Distribution Agreement - UTStarcom Inc. and DirecTouch Communications Ltd.


                            DISTRIBUTION AGREEMENT

                                   between

                              UTSTARCOM, INC.

                                     and

                      DIRECTOUCH COMMUNICATIONS LIMITED

                                 dated as of

                                July 30, 1999




                              TABLE OF CONTENTS



                                                                                                           PAGE
                                                                                                        
ARTICLE I - DEFINITIONS......................................................................................2

   Section 1.01      General.................................................................................2

ARTICLE II - ASSUMPTION AND SATISFACTION OF LIABILITIES......................................................6

   Section 2.01      Assumption and Satisfaction of Liabilities..............................................6

ARTICLE III - CAPITAL CONTRIBUTION OF UTS....................................................................6

ARTICLE IV - THE DISTRIBUTION................................................................................6

   Section 4.01      Cooperation Prior to the Distribution...................................................6
   Section 4.02      Transfers Not Effected Prior to the Distribution; Transfers Deemed Effective
                     as of the Distribution Date.............................................................7
   Section 4.03      No Representations or Warranties; Consents..............................................7
   Section 4.04      Conveyancing and Assumption Instruments.................................................8
   Section 4.05      UTS Board Action; Conditions Precedent to the Distribution..............................8
   Section 4.06      The Distribution........................................................................9

ARTICLE V - INDEMNIFICATION..................................................................................9

   Section 5.01      Indemnification by UTS..................................................................9
   Section 5.02      Indemnification by DirecTouch...........................................................9
   Section 5.03      Insurance Proceeds.....................................................................10
   Section 5.04      Procedure for Indemnification..........................................................10
   Section 5.05      Remedies Cumulative....................................................................12
   Section 5.06      Survival of Indemnities................................................................12

ARTICLE VI - CERTAIN ADDITIONAL MATTERS.....................................................................13

   Section 6.01      DirecTouch Board.......................................................................13
   Section 6.02      Employee Matters.......................................................................13

ARTICLE VII - ACCESS TO INFORMATION AND SERVICES............................................................13

   Section 7.01      Provision of Corporate Records.........................................................13
   Section 7.02      Access to Information..................................................................14
   Section 7.03      Production of Witnesses................................................................14
   Section 7.04      Reimbursement..........................................................................14
   Section 7.05      Retention of Records...................................................................14
   Section 7.06      Confidentiality........................................................................15
   Section 7.07      Privileged Matters.....................................................................15

ARTICLE VIII - MISCELLANEOUS................................................................................17

   Section 8.01      Complete Agreement; Construction.......................................................17
   Section 8.02      Expenses...............................................................................17


                                      -1-


                              TABLE OF CONTENTS
                                 (CONTINUED)

   Section 8.03      Governing Law..........................................................................17
   Section 8.04      Notices................................................................................17
   Section 8.05      Amendments.............................................................................18
   Section 8.06      Successors and Assigns.................................................................18
   Section 8.07      Termination............................................................................18
   Section 8.08      Subsidiaries...........................................................................18
   Section 8.09      No Third-Party Beneficiaries...........................................................18
   Section 8.10      Titles and Headings....................................................................18
   Section 8.11      Exhibits and Schedules.................................................................18
   Section 8.12      Legal Enforceability...................................................................19
   Section 8.13      Arbitration of Disputes................................................................19



LIST OF EXHIBITS

Exhibit A:        DirecTouch Bylaws

Exhibit B:        DirecTouch Certificate

Exhibit C:        DirecTouch Financial Statements

Exhibit D:        Inter-company Option Agreement

Exhibit E:        Stock Transfer Restriction Agreement

Exhibit F:        UTS Financial Statements


                                      -2-


                             DISTRIBUTION AGREEMENT

     This DISTRIBUTION AGREEMENT (this 'Agreement') is made as of this 30th 
day of July, 1999 between UTStarcom, Inc., a Delaware corporation ('UTS'), 
and DirecTouch Communications Limited, a British Virgin Islands corporation 
and wholly-owned subsidiary of UTS ('DirecTouch')

                                 RECITALS

     A. WHEREAS, UTS is the holder of all of the issued and outstanding 
shares of capital stock of DirecTouch;

     B. WHEREAS, the Board of Directors of UTS has determined that it is in 
the best interests of UTS and the stockholders of UTS to separate DirecTouch 
from UTS and to effect such separation, to distribute all of the outstanding 
shares of DirecTouch common stock held by UTS to the holders of record of (i) 
UTS capital stock in the ratio of one share of DirecTouch common stock for 
every one share of UTS capital stock held by UTS stockholders and (ii) vested 
options to purchase shares of UTS common stock in the ratio of one vested 
option to purchase a share of DirecTouch common stock for every one vested 
option to purchase UTS common stock held by UTS optionholders ((i) and (ii) 
collectively, the 'Distribution');

     C. WHEREAS, the exercise price of UTS' options to purchase shares of UTS 
stock (the 'UTS Options') must be adjusted to account for the issuance of 
the options to purchase shares of DirecTouch (the 'DirecTouch Options') 
consistent with Treasury Regulation Section 1.425-(e)(5)(ii)(b) (the 'UTS 
Option Price Adjustment') as follows: (i) after the Distribution, the 
aggregate exercise price of the UTS Option and the DirecTouch Option will 
equal the aggregate exercise price of the UTS Option immediately prior to the 
Distribution; and (ii) the adjustment shall be calculated so that the 
pre-Distribution exercise price per share of the UTS Option will be allocated 
among the adjusted UTS Options and the DirecTouch Options on the basis of the 
relative fair market values of the underlying Common Stock of UTS and 
DirecTouch after the Distribution (the valuation of the DirecTouch Common 
Stock will be based on a post-Distribution market valuation).

     D. WHEREAS, in connection with the Distribution, the Board of Directors 
of UTS has determined that it is in the best interests of UTS, DirecTouch, 
and the stockholders of each, respectively, to amend certain provisions of 
the vested options to purchase shares of UTS common stock held by the 
employees of DirecTouch as of the Distribution Record Date so that these 
options will continue for the term of the option and will not terminate 90 
days after these DirecTouch employees terminate their employment from UTS; and




     E. WHEREAS, in connection with the Distribution, UTS and DirecTouch have 
determined that it is necessary and desirable to set forth the principal 
corporate transactions required to effect the Distribution, and to set forth 
the agreements that will govern certain matters following the Distribution.

     NOW, THEREFORE, in consideration of the mutual agreements, provisions 
and covenants contained in this Agreement, the parties hereby agree as 
follows:

                                   ARTICLE I

                                  DEFINITIONS

     Section 1.01 GENERAL. As used in this Agreement, the following terms 
shall have the following meanings:

                  ACTION: Any action, claim, suit, arbitration, inquiry, 
proceeding or investigation by or before any court, any governmental or other 
regulatory or administrative agency or commission or any arbitration tribunal.

