Exhibit 10.2

(GLENAYRE LOGO) [g96390g9639000.gif]

Glenayre Electronics (UK) Limited

Service Contract

Date:      19 July 2005

Parties:

1.   Glenayre Electronics (UK) Ltd of 5 Brookfields, Pavenham, Bedfordshire MK43
7QA (the “Employer”).   2.   Glenayre Electronics Inc of 11360 Lakefield Drive
Duluth Georgia 30097 (“the Guarantor”).   3.   Roger Morgan (the “Executive”)
The Old Coach House, 146A Wakefield Road, Lightcliffe, Halifax, HX3 8TH.

Recitals:

A.   This contract states the terms of employment of the Executive by the
Employer as at the above date.   B.   The Executive’s employment began on 07
June 2005, which was also the date when his statutory period of continuous
employment began (no employment with a previous employer counting towards that
period).

Operative Provisions:

1.   Job Title

  1.1.   The Executive is employed as Executive Vice President International
Operations, and will perform those duties and exercise those powers commensurate
with his office as may be reasonably requested of him by the Chief Operating
Officer of the Employer. He will also: (1) devote substantially all of his
business time, attention and abilities to the Employer’s business and
(2) faithfully serve the company and use all reasonable efforts to promote the
interests of the business.     1.2.   The Employer may from time to time vary
these duties, and the Executive may also be required at any time to undertake
additional or other duties, as may be reasonably necessary to meet the needs of
the business.     1.3.   The Executive may also from time to time undertake
additional or other duties in relation to any associated company of the
Employer, as may be reasonably necessary to meet the needs of the business.

• 11360 Lakefield Drive | Duluth, GA 30097 USA • t 770 283 1000 •
www.Glenayre.com •

 

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2.   Remuneration

  2.1.   The Executive is paid a salary of £150,000.00 per year, payable by bank
transfer monthly in arrears on or before the last working day of each calendar
month. This is subject to deduction of tax and national insurance contributions,
as required by law.     2.2.   The Executive will be entitled to participate in
the Executive Bonus Plan for the Employer, pursuant to which the Executive may
earn a bonus of up to 100% of his Base Salary at 100% of the target established
by the Board upon recommendations from management of the Employer. The normal
matrix used by the Employer for bonuses will be used to provide bonuses at
targets above and below 100% of the target (that is, a bonus of 25% of Base
Salary paid at 50% of the target with a straight line calculation up to 100% and
200% of Base Salary paid at 200% of target, with the payments straight-lined
from 100% to 200%). Any bonus earned and approved will become payable by the end
of March following the calendar year end. The Executive may elect whether he
wishes to receive any due bonus, or part thereof, by way of direct remuneration
(less tax and national insurance) or salary sacrifice; if the latter occurs it
will result in the company making a voluntary payment into the Executive’s
applicable pension plan. In that event the Employer will make an additional
bonus payment to be paid into the pension plan of 12% of the amount elected for
salary sacrifice.     2.3.   On the date the Executive commences employment with
the Company, the Executive will be granted Profits Interests in Entertainment
Distribution Company LLC, allocated among Tier One, Tier Two and Tier Three, all
as described in the LLC Agreement, representing 2.5% of the Company’s total
Profits Interests as specified in the LLC Agreement. The 2.5% represents the
right to receive 0.75% of the distributions by the Company beyond certain
thresholds, all as described in the LLC Agreement. On the Effective Date, the
Executive shall become vested with respect to one-third of each of his Tier One,
Tier Two and Tier Three Profits Interests. Provided that he is still employed by
Glenayre under this letter agreement at such time, he shall become vested with
respect to an additional one-third of each of your Tier One, Tier Two and Tier
Three Profits Interests on the first anniversary of the Effective Date. Provided
that he is still employed by Glenayre under this letter agreement at such time,
he shall become vested with respect to the final one-third of each of his Tier
One, Tier Two and Tier Three Profits Interests on the second anniversary of the
Effective Date.         Notwithstanding the foregoing, the Executive shall
become fully vested in all of such entire Profits Interests upon (1) a Change of
Control of the Company, (2) his death, (3) the termination of his employment
hereunder because of his Disability, (4) the termination of his employment
hereunder by Glenayre in the absence of gross misconduct on the Executive’s
part, entitling the Company to summarily terminate the employment or (5) the
termination of his employment hereunder by him for Good Reason. Upon the
termination of the Executive’s employment under this letter agreement (other
than after a Change of Control or on account of the reasons specified in clauses
(2) through (5) above), any portion of your Profits Interests that has not
previously vested shall be deemed cancelled and of no further force or effect.  
      For the purposes of this clause 2.3:         “Change of Control” shall
mean:

  -   the sale or other change of ownership of all or the majority of the shares
in the Company; or     -   the sale or other change of ownership of all the
majority of the assets and/or goodwill of the Company;

 

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      “Disability” shall mean any long term illness or disability that is
covered by the Disability Discrimination Act 1995;         “Good Reason” shall
mean any circumstances other that by reason of constructive unfair dismissal,
breach of contract, ill health, retirement, or to join a competitor     2.4.  
The Executive will be entitled to be reimbursed for social club fees up to
£5000.00 for each 12-month period during employment.

3.   Car Allowance

  3.1.   The Employer will provide the Executive with a car allowance of
£15,000.00 per year, payable monthly. It will be subject to the deduction of tax
and national insurance in the usual way.

4.   Expenses

  4.1.   The Employer will reimburse to the Executive on a monthly basis all
authorized travelling, hotel, entertainment and other expenses reasonably
incurred by him in the proper performance of his duties, subject to the
Executive complying with the Employer’s expenses policy as notified to him by
the Employer from time to time and to him producing to the Employer such
vouchers or other evidence of actual payment of the expenses as the Employer may
reasonably require. The Executive will use his discretion in determining the
appropriate class and category of travel to utilize for business purposes.    
4.2.   If the Employer issues a company credit or charge card to the Executive
he may only use it for expenses reimbursable under Clause 4.1, and must return
it to the Employer forthwith upon the termination of his employment for any
reason.     4.3.   The Employer will reimburse to the Executive on monthly basis
all authorized business related expenditures including an ADSL connection (or
similar type of connection to the Internet) and landline phone charges.     4.4.
  The Employer will reimburse to the Executive on monthly basis for his entire
mobile phone bill provided personal related phone calls are kept at a reasonable
level.

5.   Hours of Work

  5.1.   The Executive’s normal working hours are from 9.00 a.m. to 5.30pm
Monday to Friday inclusive. A one-hour break may be taken for lunch.     5.2.  
The Executive may on occasion be required to work such additional hours as may
be reasonably necessary to meet the needs of the business.

6.   Place of Work

  6.1.   The Executive’s normal place of work is The Old Coach House, 146A
Wakefield Road, Lightcliffe, Halifax, HX3 8TH. However, the Employer may require
the Executive to work at or travel to other addresses within the United Kingdom
on a temporary or permanent basis, provided always that the Executive shall not
be required to move office if this necessitates him relocating his home, without
his prior consent. In the event this is agreed, all reasonable relocation costs
will be paid by the Company.     6.2.   The Employer may on occasion require the
Executive to work (temporarily) at or travel outside the United Kingdom and
requires a reasonable amount of international travel.

 

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  6.3.   The Executive will be required to travel throughout his territory and
to North America, and other locations as business needs dictate.

