. Within [***] after the effective date of
termination of this Agreement, UTStarcom shall at [***] option destroy all
tangible items bearing, containing, or contained in, any of the foregoing, in
its possession or control and provide written certification of such destruction,
or prepare such tangible items for shipment and ship such items to IWAV or
IWAV's designee, [***] IWAV, at [***] expense. UTStarcom shall not make or
retain any copies of any Confidential Information (as defined in Section 16
below) which may have been entrusted to it.

       16.    CONFIDENTIALITY AND PROPRIETARY RIGHTS

              16.1   CONFIDENTIALITY. Each party hereto acknowledges that by
reason of its relationship to the other party hereunder it will have access to
certain information and materials concerning the other party's business, plans,
Customers, technology, and products that are confidential and of substantial
value to the Parties, which value would be impaired if such information were
disclosed to third parties ("Confidential Information"). Each party agrees that
it will not use in any way for its own account or the account of any third
party, nor disclose to any third party, any Confidential Information revealed to
it by the other party. Each party shall take every reasonable precaution to
protect the confidentiality of Confidential Information. Upon request by either
party, the other party shall advise whether or not it considers any particular
information or materials to be confidential. Neither party shall publish any
technical description of the Products beyond the description authorized by
mutual agreement between the parties. In the event of termination of this
Agreement, there shall be no use or disclosure by either party of any
Confidential Information, and neither party shall manufacture or have
manufactured any devices, components or assemblies utilizing any of the other
party's confidential information. Notwithstanding the provisions of this Section
16.1, the parties hereby consent to the public disclosure of the existence of
this Agreement, and to disclosure of the terms of this Agreement as may be
required by law or governmental decree, including but not limited to any
disclosures which may be required by the United States Securities and Exchange
Commission. Additionally, the parties hereto agree that each party may, after
the signing of this Agreement, publicize the existence of this Agreement by
issuance of a press release describing the general nature of the relationship
envisioned hereby. Prior to the issuance of said press release[s], the releasing
party shall provide the other party with a draft copy of the proposed press
release, and shall gain the other party's approval of the press release prior to
issuance.

              16.2   PROPRIETARY RIGHTS. UTStarcom agrees that IWAV retains all
of its rights, title and interest in and to all patent rights, trademarks, trade
names, inventions, copyrights, know-how and trade secrets relating to the
Products or the product lines that include the Products, and the design,
manufacture, operation or service of the Products. The use by UTStarcom of any
of these property rights is authorized only for the purposes herein set forth
and upon termination of this Agreement for any reason such authorization will
cease. UTStarcom shall not (and shall require that


                                      -11-
<PAGE>

its Customers do not) remove, alter, cover or obfuscate any copyright notices or
other proprietary rights notices placed or embedded by IWAV on or in any
Product.

       17.    PATENT/COPYRIGHT/TRADEMARK INDEMNIFICATION

              17.1   INDEMNITY. UTStarcom agrees that IWAV has the right to
defend, or at its option to settle, and IWAV agrees, at its own expense, to
defend or at its option to settle, any third party claim, suit or proceeding
(collectively, "Action") brought against UTStarcom alleging the Products
infringe any patent, copyright or IWAV Trademark (as defined in Section 18.1) in
existence as of the Effective Date, subject to the limitations hereinafter set
forth. IWAV will have sole control of any such Action or settlement
negotiations, and IWAV agrees to pay, subject to the limitations hereinafter set
forth, any final judgment entered against UTStarcom on such issue in any such
Action defended by IWAV. UTStarcom agrees that IWAV will be relieved of the
foregoing obligations unless UTStarcom notifies IWAV promptly in writing of such
Action, gives IWAV authority to proceed as contemplated herein, and gives IWAV
proper and full information and assistance to settle and/or defend any such
Action. If it is adjudicatively determined, or if IWAV believes, that the
Products, or any part thereof, infringe any patent, copyright or trademark, or
if the sale or use of the Products, or any part thereof, is, as a result,
enjoined, then IWAV may, at its election, option, and expense: (i) procure for
UTStarcom the right under such patent, copyright or trademark to sell or use, as
appropriate, the Products or such part thereof; or (ii) replace the Products, or
part thereof, with other noninfringing suitable Products or parts; or (iii)
suitably modify the Products or part thereof; or (iv) remove the Products, or
part thereof, terminate distribution or sale thereof and refund the payments
paid by UTStarcom for such Products less a reasonable amount for use and damage.
IWAV will not be liable for any costs or expenses incurred without its prior
written authorization, or for any installation costs of any replaced Products.

              17.2   LIMITATIONS. Notwithstanding the provisions of Section 17.1
above, IWAV has no liability to UTStarcom for (i) any infringement of patent or
copyright claims alleging infringement by completed equipment or any assembly,
circuit, combination, method or process in which any of the Products may be used
but not covering the Products standing alone; (ii) any trademark infringements
involving any marking or branding not applied by or requested by IWAV, or
involving any marking or branding applied by IWAV at the request of UTStarcom;
or (iii) the modification of the Products, or any part thereof, unless such
modification was made by IWAV, where such infringement would not have occurred
but for such modifications.

              17.3   DISCLAIMER. IWAV'S LIABILITY ARISING OUT OF OR RELATING TO
THIS SECTION 17 SHALL NOT EXCEED THE AGGREGATE AMOUNTS PAID BY UTSTARCOM TO IWAV
FOR THE ALLEGEDLY INFRINGING PRODUCTS THAT ARE THE SUBJECT OF THE INFRINGEMENT
CLAIM. THE FOREGOING PROVISIONS OF THIS SECTION 17 STATE THE ENTIRE LIABILITY
AND OBLIGATIONS OF IWAV AND THE EXCLUSIVE REMEDY OF UTSTARCOM AND ITS CUSTOMERS,
WITH RESPECT TO ANY ALLEGED PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT BY THE
PRODUCTS OR ANY PART THEREOF.

       18.    USE OF TRADEMARKS/TRADE NAMES


                                      -12-
<PAGE>

              18.1   TRADEMARKS. During the term of this Agreement, UTStarcom
shall distribute the IWAV Product(s) under the UTStarcom trademark and product
label. The trademarks, marks, trade names and product labels of UTStarcom which
shall be used for distribution of the Product(s) are set forth in EXHIBIT C
("Trademarks"), a copy of which is attached hereto, and incorporated into this
Agreement by reference. UTStarcom shall have the right to indicate to the public
that it is an authorized distributor of IWAV's Products.

              18.2   USE. Except as set forth in this Section 18, nothing
contained in this Agreement shall grant or shall be deemed to grant to UTStarcom
any right, title or interest in or to IWAV's Trademarks. All uses of IWAV's
Trademarks will inure solely to IWAV and UTStarcom shall obtain no rights with
respect to any of IWAV's Trademarks, other than the right to distribute Products
as set forth herein, and UTStarcom irrevocably assigns to IWAV all such right,
title and interest, if any, in any of IWAV's Trademarks. At no time during or
after the term of this Agreement shall UTStarcom challenge or assist others to
challenge IWAV's Trademarks (except to the extent expressly prohibited by
applicable law) or the registration thereof or attempt to register any
trademarks, marks or trade names confusingly similar to those of IWAV.

       19.    LIMITATION OF LIABILITY

       IWAV's liability arising out of or relating to this Agreement shall not
exceed the aggregate amounts paid by UTStarcom to IWAV hereunder. IN NO EVENT
SHALL EITHER PARTY BE LIABLE FOR LOST PROFITS, COST OF PROCUREMENT OF SUBSTITUTE
GOODS, OR ANY OTHER SPECIAL, RELIANCE, INCIDENTAL, OR CONSEQUENTIAL DAMAGES,
HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY WHETHER BASED IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), OR OTHERWISE. THE FOREGOING LIMITATIONS SHALL APPLY
REGARDLESS OF WHETHER SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY STATED HEREIN.

       20.    COMPLIANCE WITH LAWS

              20.1   EXPORT CONTROL. UTStarcom understands and acknowledges that
IWAV is subject to regulation by agencies of the United States Government,
including, but not limited to, the U.S. Department of Commerce, which prohibit
export or diversion of certain products and technology to certain countries. Any
and all obligations of IWAV to provide the Products, as well as any other
technical information or assistance shall be subject in all respects to such
United States laws and regulations as shall from time to time govern the license
and delivery of technology and products abroad by persons subject to the
jurisdiction of the United States, including the Export Administration Act of
1979, as amended, any successor legislation, and the Export Administration
Regulations issued by the Department of Commerce, Bureau of Export
Administration. UTStarcom agrees to cooperate with IWAV including without
limitation, providing required documentation, in order to assist IWAV in
obtaining export licenses or exemptions therefrom. UTStarcom warrants that it
will comply with the Export Administration Regulations and other United States
laws and regulations governing exports in effect from time to time. UTStarcom
further agrees not to resell Products to any organization, public or private,
which engages in the research or production of


                                      -13-
<PAGE>

military devices, armaments, or any instruments of warfare, including
biological, chemical and nuclear warfare.

              20.2   GOVERNMENTAL APPROVALS. UTStarcom represents and warrants
that it has obtained all required approvals of the government within the
Territory in connection with this Agreement and that the provisions of this
Agreement and the rights and obligations of the parties hereunder, are
enforceable under the laws within the Territory.

              20.3   FOREIGN CORRUPT PRACTICES ACT. In conformity with the
United States Foreign Corrupt Practices Act and with IWAV's established
corporate policies regarding foreign business practices, UTStarcom and its
employees and agents shall not directly or indirectly make any offer, payment,
or promise to pay; authorize payment; nor offer a gift, promise to give, or
authorize the giving of anything of value for the purpose of influencing any act
or decision of an official of any government within the Territory or the United
States Government (including a decision not to act) or inducing such a person to
use his or her influence to affect any such governmental act or decision in
order to assist IWAV in obtaining, retaining or directing any such business.

       21.    MISCELLANEOUS PROVISIONS

              21.1   INDEPENDENT CONTRACTORS. The relationship of IWAV and
UTStarcom established by this Agreement is that of independent contractors, and
neither party is an employee, agent, partner or joint venturer of the other. All
financial obligations associated with UTStarcom's business are the sole
responsibility of UTStarcom. All sales and other agreements between UTStarcom
and its Customers are UTStarcom's exclusive responsibility and will have no
effect on UTStarcom's obligations under this Agreement.

              21.2   ASSIGNMENT. UTStarcom may not transfer or assign its rights
or obligations under this Agreement without the prior written consent of IWAV.
Subject to the foregoing sentence, this Agreement will be binding upon and inure
to the benefit of the parties hereto, their successors and assigns.

              21.3   INDEMNITY. Except for warranty claims for which IWAV is
liable under Section 14 and infringement claims covered by Section 17, UTStarcom
agrees to indemnify and hold IWAV harmless against any cost, loss, liability or
expense (including attorney's fees) arising out of third party claims against
IWAV relating to UTStarcom's use and distribution of the Products.

              21.4   NO IMPLIED WAIVERS. The failure of either party at any time
to require performance by the other of any provision hereof shall not affect the
right of such party to require performance at any time thereafter, nor shall the
waiver of either party of a breach of any provision hereof be taken or held to
be a waiver of a provision itself.

              21.5   SEVERABILITY. If any provision of this Agreement is held to
be invalid by a court of competent jurisdiction, then the remaining provisions
will nevertheless remain in full force and effect. The parties agree to
renegotiate in good faith those provisions so held to be invalid to be valid,
enforceable provisions which provisions shall reflect as closely as possible the
original intent of the parties, and further agree to be bound by the mutually
agreed substitute provision.


                                      -14-
<PAGE>

              21.6   FORCE MAJEURE. Except for payment of monies, neither party
shall be liable for failure to fulfill its obligations under this Agreement or
any purchase order issued hereunder or for delays in delivery due to causes
beyond its reasonable control, including, but not limited to, acts of God,
man-made or natural disasters, earthquakes, fire, riots, flood, material or
supplier shortages, strikes, delays in transportation or inability to obtain
labor or materials through its regular sources. The time for performance of any
such obligation shall be extended for the time period lost by reason of the
delay.

