** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

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**FORM 10-K/A**

**(AmendmentNo. 1)**

 
| **(Mark One)**                                   |
|--------------------------------------------------|
|                                             |   |
| **x**                                            | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                       |
| **For  the Fiscal Year Ended December 31, 2009** |

 

**Or**

 
| **o** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------|

 
| **For  the transition period from                      to** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                      |
| **Commission  File Number: 000-29661**                                                                                                                          |

 

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**UTSTARCOM, INC.**

(Exact name of registrant asspecified in its charter)

 

| **Delaware**                                                    | ** ** | **52-1782500**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |       | (I.R.S. Employer  Identification No.) |
|                                                            |       |                                  |
| **1275 Harbor Bay Parkway  Alameda, California**                | ** ** | **94502**                             |
| (Address of principal executive offices)                        |       | (Zip Code)                            |

 

Registrant’s telephone number, including area code: **(510) 864-8800**

 

Securities registered pursuant to Section 12(b) of theAct:

 

| **Title of each class**          | ** ** | **Name of each exchange  on which registered** |
|----------------------------------|------------|------------------------------------------------|
| Common Stock, $0.00125 par value |       | The NASDAQ Stock Market LLC                    |

 

Securities registeredpursuant to Section 12(g) of the Act: **None**

 

Indicate by check mark if theregistrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act. Yes o No x

 

Indicate by check mark if theregistrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act. Yes o No x

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file suchreports) and (2) has been subject to such filing requirements for the past 90 days.Yes x No o

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) duringthe preceding 12 months (or for such shorter period that the registrant was requiredto submit and post such files. Yes o No o

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K. o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definitions of “largeaccelerated filer”, “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act.

 

| Large accelerated filer o                                            |   | Accelerated filer x         |
|----------------------------------------------------------------------|--------|-----------------------------|
|                                                                 |   |                        |
| Non-accelerated filer o(Do not check if a smaller reporting company) |   | Smaller reporting company o |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). Yes o No x

 

The aggregatemarket value of the voting stock held by non-affiliates of the registrant as ofthe last business day of the registrant’s most recently completed second fiscalquarter was approximately $177,300,065 based upon the closing price of $1.63reported for such date on The NASDAQ Stock Market, LLC. For purposes of this disclosure,shares of Common Stock held by persons who hold more than 10% of theoutstanding shares of Common Stock and shares held by officers and directors ofthe registrant, have been excluded in that such persons may be deemed to beaffiliates. This determination is not necessarily conclusive for otherpurposes.

 

As of March 31,2010, the registrant had 131,510,427 outstanding shares of Common Stock.

 

**DOCUMENT INCORPORATED BY REFERENCE**

 

None.

 

 

 

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**EXPLANATORY NOTE**

 

UTStarcom, Inc. (the “Registrant”)is filing this Amendment No. 1 on Form 10-K/A (“Form 10-K/A”) to amend theRegistrant’s Annual Report on Form 10-K for the fiscal year ended December 31,2009 filed with the Securities and Exchange Commission for the purposes ofincluding information required by Items 10, 11, 12, 13 and 14 of Part IIIrelating to Directors, Executive Officers and Corporate Governance, ExecutiveCompensation, Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters, Certain Relationships and RelatedTransactions, and Director Independence and Principal Accountant Fees andServices, respectively (the “Part III Information”).  In order to preserve the nature and characterof the disclosures as originally filed, except as specifically discussed inthis Form 10-K/A, no attempt has been made to modify or update such disclosuresfor events which occurred subsequent to the original filing on March 15,2010.  Accordingly, this Form 10-K/Ashould be read in conjunction with the Registrant’s subsequent filings with theSecurities and Exchange Commission.  Theinvestment by Beijing E-town International Investment and Development Co.,Ltd., Elite Noble Limited and Shah Capital Opportunity Fund LP announced on February1, 2010 has not yet closed.  As a result,the Registrant will not file its definitive proxy statement pursuant toRegulation 14A of the Securities and Exchange Act of 1934 in connection withits 2010 annual meeting of stockholders, which would include the Part IIIInformation, within 120 days of its fiscal year ended December 31, 2009, asrequired by General Instruction G(3) of Form 10-K.  Since the Registrant will not file its proxystatement within this period, it is amending its Annual Report on Form 10-K asset forth below to include such Part III Information.

 

**PART III**

 

**ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

 

**Directors**

 

On February 1, 2010, theCompany entered into a Common Stock Purchase Agreement (the “BEIID Agreement”)with Beijing E-town International Investment and Development Co., Ltd. (“BEIID”),and a Common Stock Purchase Agreement with Elite Noble Limited and Shah CapitalOpportunity Fund LP, pursuant to which the Company will issue and sell anaggregate of 22,045,454 shares of common stock, par value $0.00125 per sharefor a purchase price of $2.20 per share in a private placement transaction (the“Placement”).

 

Inconnection with and as a condition to the consummation of the Placement,effective upon the closing (the “Closing”) of the Placement, the total numberof directors on the Company’s board of directors (the “Board”) will beincreased from six to seven, and Mr. Baichuan Du, Mr. Xiaoping Li, and Mr. WilliamWong will join the Board upon the Closing. Mr. Li is the designee for BEIID, which was given the right to designatea director on the Board upon the Closing. Messrs. Li and Wong will replace Mr. Allen Lenzmeier and Mr. JeffClarke, respectively, who will resign from the Board upon the Closing.

 

Thefollowing table sets forth biographical information as of March 31, 2010regarding our current and proposed directors:

 
| **Name  of Director** | ** ** | **Age** | ** ** | **Position**                                     | ** ** | **Director  Since** | ** ** | **Term  Expires** | ** ** |
|-----------------------|------------|---------|------------|--------------------------------------------------|------------|---------------------|------------|-------------------|------------|
| Thomas J. Toy         |       | 55      |       | Chairman  of the Board                           |       | 1995                |       | 2010              |       |
| Bruce J. Ryan         |       | 66      |       | Director                                         |       | 2008                |       | 2010              |       |
| Peter Blackmore       |       | 63      |       | Director,  President and Chief Executive Officer |       | 2008                |       | 2011              |       |
| Allen Lenzmeier       |       | 66      |       | Director                                         |       | 2005                |       | 2011              |       |
| Jeff Clarke           |       | 48      |       | Director                                         |       | 2005                |       | 2012              |       |
| Hong Liang Lu         |       | 55      |       | Director                                         |       | 1991                |       | 2012              |       |
| Baichuan Du           |       | 63      |       | Proposed  Director                               |       | —              |       | 2011              |       |
| Xiaoping Li           |       | 46      |       | Proposed  Director                               |       | —              |       | 2011              |       |

 

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| **Name  of Director** | ** ** | **Age** | ** ** | **Position**                                                          | ** ** | **Director  Since** | ** ** | **Term  Expires** | ** ** |
|-----------------------|------------|---------|------------|-----------------------------------------------------------------------|------------|---------------------|------------|-------------------|------------|
| William Wong          |       | 51      |       | Proposed  Director                                                    |       | —              |       | 2012              |       |
| Jack Lu               |       | 47      |       | Proposed  Director, Senior Vice President and Chief Operating Officer |       | —              |       | 2011              |       |

 

*Peter Blackmore* has served as our ChiefExecutive Officer and President and as a director since July 2008, and servedas our President and Chief Operating Officer from July 2007 to June 2008. From2005 until he joined us, Mr. Blackmore served as Executive Vice President incharge of world-wide sales, marketing and technology at Unisys Corporation.Prior to joining Unisys in 2005, he served as Executive Vice President of theCustomer Solutions Group at Hewlett-Packard Company from 2004 and as ExecutiveVice President of the Enterprise Systems Group from 2002 through 2004. From1991 until its acquisition by Hewlett-Packard in 2002, Mr. Blackmore served ina number of senior management positions with Compaq Computer Corporation, mostrecently as its Executive Vice President of worldwide sales and services from2000 through 2002. Mr. Blackmore serves on the board of MEMC ElectronicMaterials Inc. From March 2005 through March 2008, Mr. Blackmore served on theboard of Multi-Fineline Electronix, Inc., a flexible circuit manufacturing andassembling company. Mr. Blackmore holds an M.A. in Economics from TrinityCollege, Cambridge, U.K. Mr. Blackmore brings experience in senior executivepositions at large public technology companies and leadership skills necessaryto manage a complex public company such as ours.  Upon the appointment of Jack Lu as Chief ExecutiveOfficer of the Company, Mr. Blackmore will no longer be our Chief ExecutiveOfficer.

 

*Jeff Clarke* has served as a directorsince January 2005. Since May 2006, Mr. Clarke has served as Chief ExecutiveOfficer and President and a director of Travelport Incorporated, a privatecompany. From April 2004 to April 2006, Mr. Clarke served as the ChiefOperating Officer of CA, Inc., a global provider of management software. From2002 to 2004, Mr. Clarke was Executive Vice President of Hewlett-PackardCompany, and prior to that he was the Chief Financial Officer of CompaqComputer Corporation.  Mr. Clarke servesas Chairman of the Board of Orbitz Worldwide, Inc. and as a director of Red Hat,Inc.  He holds a B.A. in Economics fromthe State University of New York at Geneseo and an M.B.A. from NortheasternUniversity. Mr. Clarke has resigned from the Board effective upon the Closing.

 

*Allen Lenzmeier* has served as a directorsince March 2005. Mr. Lenzmeier has served as a director since February 2001and the Vice Chairman of Best Buy Co. Inc. since December 2004 to February 2009.From 2002 to 2004, Mr. Lenzmeier served as the President and Chief OperatingOfficer of Best Buy Co. Inc. Mr. Lenzmeier served as the President of Best BuyRetail from 2001 to 2002. From 1991 to 2001 Mr. Lenzmeier served as theExecutive Vice President and Chief Financial Officer of Best Buy Co. Inc. andbegan his employment with Best Buy in 1984. Mr. Lenzmeier serves on the boardof directors of several private companies. Mr. Lenzmeier holds a B.S. fromMinnesota State University Mankato. Mr. Lenzmeier has resigned from the Boardeffective upon the Closing.

 

*Hong Liang Lu* has served as a directorsince June 1991.  Mr. Lu served asPresident and Chief Executive Officer from June 1991 to July 2007 and as ChiefExecutive Officer from July 2007 to July 2008.  Mr. Lu also served as our Chairman from March 2003 to December 2006 andfrom July 2008 to August 2009.  In June 1991,Mr. Lu co-founded UTStarcom, Inc. under its prior name, Unitech Telecom, Inc.,which subsequently acquired StarCom Network Systems, Inc. in September 1995.From 1986 through December 1990, Mr. Lu served as President and Chief ExecutiveOfficer of Kyocera Unison, a majority-owned subsidiary of Kyocera International,Inc. Mr. Lu served as President and Chief Executive Officer of Unison World, Inc.,a software development company from 1983 until its merger with Kyocera in 1986.From 1979 to 1983, Mr. Lu served as Vice President and Chief Operating Officerof Unison World, Inc. Mr. Lu holds a B.S. in Civil Engineering from theUniversity of California at Berkeley.  Mr.Lu also serves as a director of Fortinet, Inc., a network security company. Mr.Lu is a founder of the Company and brings global, technology and industryexperience as well as a long history with the Company.

 

*Bruce J. Ryan* has served as a directorsince April 2008. Mr. Ryan is currently a private consultant. From February 1998to November 2002, he served as Executive Vice President and Chief FinancialOfficer of Global Knowledge Network, a provider of information technology andcomputer software training programs and certifications. From 1994 to 1998, Mr. Ryanserved as the Executive Vice President and Chief Financial Officer of AmdahlCorporation, a provider of information technology solutions. Mr. Ryanpreviously had a 25-year career at Digital Equipment Corporation, where heserved in various executive positions, including Senior Vice President of thefinancial services, government and 

 

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professionalservices business group. Mr. Ryan also serves as a director of KVH Industries, Inc.and two private companies.  Mr. Ryanholds a B.S. in business administration from Boston College and an M.B.A. fromSuffolk University.  Mr. Ryan contributesexperience in finance and internal control matters at complex public companies.

 

*Thomas J. Toy* has served as a directorsince February 1995 and as our Chairman since August 2009.  He served as our Lead Director from July 2008to August 2009. Since March 1999, Mr. Toy has served as Managing Director ofPacRim Venture Partners, a professional venture capital firm specializing ininvestments in the information technology sector. From 2005 to 2010, Mr. Toyhas served as a partner of SmartForest Ventures, a professional venture firmspecializing in the information technology sector. Mr. Toy has been a venturepartner and advisor to ICCP Ventures since 2009. From 1987 until 1992, Mr. Toywas employed as a Vice President at Technology Funding and was a partner therefrom 1992 until 1999. Mr. Toy also serves as a director of White ElectronicDesigns Corporation, Solarfun Power Holdings and several private companies. Mr.Toy holds B.A. and M.M. degrees from Northwestern University.  Mr. Toy brings significant experience withcapital markets and international business as well as a long history with theCompany.

 

*Baichuan Du* has been appointed as a director effective upon theClosing.  Mr. Du served as theDeputy Chief Engineer of China State Administration of Radio, Film, and Television(“SARFT”) from 2001 to 2006.  From 1995to 1998, Mr. Du served as the Chair of China HDTV Experts Group and from1998 to 2009, the Vice Chairman of China Radio and TV Standardization WorkingGroup.  He has also served as the ViceChairman of SARFT Science and Technology Committee since 1998.   From 1999 to 2001, Mr. Du served as thePresident of SARFT Academy of Broadcasting Science.  From 2007 to 2009, Mr. Du served as adirector of Tvia, Inc., a fabless semiconductor company listed on NASDAQ,and Mr. Du currently serves as an independent director on the board ofseveral private companies.  Mr. Duholds bachelor and master’s degrees in fiber optic communications from BeijingUniversity.  Mr. Du contributesexperience in China and understanding of the China market and telecommunicationindustry.

 

*XiaopingLi* has been appointed as a director effective upon the Closing.  Mr. Libegan working to establish BEIID in October 2008 and since February 2009when BEIID was formed, Mr. Li has served as its Executive Deputy GeneralManager and as a member of its Board of Directors.  Mr. Li served asManager of Beijing Economic-Technological Investment & DevelopmentCo., Ltd., an investment company established by the Beijing Municipality, from October 2006to October 2008.  Mr. Li was an Advisor to Ministry of Financeon international finance organization projects from July 2004 to October 2006. Mr. Li was a senior researcher in environmental economics at ChineseAcademy of Forestry from August 2001 to July 2004.  Mr. Liholds a bachelor’s degree in forestry, a master’s degree in forest economicsand has completed all the course requirements to be awarded a doctorate degreein economy and management from Beijing Forestry University.  Mr. Liis the designee of BEIID which will have the right to designate one member ofthe Board of Directors.

 

*WilliamWong*has been appointed as a director effective upon the Closing.* *SinceJanuary 2008, Mr. Wong has served as Managing Director of Yellow Capital GroupLtd., a consulting firm.  From February 2002to May 2007, Mr. Wong served various roles as Senior VP, President of CellonInternational, an independent mobile phone design house.  In July 2007, Mr. Wong co-founded BORQSInternational Holding Corp, a wireless software company.  Mr. Wong holds a B.S. in electricalengineering from Northwestern University, an M.S. in electrical engineering andM.B.A. from the University of California, Berkeley.  Mr. Wong will bring finance, technology andindustry experience, in particular in the China market, to the Company.

 

*Jack Lu*has served as our Senior Vice President and Chief Operating Officersince March 2010.  Mr. Lu has beenappointed our Chief Executive Officer and President effective the later date ofJune 30, 2010 or three months after the Closing. From August 2008 until joiningUTStarcom, Mr. Lu worked as an entrepreneur seeking to establish a RMBdenominated investment fund to invest in high technology companies in southwestChina. From July 2007 to July 2008, Mr. Lu served as Global Co-Chief OperatingOfficer and General Manager of China Operations for Source Photonics, Inc., anoptoelectronics components company. From September 2001 until June 2007, heserved in a number of senior management positions, including most recently asPresident and Chief Executive Officer from January 2007 to June 2007 and ChiefOperating Officer from June 2006 to December 2006, with Fiberxon Inc., anoptical telecommunications components company, which was acquired by MRVCommunications Inc., a communications equipment and services company, in July 2007.From 2000 until 2001, Mr. Lu served as Director of Business StrategyDevelopment for US Business Networks Inc. (MeetChina.com), abusiness-to-business portal provider. From 1988 to 1998, Mr. Lu served in anumber of management positions with China National Technical Import and ExportCorporation, an import/export, manufacturing and consulting firm.  Mr. Lu received a B.S. in ElectricalEngineering from Huazhong University of Science and Technology in China andholds an M.B.A. from the University of Southern California.  Jack Lu will contribute significant leadership,operational and sales expertise in the technology industry in China and withmultinational companies operating in China.