7.   Holidays

  7.1.   The Executive is entitled, in addition to the normal public holidays,
to take 25 working days as paid holiday in each holiday year, which runs from 1
January to 31 December.     7.2.   Holidays must be taken at convenient times,
having regard to the requirements of the business and holidays already booked by
other employees. The Executive must give sufficient advance notice of his
intention to take holiday in writing to the Chief Operating Officer, whose
approval must be obtained of the dates required. No more than 12 consecutive
working days of holiday may be taken at any one time without special permission
from Chief Operating Officer. The Executive may carry forward no more that 10
days unused holidays at the end of the calendar year unless he has been
prevented from using any further days for business reasons in which case these
may also be carried forward; the Executive should use any carried forward days
by 1 April. If they have not been taken by this date the Executive will agree
specifically with the Employer how they are to be used.     7.3.   During the
first year of employment, the Executive’s holiday entitlement for that year will
accrue at 25/12 of a working day accruing on the first day of each calendar
month of that year, with the amount accrued so far being rounded up to the
nearest 1/2 day. During subsequent years, the full entitlement may be taken at
any time during the year, subject to Clauses 7.1 and 7.2.     7.4.   If the
Executive’s employment ends part way through a holiday year, for the purpose of
calculating pay in lieu the Executive’s holiday entitlement for that year will
instead be deemed to have accrued at 25/12 of a working day accruing on the last
day of each calendar month of that year throughout which he was employed, with
the amount accrued so far being rounded up to the nearest 1/2 day. Holidays
taken so far will then be deducted from the amount so accrued. Subject to Clause
7.5, the Executive will then be entitled to payment in lieu of holidays accrued
due but untaken, or if he has taken more holidays than the amount so accrued,
then no deduction will be made.     7.5.   If on the termination of employment
the Executive has taken more holidays than the amount so accrued, the Executive
consents to a deduction from his final salary payment in respect of holidays
taken but not accrued due.

8.   Sickness Absence

  8.1.   If the Executive is absent from work because of sickness or injury,
then he or someone on his behalf must inform the Employer, by telephoning the
Chief Operating Officer, that the Executive is absent and of the reason for his
absence as soon as possible, but no later than the end of the first working day
of the Executive’s absence. The Executive must continue to keep the Employer
informed of his condition, and the likely date of his return to work.     8.2.  
If the Executive is absent for 7 or fewer days, he need not produce a medical
certificate unless the Employer specifically requests one. The Executive must,
however, complete a self-certification sickness form immediately upon his return
to work.     8.3.   If the Executive is absent for 7 days or more, he must on
the 8th day provide a medical certificate stating the reason for his absence,
and if his absence continues, then he must provide such a certificate every 7th
day after then.

 

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  8.4.   The Employee is entitled to up to 26 weeks of Contractual Sick Pay in a
12 month period not determined by reference to calendar year. The Employer also
operates the Statutory Sick Pay scheme, and the Executive must co-operate with
the Employer to maintain the necessary records. For the purpose of calculating
the Executive’s entitlement to Statutory Sick Pay or Contractual Sick Pay the
Executive’s “qualifying days” are Monday to Friday inclusive. If the Employer
makes Contractual Sick Pay payments to the Executive it will count towards the
Executive’s entitlement to Statutory Sick Pay.

9.   Intellectual Property

  9.1.   If the Executive creates any work in which any copyright, design right
or similar rights may exist during the course of his employment (including any
work created during any time spent by him on the Employer’s business outside his
normal working hours and which relates to that business), those rights will
belong to the Employer.     9.2.   If the Executive makes any invention, whether
patentable or not, which relates to or is capable of being used in any business
activity of the Employer in which he has been actively involved at any time
during the period of two years before making the invention, he must disclose it
to the Employer immediately, and the ownership of the invention is to be
determined in accordance with Section 39 of the Patents Act 1977.

10.   Retirement Age

  10.1.   The normal retirement age applicable to the Executive’s employment is
65. The Executive’s employment will automatically terminate at the end of the
calendar month during which he reaches that age.

11.   Pensions

  11.1.   The Employer will make an annual contribution equivalent to 20% of the
Executive’s base salary to a personal and recognized pension arrangement
established by the Executive and it will be paid pro rata either monthly
together with the Employee’s base salary or at such longer interval as the
Executive or the Employee may agree.     11.2.   The Executive consents to the
Employer deducting any agreed Employee contributions from the Executive’s
salary.

