LOAN AGREEMENT, dated as of June 15, 1998, between UTStarcom, Inc., a
Delaware corporation (the 'Borrower'), and SOFTBANK Corp., a Japanese
corporation (the 'Lender').
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lender make available to
it loans in an aggregate amount of up to $55 million; and
WHEREAS, the Lender is willing to make the loans available to the
Borrower on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. THE LOANS
(a) Subject to the terms and conditions hereof, the Lender shall lend
to the Borrower up to $55 million in two portions (the 'Loans') in amounts of
(i) $25 million on June 30, 1998 and (ii) at least $10 million plus integral
multiples of $5 million (up to $30 million) on a date on or before December 31,
1998, both as specified by the Borrower by not less than five Business Days
notice to the Lender. Each of the dates on which the Loans are made is herein
called a 'Drawdown Date' and, for purposes of this Agreement, a 'Business Day'
means any day except a Saturday, Sunday or other day on which commercial banks
in Tokyo or New York City are authorized by law to close.
(b) The Borrower's obligation to repay the Loans shall be evidenced
by promissory notes of the Borrower, substantially in the form of Exhibit A
attached hereto (the 'Notes'), payable to the order of the Lender on a maturity
date (the 'Maturity Date') which shall be the earlier of (i) two Business Days
after the closing date of the initial public offering of common stock of the
Borrower and (ii) two years after the latest Drawdown Date.
(c) The Loans shall bear interest until maturity at a rate of 10% per
annum (based on a 360-day year for the actual number of days elapsed), payable
semi-annually in arrears on the last Business Day of March and September, and on
the Maturity Date.
(d) All payments hereunder and under the Notes shall be made to the
Lender in U.S. dollars at a bank in New
York City specified by the Lender, net of withholding or other tax on interest.
2. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender that:
(a) ORGANIZATION. The Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has full power and authority to own its property and to carry on its
business as presently conducted. The Borrower is duly qualified in good
standing to do business in California and New Jersey, and there is no other
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or operations.
(b) AUTHORITY. The Borrower has full power and authority to enter
into this Agreement, to make the borrowings contemplated hereby, to execute and
deliver the Notes and to incur the obligations provided for herein and therein,
all of which have been duly authorized by all proper and necessary action. No
consent or approval of stockholders is required as a condition to the validity
or performance of this Agreement and the Notes.
(c) AUTHORIZATIONS. All authorizations, consents, approvals,
registrations, exemptions and licenses with or from governmental authorities
which are necessary for the borrowing hereunder, the execution and delivery of
this Agreement and the Notes, and the performance by the Borrower of its
obligations hereunder and thereunder have been effected or obtained and are in
full force and effect.
(d) BINDING AGREEMENT. This Agreement constitutes, and each of the
Notes, when executed and delivered pursuant hereto for value received, will
constitute, a valid and legally binding obligation of the Borrower enforceable
in accordance with its terms.
(e) NO CONFLICTS. There is no statute, regulation, rule, order or
judgment, no charter, by-law or preference stock provision of the Borrower, and
no provision of any mortgage, indenture, contract or agreement binding on the
Borrower or affecting its property, which would prohibit, conflict with or in
any way prevent the execution, delivery, or carrying out of the terms of this
Agreement and of the Notes in any material respect.
(f) FINANCIAL CONDITION. The consolidated financial statements of
the Borrower and its subsidiaries as
of December 31, 1997, and the related statements of earnings, shareholders
equity and cash flows for the fiscal year then ended, heretofore delivered to
the Lender, fairly present the financial condition and results of operations of
the Borrower and its subsidiaries as of the date and for such period, and have
been prepared in accordance with generally accepted accounting principles
consistently applied. There are no liabilities, direct or indirect, fixed or
contingent, of the Borrower or its subsidiaries as of the date of such financial
statements which are not reflected therein or in the notes thereto. Since
December 31, 1997, there has been no material adverse change in the business,
properties, financial condition or operations, present or prospective, of the
Borrower or its subsidiaries.