 

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**Executive Officers**

 

Inconnection with the Placement, Mr. Jack Lu was appointed as the Company’s ChiefExecutive Officer, effective the later of June 30, 2010 or three monthsfollowing the Closing, pursuant to the terms and conditions set forth in anemployment offer letter dated February 1, 2010, as amended on February 22, 2010.  Mr. Lu joined the Company as Chief OperatingOfficer on March 1, 2010 and is expected to serve in such position until heassumes the Chief Executive Officer position. Upon his appointment as the Company’s Chief Executive Officer, Mr. Lu isexpected to be appointed to the Board, replacing Mr. Peter Blackmore, thecurrent Chief Executive Officer of the Company.

 

Ourcurrent executive officers and their ages as of March 31, 2010 are as follows:

 
| **Name**         | ** ** | **Age** | ** ** | **Position**                                       | ** ** |
|------------------|------------|---------|------------|----------------------------------------------------|------------|
| Peter  Blackmore |       | 63      |       | Chief  Executive Officer and President             |       |
| Jack  Lu         |       | 47      |       | Senior  Vice President and Chief Operating Officer |       |
| Kenneth  Luk     |       | 58      |       | Senior  Vice President and Chief Financial Officer |       |

 

*Peter Blackmore* please see Mr. Blackmore’sbiography above.

 

*Jack Lu*please see Mr. Lu’sbiography above.

 

*Kenneth Luk* has served as our SeniorVice President and Chief Financial Officer since December 2009.  Mr. Luk served as Chief Financial Officer forChina Sunergy Company Ltd. from December 2007 to March 2009. From April 2004 untilJune 2007, he was Corporate Controller, Asia/Japan of Freescale SemiconductorHong Kong Ltd., a spin-off business of Motorola. From 1990 until the businessspin-off of Freescale,  Mr. Luk served ina number of positions with Motorola Semiconductor Hong Kong Ltd., most recentlyas its Sector Controller of Asia/Japan from March 2002 to March 2004. Prior tojoining Motorola Semiconductor, Mr. Luk worked for A.S. Watson & CompanyLimited as Group Credit Manager from July 1985 to December 1989. Mr. Luk beganhis career at The Hong Kong & Shanghai Banking Corporation Ltd. in 1977. Mr.Luk received a B.A. in Economics from University of Toronto in Canada and holdsa M.B.A. from York University, Ontario, Canada. Mr. Luk brings experience as the chief financial officer of a publiccompany operating in China.

 

**FamilyRelationships**

 

There are no familyrelationships between any of our directors, executive officers and proposeddirectors.

 

**LegalProceedings**

 

TheCompany is not aware of any legal proceedings in which any director, proposeddirector, officer or affiliate of the Company, any owner of record orbeneficially of more than five percent of any class of voting securities of theCompany, or any associate of any such Director, nominee, officer, affiliate ofthe Company, or security holder is a party adverse to the Company or any of itssubsidiaries or has a material interest adverse to the Company or any of itssubsidiaries.

 

**Section 16(a) Beneficial Ownership ReportingCompliance**

 

Section16(a) of the Exchange Act requires the Company’s Directors and executiveofficers and persons who own more than ten percent of a registered class of theCompany’s equity securities to file with the Securities and Exchange Commission(“SEC”) initial reports of ownership and reports of changes in ownership of thecommon stock and other equity securities of the Company. Officers, Directorsand greater than ten percent stockholders are required by SEC regulations tofurnish the Company with copies of all Section 16(a) forms they file. Theinformation in this section is based solely upon a review of Forms 3, 4 and 5received by the Company.

 

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TheCompany is not aware of any person who at any time during the period prior tothe year ended December 31, 2009 was a director, officer, or beneficial ownerof more than ten percent of the common stock of the Company, and who failed tofile, on a timely basis, reports required by Section 16(a) of the SecuritiesExchange Act of 1934 during the 2009 fiscal year.

 

**Business Conduct Policy**

 

We have adopted aCode of Business Conduct and Ethics (“Code of Ethics”) that applies to allemployees including our principal executive officers. The Code of Ethics isdesigned to promote: (i) honest and ethical conduct, including the ethicalhandling of actual or apparent conflicts of interest between personal andprofessional relationships, (ii) full, fair, accurate, timely andunderstandable disclosure in reports and documents that we are required to fileto the SEC and in other public communications, (iii) compliance with applicablelaws, rules and regulations, (iv) the prompt internal reporting of violationsof the Code of Ethics to an appropriate person or entity, and (v) accountabilityfor adherence to the Code of Ethics.

 

As a supplement tothe Code of Ethics, we have also adopted a Code of Ethics for Chief ExecutiveOfficer and Senior Financial Officers (“Code of Ethics for Financial Officers”),which is designed to highlight the legal and ethical obligations of the ChiefExecutive Officer and financial officers. The Code of Ethics for FinancialOfficers imposes upon applicable officers certain additional internal reportingrequirements for acts committed in violation of the Code of Ethics and/or thesecurities laws.

 

Copies of the Codeof Ethics and the Code of Ethics for Financial Officers are available on ourwebsite at *http://investorrelations.utstar.com/governance.cfm.*Any waiver of the Code of Ethics or Code of Ethics for Financial Officerspertaining to a member of our Board or one of our executive officers will bedisclosed on our website at *http://investorrelations.utstar.com/governance.cfm.*

 

**Audit Committee Information**

 

TheAudit Committee of the Board is a separately-designated, standing committee ofthe Board of Directors and currently consists of three members of the Board ofDirectors, all of whom: (1) meet the criteria for “independence” set forth in Rule10A-3(b)(1) under the Securities Exchange Act of 1934, as amended, and thelisting standards of the NASDAQ Stock Market; (2) have not participated in thepreparation of the financial statements of the Company or any of its currentsubsidiaries at any time during the past three years; and (3) are able to readand understand fundamental financial statements, including a company’s balancesheet, income statement and cash flow statement. The members of the AuditCommittee are Mr. Ryan, who chairs the committee, and Messrs. Lenzmeier andToy. Mr. Ryan was appointed as a member of the Audit Committee effective April 25,2008. The Audit Committee held 13 meetings during 2009. Messrs. Lenzmeier andRyan have been determined by the Board to qualify as “audit committee financialexperts” under applicable SEC and NASDAQ rules.

 

**ITEM 11. EXECUTIVE COMPENSATION**

 

**Compensation Discussion and Analysis**

 

This CompensationDiscussion and Analysis provides information about the material components ofour executive compensation program for:

 

·                  Peter Blackmore, our President and Chief ExecutiveOfficer (the “CEO”);

 

·                  Kenneth Luk, our Senior Vice President and ChiefFinancial Officer (the “CFO”);

 

·                  Viraj Patel, our former Interim Chief FinancialOfficer, Vice President, Corporate Controller, and Chief Accounting Officer;

 

·                  Susan Marsch, our former Senior Vice President,General Counsel, Secretary, and Chief Ethics Officer;

 

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·                  Hong Liang Lu, our former Executive Chairman (the “Chairman”);and

 

·                  Mark Green, our former Senior Vice President,Worldwide Human Resources and Real Estate.

 

Werefer to these executive officers collectively as the “Named ExecutiveOfficers.”

 

EffectiveDecember 16, 2009, Mr. Luk was named as our Senior Vice President and ChiefFinancial Officer, replacing Mr. Patel, who was serving as our Interim ChiefFinancial Officer, Vice President, Corporate Controller, and Chief AccountingOfficer.  Mr. Patel left his position asour Vice President, Corporate Controller, and Chief Accounting Officereffective February 26, 2010 in connection with our previously-announced plansto relocate certain corporate functions to China.

 

OnFebruary 1, 2010, we announced that Mr. Blackmore will retire as our Presidentand Chief Executive Officer on the later to occur of (i) the date three monthsafter the Closing as disclosed in our current report on Form 8-K filed on February4, 2010 or (ii) June 30, 2010.

 

ThisCompensation Discussion and Analysis provides an overview of our executivecompensation philosophy, the overall objectives of our executive compensationprogram, and each compensation component that we provide.  In addition, we explain how and why theCompensation Committee of the Board of Directors (the “Compensation Committee “)arrived at specific compensation policies and decisions involving our executiveofficers during 2009.

 

***Executive Compensation Philosophy***

 

*Compensation Objectives*

 

Ourexecutive compensation program is designed to achieve three primary objectives:

 

·                  Be competitive with the market to attract, retain, andmotivate the caliber of talent required to drive shareholder value;

 

·                  Create a high-performance culture by linking rewardsto performance; and

 

·                  Apply reward practices in a fair and consistentmanner.

 

***Compensation-Setting Process***

 

*Role of Compensation Committee*

 

TheCompensation Committee determines the form and amount of compensation for ourexecutive officers, including the Named Executive Officers.

 

TheCompensation Committee is responsible for:

 

·                  Approving and overseeing the total compensationpackage for our executive officers, including their base salaries, annual cashincentive awards, equity awards, perquisites, and other benefits;

 

·                  Reviewing and approving the corporate goals andobjectives relevant to the compensation of our CEO, evaluating his performance,and determining his compensation based on this evaluation;

 

·                  Reviewing our CEO’s performance evaluation of ourexecutive officers and approving compensation decisions for them; and

 

·                  Reviewing periodically and making recommendations tothe Board of Directors regarding any equity or long-term compensation plans,and administering these plans.

 

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Inaddition, before he stepped down, the Compensation Committee also reviewed andapproved the corporate goals and objectives relevant to the compensation of ourExecutive Chairman, evaluated his performance, and determined his compensationbased on that evaluation.

 

TheCompensation Committee operates pursuant to a charter *http://investorrelations.utstar.com/governance.cfm*that describes its specific duties and responsibilities.

 

Typically,the Compensation Committee holds at least four scheduled meetings during theyear and holds additional meetings periodically to review and discuss executivecompensation matters.  In the firstquarter of each year, typically in February, the Compensation Committee:

 

·                  considers adjustments to the base salaries of ourexecutive officers;

 

·                  decides whether to pay bonuses to our executiveofficers for the prior year’s performance and, if so, the amount of any suchbonuses;

 

·                  reviews and approves annual equity awards for ourexecutive officers in accordance with our Equity Award Grant Policy (as definedbelow); and

 

·                  reviews the level of perquisites and other benefitsprovided to each executive officer.

 

Aspart of its annual compensation review, the Compensation Committee alsoevaluates (i) our corporate financial performance, (ii) the individualperformance of each executive officer, and (iii) data about the marketpractices for executive compensation for positions comparable to those of eachof our executive officers.  In addition,our CEO reviews and discusses with the Compensation Committee the performanceand contributions of each executive officer (other than for himself).  Before he stepped down, our ExecutiveChairman reviewed and discussed with the Compensation Committee the performanceand contributions of our CEO.  Althoughthe Compensation Committee may discuss the performance and compensation packageof our CEO with him, it meets in executive session to determine his compensation.

 

*Role of Management*

 

OurCEO plays a significant role in the compensation setting process.  Generally, he attends and participates in allCompensation Committee meetings (except executive sessions of the CompensationCommittee or discussions involving his own compensation).  The key aspects of our CEO’s role include:

 

·                  evaluating executive officer and other employeeperformance;

 

·                  assisting in the establishment of corporateperformance goals and objectives, and the related target levels; and

 

·                  recommending base salary levels and equity awards forour executive officers (other than for himself).

 

TheCompensation Committee considers, but is not bound to and does not alwaysaccept, our CEO’s recommendations with respect to the compensation of ourexecutive officers.  While the CompensationCommittee seeks input primarily from our CEO, it also consults with otherexecutive officers, including our Chairman and our senior human resourcespersonnel, to obtain recommendations with respect to our compensation programs,practices, and packages for executive officers and other employees.  The Compensation Committee also has theopportunity, upon request, to meet with each executive officer to discuss hisor her individual performance for the prior year.  Other than participating in an annual evaluationprocess with our CEO and these discussions with the Compensation Committee, theother Named Executive Officers do not play a role in their own compensationdeterminations.

 

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OurHuman Resources Department supports the Compensation Committee in its work byproviding compensation data as requested.

 

*Role of Compensation Consultant*

 

TheCompensation Committee has engaged Compensia, Inc., a national compensationconsulting firm (“Compensia”),to advise it on executive and equity compensation matters.  Compensia reports directly to theCompensation Committee, and it has sole authority to hire, fire, and direct thefirm’s work.  In 2009, Compensiaperformed no other work for us, other than its work for the CompensationCommittee.

 

In2009, Compensia assisted the Compensation Committee in updating thecompensation peer group, developed compensation “tally sheets” for each NamedExecutive Officer, conducted a market pay assessment for each executiveofficer, and provided input on equity compensation and market trends.  A representative from Compensia attendsmeetings of the Compensation Committee upon request.

 

The“tally sheets” prepared by Compensia provided a comprehensive summary of eachNamed Executive Officer’s compensation, including:

 

·                  an estimate of projected compensation for 2009,including total target cash compensation and the total estimated value ofequity awards, to be received by each Named Executive Officer;

 

·                  a summary of the intrinsic value of all outstandingvested and unvested equity awards held by each Named Executive Officer atcurrent stock prices; and

 

·                  the potential payments and benefits in the event of aninvoluntary termination of employment or upon a change of control of the Company.

 

These“tally sheets” provided the Compensation Committee with context for thedecisions they made concerning total direct compensation and individualcompensation elements.  Although they didnot necessarily drive decision-making with regard to the specific elements ofour executive compensation program, the “tally sheets” enabled the CompensationCommittee to assess total direct compensation and the relationship of variouscompensation elements to each other. These “tally sheets” also provided context to the Compensation Committee’sviews on a variety of issues, such as changes to severance plans and employmentagreements, special equity awards to promote retention, or changes in long-termvariable equity incentives.

 

*Competitive Positioning of Executive Compensation*

 

Weused a group of peer companies to assess the competitiveness of thecompensation practices for our executive officers in 2009.  This peer group, the data for which wasobtained from publicly-available sources, was used to establish the competitivemarket for our CEO and CFO positions (the “Peer Group”).  Because ofthe difficulty in identifying comparable positions at these peer companies forour other executive officer positions, we also reviewed the data with respectto technology companies reflected in the annual Radford High TechnologyExecutive Survey (the “Radford Survey”) to develop a sense of the competitivemarket for these positions The Compensation Committee compared its compensationdecisions against its perspective of market practice as reflected by the PeerGroup and the Radford Survey data when determining the compensation of our CEOand CFO and against the Radford Survey data when determining the compensationof our other executive officers.

 

For2009, the Compensation Committee established the Peer Group to consist of thefollowing 15 companies, which were selected on the basis of being in relatedbusinesses and having comparable revenues (between $320 million and $1.7billion) and a comparable market capitalization (between $60 million and $660million) to us:

 
| ADAC  Telecommunications    |   | Harmonic,  Inc.             |
|-----------------------------|--------|-----------------------------|
| Agilysis                    |   | Harris  Stratex Networks    |
| Avocent                     |   | Powerwave  Technologies     |
| Black  Box Network Services |   | RF  Micro Devices           |
| Ciena                       |   | Silicon  Storage Technology |
| CTS                         |   | Sonus  Networks             |
| Emulex,  Inc.               |   | ViaSat,  Inc.               |
| Extreme  Networks, Inc.     |   |                        |

 

8

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***Compensation of Named Executive Officers***

 

Weuse three primary pay elements to support our compensation objectives:

 

·                  base salary;

 

·                  an annual cashincentive award; and

 

·                  equity awards.

 

Collectively,these pay elements constitute the total directcompensation opportunity of our executive officers.  In conducting its annual compensation reviewfor 2009, the Compensation Committee was provided with an analysis of thecompensation practices of the Peer Group and the technology companies reflectedin the Radford Survey data.  TheCompensation Committee used this analysis to compare the total directcompensation opportunities of our executive officers against the competitivemarket for executive talent (which the Compensation Committee believed wasbetween approximately the median and the 75th percentile****of the Peer Group). The Compensation Committee determined that, to attract and retainqualified executive officers to manage our business in the current environment,it would be necessary to offer total direct compensation opportunities atlevels that were consistent with the competitive market.

 

TheCompensation Committee set the target total direct compensation opportunitiesfor our executive officers relative to the competitive market as reflected inthe Peer Group****for comparable positions.  Ultimately, and consistent with our “pay-for-performance”philosophy, the actual compensation earned by our executives officers is basedon actual corporate and individual performance. This result is enhanced by the Compensation Committee’s decision toweight the majority of our executive officers’ total direct compensationtowards variable, or “at-risk,” pay elements, which are designed to provide ourexecutive officers with above-market total compensation only to the extent thatour corporate and individual performance objectives have been achieved orexceeded.