                  AFFILIATE: With respect to any specified Person, any other 
Person directly or indirectly controlling or controlled by, or under direct 
or indirect common control with, such specified Person. For purposes of this 
definition, 'control,' when used with respect to any Person, means the 
power to direct the management and policies of such Person, directly or 
indirectly, whether through the ownership of voting securities, by contract 
or otherwise; and the terms 'controlling' and 'controlled' shall have 
meanings correlative to the foregoing. Notwithstanding the foregoing, (i) the 
Affiliates of UTS shall not include DirecTouch, the DirecTouch Subsidiaries 
or any other Person which would be an Affiliate of UTS by reason of UTS's 
ownership of the capital stock of DirecTouch prior to the Distribution or the 
fact that any officer or director of DirecTouch or any of the DirecTouch 
Subsidiaries shall also serve as an officer or director of UTS, and (ii) the 
Affiliates of DirecTouch shall not include UTS or any other Person which 
would be an Affiliate of DirecTouch by reason of UTS's ownership of capital 
stock of DirecTouch prior to the Distribution or the fact that any officer or 
director of DirecTouch or any of the DirecTouch Subsidiaries shall also serve 
as an officer or director of UTS.

                  DIRECTOUCH ASSETS: The assets of the DirecTouch Group, 
including without limitation (i) assets relating to the DirecTouch Business, 
determined on a basis consistent with the determination of assets included on 
the DirecTouch Financial Statements, and (ii) any other assets of the 
DirecTouch Group relating to the DirecTouch Business.

                  DIRECTOUCH BOARD: The Board of Directors of DirecTouch.


                                      -2-


                  DIRECTOUCH BOOKS AND RECORDS: The books and records 
(including computerized records) of DirecTouch and the DirecTouch 
Subsidiaries and all books and records owned by UTS which relate to the 
DirecTouch Business or are necessary to operate the DirecTouch Business, 
including, without limitation, all such books and records relating to 
DirecTouch Employees, all files relating to any Action being assumed by 
DirecTouch as part of the DirecTouch Liabilities, original corporate minute 
books, stock ledgers and certificates and corporate seals, and all licenses, 
leases, agreements and filings, relating to DirecTouch, the DirecTouch 
Subsidiaries or the DirecTouch Business (but not including the UTS Books and 
Records, provided that DirecTouch shall have access to, and have the right to 
obtain duplicate copies of the UTS Books and Records in accordance with the 
provisions of Article VI).

                  DIRECTOUCH BYLAWS: The Bylaws of DirecTouch, substantially 
in the form of EXHIBIT A, to be in effect at the Distribution Date.

                  DIRECTOUCH CERTIFICATE: The Restated Certificate of 
Incorporation of DirecTouch, substantially in the form of EXHIBIT B, to be in 
effect at the Distribution Date.

                  DIRECTOUCH COMMON STOCK: The common stock, par value $0.01 
per share, of DirecTouch.

                  DIRECTOUCH EMPLOYEES: All of the employees of DirecTouch at 
the time of the Distribution; PROVIDED HOWEVER, that James Miller and 
Chauncey Shey shall be employees of both UTS and DirecTouch.

                  DIRECTOUCH GROUP: DirecTouch and the DirecTouch 
Subsidiaries, collectively.

                  DIRECTOUCH LIABILITIES: (i) All of the Liabilities of the 
DirecTouch Group under, or to be retained or assumed by DirecTouch or any of 
the DirecTouch Subsidiaries pursuant to this Agreement or any of the Related 
Agreements, (ii) all Liabilities for payment of outstanding loans of UTS 
attributable to the DirecTouch Business existing as of the Distribution Date, 
(iii) all Liabilities arising out of or in connection with any of the 
DirecTouch Assets or the DirecTouch Business, determined on a basis 
consistent with the determination of the Liabilities of DirecTouch included 
on the DirecTouch Financial Statement, and (iv) all Liabilities arising out 
of or in connection with any claims made by former DirecTouch officers or 
employees, whether brought against UTS or DirecTouch.

                  DIRECTOUCH FINANCIAL STATEMENTS: The Financial Statements 
for DirecTouch for the years ended 1998 and 1997 attached hereto as EXHIBIT C.

                  DIRECTOUCH SUBSIDIARIES: All Subsidiaries of DirecTouch at 
the time of the Distribution.


                                      -3-

                  DISTRIBUTION DATE: The date determined by the UTS Board as 
the date on which the Distribution shall be effected, which Distribution Date 
is contemplated by the UTS Board to occur on or about August 5, 1999.

                  DISTRIBUTION RECORD DATE: The date established by the UTS 
Board as the date for taking a record of the Holders of UTS Common Stock 
entitled to participate in the Distribution, which Distribution Record Date 
has been established as July 15, 1999.

                  HOLDERS: The holders of record of (i) UTS Capital Stock (as 
defined below) or (ii) vested options to purchase UTS common stock as of the 
Distribution Record Date.

                  INTER-COMPANY OPTION AGREEMENT: The option agreement 
between UTS and DirecTouch, which agreement shall be entered into on or prior 
to the Distribution Date in substantially the form of EXHIBIT D attached 
hereto.

                  LIABILITIES: Any and all debts, liabilities and 
obligations, absolute or contingent, matured or unmatured, liquidated or 
unliquidated, accrued or unaccrued, known or unknown, whenever arising, 
including all costs and expenses relating thereto, and including, without 
limitation, those debts, liabilities and obligations arising under any law, 
rule, regulation, Action, threatened Action, order or consent decree of any 
governmental entity or any award of any arbitrator of any kind, and those 
arising under any contract, commitment or undertaking.

                  PERSON: Any individual, corporation, partnership, 
association, trust, estate or other entity or organization, including any 
governmental entity or authority.

                  PRIVILEGES: All privileges that may be asserted under 
applicable law, including, without limitation, privileges arising under or 
relating to the attorney-client relationship (including but not limited to 
the attorney-client and work product privileges), the accountant-client 
privilege, and privileges relating to internal evaluative processes.

                  PRIVILEGED INFORMATION: All Information as to which UTS, 
DirecTouch or any of their Subsidiaries are entitled to assert the protection 
of a Privilege.

                  RELATED AGREEMENTS: All of the agreements, instruments, 
understandings, assignments or other arrangements which are entered into in 
connection with the transactions contemplated hereby and which are set forth 
in a writing, including, without limitation, (i) the Inter-Company Option 
Agreement and (ii) the Stock Transfer Restriction Agreement, attached hereto 
as EXHIBIT E.

                  RETAINED ASSETS: The assets of UTS other than the 
DirecTouch Assets, including without limitation (i) assets relating to the 
Retained Business, determined on a basis consistent with the determination of 
assets included on the UTS Financial Statements, (ii) any other assets of UTS 
and its Affiliates relating to the Retained Business.


                                      -4-


                  RETAINED BUSINESS: The businesses conducted by UTS pursuant 
to or utilizing the Retained Assets.

                  RETAINED EMPLOYEES: The individuals employed by UTS and not 
DirecTouch on the Distribution Date; PROVIDED HOWEVER, James Miller and 
Chauncey Shey shall be employees of both UTS and DirecTouch.

