Exhibit 10.1


 


UTSTARCOM, INC.


 


CHANGE OF CONTROL/INVOLUNTARY TERMINATION 

SEVERANCE AGREEMENT


 


This Change of Control/Involuntary Termination Severance Agreement (the
“Agreement”) is made and entered into effective as of July 2, 2007 (the
“Effective Date”), by and between Peter Blackmore (the “Employee”) and
UTStarcom, Inc., a Delaware corporation (the “Company”). Certain capitalized
terms used in this Agreement are defined in Section 1 below.


 


RECITALS


 


A.            The
Company desires to retain the services of the Employee, and the Employee
desires to be employed by the Company, on the terms and subject to the
conditions set forth in this Agreement.


 


B.            The Board of Directors
of the Company (the “Board”) believes that it is in the best interests of the
Company and its shareholders to provide the Employee with enhanced financial
security and sufficient encouragement to remain with the Company.


 


AGREEMENT


 


In
consideration of the mutual covenants herein contained and the employment of
Employee by the Company, the parties agree as follows:


 


1.     Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:


 


(a)   Cause. “Cause” shall
mean (i) any act of personal dishonesty taken by the Employee in
connection with his responsibilities as an employee which is intended to result
in substantial personal enrichment of the Employee, (ii) Employee’s
conviction of a felony which the Board reasonably believes has had or will have
a material detrimental effect on the Company’s reputation or business,
(iii) a willful act by the Employee which constitutes misconduct and is
injurious to the Company, and (iv) continued willful violations by the
Employee of the Employee’s obligations to the Company after there has been
delivered to the Employee a written demand for performance from the Company
which describes the basis for the Company’s belief that the Employee has not
substantially performed his duties.


 


(b)   Change of Control.
“Change of Control” shall mean the occurrence of any of the following events:


 


(i)    the approval by shareholders
of the Company of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto


 

















 


continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) more than fifty percent (50%) of the total voting
power represented by the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation;


 


(ii)   the approval by the
shareholders of the Company of a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all or substantially
all of the Company’s assets;


 


(iii)  any “person” (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended) becoming the “beneficial owner” (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the Company
representing 50% or more of the total voting power represented by the Company’s
then outstanding voting securities; or


 


(iv)  a change in the composition of
the Board, as a result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent Directors” shall mean directors who either
(A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of those directors whose election or nomination was not in
connection with any transactions described in subsections (i), (ii), or
(iii) or in connection with an actual or threatened proxy contest relating
to the election of directors of the Company.


 


Notwithstanding
the foregoing or anything in this Agreement to the contrary, a “Change of
Control” will not include any transaction described in clauses (i), (ii) or
(iii) of this Section 1(b) which is pursuant to a definitive agreement executed
within one hundred twenty (120) days of the Effective Date; provided, however,
an event that could be described in clause (iv) will be deemed a “Change of
Control”.


 


(c)   Good Reason. “Good
Reason” shall mean (i) without the Employee’s express written consent, a
significant reduction of the Employee’s duties, position or responsibilities
relative to the Employee’s duties, position or responsibilities in effect
immediately prior to such reduction, or the removal of the Employee from such
position, duties and responsibilities, unless the Employee is provided with
comparable duties, position and responsibilities; provided, however, that a
reduction in duties, position or responsibilities solely by virtue of the
Company being acquired and made part of a larger entity shall not constitute a “Good
Reason;” (ii) without the Employee’s express written consent, a
substantial reduction, without good business reasons, of the facilities and
perquisites (including office space and location) available to the Employee
immediately prior to such reduction; (iii) a reduction by the Company of
the Employee’s base salary as in effect immediately prior to such reduction;
(iv) a material reduction by the Company in the kind or level of employee
benefits to which the Employee is entitled immediately prior to such reduction
with the result that the Employee’s overall benefits package is significantly
reduced; (v) without the Employee’s express written consent, the
relocation of the Employee to a facility or a location more than fifty
(50) miles from his current location; (vi) any purported termination
of the Employee by the Company which is not effected for Cause or for which the
grounds relied upon are not valid; or (vii) the failure of the Company to
obtain the assumption of this Agreement by any successors contemplated in
Section 9 below.