 

Notwithstandingour “pay-for-performance” philosophy, our continuing lack of profitability hasincreased the Compensation Committee’s concern about our ability to attract andretain qualified executive officers to lead our return to profitability.  As a result, the Compensation Committee alsotook into consideration recruiting and retention concerns in setting executivecompensation levels in 2009.

 

*Base Salary*

 

Basesalary is the primary fixed compensation in our executive compensation programand is used to attract, motivate, and retain highly qualified executiveofficers.  An individual’s initial basesalary is determined by his or her levels of expertise, experience andresponsibility, as well as the competitive market as reflected in the PeerGroup.  Annual base salary increases, ifany, are a reflection of the executive officer’s performance for the precedingyear, anticipated future contributions, and pay level relative to similarpositions in the Peer Group (as it may be revised from time to time).  We also take into consideration internalequity with respect to the entire executive team.

 

InFebruary 2009, after consideration of corporate and individual performance, aswell as a review of competitive market practices for executive compensationwithin the Peer Group, the Compensation Committee determined that it would makeno adjustments to the base salaries for any of our executive officers,including the Named Executive Officers, for 2009.

 

InMarch 2009, our CEO and our Executive Chairman agreed to voluntary and temporarybase salary reductions of 20% for a one-year period.  Notwithstanding this base salary reduction,each Named Executive Officer’s base salary, as in effect immediately prior tothis reduction, was deemed and continued to be his base salary for all other purposesunder our benefit and personnel plans, programs, and policies, including,without limitation, bonuses, equity awards, severance payments, change incontrol payments, and any other benefits.

 

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*Annual Cash Incentive Awards (“Bonus”)*

 

Consistentwith our “pay-for-performance” philosophy, we offer annual cash incentiveawards to our executive officers, including the Named Executive Officers, basedon their performance against one or more pre-established corporate andindividual performance objectives.

 

TargetAward Opportunities

 

During2009, each of our executive officers, including the Named Executive Officers(with the exception of Mr. Luk) was eligible to earn an annual cashincentive award equal to a specific percentage of his or her base salary.  These amounts, which were unchanged from 2008levels, were as follows:

 
| **Named  Executive Officer** | ** ** | **Target  Annual Cash  Incentive  Award  Opportunity  (as a  percentage of  base salary)** | ** ** |
|------------------------------|------------|--------------------------------------------------------------------------------------------|------------|
| Peter Blackmore              |       | 100                                                                                        | %          |   |
| Kenneth Luk                  |       | *                                                                                          |       |   |
| Viraj Patel                  |       | 50                                                                                         | %          |   |
| Susan Marsch                 |       | 50                                                                                         | %          |   |
| Hong Liang Lu                |       | 100                                                                                        | %          |   |
| Mark Green                   |       | 65                                                                                         | %          |   |

 

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*                 Mr. Luk’starget annual cash incentive award opportunity was established when he joinedus in December 2009.  Accordingly,he was not eligible to earn an annual cash incentive award in 2009.

 

CorporatePerformance Objectives

 

InApril 2009, the Compensation Committee, based on the recommendations ofour CEO, established and approved the corporate performance objectives for thefirst half of 2009 for the annual cash incentive awards.  These corporate performance objectivesinvolved achieving a specified improvement in operating income (adjusted forcertain one-time costs) as well as bookings and collections targets for thefirst two fiscal quarters of 2009.** **The Compensation Committeebelieved that encouraging our executive officers to focus their efforts onthese objectives would enable us to attain the financial performance reflectedin our operating plan for the first half of 2009.  The Compensation Committee further believedthat the attainment of the target levels established for each of thesecorporate performance metrics were realistic but not easily achieved, and,therefore, would drive the achievement of our short-term financial goals.

 

Thecorporate performance objectives for first half of 2009 as approved by theCompensation Committee were as follows:

 
| **Corporate  Performance Metric** | ** ** | **Threshold  (75%)  Performance  (in millions)** | ** ** | **Target (100%)  Performance  (in millions)** | ** ** | **Maximum  (125%)  Performance  (in millions)** | ** ** | **Weighting** | ** ** |
|-----------------------------------|------------|--------------------------------------------------|------------|-----------------------------------------------|------------|-------------------------------------------------|------------|---------------|------------|
| Operating Income                  |       |                                             | *          |                                          | $          | (82.8                                           | )          |          | $          | (62. | 1) |   | 1/3 |   |
| Bookings                          |       | $                                                | 260.       | 55                                            |       | $                                               | 347.4      |          |       | $ | 434. | 5 |   | 1/3 |   |
| Collections                       |       | $                                                | 244.       | 875                                           |       | $                                               | 326.5      |          |       | $ | 408. | 125 |   | 1/3 |   |

 

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*                 TheCompensation Committee determinedthat there would be no payout with respect to any of the corporate performanceobjectives if the target performance level for the operating income performanceobjective was not achieved.

 

10

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Inthe case of the corporate performance objectives, if target performance for ametric was achieved, 100% of the target award payout opportunity applicable tothat metric was payable.  If thresholdperformance was not achieved, none of the target award payout opportunityapplicable to that metric was payable. If threshold performance for that metric was achieved, 75% of the targetaward payout opportunity applicable to that metric was payable.  If maximum performance for that metric wasachieved or exceeded, 125% of the target award payout opportunity applicable tothat metric was payable.  For performancebetween the specified threshold, target, and maximum levels, an interpolatedmultiplier was used to calculate the amount payable with respect to eachmetric.

 

InOctober 2009, the Compensation Committee, based on the recommendations of ourCEO, established and approved the corporate performance objectives for thesecond half of 2009 for the annual cash incentive awards.  These corporate performance objectives weresimilar to the objectives established for the first half of 2009, as we workedto improve our overall financial performance for the year. ** **The Compensation Committee believedthat the attainment of the target levels established for each of thesecorporate performance metrics were realistic but not easily achieved, and,therefore, would drive the achievement of our short-term financial goals.

 

Thecorporate performance objectives for second half of 2009 as approved by theCompensation Committee were as follows:

 
| **Corporate Performance Metric** | ** ** | **Threshold  (75%)  Performance  (in millions)** | ** ** | **Target  (100%)  Performance  (in millions)** | ** ** | **Maximum  (125%)  Performance  (in millions)** | ** ** | **Weighting** | ** ** |
|----------------------------------|------------|--------------------------------------------------|------------|------------------------------------------------|------------|-------------------------------------------------|------------|---------------|------------|
| Operating Income                 |       | $                                                | (48.75     | )                                              |       | $                                               | (39        | )             |       | $ | (29.25 | ) |   | 1/3 |   |
| Bookings                         |       | $                                                | 167.25     |                                           |       | $                                               | 223        |          |       | $ | 278.75 |   |   | 1/3 |   |
| Collections                      |       | $                                                | 156        |                                           |       | $                                               | 208        |          |       | $ | 260 |   |   | 1/3 |   |

 

Inthe case of the corporate performance objectives, if target performance for ametric was achieved, 100% of the target award payout opportunity applicable tothat metric was payable.  If thresholdperformance was not achieved, none of the target award payout opportunityapplicable to that metric was payable. If threshold performance for that metric was achieved, 75% of the targetaward payout opportunity applicable to that metric was payable.  If maximum performance for that metric wasachieved or exceeded, 125% of the target award payout opportunity applicable tothat metric was payable.  For performancebetween the specified threshold, target, and maximum levels, an interpolatedmultiplier was used to calculate the amount payable with respect to eachmetric.

 

Evenif the target corporate performance objectives were achieved in full, theCompensation Committee reserved the right, in its sole discretion, to decreasethe award payout applicable to that metric. Similarly, the Compensation Committee retained the right, in its solediscretion, to make award payouts for any corporate performance metric ormetrics in the event that significant and unanticipated external eventsprevented us from meeting one or more pre-established corporate performanceobjectives.

 

IndividualPerformance Objectives

 

Theindividual performance objectives for our executive officers, with theexception of our Executive Chairman, were jointly developed by each executiveofficer and our CEO.  These individual performanceobjectives varied from individual to individual, depending on his or her roleand responsibilities.  Typically, theseindividual performance 

 

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objectivesincluded, for example, quantitative and qualitative goals for corporateacquisitions and divestitures, compliance, technology innovations, customerrelations, improving market position, and cost management.  These individual performance objectives werethen reviewed and approved by the Compensation Committee.

 

Aswith the corporate performance objectives, award payouts could range from 0% to125% of target performance levels, depending on the degree to which eachindividual performance objective was met.

 

AwardWeightings

 

Forour CEO, 50% of his target annual cash incentive award opportunity was to bebased on the corporate performance objectives described above and 50% was to bebased on the completion of several strategic/operational initiatives (includinga successful strategy review with the Board of Directors, successful executionof identified divestitures, compliance, benchmarking costs for businessfunctions, and setting the ethics tone for the organization).

 

Forour Executive Chairman, 50% of his target annual cash incentive award opportunitywas to be based on the corporate performance objectives described above; and50% was to be based on the completion of several strategic/operationalinitiatives (including a successful strategy review with the Board ofDirectors, successful execution of identified divestitures, identifying newbusiness opportunities and setting the ethics tone for the organization).

 

ForMs. Marsch, 50% of her target annual cash incentive award opportunity wasto be based on the corporate performance objectives described above anddepartmental expense results and 50% was to be based on the completion ofseveral strategic/operational initiatives (including expanding awareness andcompliance with code of conduct and ethics, reducing costs, aligning ourintellectual property portfolio, and setting the ethics tone for theorganization).

 

ForMr. Patel, 55% of his target annual cash incentive award opportunity wasto be based on the corporate performance objectives described above anddepartmental expense results and 45% was to be based on the completion ofseveral strategic/operational initiatives (including timely filings,compliance, and benchmarking departmental costs).

 

ForMr. Green, 50% of his target annual cash incentive award opportunity wasto be based on the corporate performance objectives described above anddepartment expense results and 50% was to be based on the completion of severalstrategic/operational initiatives (including leadership development, strategicstaffing, supporting organizational evolution and restructuring, and settingthe ethics tone for the organization).

 

AwardDecisions

 

After the end of theyear, each executive officer’s performance against his or her individualperformance objectives was assessed by our CEO. Our CEO then made recommendations to the Compensation Committee as tothe payout for this individual performance component for each executive officer(other than for himself).  While theCompensation Committee considered these recommendations in making award payouts, it determined the payouts for eachexecutive officer based on its own evaluation of his or her performance, andits consideration of various subjective factors, such as its consideration ofour “pay-for-performance” philosophy as well as recruiting and retentionconcerns.

 

Based on theseconsiderations, the Compensation Committee determined the following annual cashincentive awards for the Named Executive Officers:

 
| **Named  Executive Officer** | ** ** | **Annual Cash  Incentive  Award** | ** ** |
|------------------------------|------------|-----------------------------------|------------|
| Peter Blackmore              |       | $                                 | 529,600    |   |   |
| Kenneth Luk                  |       | *                                 |       |   |
| Viraj Patel                  |       | $                                 | 90,668     |   |   |
| Susan Marsch                 |       | **                                |       |   |
| Hong Liang Lu                |       | **                                |       |   |
| Mark Green                   |       | **                                |       |   |

 

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*                 Mr. Luk’starget annual cash incentive award opportunity was established when he joinedus in December 2009.  Accordingly,he was not eligible to earn an annual cash incentive award in 2009.

 

**          Messrs. Luand Green and Ms. Marsch left the company prior to the end of 2009.  Accordingly, the Compensation Committee didnot award them an annual cash incentive award for 2009.

 

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*Equity Awards*

 

Equitycompensation is a significant component of our executive compensationprogram.  We believe this is an effectiveway to align the interests of our executive officers with those of ourstockholders to increase long-term stockholder value.  In designing our equity program, we take intoaccount stockholder concerns about share usage and dilution.  The Compensation Committee limits annual netissuances of stock-based awards, subject to extraordinary events (forexample, acquisitions).  The CompensationCommittee adjusts this target rate each year based on performance and retentionobjectives, taking into account market practices.

 

InFebruary 2009, the Compensation Committee granted our executive officers,including the Named Executive Officers, restricted stock unit awards, in theamounts set forth below.  While some ofthese awards are subject to service-based vesting (as noted below), themajority of the awards are subject to performance-based vestingrequirements.  Generally, the performancecriteria for these equity awards are the same as the criteria discussed abovefor the 2009 annual cash incentive awards. The actual number of shares to be earned by each executive officer withrespect to his or her performance-based RSU award was to be determined by theCompensation Committee at the end of 2009, based on each executive officer’sactual performance as measured against these performance criteria.

 
| **Named  Executive Officer** | ** ** | **Award Type** | ** ** | **Number of  Shares  (Service-  Based)*** | ** ** | **Target  Number of  Shares  (Performance-  Based)**** | ** ** |
|------------------------------|------------|----------------|------------|-------------------------------------------|------------|--------------------------------------------------------|------------|
| Peter Blackmore              |       | RSU            |       | 112,364                                   |       |                                                   |       |   |   |
|                         |       | RSU            |       |                                      |       |                                                   | 224,727    |   |   |
| Hong Liang Lu                |       | RSU            |       | 88,061                                    |       |                                                   |       |   |   |
|                         |       | RSU            |       |                                      |       |                                                   | 176,121    |   |   |
| Viraj Patel                  |       | RSU            |       | 18,646                                    |       |                                                   |       |   |   |
|                         |       | RSU            |       |                                      |       |                                                   | 37,293     |   |   |
| Susan Marsch                 |       | RSU            |       | 33,333                                    |       |                                                   |       |   |   |
|                         |       | RSU            |       |                                      |       |                                                   | 66,667     |   |   |
| Mark Green                   |       | RSU            |       | 60,889                                    |       |                                                   |       |   |   |
|                         |       | RSU            |       |                                      |       |                                                   | 121,778    |   |   |

 

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*                 Theservice-based RSU awards vest over four years as follows: 25% on each of February 26,2010, February 28, 2011, February 29, 2012, and February 28,2013, subject to the Named Executive Officer remaining a service providerthrough each such date.

 

**          Theperformance-based RSU awards, if earned, vest as follows: 50% of the earnedamount will vest on each of February 26, 2010 and February 28, 2011,provided that the Named Executive Officer remains a service provider througheach such date.

 

Inmaking these equity awards, the Compensation Committee reviewed and approvedCompensia’s proposed adjustments to its analysis of the competitive market asreflected by the Peer Group****to reflectboth the lag in current market data on equity awards as a result of the globaleconomic recession and the significant reduction in our revenues resulting fromthe divestiture of our Personal Communications Division and other non-corebusinesses over the preceding 12 months. To account for these factors, the market value of the equity awardsreported by the Peer Group was reduced by an amount equal to the median stockprice decline (57%) of the Peer Group.

 

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In February 2010, the Compensation Committeedetermined the actual number of shares earned by the Named Executive Officersidentified below from their restricted stock unit awards granted in February 2009based on an evaluation of their performance against the pre-established objectivesfor the year, as follows:

 
| **Named  Executive Officer** | ** ** | **Target  Number of  Shares  Covered by  RSU  Granted in  February  2009** | ** ** | **Actual  Number of  Shares  Earned From  RSU as  determined  in February  2010** | ** ** | **Shares  Earned as a  Percentage of  Target  Shares  Granted** | ** ** |
|------------------------------|------------|----------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| Peter Blackmore              |       | 224,727                                                                    |       |                                                                              | 148,769    |                                                            |       | 66.2 | % |   |
| Viraj Patel                  |       | 37,293                                                                     |       |                                                                              | 37,293     |                                                            |       | 100 | % |   |

 

In determining the number of shares earned by Mr. Patel,the Compensation Committee recognized his performance in various transitionactivities, including his work following his originally targeted employmenttermination date at the end of 2009. Pursuant to our severance arrangements with Mr. Patel, all of hisoutstanding equity awards fully vested and became exercisable upon histermination of employment effective February 26, 2010.

 

***Employment of Mr. Luk***

 

On December 16, 2009, Mr. Luk was named our Senior VicePresident and Chief Financial Officer. The terms and conditions of his employment were set forth in a writtenoffer letter.  The negotiation of theterms of his employment was undertaken by our CEO, reviewed and recommended forapproval by the Compensation Committee, and approved by the Board ofDirectors.  For a summary of the materialterms and conditions of his employment arrangements, see “Employment Contractsand Severance Agreements with Named Executive Officers” in this Amendment No. 1.