              21.7   CONFLICTING TERMS. The parties agree that the terms and
conditions of this Agreement shall prevail, notwithstanding contrary or
additional terms, in any purchase order, sales acknowledgment, confirmation or
any other document issued by either party effecting the purchase and/or sale of
Products.

              21.8   HEADINGS. Headings of paragraphs herein are inserted for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.

              21.9   LIABILITY OF IWAV. The provisions of this Agreement under
which the liability of IWAV is excluded or limited shall not apply to the extent
that such exclusions or limitations are declared illegal or void under the laws
applicable in the Territory in which Products are sold, unless the illegality or
invalidity is cured under the laws of the Territory by the fact that the law of
California governs this Agreement.

              21.10  CURRENCY CONTROL. UTStarcom represents and warrants that,
as of the Effective Date of this Agreement, no currency control laws applicable
in the Territory prevent the payment to IWAV of any sums due under this
Agreement. In the event that any such laws come into effect and the local
government of the Territory does not permit that payment be made in United
States Dollars, UTStarcom will notify IWAV immediately, and if so instructed by
IWAV, deposit all monies due IWAV to the account of IWAV in a local bank of
IWAV's choice in the Territory.

              21.11  NOTICE. Any notice required or permitted to be given under
this Agreement shall be delivered (i) by hand, (ii) by registered or certified
mail, postage prepaid, return receipt requested, to the address of the other
party first set forth above, or to such other address as a party may designate
by written notice in accordance with this Section 21.11, (iii) by overnight
courier, or (iv) by fax with confirming letter mailed under the conditions
described in (ii) above. Notice so given shall be deemed effective when
received, or if not received by reason of fault of addressee, when delivered.

              21.12  ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements relating thereto, written or oral, between the
parties. Amendments to this Agreement must be in writing, signed by the duly
authorized officers of the parties. The terms of any purchase order are
expressly excluded.

              21.13  GOVERNING LAW. This Agreement shall be governed by and
construed under the law of the State of California, without regard to conflict
of laws principles or the U.N. Convention on Contracts for the International
Sale of Goods.

                                      -15-
<PAGE>

              21.14  ARBITRATION. Any dispute or claim arising out of or in
relation to this Agreement, or the interpretation, making, performance, breach
or termination thereof, shall be finally settled by binding arbitration under
the Rules of Conciliation and Arbitration of the International Chamber of
Commerce as presently in force ("Rules") and by 3 arbitrators appointed in
accordance with said Rules. Judgment on the award rendered may be entered in any
court having jurisdiction thereof. The place of arbitration shall be Alameda
County, U.S.A. Any monetary award shall be in U.S. dollars and the arbitration
shall be conducted in the English language. The parties may apply to any court
of competent jurisdiction for temporary or permanent injunctive relief, without
breach of this Section 21.14 and without any abridgment of the powers of the
arbitrator.



                                      -16-
<PAGE>


       IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the Effective Date.

Interwave Communications International, LTD:         UTSTARCOM:


By: /s/ Ian v. Sugarbroad                            By: /s/ Hong Liang Lu
   --------------------------------------------         ------------------------
Name:    Ian V. Sugarbroad                           Name:    Hong Liang Lu

Title:   President & Chief Operating Officer         Title:   President & CEO




Exhibit:
- -------
A:       Product Listing & Pricing

B:       Activity Schedule

C:       Trademarks


<PAGE>



                         EXHIBIT A - PRODUCTS & PRICING

                       INTERWAVE LIST PRICE LESS [***] (i)

       (i)    Pricing based on distributor volume discount. Supplier and
Distributor may negotiate alternative discount structures to meet specific needs
in target markets or applications, on a case by case basis.

<TABLE>
<CAPTION>
- ------------------------------------------ --------------------------------------- ----------------------------------------
               PART NUMBER                              DESCRIPTION                            UNIT PRICE US $
- ------------------------------------------ --------------------------------------- ----------------------------------------
<S>                                       <C>                                      <C>
                                                         [***]
</TABLE>





<PAGE>



                         EXHIBIT A - PRODUCTS & PRICING

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
OPTIONS/SPARES
- ---------------------------------------------------------------------------------------------------------------------------
              PART NO.                    QNTY.                        DESCRIPTION                            PRICE
- ------------------------------------- ----------------- ------------------------------------------------ ------------------
<S>                                  <C>               <C>                                               <C>
[***]














- ------------------------------------- -------------- ------------------------------------------------- --------------------
</TABLE>




                                      -2-
<PAGE>



                          EXHIBIT B - ACTIVITY SCHEDULE

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------ -------------------------
                                          ACTIVITIES                                                   TARGET DATES
- ------------------------------------------------------------------------------------------------ -------------------------
<S>                                                                                              <C>
1.   Begin Type Approval/Certification Process                                                   [***]
- ------------------------------------------------------------------------------------------------ -------------------------
2.   Launch Sales & Marketing Plan with Targeted Operators                                       [***]
- ------------------------------------------------------------------------------------------------ -------------------------
3.   Launch First Trial with Selected Operator                                                   [***]
- ------------------------------------------------------------------------------------------------ -------------------------
</TABLE>





<PAGE>



                             EXHIBIT C - TRADEMARKS

- - UTStarcom-Registered Trademark- (name and distinctive logo)

- - PAS-TM-

- - WLL-TM-

- - AN-2000-TM-

- - OMUX-TM-

- - WACOS-TM-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>a2030832zex-10_4.txt
<DESCRIPTION>EXHIBIT 10.4
<TEXT>

<PAGE>
                                                                   EXHIBIT 10.4

                                  OEM AGREEMENT

                          (International/Asia Pacific)





                       Foundry Networks, Inc., as Supplier





                          UTStarcom, Inc., as Purchaser





                         Effective Date: August 10, 2000



UTStarcom, Inc.                                        Foundry Networks, Inc.
1275 Harbor Bay Parkway                                2100 Gold Street
Alameda, CA 94502, USA                                 San Jose, CA 95164, USA
Telephone: 510-864-8800                                Telephone:
Facsimile: 510-864-8802                                Facsimile:



<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>                                                                         PAGE
                                                                            <C>
ARTICLE I TERM OF AGREEMENT; DEFINED TERMS...................................1
         1.01     General Relationship.......................................1
         1.02     Term of Agreement..........................................1
         1.03     Definitions................................................1

ARTICLE II PURCHASE ORDERS; REPORTS..........................................1

         2.01     Issuance and Acceptance of Purchase Orders.................1
         2.02     Invoices...................................................3
         2.03     Rolling [***] Forecast.....................................3
         2.04     Purchase Order Modifications or Cancellations..............3
         2.05     Customization Requirements.................................3
         2.06     Hardware and Software Enhancements.........................4
         2.07     Cost Reduction Program.....................................4
         2.08     Initial Order..............................................4

ARTICLE III DELIVERY AND ACCEPTANCE OF PRODUCTS..............................4

         3.01     Title and Risk of Loss.....................................4
         3.02     Acceptance of Products.....................................4
         3.03     Defective Products.........................................4

ARTICLE IV PRICES: PAYMENT TO THE SUPPLIER...................................5

         4.01     Prices for Products........................................5
         4.02     Payment....................................................5
         4.03     Taxes......................................................5
         4.04     Place of Payment...........................................6

ARTICLE V PROMOTION AND SALE OF PRODUCTS.....................................6

         5.01     Purchaser Trademarks.......................................6
         5.02     Product Labeling...........................................6
         5.03     Supplier Materials.........................................6
         5.04     Adaptation of Documentation and Promotion Literature.......7
         5.05     Technical and Sales Training...............................7
         5.06     Technical Support..........................................8

ARTICLE VI WARRANTIES........................................................8

         6.01     Product Warranties.........................................8
         6.02     Proprietary Rights Warranties..............................9
         6.03     Proprietary Rights Indemnification.........................9
         6.04     Disclaimer of Warranties...................................9
</TABLE>

                                     -i-
<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)
<TABLE>
<CAPTION>
<S>                                                                         PAGE
                                                                            <C>
ARTICLE VII TERMINATION......................................................9

         7.01     Termination................................................9
         7.02     Termination for Insolvency or Bankruptcy..................10
         7.03     Rights Upon Termination...................................10
         7.04     Return of Materials.......................................10
         7.05     No Liability..............................................10

ARTICLE VIII MISCELLANEOUS..................................................10

         8.01     Limitation of Liability...................................10
         8.02     Entire Agreement..........................................11
         8.03     Relationship of Parties...................................11
         8.04     Confidentiality...........................................11
         8.05     Survival of Maintenance Obligations.......................12
         8.06     Notices...................................................12
         8.07     Force Majeure.............................................12
         8.08     Governing Law.............................................13
         8.09     Binding Effect............................................13
         8.10     Exhibits..................................................13
         8.11     Severability..............................................13
         8.12     Headings..................................................13
         8.13     Remedies Cumulative.......................................13
         8.14     Delays or Omissions.......................................13
         8.15     Survival of Terms.........................................13
         8.16     Nonexclusive Market and Purchase Rights...................14
         8.17     Software Licenses.........................................14
         8.18     Choice of Language........................................14
         8.19     Export Control and Related Provisions.....................14

EXHIBITS
Exhibit 1         Description of Products
Exhibit 2         International Price List
Exhibit 3         Initial Forecasted Volumes
Exhibit 4         Time Schedule
Exhibit 5         Foundry Networks Service Guide
Exhibit 6         Customization
Exhibit 7         Return Material Authorization Procedure

</TABLE>
                                     -ii-

<PAGE>

                                  OEM AGREEMENT

         THIS OEM AGREEMENT (the "AGREEMENT") is made and entered into as of
the date set forth on the cover page hereof (the "Effective Date"), between
Foundry Networks, Inc. (the "SUPPLIER"), and UTStarcom, Inc. a Delaware
corporation and on behalf of its subsidiaries (the "PURCHASER").

         The Supplier develops, manufactures, produces and/or supplies
high-performance networking products and desires to grant to the Purchaser
the right to sell and market certain of such products, and combine same with
other products manufactured, produced and supplied by the Supplier, all upon
the terms and conditions set forth in this Agreement. The Purchaser develops,
manufactures and/or sells and distributes telecommunications access and
networking products and desires to have the right to sell and market the
Supplier's products upon the terms and conditions in this Agreement within
the "Territory" as defined in Article 1.04 (xi) below.

         NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

                                    ARTICLE I

                        TERM OF AGREEMENT; DEFINED TERMS

         1.01   GENERAL RELATIONSHIP. During the term of this Agreement, the
Supplier agrees to make available and sell to the Purchaser the Products (as
defined in Section 1.04 of this Agreement) set forth in Exhibit 1 in
accordance with the terms and conditions set forth herein.

         1.02   TERM OF AGREEMENT. The term of this Agreement shall commence
on the Effective Date and shall remain in full force and effect for one year
or until terminated by either party as set forth herein.

         1.03   EXCLUSIVITY. As a result of preexisting relationships the
Supplier is unable to offer non-exclusive rights to the Purchaser to sell
Products in the Territory. Notwithstanding, the Supplier hereby warrants and
represents that it will not actively recruit any entity or individual to sell
Products to any Telecom Carrier in [***] (as defined in Section 1.04 of the
Agreement) in the Territory. If minimum revenue projections are not met after
initial [***] of this agreement, supplier may notify the Purchaser, in
writing, of its intent to seek additional distribution partners.

         1.04   DEFINITIONS As used in this Agreement, the following terms
shall have the meanings indicated, unless the context clearly indicates
otherwise:

         (i) "APPLICABLE SPECIFICATIONS" means the functional performance,
operational and compatibility characteristic of a Product agreed upon in
writing by the parties or, by mutual agreement of the parties, as described
in applicable Documentation.

<PAGE>

         (ii) "CUSTOMERS" means distributors, dealers, resellers, value-added
resellers, system integrators and other similar customers of the Purchaser,
including End Users.