 


2

















 


(d)   Involuntary Termination.
“Involuntary Termination” shall mean any termination (other than a termination
for Cause) of the Employee by the Company.


 


(e)   Termination Date.
“Termination Date” shall mean the effective date of any notice of termination
delivered by one party to the other hereunder.


 


2.     Term of Agreement. This Agreement will have a term of three
(3) years commencing on the Effective Date. Following the expiration of
the three-year term, the Employee and the Company may, but are not obligated
to, enter into a new agreement. If Employee’s employment continues following
the expiration of the three-year term, and the Company and Employee do not
enter into a new agreement, the terms of this Agreement shall continue in
effect until the Parties agree otherwise.


 


3.     At-Will Employment. The Company and the Employee acknowledge that
subject to the provisions of this Agreement, the Employee’s employment is and
shall continue to be at-will, as defined under applicable law. If the
Employee’s employment terminates for any reason, the Employee shall not be
entitled to any payments, benefits, damages, awards or compensation other than
as provided by this Agreement, or as may otherwise be established under the
Company’s then existing employee benefit plans or policies at the time of
termination.


 


4.     Failure to Receive Offer to Become Chief Executive
Officer. If the Employee remains
employed with the Company through the date that is the twelve (12)-month
anniversary of the Effective Date (the “Trigger Date”) and the Employee is not
offered the position of Chief Executive Officer of the Company on or before the
Trigger Date, the Employee shall be entitled to the following benefits:


 


(a)   twelve (12) months of the
Employee’s base salary as in effect as of the Trigger Date, less applicable
withholding, payable in a lump sum within thirty (30) days of the Trigger
Date;


 


(b)   one hundred percent (100%) of
the Employee’s full annual performance target bonus for the year of the Trigger
Date, payable in a lump sum within thirty (30) days of the Trigger Date;


 


(c)   all equity awards, including
without limitation stock option grants, restricted stock and stock purchase
rights, granted by the Company to the Employee shall become fully vested or
released from the Company’s repurchase right (if any shares of stock purchased
by or granted to the Employee remain subject to such repurchase right) and
exercisable as of the Trigger Date to the extent such equity awards are
outstanding and unexercisable or unreleased at such date; and


 


(d)   all Employee’s outstanding
restricted cash awards shall become fully vested, payable in a lump sum within
thirty (30) days of the Trigger Date.


 


Notwithstanding
the foregoing or anything in this Agreement to the contrary, the Board and the
Employee may mutually agree to extend the Trigger Date beyond the twelve
(12)-month anniversary of the Effective Date; provided, however, that the
Trigger Date cannot be extended beyond February 13, 2009 and such change must
be in writing. For the avoidance of doubt, if the Trigger Date is extended, to
receive any of the payments and benefits provided in this Section 4, the


 


3

















 


Employee must (i) remain employed with the Company through the extended
Trigger Date, and (ii) not be offered the position of Chief Executive Officer
of the Company on or before the extended Trigger Date.


 


5.     Severance Benefits.


 


(a)   Termination Following A
Change of Control. If the Employee’s employment with the Company terminates
as a result of a Good Reason or an Involuntary Termination at any time within
eighteen (18) months after a Change of Control, Employee shall be entitled
to the following severance benefits:


 


(i)    twenty-four (24) months
of Employee’s base salary as in effect as of the date of such termination, less
applicable withholding, payable in a lump sum within thirty (30) days of
the termination;


 


(ii)   two hundred percent (200%) of
Employee’s full annual performance target bonus and a monthly pro rated amount
of the Employee’s full annual performance bonus for the year in which the
termination occurs, payable in a lump sum within thirty (30) days of the
termination;


 


(iii)  all equity awards, including
without limitation stock option grants, restricted stock and stock purchase
rights, granted by the Company to the Employee prior to the Change of Control
shall become fully vested or released from the Company’s repurchase right (if
any shares of stock purchased by or granted to the Employee prior to the Change
of Control remain subject to such repurchase right) and exercisable as of the
date of the termination to the extent such equity awards are outstanding and
unexercisable or unreleased at the time of such termination. The Employee shall
be permitted to exercise his vested equity awards (including awards that vest
as a result of the Agreement) for twelve (12) months from the date of
termination;