                  RETAINED LIABILITIES: All of the Liabilities arising out of 
or in connection with the Retained Assets or the Retained Business, 
determined on a basis consistent with the determination of the Liabilities of 
UTS included on the UTS Financial Statements.

                  SUBSIDIARY: With respect to any Person, (a) any corporation 
of which at least a majority in interest of the outstanding voting stock 
(having by the terms thereof voting power under ordinary circumstances to 
elect a majority of the directors of such corporation, irrespective of 
whether or not at the time stock of any other class or classes of such 
corporation shall have or might have voting power by reason of the happening 
of any contingency) is at the time, directly or indirectly, owned or 
controlled by such Person, by one or more Subsidiaries of such Person, or by 
such Person and one or more of its Subsidiaries, or (b) any non-corporate 
entity in which such Person, one or more Subsidiaries of such Person, or such 
Person and one or more Subsidiaries of such Person, directly or indirectly, 
at the date of determination thereof, has at least majority ownership 
interest.

                  UTS BOARD: The Board of Directors of UTS.

                  UTS BOOKS AND RECORDS: The books and records (including 
computerized records) of UTS and all books and records owned by DirecTouch 
which relate to the Retained Business or are necessary to operate the 
Retained Business, including, without limitation, all such books and records 
relating to Retained Employees, all files relating to any Action pertaining 
to the Retained Liabilities, original corporate minute books, stock ledgers 
and certificates and corporate seals, and all licenses, leases, agreements 
and filings, relating to UTS or the Retained Business (but not including the 
DirecTouch Books and Records, provided that UTS shall have access to, and 
shall have the right to obtain duplicate copies of, the DirecTouch Books and 
Records in accordance with the provisions of Article VI).

                  UTS CAPITAL STOCK: The common stock and preferred stock, 
par value $0.0025 per share, of UTS.

                  UTS FINANCIAL STATEMENT: The Financial Statements for UTS 
for the years ended 1998, 1997 and 1996 attached hereto as EXHIBIT F.

                  UTS GROUP: UTS and the UTS Subsidiaries, collectively.

                  UTS SUBSIDIARIES: All Subsidiaries of UTS at the time of 
the Distribution.


                                      -5-


                                   ARTICLE II

                   ASSUMPTION AND SATISFACTION OF LIABILITIES

     Section 2.01 ASSUMPTION AND SATISFACTION OF LIABILITIES. Except as set 
forth in the Inter-company Option Agreement or the other Related Agreements, 
effective as of and after the Distribution Date, (a) DirecTouch shall, and/or 
shall cause the DirecTouch Subsidiaries to, assume, pay, perform and 
discharge in due course all of the DirecTouch Liabilities and (b) UTS shall 
pay, perform and discharge in due course all of the Retained Liabilities.

                                  ARTICLE III

                           CAPITAL CONTRIBUTION OF UTS

     Section 3.01 Prior to the Distribution Date, UTS hereby agrees to make a 
capital contribution to DirecTouch in the amount of $338,835.47 and to cancel 
previously existing indebtedness of $338,835.47, owing by DirecTouch to UTS. 
UTS acknowledges that no additional shares of DirecTouch Common Stock will be 
issued or issuable in connection with or as a result of such capital 
contribution or forgiveness of debt, except as may otherwise be provided in a 
Related Agreement. The contribution to capital is intended to qualify under 
Section 351 of the Internal Revenue Code of 1986, as amended, and shall be 
reported on all UTS and DirecTouch tax returns and information statements in 
accordance with such intentions, unless otherwise indicated by UTS. UTS and 
DirecTouch understand and acknowledge that all of the shares of DirecTouch 
Common Stock held by UTS will be distributed by UTS to the holders of 
outstanding shares of UTS common stock. Prior to the Distribution Date, UTS 
shall return to DirecTouch for cancellation such number of shares of 
DirecTouch Common Stock as UTS deems not to be required for purposes of 
effecting the Distribution. 

                                   ARTICLE IV

                                THE DISTRIBUTION

     Section 4.01 COOPERATION PRIOR TO THE DISTRIBUTION.

                  (a) CONSENTS. UTS and DirecTouch shall use all reasonable 
efforts to obtain any third-party consents or approvals necessary or 
desirable in connection with the transactions contemplated hereby 
('Consents').

                  (b) UTS and DirecTouch will use all reasonable efforts to 
take, or cause to be taken, all actions, and to do, or cause to be done, all 
things necessary or desirable under 


                                      -6-


applicable law, to consummate the transactions contemplated under this 
Agreement and the Related Agreements.

     Section 4.02 TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION; TRANSFERS 
DEEMED EFFECTIVE AS OF THE DISTRIBUTION DATE. To the extent that any 
transfers or other actions contemplated by this Agreement shall not have been 
consummated prior to the Distribution Date, the parties shall cooperate to 
effect such transfers or other actions as promptly following the Distribution 
Date as shall be practicable, it nonetheless being agreed and understood by 
the parties that neither party shall be liable in any manner to any other 
party for any failure of any of the transfers or assumptions contemplated by 
this Agreement to be consummated prior to the Distribution Date. Nothing 
herein shall be deemed to require the transfer of any assets or the 
assumption of any Liabilities which by their terms or operation of law cannot 
be transferred or assumed; PROVIDED, HOWEVER, that UTS and DirecTouch shall 
cooperate to seek to obtain any necessary consents or approvals for the 
transfer of all assets and assumption of all Liabilities contemplated to be 
transferred or assumed pursuant to this Agreement. In the event that any such 
transfer of assets or assumption of Liabilities has not been consummated, 
effective as of and after the Distribution Date, the party retaining such 
asset or Liability shall thereafter hold such asset for the party entitled 
thereto (at the expense of the party entitled hereto) and retain such 
Liability for the account of the party by whom such Liability is to be 
assumed, and to whom such asset is to be transferred, or by whom such 
Liability is to be assumed, as the case may be, in order to place such party, 
insofar as reasonably possible, in the same position as would have existed 
had such asset or Liability been transferred or assumed as of the 
Distribution Date. As and when such assets or Liability becomes transferable 
or assumable, such transfer or assumption shall be effected forthwith. The 
parties agree that, as of the Distribution Date, each party hereto shall be 
deemed to have assumed, in accordance with the terms of this Agreement and 
the Related Agreements, all of the Liabilities, and all duties, obligations, 
and responsibilities incident thereto, which such party is required to assume 
pursuant to the terms hereof and thereof.