 

In filling this position, the Compensation Committee was aware that itwould be necessary to recruit a candidate from outside our company with therequisite experience and skills.  Inaddition, the Compensation Committee recognized that a competitive compensationpackage would have to contain a financial inducement sufficient to motivate thecandidate to accept an employment offer over any competing offers and torelocate to our offices to Hangzhou, China, and, at the same time, reflect thecustomary elements of compensation packages for executives in China.  These factors influenced the development of acompensation package that, in the aggregate, was at the 50% percentile of the marketrange, even though individual compensation elements were either above or belowthe median. At the same time, the Compensation Committee was sensitive to theneed to integrate a new senior executive into the executive compensationstructure that it was seeking to develop, balancing both competitive andinternal equity considerations.

 

Inretaining Mr. Luk, the Compensation Committee recommended, and the Boardof Directors approved, that he receive (the US dollar amount provided in theparenthesis are for references only and the conversion rate used is the middlerate of 6.8282 RMB *yuan* per USdollar as of the end of day on December 31, 2009 as published by the Bankof China):

 

·                  an initialannual base salary of RMB 2,500,000 (approximately $366,129);

 

·                  a signing bonusof RMB 340,800 (approximately $49,911);

 

·                  an annual cashincentive award opportunity equal to 50% of his annual base salary, based uponthe achievement of corporate and individual performance goals (for 2010, aminimum of 80% of his annual cash incentive award opportunity is guaranteed);

 

·                  a restrictedstock award of 300,000 shares, with a three-year vesting schedule, subject tohis continuing to provide services to us through each applicable vesting date;

 

·                  financialplanning services reimbursement of up to RMB 34,100 (approximately $4,994) peryear; and

 

·                  certainexpatriation benefits, including an apartment in Hangzhou, China withmonthly rental not exceeding RMB 20,450 (approximately $2,995) per month,relocation assistance of up to RMB 102,250 (approximately $14,975), oneround-trip airfare per quarter to Hong Kong, tax equalization payments of RMB22,720 (approximately $3,327), and automobile and driver assistance.

 

Inaddition, Mr. Luk is eligible for coverage under our medical, dental, andvision plans for expatriate employees and to participate in the ExecutiveInvoluntary Termination Severance Pay Plan.

 

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***Perquisites and Other Benefits***

 

Weprovide medical and other benefits to our executive officers that are generallyavailable to other full-time employees, including disability and group termlife insurance, expatriate remuneration for employees who are assigned overseasand who qualify under the terms of our expatriate remuneration plan, tuitionreimbursement, and a Section 401(k) plan.

 

Wealso provide the Named Executive Officers and certain other executive officerswith certain perquisites and other personal benefits, including financialplanning services, tax assistance payments in connection with our taxequalization policy whereby we provide qualified employees with tax assistanceto mitigate the tax differential arising from an employee’s international workassignment, business travel accident insurance, a housing allowance,car/transportation allowances, and a relocation allowance for certain executiveofficers who have been asked to relocate to conduct business on our behalf, anddisability insurance.  The CompensationCommittee believes that such perquisites and personal benefits are necessary****to successfully compete for executive talent, particularlyin China where they are often a customary part of executive compensationpackages.

 

TheCompensation Committee reviews the perquisites and other benefits provided toour executive officers as part of its overall review of executivecompensation.  The Compensation Committeehas determined the type and amount paid in perquisites to be within theappropriate range of competitive compensation practices.  For information about the perquisites andother personal benefits provided to the Named Executive Officers in 2009, see “SummaryCompensation Table” of this Amendment No. 1.

 

*Section 401(k) Plan*

 

We have established atax-qualified Section 401(k) retirement savings plan for ouremployees, including the Named Executive Officers, who satisfy certaineligibility requirements.  Under thisplan, participants may elect to make pre-tax contributions of up to 100% oftheir current compensation, not to exceed the applicable statutory income taxlimitation, which was $16,500 in 2009. We intend for the plan to qualify under Section 401(a) of theInternal Revenue Code so that contributions by participants to the plan, andincome earned on plan contributions, are not taxable to participants untilwithdrawn from the plan.

 

InFebruary 2009, the Compensation Committee determined that, in view of theglobal economic recession and our projected operating performance, it was inthe best interests of our stockholders to suspend employer matchingcontributions on behalf of eligible participants in our Section 401(k) plan.  This decision took effect March 1, 2009.

 

*Employee Stock Purchase Plan*

 

InFebruary 2009, the Compensation Committee determined that, in view of theglobal economic recession and our projected operating performance, it was inthe best interests of our stockholders to suspend the operation of our EmployeeStock Purchase Plan (the “ESPP”).  Consequently, the ESPP offering periods thenin effect terminated on May 14, 2009. The ESPP remained suspended during the remainder of 2009.

 

***Post-Employment Compensation***

 

Wehave change in control and involuntary termination severance agreements inplace with certain of the Named Executive Officers and an Executive InvoluntaryTermination Severance Pay Plan for the other Named Executive Officers.  For a summary of the material terms of thesearrangements, see “Potential Payments Upon Termination and Change on Control”of this Amendment No. 1.

 

TheCompensation Committee believes that these arrangements are in the bestinterests of our stockholders.  As withany public company, the possibility of a corporate transaction involving achange in control exists for us.  Such achange in control typically means a degree of ambiguity for executives aboutthe continuity of their employment.  TheCompensation Committee believes these arrangements help to ensure that ourexecutive officers will remain focused on, and committed to, the interests ofthe business throughout the process of exploring and/or executing a transactionthat may result in a change in control.

 

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*** ***

***Other Compensation Policies***

 

*Equity Grant Policy*

 

TheCompensation Committee has adopted the UTStarcom, Inc. Equity Award GrantPolicy and Procedures (the “EquityAward Grant Policy”).  Under theEquity Award Grant Policy, equity awards for our executive officers areconsidered and approved as follows:

 

·                  All equityawards for our executive officers are to be approved by the CompensationCommittee;

 

·                  TheCompensation Committee will use its best efforts to approve equity awards at aduly-called meeting, and awards will be made by unanimous written consent onlyif meetings are unable to be held;

 

·                  The date ofgrant of any equity award will be the last trading day in the month in whichthe Compensation Committee approves the award; and

 

·                  For purposes ofequity awards that are to be granted at the fair market value of our commonstock, “fair market value” will be the closing sales price per share of ourcommon stock on the date of grant.

 

Typically,meetings of the Compensation Committee to consider the approval of annual focalequity awards to our executive officers are held during the last two weeks of February ofeach year.  In addition, meetings of theCompensation Committee may be held at any time to consider the approval ofequity awards for new executive officers (including new executive officersresulting from either new hires or promotions), but these equity awards will beeffective as of the last trading day in the month in which the CompensationCommittee approved the award.

 

*Burn Rate Policy*

 

TheBoard of Directors has adopted a burn rate policy committing us to limit thenumber of shares of our common stock that we may use for equity compensationduring fiscal years 2008, 2009 and 2010. For this three-year period, the policy limits the number of shares that wegrant subject to equity awards to an average of 4.80% of our outstanding commonstock.  Thus, while we may exceed the4.80% burn rate in a given year, the policy requires that our three-yearaverage not exceed 4.80%.  Awards thatare settled in cash, awards issued under the ESPP, awards assumed inacquisitions, and any awards granted in connection with our stock optionexchange program are excluded from this burn rate calculation.  For purposes of this calculation, each sharesubject to a full value award (such as a restricted stock unit, performanceshare, performance unit, and any other award that does not have an exerciseprice per share equal to the per share fair market value of our common stock onthe grant date) will be counted as 1.5 shares.

 

*Stock Ownership Guidelines*

 

Wemaintain stock ownership guidelines (the “Guidelines”) for certain of our executive officers and ournon-employee directors.  Each executiveofficer and non-employee director is expected to acquire and hold the number ofshares of our common stock specified below before the later of (i) January 1,2010 or (ii) four years after the date of an executive officer’sappointment to such position or a non-employee director’s appointment to theBoard of Directors.

 
| **Position**                               | ** ** | **Minimum  Share  Ownership  Requirement** | ** ** |
|--------------------------------------------|------------|--------------------------------------------|------------|
| President and Chief Executive Officer      |       | 50,000                                     |       |
| Executive Vice Presidents                  |       | 25,000                                     |       |
| Senior Vice Presidents/Division Presidents |       | 10,000                                     |       |
| Non-Employee Directors                     |       | 10,000                                     |       |

 

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We review compliance with the Guidelinesannually.  Failure to comply with theGuidelines may result in a reduction in future long-term incentive awardsand/or payment of future annual and/or long-term incentive payouts made in theform of shares of our common stock.  TheNominating and Corporate Governance Committee has the discretion to waive theGuidelines if compliance would create severe personal hardship for an executiveofficer or non-employee director or prevent an executive officer ornon-employee director from complying with a court order.  The Nominating and Governance Committeeexpects that such instances will be rare. All executive officers subject to the Guidelines currently satisfy theGuidelines.

 

***Tax and Accounting Considerations***

 

*Section 162(m)*

 

Section 162(m) ofthe Internal Revenue Code limits the ability of public companies to deductcompensation paid to certain senior executive officers in excess of$1 million per year, but excludes from this limitation certain types ofcompensation, including “performance-based compensation,” provided that certainrequirements are met.  The CompensationCommittee takes compliance with Section 162(m) into account whenmaking compensation decisions and retains the discretion to pay compensationthat is not fully deductible.  Whilestock options granted under our 1997 Stock Plan did not meet the requirementsof Section 162(m), equity awards granted under our 2006 Plan, which wasapproved by our stockholders, are able to meet the requirements of the “performance-basedcompensation” exception of Section 162(m).

 

*Section 409A*

 

Section 409Aof the Internal Revenue Code imposes significant additional taxes in the eventthat an executive officer, director, or other service provider receives “deferredcompensation” that does not satisfy the restrictive conditions of theprovision.  Although we did not have atraditional nonqualified deferred compensation plan in place during 2009, Section 409Aapplies to certain equity awards and severance arrangements.  Consequently, to assist our executiveofficers and other service providers in avoiding additional tax under Section 409A,we believe that we have structured our equity awards and severance arrangementsin a manner intended to either avoid the application of Section 409A or,to the extent doing so is not possible, comply with the applicable Section 409Aconditions.

 

*Accounting for Stock-Based Compensation*

 

Wefollow Financial Accounting Standards Board Accounting Standards CodificationTopic No. 718 (“ASC Topic 718”) for our stock-based compensationawards.   ASC Topic 718 requirescompanies to calculate the grant date “fair value” of their stock-based awardsusing a variety of assumptions.  Thiscalculation is performed for accounting purposes and reported in thecompensation tables below, even though recipients may never realize this amountfrom their awards.  ASC Topic 718 alsorequires companies to recognize the compensation cost of their stock-basedawards in their income statements over the period that an employee is requiredto render service in exchange for the award.

 

**Summary Compensation Table**

 

Thefollowing table presents information concerning the total compensation of theindividuals who served as the Company’s CEO, CFO and other Named ExecutiveOfficers during 2009. No disclosure is provided for 2008 and 2007 for thosepersons who were not Named Executive Officers in 2008 and/or 2007.

 

17

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** **

**SUMMARY COMPENSATION TABLE**

 
| **Name and principal position**                                         | ** ** | **Year** | ** ** | **Salary  ($)** | ** ** | **Bonus  ($)(1)** | ** ** | **Stock  Awards  ($)(2)** | ** ** | **Option  Awards  ($) (3)** | ** ** | **Non-Equity  Incentive Plan Compensation  ($)** | ** ** | **All  Other Compensation  ($)** | ** ** | **Total  ($)** | ** ** |
|-------------------------------------------------------------------------|------------|----------|------------|-----------------|------------|-------------------|------------|---------------------------|------------|-----------------------------|------------|--------------------------------------------------|------------|----------------------------------|------------|----------------|------------|
| Peter  Blackmore                                                        |       | 2009     |       | 676,667         |       |              | 529,600    |                      |       | 245,133                     | (5)        |                                             | 0          |                             | 529,600    |           | 5,802      | (15) |   | 1,986,802 |   |
| Chief  Executive Officer                                                |       | 2008     |       | 800,000         |       |              | 0          |                      |       | 1,461,390                   | (6)        |                                             | 0          |                             | 0          |           | 802        | (16) |   | 2,262,192 |   |
|                                                                    |       | 2007     |       | 400,000         |       |              | 500,000    | (4)                       |       | 4,000,000                   |       |                                             | 1,200,000  |                             | 0          |           | 0          |   |   | 6,100,000 |   |
| Kenneth  Luk                                                            |       | 2009     |       | 14,763          | (17)       |              | 49,911     | (17)                      |       | 657,000                     |       |                                             | 0          |                             | 0          |           | 18,302     | (18) |   | 739,976 |   |
| SVP,  CFO                                                               |       |     |       |            |       |              |       |                      |       |                        |       |                                             |       |                             |       |           |       |   |   |   |   |
| Viraj  Patel *                                                          |       | 2009     |       | 288,750         |       |              | 90,668     |                      |       | 40,678                      | (7)        |                                             | 0          |                             | 90,668     |           | 3,252      | (19) |   | 514,016 |   |
| Form Interim  CFO /VP, CAO & Corporate Controller         |       | 2008     |       | 286,458         |       |              | 115,001    |                      |       | 253,800                     | (8)        |                                             | 0          |                             | 0          |           | 8,252      | (20) |   | 663,511 |   |
| Susan  Marsch **                                                        |       | 2009     |       | 330,000         |       |              | 0          |                      |       | 72,720                      | (9)        |                                             | 0          |                             | 0          |           | 953,281    | (21) |   | 1,356,001 |   |
| Former  SVP, General Counsel, Secretary & Chief Ethics Officer |       |     |       |            |       |              |       |                      |       |                        |       |                                             |       |                             |       |           |       |   |   |   |   |
| Hong  Liang Lu ***                                                      |       | 2009     |       | 385,417         |       |              | 0          |                      |       | 192,114                     | (10)       |                                             | 0          |                             | 0          |           | 2,574,615  | (22) |   | 3,152,146 |   |
| Former  Executive Chairman                                              |       | 2008     |       | 700,000         |       |              | 0          |                      |       | 1,225,999                   | (11)       |                                             | 0          |                             | 0          |           | 550,347    | (23) |   | 2,476,346 |   |
|                                                                    |       | 2007     |       | 700,000         |       |              | 0          |                      |       | 1,617,124                   | (12)       |                                             | 0          |                             | 0          |           | 198,567    | (24) |   | 2,515,691 |   |
| Mark  Green ****                                                        |       | 2009     |       | 338,288         |       |              | 0          |                      |       | 132,836                     | (13)       |                                             | 0          |                             | 0          |           | 655,993    | (25) |   | 1,127,117 |   |
| Former  SVP, Global HR & Real Estate                           |       | 2008     |       | 364,583         |       |              | 216,466    |                      |       | 465,300                     | (14)       |                                             | 0          |                             | 0          |           | 14,601     | (26) |   | 1,060,950 |   |

 

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| *      | Viraj  Patel left his position as Chief Accounting Officer and Corporate Controller  on February 26, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **     | Susan  Marsch left her position as SVP, General Counsel, Secretary and Chief Ethics  Officer on December 31, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| ***    | Hong  Liang Lu left his position as Executive Chairman on August 3, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| ****   | Mark  Green left his position as SVP, Global HR & Real Estate on  December 1, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (1)    | The  amounts reported in this column represent the dollar value of bonuses earned  by the Named Executive Officers during the covered fiscal year, regardless of  when such bonuses were actually paid.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (2)    | The  amounts reported in this column represent the aggregate value of the stock  awards granted to the Named Executive Officers during 2009, 2008 and 2007,  based upon their grant date fair value, as determined in accordance with the  share-based payment accounting guidance under ASC Topic 718. The value of the  stock awards reported for 2008 and 2007 have been revised from prior years’  proxy disclosure to reflect their grant date fair value in accordance with  the revised SEC disclosure requirements relating to such awards. In addition  to service-based RSU awards, each of the Named Executive Officers, with the  exception of Mr. Luk, received performance-based RSU awards during 2009.  The performance-based RSU awards are reflected in this column at their grant  date fair value based on the probable outcome of the underlying performance  conditions, measured as of the date of grant. Additional information  regarding these RSU awards can be found in the 2009 Grants of Plan-Based  Awards Table and additional information regarding outstanding stock awards  can be found in the Outstanding Equity Awards at 2009 Fiscal Year-End Table. |

 