 


(iv)  all Employee’s outstanding
restricted cash awards shall become fully vested, payable in a lump sum within
thirty (30) days of the termination; and


 


(v)   the same level of health (i.e.,
medical, vision and dental) coverage and benefits as in effect for the Employee
on the day immediately preceding the day of the Employee’s termination of
employment; provided, however, that (A) the Employee constitutes a
qualified beneficiary, as defined in Section 4980B(g)(l) of the Internal
Revenue Code of 1986, as amended (the “Code”); and (B) Employee elects
continuation coverage pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”), within the time period
prescribed pursuant to COBRA. The Company shall continue to reimburse Employee
for such health coverage until the earlier of (A) the date Employee is no
longer eligible to receive continuation coverage pursuant to COBRA, or
(B) twelve (12) months from the termination date.


 


4

















 


(b)   Termination Apart from a
Change of Control. If the Employee’s employment with the Company terminates
as a result of a Good Reason or an Involuntary Termination during the term of
this Agreement, then the Employee shall be entitled to the following severance
benefits:


 


(i)    twelve (12) months of
Employee’s base salary as in effect as of the date of such termination, less
applicable withholding, payable in a lump sum within thirty (30) days of
the termination;


 


(ii)   one hundred percent (100%) of
Employee’s full annual performance target bonus for the year in which the termination
occurs, payable in a lump sum within thirty (30) days of the termination;


 


(iii)  all equity awards, including
without limitation stock option grants, restricted stock and stock purchase
rights, granted by the Company to the Employee shall become fully vested or
released from the Company’s repurchase right (if any shares of stock purchased
by or granted to the Employee remain subject to such repurchase right) and
exercisable as of the date of the termination to the extent such equity awards
are outstanding and unexercisable or unreleased at the time of such
termination. The Employee shall be permitted to exercise his vested equity
awards (including awards that vest as a result of the Agreement) for twelve
(12) months from the date of termination;


 


(iv)  all Employee’s outstanding
restricted cash awards shall become fully vested, payable in a lump sum within
thirty (30) days of the termination; and


 


(v)   the same level of health (i.e.,
medical, vision and dental) coverage and benefits as in effect for the Employee
on the day immediately preceding the day of the Employee’s termination of
employment; provided, however, that (A) the Employee constitutes a
qualified beneficiary, as defined in Section 4980B(g)(l) of the Code; and
(B) Employee elects continuation coverage pursuant to COBRA, within the
time period prescribed pursuant to COBRA. The Company shall continue to
reimburse Employee for such health coverage until the earlier of (A) the
date Employee is no longer eligible to receive continuation coverage pursuant
to COBRA, or (B) twelve (12) months from the termination date.


 


(c)   Termination Apart from a
Change of Control or Involuntary Termination. For avoidance of doubt, if
the Employee’s employment with the Company terminates as a result of Cause,
then the Employee shall not be entitled to receive severance or other benefits
hereunder, except those benefits required to be provided by law.


 


(d)   Accrued Wages and Vacation;
Expenses. Without regard to the reason for, or the timing of, Employee’s
termination of employment: (i) the Company shall pay the Employee any
unpaid base salary due for periods prior to the Termination Date; (ii) the
Company shall pay the Employee all of the Employee’s accrued and unused
vacation through the Termination Date; and (iii) following submission of
proper expense reports by the Employee, the Company shall reimburse the
Employee for all expenses reasonably and necessarily incurred by the Employee
in connection with the business of the Company prior to the Termination Date.
These payments shall be made promptly upon termination and within the period of
time mandated by law.