(g) LITIGATION. There are no proceedings or investigations pending
or, to the best of the Borrower's knowledge, threatened before any court or
arbitrator or before or by any governmental authority which, in any one case or
in the aggregate, if determined adversely to the interests of the Borrower or
any of its subsidiaries, would have a material adverse effect on the business,
properties, financial condition or operations, present or prospective, of the
Borrower and its subsidiaries, taken as a whole.
(a) Until repayment in full of the Loans, the Borrower will:
(i) Furnish to the Lender (A) as soon as available but in no event
more than 60 days after the end of each quarterly period of the Borrower's
fiscal year consolidated balance sheets of the Borrower and its
subsidiaries as of the close of such period and consolidated statements of
income and expense; (B) as soon as available but in no event more than 120
days after the close of each of the Borrower's fiscal years audited balance
sheets of the Borrower and its subsidiaries together with audited
consolidated statements of income and expense, retained earnings, paid-in
capital and surplus and changes in financial position for such fiscal year,
prepared in accordance with generally accepted accounting principles; and
(C) such additional information, reports or statements as the Lender may
from time to time reasonably request.
(ii) Notify the Lender promptly after the discovery by any officer of
the Borrower of the occurrence of (A) any Event of Default, or any event
which with the giving of notice of lapse of time, or
both, would constitute an Event of Default; (B) any material litigation or
proceedings that are instituted against the Borrower or its subsidiaries or
any of their respective assets; and (C) any other development in the
business or affairs of the Borrower or its subsidiaries which could be
reasonably expected to have a material adverse effect on the business,
properties, financial condition or operations, present or prospective, of
the Borrower and its subsidiaries, taken as a whole -- in each case
describing the nature thereof and the action the Borrower proposes to take
with respect thereto.
(b) Until payment in full of the Loans, without the prior written
consent of the Lender, the Borrower will not:
(i) Enter into any merger or consolidation or acquire the assets of
any person, or sell, lease or otherwise dispose of all or substantially all
of its assets, or permit any of its subsidiaries so to do, except that a
wholly-owned subsidiary may be merged or consolidated with one or more
other wholly-owned subsidiaries or into the Borrower.
(ii) Create, incur, assume or suffer to exist any liability for
borrowed money, or permit any subsidiary so to do, except (A) indebtedness
to the Lender, (B) indebtedness of the Company or any subsidiary secured by
mortgages, encumbrances or liens specifically permitted by
Section 3(b)(iii) below and (C) intercompany indebtedness.
(iii) Create, incur, assume or suffer to exist any mortgage, pledge,
lien or other encumbrance of any kind upon, or any security interest in,
any of its property or assets, whether now owned or hereafter acquired, or
permit any of its subsidiaries so to do, except:
(A) liens for taxes not delinquent or being contested in good
faith and by appropriate proceedings and for which reserves adequate
under generally accepted accounting principles are being maintained,
(B) deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, or under unemployment
(C) deposits or pledges to secure bids, tenders, contracts
(other than contracts for the
payment of money), leases, statutory obligations, surety and appeal
bonds and other obligations of like nature arising in the ordinary
course of business,
(D) mechanics', workmen's, materialmen's or other like liens
arising in the ordinary course of business with respect to obligations
which are not due or which are being contested in good faith, and
(E) any mortgage, encumbrance or other lien upon, or security
interest in, any property hereafter acquired by the Borrower or its
subsidiaries, created contemporaneously with such acquisition to
secure or provide for the payment or financing of any part of the
purchase price thereof, or the assumption of any mortgage, encumbrance
or lien upon, or security interest in, any such property hereafter
acquired existing at the time of such acquisition, or the acquisition
of any such property subject to any mortgage, encumbrance or other
lien or security interest without the assumption thereof, provided
that such mortgage, encumbrance, lien or security interest attaches
only to the property so acquired.
(iv) Make loans or advances to any person, firm, joint venture,
corporation or other entity, or permit any subsidiary so to do, exceeding
in the aggregate for the Company and its subsidiaries $5,000,000 principal
amount at any one time outstanding, other than intercompany loans and loans
to employees, officers and directors in the ordinary course of business.