     Section 4.03 NO REPRESENTATIONS OR WARRANTIES; CONSENTS. Each of the 
parties hereto understands and agrees that no party hereto is, in this 
Agreement or in any Related Agreement or in any other agreement or document 
contemplated by this Agreement or otherwise, representing or warranting in 
any way (i) as to the value or freedom from encumbrance of, or any other 
matter concerning, any assets of such party or (ii) as to the legal 
sufficiency to convey title to any asset pursuant to this Agreement or any 
Related Agreements, it being agreed and understood that all such assets are 
being transferred 'as is, where is' and that the party to which such assets 
are to be transferred hereunder shall bear the economic and legal risk that 
any conveyancing of such assets shall prove to be insufficient or that such 
party's title to any such assets shall be other than good and marketable and 
free from encumbrances. Similarly, each party hereto understands and agrees 
that no party hereto is, in this Agreement or in any other agreement or 
document contemplated by this Agreement or otherwise, representing or 
warranting in any way that the obtaining of any consents or approvals, the 
execution and delivery of any agreements or the making of any filings or 
applications contemplated by this Agreement will satisfy the provisions of 
any or all applicable agreements or the requirements of any and all 
applicable laws or judgments, it being agreed and understood that the party 
to which any assets are transferred shall bear the economic and legal risk 
that any necessary consents or approvals are not obtained or that any 
requirements of laws or judgments are not


                                      -7-


compiled with. Notwithstanding the foregoing, the parties shall use
reasonable efforts to obtain all consents and approvals, to enter into all
agreements and to make all filings and applications which may be required for
the consummation of the transactions contemplated by this Agreement,
including, without limitation, all applicable regulatory filings or consents
under federal or state laws and all necessary consents, approvals,
agreements, filings and applications.

     Section 4.04 CONVEYANCING AND ASSUMPTION INSTRUMENTS. In connection with 
the transfers of assets (other than capital stock) and the assumptions of 
Liabilities contemplated by this Agreement and the Information Statement, the 
parties shall execute or cause to be executed by the appropriate entities the 
Conveyancing and Assumption Instruments in such form as the parties shall 
agree. The transfer of capital stock shall be effected by means of delivery 
of stock certificates and executed stock powers and notation on the stock 
record books of the corporation or other legal entities involved.

     Section 4.05 UTS BOARD ACTION; CONDITIONS PRECEDENT TO THE DISTRIBUTION. 
The UTS Board shall, in its discretion, establish any appropriate procedures 
in connection with the Distribution. In no event shall the Distribution occur 
unless the following conditions shall have been satisfied:

                  (a) the DirecTouch Board, comprised as contemplated by 
Section 6.01, shall have been elected, and the DirecTouch Certificate and 
DirecTouch Bylaws shall have been adopted and shall be in effect;

                  (b) UTS and DirecTouch shall have obtained all Consents, 
the failure of which to obtain would, in the determination of the UTS Board, 
have a material adverse effect on UTS or DirecTouch;

                  (c) UTS and DirecTouch shall have entered into the Related 
Agreements; PROVIDED, HOWEVER, that (i) any such condition may be waived by 
the UTS Board in its sole discretion, and (ii) the satisfaction of such 
conditions shall not create any obligation on the part of UTS or any other 
party hereto to effect the Distribution or in any way limit UTS's power of 
termination set forth in Section 8.07 or alter the consequences of any such 
termination from those specified in such Section.

                  (d) UTS shall have granted vested options pursuant to the 
1999 Special Stock Option Plan to every holder of vested options to purchase 
UTS common stock in the ratio of one vested option to purchase a share of 
DirecTouch common stock for every vested option to purchase a share of UTS 
common stock held by the UTS option holder as of the Distribution Record Date 
(the 'Spin-off Options').

                  (e) UTS shall have effected the UTS Option Price Adjustment 
with respect to every UTS Option so that the aggregate exercise price of each 
UTS Option and DirecTouch Option will equal the aggregate exercise price of 
each UTS Option immediately prior to the Distribution.


                             -8-


                  (f) UTS shall have amended the vested options to purchase 
UTS common stock held by all the DirecTouch Employees as of the Distribution 
Record Date excluding Jim Miller and Chauncey Shey (the 'DirecTouch 
Amendment Optionees') so that these vested options (the 'Amended Options') 
will remain exercisable as if such DirecTouch Amendment Optionees remained 
employed by UTS; PROVIDED, HOWEVER, that upon the termination of these 
DirecTouch Amendment Optionees from DirecTouch, their Amended Options will 
terminate according to the terms of the UTS' 1997 Stock Plan as if these 
DirecTouch Amendment Optionees had terminated from UTS on a date even with 
their termination from DirecTouch. All nonvested options to purchase UTS 
common stock held by DirecTouch Amendment Optionees terminate as of the 
Distribution Date.

     Section 4.06 THE DISTRIBUTION. On the Distribution Date, subject to the 
conditions and rights of termination set forth in this Agreement, UTS shall 
distribute, on or as soon as practicable following the Distribution Date, to 
each Holder one share of DirecTouch common stock for every share of UTS 
capital stock held by such Holder. DirecTouch agrees to provide all share 
certificates that UTS shall require in order to effect the Distribution.

                               ARTICLE V

                            INDEMNIFICATION

     Section 5.01 INDEMNIFICATION BY UTS. Except as otherwise expressly set 
forth in a Related Agreement, UTS shall indemnify, defend and hold harmless 
DirecTouch and each of the DirecTouch Subsidiaries, and each of their 
respective directors, officers, employees, agents and Affiliates and each of 
the heirs, executors, successors and assigns of any of the foregoing (the 
'DirecTouch Indemnitees') from and against the Retained Liabilities and any 
and all losses, Liabilities, damages, including, without limitation, the 
costs and expenses of any and all Actions, threatened Actions, demands, 
assessments, judgments, settlements and compromises relating to the Retained 
Liabilities and attorneys' fees and any and all expenses whatsoever 
reasonably incurred in investigating, preparing or defending against any such 
Actions or threatened Actions (collectively, 'DirecTouch Indemnifiable 
Losses' and, individually, a 'DirecTouch Indemnifiable Loss') of the 
DirecTouch Indemnitees arising out of or due to the failure or alleged 
failure of UTS or any of its Affiliates prior to or after the Distribution 
Date to pay, perform or otherwise discharge in due course any of the Retained 
Liabilities.

     Section 5.02 INDEMNIFICATION BY DIRECTOUCH. Except as otherwise 
expressly set forth in a Related Agreement, DirecTouch shall indemnify, 
defend and hold harmless UTS and each of its directors, officers, employees, 
agents and Affiliates and each of the heirs, executors, successors and 
assigns of any of the foregoing (the 'UTS Indemnitees') from and against 
the DirecTouch Liabilities and any and all losses, Liabilities, damages, 
including, without limitation, the costs and expenses of any and all Actions, 
threatened Actions, demands, assessments, judgments, settlements and 
compromises relating to the DirecTouch Liabilities and attorneys' fees and 
any and all expenses 


                             -9-


whatsoever reasonably incurred in investigating, preparing or defending 
against any such Actions or threatened Actions (collectively, 'UTS 
Indemnifiable Losses' and, individually, a 'UTS Indemnifiable Loss') of 
the UTS Indemnitees arising out of or due to the failure or alleged failure 
of DirecTouch or any of its Affiliates prior to or after the Distribution 
Date to pay, perform or otherwise discharge in due course any of the 
DirecTouch Liabilities. The 'DirecTouch Indemnifiable Losses' and the 'UTS 
Indemnifiable Losses' are collectively referred to as the 'Indemnifiable 
Losses.'