         (iii) References to "dollars" and "$" refer to United States currency.

         (iv) "DOCUMENTATION" means user manuals, training materials, product
descriptions and specifications, technical manuals, license agreements,
supporting materials and other printed information relating to the Products,
whether distributed in print, electronic or video format, in effect as of the
date of the applicable purchase order relating thereto.

         (v) "END USERS" means final retail purchasers or licensees who acquire
Products for their own use and not for resale, re-marketing or redistribution.

         (vi) "PRODUCTS" means, individually or collectively as appropriate, the
hardware, licensed software, Documentation, supplies, accessories and other
commodities related to any of the foregoing as set forth in Exhibit 1 and
customized in accordance with the requirements set forth in Exhibit 6 and which
are to be provided by the Supplier pursuant to this Agreement.

         (vii) "PURCHASE ORDER" means an official document, signed by an
authorized employee of the Purchaser, which is used to place product orders with
the Supplier.

         (viii) "PURCHASER TRADEMARKS" means any existing or future trademarks
that are registered by the Purchaser in the US or other countries.

         (ix) "SERVICES" means any warranty, maintenance, advertising, marketing
or technical support and training and any other services performed or to be
performed by the Supplier.

         (x) "TELECOM CARRIER" means any provider of voice or data transmission
services within the Territory, including but not limited to [***] and/or any
subsidiaries of such Telecom Carriers.

         (xi) "TERRITORY" means the countries, regions and territories as
defined in Exhibit 2. This list may be ammended from time to time by mutual
agreement of the parties.

                                   ARTICLE II
                            PURCHASE ORDERS; REPORTS

         2.01     ISSUANCE AND ACCEPTANCE OF PURCHASE ORDERS. The Purchaser may
purchase, and the Supplier shall sell to the Purchaser, Products as described
below;

                  (a)      The Purchaser may issue to the Supplier Purchase
Orders based on the prices listed in Exhibit 1 identifying the Products that the
Purchaser desires to purchase from the Supplier. Each Purchase Order for
Products shall be signed by an authorized representative of the Purchaser, and
shall clearly state the following:

                               (i)    Purchase Order number,

                               (ii)   Purchase order date,

                               (iii)  a description of the Product(s) ordered,

                               (iv)   Purchaser's Product number,

                               (v)    number of units of Product ordered,

                               (vi)   agreed cost per unit, the total price for
the Purchase Order,

                               (vii)  delivery date(s) requested for each
Product included in the Purchase Order (which delivery dates may not be later
than [***] after the date on which the Purchase Order is submitted by the
Purchaser),

                               (viii) address to which the Products described
in the Purchase Order are to be shipped, and

                               (ix)   address to which the Products described
in the Purchase Order are to be invoiced.

                  (b)      A Purchase Order may include other terms and
conditions which are consistent with the terms and conditions of this Agreement
or which are necessary to place a Purchase Order. Purchase Orders may be placed
by the Purchaser by facsimile or electronically transferred to the Supplier.
Terms and conditions on Purchase Orders which differ from those contained in
this Agreement shall not be valid unless specifically agreed in writing by an
authorized representative of the Supplier.

                  (c)      All Purchase Orders shall be transmitted to the
address set forth in Section 8.06.

                  (d)      A Purchase Order shall be deemed accepted by the
Supplier only after a written confirmation thereof has been issued by the
Supplier and delivered to the Purchaser. The Supplier shall issue such
written confirmation within [***] after receipt of the Purchase Order. If
such confirmation has not been issued within the [***] period, the Purchase
Order shall be deemed to be accepted by the Supplier. Without limiting the
generality of the foregoing, the Supplier may reject any Purchase Order that
fails to contain any of the information required to be set forth by Section
2.01(a). In the event of a conflict between the provisions of this Agreement
and the terms and conditions of a Purchase Order or the Supplier's
confirmation or other written communications, the provisions of this
Agreement shall prevail and be controlling.

                                      -2-
<PAGE>

                  (e)      Upon the termination of this Agreement, the Supplier
agrees to accept Purchase Orders from the Purchaser for additional Products
which, at the time of such termination, the Purchaser is contractually obligated
to furnish to its Customers and does not have in its inventory, provided that
the Purchaser notifies the Supplier of all such obligations in writing within
[***] of such date of termination.

                  (f)      This Agreement shall not obligate the Purchaser to
purchase any Products or Services, except as specifically set forth in a written
Purchase Order from the Purchaser or as otherwise set forth herein.

         2.02     INVOICES. For each shipment of Products to the Purchaser,
the Supplier shall transmit to the Purchaser an invoice which sets forth the
Purchaser's Purchase Order number, the Products shipped, the Supplier's and
the Purchaser's Product number and the price therefore.

         2.03     ROLLING [***] FORECAST. No later than [***] after the end
of each [***], the Purchaser shall deliver to the Supplier an updated,
non-binding, forward-looking rolling unit order forecast (each, a "ROLLING
[***] FORECAST") for each Product for the subsequent [***] period, to enable
the Supplier to plan production to meet the lead times anticipated. The
Rolling [***] Forecast is not an order or a commitment by the Purchaser to
purchase Products. Rolling [***]Forecasts shall be transmitted to the
Supplier via electronic mail or by such other means as may be agreed between
the Supplier and the Purchaser. Exhibit 4 sets forth the initial forecasted
volumes.

         2.04     PURCHASE ORDER MODIFICATIONS OR CANCELLATIONS.

                  (a)      Prior to shipment of Products, the Supplier shall
accept a modification to a Purchase Order in order to:

                               (i)  change a location for delivery,

                               (ii) change dates for delivery of Products
provided that said new delivery dates remain within the Suppliers' fiscal
quarter of the original shipment date, or

                               (iii) correct typographical or clerical
errors; provided, however, that notices of modification must be received by
the Supplier at least [***] prior to the original shipment date.

                  (b)      The Purchaser will confirm [***] before end of
[***]the forecasting of the following [***] by PO for delivery of orders
consistent with the Suppliers then current lead times. In the case that the
PO quantity is less than the forecasting quantity, the over-forecasted
quantity will be shifted to the [***] following. In the case that the PO is
larger than the forecasted quantity, Foundry Networks will make reasonable
efforts to satisfy the demand for non-forecasted units.

         2.05     CUSTOMIZATION REQUIREMENTS. In accordance with the time
schedule in Exhibit 4, the Supplier will modify the Products to fulfill the
customization requirements in Exhibit 6.


                                      -3-
<PAGE>

         2.06     Hardware and Software Enhancements. Should the Supplier
change, improve or add any enhancements to a Product at any time during the
term of this Agreement, the Supplier shall provide at least [***] notice to
the Purchaser of same prior to the implementation thereof. The Supplier will
make available to the Purchaser each new version of software made available
by the Supplier from time to time to its customers generally. With respect to
modifications in software and the rendition of other services that may be
requested of the Supplier by the Purchaser, the provision of same shall be as
mutually agreed by the parties, and without limiting the generality of the
foregoing, the Supplier may charge for such modifications or other services
[***]. Modifications to software and changes in product features which are
not part of the Supplier's standard releases are not part of this Agreement,
except to the extent set forth in Exhibit 5 and as the Supplier may otherwise
agree in writing. At the request of the Purchaser and upon the agreement of
the Supplier, such modifications or other services may be provided at a
pre-determined price.

         2.07     COST REDUCTION PROGRAM. The Parties agree to cooperate to
ensure that the Supplier's manufacturing of the Products at any time is
performed in the most cost efficient way hereunder on [***] basis to evaluate
the possibility of conducting a cost reduction program. The parties agree
that all cost reductions should be to the benefit of both Parties and as such
reflected in the prices for the Products.

         2.08     INITIAL ORDER. The Purchaser will place an initial order
for [***] to be used as a Test/Demonstration System ("TDS") in accordance
with the time schedule of Exhibit 4.


                                   ARTICLE III

                       DELIVERY AND ACCEPTANCE OF PRODUCTS

         3.01     TITLE AND RISK OF LOSS. Title to Products shall pass to the
Purchaser at the time that the Products are delivered to the [***]. Products
shall be shipped [***]. All risk of loss or damage to the products shall be
borne by the Supplier until delivery to the [***].

         3.02     ACCEPTANCE OF PRODUCTS. Acceptance of the TDS by Purchaser
will be based upon mutually agreed tests and success criteria. Each Product
shipment thereafter will be deemed accepted by Purchaser upon delivery to the
[***].

         3.03     DEFECTIVE PRODUCTS. In the event that any Products are
received by the Purchaser in a defective condition or not in accordance with
the Applicable Specifications, including the Purchaser's customization
requirements therefore or the Documentation relating to such Products
(collectively, "DEFECTIVE PRODUCTS"), the Purchaser may return such Defective
Products to the Supplier in the manner set forth in Section 6.01(b). The
Purchaser shall have the right to return any such Defective Products within
sixty (60) days after delivery and in accordance with any applicable warranty
with respect thereto.


                                      -4-
<PAGE>

                                   ARTICLE IV

                         PRICES: PAYMENT TO THE SUPPLIER

         4.01     PRICES FOR PRODUCTS. The price for each Product purchased
by the Purchaser pursuant hereto shall include the agreed discount on the
Supplier's list price for such Product.

                  (a)      The prices set forth in Exhibit 1 shall be discounted
according to the Discount Schedule and Forecasted Volumes of Exhibit 3. The
Parties will on a [***] basis negotiate the discounts and prices based on the
previous actual volume purchased and the future forecast. Furthermore, the
Parties agree to reevaluate prices if significant changes in market conditions
occur, and as Supplier's cost of manufacturing permits.

                  (b)      The Supplier agrees that [***] discount will be
granted on the project base in order to win the business.

                  (c)      Supplier will update the price list once the new
one is available to any other distributors, resellers or its repesent offices.

         4.02     PAYMENT. The Supplier shall invoice the Purchaser no
earlier than the applicable shipping date for the Products covered by such
invoice.

                  (a)      The Purchaser shall submit to Supplier payment for
any Purchase Order:

                               (i)  within [***] of the date of shipment of
the Products on such Purchase Order paid by company check issued in Alameda,
California.

                  (b)      Invoices that are unpaid at their due date, shall
bear interest at a rate of [***] or the maximum rate allowed by law,
whichever is less, until paid by Purchaser.

                  (c)      If deliveries are made in installments, the
invoice with respect to each shipment shall be paid when due without regard
to the other scheduled deliveries.

         4.03     TAXES. All payments to the Supplier hereunder shall be made
free and clear of and without reduction by reason of any taxes, levies, costs
or charges whatsoever imposed, assessed, levied or collected by any
government, political subdivision, jurisdiction or taxing authority, all of
which shall be for the account of the Purchaser and paid when due by the
Purchaser, unless the Purchaser shall have provided the Supplier with a valid
resale exemption certificate with respect thereto. Notwithstanding the
foregoing, if, under any applicable law, the Purchaser is required to
withhold tax or any other amount from any payment to the Supplier, the amount
due from the Purchaser to the Supplier shall be increased to the amount that
the Supplier would have received if no withholding had been required.


                                      -5-
<PAGE>

         4.04     PLACE OF PAYMENT. The Purchaser shall pay all amounts due
to the Supplier into such account as the Supplier may designate in U.S.
dollars. Payment shall be deemed to have been made only upon receipt of full
payment in the account specified pursuant hereto.

                                    ARTICLE V

                         PROMOTION AND SALE OF PRODUCTS

         5.01     PURCHASER TRADEMARKS. The Purchaser authorizes the Supplier
to apply the Purchaser's name or Purchaser Trademarks to the Products, as
directed by the Purchaser, for the sole purpose of supplying Products
pursuant to this Agreement. The Supplier shall acquire no right to the
Purchaser Trademarks by its use thereof, and may use the Purchaser Trademark
for the duration of this Agreement only to the extent specified herein. Any
such use of Purchaser Trademarks by the Supplier shall be to the Purchaser's
benefit.

                  (a)      The Purchaser shall retain the sole and exclusive
right, in its discretion, to bring legal action for trademark infringement with
respect to any of the Purchaser Trademarks.