18

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| (3)    | The  amounts reported in this column represent the value of a stock option granted  to Mr. Blackmore upon joining the Company in 2007, based upon its grant  date fair market value, as determined in accordance with the share-based  payment accounting guidance under ASC Topic 718. A discussion of the  valuation assumptions used for purposes of calculating the grant date fair  value of this stock option is included under Note 14 to our 2007 Consolidated  Financial Statements that are part of our Annual Report on Form 10-K for  the fiscal year ended December 31, 2007. The value of the stock option  reported for 2007 has been revised from the prior year proxy disclosure to  reflect its grant date fair value in accordance with the revised SEC  disclosure requirements relating to such awards. Additional information  regarding outstanding stock options can be found in the Outstanding Equity  Awards at 2009 Fiscal Year-End Table. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (4)    | The  amount reported includes a $100,000 signing bonus paid in connection with  Mr. Blackmore’s initial employment and a $400,000 guaranteed bonus paid  in accordance with the terms of his employment agreement. Please see the  section of this Amendment No. 1 entitled “Employment Contracts and  Severance Agreements with Named Executive Officers” for a summary of the  terms and conditions of the employment agreement with Mr. Blackmore.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (5)    | The  amount reported includes the grant date probable value of $131,645 for  performance-based RSU awards. The value of the maximum potential payout for  such performance-based RSU awards was $226,974 and the value of the awards  granted was $226,974.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (6)    | The  amount reported includes the grant date probable value of $407,490 for  performance-based RSU awards. The value of the maximum potential payout for  such performance-based RSU awards was $479,400 and the value of the awards  granted was $479,400.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (7)    | The  amount reported includes the grant date probable value of $21,846 for  performance-based RSU awards. The value of the maximum potential payout for  such performance-based RSU awards was $37,666 and the value of the awards  granted was $37,666.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (8)    | The  amount reported includes the grant date probable value of $169,200 for  performance-based RSU awards. The value of the maximum potential payout for  such performance-based RSU awards was $169,200 and the value of the awards  granted was $169,200.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (9)    | The  amount reported includes the grant date probable value of $39,054 for  performance-based RSU awards. The value of the maximum potential payout for  such performance-based RSU awards was $67,334 and the value of the awards  granted was $67,334.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (10)   | The  amount reported includes the grant date probable value of $103,172 for  performance-based RSU awards. The value of the maximum potential payout for  such performance-based RSU awards was $177,882 and the value of the awards  granted was $177,882.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (11)   | The  amount reported includes the grant date probable value of $568,000 for  performance-based RSU awards. The value of the maximum potential payout for  such performance-based RSU awards was $1,136,000 and the value of the awards  granted was $1,136,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (12)   | The  amount reported includes the grant date probable value of $774,549 for  performance-based RSU awards. The value of the maximum potential payout for  such performance-based RSU awards was $774,549 and the value of the awards  granted was $774,549.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (13)   | The  amount reported includes the grant date probable value of $71,338 for  performance-based RSU awards. The value of the maximum potential payout for  such performance-based RSU awards was $122,996 and the value of the awards  granted was $122,996.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (14)   | The  amount reported includes the grant date probable value of $310,200 for  performance-based RSU awards. The value of the maximum potential payout for  such performance-based RSU awards was $310,200 and the value of the awards  granted was $310,200.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (15)   | The  amount reported consists of a premium payment of $802 for disability  insurance and $5,000 for financial planning.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (16)   | The  amount reported consists of a premium payment of $802 for disability  insurance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (17)   | The  amount reported represents a signing bonus of approximately $49,911 paid in  connection with Mr. Luk’s initial employment. Please see the section of  this Amendment No. 1 entitled “Employment of Mr. Luk” for a summary  of the terms and conditions of the employment agreement with Mr. Luk.  The salary and bonus were paid in RMB and are converted into US dollars in  this table for presentation purposes only, using the middle rate of 6.8282  RMB *yuan* per US dollar as of the end of  day on December 31, 2009 as published by the Bank of China.                                                                                                                                                                                                                                                                                                                                                                         |

 

19

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| (18)   | The  amount reported consists of a relocation allowance of approximately $14,975  and a tax assistance payment of approximately $3,327. The relocation  allowance and tax assistance were paid in RMB and are converted into US  dollars in this table for presentation purposes only, using the middle rate  of 6.8282 RMB *yuan* per US dollar as of the  end of day on December 31, 2009 as published by the Bank of China.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (19)   | The  amount reported consists of a premium payment of $802 for disability  insurance and Section 401(k) matching payments in the aggregate  amount of $2,450.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (20)   | The  amount reported consists of $1,950 for financial planning services,  Section 401(k) matching payments in the aggregate amount of $5,500,  and a premium payment of $802 for disability insurance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (21)   | The  amount reported consists of restricted cash payment in the amount of  $133,334, a payment in the amount of $39,995 for accrued but unused paid time  off, a premium payment of $802 for disability insurance,  Section 401(k) matching payments in the aggregate amount of $5,500,  $5,000 for financial planning services and a severance payment totaling  $768,650 in connection with Ms. Marsch’s termination of employment, the  payment of which will be delayed in accordance with the terms of her  severance arrangement. Please see the section of this Amendment No. 1  entitled “Employment Contracts and Severance Agreements with Named Executive  Officers” for detailed information about Ms. Marsch’s severance payment.                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (22)   | The  amount reported consists of Section 401(k) matching payments in the  aggregate amount of $1,124, $13,220 for financial planning services, a $8,205  car allowance, a $32,000 housing allowance, a tax assistance payment of  $260,458 paid in connection with our tax equalization policy whereby we  provide qualified employees with tax assistance to mitigate the tax  differential arising from an employee’s international work assignment,  $15,000 in taxable relocation benefits in connection with Mr. Lu’s  international work assignment, a premium payment of $535 for disability  insurance, a payment in the amount of $134,610 for accrued but unused paid  time off, and a severance payment totaling $2,109,463 in connection with  Mr. Lu’s termination of employment. Please see the section of this  Amendment No. 1 entitled “Employment Contracts and Severance Agreements  with Named Executive Officers” for detailed information about Mr. Lu’s  severance payment. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (23)   | The  amount reported consists of Section 401(k) matching payments in the  aggregate amount of $5,500, $6,355 for financial planning services, a $12,103  car allowance, a $48,000 housing allowance, a $471 meal allowance, $4,547 for  a home visit in connection with Mr. Lu’s international work assignment,  a tax assistance payment of $472,319 paid in connection with our tax  equalization policy whereby we provide qualified employees with tax  assistance to mitigate the tax differential arising from an employee’s  international work assignment, $250 in taxable relocation benefits in  connection with Mr. Lu’s international work assignment, and a premium  payment of $802 for disability insurance.                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (24)   | The  amount reported consists of Section 401(k) matching payments in the  aggregate amount of $5,500, a premium payment of $1,235 for life insurance  coverage under our Business Travel Accident Insurance Policy, $12,000 for  financial planning services and a tax gross-up in the amount of $6,817  related thereto, a $5,611 car allowance, a $24,000 housing allowance in  connection with Mr. Lu’s international work assignment, a tax assistance  payment of $100,680 paid in connection with our tax equalization policy  whereby we provide qualified employees with tax assistance to mitigate the  tax differential arising from an employee’s international work assignment,  $15,000 in taxable relocation benefits in connection with Mr. Lu’s  international work assignment, a premium payment of $802 for disability  insurance, and $26,922 as payment for accrued but unused paid time off.                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (25)   | The  amount reported consists of $3,661 for financial planning services,  Section 401(k) matching payments in the aggregate amount of $1,500,  $735 for disability insurance, a payment in the amount of $27,609 for accrued  but unused paid time off and a severance payment totaling $622,488 in  connection with Mr. Green’s termination of employment, the payment of  which will be delayed in accordance with the terms of his severance  arrangement. Please see the section of this Amendment No. 1 entitled  “Employment Contracts and Severance Agreements with Named Executive Officers”  for detailed information about Mr. Green’s severance payment.                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (26)   | The amount reported  consists of $4,048 for financial planning services,  Section 401(k) matching payments in the aggregate amount of $5,500,  $4,251 for ESPP disqualifying disposition, and a premium payment of $802 for  disability insurance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

20

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Fromtime to time, we enter into offer letters and other agreements with ourexecutive officers. For a description of the material terms of such agreements,please see the section entitled “Employment Contracts and Severance Agreementswith Named Executive Officers” in the “Potential Payments Upon Termination andChange of Control” section included in this Amendment No. 1.

 

Fora description of material modifications made to certain of the Named ExecutiveOfficers’ outstanding equity awards, please see the section entitled “Modificationsto Outstanding Equity Awards” included in this Amendment No. 1.

 

**Grants of Plan-Based Awards in Fiscal Year 2009**

 

Thefollowing table presents information concerning grants of plan-based awards toeach of the Named Executive Officers during the fiscal year ended December 31,2009.

 

21

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**Grants of Plan-Based Awards in 2009**

 
| ** **        | ** ** | ** **     | ** ** | **Compensation  Committee** | ** ** | **Estimated Future Payouts Under Non-  Equity Incentive Plan Awards** | ** ** | **Estimated Future Payouts Under Equity  Incentive Plan Awards (1)** | ** ** | **All Other  Stock  Awards:  Number of  Shares of** | ** ** | **All Other  Option  Awards:  Number of  Securities** | ** ** | **Exercise  or Base  Price of  Option** | ** ** | **Grant Date  Fair Value of  Stock and** | ** ** |
|-------------------|------------|----------------|------------|-----------------------------|------------|-----------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------------------------|------------|-----------------------------------------|------------|------------------------------------------|------------|
| **Name**          | ** ** | **Grant Date** | ** ** | **Approval  Date**          | ** ** | **Threshold  ($)**                                                    | ** ** | **Target  ($)**                                                      | ** ** | **Maximum  ($)**                                    | ** ** | **Threshold  (#)(4)**                                 | ** ** | **Target  (#)**                         | ** ** | **Maximum  (#)**                         | ** ** | **Stock or  Units (#)** | ** ** | **Underlying  Options (#)** | ** ** | **Awards  ($/Sh)** | ** ** | **Option  Awards ($) (5)** | ** ** |
| Blackmore, Peter  |       | 2/27/2009      |       | 2/18/2009                   |       |                                                                  |       |                                                                 |       |                                                |       |                                                  |       |                                    |       |                                     |       | 112,364 | (2) |   |   |   |   |   | 113,488 |   |
|              |       | 2/27/2009      |       | 2/18/2009                   |       |                                                                  |       |                                                                 |       |                                                |       |                                                  |       | 224,727                                 | (1)        |                                     | 224,727    |   | — |   |   |   |   |   |   | 131,645 |   |
| Luk, Kenneth      |       | 12/31/2009     |       | 12/16/2009                  |       |                                                                  |       |                                                                 |       |                                                |       |                                                  |       |                                    |       |                                     |       |   | 300,000 | (3) |   |   |   |   |   | 657,000 |   |
| Lu, Hong L *      |       | 2/27/2009      |       | 2/18/2009                   |       |                                                                  |       |                                                                 |       |                                                |       |                                                  |       |                                    |       |                                     |       |   | 88,061 | (2) |   |   |   |   |   | 88,942 |   |
|              |       | 2/27/2009      |       | 2/18/2009                   |       |                                                                  |       |                                                                 |       |                                                |       |                                                  |       | 176,121                                 | (1)        |                                     | 176,121    |   |   |   |   |   |   |   |   | 103,172 |   |
| Patel, Viraj      |       | 2/27/2009      |       | 2/18/2009                   |       |                                                                  |       |                                                                 |       |                                                |       |                                                  |       |                                    |       |                                     |       |   | 18,646 | (2) |   |   |   |   |   | 18,832 |   |
|              |       | 2/27/2009      |       | 2/18/2009                   |       |                                                                  |       |                                                                 |       |                                                |       |                                                  |       | 37,293                                  | (1)        |                                     | 37,293     |   |   |   |   |   |   |   |   | 21,846 |   |
| Green, Mark S **  |       | 2/27/2009      |       | 2/18/2009                   |       |                                                                  |       |                                                                 |       |                                                |       |                                                  |       |                                    |       |                                     |       |   | 60,889 | (2) |   |   |   |   |   | 61,498 |   |
|              |       | 2/27/2009      |       | 2/18/2009                   |       |                                                                  |       |                                                                 |       |                                                |       |                                                  |       | 121,778                                 | (1)        |                                     | 121,778    |   |   |   |   |   |   |   |   | 71,338 |   |
| Marsch, Susan *** |       | 2/27/2009      |       | 2/18/2009                   |       |                                                                  |       |                                                                 |       |                                                |       |                                                  |       |                                    |       |                                     |       |   | 33,333 | (2) |   |   |   |   |   | 33,666 |   |
|              |       | 2/27/2009      |       | 2/18/2009                   |       |                                                                  |       |                                                                 |       |                                                |       |                                                  |       | 66,667                                  | (1)        |                                     | 66,667     |   |   |   |   |   |   |   |   | 39,054 |   |
|                   |            |                |            |                             |            |                                                                       |            |                                                                      |            |                                                     |            |                                                       |            |                                         |            |                                          |            |  |  |  |  |  |  |  |  |  |  |  |

 

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| *      | Mr. Lu’s  employment terminated on August 31, 2009. However, he continues to serve  as a member of the board of directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **     | Mr. Green’s  employment terminated on December 1, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| ***    | Ms. Marsch’s  employment terminated on December 31, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (1)    | Represents  RSUs granted under the 2006 Plan, with target awards based upon Company and  individual performance objectives established and tailored for each Named  Executive Officer by the Compensation Committee for our 2009 fiscal year. Following  the determination of the number of RSUs earned by each Named Executive  Officer, 50% of the earned RSUs shall vest on each of February 26, 2010  and February 28, 2011, provided that such Named Executive Officer  remains a service provider of the Company through those dates.                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (2)    | Represents  RSUs granted under the 2006 Plan and which vest as follows: 25% to vest on  2/26/2010, 25% annually thereafter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (3)    | Represents  RSU granted under the 2006 Plan which vests as follows: 33% to vest on each  of 12/31/2010, 12/31/2011, and 12/31/2012.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (4)    | There  is no threshold (or equivalent item) for the equity incentive plan awards.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (5)    | The  amounts reported in this column represent the aggregate value of the stock  options and RSU awards granted to the Named Executive Officers during 2009,  based upon their grant date fair value, as determined in accordance with the  share-based payment accounting guidance under ASC Topic 718. In addition to  service-based RSU awards, each of the Named Executive Officers, with the  exception of Mr. Luk, received performance-based RSU awards during 2009.  Grant date fair value amounts for the performance-based RSU awards are based  on 58% of the target performance-based RSU awards, which was determined to be  the probable outcome of the performance conditions as of the date of grant.  Additional information regarding outstanding stock awards can be found in the  Outstanding Equity Awards at 2009 Fiscal Year-End Table. |

 

22

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**OutstandingEquity****Awards****atFiscal 2009 Year-End 2009**

 

Thefollowing table sets forth the outstanding equity awards for each NamedExecutive Officer as of December 31, 2009.