12.   Notice

  12.1.   The Executive may terminate this contract by giving the Employer not
less than six months notice in writing.     12.2.   The Employer may terminate
the Executive’s employment by giving the Executive notice in writing of not less
than 12 months, except in circumstances where the Executive’s summary dismissal
is justified.     12.3.   In addition to any payments due under clause 2.3, in
the event that the Executive’s employment is terminated without notice (other
than for gross misconduct as defined in the Company’s disciplinary procedures
from time to time) or he resigns in circumstances that that amount to
constructive dismissal, it is agreed that:

  12.3.1.   the Executive shall be paid any salary due and owing to the date the
Executive’s employment terminates (the “Termination Date”), together with any
accrued holiday pay and any accrued but unpaid bonus for any previous financial
year; and

 

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  12.3.2.   the Company shall make a lump sum payment to the Executive in lieu
of notice which shall be equivalent to 95% of the salary and contractual
benefits that the Executive would have received had he remained in employment
during the notice period (provided always that the Company shall have the option
of continuing any of the benefits rather than making a payment in lieu of such
benefits if it so chooses);         together the “Termination Payment”.

      The Termination Payment shall be paid less statutory deductions within
28 days of the Termination Date and shall be accepted by the Executive in full
and final settlement of any claims he may have against the Company or any
Companies affiliated or associated with the Company. It is agreed that the
Termination Payment is a genuine pre-estimate of the Executive’s loss and as
such is not a penalty. It is therefore agreed that the Termination Payment shall
not be reduced by reason of mitigation or accelerated receipt.

13.   Non-competition

  13.1.   The Executive is employed on a full time basis, and may not therefore
take any other employment, including evening or part-time work, without prior
permission in writing from the Chief Operating Officer.     13.2.   The
Executive will have access during his employment to information (which may or
may not be confidential) concerning the Employer’s business, customers and/or
suppliers. He may not disclose such information at any time, even after the
termination of his employment, unless it has become public knowledge otherwise
than by his disclosing it, or as may be required by law. The Executive also
agrees to sign and abide by the Employer’s Proprietary Information Agreement
(PIA); Infringement of it may constitute gross misconduct and summary dismissal.
    13.3.   On the termination of the Executive’s employment for any reason, he
must return to the Employer all property of the Employer in his possession,
including (without limitation) any company car, telephones or faxes, computers
and other hardware, and all records and information belonging to the Employer
(whether or not confidential) whether in written or machine-readable form. Any
such information held in machine-readable form on hardware or storage media
which he/she is not otherwise obliged to return by this Clause must be deleted
and purged.     13.4.   The Executive must not without the Employer’s prior
written consent, for a period of 6 months after the notice of the termination of
his employment for any reason (except if he has been terminated without cause or
wrongfully dismissed by the Employer without full or agreed pay or compensation
in lieu of notice), either himself or on behalf of another person, firm or
company:

  13.4.1.   solicit or approach in relation to any business competing with that
of the Employer any customer or supplier of the Employer (or Companies
affiliated or associated with the Employer) with whom he had material dealings
during the last six months of his employment, or whose details have been
obtained from confidential information of the Employer; or     13.4.2.   employ
or offer employment to any of the Employer’s (or Companies affiliated or
associated with the Employer) other senior or managerial employees with whom the
Executive has had material dealings in the last six months of his employment.

 

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  13.4.3.   engage within a 50 mile radius of what was his normal place of work
in any business activity which is in direct competition with any business
activity of the Employer (or Companies affiliated or associated with the
Employer) in which he was actively involved during the last six months of his
employment.

  13.5.   The parties consider the above restrictions to be no more than is
reasonably necessary to protect the Employer’s legitimate business interests.
However, if any part of these restrictions should prove to be unenforceable, it
is agreed that such lesser restriction as may be enforceable will apply instead,
and without affecting the validity of the rest of this Clause 13.