                  (b)      The Purchaser agrees to indemnify and hold the
Supplier harmless from and against an and all actions, claims, losses and
damages (including reasonable attorneys' fees and court costs) arising out of or
in connection with the use of any Purchaser Trademark by the Supplier pursuant
to the terms of this Agreement.

                  (c)      The Purchaser agrees that it will not use any trade
names and trademarks of or licensed to the Supplier, all of which shall remain
the property of the Supplier. The Purchaser agrees not to contest any trade
names or trademarks of or licensed to the Supplier, or make application for
registration of any trade names or trademarks of or licensed to the Supplier,
without the Supplier's prior written consent. The Purchaser agrees not to use,
employ or attempt to register any trade names or trademarks that are confusingly
similar to the trade names or trademarks of or licensed to the Supplier.

                  (d)      The Purchaser shall provide the Supplier the
applicable templates and computer graphic files necessary to create the
logos/markings requested to be affixed to the products ordered by the Purchaser.
Supplier requests that these materials be provided at least [***] prior to first
shipment where this is required by the Purchaser.

         5.02     PRODUCT LABELING. All Products will be shipped to the
Purchaser as set forth in Exhibit 6.

         5.03     SUPPLIER MATERIALS. The Supplier agrees to provide upon the
Purchaser's request, [***], the following materials in media form with
respect to the Products: (i) the specifications, (ii) published user
instructions, manuals and other training materials, (iii) current manuals
covering installation, operation and maintenance of the Products, and (iv)
software. (v) Sales Tools such as presentation slides, competition analysis
and demonstration software, etc. The Purchaser shall have


                                      -6-
<PAGE>

the right to copy or reproduce the foregoing materials for use in connection
with the Purchaser's use, sale or support of the Products, or its support
thereof pursuant to Section 5.06, provided that the Purchaser makes no
modifications in such copied or reproduced materials without the prior
written consent of the Supplier and all designations or references therein of
or relating to the intellectual property rights of the Supplier shall be
maintained (including, without limitation, all references to the Supplier's
copyright and other intellectual property rights. The Purchaser shall include
with each Product delivered to a Customer a license agreement if so required
by the Supplier and warranty in the form promulgated by the Supplier (with
appropriate changes to reflect the OEM relationship between he Supplier and
the Purchaser).

         5.04     ADAPTATION OF DOCUMENTATION AND PROMOTION LITERATURE. The
Purchaser may translate into languages other than the English language such
of the Suppliers user manuals, product descriptions and specifications,
technical manuals, license agreements and other printed information relating
to the Products as shall be determined to be appropriate by the Purchaser.
The Purchaser shall own all rights in all such translated adaptations to
promotional materials, including, without limitation, rights to all local
language translations of the Supplier's user manuals, product descriptions
and specifications, technical manuals, license agreements and other printed
information relating to the Products. In connection therewith, the Purchaser
shall take appropriate action to secure copyrights with respect to all such
translated adaptations. The Supplier will review any translated materials for
correctness if so requested by the Purchaser but will not be bound by any
documents not printed by Supplier. The Supplier shall execute any and all
documents and/or instruments deemed by the Purchaser to be necessary or
appropriate to effect the assignments hereinabove described.

         5.05     TECHNICAL AND SALES TRAINING.

                  (a)      TRAINING SERVICES. During the term of this Agreement,
Supplier shall, at [***] expense, provide Purchaser at such location as
designated by Purchaser, with one day of training for the Purchaser Sales Force,
one day of training for Purchaser Field Sales Engineers and one day of training
per Product of engineering level training for Purchaser's employees engaged in
tier two technical support of the Products, to be conducted one day each at
Purchaser's premises in [***] or another location if agreed upon between the
Parties.

         Sales training will cover the [***] market, competition and product
features and benefits. The other training modules shall cover in detail, the
installation, configuration, operation, trouble shooting, adjustment, test and
maintenance of the product.

                  (b)      TRAINING MATERIALS. During the term of this
Agreement, Supplier shall, at [***] expense, provide Purchaser with all
materials utilized to provide training in connection with the Product(s),
materials as they become available. Such training shall include, but is not
limited to, Purchaser sales, Purchaser Field Sales Engineers, and Technical
Support courses. Training materials shall include, but are not limited to,
instructor guides, overheads, student workbooks, and manual/guides. Purchaser
shall have the right to reproduce and distribute copies of all training
materials, related documents and recordings under Purchaser's name to trainees
in training courses offered by Purchaser. All training material shall be
provided electronically.


                                      -7-
<PAGE>

                  (c)      The Supplier shall provide electronic mail access or
access to a private web account for software updates and bulletins, which
include known problems, work arounds, expected fixes and matters of a similar
nature.

                  (d)      In connection with the technical and sales training
and assistance described in this Section 5.05, the cost and expense of the
Purchaser's personnel in attending same shall be borne by the [***].

         5.06     TECHNICAL SUPPORT. During the term of this Agreement, the
Supplier shall provide technical support as set forth in Exhibit 5.

                                   ARTICLE VI

                                   WARRANTIES

         6.01     PRODUCT WARRANTIES. The Supplier warrants that each Product
will be free from defects in design, materials and workmanship and will
perform in conformance with the Applicable Specifications and Documentation
with respect to such Product, including the customization requirements set
forth in Exhibit 6. The period of warranty shall be [***] from the date of
delivery of such Product to the Purchaser. Software is warranted for [***]
from date of delivery, except for the software bug fixes which should be
warranted to [***].

                  (a)      During the warranty period set forth in this Section
6.01, the Purchaser's [***] remedy in the event of such defect or failure to
perform is [***] limited to the correction of the defect or failure by repair,
refurbishment or replacement, at the Supplier's sole option and expense. During
the warranty period, change orders and maintenance revision upgrades will be
provided upon request and as may be needed for proper operation of Products. The
Supplier reserves the right, in connection with the replacement of returned
Products or the repair of Products returned for repair, to use parts and
components (including refurbished parts and components) that are like new or
equivalent in performance to the original part or component. Replaced products,
parts or components shall become the property of the Supplier.

                  (b)      Claims by the Purchaser with respect to Defective
Products shall be made as follows: (i) claims shall be made in accordance with
the Return Material Authorization procedure of the Supplier set forth in Exhibit
7 as same may be amended from time to time on at least [***] notice to the
Purchaser.

                  (c)      Notwithstanding the foregoing, the Supplier shall
have no liability pursuant to Section 6.01 with respect to defects arising in
Products through: (i) normal wear and tear or obsolescence, (ii) causes external
to the Products (such as, for example, unusual physical stress, power failure or
unusual environmental conditions), and (iii) any cause other than ordinary use
(such as, for example, accident, fire, lightning, water damage, neglect, misuse,
improper installation or testing, or unauthorized attempts to repair, alter or
modify).


                                      -8-
<PAGE>

         6.02     PROPRIETARY RIGHTS WARRANTIES. The Supplier warrants that,
to the best of its knowledge, it has all right, title, ownership interest
and/or marketing rights necessary to provide the Products to the Purchaser,
and the Products and their sale and use hereunder do not infringe upon any
copyright, patent, trademark, trade secret or other proprietary or
intellectual property right of any third party.

         6.03     PROPRIETARY RIGHTS INDEMNIFICATION. The Supplier agrees to
indemnify and hold the Purchaser harmless from and against any and all
actions, claims, losses and damages (including reasonable attorneys' fees and
court costs) arising out of or in connection with any breach or alleged
breach of the warranties set forth in Section 6.02, provided that the
Supplier is notified promptly in writing thereof and is given complete
authority and information required for the defense thereof. The Purchaser
shall have the right to participate in the defense of any such suit or
proceeding at the Purchaser's expense and through counsel of its choosing. In
the event that an injunction is sought or obtained against the use of a
Product, the Supplier shall, within [***] of its receipt of notice thereof,
at [***] option and expense: (i) procure for the Purchaser and its Customers
the right to continue to use the infringing Product as set forth in this
Agreement, or (ii) replace the Product with a non-infringing alternative, or
(iii) modify the infringing Product to make its use non-infringing. The
Supplier shall have no liability under Section 6.02 or under this Section
6.03 for any infringement based on the use of any Product (including, without
limitation, software), if the Product (or software) is used in a manner or
with equipment for which it was not reasonably intended, or if the Product
(or software) is used in an infringing process.

         6.04     DISCLAIMER OF WARRANTIES. THE WARRANTIES SET FORTH IN THIS
ARTICLE VI ARE THE ONLY WARRANTIES MADE BY THE SUPPLIER PURSUANT TO THIS
AGREEMENT. EXCEPT FOR SUCH WARRANTIES, THE SUPPLIER MAKES, AND THE PURCHASER,
ITS CUSTOMERS AND END USERS OF PRODUCTS RECEIVE, NO OTHER WARRANTY, EXPRESS
OR IMPLIED, AND THE SUPPLIER EXPRESSLY DISCLAIMS AND EXCLUDES ALL OTHER
WARRANTIES. NO REPRESENTATION OR OTHER AFFIRMATION OF FACT, INCLUDING,
WITHOUT LIMITATION, STATEMENTS REGARDING CAPACITY, SUITABILITY FOR USE OR
PERFORMANCE OF THE PRODUCTS PROVIDED HEREUNDER, WHETHER MADE BY THE
SUPPLIER'S EMPLOYEES OR OTHERWISE, WHICH IS NOT CONTAINED IN THIS AGREEMENT,
SHALL BE DEEMED TO BE A WARRANTY BY THE SUPPLIER FOR ANY PURPOSE, OR GIVE
RISE TO ANY LIABILITY OF THE SUPPLIER WHATSOEVER.

                                   ARTICLE VII

                                   TERMINATION

         7.01     TERMINATION. Either party may terminate this Agreement,
with or without cause, upon giving the other party at least [***] prior
written notice. In case of termination by Supplier, Purchaser may in the [***]
 notice period place a non-cancelable last-time-buy order for such Products
at [***].


                                      -9-
<PAGE>

         In the event that either party materially defaults in the performance
of any of its duties or obligations set forth herein this Agreement, and such
default is not substantially cured within [***] after written notice is given to
the defaulting party specifying the default in reasonable detail, then the party
not in default may, by giving written notice thereof to the defaulting party,
terminate this Agreement or the applicable Purchase Order relating to such
default as of the date specified in such notice of termination.

         7.02     TERMINATION FOR INSOLVENCY OR BANKRUPTCY. Either party may
immediately terminate this Agreement and any Purchase Order by giving written
notice to the other party in the event of any of the following: (i) the
liquidation or insolvency of the other party; (ii) the appointment of a
receiver or similar officer for the other party; (iii) an assignment by the
other party for the benefit of all or substantially all of its creditors;
(iv) the entry by the other party into an agreement for the composition; (v)
extension or readjustment of all or substantially all of its obligations; or
(vi) the filing of a meritorious petition in bankruptcy by or against the
other party under any bankruptcy or debtors' law for its relief or
reorganization.

         7.03     RIGHTS UPON TERMINATION. The termination of this Agreement
or any Purchase Order shall not affect the Supplier's right to be paid for
Products previously shipped. The termination of this Agreement shall not
affect any of the Supplier's warranties, indemnifications or obligations
relating to returns, credits or any other matters set forth in this Agreement
that by their nature are to survive termination in order to carry out their
intended purpose, all of which shall survive the termination of this
Agreement. The termination of this Agreement shall not affect the obligations
of either party to the other party pursuant to any Purchase Order previously
accepted and confirmed by the Supplier.

         7.04     RETURN OF MATERIALS. In the event of the termination of
this Agreement, the Purchaser shall promptly return to the Supplier all sales
materials, specifications, drawings and other technical documents (including
all copies thereof received from the Supplier under this Agreement as
directed by the Supplier. The provisions of Section 7.04 shall survive the
termination of this Agreement.