 

**OUTSTANDING EQUITY AWARDS ATFISCAL YEAR-END 2009**

 
| ** **        | ** ** | **OPTION AWARDS**                                                                   | ** ** | **STOCK AWARDS**                                                                    | ** ** |
|-------------------|------------|------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------|------------|
| **Name**          | ** ** | **Number of  Securities  Underlying  Unexercised  Options  (#)********Exercisable** | ** ** | **Number of  Securities  Underlying  Unexercised  Options (#)  Unexercisable** | ** ** | **Equity  Incentive Plan  Awards:  Number of  Securities  Underlying  Unexercised  Unearned  Options  (#)** | ** ** | **Option Exercise  Price  ($)** | ** ** | **Option  Expiration Date** | ** ** | **Number of  Shares or Units  of Stock That  Have Not  Vested  (#)** | ** ** | **Market Value  of Shares or  Units of Stock  That Have Not  Vested  ($)** | ** ** | **Equity  Incentive Plan  Awards:  Number of  Unearned  Shares, Units or  Other Rights  That Have Not  Vested  (#)** | ** ** | **Equity  Incentive Plan  Awards:  Market or  Payout Value of  Unearned  Shares, Units or  Other Rights  That Have Not  Vested (1)  ($)** | ** ** |
| Peter Blackmore   |       | 453,125                                                                                  | (2)        |                                                                                     | 296,875    |   | — |   | 3.20 |   | 10/31/2014 |   |   |   |   |   |   | — |   | — |   |
|              |       | —                                                                                   |       |                                                                                     | —     |   | — |   |   |   |   |   | 450,000 | (8) |   | 985,500 |   | — |   | — |   |
|              |       |                                                                                     |       |                                                                                     | —     |   | — |   |   |   |   |   | 175,000 | (9) |   | 383,250 |   | — |   | — |   |
|              |       |                                                                                     |       |                                                                                     | —     |   | — |   |   |   |   |   | 63,750 | (10) |   | 139,613 |   | — |   | — |   |
|              |       |                                                                                     |       |                                                                                     | —     |   | — |   |   |   |   |   | 42,500 | (11) |   | 93,075 |   | — |   | — |   |
|              |       |                                                                                     |       |                                                                                     | —     |   | — |   |   |   |   |   | 57,500 | (12) |   | 125,925 |   | — |   | — |   |
|              |       |                                                                                     |       |                                                                                     | —     |   | — |   |   |   |   |   | 43,125 | (13) |   | 94,444 |   | — |   | — |   |
|              |       |                                                                                     |       |                                                                                     | —     |   | — |   |   |   |   |   | 112,364 | (14) |   | 246,077 |   | — |   | — |   |
|              |       |                                                                                     |       |                                                                                     | —     |   | — |   |   |   |   |   |   |   |   |   |   | 224,727(20) |   | 492,152 |   |
| Kenneth Luk       |       | —                                                                                   |       |                                                                                     | —     |   | — |   | — |   | — |   | 300,000 | (15) |   | 657,000 |   | — |   | — |   |
| Viraj Patel       |       | 50,000                                                                                   | (3)        |                                                                                     | —     |   | — |   | 7.53 |   | 11/17/2005 |   | — |   |   | — |   | — |   | — |   |
|              |       | 23,959                                                                                   | (4)        |                                                                                     | —     |   | 1,041 |   | 6.25 |   | 2/27/2016 |   | — |   |   | — |   | — |   | — |   |
|              |       | —                                                                                   |       |                                                                                     | —     |   | — |   | — |   | — |   | 30,357 | (16) |   | 66,482 |   | — |   | — |   |
|              |       | —                                                                                   |       |                                                                                     | —     |   | — |   | — |   | — |   | 30,000 | (17) |   | 65,700 |   | — |   | — |   |
|              |       | —                                                                                   |       |                                                                                     | —     |   | — |   | — |   | — |   | 22,500 | (18) |   | 49,275 |   | — |   | — |   |
|              |       | —                                                                                   |       |                                                                                     | —     |   | — |   | — |   | — |   | 18,646 | (19) |   | 40,835 |   | — |   | — |   |
|              |       | —                                                                                   |       |                                                                                     | —     |   | — |   | — |   | — |   | — |   |   | — |   | 37,293(20) |   | 81,672 |   |
| Susan Marsch (21) |       | 83,333                                                                                   | (5)        |                                                                                     | 41,667     |   | — |   | 3.20 |   | 10/31/2014 |   | — |   |   | — |   | — |   | — |   |

 

23

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| ** **         | ** ** | **OPTION  AWARDS**                                                                 | ** ** | **STOCK  AWARDS**                                                                        | ** ** |
|--------------------|------------|------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------|------------|
| **Name**           | ** ** | **Number of  Securities  Underlying  Unexercised  Options  (#)  Exercisable** | ** ** | **Number of  Securities  Underlying  Unexercised  Options (#)  Unexercisable** | ** ** | **Equity  Incentive Plan  Awards:  Number of  Securities  Underlying  Unexercised  Unearned  Options  (#)** | ** ** | **Option Exercise  Price  ($)** | ** ** | **Option  Expiration Date** | ** ** | **Number of  Shares or Units  of Stock That  Have Not  Vested  (#)** | ** ** | **Market Value  of Shares or  Units of Stock  That Have Not  Vested  ($)** | ** ** | **Equity  Incentive Plan  Awards:  Number of  Unearned  Shares, Units or  Other Rights  That Have Not  Vested  (#)** | ** ** | **Equity  Incentive Plan  Awards:  Market or  Payout Value of  Unearned  Shares, Units or  Other Rights  That Have Not  Vested (1)  ($)** | ** ** |
| Hong Liang Lu (21) |       | 150,000                                                                            |       | —                                                                                   |       | — |   | 13.00 |   |   | 2/3/2010 |   | — |   | — |   | — |   | — |   |
|               |       | 89,999                                                                             |       | —                                                                                   |       | — |   | 15.00 |   |   | 10/17/2010 |   | — |   | — |   | — |   | — |   |
|               |       | 90,000                                                                             |       | —                                                                                   |       | — |   | 12.50 |   |   | 12/20/2010 |   | — |   | — |   | — |   | — |   |
|               |       | 134,999                                                                            |       | —                                                                                   |       | — |   | 25.25 | (6) |   | 2/27/2012 |   | — |   | — |   | — |   | — |   |
|               |       | 67,500                                                                             |       | —                                                                                   |       | — |   | 20.82 | (7) |   | 7/24/2012 |   | — |   | — |   | — |   | — |   |
|               |       | 108,000                                                                            |       | —                                                                                   |       | — |   | 19.04 |   |   | 2/2/2013 |   | — |   | — |   | — |   | — |   |
|               |       | 224,999                                                                            |       | —                                                                                   |       | — |   | 37.46 |   |   | 1/19/2014 |   | — |   | — |   | — |   | — |   |
|               |       | 210,599                                                                            |       | —                                                                                   |       | — |   | 6.25 |   |   | 2/27/2016 |   | — |   | — |   | — |   | — |   |

 

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| (1)    | Value  is based on the closing market price of our Common Stock of $2.19 on  December 31, 2009, the last trading date of fiscal year 2009, as  reported on the NASDAQ Stock Market.                                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                        |
| (2)    | The  options were granted on October 31, 2007 and vest as follows: 25% on  July 31, 2008, and 1/36th per month thereafter.                                                                                                                        |
|   |                                                                                                                                                                                                                                                        |
| (3)    | The  options were granted on November 18, 2005 and vest as follows: 25% on  November 18, 2006, and 1/36th per month thereafter.                                                                                                                   |
|   |                                                                                                                                                                                                                                                        |
| (4)    | The  options were granted on February 28, 2006 and vest as follows: 25% on  February 28, 2007 and 1/36th per month thereafter.                                                                                                                    |
|   |                                                                                                                                                                                                                                                        |
| (5)    | The  options were granted on October 31, 2007 in connection with the  commencement of Ms. Marsch’s employment with the company and vest as  follows: 25% on April 30, 2008 and 1/36th per month thereafter.                             |
|   |                                                                                                                                                                                                                                                        |
| (6)    | The  exercise price of the stock option was increased from $20.25 per share to  $25.25 in 2007.                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                        |
| (7)    | The  exercise price of the stock option was increased from $15.72 per share to  $20.82 in 2007.                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                        |
| (8)    | Represents  unvested portion of restricted stock award granted on October 31, 2007  in connection with the commencement of Mr. Blackmore’s employment with  the company that vest 50% on each of July 31, 2010 and 2011.                |
|   |                                                                                                                                                                                                                                                        |
| (9)    | Represents  unvested portion of restricted stock units granted on October 31, 2007  in connection with the commencement of Mr. Blackmore’s employment with  the company that vest 50% on each of July 31, 2010 and 2011.                |
|   |                                                                                                                                                                                                                                                        |
| (10)   | Represents  unvested portion of restricted stock units granted on February 29, 2008  and vests 33% on each of February 26, 2010, February 28, 2011, and  February 29, 2012.                                                             |
|   |                                                                                                                                                                                                                                                        |
| (11)   | Represents  unvested portion of restricted stock units granted on February 29, 2008  and vests on February 26, 2010.                                                                                                                              |
|   |                                                                                                                                                                                                                                                        |
| (12)   | Represents  unvested portion of restricted stock award granted on July 31, 2008 in  conjunction with Mr. Blackmore’s designation as CEO and vests on  February 26, 2010.                                                                |
|   |                                                                                                                                                                                                                                                        |
| (13)   | Represents  unvested portion of restricted stock award granted on July 31, 2008 in  conjunction with Mr. Blackmore’s designation as CEO and vests 33% on  each of February 26, 2010, February 28, 2011, and February 29,2012. |
|   |                                                                                                                                                                                                                                                        |
| (14)   | Represents unvested portion  of restricted stock units granted on February 27, 2009 and vests 25% on  each of February 26, 2010, February 28, 2011, February 29,  2010, and February 28, 2013.                                     |

 

24

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| (15)   | Represents unvested portion  of restricted stock award granted on December 31, 2009 in conjunction  with the commencement of Mr. Luk’s employment with the company that  vests 33% on each of December 31, 2010, December 31, 2011, and  December 31, 2012.                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (16)   | Represents unvested portion  of restricted stock units granted on November 30, 2007 and vests 50% on  each of February 26, 2010, and February 28, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (17)   | Represents unvested portion  of restricted stock units granted on February 29, 2008 and vests on  February 26, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (18)   | Represents unvested portion  of restricted stock units granted on February 29, 2008 and vests 33% on  each of February 26, 2010, February 28, 2011, and February 29,  2012.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (19)   | Represents unvested portion  of restricted stock units granted on February 27, 2009 and vests 25% on  each of February 26, 2010, February 28, 2011, February 29,  2012, and February 28, 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (20)   | Represents stock award  opportunity, based on Company and individual performance objectives  established and tailored for each NEO by the Compensation Committee for our  2009 fiscal year. On February 18, 2010, the Compensation Committee  determined, based on Company and individual performance during the 2009  fiscal year, Mr. Blackmore would be eligible to receive 148,769 shares  of Common Stock and Mr. Patel would be eligible to receive 37,293 shares  of Common Stock. For a discussion of how these awards were determined. see  the section entitled “Equity Compensation” in the Compensation Discussion and  Analysis included in this Proxy Statement. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (21)   | Mr. Lu and  Ms. Marsch’s employment with the Company ended as a result of internal  restructuring on August 31, 2009 and December 31, 2009,  respectively. Pursuant to their employment agreements, all unvested equity  awards vested on an accelerated basis. Vested options remain exercisable  until the earlier of (i) expiration of the option according to its  original terms, or (ii) for a period of 12 months following termination.                                                                                                                                                                                                                      |

 

25

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**OptionExercises and Stock Vested in Fiscal Year 2009**

 

Thefollowing table presents all stock options exercised and value realized uponexercise, and all stock awards vested and value realized upon vesting, by theNamed Executive Officers during the fiscal year ended December 31, 2009.

 

**OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2009**

 
| ** **               | ** ** | **OPTION AWARDS**                                 | ** ** | **STOCK AWARDS**                       | ** ** |
|--------------------------|------------|---------------------------------------------------|------------|----------------------------------------|------------|
| **Name**                 | ** ** | **Number of  Shares  Acquired  on Exercise  (#)** | ** ** | **Value  Realized  on  Exercise  ($)** | ** ** | **Number of  Shares  Acquired  on  Vesting  (#)** | ** ** | **Value  Realized  on  Vesting  ($) (1)** | ** ** |
| Blackmore, Richard Peter |       | —                                            |       | —                                 |       | 448,125 |   |   | 671,356 |   |   |
| Luk, Kenneth             |       | —                                            |       | —                                 |       | — |   |   | — |   |   |
| Lu, Hong L               |       | —                                            |       | —                                 |       | 864,444 | (2) |   | 1,186,803 | (3) |   |
| Patel, Viraj             |       | —                                            |       | —                                 |       | 125,893 |   |   | 136,886 |   |   |
| Green, Mark S            |       | —                                            |       | —                                 |       | 492,667 | (4) |   | 791,855 | (5) |   |
| Marsch, Susan            |       | —                                            |       | —                                 |       | 40,000 | (6) |   | 40,400 | (7) |   |

 

----

(1)   The amount reported is themarket price (closing price) of the Company’s Common Stock on the vesting dateless the original purchase price, multiplied by the number of shares of stockvested.

 

(2)   The amount reported includes439,182 accelerated shares vested as a result of Mr. Lu’s termination ofemployment pursuant to the Executive Involuntary Termination/Change in ControlAgreement (the Company treated Mr. Lu’s stepping down as Chairman as aninvoluntary termination for purposes of the agreement) and execution of a fulland final release of claims against us.

 

(3)   The amount reported includesthe $680,732 value realized from shares accelerated as a result of Mr. Lu’stermination of employment pursuant to the Executive InvoluntaryTermination/Change in Control Agreement (the Company treated Mr. Lu’sstepping down as Chairman as an involuntary termination for purposes of theagreement) and execution of a full and final release of claims against us.

 

(4)   The amount reported includes310,881 accelerated shares vested as a result of Mr. Green’s involuntarytermination of employment pursuant to the Executive InvoluntaryTermination/Change in Control Agreement and execution of a full and finalrelease of claims against us.

 

(5)   The amount reported includes$596,892 value realized from shares accelerated as a result of Mr. Green’sinvoluntary termination of employment pursuant to the Executive InvoluntaryTermination/Change in Control Agreement and execution of a full and final releaseof claims against us.

 

(6)   The amount reported does notinclude 210,000 accelerated shares vested on February 3, 2010 as a resultof Ms. Marsch’s involuntary termination of employment pursuant to theExecutive Involuntary Termination/Change in Control Agreement and execution ofa full and final release of claims against us.

 

(7)   The amount reported does notinclude $447,300 value realized from shares accelerated on February 3,2010 as a result of Ms. Marsch’s involuntary termination of employment pursuantto the Executive Involuntary Termination/Change in Control Agreement andexecution of a full and final release of claims against us.

 

**Modifications toOutstanding Equity Awards**

 

In connection withour voluntary review of our historical equity award grant practices, each ofour independent directors at such time, including continuing directors Clark,Lenzmeier and Toy, elected to amend any of his previously granted stock optionsthat may in the future be determined to be discounted stock options under Section 409Aof the Internal Revenue Code of 1986, as amended (“Section 409A”), by executing a Stock Option AmendmentElection Form in December 2006. In the event any such previouslygranted stock option is determined to be a discounted stock option under Section 409A,the affected stock option agreement will be automatically amended to providefor an exercise price not less than the fair market value of the Common Stocksubject to option on the effective date of grant.

 

26

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**PensionBenefits for Fiscal Year 2009**

 

The NEOs did notreceive any benefits from the Company under defined pension or definedcontribution plans, other than our tax-qualified 401(k) Plan, during thefiscal year ended December 31, 2009.

 

**Nonqualified DeferredCompensation for Fiscal Year 2009**

 

The Company does nothave any non-qualified deferred compensation plans that allow the NEOs to defertheir compensation.

 

**Potential Payments UponTermination or Change-in-Control**

 

***Employment Contracts and Severance Agreements with Named ExecutiveOfficers***

 

*Peter Blackmore.* We entered into a Change ofControl/Involuntary Termination Severance Agreement with Mr. Blackmore,effective July 2, 2007 (the “BlackmoreSeverance Agreement”) which was subsequently amended and restated on January 30,2008 to bring the agreement into compliance with Section 409A. It wasamended again on December 17, 2008 for Section 409A compliance. TheBlackmore Severance Agreement has a term of three (3) years from January 30,2008. Following the expiration of the three (3)-year term, Mr. Blackmoreand the Company may, but are not obligated to, enter into a new agreement. If Mr. Blackmore’semployment continues following the expiration of the three (3)-year term andthe Company and Mr. Blackmore do not enter into a new agreement, Mr. Blackmore’sthen current benefits arrangements shall continue in accordance with the termsof the Blackmore Severance Agreement until the parties agree otherwise.

 

TheBlackmore Severance Agreement provides that if Mr. Blackmore’s employmentis terminated by the Company without cause or terminated by Mr. Blackmorefor good reason at any time within eighteen (18) months after a change ofcontrol, he shall be entitled to the following severance benefits: (i) twenty-four(24) months of base salary as in effect as of the date of suchtermination, less applicable withholding, (ii) two hundred percent (200%)of his full annual performance target bonus and a monthly pro rated amount ofhis full annual performance bonus for the year in which the termination occurs,(iii) all equity awards, including without limitation stock option grants,restricted stock and stock purchase rights, granted to him by the Company priorto the change of control shall become fully vested, or, as applicable, releasedfrom the Company’s repurchase right and exercisable as of the date of thetermination to the extent such equity awards are outstanding and unexercisableor unreleased at the time of such termination, (iv) such equity awardsshall be exercisable until the earliest of (a) twelve (12) monthsfrom his date of termination, (b) the latest date the equity award couldhave expired by its original terms under any circumstances, (c) the tenth(10th) anniversaryof the original date of grant of the equity award, or (d) the dateprovided for under the equity plan under which the award was granted, (v) allMr. Blackmore’s outstanding restricted cash awards shall become fullyvested, and (vi) an amount equal to twelve (12) months of healthinsurance premiums for continuation coverage under Consolidated Omnibus BudgetReconciliation Act of 1985, as amended (“COBRA”) at the same level of health (i.e., medical, visionand dental) coverage and benefits as in effect for Mr. Blackmore on the dayimmediately preceding the day of his termination of employment.