(v) Assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable upon the obligation of any person, firm, joint
venture, corporation or other entity (other than in connection with a
merger permitted by Section 3(b)(i) above), or permit any subsidiary so to
do, except (A) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business,
(B) guarantees by the Company of contractual obligations (other than for
the payment of borrowed money) of any wholly-owned subsidiary, and
(C) guarantees of indebtedness for borrowed money permitted under
clause (ii) above.
(vi) Declare any cash dividends on any shares of its capital stock, or
apply any of its property or assets to the purchase, redemption or other
of, or make any other distribution by reduction of capital or otherwise in
respect of, capital stock of the Company.
The obligation of the Lender to make the Loans is subject to the
following conditions precedent:
(a) On the Drawdown Date the Lender shall have received the following
documents, each satisfactory in form and substance to the Lender:
(i) A Note, dated the Drawdown Date.
(ii) Certified copies of all corporate action taken by the
Borrower to authorize this Agreement and such Note.
(iii) The favorable written opinion of Wilson, Sonsini, Goodrich & Rosati, counsel for the Borrower, dated the Drawdown Date, as to the
matters referred to in paragraphs (a)-(e) and (g) of Section 2.
(b) On the Drawdown Date (i) the Borrower shall have complied with
all the terms, covenants and conditions of this Agreement, (ii) there shall
have occurred no Event of Default and no event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default,
(iii) the representations and warranties contained in Section 2 shall be
true in all material respects with the same effect as though made on and as
of the Drawdown Date, and (iv) the Lender shall have received a certificate
dated the Drawdown Date and signed by an executive officer of the Borrower
to the foregoing effect.
5. EVENTS OF DEFAULT
(a) If one of more of the following events (each, an 'Event of
Default') shall occur:
(i) Default shall be made in the payment of principal of or interest
on any of the Loans when due and payable; or
(ii) Default shall be made in the due observance or performance of
any term, covenant, or agreement contained in Section 3(b); or
(iii) Default shall be made in the due observance or performance of
any other term, covenant or agreement contained in this Agreement, and such
default shall have continued unremedied for a period of 30 days after any
officer of the Borrower becomes aware of such default; or
(iv) Any representation or warranty made by the Borrower herein or
any statement or representation made in any certificate, report or opinion
delivered in connection herewith shall prove to have been incorrect or
misleading in any material respect when made; or
(v) Any obligation of the Borrower or any of its subsidiaries for the
payment of borrowed money is not paid when due or becomes or is declared
due and payable prior to the expressed maturity thereof, or there shall
have occurred an event which, with the giving of notice or lapse of time,
or both, would cause any such obligation to become or be declared due and
(vi) The Borrower or any of its subsidiaries makes an assignment for
the benefit of creditors, files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal for any
receiver of or any trustee for the Borrower or any subsidiary or any
substantial part of its property, commences any proceeding relating to the
Borrower or any subsidiary under any reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or there is commenced
against the Borrower or any subsidiary any such proceeding which remains
undismissed for a period of 60 days, or the Borrower or any subsidiary by
any act indicates its consent to, approval of or acquiescence in any such
proceeding or the appointment of any receiver of or any trustee for the
Borrower or any subsidiary or any substantial part of its property, or
suffers any such receivership or trusteeship to continue undischarged for a
period of 60 days; or
(vii) One or more judgments against the Borrower or any of its
subsidiaries or attachments against its property, which in the aggregate
exceed $10,000,000, or the operation or result of which could be to
interfere materially and adversely with the conduct of the business of the
Borrower or any subsidiary, remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of 30 days;
then upon the happening of any of the foregoing Events of Default which shall be
continuing, the Notes shall become and be immediately due and payable upon
declaration to that effect delivered by the Lender to the Borrower; provided,
that upon the happening of any event specified in subsection (f) of this Section
5 the Notes shall be immediately due and payable without declaration or other
notice to the Borrower. The Borrower expressly waives any presentment, demand,
protest or other notice of any kind.
