UTStarcom, Inc. (Nasdaq: UTSI) today announced that it has entered into agreements for a strategic relationship with Beijing E-town International Investment and Development Co., Ltd (BEIID), an investment company established by the Beijing Municipality which includes an investment of $48.5 million by BEIID and two unrelated investment funds, Ram Max Group Limited and Shah Capital Management. The three investment parties are advised by Yellowstone Capital. As part of the investment, UTStarcom will issue approximately 22 million shares of common stock at a price of $2.20 per share, with BEIID investing $25 million, Ram Max Group Limited investing $12.5 million and Shah Capital investing $11 million.

Upon closing of the transaction, Mr. Baichuan Du, a former Deputy Chief Engineer of China's State Administration of Radio, Film and Television, will join the board of directors of the Company. Mr. Xiaoping Li, Executive Deputy General Manager of BEIID, and Mr. William Wong, a Managing Director at Yellowstone Capital, will also join UTStarcom's board of directors upon closing of the transaction. Mr. Li and Mr. Wong will replace Mr. Allen Lenzmeier and Mr. Jeff Clarke, who will resign from UTStarcom's board of directors at that time. The total number of directors on the board will be increased from six to seven in connection with the transaction.

"We are very pleased to announce this relationship with and commitment from the Beijing Development Area and the investment from Ram Max and Shah Capital," said Peter Blackmore, Chief Executive Officer and President of UTStarcom. "The relationship with Beijing Development Area is consistent with UTStarcom's growth strategy of focusing on selective IP-based infrastructure products and services in high growth regions of Asia, particularly China. UTStarcom's growth strategy is in good alignment with the series of guidelines recently issued by China's State Council to push forward network convergence among telecom, cable television, and internet companies. This relationship will contribute significant financial and strategic value to UTStarcom, including strengthening our relationships and presence in China, and better positioning UTStarcom to achieve profitable growth in the future."

In connection with the transaction and in furtherance of UTStarcom's strategic goals in China, Mr. Jack Lu has been appointed the new Chief Executive Officer and President of the Company effective the later date of three months after the closing of the investment or June 30, 2010. From the closing of the transaction until he assumes the CEO position, he will be the Company's Chief Operations Officer. Mr. Peter Blackmore will retire as CEO and President of UTStarcom upon Mr. Lu's assumption of the CEO position.

"The UTStarcom team has expended a tremendous amount of effort in refocusing our business strategy, simplifying our business lines, strengthening our balance sheet, rightsizing the company, resolving a number of past legal issues that the Company had faced, and developing a strong relationship with the Beijing Municipal Government entities," said Thomas Toy, Chairman of the Board of Directors for UTStarcom. "In particular, I would like to thank our CEO, Peter Blackmore, for his dedication to these actions. In addition, I would like to thank Yellowstone Capital for its strategic guidance as we sought to strengthen our relationships in China. We all look forward to working with Jack Lu as CEO and we are confident he will build on the work that Peter has done."

Mr. Lu most recently served as Co-Chief Operating Officer and General Manager, China at Source Photonics, a leading global opto-electronic component company. Prior to Source Photonics he held numerous positions at Fiberxon, which was sold to MRV Communications Inc. in July 2007, including Chief Executive Officer, Chief Operations Officer and Vice President of Marketing and Sales. Prior to joining Fiberxon in September 2001, Mr. Lu worked for US Business Networks Inc. (MeetChina.com) as Director of Business Strategy Development from March 2000 to May 2001, and China National Technical Import and Export Corporation as Senior Manager from May 1988 to July 1998. Mr. Lu holds a Bachelor of Science degree in Electronic Engineering from Huazhong University of Science and Technology and an M.B.A. from the University of Southern California.

Consistent with its previously announced plans, UTStarcom will move its headquarters to Beijing, China as part of an agreement with Beijing Development Area, which is also related to Beijing Municipality. That agreement will be effective upon closing of the investment. As part of the agreement, UTStarcom will be able to apply to Beijing Development Area for tax incentives and other financial and non-financial assistance to the Company. The Company plans to retain all its operations in Hangzhou and Shenzhen.

The transaction is subject to certain customary closing conditions including receipt of regulatory approval in China. The Company anticipates closing the transaction prior to March 31, 2010.

Yellowstone Capital initiated the investment transaction, advised and coordinated amongst BEIID, Ram Max and Shah Capital in connection with the transaction. BofA Merrill Lynch is acting as financial advisor to UTStarcom. Wilson Sonsini Goodrich & Rosati, Professional Corporation is serving as outside counsel to UTStarcom and King & Wood LLP is acting as legal counsel for BEIID.

Source:C114