 

A“change in control” is defined in Mr. Blackmore’s agreement to generallyinclude any of the following:

 

·                  the approval by the stockholders of a merger,other than a merger which results in the company’s securities outstandingimmediately prior to the merger continuing to represent more than 50% of thesurviving entity’s securities;

 

·                  the approval by the stockholders of a plan ofcomplete liquidation or an agreement for sale or disposition of all orsubstantially all of the Company’s assets;

 

·                  a transaction as a result of which any personbecomes the beneficial owner of securities of the Company representing at least50% of the total voting power; or

 

·                  a change in the compositionof the Board as a result of which fewer than a majority of the directors areincumbent directors.

 

27

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Inaddition, the Blackmore Severance Agreement provides that if Mr. Blackmore’semployment is terminated by the Company without cause or terminated by Mr. Blackmorefor good reason during the term of the Blackmore Severance Agreement apart froma change of control, he shall be entitled to the following severance benefits: (i) twelve(12) months of base salary as in effect as of the date of suchtermination, less applicable withholding, (ii) one hundred percent (100%)of his full annual performance target bonus for the year in which thetermination occurs, (iii) all equity awards, including without limitationstock option grants, restricted stock and stock purchase rights, granted to himby the Company shall become fully vested, or, as applicable, released from theCompany’s repurchase right and exercisable as of the date of the termination tothe extent such equity awards are outstanding and unexercisable or unreleasedat the time of such termination, (iv) such equity awards shall beexercisable until the earliest of (a) twelve (12) months from hisdate of termination, (b) the latest date the equity award could have expiredby its original terms under any circumstances, (c) the tenth (10th) anniversary of theoriginal date of grant of the equity award, or (d) the date provided forunder the equity plan under which the award was granted, (v) all Mr. Blackmore’soutstanding restricted cash awards shall become fully vested, and (vi) anamount equal to twelve (12) months of health insurance premiums forcontinuation coverage under COBRA at the same level of health(i.e., medical, vision and dental) coverage and benefits as in effect for Mr. Blackmoreon the day immediately preceding the day of his termination of employment.

 

Severancebenefits payable under the terms of the Blackmore Severance Agreement arepayable in a lump sum within thirty (30) days of the date of termination;provided, however, that if Mr. Blackmore is a “specified employee” (“Specified Employee”) within themeaning of Section 409A at the time of his termination, then the severanceand benefits payable to Mr. Blackmore pursuant to the Blackmore Severance Agreement(other than due to death), if any, and any other severance payments orseparation benefits which may be considered deferred compensation separationbenefits under Section 409A (together, the “Deferred Compensation Separation Benefits”) and which areotherwise due to Mr. Blackmore on or within the six (6)-month periodfollowing Mr. Blackmore’s termination will accrue during such six(6)-month period and will become payable in a lump sum on the date six (6) monthsand one (1) day following the date of his termination of employment or thedate of his death, if earlier. All subsequent Deferred Compensation SeparationBenefits, if any, will be payable in accordance with the payment scheduleapplicable to each payment or benefit. As a condition to receiving severancebenefits as described above, Mr. Blackmore is required to sign a waiverand release of all claims arising out of his termination of employment and anondisparagement agreement.

 

Theterms “cause” and “good reason” are each defined in the Blackmore SeveranceAgreement.

 

Terminationof Mr. Blackmore for “cause” generally requires:

 

·                  an act of personal dishonesty taken inconnection with his responsibilities as an employee which is intended to resultin substantial personal enrichment;

 

·                  conviction of a felony which the Boardreasonably believes has had or will have a material detrimental effect on thecompany’s reputation or business;

 

·                  a willful act which constitutes misconductand is injurious to the company; or

 

·                  continued willful violations of the hisobligations to the company after there has been delivered to him a written demandfor performance which describes the basis for the company’s belief that he hasnot substantially performed his duties.

 

Atermination by Mr. Blackmore for “good reason” would generally require:

 

·                  a significant reduction in duties, positionor responsibilities relative to his duties, position or responsibilities ineffect immediately prior to such reduction, or the removal of him from suchposition, duties and responsibilities, unless he is provided with comparableduties, position and responsibilities; provided, however, that the soleoccurrence of the Company being acquired and made part of a larger entity shallnot constitute a “good reason;”

 

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·                  a reduction of base salary as in effectimmediately prior to such reduction;

 

·                  a material reduction in the kind or level ofemployee compensation or benefits immediately prior to such reduction with theresult that the overall benefits package is significantly reduced;

 

·                  the relocation to a facility or a locationwhere such relocation increases the travel distance to work by more than thirty(30) miles from the commute prior to the relocation;

 

·                  any purported termination by the companywhich is not effected for cause or for which the grounds relied upon are notvalid; or

 

·                  failure of the Company to obtain the assumption ofthe agreement by any successors to the company.

 

*Hong Liang Lu.*  Hong Liang Lu stepped down as executivechairman of the board of directors on August 3, 2009 but he remained as adirector on the board. In connection with his termination of employment withthe Company, the Compensation Committee approved a package to Hong Liang Luwhich included the severance payment of $2,109,463.47 including the two years of base pay,100% of 2009 target bonus and 12 months premium for COBRA.

 

During2009 and prior to his termination of employment, Mr. Lu had the followingagreements in place:

 

OnNovember 30, 2007, we entered into an Amended and Restated Change ofControl/Involuntary Termination Severance Agreement with Hong Liang Lu, theCompany’s then Chief Executive Officer (the “Lu Severance Agreement”), which was subsequently amended andrestated on January 30, 2008 to bring the agreement into compliance with Section 409A.It was amended again on December 17, 2008 for Section 409Acompliance.  The Lu Severance Agreement,as amended and restated, amends Mr. Lu’s previous Change of ControlSeverance Agreement with the Company dated January 17, 2003, as previouslyfiled with the SEC. The Lu Severance Agreement has a term of three (3) yearsfrom January 30, 2008. Following the expiration of the three (3)-yearterm, Mr. Lu and the Company may, but are not obligated to, enter into anew agreement. If Mr. Lu’s employment continues following the expirationof the three (3)-year term and the Company and Mr. Lu do not enter into anew agreement, Mr. Lu’s then current benefits arrangements shall continuein accordance with the terms of the Lu Severance Agreement until the partiesagree otherwise.

 

TheLu Severance Agreement provides that if Mr. Lu’s employment with theCompany is terminated by the Company without cause or terminated by Mr. Lufor good reason at any time within eighteen (18) months after a change ofcontrol, he shall be entitled to the following severance benefits: (i) twenty-four(24) months of base salary as in effect as of the date of suchtermination, (ii) two hundred percent (200%) of his full annualperformance target bonus for the year in which termination occurs, lessapplicable withholding, (iii) all equity awards including, withoutlimitation, option grants, restricted stock and stock purchase rights, grantedto Mr. Lu prior to the change of control will become fully vested orreleased from the Company’s repurchase right (if any shares of stock purchasedby or granted to Mr. Lu prior to the change of control remain subject tothat repurchase right) and exercisable as of the date of termination to theextent such equity awards are outstanding and unexercisable or unreleased atthe time of such termination, (iv) such equity awards shall be exercisableuntil the earliest of (a) twelve (12) months from Mr. Lu’s dateof termination, (b) the latest date the equity award could have expired byits original terms under any circumstances, (c) the tenth (10th) anniversary of theoriginal date of grant of the equity award, or (d) the date provided forunder the equity plan under which the award was granted, and (v) an amountequal to twelve (12) months of health insurance premiums for continuationcoverage pursuant to the COBRA, at the same level of health(i.e., medical, vision and dental) coverage and benefits in effect for Mr. Luon the day preceding the date of his termination of employment.  The term “change in control” is defined inthe Lu Severance Agreement and is substantially similar to the definition ofchange in control set forth in Mr. Blackmore’s agreement and summarizedabove.

 

TheLu Severance Agreement also provides that if Mr. Lu’s employment with theCompany is terminated by the Company without cause or terminated by Mr. Lufor good reason during the term of the Lu Severance Agreement, apart from achange of control, he shall be entitled to the following severance benefits: (i) twenty-four(24) months of base salary as in effect as of the date of suchtermination, (ii) one hundred percent (100%) of his full annualperformance target bonus for the year in which termination occurs, lessapplicable withholding, (iii) all equity awards, including 

 

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withoutlimitation option grants, restricted stock and stock purchase rights, grantedto Mr. Lu will become fully vested or released from the Company’srepurchase right (if any shares of stock purchased by or granted to Mr. Luremain subject to such repurchase right) and exercisable to the extent suchequity awards are outstanding and unexercisable or unreleased at the time ofsuch termination, (iv) such equity awards shall be exercisable until theearliest of (a) twelve (12) months from his date of termination, (b) thelatest date the equity award could have expired by its original terms under anycircumstances, (c) the tenth (10th) anniversary of the original date of grant of theequity award, or (d) the date provided for under the equity plan underwhich the award was granted, and (v) an amount equal to twelve(12) months of health insurance premiums for continuation coveragepursuant to COBRA, at the same level of health (i.e., medical, vision anddental) coverage and benefits in effect for Mr. Lu on the day precedingthe date of his termination of employment.

 

Severancebenefits payable under the terms of the Lu Severance Agreement are payable in alump sum within thirty (30) days of the date of termination; however, if Mr. Luis a Specified Employee within the meaning of Section 409A at the time ofhis termination, then the severance and benefits payable to Mr. Lupursuant to the Agreement (other than due to death), if any, and any otherseverance payments or separation benefits which may be considered Deferred Compensation Separation Benefitsand which are otherwise due to Mr. Lu on or within the six (6) monthperiod following Mr. Lu’s termination will accrue during such six (6) monthperiod and will become payable in a lump sum on the date six (6) monthsand one (1) day following the date of his termination of employment or thedate of his death, if earlier. All subsequent Deferred Compensation SeparationBenefits, if any, will be payable in accordance with the payment scheduleapplicable to each payment or benefit. As a condition to receiving severancebenefits as described above, Mr. Lu is required to sign a waiver andrelease of all claims arising out of his termination of employment and a nondisparagementagreement.  The terms “cause” and “goodreason” are defined in the Lu Severance Agreement and are substantially similarto the definitions of cause and good reason set forth in Mr. Blackmore’sagreement and summarized above.

 

*Kenneth Luk.*  Effective June 20, 2006, theCompensation Committee of the Board of Directors adopted the ExecutiveInvoluntary Termination Severance Pay Plan which was subsequently amended andrestated on December 17, 2008 to bring the plan into compliance with Section 409A(the “Executive Plan”).  It was amended and restated again on February 26,2009 to clarify the terms around modification or termination of the ExecutivePlan. The Executive Plan extends certain change of control and severancebenefits to certain of the Company’s executive officers, including Mr. Lukwho does not have separate agreements with the Company. The Executive Plan isfiled as Exhibit 10.30 to our Annual Report on Form 10-K for thefiscal year ended December 31, 2008. The following description of the Executive Plan is qualified in itsentirety by the actual language of the plan.

 

Thepurpose of the Executive Plan is to (a) assure that the Company will havecontinued dedication and objectivity of its employees, and (b) provide theCompany’s employees with an incentive to continue their employment and tomotivate its employees to maximize the value of the Company for the benefit ofits stockholders.

 

TheExecutive Plan provides that if the Company (or any parent or subsidiary of theCompany) terminates the employment of an employee covered by the Executive Plan(a “Covered Employee”) for other than cause, death or disability, or a CoveredEmployee terminates his or her employment with the Company for good reason, theCovered Employee shall receive the following severance benefits: (i) alump sum cash payment equal to one (1) year of base pay plus one hundredpercent (100%) of the Covered Employee’s target bonus for the year oftermination, (ii) an amount equal to twelve (12) months of thepremiums for continuation coverage under COBRA of each Covered Employee (andany eligible dependents) under the Company’s medical, dental and vision plansat the same level of coverage in effect on the date of termination, (iii) theCovered Employee shall fully vest in and, if applicable, have the right toexercise, all of his or her outstanding and unvested equity compensationawards, and (iv) all such equity awards (including awards that vest as aresult of the Executive Plan) shall be exercisable until the earliest of (a) twelve(12) months from the Covered Employee’s date of termination, (b) thelatest date the equity award could have expired by its original terms under anycircumstances, (c) the tenth (10th) anniversary of the original date of grant of theequity award, or (d) the date provided for under the equity plan underwhich the award was granted.  The terms “cause”and “good reason” are defined in the Executive Plan and are substantiallysimilar to the definitions of cause and good reason set forth in Mr. Blackmore’sagreement and summarized above.

 

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Severancebenefits payable under the terms of the Executive Plan are payable in a lumpsum within thirty (30) days of the date of termination; however, if theCovered Employee is a Specified Employee within the meaning of Section 409Aat the time of such termination, then the severance and benefits payable to theCovered Employee pursuant to the Executive Plan (other than due to death), ifany, and any other severance payments or separation benefits which may beconsidered Deferred Compensation Separation Benefits, which are otherwise dueto the Covered Employee on or within the six (6)-month period following theCovered Employee’s termination will accrue during such six (6)month period andwill become payable in a lump sum on the date six (6) months and one (1) dayfollowing the date of the Covered Employee’s termination of employment or thedate of the Covered Employee’s death, if earlier. All subsequent Deferred CompensationSeparation Benefits, if any, will be payable in accordance with the paymentschedule applicable to each payment or benefit. As a condition to receivingbenefits under the Executive Plan, the Covered Employee is required to sign andnot revoke a waiver and release of all claims arising out of the CoveredEmployee’s termination of employment and a nondisparagement agreement. Thebenefits provided under the Executive Plan are in lieu of any other severanceor retention plan benefits available to the Covered Employee and shall bereduced by any severance paid to a Covered Employee under any other plan orarrangement.

 

*Mark Green. *Mr. Green’s employment with the Company terminated effective December 1,2009.  In connection with Mr. Green’s termination of employment andpursuant to his severance arrangement, the Company will pay $622,488.47including one year of base pay, 100% of 2009 target bonus and 12 months premiumfor COBRA in accordance with the terms of the Executive Plan.

 

*Susan Marsch.*  Ms. Marsch’s employment with the Company terminatedeffective December 31, 2009. In connection with Ms. Marsch’stermination of employment and pursuant to her severance arrangement, theCompany will pay $768,649.65****including oneyear of base pay, 100% of 2009 target bonus and 12 months premium for COBRA in accordancewith the terms of the Executive Plan.

 

*Viraj Patel.*  Mr. Patel’semployment with the Companyterminated effective February 26, 2010.  In connection with Mr. Patel’s termination ofemployment and pursuant to his severance arrangement, the Company will pay $450,545.82 including one year of base pay, 100% of 2010 target bonusand 12 months premium for COBRA in accordance with the termsof the Executive Plan.

 

***Change of Control Provisions in the Company’s Equity Compensation Plans***

 

*The 1997 Stock Plan.*  Our 1997 Plan provides that, in the event ofour proposed dissolution or liquidation, the Board must notify each participantunder the 1997 Plan as soon as practicable prior to the effective date of suchproposed dissolution or liquidation. The Board has the discretion to allow theparticipant to exercise his or her option or stock purchase right until15 days prior to the effective date of such dissolution or liquidation. Inthe event of our merger with or into another corporation, or the sale ofsubstantially all of our assets, each outstanding option or stock purchaseright under the 1997 Plan will be assumed or substituted by the successorcorporation. In case the successor corporation refuses to assume or substitutethe outstanding option or stock purchase right, such outstanding option orstock purchase right will become fully exercisable for a period of 15 daysfrom the date the participant is notified of such refusal by the Board.

 

Inaddition, the 1997 Plan provides, in general, that a participant whose statusas a Service Provider (as defined in the 1997 Plan) is terminated is entitledto exercise his or her option, to the extent such option has vested as of thedate of termination, until the earlier of (i) expiration of the optionaccording to its terms, (ii) expiration of a period of 3 monthsfollowing termination, or (iii) expiration of a period of 12 monthsfollowing termination as a result of death or disability. The 1997 Plan allowsthe post-termination exercise period to extend beyond the default term, if thestock option agreement entered into by the Company and the participant pursuantto the 1997 Plan provides for a longer term.

 

Underthe Officer and Director Option Agreement approved for use under the 1997 Planin connection with awards to our directors and officers beginning in December of2005, if the participant’s status as a Service Provider or director isterminated following a change of control, the participant shall be entitled toexercise his or her option, to the extent such option has vested as of the dateof such termination, until the earlier of (i) expiration of the optionaccording to its terms, or (ii) expiration of a period of 12 monthsfollowing the termination of the participant’s status as a Service Provider ordirector.

 

The1997 Plan was terminated in July 2006 effective upon stockholder approvalof our 2006 Plan.