     Section 5.03 INSURANCE PROCEEDS. The amount which any party (an 
'Indemnifying Party') is or may be required to pay to any other Person (an 
'Indemnitee') pursuant to Section 5.01 or Section 5.02 shall be reduced 
(including, without limitation, retroactively) by any Insurance Proceeds or 
other amounts actually recovered by or on behalf of such Indemnitee in 
reduction of the related Indemnifiable Loss. If an Indemnitee shall have 
received the payment required by this Agreement from an Indemnifying Party in 
respect of an Indemnifiable Loss and shall subsequently actually receive 
Insurance Proceeds, or other amounts in respect of such Indemnifiable Loss as 
specified above, then such Indemnitee shall pay to such Indemnifying Party a 
sum equal to the greater of (i) the amount of such Insurance Proceeds or 
other amounts actually received and (ii) the amount of the payment previously 
made by the Indemnifying Party in respect of the Indemnifiable Loss.

     Section 5.04 PROCEDURE FOR INDEMNIFICATION.

                  (a) Except as may be set forth in a Related Agreement, if 
an Indemnitee shall receive notice or otherwise learn of the assertion by a 
Person (including, without limitation, any governmental entity) who is not a 
party to this Agreement or to any of the Related Agreements of any claim or 
of the commencement by any such Person of any Action (a 'Third-Party 
Claim') with respect to which an Indemnifying Party may be obligated to 
provide indemnification pursuant to this Agreement, such Indemnitee shall 
give such Indemnifying Party written notice thereof promptly after becoming 
aware of such Third-Party Claim; PROVIDED that the failure of any Indemnitee 
to give notice as required by this Section 5.04 shall not relieve the 
Indemnifying Party of its obligations under this Article IV, except to the 
extent that such Indemnifying Party is prejudiced by such failure to give 
notice. Such notice shall describe the Third-Party Claim in reasonable 
detail, and shall indicate the amount (estimated if necessary) of the 
Indemnifiable Loss that has been or may be sustained by such Indemnitee.

                  (b) An Indemnifying Party may elect to defend or to seek to 
settle or compromise, at such Indemnifying Party's own expense and by such 
Indemnifying Party's own counsel, any Third-Party Claim, provided that the 
Indemnifying Party must confirm in writing that it agrees that the Indemnitee 
is entitled to indemnification hereunder in respect of such Third-Party 
Claim. Within 30 days of the receipt of notice from an Indemnitee in 
accordance with Section 5.04(a) (or sooner, if the nature of such Third-Party 
Claim so requires), the Indemnifying Party 


                             -10-


shall notify the Indemnitee of its election whether to assume responsibility 
for such Third-Party Claim (provided that if the Indemnifying Party does not 
so notify the Indemnitee of its election within 30 days after receipt of such 
notice from the Indemnitee, the Indemnifying Party shall be deemed to have 
elected not to assume responsibility for such Third-Party Claim), and such 
Indemnitee shall cooperate in the defense or settlement or compromise of such 
Third-Party Claim. After notice from an Indemnifying Party to an Indemnitee 
of its election to assume responsibility for a Third-Party Claim, such 
Indemnifying Party shall not be liable to such Indemnitee under this Article 
IV for any legal or other expenses (except expenses approved in advance by 
the Indemnifying Party) subsequently incurred by such Indemnitee in 
connection with the defense thereof; PROVIDED THAT if the defendants in any 
such claim include both the Indemnifying Party and one or more Indemnitees 
and in such Indemnitees' reasonable judgment a conflict of interest between 
such Indemnitees and such Indemnifying Party exists in respect of such claim, 
such Indemnitees shall have the right to employ separate counsel and in that 
event the reasonable fees and expenses of such separate counsel (but not more 
than one separate counsel reasonably satisfactory to the Indemnifying Party) 
shall be paid by such Indemnifying Party. If an Indemnifying Party elects not 
to assume responsibility for a Third-Party Claim (which election may be made 
only in the event of a good faith dispute that a claim was inappropriately 
tendered under Section 5.01 or 5.02, as the case may be), the Indemnitee may 
defend or (subject to the following sentence) seek to compromise or settle 
such Third-Party Claim. Notwithstanding the foregoing, an Indemnitee may not 
settle or compromise any claim without prior written notice to the 
Indemnifying Party, which shall have the option within ten days following the 
receipt of such notice (i) to disapprove the settlement and assume all past 
and future responsibility for the claim, including reimbursing the Indemnitee 
for prior expenditures in connection with the claim, or (ii) disapprove the 
settlement and continue to refrain from participation in the defense of the 
claim, in which event the Indemnifying Party shall have no further right to 
contest the amount or reasonableness of the settlement if the Indemnitee 
elects to proceed therewith, or (iii) to approve the amount of the 
settlement, reserving the Indemnifying Party's right to contest the 
Indemnitee's right to indemnity, or (iv) to approve and agree to pay the 
settlement. In the event the Indemnifying Party makes no response to such 
written notice from the Indemnitee, the Indemnifying Party shall be deemed to 
have elected option (ii).

                  (c) If an Indemnifying Party chooses to defend or to seek 
to compromise any Third-Party Claim, the Indemnitee shall make available to 
such Indemnifying Party any personnel and any books, records or other 
documents within its control or which it otherwise has the ability to make 
available that are necessary or appropriate for such defense.

                  (d) Notwithstanding anything else in this Section 5.04 to 
the contrary, an Indemnifying Party shall not settle or compromise any 
Third-Party Claim unless such settlement or compromise contemplates as an 
unconditional term thereof the giving by such claimant or plaintiff to the 
Indemnitee of a written release from all liability in respect of such 
Third-Party Claim (and provided further that such settlement may not provide 
for any non-monetary relief by Indemnitee without the written consent of 
Indemnitee). In the event the Indemnitee shall notify the Indemnifying Party 
in writing that such Indemnitee declines to accept any such settlement or 
compromise, such Indemnitee may continue to contest such Third-Party Claim, 
free of any participation by such Indemnifying Party, at such Indemnitee's 
sole expense. In such event, the obligation of such Indemnifying Party to 
such Indemnitee with respect to such Third-Party Claim shall be equal to (i) 
the costs and expenses of such Indemnitee prior to the date such Indemnifying 
Party notifies such Indemnitee of the offer to settle or compromise (to the 
extent such costs and 


                             -11-


expenses are otherwise indemnifiable hereunder) PLUS (ii) the lesser of (A) 
the amount of any offer of settlement or compromise which such Indemnitee 
declined to accept and (B) the actual out-of-pocket amount such Indemnitee is 
obligated to pay subsequent to such date as a result of such Indemnitee's 
continuing to pursue such Third-Party Claim.

                  (e) Any claim on account of an Indemnifiable Loss which 
does not result from a Third-Party Claim shall be asserted by written notice 
given by the Indemnitee to the applicable Indemnifying Party. Such 
Indemnifying Party shall have a period of 15 days after the receipt of such 
notice within which to respond thereto. If such Indemnifying Party does not 
respond within such 15-day period, such Indemnifying Party shall be deemed to 
have refused to accept responsibility to make payment. If such Indemnifying 
Party does not respond within such 15-day period or rejects such claim in 
whole or in part, such Indemnitee shall be free to pursue such remedies as 
may be available to such party under applicable law or under this Agreement.