14.   Guarantee

  14.1.   In consideration of the Executive entering into this Agreement, the
Guarantor irrevocably and unconditionally guarantees to the Executive the due
and punctual performance of each obligation of the Company contained in this
Agreement. The Guarantor shall pay to the Executive from time to time on demand
any sum of money which the Company is at any time liable to pay to the Executive
under or pursuant to this Agreement and which has not been paid at the time the
demand is made. The Guarantor’s obligations under this sub-clause are primary
obligations and not those of a mere surety. If an obligation of the Company is
void, voidable or unenforceable for any reason, the Guarantor’s obligations
under this sub-clause are unaffected and the Guarantor shall perform the
Company’s obligations as if it were primarily liable for the performance.    
14.2.   The Guarantor’s obligations under clause 14.1 are continuing obligations
and are not satisfied, discharged or affected by an intermediate payment or
settlement of account by, or a change in the constitution or control of, or the
insolvency of, or bankruptcy, winding up or analogous proceedings relating to,
the Company     14.3.   The Guarantor’s liability under clause 14.1 is not
affected by any arrangement which the Executive may make with the Company or
with another person which (but for this provision) might operate to diminish or
discharge the liability of or otherwise provide a defence to a surety.

15.   Miscellaneous

  15.1.   The Employer is an equal opportunity employer, and the Executive must
treat all employees and customers on their merits, irrespective of sex, gender,
marital status, age, creed, religion, disability, race, colour, nationality or
ethnic origin. Any failure to do so will be treated as disciplinary matter and a
serious case may render him liable to summary dismissal.     15.2.   In order to
protect the health and safety of all its employees, the Employer operates a
non-smoking policy. The Executive is not permitted to smoke anywhere on the
Employer’s premises.     15.3.   The Executive consents to the Employer’s
retention of his personal data in relation to his employment and to its
processing for that purpose, including after his employment has terminated. In
the later case this specifically refers only to the Executive’s consent for its
disclosure to potential employers as may be required to reply to requests for
references, including the disclosure of personal data relating to his sickness
record.     15.4.   The Employer will reimburse 100% the Executive’s
contributions into a medical insurance scheme with BUPA medical insurance
company for him. The Executive will have the option of adding his family to the
medical insurance scheme and will contribute

 

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      approximately £930 per year on behalf of his family by deduction of net
salary. Medical contributions will be subject to the deduction of tax and
national insurance in the usual way. The Executive will also be entitled to an
annual premium health scan provide by UPA.     15.5.   A note of the
disciplinary rules and grievance procedure applicable to the Executive is
attached to this Contract. The Employer may update or vary its disciplinary
rules and grievance procedure from time to time at its sole discretion, and
copies of the current rules and procedures will be made available to the
Executive on request to the Company Secretary.     15.6.   The Executive is also
expected to be familiar with the Employer’s company Handbook that is available
on its intranet. It contains policies and procedures with which the Executive
must comply in respect of general day-to-day matters. If there is conflict
between the handbook and this contract or the attached disciplinary and
grievances the latter will prevail.     15.7.   The Employer has effected on
behalf of the Executive:

  15.7.1.   A Group Life Cover of 4 x annual base salary     15.7.2.   A Group
Income Protection Cover of 60% of annual base salary, deferred period of 26
weeks. If this Cover is invoked the Company will also ensure that the Employee
continues to receive a pension contribution equivalent to 20% per annum of his
base salary until such time as the Cover expires.     15.7.3.   A Personal
Accident Cover of 2 x annual base salary with a maximum individual limit of
£200,000     15.7.4.   Business Travel Insurance.

  15.8.   This contract will be governed by and interpreted in accordance with
the laws of England.

             
SIGNED:
           
 
           
/s/ Debra Ziola
          /s/ Roger Morgan
 
           
Debra Ziola
           
Senior Vice President & CFO
           
For and on behalf of Glenayre Electronics (UK) Ltd.
          the Executive
 
           
EXECUTED AS A DEED by
    )      
Glenayre Electronics Inc
    )      
acting by Debra Ziola
    )      
in the presence of:
    )      

Witness Signature:     /s/ Thomas Costabile

Name:     Thomas Costabile

Address:     158 Brown Stone Court, Old Tappan NJ 07675

Occupation:     Chief Operating Officer of Entertainment Distribution, LLC