         7.05     NO LIABILITY. Upon the termination of this Agreement, the
Supplier shall not be liable or obligated to the Purchaser with respect to
any payments, future profits, exemplary, special or consequential damages,
indemnification or other compensation regarding such termination,
irrespective of whether such obligations or liabilities may be contemplated
by the law(s) of the governments of any jurisdiction in which Products of the
Supplier are sold or marketed by the Purchaser, and the Purchaser hereby
waives and relinquishes any rights, pursuant to law or otherwise, to any such
payments, indemnifications or compensation.

                                  ARTICLE VIII

                                  MISCELLANEOUS

         8.01     LIMITATION OF LIABILITY. THE SUPPLIER SHALL HAVE NO
LIABILITY FOR ANY LOSS OF PROFIT OR OTHER COMMERCIAL DAMAGE, INCLUDING,
WITHOUT


                                      -10-
<PAGE>

LIMITATION: INCIDENTAL, CONSEQUENTIAL, INDIRECT, SPECIAL OR PUNITIVE DAMAGES
OF ANY KIND; LOSS OF, OR DAMAGE TO, THE PURCHASER'S OR ANY END USER'S RECORDS
OR DATA; THIRD PARTY CLAIMS AGAINST THE PURCHASER; OR LOSS OF REVENUE, LOSS
OF BUSINESS OR OTHER FINANCIAL LOSS ARISING OUT OF OR IN CONNECTION WITH ANY
PRODUCTS SOLD OR LICENSED BY THE SUPPLIER TO THE PURCHASER OR TO ANY END USER
OF PRODUCTS, EVEN IF THE SUPPLIER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.

         8.02     ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties relating to the subject matter contained herein
and supersedes all prior agreements and understandings, written or oral,
relating to the subject matter hereof. This Agreement shall not be modified,
amended or terminated except in a writing signed by both parties.

         8.03     RELATIONSHIP OF PARTIES. The relationship of the parties
under this Agreement shall be, and at all times remain, that of independent
contractors, and the Purchaser is neither an employee nor an agent of the
Supplier nor is the Purchaser authorized to represent itself, directly or by
implication, as such.

         8.04     CONFIDENTIALITY. Each party acknowledges that in the course
of performance of its obligations pursuant to this Agreement, it may obtain
certain Confidential Information (as defined herein in Section 8.04(a)) of
the other party. Each party hereby agrees that all Confidential Information
communicated to it by the other party, its subsidiaries or Customers, whether
before or after the Effective Date, shall be and was received in strict
confidence, shall be used only for purposes of this Agreement, and shall not
be disclosed without the prior written consent of the other party.

                  (a)      As used herein this Agreement, the term "CONFIDENTIAL
INFORMATION" refers to all information proprietary to a party and not generally
known in the industry that is disclosed to or learned by the recipient party in
connection with this Agreement and clearly marked or identified as confidential
or proprietary, whether or not reduced to writing, including, without
limitation: (a) information not generally known in the industry which relates to
the business, products or work of a party: (x) of a technical nature, such as
trade secrets, methods, know-how, formulas, compositions, designs, processes,
information regarding product development and other similar information and
materials, and (y) of a business or commercial nature, such as information or
compilation of data about costs, pricing, profits, compensation, sales, product
plans, markets, marketing plans and strategies, equipment and operational
requirements, operating policies or plans, finances, financial records, methods
of operation and competition, management organization, customers and suppliers,
and other similar information and materials of a party; and (b) any other
technical business or commercial information designated as confidential or
proprietary that a party may receive belonging to any supplier, customer or
others who do business with a party. The foregoing limitations on use and
disclosure shall not apply to information that: (i) was lawfully known to the
receiving party before its receipt thereof; (ii) is learned by the receiving
party from a third party entitled to disclose same; (iii) becomes publicly known
other than through the actions of the receiving party, or (iv) is required by
law or court order to be disclosed by the receiving party.


                                      -11-
<PAGE>

                  (b)      Upon the termination of this Agreement, each party
that has received Confidential Information shall immediately surrender to the
other party all Confidential Information in a receiving party's possession of or
relating to the other party, or in the possession of any person or entity under
the receiving party's control, including all copies thereof, relating directly
or indirectly to any Confidential Information of the other party, or otherwise
relating directly or indirectly to the business of the other party. All
Confidential Information obtained by either party shall remain confidential for
a period of [***] after the termination of this Agreement.

                  (c)      The provisions of this Section 8.04 shall survive the
termination of this Agreement.

                  (d)      The parties will agree in advance to the content and
timing of any Press Releases and SEC filings and also to the existance of this
contract.

         8.05     SURVIVAL OF MAINTENANCE OBLIGATIONS. The Supplier warrants
for a period of [***] after the expiration of the Agreement to provide
Purchaser with new software updates/versions.

         8.06     Notices. Any notice, request, instruction or other document
to be given under this Agreement by a party hereto to the other party shall
be in writing and shall be deemed to have been duly given on the date of
service if delivered personally, or on the third day after mailing if sent by
certified mail, postage prepaid, at the addresses set forth below, or to such
other address or person as a party may designate by written notice to the
other:

         IN THE CASE OF THE SUPPLIER:           IN THE CASE OF THE PURCHASER:
         Foundry Networks, Inc.                 UTStarcom, Inc.
         2100 Gold Street                       1275 Harbor Bay Parkway
         San Jose, CA 95164, USA                Alameda, CA 94502, USA
         Attn.: OEM Contract Administration     Attn.: Russell Boltwood
                                                       Corporate Counsel

         8.07     FORCE MAJEURE. The term "Force Majeure" shall be defined to
include fires or other casualties or accidents, acts of God, fire, flood,
typhoon, peril or accident on the sea, other severe weather conditions,
strikes or other labor disputes (whether lawful or not), war, revolution, not
or other violence, lack of energy, or any other law, order, proclamation,
regulation, ordinance, demand or requirement of any governmental agency, or
any other cause beyond the control of a party.

                  (a) A party whose performance is prevented, restricted or
interfered with by reason of a Force Majeure condition shall be excused from
such performance to the extent of such Force Majeure condition so long as such
party provides the other party with prompt written notice describing the Force
Majeure condition and the causes of nonperformance and immediately continues
performance whenever and to the extent such conditions and causes of
nonperformance cease to exist. Without limitation, obligations with respect to
the payment of monies or other consideration shall not be excused due to the
occurrence of a Force Majeure condition.


                                      -12-
<PAGE>

                  (b) If, due to a Force Majeure condition, the scheduled time
of delivery or performance is or will be delayed for more than [***] after the
scheduled date thereof, the party not relying upon the Force Majeure condition
may terminate, without liability to the other party, any Purchase Order or
portion thereof covering the Products for which delivery has been delayed by the
occurrence of the Force Majeure condition.

         8.08     GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws, other than choice of law rules, of the
State of California and the parties hereby consent to the exclusive
jurisdiction of the courts of the State of California.

         8.09     BINDING EFFECT. This Agreement shall be binding on, and
inure to the benefit of the parties hereto and their respective
representatives, successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned
by either of the parties hereto, whether by operation of law or otherwise,
without the prior written consent of the other party.

         8.10     EXHIBITS. All exhibits attached hereto are incorporated
herein by reference.

         8.11     SEVERABILITY. In the event that any provision contained
herein shall be held to be invalid, illegal or unenforceable for any reason,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.

         8.12     HEADINGS. The headings of the sections and articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof nor affect in any way the meaning or interpretation of this Agreement.

         8.13     REMEDIES CUMULATIVE. Except as herein expressly provided,
the remedies provided herein shall be cumulative and shall not preclude the
assertion by any party of any other rights or the seeking of any other
remedies against any other party, as the case may be.

         8.14     DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing upon any breach or default under this
Agreement shall impair any such right, power or remedy nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or in any similar breach or default thereafter occurring, nor shall
any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character of any breach or default under
this Agreement, or any waiver of any provisions or conditions of this
Agreement, shall be in writing and shall be effective only to the extent
specifically set forth in such writing.

         8.15     SURVIVAL OF TERMS. Termination of this Agreement for any
reason shall not release either party from any liabilities or obligations set
forth in this Agreement which (i) the parties have expressly agreed shall
survive any such termination, or (ii) remain to be performed or by their
nature would be intended to be applicable following any such termination.


                                      -13-
<PAGE>

         8.16     NONEXCLUSIVE MARKET AND PURCHASE RIGHTS. It is expressly
understood and agreed that this Agreement does not grant to the Supplier or
the Purchaser an exclusive right to purchase or sell products and shall not
prevent either party from developing relationships with other vendors or
customers.

         8.17     SOFTWARE LICENSES. Whenever the Products described in this
Agreement shall include software, the Supplier hereby grants to the Purchaser
a nonexclusive license to market, demonstrate and distribute through its
normal channels of distribution such software, in object code only, to
Customers of the Purchaser. The Purchaser agrees to comply with the
Supplier's reasonable software license agreements, and agrees to use
reasonable efforts to protect the Supplier's software, including using
reasonable efforts to avoid allowing Customers, individuals or employees: (i)
to make any unauthorized copies of the Supplier's licensed software; (ii) to
modify, disassemble or decompile any software; (iii) to remove, obscure or
alter any notice of patent, trademark, copyright or trade name; or (iv) to
authorize any person to do anything that the Purchaser is prohibited from
doing under this Agreement.

                  (a) The Purchaser acknowledges that no title or ownership of
the proprietary rights to any software is or will be transferred by virtue of
this Agreement. The Supplier and its licensors retain all title to and, except
as expressly licensed herein, all rights to any software contained in the
Products, all copies and derivative works thereof, related Documentation and
materials and all of their service marks, trademarks, trade names or any other
designations. Any invoices of the Supplier purporting to cover such items do not
convey title to, or patent rights, copyrights or any other proprietary interest
in, such items to the Purchaser.

                  (b) The Purchaser shall use reasonable efforts to protect the
Supplier's rights under this section, but the Purchaser is not authorized and
shall not be required to instigate legal action on behalf of the Supplier or its
suppliers against any third parties for infringement. The Purchaser shall notify
the Supplier of any infringement of which it obtains actual knowledge.

         8.18     CHOICE OF LANGUAGE. The original of this Agreement has been
written in the English language, and the English language version of this
Agreement shall be considered controlling for all purposes.

         8.19     EXPORT CONTROL AND RELATED PROVISIONS. The Purchaser hereby
agrees that it shall not, directly or indirectly, re-export, resell or
otherwise ship or transfer any of the Products, related Documentation, any
technology related thereto, any direct products of such technology, or any
products of which any of the Products is a component (collectively,
"CONTROLLED PRODUCTS") in violation of any prohibitions of the Export
Administration Regulations of the United States Department of Commerce, as
amended from time to time (the "BXA REGULATIONS"), whether such prohibitions
are based on the type of product, the country of destination, the end-user or
end-use of the product or otherwise. The Purchaser shall obtain appropriate
licenses, comply with applicable license exceptions and/or obtain appropriate
written assurances from purchasers or importers as may be necessary for its
activities with respect to the Controlled Products to comply with the BXA
Regulations. The Purchaser further agrees that it shall not, directly or
indirectly, export, re-export, resell or otherwise ship or transfer any
Controlled Products to any countries listed as "embargoed


                                      -14-
<PAGE>

countries" in the Foreign Assets Control Regulations of the United States
Department of the Treasury, as amended from time to time (the "FOREIGN ASSETS
CONTROL REGULATIONS"), without compliance with the Foreign Assets Control
Regulations, including, without limitation, obtaining any required prior
written consent of the United States Office of Foreign Assets Control.

                  (a) The Purchaser warrants that it has not been, and is not
currently, debarred or suspended from or otherwise prohibited or impaired from
exporting, re-exporting, receiving, purchasing, procuring or otherwise obtaining
any item, product, article, commodity or technical data regulated by any agency
of the government of the United States.

                  (b) In all of its activities hereunder or otherwise with
respect to Controlled Products, the Purchaser shall comply with (i) the
anti-boycott provisions of the BXA Regulations and of Section 999 of the United
States Internal Revenue Code and any regulations promulgated thereunder, as
amended from time to time (collectively, the "ANTI-BOYCOTT PROVISIONS"), and
(ii) the United States Foreign Corrupt Practices Act (the "FCPA").