                  (f) In addition to any adjustments required pursuant to 
Section 5.03, if the amount of any Indemnifiable Loss shall, at any time 
subsequent to the payment required by this Agreement, be reduced by recovery, 
settlement or otherwise, the amount of such reduction, less any expenses 
incurred in connection therewith, shall promptly be repaid by the Indemnitee 
to the Indemnifying Party.

                  (g) In the event of payment by an Indemnifying Party to any 
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party 
shall be subrogated to and shall stand in the place of such Indemnitee as to 
any events or circumstances in respect of which such Indemnitee may have any 
right or claim relating to such Third-Party Claim against any claimant or 
plaintiff asserting such Third-Party Claim. Such Indemnitee shall cooperate 
with such Indemnifying Party in a reasonable manner, and at the cost and 
expense of such Indemnifying Party, in prosecuting any subrogated right or 
claim.

     Section 5.05 REMEDIES CUMULATIVE. The remedies provided in this Article 
IV shall be cumulative and shall not preclude assertion by any Indemnitee of 
any other rights or the seeking of any and all other remedies against any 
Indemnifying Party.

     Section 5.06 SURVIVAL OF INDEMNITIES. The obligations of each of 
DirecTouch and UTS under this Article IV shall survive the sale or other 
transfer by it of any assets or businesses or the assignment by it of any 
Liabilities with respect to any Indemnifiable Loss of the other related to 
such assets, businesses or Liabilities.


                             -12-


                            ARTICLE VI

                   CERTAIN ADDITIONAL MATTERS

     Section 6.01 DIRECTOUCH BOARD. DirecTouch and UTS shall take all actions 
which may be required to constitute, effective as of the Distribution Date, 
the board of directors of DirecTouch with the following persons: Hong Lu, 
Chauncey Shey, Li Kin Shing, Jim Miller and Charlie Shi.

     Section 6.02 EMPLOYEE MATTERS.

                  (a) On the Distribution Date, except to the extent retained 
or assumed by UTS under this Agreement or any other agreement relating to the 
Distribution, DirecTouch shall retain or assume, as the case may be, 
responsibility as employer for the DirecTouch Employees. On the Distribution 
Date, except to the extent retained or assumed by DirecTouch under this 
Agreement or any other agreement relating to the Distribution, UTS shall 
retain or assume, as the case may be, responsibility as employer for the 
Retained Employees.

                  (b) DirecTouch shall cause all of the DirecTouch Employees 
to resign, effective as of the Distribution Date, from all positions as 
officers or employees of UTS in which they serve. UTS shall cause all of the 
Retained Employees to resign, effective as of the Distribution Date, from all 
positions as officers or employees of DirecTouch or any of its Subsidiaries 
in which they serve.

                              ARTICLE VII
 
                  ACCESS TO INFORMATION AND SERVICES
 
     Section 7.01 PROVISION OF CORPORATE RECORDS.

                  (a) Except as may otherwise be provided in a Related 
Agreement, UTS shall arrange as soon as practicable following the 
Distribution Date for the transportation (at DirecTouch's cost) to DirecTouch 
of the DirecTouch Books and Records in its possession, except to the extent 
such items are already in the possession of DirecTouch or a DirecTouch 
Subsidiary. The DirecTouch Books and Records shall be the property of 
DirecTouch, but shall be available to UTS for review and duplication until 
UTS shall notify DirecTouch in writing that such records are no longer of use 
to UTS.

                  (b) Except as otherwise provided in a Related Agreement, 
DirecTouch shall arrange as soon as practicable following the Distribution 
Date for the transportation (at UTS's cost) to UTS of the UTS Books and 
Records in its possession, except to the extent such items are already in the 
possession of UTS. The UTS Books and Records shall be the property of UTS, 
but 


                             -13-


shall be available to DirecTouch for review and duplication until 
DirecTouch shall notify UTS in writing that such records are no longer of use 
to DirecTouch.

     Section 7.02 ACCESS TO INFORMATION. Except as otherwise provided in a 
Related Agreement, from and after the Distribution Date, UTS shall afford to 
DirecTouch and its authorized accountants, counsel and other designated 
representatives reasonable access (including using reasonable efforts to give 
access to persons or firms possessing information) and duplicating rights 
during normal business hours to all records, books, contracts, instruments, 
computer data and other data and information relating to pre-Distribution 
operations (collectively, 'Information') within UTS's possession insofar as 
such access is reasonably required by DirecTouch for the conduct of its 
business, subject to appropriate restrictions for classified or Privileged 
Information. Similarly, except as otherwise provided in a Related Agreement, 
DirecTouch shall afford to UTS and its authorized accountants, counsel and 
other designated representatives reasonable access (including using 
reasonable efforts to give access to persons or firms possessing information) 
and duplicating rights during normal business hours to Information within 
DirecTouch's possession, insofar as such access is reasonably required by UTS 
for the conduct of its business, subject to appropriate restrictions for 
classified or Privileged Information. Information may be requested under this 
Article VI for the legitimate business purposes of either party, including, 
without limitation, audit, accounting, claims (including claims for 
indemnification hereunder), litigation and tax purposes, as well as for 
purposes of fulfilling disclosure and reporting obligations and for 
performing this Agreement and the transactions contemplated hereby.

     Section 7.03 PRODUCTION OF WITNESSES. At all times from and after the 
Distribution Date, each of DirecTouch and UTS shall use reasonable efforts to 
make available to the other, upon written request, its and its Subsidiaries' 
officers, directors, employees and agents as witnesses to the extent that 
such persons may reasonably be required in connection with any Action.

     Section 7.04 REIMBURSEMENT. Except to the extent otherwise contemplated 
in any Related Agreement, a party providing Information or witness services 
to the other party under this Article VI shall be entitled to receive from 
the recipient, upon the presentation of invoices therefor, payments of such 
amounts, relating to supplies, disbursements and other out-of-pocket expenses 
(at cost) and direct and indirect expenses of employees who are witnesses or 
otherwise furnish assistance (at cost), as may be reasonably incurred in 
providing such Information or witness services.

     Section 7.05 RETENTION OF RECORDS. Except as otherwise required by law 
or agreed to in a Related Agreement or otherwise in writing, each of UTS and 
DirecTouch may destroy or otherwise dispose of any of the Information, which 
is material Information and is not contained in other Information retained by 
UTS or DirecTouch, as the case may be, at any time after the seventh 
anniversary of this Agreement, provided that, prior to such destruction or 
disposal, (a) it shall provide no less than 90 or more than 120 days prior 
written notice to the other, specifying in reasonable detail the Information 
proposed to be destroyed or disposed of and (b) if a recipient of such notice 
shall request in writing prior to the scheduled date for such destruction or 
disposal that any of the Information proposed to be destroyed or disposed of 
be delivered to such requesting party, 


                             -14-


the party proposing the destruction or disposal shall promptly arrange for 
the delivery of such of the Information as was requested at the expense of 
the party requesting such Information.

