Common Stock Purchase Warrant - UTStarcom Inc. and Talent Group International Ltd.
COMMON STOCK PURCHASE WARRANT
THIS WARRANT HAS BEEN, AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
PURSUANT TO THE EXERCISE OF THIS WARRANT (THE 'SHARES') WILL BE, ACQUIRED SOLELY
FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES (TOGETHER, THE
'SECURITIES') HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE 'ACT'), OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE TWO HUNDRED FIFTY THOUSAND (250,000) SHARES OF COMMON STOCK
THIS CERTIFIES THAT, for value received, Talent Group International,
Ltd., a corporation organized under the laws of Hong Kong (the 'HOLDER') is
entitled to subscribe for and purchase from UTStarcom, Inc., a Delaware
corporation (the 'COMPANY'), 250,000 shares (as adjusted pursuant to Section 4
hereof) of the fully paid and nonassessable Common Stock, $.0025 par value (the
'SHARES'), of the Company at the price of $12.50 per share (the 'EXERCISE
PRICE') (as adjusted pursuant to Section 4 hereof), subject to the provisions
and upon the terms and conditions hereinafter set forth.
This Warrant is subject to the following terms and conditions:
1. TERM AND VESTING.
(a) TERM. Subject to vesting requirements set forth in
Section 1(b) below, this Warrant is exercisable, in whole or in part, any time
from and after the date of issuance of this Warrant and prior to the earlier
of: (i) December 11, 2003; (ii) the consummation of the Company's initial
public offering of its capital stock pursuant to a registration statement filed
under the Securities Act of 1933, as amended (the 'ACT'); and (iii) the
consummation of a liquidation,
dissolution or winding up of the Company as set forth in the Company's
Certificate of Incorporation. The Company shall be obligated to provide Holder
with written notice of termination of this Warrant at least 30 days prior
(b) VESTING. The right to purchase the Shares hereunder shall
vest and become exercisable as follows: 100% of the Shares subject to this
Warrant are immediately vested.
2. METHOD OF EXERCISE; PAYMENT.
(a) CASH EXERCISE. The purchase rights represented by this
Warrant may be exercised by the Holder, in whole or in part, from time to time
at the principal office of the Company, by delivering a completed and duly
executed Notice of Exercise (attached hereto as EXHIBIT A) and by the payment
to the Company of an amount equal to the Exercise Price multiplied by the
number of the Shares being purchased, which amount may be paid, at the election
of the Holder, by wire transfer or certified check payable to the order of the
Company. The person or persons in whose name(s) any certificate(s) representing
Shares shall be issuable upon exercise of this Warrant shall be deemed to have
become the holder(s) of record of, and shall be treated for all purposes as the
record holder(s) of, the Shares represented thereby (and such Shares shall be
deemed to have been issued) immediately prior to the close of business on the
date or dates upon which this Warrant is exercised.
(b) STOCK CERTIFICATES. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of Common Stock
so purchased shall be delivered to the Holder within a reasonable time and,
unless this Warrant has been fully exercised or has expired, a new Warrant
representing the shares with respect to which this Warrant shall not have been
exercised shall also be issued to the Holder within such time.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All of the Shares
issuable upon the exercise of the rights represented by this Warrant will, upon
issuance and receipt of the Exercise Price therefor, be fully paid and
nonassessable, and free from all preemptive rights, rights of first refusal or
first offer, taxes, liens and charges with respect to the issuance thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company shall at all times have authorized and reserved for
issuance sufficient shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant.
4. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. Subject to
the provisions of Section 1 hereof, the number and kind of Shares purchasable
upon the exercise of this Warrant and the Exercise Price therefor shall be
subject to adjustment from time to time upon the occurrence of certain events,
(a) RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of any
reclassification of the Common Stock (other than a change in par value, or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger with another corporation in which the Company is a
continuing corporation and in which the Company's stockholders immediately
preceding such consolidation or
merger own at least 50% of the voting securities of the Company following such
consolidation or merger and which does not result in any reclassification of
the Shares issuable upon exercise of this Warrant), or in case of any sale of
all or substantially all of the assets of the Company, the Company, or such
successor or purchasing corporation as the case may be, shall execute a new
Warrant, providing that the holder of this Warrant shall have the right to
exercise such new Warrant, and procure upon such exercise and payment of the
same aggregate Exercise Price, in lieu of the Shares of Common Stock
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change, consolidation, sale of all or substantially all of
the Company's assets or merger by a holder of an equivalent number of shares of
Common Stock. Such new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 4. The provisions of this subsection (a), subject to Section 1 hereof,
shall similarly apply to successive reclassifications, consolidations, mergers,
and the sale of all or substantially all of the Company's assets.