 


5

















 


6.     Section 409A. Notwithstanding anything to the contrary in this
Agreement, if the Company, based on the advice of independent counsel,
reasonably determines that Section 409A of the Code will result in the
imposition of additional tax to an earlier payment of any severance or other
benefits otherwise due to the Employee pursuant to Section 3 or Section 4
of this Agreement or otherwise on or within the six (6) month period
following the Employee’s termination, the severance benefits will accrue during
such six (6) month period and will become payable in a lump sum payment on
the date six (6) months and one (1) day following the Employee’s date
of termination. All subsequent payments, if any, will be payable as provided in
this Agreement. In addition, notwithstanding anything to the contrary in this
Agreement, this Agreement will be deemed amended to the extent necessary to
avoid imposition of any additional tax or income recognition prior to actual
payment to the Employee under Code Section 409A and any temporary,
proposed or final Treasury Regulations and guidance promulgated thereunder and
the parties agree to cooperate with each other and to take reasonably necessary
steps in this regard. The Employee agrees to work with the Company in good
faith to amend this Agreement by December 31, 2007 to comply with the final
Treasury Regulations and any subsequent guidance promulgated under Code Section
409A.


 


7.     Limitation on Payments. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee
(i) constitute “parachute payments” within the meaning of
Section 280G of the Code, and (ii) would be subject to the excise tax
imposed by Section 4999 of the Code (the “Excise Tax”), then Employee’s
benefits under this Agreement shall be either


 


(a)   delivered in full, or


 


(b)   delivered as to such lesser
extent which would result in no portion of such benefits being subject to the
Excise Tax, whichever of the foregoing amounts, taking into account the
applicable federal, state and local income taxes and the Excise Tax, results in
the receipt by Employee on an after-tax basis, of the greatest amount of
benefits, notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code.


 


Unless the
Company and the Employee otherwise agree in writing, any determination required
under this Section shall be made in writing by the Company’s independent
public accountants (the “Accountants”), whose determination shall be conclusive
and binding upon the Employee and the Company for all purposes. For purposes of
making the calculations required by this Section, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Section 280G and 4999 of the Code. The Company and the Employee shall furnish
to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section. The Company shall indemnify
Employee for any tax, penalties or interest incurred by Employee as a result of
any errors caused by Employee’s reliance on such calculations.


 


6

















 


8.     Release and Non-Disparagement Agreement. As a condition to receiving severance or other
benefits under this Agreement, Employee will be required to sign a waiver and
release of all claims arising out of his Involuntary Termination or separation
for Good Reason and an agreement not to disparage the Company, its directors,
or its executive officers, in a reasonable form satisfactory to the Company;
provided, however, Employee will not be required to waive or release any rights
related to the Company’s indemnification obligations or that arise under the
Company’s D&O insurance coverage.


 


9.     Successors.


 


(a)   Company’s Successors.
Any successor to the Company (whether direct or indirect and whether by
purchase, lease, merger, consolidation, liquidation or otherwise) to all or
substantially all of the Company’s business and/or assets shall assume the
Company’s obligations under this Agreement and agree expressly to perform the
Company’s obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
“Company” shall include any successor to the Company’s business and/or assets
which executes and delivers the assumption agreement described in this
subsection (a) or which becomes bound by the terms of this Agreement by
operation of law.


 


(b)   Employee’s Successors.
Without the written consent of the Company, Employee shall not assign or
transfer this Agreement or any right or obligation under this Agreement to any
other person or entity. Notwithstanding the foregoing, the terms of this
Agreement and all rights of Employee hereunder shall inure to the benefit of,
and be enforceable by, Employee’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.


 


10.   Notices.


 


(a)   General. Notices and all
other communications contemplated by this Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered or when
mailed by U.S. registered or certified mail, return receipt requested and
postage prepaid. In the case of the Employee, mailed notices shall be addressed
to him at the home address which he most recently communicated to the Company
in writing. In the case of the Company, mailed notices shall be addressed to
its corporate headquarters, and all notices shall be directed to the attention
of its Secretary.


 


(b)   Notice of Termination.
Any termination by the Company for Cause or by the Employee as a result of a
voluntary resignation or an Involuntary Termination shall be communicated by a
notice of termination to the other party hereto given in accordance with this
Section. Such notice shall indicate the specific termination provision in this
Agreement relied upon, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision so
indicated, and shall specify the Termination Date (which shall be not more than
thirty (30) days after the giving of such notice). The failure by the
Employee to include in the notice any fact or circumstance which contributes to
a showing of Involuntary Termination shall not waive any right of the Employee
hereunder or preclude the Employee from asserting such fact or circumstance in
enforcing his rights hereunder.