                  (c) The Purchaser's obligations to comply with the BXA
Regulations, Foreign Assets Control Regulations, Anti-boycott Provisions and
FCPA shall apply to the extent that (i) such laws, rules and regulations are
applicable to the Purchaser, or (ii) the Purchaser's noncompliance would cause
the Supplier to be in violation of such laws, rules or regulations.

                           [SIGNATURE PAGE TO FOLLOW]





                                      -15-
<PAGE>


         IN WITNESS WHEREOF, the parties have been caused this Agreement to be
signed and delivered by its duly authorized officer or representative as of the
Effective Date.

SUPPLIER:                                     PURCHASER:

Foundry Networks, Inc.                        UTStarcom, Inc.



By: /s/ Signature Illegible                   By:
                                                   ----------------------------

Title: VICE PRESIDENT [Illegible]             Title:
       Aug. 25, 2000                                  -------------------------







                                      -16-
<PAGE>

                                    EXHIBIT 1

                          DESCRIPTION OF PRODUCTS AND
                   INTERNATIONAL PRICE LIST (IN U.S. DOLLARS)

         The following list prices were published by Supplier on [***] and shall
remain in effect for [***]

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
[GRAPHIC] FOUNDRY NETWORKS
<S>            <C>                                    <C>          <C>
                                                      Int'l List
    [***]               Complete Description           (in US $)      Category
- -------------  -------------------------------------- ------------ -------------
</TABLE>

[***]

<PAGE>

                                    EXHIBIT 2

                                    TERRITORY

         Foundry Networks allows UTStarcom to sell Supplier's products in the
countries, regions and territories listed below. This list may be ammended by
mutual agreement of the parties.

         [***]



<PAGE>

                                    EXHIBIT 3

                 DISCOUNT SCHEDULE AND INITIAL FORCASTED VOLUMES

Discount Schedule

         The following percentage discounts from Supplier's List Prices will
apply for Supplier's Products shipped to Reseller during the [***] period
beginning on the Effective date, and for each subsequent [***] period during the
Term of the Agreement.

         a. A [***] discount will be applied for the first Purchase Order
regarding the TDS (Test and Demo System)

         b. With sufficent detailed forcast for initial [***] day period of this
agreement a [***] discount will be applied [***] subesquent Purchase Orders

         c. If no detailed forecast is provided or if forecast provided is below
minimum of [***] in net purchases for the first [***] of this agreement, an
alternative discount structure, as shown in Exhibit 3, Sec. (d) below, will be
substituted for [***] discounts offered in Exhibit 3, Sec.(a) above. Detailed
forecast is intended to be a [***] forecast as opposed to a [***] forecast.

         d. Alternative discount structure. If Purchaser attains the following
volumes in invoices to Supplier within [***] of the Effective Date of this
agreement, the corresponding discounts will be applied.

<TABLE>
<CAPTION>
                  VOLUME                             DISCOUNT
                  ------                             --------
<S>                                      <C>
                  [***]
</TABLE>

         e. Supplier and Purchaser will review the prices & discount regularly
to meet market and competitive requirements.

         f. Supplier will provide a discount not to exceed [***] under any and
all conditions for the [***] products only.

Initial Forcasted Volumes

         Purchaser forecasts sales within the Territory for the [***] to be as
follows:

         [***]


<PAGE>

                                    EXHIBIT 4
<TABLE>
<CAPTION>
                                  TIME SCHEDULE
<S>    <C>                                                                <C>
1.     Submit Purchase Orders for TDS and Support System                  [***]

[***].

2.     Shipment of the TDS and Support System                             [***]

3.     Training for UTStarcom, Inc. Sales/Support                         [***]

4.     Install TDS                                                        [***]

</TABLE>


<PAGE>


                                    EXHIBIT 5

                         FOUNDRY NETWORKS SERVICE GUIDE


                                  INTRODUCTION

         This Exhibit outlines the service and support requirements for the
Foundry International Service and Support Program. Specifically, this document
outlines Partner requirements with respect to providing maintenance and support
services including technical support, hardware replacement and software upgrades
to its End-Users. For purposes of this document, defined terms are set forth
below.

                                   DEFINITIONS

         "Partner" shall mean any party who purchases Foundry products for
resale or sublicense to End-Users. Partners to include but not be limited to:
Systems Integrators, VAR's, OEM's and Distributors.

         "End-User" shall mean any party who purchases Foundry products from
Partner for their own internal use and not for redistribution.

         "TAC" shall mean each party's telephone technical support center that
provides support in the configuration, operation and diagnosis of Foundry
Products.

         "1st Level Support" shall mean Partner's 24x7 telephone technical
support to directly assist End-Users in the configuration, operation and
diagnosis of Foundry products.

         "2nd Level Support" shall mean the Partner's second level of support
including the engineers in the Partners support organization certified on
Foundry products. These individuals will perform advanced troubleshooting and
diagnosis of the End-User's issues as well as on-site visits when necessary.

         "3rd Level Support" shall mean Foundry TAC Level 3 Engineering
department which is staffed with individuals with many years of industry
experience. These engineers are capable of the highest level of support. This
department has direct access to Foundry Development Engineering and can solve
extremely difficult or unusual problems.



<PAGE>

                          COMMITMENTS AND DELIVERABLES

         The following table sets the agreed upon Foundry and Partner
commitments for the Partners Service and Support Program.

<TABLE>
<CAPTION>
- --------------------- ------------------------- ------------------------------
Support Service       Foundry Commitments       Partner Commitments
- --------------------- ------------------------- ------------------------------
<S>                   <C>                       <C>

[***]

</TABLE>



                                      -2-

<PAGE>

                    FOUNDRY TECHNICAL ASSISTANCE CENTER (TAC)

         The Foundry TAC is the focal point of Foundry support services. Network
Support Engineers (NSEs), who possess detailed knowledge of the complete product
family and all aspects of [***] staff our global TAC located in San Jose,
California. In addition to the TAC personnel, Foundry also has field-based
Network Support Engineers and Systems Engineers available to assist with pre-
and post-sales issues.

         The TAC consists of three groups:

TIER ONE SUPPORT GROUP

         The Tier One Support Group is the first point of contact into Foundry's
TAC. These individuals take the first call, and ensure that the proper
information is entered into the Call Tracking System ("CTS"). In addition, the
FLS staff assists the Partner with simple configuration and problem resolution.

TIER TWO SUPPORT GROUP

         Once a case has been entered into the CTS, a Foundry NSE handles the
case. The NSEs are grouped according to product type and it is their job to work
a case to closure or escalate to the Tier Three Support Group. This strong
teaming aspect within the TAC, and within the product groups, develops
additional experience and leadership.

         The NSEs have access to labs with Foundry equipment, as well as
equipment from other vendors, to assist in recreating whatever problem the
Partner may be experiencing. In addition to the equipment in the labs, the
engineers have access to the most modern analysis tools.

TIER THREE SUPPORT GROUP

         This team is the escalation point from the Tier Two Support Group to
ensure that problems are solved in an expeditious time frame and Partner
satisfaction is maintained.

         This is a group of senior Network Analysts. Program Managers and
Development Engineers dedicated to working on the critical network problems.
This organization is responsible for ensuring all available resources are
applied to the problem so that a resolution can be reached as quickly as
possible for all escalated cases.

FIELD NETWORK SUPPORT ENGINEERING

         In the event that on-site support is required, Foundry has post-sales
field resources available to assist Partners' field resources in restoring an
End-User's network to an operational state. These network engineering resources
are deployed by Foundry's support management.

<PAGE>

         4.1      TAC Process

                  Partner and End-User work on case.
                  Case resolution requires participation by Foundry's TAC.
                  Partner accesses the TAC via methods listed above. A case is
                  opened in Foundry's Call Tracking System (CTS). The call is
                  assigned a customer case tracking number The Partner is
                  advised of the case tracking number for their query. A NSE is
                  assigned to the case and the priority set.
                  The NSE, working with the Partner, is responsible for the case
                  until it is closed.

         4.2      Accessing the TAC

         Foundry offers multiple access methods to reach the 24x7 TAC:

                  7x24x365 telephone at + 1 xxxxxxxxxxxx
                  Email to SUPPORT@XXXXXXXXXXXX
                  Fax to+1 xxxxxxxxxxxx

         4.3      Site ID

         The site ID is a very important piece of the support model. All
Partners under a support services plan will have a site ID that must be used
when calling the TAC. This will ensure the following occurs.

         All information for a particular Partner is consistent in Foundry e's
         database. Partner will see cases that are opened to Partner's site ID
         on the TACtics Online system. Proper escalation and notification of
         problems can occur to proper account management. Any network drawings
         or site specific information are linked and available at time of call.
         Partner receives the proper level of service.

         If the site ID is unknown, an email should be sent to support @
Foundry.com that provides detailed company information and the Foundry Service
group will provide the correct site ID.

         4.4      Case Priority Matrix

         Cases opened in the TAC are given a severity level agreed upon between
the NSE and the Partner as follows:


                                      -2-
<PAGE>
<TABLE>
<CAPTION>
- ------------------- ------------------------------- --------------------------
SEVERITY LEVEL      PRODUCTION NETWORK              COMMITMENT
- ------------------- ------------------------------- --------------------------
<S>                 <C>                             <C>
Critical                     [***]                           [***]
- ------------------- ------------------------------- --------------------------

High                         [***]                           [***]
- ------------------- ------------------------------- --------------------------

Medium                       [***]                           [***]
- ------------------- ------------------------------- --------------------------

Low                          [***]                           [***]
- ------------------- ------------------------------- --------------------------
</TABLE>

         Based on the level of severity of the case (i.e., critical, high,
medium, low), the appropriate NSE is assigned to the case.

         For problems of a critical and/or high nature, automatic notifications
are sent out to notify appropriate Foundry management (both field and internal)
of problem severity and status.



                                      -3-
<PAGE>


                                HARDWARE SUPPORT

         The following describes hardware replacement via a Return Material
Authorization (RMA). The process for submitting an RMA is described in Section
9.

         5.1      Advance Replacement

         Parts (serial number based) covered under this option will be shipped
out for advance replacement once the RMA is received and issued by the RMA
department, Monday through Friday. The part can be shipped to either the Partner
or the End-User and this be will determined at time of the RMA. Foundry may, at
[***] option, issue a new or reconditioned, good-as-new part.

         It is the responsibility of the Partner to retrieve the defective part
and return the same to Foundry within [***] of the receipt of the replacement
part. Equipment not received by Foundry within [***] will be invoiced to the
Partner at then-current list price.

         5.2      Return Material Authorization (RMA) Process

                  1   Partner calls TAC and establishes a Customer Case number.
                  2   TAC will assist where necessary in initial fault
                      information.
                  3   TAC/Partner will determine what part needs to be replaced
                      and obtain serial number.
                  4   Case is transferred to the RMA department.
                  5   RMA department will check for hardware support option and
                      issue Partner an RMA number.

         Equipment returned without a valid RMA number will be rejected by
Foundry's receiving department.

         5.3      Return of Defective Product

         Defective product must be returned to Foundry within [***] of receipt
of the advance replacement. Partner will be billed the full value of the product
if not returned within [***].

         The product must be properly packaged, WITH THE RMA NUMBER CLEARLY
MARKED ON THE OUTSIDE OF THE BOX, and shipped prepaid to the following address:

         Foundry, Inc.
         Xxxxxxxxxx
         xxxxxxxxxx
         United States of America

         Equipment returned without a valid RMA number will be rejected by
Foundry's receiving department.


                                      -4-
<PAGE>

         Telephone: +1 xxxxxxxxxx

         Facsimile: +1 xxxxxxxxxxx

         Only the affected part needs to be returned.

         Foundry product repairs in process or en route prior to the inception
of this support plan shall be repaired according to the terms and conditions in
place at the time the Foundry product was submitted for repair.