     Section 7.06 CONFIDENTIALITY. Each of UTS and its Subsidiaries on the 
one hand, and DirecTouch and its Subsidiaries on the other hand, shall hold, 
and shall cause its consultants and advisors to hold, in strict confidence, 
all Information concerning the other in its possession or furnished by the 
other or the other's representatives pursuant to this Agreement (except to 
the extent that such Information has been (i) in the public domain through no 
fault of such party or (ii) later lawfully acquired from other sources by 
such party), and each party shall not release or disclose such Information to 
any other person, except its auditors, attorneys, financial advisors, rating 
agencies, bankers and other consultants and advisors, unless compelled to 
disclose by judicial or administrative process or, as reasonably advised by 
its counsel or by other requirements of law, or unless such Information is 
reasonably required to be disclosed in connection with (x) any litigation 
with any third-parties or litigation between UTS and the DirecTouch Group, 
(y) any contractual agreement to which UTS or the DirecTouch Group are 
currently parties, or (z) in exercise of either party's rights hereunder.

     Section 7.07 PRIVILEGED MATTERS. UTS and DirecTouch recognize that legal 
and other professional services that have been and will be provided prior to 
the Distribution Date have been and will be rendered for the benefit of both 
the UTS Group and the DirecTouch Group and that both the UTS Group and the 
DirecTouch Group should be deemed to be the client for the purposes of 
asserting all Privileges. To allocate the interests of each party in the 
Privileged Information, the parties agree as follows:

                  (a) UTS shall be entitled, in perpetuity, to control the 
assertion or waiver of all Privileges in connection with Privileged 
Information which relates solely to the Retained Business, whether or not the 
Privileged Information is in the possession of or under the control of UTS or 
DirecTouch. UTS shall also be entitled, in perpetuity, to control the 
assertion or waiver of all Privileges in connection with Privileged 
Information that relates solely to the subject matter of any claims 
constituting Retained Liabilities, now pending or which may be asserted in 
the future, in any lawsuits or other proceedings initiated against or by UTS, 
whether or not the Privileged Information is in the possession of or under 
the control of UTS or DirecTouch.

                  (b) DirecTouch shall be entitled, in perpetuity, to control 
the assertion or waiver of all Privileges in connection with Privileged 
Information which relates solely to the DirecTouch Business, whether or not 
the Privileged Information is in the possession of or under the control of 
UTS or DirecTouch. DirecTouch shall also be entitled, in perpetuity, to 
control the assertion or waiver of all Privileges in connection with 
Privileged Information which relates solely to the subject matter of any 
claims constituting DirecTouch Liabilities, now pending or which may be 
asserted in the future, in any lawsuits or other proceedings initiated 
against or by DirecTouch, whether or not the Privileged Information is in the 
possession of DirecTouch or under the control of UTS or DirecTouch.


                             -15-


                  (c) UTS and DirecTouch agree that they shall have a shared 
Privilege, with equal right to assert or waive, subject to the restrictions 
in this Section 7.07, with respect to all Privileges not allocated pursuant 
to the terms of Sections 7.07(a) and (b). All Privileges relating to any 
claims, proceedings, litigation, disputes or other matters which involve both 
UTS and DirecTouch in respect of which UTS and DirecTouch retain any 
responsibility or liability under this Agreement shall be subject to a shared 
Privilege.

                  (d) No party may waive any Privilege which could be 
asserted under any applicable law, and in which the other party has a shared 
Privilege, without the consent of the other party, except to the extent 
reasonably required in connection with any litigation with third-parties or 
as provided in subsection (e) below. Consent shall be in writing, or shall be 
deemed to be granted unless written objection is made within 20 days after 
notice upon the other party requesting such consent.

                  (e) In the event of any litigation or dispute between a 
member of the UTS Group and a member of the DirecTouch Group, either party 
may waive a Privilege in which the other party has a shared Privilege, 
without obtaining the consent of the other party, provided that such waiver 
of a shared Privilege shall be effective only as to the use of Information 
with respect to the litigation or dispute between the UTS Group and the 
DirecTouch Group, and shall not operate as a waiver of the shared Privilege 
with respect to third-parties.

                  (f) If a dispute arises between the parties regarding 
whether a Privilege should be waived to protect or advance the interest of 
either party, each party agrees that it shall negotiate in good faith, shall 
endeavor to minimize any prejudice to the rights of the other party, and 
shall not unreasonably withhold consent to any request for waiver by the 
other party. Each party specifically agrees that it will not withhold consent 
to waiver for any purpose except to protect its own legitimate interests.

                  (g) Upon receipt by any party of any subpoena, discovery or 
other request which arguably calls for the production or disclosure of 
Information subject to a shared Privilege or as to which the other party has 
the sole right hereunder to assert a Privilege, or if any party obtains 
knowledge that any of its current or former directors, officers, agents or 
employees have received any subpoena, discovery or other requests which 
arguably calls for the production or disclosure of such Privileged 
Information, such party shall promptly notify the other party of the 
existence of the request and shall provide the other party a reasonable 
opportunity to review the Information and to assert any rights it may have 
under this Section 7.07 or otherwise to prevent the production or disclosure 
of such Privileged Information.

                  (h) The transfer of the DirecTouch Books and Records and 
the UTS Books and Records and other Information between the UTS Group and the 
DirecTouch Group is made in reliance on the agreement of UTS and DirecTouch, 
as set forth in Sections 7.06 and 7.07, to maintain the confidentiality of 
Privileged Information and to assert and maintain all applicable Privileges. 
The access to information being granted pursuant to Sections 7.01 and 7.02, 
the agreement to provide witnesses and individuals pursuant to Section 7.03 
and the transfer of 


                             -16-


Privileged Information between the UTS Group and the DirecTouch Group 
pursuant to this Agreement shall not be deemed a waiver of any Privilege that 
has been or may be asserted under this Agreement or otherwise.

                        ARTICLE VIII

                       MISCELLANEOUS

     Section 8.01 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement, including 
the Exhibits and the Related Agreements and other agreements and documents 
referred to herein, shall constitute the entire agreement between the parties 
with respect to the subject matter hereof and thereof and shall supersede all 
previous negotiations, commitments and writings with respect to such subject 
matter. Notwithstanding any other provisions in this Agreement to the 
contrary, in the event and to the extent that there shall be a conflict 
between the provisions of this Agreement and the provisions of the Related 
Agreements, the Related Agreements shall control.

     Section 8.02 EXPENSES. Except as otherwise set forth in this Agreement 
or any Related Agreement, all costs and expenses in connection with the 
preparation, execution, delivery and implementation of this Agreement, the 
Distribution and with the consummation of the transactions contemplated by 
this Agreement shall be charged to the party for whose benefit the expenses 
are incurred, with any expenses which cannot be allocated on such basis to be 
split equally between the parties.

     Section 8.03 GOVERNING LAW. This Agreement shall be governed by and 
construed in accordance with the laws of the State of California, without 
regard to the principles of conflicts of laws thereof.