 


7

















 


11.   Arbitration.


 


(a)   Any dispute or controversy
arising out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach, or termination
thereof, shall be settled by binding arbitration to be held in Santa Clara
County, California, in accordance with the National Rules for the Resolution of
Employment Disputes then in effect of the American Arbitration Association (the
“Rules”). The arbitrator may grant injunctions or other relief in such dispute
or controversy. The decision of the arbitrator shall be final, conclusive and
binding on the parties to the arbitration. Judgment may be entered on the
arbitrator’s decision in any court having jurisdiction.


 


(b)   The arbitrator(s) shall apply
California law to the merits of any dispute or claim, without reference to
conflicts of law rules. The arbitration proceedings shall be governed by
federal arbitration law and by the Rules, without reference to state
arbitration law. Employee hereby consents to the personal jurisdiction of the
state and federal courts located in California for any action or proceeding
arising from or relating to this Agreement or relating to any arbitration in
which the parties are participants.


 


(c)   Employee understands that
nothing in this Section modifies Employee’s at-will employment status.
Either Employee or the Company can terminate the employment relationship at any
time, with or without Cause.


 


(d)   EMPLOYEE HAS READ AND
UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EMPLOYEE UNDERSTANDS
THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH
THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE,
BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF
EMPLOYEE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES
RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT
NOT LIMITED TO, THE FOLLOWING CLAIMS:


 


(i)    ANY AND ALL CLAIMS FOR
WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED;
BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND
IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT
OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH
CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.


 


(ii)   ANY AND ALL CLAIMS FOR
VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED
TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991,
THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH
DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR
EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq;


 


8

















 


(iii)  ANY AND ALL CLAIMS ARISING OUT
OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT
DISCRIMINATION.


 


12.   Miscellaneous Provisions.


 


(a)   No Duty to Mitigate. The
Employee shall not be required to mitigate the amount of any payment
contemplated by this Agreement, nor shall any such payment be reduced by any
earnings that the Employee may receive from any other source.


 


(b)   Waiver. No provision of
this Agreement may be modified, waived or discharged unless the modification,
waiver or discharge is agreed to in writing and signed by the Employee and by
an authorized officer of the Company (other than the Employee). No waiver by
either party of any breach of, or of compliance with, any condition or
provision of this Agreement by the other party shall be considered a waiver of
any other condition or provision or of the same condition or provision at
another time.


 


(c)   Integration. This
Agreement, together with the offer letter agreement between the Company and the
Employee dated May 10, 2007, and any outstanding restricted cash agreements and
equity award agreements referenced herein represent the entire agreement and
understanding between the parties as to the subject matter herein and supersede
all prior or contemporaneous agreements, whether written or oral, with respect
to this Agreement, any restricted cash agreement and equity award agreements.


 


(d)   Choice of Law. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the internal substantive laws, but not the conflicts of law
rules, of the State of California.


 


(e)   Severability. The
invalidity or unenforceability of any provision or provisions of this Agreement
shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.


 


(f)    Employment Taxes. All
payments made pursuant to this Agreement shall be subject to withholding of
applicable income and employment taxes.


 


(g)   Counterparts. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together will constitute one and the same
instrument.


 


(h)   No Representations. The
Employee represents that he has had the opportunity to consult with his
attorneys and tax advisors, and has carefully read and understands the scope,
effect and potential tax consequences of the provisions of this Agreement,
including, but not limited to, the potential consequences of Section 409A of
the Code. The Employee represents that he is not relying on the Company for any
tax advice.


 


9

















 


IN WITNESS
WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the day and year first above
written.


 


	
  COMPANY:

  	
  UTSTARCOM, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Mark Green

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Senior VP, Human Resources

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  EMPLOYEE:

  	
  /s/ Peter Blackmore

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Peter Blackmore

  	
   

  
	
   

  	
  Printed Name

  
					



 


SIGNATURE PAGE TO CHANGE OF
CONTROL/

INVOLUNTARY TERMINATION SEVERANCE AGREEMENT