         Per customs regulations, Foundry is required to list fair market value
(i.e. what Partner originally paid for the product) on the commercial invoice
for customs purposes only. Foundry cannot alter these prices. All duties and
taxes are the sole responsibility of [***]. [***] is responsible for registering
the defective product with their country prior to exporting in order to apply
for duty drawback after the product is re-imported. If special verbiage or
documentation is required to facilitate entry of a Foundry product into a
particular country, it is [***] responsibility to provide such verbiage or
documentation prior to the shipment of a Foundry product. Foundry reserves the
right to refuse special requests if it is felt to be in violation of standard
customs regulations.

                                     PRICING

         Foundry will provide support services [***] for the [***] period of
this agreement. At the end of this [***] period, support services pricing will
be jointly re-evaluated between UTStarcom and Foundry.

         The support services fee must be included as a separate item on all
Partner purchase orders. Orders that do not include support services fees will
be rejected.

<TABLE>
<CAPTION>
- --------------------------------------------------- ---------------------------
ADDITIONAL FOUNDRY SERVICE                          PRICE AS SPECIFIED
- --------------------------------------------------- ---------------------------
<S>                                                 <C>
On-site assistance for non-Foundry problem:         [***]
- --------------------------------------------------- ---------------------------

Assistance with modem configuration or delay
caused by improper modem configuration [***]
delay maximum before charge is applied:             [***]
- --------------------------------------------------- ---------------------------
</TABLE>

                               END-OF-LIFE SUPPORT

         Partner will be notified when Foundry announces end-of-life on a
product. At that time, Partner will be authorized to procure Foundry product for
a last-buy to satisfy the requirements of their End-Users.


                                      -5-
<PAGE>

         Foundry will support a particular product for a period of [***] after
announced end-of-life. The support will only include critical bug fixes as well
as hardware (or functionally equivalent hardware) RMA support during this time
period.

                                    EXHIBIT 6

                                  CUSTOMIZATION

         Both parties should make sure that the product delivered with all
modification is done no later than [***] after the signature date of this
agreement.

         The Supplier's products will be modified to reflect purchaser's
requirements as listed below.

CUSTOMIZED HARDWARE DELIVERABLES:

         The following is an overview of the customization requirement to be
done by Supplier on every product and shipped to Purchaser:

         [***]

CUSTOMIZED SOFTWARE DELIVERABLES:

         The following is an overview of the customization requirement to be
done by Supplier on every software or management product and shipped to
Purchaser:

         [***]

CUSTOMIZATION SCHEDULE:

- -        Product Drawings (including Modules)

         Date: TBD     Supplier will send Mechanical and label drawings to
                       Purchaser.

         Date: TBD     Purchaser returns drawings to Supplier with [***] and
                       [***].

- -        Product User Manual

         Date: TBD     Send Supplier User Manual in Word/ASCII format to
                       Purchaser.

         Date: TBD     UTStarcom, Inc. returns finished UTStarcom, Inc. User
                       Manual with production specifications.



                                      -6-
<PAGE>

                                    EXHIBIT 7

                 RETURN MATERIAL AUTHORIZATION (RMA) PROCEDURES

         1.   The Purchaser fills in a RMA problem form (see attachment
below) which describes the particular problem and the serial number of the
Product. The form is faxed or e-mailed to the contact person (for RMA) at the
Supplier.

         2.   The Supplier responds to the RMA request providing an RMA
number (based on need).

         3.   The Product is shipped to the Supplier's facility (San Jose,
California) with the RMA problem form so that the Supplier can quickly trace
out the related problem for each Product and test/verify the problem.

         4.   The Supplier uses an RMA form (see attachment below) as a
travel form, which travels with the Product through the various entities in
the production/RMA/QA loop for processing. Each party fills in additional
details until the form is cleared (all details are complete) and signed.

         5.   The Product is fixed during its travel and is then shipped with
the RMA form back to the Purchaser.

<PAGE>
<TABLE>
<CAPTION>
                  PROBLEM REPORT FORM / UTSTARCOM, INC.-REPORT
<S>      <C>                                                      <C>


1.       Problem Number:                                          2.       Status:   OPEN    CLOSED
                               -------------------------------

3.       RMA Requested:    YES      NO

4.       Serial#:                                                 5.       Date Sent:
                   -------------------------------------------                          -----------------------------------

6.       Sent By:                                                 7.       Received Date:
                    ------------------------------------------                                -----------------------------

Short Summary:
                    -------------------------------------------------------------------------------------------------------

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

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


Test Details
Configuration:
                  ---------------------------------------------------------------------------------------------------------


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

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

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

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

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

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

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

Foundry Contact Person:
                               -------------------------------
RMA No:                                (Only if RMA)                         Date Promised:
              --------------------------                                                        ---------------------------
                                                                                        -----------------------------------
Responsible Person                                                           Phone#:
                         ------------------------------------------------               -----------------------------------
Results:
          -----------------------------------------------------------------------------------------------------------------

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

- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                FOUNDRY NETWORKS

                        RMA REPORT FORM - UTSTARCOM, INC.

<S>                                         <C>
RMA#:                                       SERIAL#:
     ------------------------------                 ----------------------------
Reason specified by Customer:
                             ---------------------------------------------------
Received Date:                              Due Date:
              ---------------------                  ----------------
VERIFICATION DETAILS: Verified on:                            By:
                                   ----------------               --------------

Result:   NPF    VERIFIED    OTHER    Type:   PRODUCTION      COMPONENT DESIGN

Verification Method:
                    ------------------------------------------------------------
CAUSE IDENTIFICATION: Problem Identified on:                          By:
                                             ------------------------     ------
Cause:
      --------------------------------------------------------------------------

RESOLUTION DETAILS: Resolution Provided on:                       By:
                                           -----------------         -----------
Method:
       -------------------------------------------------------------------------

Final Test: PASS FAIL (Perform Validation Test + Standard Test) Date:
                                                                      ----------
PREVENTION PROCEDURE: Advised on:                         By:
                                  --------------------        ------------------
Method:
       -------------------------------------------------------------------------

LABELING INFORMATION: Signed on:                        By:
                                 ----------------------     --------------------
Main Board Ser#:        Ver:       Management Assembly Ser#:          Ver:
                 -------     -----                           --------      -----
Return Date:                      By:
             --------------------     -------------------------

- --------------------------------------------------------------------------------
VP OPERATIONS                 RM PROGRAM MANAGER

</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>6
<FILENAME>a2030832zex-10_5.txt
<DESCRIPTION>EXHIBIT 10.5
<TEXT>

<PAGE>
                                                                  Exhibit 10.5


                                  LOAN CONTRACT


                                          Contract Number: 200001RL Zi No.(190)

BORROWER: UTStarcom (China) Co., Ltd.
Address: No.6 Chao YangMen BeiDaJie DongCheng District, Beijing

LENDER: Bank of China Beijing Branch
Address: No.8, YangBaoLu, Chao Yang District, Beijing

         In accordance with provisions of Contract Law of the People's Republic
of China and Bank of China, after reviewing the status and the request of the
Borrower, the Lender agrees to grant the Borrower a line of credit on September
12, 2000. The Borrower, Lender and Guarantor, through friendly negotiation, have
executed this Contract as follows:

ARTICLE 1    CURRENCY, AMOUNT AND TERM OF THE LOAN:

             1. The Currency under this loan is Reiminbi.

             2. The Line of the loan is fifty million yuan.

             3. The period of this loan is 12 months from the date of
                effectiveness of this contract.

ARTICLE 2    THE PURPOSE OF THE LOAN:

             1. The purpose of this loan is used for working capital turnover.

             2. Without written approval of the Lender, the Borrower could not
use the loan out of the scope of the purpose.

ARTICLE 3    INTEREST RATE AND CALCULATION OF INTEREST:

             1. Interest rate: The interest rate shall be [***] During the loan
term, if the country's related authority adjusted the interest rate or the
manner of calculation of interest, the interest of this contract shall be
adjusted accordingly after one year from the date of execution of this contract.
The adjustment shall be conducted when the interest rate are executed one year.
It is not obliged to inform the Borrower when the adjustment of interest.

             2. The interest shall be calculated from the date of first drawdown
and the actual days the borrower use. One year shall be calculated as 360 days.

             3. The payment of interests: The Borrower shall pay the interests
per quarter. The payment date shall be March 20, June 20, September 20 and
December 20. If the payment for the last installment is not on the payment date,
the interests shall deduct the interest from the bank account of the Borrower.
In the event that the Borrower fails to pay the interests on time and the
balance of the account of the Borrower is not enough for the payment of
interest, the Lender shall

<PAGE>

have rights to collect a penalty being [***] of the outstanding amount per day
for the Borrower's breach of contract.

ARTICLE 4    OVERDUE INTERESTS AND MISUSING INTERESTS

             1. If the Borrower fails to repay the loan and can not reach a
agreement with the Lender regarding the extension, the Lender shall collect an
overdue penalty for [***] of the overdue amount per day.

             2. If the Borrower fails to uses the loan in accordance with the
provisions set forth in this contract, the Lender shall have right to charge a
interests for the misusing part at a rate of [***] per day.

ARTICLE 5    ACCOUNT

         The Borrower shall open Reiminbi basic account and/or foreign currency
account at the Lender or Lender's branch for the use of draw-down, repayment,
payment of interests and fees.

ARTICLE 6    DRAW-DOWN

             1. The loan under this contract is revolving, the balance of this
contract shall not more than the line of credit.

             2. The Borrower shall send a draw-down application as the form
herein attached in this contract 7 days before the date of draw-down.

             3. The Borrower shall not draw the loan less than 1 million.

ARTICLE 7    CONDITIONS FOR DRAW-DOWN

         The following conditions shall be satisfied in advance of the draw-down
date:

             1. The Borrower has opened foreign account and Reiminbi account at
the office of the Lender or the branch of the Lender;

             2. This contract and the appendices have been effective;

             3. The Borrower has provided the recognition of the investment or
certificate of the investment to the Lender;

             4. The Borrower has provided the board resolution and power of
attorney regarding this loan contract;

             5. The Borrower has provided the list and the signature sample of
the authorized person who empower to sign this contract and documents;

             6. The Guaranty under this contract has been effective;


                                      -2-
<PAGE>

             7. The Borrower has been satisfied the warrants under Article 11
of this contract;

             8. The other requirement for the draw-down have been satisfied.

ARTICLE 8    REPAYMENT PLAN AND PREPAYMENT

             1. The Borrower shall repay the loan in accordance with the status
of its cash. The Borrower shall inform the Lender the payment amount and date
[***] prior to make the payment. The Borrower shall be obliged to repay the
principal and related interests on due date without any condition.

             2. The payment made by the Borrower and the deduction from the
account of the Borrower shall be used for repaying the interest at first and
then for repaying the principal.

             3. In the event the Borrower fails to repay the loan, the Lender
shall have rights to deduct the debt from the bank account of the Borrower at
the Lender or empower the branches of the Lender to deduct the debt from the
bank account of the Borrower at the Lender's branches;

             4. The installment of repayment shall not less than 1 million.

ARTICLE 9    DEBT CERTIFICATE

         The Lender shall keep record in the Lender's account for the principal,
interests and fees and other fees of the Borrower under this contract; The above
mentioned record and the documentation for the draw-down, repayment and payment
of interest is the certificates of the debts between the Borrower and the
Lender.

ARTICLE 10   GUARANTY

             1. UTStarcom (Hangzhou) telecom Co., Ltd. (the "Guarantor") shall
be the guarantor for the loan under this contract and take jointly liabilities.

             2. During the term of this contract, if the guarantor's financial
status become deteriorated or the liabilities for repayment of debts become
weak, the Lender shall have right to request the Borrower changes guarantor or
provide mortgage and pawn secured for this loan under this contract.

ARTICLE 11   REPRESENTATIONS AND WARRANTIES

    I.   The Borrowers represents and warrants as follows:

             1. The Borrower is a company duly organized and validly existing
under the law of the People's Republic of China and has the power and authority
to own its property to consummate the transactions contemplated in this contract
and join the litigation. The Borrower has the power to handle it assets used in
operation.