(b) In the event the Notes are not paid as contemplated by
Section 5(a), the Lender shall have the option of converting the Notes into such
number of shares of Series C Preferred Stock as is determined by dividing the
unpaid principal amount by $6.88 or the corresponding adjusted Series B
Conversion Price determined as provided in the Borrower's Certificate of
(a) The Borrower agrees to pay all out-of-pocket expenses incurred by
the Lender, including reasonable fees and disbursements of counsel, in
connection with the preparation, execution and delivery of, and the enforcement
of, this Agreement and the Notes.
(b) This Agreement shall be binding upon and inure to the benefit of
the Borrower and the Lender and their respective successors and assigns, except
that neither party may assign any of its rights hereunder without the prior
written consent of the other parties.
(c) Any provision of this Agreement or the Notes may be amended or
waived only if such amendment or waiver is in writing and is signed by the
Borrower and the Lender.
(d) Each and every right granted to the Lender hereunder or under any
other document delivered hereunder or in connection herewith, or allowed it by
law or equity, shall be cumulative and may be exercised from time to time. No
failure on the part of the Lender to exercise, and no delay in exercising, any
right will operate as a waiver thereof, nor will any single or partial exercise
by the Lender of any right preclude any other or future exercise thereof or the
exercise of any other right.
(e) In case any one or more of the provisions contained in this
Agreement shall be invalid, illegal or unenforceable in any respect under any
law, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
(f) Any judicial proceeding against the Borrower with respect to this
Agreement or the Notes may be brought in any court of competent jurisdiction in
the City of New York. The Borrower hereby accepts the jurisdiction of any such
court and irrevocably agrees to be bound by any judgment rendered thereby, and
waives any objection as to the venue of any proceeding brought in such court.
Nothing herein shall limit the right of the Lender to bring proceedings against
the Borrower in the courts of any other jurisdiction.
(g) Any communication, demand or notice to be given hereunder or with
respect to the Notes will be duly given when delivered in writing (including
communication by facsimile) to the following addresses:
If to the Borrower:
Address: UTStarcom, Inc.
333 Hegenberger Road, Suite 328
Oakland, California 94621
Attention: Mr. Hong Liang Lu, President
Telephone: (510) 632-8802
Facsimile: (510) 632-8827
with a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Steven E. Bochner, Esq.
Carmen Chang, Esq.
Telephone: (415) 493-9300
Facsimile: (415) 493-6811
If to the Lender:
Address: SOFTBANK Corp.
Chuo-ku, Tokyo 103, Japan
Attention: Yoshitaka Kitao, Executive Vice
President and CFO
Hitoshi Hasegawa, Esq.
Telephone: (813) 5642-8020
Facsimile: (813) 5641-3400
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Stephen A. Grant, Esq.
Telephone: (212) 558-3504
Facsimile: (212) 558-3588
or to such other address as either party may specify by notice in writing to the
(h) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, United States of America.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
By: /s/ Ed Supplee
Vice President of Finance
Chief Financial Officer
By: /s/ Masayoshi Son
President and Chief
U.S.$[LOAN AMOUNT] [DRAWDOWN DATE]
UTSTARCOM, INC., a Delaware corporation (the 'Borrower'), for value
received, hereby promises to pay to the order of SOFTBANK Corp., a Japanese
corporation (the 'Lender'), the principal sum of $________ on the Maturity Date
(as such term is defined in the Loan Agreement referred to below), and to pay
interest on such principal sum at a rate of 10% per annum on the last Business
Day of March and September, and on the Maturity Date, as provided in such Loan
This is one of the Notes referred to in a Loan Agreement, dated as of
June 15, 1998, between the Borrower and the Lender and its maturity is subject
to acceleration on the terms and conditions set forth therein.
If this Note becomes due and payable on a Saturday, Sunday or other
day on which commercial banks in Tokyo and New York City are authorized by law
to close, the maturity shall be extended to the next succeeding business day,
and interest shall be payable at the rate herein specified during such
This Note shall be governed by and construed in accordance with the
laws of the State of New York.