(b) STOCK SPLITS, DIVIDENDS AND COMBINATIONS. In the event
that the Company shall at any time subdivide the outstanding shares of Common
Stock, or shall issue a stock dividend on its outstanding shares of Common
Stock, the number of Shares issuable upon exercise of this Warrant immediately
prior to such subdivision or to the issuance of such stock dividend shall be
proportionately increased, and the Exercise Price shall be proportionately
decreased, and in the event that the Company shall at any time combine the
outstanding shares of Common Stock, the number of Shares issuable upon exercise
of this Warrant immediately prior to such combination shall be proportionately
decreased, and the Exercise Price shall be proportionately increased, effective
at the close of business on the date of such subdivision, stock dividend or
combination, as the case may be.
(a) Upon any adjustment of the Exercise Price and any increase
or decrease in the number of Shares purchasable upon the exercise of this
Warrant in accordance with Section 4 hereof, then, and in each such case, the
Company, within thirty (30) days thereafter, shall give written notice thereof
to the Holder at the address of such Holder as shown on the books of the
Company which notice shall state the Exercise Price as adjusted and, if
applicable, the increased or decreased number of Shares purchasable upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation of each.
(b) Any written notice by the Company required or permitted
hereunder shall be given by hand delivery or first class mail, postage prepaid,
addressed to the Holder at the address shown on the books of the Company for
6. NON-TRANSFERABILITY OF WARRANT. This Warrant is not assignable
or otherwise transferable by the Holder without the written consent of the
Company. Notwithstanding the foregoing, the terms and provisions of this
Warrant shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns.
7. CONDITION OF EXERCISE OF WARRANT.
(a) Unless exercised pursuant to an effective registration
statement under the Act which includes the Shares so exercised, it shall be a
condition to any exercise of this Warrant that the Company shall have received,
at the time of such exercise, a representation in writing from the recipient in
the form attached hereto as EXHIBIT A-1, that the Shares being issued upon
exercise, are being acquired for investment and not with a view to any sale or
(b) Each certificate evidencing the Shares issued upon
exercise of this Warrant, shall be stamped or imprinted with a legend
substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE 'ACT') OR ANY STATE SECURITIES LAWS. SUCH
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE ACT.
Subject to this Section 7, the Company may instruct its transfer agent
not to register the transfer of all or a part of this Warrant, or any of the
Shares, unless one of the conditions specified in the above legend is satisfied.
8. FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor upon the basis
of the Exercise Price then in effect.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Holder as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions
granted to or imposed upon the Shares and the holders thereof are as set forth
in the Company's Certificate of Incorporation, a true and complete copy of
which has been delivered to the original Holder of this Warrant; and
(d) The execution and delivery of this Warrant are not, and
the issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Certificate of
Incorporation or Bylaws, as amended.
10. REPRESENTATIONS AND WARRANTIES BY THE HOLDER. The Holder
represents and warrants to the Company as follows:
(a) This Warrant is being acquired for its own account, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Act. Upon
exercise of this Warrant, the Holder shall, if so requested by the Company,
confirm in writing, in a form reasonably satisfactory to the Company, that the
Shares issuable upon exercise of this Warrant are being acquired for investment
and not with a view toward distribution or resale.
(b) The Holder understands that the Warrant and the Shares
have not been registered under the Act by reason of their issuance in a
transaction exempt from the registration and prospectus delivery requirements
of the Act pursuant to Section 4(2) thereof, and that they must be held by the
Holder indefinitely, and that the Holder must therefore bear the economic risk
of such investment indefinitely, unless a subsequent disposition thereof is
registered under the Act or is exempted from such registration. The Holder
further understands that the Shares have not been qualified under the
California Securities Law of 1968 (the 'CALIFORNIA LAW') by reason of their
issuance in a transaction exempt from the qualification requirements of the
California Law pursuant to Section 25102(f) thereof, which exemption depends
upon, among other things, the bona fide nature of the Holder's investment
intent expressed above.