                                      -3-
<PAGE>

             2. The Borrower is at its option to sign and perform this contract.
It is the Borrower's true meaning and has the power to sign this contract and it
is not breach it article of association or regulations or contracts. The
procedure for signature and performance of this contract has been gone through
and fully effectiveness.

             3. The all documents, materials, reports and certificates provided
to the Lender by the borrower for consummation of this contract is true, real,
compete and effective

             4. The Borrower shall not conceal the following events which is
being happened or have been happened which will cause the Lender refuse to
extend the loan:

                (1) The Borrower or the principal executives of the Borrower
involve in material events which breach regulations, laws or compensation to
others;

                (2) Pending actions and arbitration;

                (3) The Borrower's debts or proposed debts or liens and other
encumbrances;

                (4) The other matters will impact the financial status or
abilities of repayment for the debts;

                (5) The Borrower breached contract which is between the
Borrower and other creditors.

    II.  The Borrower hereby warrants as follows:

             1. Using the capital of the loan as usage set forth in this
contract, the Borrower will not use the loan as Equity investment; The Borrower
will not use the capital of the loan invest in security, future, real estate
etc. The Borrower will not lend to the others privately or involving other
maters which is prohibited by the country. The Borrower will not misusing or
appropriation of the loan.

             2. Making payment and related expenses in accordance with the
provisions set forth in this contract;

             3. Providing update financial statement or financial bulletin every
quarter; Providing the audited financial report at the first quart of each year;
Providing operation report, financial report or other files and materials and
shall warrant the reality, correct and effectiveness for the files and
materials;

             4. Any anti-guaranty or other similar documents will not make any
impact on the rights and benefits of the Lenders;

             5. Accepting the supervision of the Lender, provides assistance and
cooperation for the Lender's supervisions;

                                      -4-
<PAGE>

             6. Will not reduce the registration capital; Prior approval from
the lender shall be required when the Borrower changes of shareholders and
operation manner(including but not limited to joint venture, cooperation,
jointly cooperation; dissolution, closedown, liquidation, transformation;
merger; change to share company, use the housing, machinery or other real assets
or trademark, intellectual property, Knowhow, landing using rights or other
intangible assets to invest in share company or investment company, trading of
operation right or own right by contracting, joint operation, trusteeship)

             7. The Borrower shall inform the Lender and warrants the liability
under its security will not more than net assets of the Borrower when the
Borrower guarantee for other party or mortgage its assets. The Borrower warrants
that will not dispose the assets which will make adverse impact on its ability
of paying debts.

             8. The Borrower will not pay the other similar loans prior to the
Lender;

             9. The Borrower warrants to inform the Lender immediately when the
following events occurred:

                (1) The event of breach of contract under this contract or other
loan or guaranty contracts between the Borrower and any branches of Bank of
China or other banks, non-bank financial organization;

                (2) The Borrower changes shareholders or revise the article of
association;

                (3) The Borrower suffer difficulties and bad result in financial
and operation;

                (4) The Borrower involves in material actions or arbitration;

            10. The Borrower shall keep sufficient balance for repayment prior
[***] to the due date.

            11. The Borrower shall keep its bank transactions regarding income
collection, sell foreign currency or buy foreign currency ect. Shall be
conducted at the Lender or other branches of the Lender. The turn-over for the
capital shall satisfy the demand of the Lender;

    III. The Borrower's representations and warrants hereunder this contract
shall be effective even though any amendment, supplements or revised to be made
to this contract.

ARTICLE 12   REPRESENTATIONS AND WARRANTS OF THE LENDER

    I.   The Lender represents and warrants as follows:

             1. The Lender is a state-owned commercial bank or branch duly
organized and validly existing under the law of P.R.C and approved by the
Industry and Commercial Administration and holds the financial institutions
legal person licenses and financial institutions operation license to be
qualified to operate financial business.


                                      -5-
<PAGE>

             2. The Lender has taken all necessary action to authorize the
execution of this contract and performance of its obligations under this
contract. The Lender is duly authorized to extend this loan.

    II.  The Lender warrants as follows:

             1. The Lender shall extend the loan in accordance with the
provisions set forth in this Contract.

             2. Collect interests in accordance with the regulations of the
People's Bank.

ARTICLE 13   EVENTS OF BREACH CONTRACT AND SETTLEMENT:

    I.   Settlement of the Borrower breach of contract

             1. Event of breach of contract:

                (1) The Borrower fails to use the loan in accordance with the
agreed usage of the Loan;

                (2) The Borrower fails to repay the due principal and pay the
interests, expenses or other payable in accordance with the agreed term of
this contract;

                (3) The Borrower breaches the representation and warrants set
forth in Article 11.

                (4) The Borrower breaches other loan agreements or guaranty
agreements or the Guarantor breach the guaranty agreement which may make
impact the Borrower to perform the obligations under this contract.

                (5) Conclusive evidence to show that the Borrower lose the
capacity of credit or during performance of the obligation under this
contract, the financial conditions of the Guarantor are seriously
deteriorating or other reasons caused the Guarantor the capacity of credit
decline.

                (6) The Borrower breaches the other obligations under this
contract.

             2. Under the above circumstances, the Lender shall have right
to:

                (1) Request the Borrower to rectify within the period
designed by the Lender;

                (2) Cease in extending the loan or cancel the credit;

                (3) Declare the loan under this contract is due and the
Lender shall have right to deduct the outstanding amount from the account of
the Borrower. The Borrower shall not appeal against the Lender.

                                      -6-
<PAGE>

                (4) Declare the loan is due under other loan agreements
between the Lender and the Borrower, request the Borrower to repay the loan
principals, interests, and other expenses.

    II.  The settlement for the Lender breach of the contract

             1. The Lender fails to extend the loan as agreed in this
contract without any reasons;

             2. The Lender breaches the agreed interest rate and collection
add interests or other fees;

             3. The Lender breaches the provisions set forth in Article 12;

             4. Under the above circumstances, the Borrower shall have right
to:

                (1) Request the Lender to rectify;

                (2) Repay the loan ahead of time and refuse to pay any
compensation for prepayment.

ARTICLE 14   DEDUCTION

         The Borrower shall pay in full for the payment without any
counteraction or any condition.

ARTICLE 15   ASSIGNMENT OF THE DEBT AND CREDIT

             1. The Borrower shall not assign its right and liability under
this contract to other third party without any written approval of the Lender;

             2. In the event the Borrower assign its right and liability
under this contract to other third party under the written consent of the
Lender, the third party shall abide this contract without any condition.

ARTICLE 16   PERFORMANCE OF OBLIGATION AND WAIVER OF RIGHTS

             1. The Borrower is independent contractor under this contract,
it will not impact by any other relations between the Borrower with other
party except the other provisions set forth in this contract.

             2. The Lender give any extension, toleration, favor to the
Borrower or permit the Borrower to delay of performance any obligation under
this contract shall not impair any rights of the Lender in accordance with
this contract and laws, regulation, it shall be deemed to have waived its
rights under this contract and the obligation shall be performed by the
Borrower under this contract.

                                      -7-
<PAGE>

ARTICLE 17   AMENDMENT, SUPPLEMENT AND INTERPRETATION OF THE CONTRACT

             1. This contract could be amended and supplemented upon the
written agreements conclude by the parties. Any a amendment and supplement
shall be integral party of this contract.

             2. In the event change of laws, regulations or legal practice
which will cause any terms contained in this Contract become illegal, invalid
or loss of practice, the other part of this contract shall not be impaired by
it. The both parties shall make efforts to change the illegal, invalid or
loss of practice part.

             3. For the matters not referred in this contract shall be
construed in accordance with the provisions of the People's Bank of China.

ARTICLE 18   DISPUTE RESOLUTION, GOVERNING LAW AND WAIVER OF EXEMPTION

             1. The conclusion, interpretation and dispute resolution shall
be subject to the Laws of the People's Republic of Chin. The disputes arising
from the execution of this contract shall be settled through friendly
consultation by both parties. In case no settlement can be reached, the
disputes shall be submitted to the People's Court of the location of the
Lender for judgment.

             2. The Borrower shall not reject any obligation during the
settlement of disputes.

             3. The execution and performance of this contract and the
related transaction is civil behavior. The Borrower shall not appeal to take
action to exempt from the obligation under this contract.

         (if both parties agree to apply arbitration, the above term shall be:)

         1. The conclusion, interpretation and dispute resolution shall be
subject to the Laws of the People's Republic of Chin. The dispute arising
from the execution of this contract shall be settled through friendly
consultation by both parties. In case no settlement can be reached, the
disputes shall be submitted to China International Economic and trade
arbitration commission for arbitration.

         2. The arbitration shall be conducted in accordance with the
Arbitration Law of People's Republic of China and Provisional Rules of
Procedure of China international economic and trade arbitration commission.

         3. During the Arbitration, this contract shall be effective and the
Borrower shall not disclaim the any obligations under this contract.

         4. The execution and performance of this contract and the related
transaction is civil behavior. The Borrower shall not appeal to take action
to exempt from the obligation under this contract.


                                      -8-
<PAGE>

ARTICLE 19   OTHER MATTER AGREED BY THE PARTIES.

ARTICLE 20   APPENDICES

         The following appendices shall be integral part of this contract:

         1. Draw-down application

         2.

ARTICLE 21   NOTICE

         1. Any notice, payment notice or telecommunications shall be
forwarded to the following address:

         To: The Borrower: UTStarcom (China) Co., Ltd.

         Address: No. 6 Bei Da Jie, Chao Yang Men, Dongcheng district, Beijing
         Post Code: 100027
         Fax: 65542058

         To: The Lender: Bank of China Beijing Branch

         Address: No. 8 YaBaoLu, ChaoYang District.
         Post Code: 100020
         Fax: 65199666

         2. If any change of address shall inform the other party immediately.

         3. Any notice, payment request or communication shall be forwarded
to the above address. The dates on which notices shall be deemed to have been
effectively given shall be determined as follows:

            (1) If given in letter it shall be deemed effectively given on
the fifth day after the date mailed by registered airmail, postage prepaid;

            (2) If given by telex it shall be deemed effectively given on the
date the other party returned the information;

            (3) If given by facsimile it shall be deemed effectively given on
the first date of transmission;

            (4) If given by personal delivery it shall be deemed effectively
given on the date of personal delivery;

         This contract become effective after signed by the authorized
representatives of both parties until the loan and the interests and other
related expenses be cleared up.


                                      -9-
<PAGE>

         This contract is executed in _____ original and be equally authentic.
Each of the Borrower, the Lender shall hold ____ copy.


Borrower:     UTStarcom (China) Co., Ltd.

Lender:       Bank of China, Beijing Branch

Date:         August 29, 2000




                                     -10-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>7
<FILENAME>a2030832zex-27_1.txt
<DESCRIPTION>EXHIBIT 27.1
<TEXT>

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-2000
<PERIOD-START>                             JUL-31-2000
<PERIOD-END>                               SEP-30-2000
<CASH>                                         189,928
<SECURITIES>                                    72,021
<RECEIVABLES>                                  131,071
<ALLOWANCES>                                  (10,499)
<INVENTORY>                                     89,687
<CURRENT-ASSETS>                               488,006
<PP&E>                                          20,095
<DEPRECIATION>                                 (8,378)
<TOTAL-ASSETS>                                 544,312
<CURRENT-LIABILITIES>                          129,748
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           120
<OTHER-SE>                                     397,384
<TOTAL-LIABILITY-AND-EQUITY>                   544,312
<SALES>                                        103,812
<TOTAL-REVENUES>                               103,812
<CGS>                                           67,853
<TOTAL-COSTS>                                   24,589
<OTHER-EXPENSES>                               (1,490)
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 795
<INCOME-PRETAX>                                 14,656
<INCOME-TAX>                                     3,786
<INCOME-CONTINUING>                             10,870
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    10,870
<EPS-BASIC>                                       0.12
<EPS-DILUTED>                                     0.11


</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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