     Section 8.04 NOTICES. All notices and other communications hereunder 
shall be in writing and shall be delivered by hand, mailed by registered or 
certified mail (return receipt requested) to the parties at the addresses 
below (or at such other addresses for a party as shall be specified by like 
notice) or sent by facsimile to the numbers listed below with confirmation of 
transmission, and shall be deemed given on the date on which such notice is 
received:

                    To DirecTouch:

                     DirecTouch, Inc.
                     Room 3813-15
                     Hong Kong Plaza
                     188 Connaught Road West
                     (011) 852-2859-9333
                     (011) 852-2859-9393 (Fax)
                     Attention:  Jim Miller


                             -17-



                        To UTS:

                           UTS, Inc.
                           1275 Harbor Bay Parkway, Suite 100
                           Alameda, California 94502
                           (510) 864-8800
                           (510) 864-8802 (Fax)
                           Attention:  Hong Lu

     Section 8.05 AMENDMENTS. This Agreement may not be modified or amended 
except by an agreement in writing signed by the parties.

     Section 8.06 SUCCESSORS AND ASSIGNS. This Agreement and all of the 
provisions hereof shall be binding upon and inure to the benefit of the 
parties and their respective successors and permitted assigns. The parties 
acknowledge and agree that any party into which UTS or DirecTouch merges or 
which acquires all or substantially all of UTS's or DirecTouch's assets in a 
sale transaction would constitute a permitted assign for purposes of this 
Section 8.06.

     Section 8.07 TERMINATION. This Agreement may be terminated and the 
Distribution abandoned at any time prior to the Distribution Date by and in 
the sole discretion of the UTS Board without the approval of DirecTouch or of 
UTS's stockholders. In the event of such termination, no party shall have any 
liability to any other party pursuant to this Agreement. 

     Section 8.08 SUBSIDIARIES. Each of the parties hereto shall cause to be 
performed, and hereby guarantees the performance of, all actions, agreements 
and obligations set forth herein to be performed by any Subsidiary of such 
party which is contemplated to be a Subsidiary of such party on and after the 
Distribution Date.

     Section 8.09 NO THIRD-PARTY BENEFICIARIES. Except for the provisions of 
Article IV relating to Indemnitees, this Agreement is solely for the benefit 
of the parties hereto and their respective Subsidiaries and Affiliates and 
should not be deemed to confer upon third-parties any remedy, claim, 
Liability, reimbursement, claim of action or other right in excess of those 
existing without reference to this Agreement.

     Section 8.10 TITLES AND HEADINGS. Titles and headings to sections herein 
are inserted for the convenience of reference only and are not intended to be 
a part of or to affect the meaning or interpretation of this Agreement.

     Section 8.11 EXHIBITS AND SCHEDULES. The Exhibits and Schedules shall be 
construed with and as an integral part of this Agreement to the same extent 
as if the same had been set forth verbatim herein.


                                      -18-


     Section 8.12 LEGAL ENFORCEABILITY. Any provision of this Agreement which 
is prohibited or unenforceable in any jurisdiction shall, as to such 
jurisdiction, be ineffective to the extent of such prohibition or 
unenforceability without invalidating the remaining provisions hereof. Any 
such prohibition or unenforceability in any jurisdiction shall not invalidate 
or render unenforceable such provision in any other jurisdiction. Without 
prejudice to any rights or remedies otherwise available to any party hereto, 
each party hereto acknowledges that damages would be an inadequate remedy for 
any breach of the provisions of this Agreement and agrees that the 
obligations of the parties hereunder shall be specifically enforceable.

     Section 8.13 ARBITRATION OF DISPUTES.

                  (a) Any controversy or claim arising out of this Agreement, 
or any breach of this Agreement, including any controversy relating to a 
determination of whether specific assets constitute DirecTouch Assets or 
Retained Assets or whether specific Liabilities constitute DirecTouch 
Liabilities or Retained Liabilities, shall be settled by arbitration in 
accordance with the Rules of the American Arbitration Association then in 
effect, as modified by this Section 8.13 or by the further agreement of the 
parties.

                  (b) Such arbitration shall be conducted in Santa Clara 
County, California.

                  (c) Any judgment upon the award rendered by the arbitrators 
may be entered in any court having jurisdiction thereof. The arbitrators 
shall have the authority to award to the prevailing party its attorneys' fees 
and costs incurred in such arbitration. The arbitrators shall not, under any 
circumstances, have any authority to award punitive, exemplary or similar 
damages, and may not, in any event, make any ruling, finding or award that 
does not conform to the terms and conditions of this Agreement.

                  (d) Nothing contained in this Section 8.13 shall limit or 
restrict in any way the right or power of a party at any time to seek 
injunctive relief in any court and to litigate the issues relevant to such 
request for injunctive relief before such court (i) to restrain the other 
party from breaching this Agreement or (ii) for specific enforcement of this 
Section 8.13. The parties agree that any legal remedy available to a party 
with respect to a breach of this Section 8.13 will not be adequate and that, 
in addition to all other legal remedies, each party is entitled to an order 
specifically enforcing this Section 8.13.

                  (e) The parties hereby consent to the jurisdiction of the 
federal courts located in Santa Clara County, California for all purposes 
under this Agreement.

                  (f) Neither party nor the arbitrators may disclose the 
existence or results of any arbitration under this Agreement or any evidence 
presented during the course of the arbitration without the prior written 
consent of both parties, except as required to fulfill applicable disclosure 
and reporting obligations, or as otherwise required by law.


                                      -19-


                  (g) Except as provided in Section 8.13(c), each party shall 
bear its own costs incurred in the arbitration. If either party refuses to 
submit to arbitration any dispute required to be submitted to arbitration 
pursuant to this Section 8.13, and instead commences any other proceeding, 
including, without limitation, litigation, then the party who seeks 
enforcement of the obligation to arbitrate shall be entitled to its 
attorneys' fees and costs incurred in any such proceeding.

                           (Signature page follows.)


                                      -20-


IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.

                                          UTStarcom, Inc.

                                          By:  /s/ Hong Liang Lu
                                               -------------------------------
                                          Name:    Hong Liang Lu
                                                ------------------------------
                                          Title:   President/CEO
                                                 -----------------------------

                                          DIRECTOUCH COMMUNICATIONS 
                                          LIMITED

                                          By:  /s/ Li Kin Shing
                                               -------------------------------
                                          Name:    Li Kin Shing
                                                ------------------------------
                                          Title:   Director
                                                 -----------------------------


                                      -21-


                                    EXHIBIT A

                                DIRECTOUCH BYLAWS

                                    [Omitted]




                                    EXHIBIT B

                              DIRECTOUCH CERTIFICATE

                                    [Omitted]




                                    EXHIBIT C

                         DIRECTOUCH FINANCIAL STATEMENTS

                                   [Omitted]




                                    EXHIBIT D

                          INTER-COMPANY OPTION AGREEMENT

                                   [Omitted]




                                    EXHIBIT E

                         STOCK TRANSFER RESTRICTION AGREEMENT

                                    [Omitted]




                                    EXHIBIT F

                             UTS FINANCIAL STATEMENTS

                                    [Omitted]