(c) The Holder has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
the purchase of this Warrant and the Shares purchasable pursuant to the terms
of this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the
purchase of the Shares pursuant to the terms of this Warrant.
11. RIGHTS OF STOCKHOLDERS. No holder of this Warrant shall be
entitled, as a warrant holder, to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company which may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the holder of this Warrant, as
such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issuance of stock, reclassification of
stock, change of par value, consolidation, merger, conveyance, or otherwise) or
to receive notice of meetings, or to receive dividends or subscription rights
or otherwise until the Warrant shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as provided
(a) This Warrant is being delivered in the State of California
and shall be construed and enforced in accordance with and governed by the laws
of such State. The parties expressly stipulate that any litigation under this
Warrant shall be brought in the State courts of the Counties of Santa Clara or
San Francisco, California and in the United States District Court for the
Northern District of California. The parties agree to submit to the
jurisdiction and venue of those courts.
(b) The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof.
(c) The terms of this Warrant shall be binding upon and shall
inure to the benefit of any successors or assigns of the Company and of the
holder or holders hereof and of the Shares issued or issuable upon the exercise
(d) This Warrant and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
(e) The Company shall not, by amendment of its Certificate of
Incorporation, or through any other means, directly or indirectly, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant
and shall at all times in good faith assist in the carrying out of all such
terms and in the taking of all such action as may be necessary or appropriate
in order to protect the rights of the holder of this Warrant against impairment.
(f) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, upon surrender and cancellation of such Warrant,
the Company at its expense will execute and deliver to the holder of record, in
lieu thereof, a new Warrant of like date and tenor.
(g) This Warrant and any provision hereof may be amended,
waived or terminated only by an instrument in writing signed by the Company and
(h) Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
Issued this 20th day of September, 1999.
By:/s/ Hong Liang Lu
Hong Lu, President and
Chief Executive Officer
Acknowledged and Accepted:
/s/ Li Kin Shing
By: Li Kin Shing
NOTICE OF EXERCISE
TO: UTStarcom, Inc.
1275 Harbor Bay Parkway, Suite 100
Alameda, CA 94502
Attention: Chief Financial Officer
1. The undersigned hereby elects to purchase ________ shares of
Common Stock of UTStarcom, Inc. pursuant to the terms of this Warrant, and
tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
3. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned
for investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in Section 10 of the attached Warrant are true and
correct as of the date hereof. In support thereof, the undersigned agrees to
execute an Investment Representation Statement in a form substantially similar
to the form attached to the Warrant as EXHIBIT A-1.
INVESTMENT REPRESENTATION STATEMENT
SELLER : UTSTARCOM, INC.
COMPANY : UTSTARCOM, INC.
SECURITY : COMMON STOCK ISSUED UPON EXERCISE OF THE COMMON
STOCK PURCHASE WARRANT ISSUED ON AUGUST __, 1999
AMOUNT : __________ SHARES
DATE : ____________, _______
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Seller and to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any 'distribution'
thereof for purposes of the Securities Act of 1933, as amended (the 'Securities
(b) I understand that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that,
in the view of the Securities and Exchange Commission (the 'SEC'), the
statutory basis for such exemption may be unavailable if my representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities. In
addition, I understand that the certificate evidencing the Securities will be
imprinted with a legend which prohibits the transfer of the Securities unless
they are registered or such registration is not required in the opinion of
counsel for the Company.
(d) I am familiar with the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permits limited public resale of
'restricted securities' acquired,
directly or indirectly, from the issuer thereof, in a non-public offering
subject to the satisfaction of certain conditions.
The Securities may be resold in certain limited circumstances subject to
the provisions of Rule 144, which requires among other things: (1) the
availability of certain public information about the Company, (2) the resale
occurring not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities
less than two years, (3) the sale being made through a broker in an unsolicited
'broker's transaction' or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) I agree, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise
dispose of any shares of Common Stock of the Company held by me (other than
those shares included in the registration) without the prior written consent of
the Company or the underwriters managing such initial underwritten public
offering of the Company's securities for one hundred eighty (180) days from the
effective date of such registration, and (2) I further agree to execute any
agreement reflecting (1) above as may be requested by the underwriters at the
time of the public offering; PROVIDED HOWEVER that the officers and directors
of the Company who own the stock of the Company also agree to such restrictions.
(f) I further understand that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.