 

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*The 2006 Equity Incentive Plan.*  Our 2006 Plan provides that in the event aparticipant in the 2006 Plan terminates service with us and our affiliates, anyoptions which have become exercisable prior to the time of termination willremain exercisable for three months from the date of termination, unless ashorter or longer period of time is determined by the 2006 Plan administrator.If termination was caused by death or disability, any options which have becomeexercisable prior to the time of termination will remain exercisable for12 months from the date of termination, unless a shorter or longer periodof time is determined by the 2006 Plan administrator. In no event may aparticipant exercise the option after the expiration date of the option.

 

Inthe event of our change of control, each outstanding award will be assumed orsubstituted by the successor corporation. In the event the successorcorporation refuses to assume or substitute awards granted under the 2006 Plan,all options and stock appreciation rights will fully vest and becomeexercisable, all restrictions on restricted stock will lapse, and, with respectto restricted stock units, performance shares, and performance units, allperformance goals or other vesting criteria will be deemed achieved at targetlevels and all other terms and conditions met. In addition, if an option orstock appreciation right becomes fully vested and exercisable in lieu ofassumption or substitution in the event of a change of control, the 2006 Planadministrator will notify the participant in writing or electronically that theoption or stock appreciation right will be fully vested and exercisable for aperiod of time determined by the 2006 Plan administrator in its solediscretion, and the option or stock appreciation right will terminate upon theexpiration of such period.

 

Thechange of control provisions in the 2006 Plan apply to all executive officers.

 

***Estimated Post-Employment Payments and Benefits***

 

Assumingthe termination of employment of the NEOs took place on December 31, 2009,and based upon the price per share of our Common Stock of $2.19, the closingmarket price as of December 31, 2009, the estimated payments and benefitsthat each of the NEOs would be eligible to receive under various circumstancesare set forth in the following charts. Please see the section above entitled “EmploymentContracts and Severance Agreements with Named Executive Officers” under “PotentialPost-Employment Payments upon Termination and Change of Control” contained inthis Amendment No. 1 for detailed descriptions of the agreements with eachof the NEOs that govern post-employment payments and benefits. No payments aredue in the event of voluntary termination of employment without good reason ortermination of employment for cause.

 

*Peter Blackmore*

 
| ** **                                                | ** ** | **Involuntary  Without  Cause/  Good Reason  Termination** | ** ** | **Termination  upon/following  Change of  Control** | ** ** | **Disability(1)** | ** ** | **Death(2)** | ** ** |
|-----------------------------------------------------------|------------|------------------------------------------------------------|------------|-----------------------------------------------------|------------|-------------------|------------|--------------|------------|
| Base Salary ($)                                           |       | $                                                          | 800,000    |                                                |       | $                 | 1,600,000  |         |       | $ | 192,000 |   |   | $ | 500,000 |   |   |
| Bonus ($)                                                 |       | $                                                          | 800,000    | (3)                                                 |       | $                 | 1,600,000  | (4)          |       |   | — |   |   |   | — |   |   |
| Accelerated Shares  Underlying Outstanding Options ($)(5) |       | $                                                          | 0          |                                                |       | $                 | 0          |         |       |   | — |   |   |   | — |   |   |
| Accelerated Stock Awards  ($)(5)                          |       | $                                                          | 2,067,884  |                                                |       | $                 | 2,067,884  |         |       | $ | 985,500 |   |   | $ | 985,500 |   |   |
| Health Care ($)                                           |       | $                                                          | 21,013     |                                                |       | $                 | 21,013     |         |       | $ | 21,013 |   |   |   | — |   |   |
| TOTAL:                                                    |       | $                                                          | 3,688,897  |                                                |       | $                 | 5,288,897  |         |       | $ | 1,198,513 |   |   | $ | 1,485,500 |   |   |

 

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(1)          We provideall active full-time employees with short and long-term disability insurancecoverage. In the case of short-term disability, employees will receive 60% ofmonthly earnings up to a maximum weekly benefit of $3,000 for up to12 weeks. Any disability beyond 12 weeks will be covered by thelong-term disability coverage which provides employees with 60% of monthlyearnings up to a maximum monthly benefit of $13,000. The amount representspayments for 12 months of disability under the policies; however, in theevent an employee continues to meet the definition of “disability” under thelong-term disability policy, long-term disability benefits may continue untilan employee’s Social Security Normal Retirement Age, as defined in thelong-term disability policy. The unvested portion of Mr. Blackmore’s newhire grant of 675,000 shares as of December 31, 2009, 450,000 sharesaccelerate in the event of disability.

 

(2)          We provideall active full-time employees with basic life and accidental death insurancecoverage which provides for payment of two times annual earnings to a maximumbenefit of $500,000 in the event of death. The unvested portion of Mr. Blackmore’snew hire grant of 675,000 shares as of December 31, 2009, 450,000 sharesaccelerate in the event of death.

 

(3)          Representstarget bonus of 100% of base salary.

 

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(4)          Representstarget bonus of 200% of base salary.

 

(5)          Amountsrepresent the value of unvested stock options and award grants as of December 31,2009 for which the vesting would have been accelerated. The value ofaccelerated options is measured as the difference between the fair market valueusing the closing market price of the Company’s Common Stock as of December 31,2009, the last trading day of fiscal year 2009, of $2.19 and the per shareexercise price for the options, multiplied by the number of all stock optionsthat were unvested as of December 31, 2009. For restricted stock awards,it is measured as the fair market value of the stock ($2.19), less the parvalue cost basis, multiplied by the number of shares of restricted stock thatwere unvested as of December 31, 2009. As of December 31, 2009, Mr. Blackmorehad no stock options with an exercise price less than $2.19.

 

*Kenneth Luk*

 
| ** **                                                | ** ** | **Involuntary  Without Cause  Termination** | ** ** | **Termination  upon/following  Change of  Control** | ** ** | **Disability(1)** | ** ** | **Death(2)** | ** ** |
|-----------------------------------------------------------|------------|---------------------------------------------|------------|-----------------------------------------------------|------------|-------------------|------------|--------------|------------|
| Base Salary ($)                                           |       | $                                           | 366,129    | *                                                   |       | $                 | 366,129    | *            |       | $ | 128,932 | ** |   | $ | 386,797 | ** |   |
| Bonus ($)                                                 |       | $                                           | 183,064    | *(3)                                                |       | $                 | 183,064    | *(4)         |       |   | — |   |   |   | — |   |   |
| Accelerated Shares Underlying Outstanding Options  ($)(5) |       | $                                           | 0          |                                                |       | $                 | 0          |         |       |   | — |   |   |   | — |   |   |
| Accelerated Stock Awards ($)(5)                           |       | $                                           | 657,000    |                                                |       | $                 | 657,000    |         |       |   | — |   |   |   | — |   |   |
| Health Care ($)                                           |       | $                                           | 640        | **                                                  |       | $                 | 640        | **           |       | $ | 640 | ** |   |   | — |   |   |
| TOTAL:                                                    |       | $                                           | 1,206,833  |                                                |       | $                 | 1,206,833  |         |       | $ | 129,572 |   |   | $ | 386,797 |   |   |

 

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*                 Thepayments will be made in RMB and are converted into US dollars in this tablefor presentation purposes only, using the middle rate of 6.8282 RMB yuan per USdollar as of the end of day on December 31, 2009 as published by the Bankof China.

 

**          Thepayments will be made in Hong Kong dollars and are converted into US dollars inthis table for presentation purposes only, using the rate of 7.756 Hong Kongdollars per US dollar as of the end of day on December 31, 2009 aspublished by the Hong Kong Monetary Authority.

 

(1)   We provide all active full-timeemployees with short and long-term disability insurance coverage. In the caseof short-term disability, employees will receive 60% of monthly earnings up toa maximum weekly benefit of $3,000 for up to 12 weeks. Any disabilitybeyond 12 weeks will be covered by the long-term disability coverage whichprovides employees with 60% of monthly earnings up to a maximum monthly benefitof $13,000. The amount represents payments for 12 months of disabilityunder the policies; however, in the event an employee continues to meet thedefinition of “disability” under the long-term disability policy, long-termdisability benefits may continue until an employee’s Social Security NormalRetirement Age, as defined in the long-term disability policy.

 

(2)   We provide all active full-timeemployees with basic life and accidental death insurance coverage whichprovides for payment of two times annual earnings to a maximum benefit of$500,000 in the event of death.

 

(3)   Represents target bonus of 65%of base salary.

 

(4)   Represents target bonus of 65%of base salary.

 

(5)   Amounts represent the value ofunvested stock options and awards grants as of December 31, 2009 for whichthe vesting would have been accelerated. The value of accelerated options ismeasured as the difference between the fair market value using the closingmarket price of the Company’s Common Stock as of December 31, 2009, thelast trading day of fiscal year 2009, of $2.19 and the per share exercise pricefor the options, multiplied by the number of all stock options that wereunvested as of December 31, 2009. For restricted stock awards, it ismeasured as the fair market value of the stock ($2.19), less the par value costbasis, multiplied by the number of shares of restricted stock that wereunvested as of December 31, 2009. As of December 31, 2009, Mr. Lukhad no stock options.

 

*Mark Green*

 

Mr. Green’semployment with the Company and its subsidiaries terminated on December 1,2009.   Please see the section aboveentitled “Employment Contracts andSeverance Agreements with Named Executive Officers” for informationregarding payments made to or to be made to Mr. Green upon and inconnection with his termination.

 

*SusanMarsch*

 

Ms. Marschemployment with the Company and its subsidiaries terminated on December 31,2009. Please see the section above entitled “Employment Contracts and Severance Agreements with Named ExecutiveOfficers” for information regarding payments made or to be made to Mr. Marschupon and in connection with her termination.

 

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*Hong LiangLu*

 

Mr. Lu’s employmentwith the Company and its subsidiaries terminated on August 31, 2009.  He stepped down from his position asExecutive Chairman on August 3, 2009, remained as an employee directoruntil August 31, 2009 and now serves as a non-employee director.  Please see the section above entitled “Employment Contracts and Severance Agreementswith Named Executive Officers” for information regarding payments madeto Mr. Lu upon and in connection with his termination.

 

*Viraj Patel*

 

Mr. Patel’semployment with the Company and its subsidiaries terminated on February 26,2010.   Please see the section aboveentitled “Employment Contracts andSeverance Agreements with Named Executive Officers” for informationregarding payments made or to be made to Mr. Patel upon and in connectionwith his termination.

 

**Director Compensation**

 

Directorswho are our employees receive no additional compensation for serving on theBoard of Directors. In 2009, our non-employee directors received both cash andequity compensation as described below. In addition, we reimburse all directorsfor travel and other related expenses incurred in connection with our business,including attending stockholder meetings and meetings of the Board or any Boardcommittee.

 

Thefollowing table sets forth information concerning compensation paid or accruedfor services rendered to us in all capacities by our non-employee directors forthe year ended December 31, 2009.

 

*Cash Compensation*

 

Approximatelyone-third of the compensation paid to our non-employee directors is comprisedof cash. During 2009, the non-employee directors’ cash compensation wascomprised of the following elements:

 
| **Type of Payment**                                                 | ** ** | **Amount** | ** ** |
|---------------------------------------------------------------------|------------|------------|------------|
| Non-Executive Chairman of  the Board (pro-rated and paid quarterly) |       | $          | 250,000    |   |   |
| Director Retainer  (pro-rated and paid quarterly)                   |       | $          | 50,000     |   |   |
| Lead Director Fee                                                   |       | $          | 70,000     | * |   |
| Audit Committee Chair Fee                                           |       | $          | 12,500     |   |   |
| Compensation Committee  Chair Fee                                   |       | $          | 7,500      |   |   |
| Nominating and Governance  Committee Chair Fee                      |       | $          | 7,500      |   |   |
| Audit Committee Member Fee                                          |       | $          | 5,000      |   |   |
| Compensation Committee  Member Fee                                  |       | $          | 4,500      |   |   |
| Nominating and Governance  Committee Member Fee                     |       | $          | 3,500      |   |   |
| Credit towards Company  Products                                    |       | $          | 1,000      |   |   |

 

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*                 The lead director fee was increased from$20,000 to $70,000 in May 2009. In September 2009, Thomas Toy, thelead director at the time, became non-executive chairman of the Board.

 

*Equity Compensation*

 

Approximatelytwo-thirds of the compensation paid to our non-employee directors is comprisedof equity: one-third of the aggregate value in stock options, and one-third ofthe aggregate value in restricted stock. The number of options and shares ofrestricted stock granted to each non-employee director during fiscal year 2009is set forth below:

 
| **Name**            | ** ** | **Stock  Options  Granted (#)** | ** ** | **Restricted  Stock  Granted (#)** | ** ** |
|---------------------|------------|---------------------------------|------------|------------------------------------|------------|
| Jeff Clarke         |       | 59,330                          |       |                               | 29,665     |   |   |
| Larry D. Horner (1) |       | —                          | (1)        |                               | —     | (1) |   |
| Allen Lenzmeier     |       | 59,809                          |       |                               | 29,904     |   |   |
| Hong Liang Lu       |       | 0                               |       |                               | 264,182    |   |   |
| Bruce Ryan          |       | 67,464                          |       |                               | 33,732     |   |   |
| Thomas J. Toy       |       | 158,373                         |       |                               | 79,187     |   |   |

 

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(1)          Mr. Hornerresigned as of 3/1/2009 and did not receive any awards in 2009.

 

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Eachstock option has an exercise price of $2.09 per share, equal to the closingprice of the Company’s Common Stock on the NASDAQ Stock Market on September 30,2009, the date of grant. The options and restricted stock vest in equal,monthly installments over a 12-month period beginning on September 30,2009. The grants were made pursuant to the 2006 Plan and are subject to thestandard terms and conditions of the forms of restricted stock award and stockoption agreements previously approved for use with the 2006 Plan and filed withthe SEC.

 

Eachnewly-elected or appointed non-employee director is eligible to receive anoption award under the 2006 Plan to purchase 80,000 shares of Common Stockwhich would vest in equal installments of 25% per year on each of the fouranniversaries of the date of grant. Any such grant would be made in accordancewith the Company’s Equity Award Grant Policy and Procedures more fullydescribed in the Compensation Discussion and Analysis under Item 11 of thisAmendment No. 1.

 

Forfurther discussion with respect to change of control arrangements applicable tooutstanding equity awards, please see the section entitled “Change of ControlProvisions in the Company’s Equity Compensation Plans” under “PotentialPayments upon Termination and Change of Control” contained in this Schedule.

 

Thefollowing table further summarizes compensation paid to the non-employeedirectors during 2009:

 
| **Name**            | ** ** | **Fees  Earned or  Paid in  Cash  ($)** | ** ** | **Stock  Awards  ($)(1)** | ** ** | **Option  Awards  ($)(2)** | ** ** | **Total  ($)** | ** ** |
|---------------------|------------|-----------------------------------------|------------|---------------------------|------------|----------------------------|------------|----------------|------------|
| Jeff Clarke         |       | 67,625                                  |       |                      | 62,000     | (3)                        |       | 66,616         | (4)        |   | 196,241 |   |
| Larry D. Horner (5) |       | —                                  |       |                      | —     |                       |       | —         |       |   | — |   |
| Allen Lenzmeier     |       | 68,125                                  |       |                      | 62,499     | (6)                        |       | 67,154         | (7)        |   | 197,778 |   |
| Hong Liang Lu       |       | 18,512                                  | (8)        |                      | —     |                       |       | —         |       |   | 18,512 |   |
| Bruce J. Ryan       |       | 76,125                                  |       |                      | 70,500     | (9)                        |       | 75,749         | (10)       |   | 222,374 |   |
| Thomas J. Toy       |       | 232,483                                 | (11)       |                      | 165,501    | (12)                       |       | 177,821        | (13)       |   | 575,805 |   |

 

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(1)   This columnincludes the value of stock awarded to directors in 2009 based upon its grantdate fair market value, as determined in accordance with the share-basedpayment accounting guidance under ASC Topic 718.

 

(2)   This columnincludes the value of options awarded to directors in 2009 based upon its grantdate fair market value, as determined in accordance with the share-basedpayment accounting guidance under ASC Topic 718. A discussion of the valuationassumptions used for purposes of calculating the fair value of an option isincluded under Note 10 to our 2009 Consolidated Financial Statements that arepart of our Annual Report on Form 10-K for the fiscal year ended December 31,2009.

 

(3)   Includes thegrant date fair value for 29,665 shares of restricted stock approved for granton 9/30/2009, with a grant date fair value of $62,000.  As of December 31, 2009, Mr. Clarkehad 22,249 shares of unvested restricted stock outstanding.

 

(4)   Includes thefollowing fair values as of the applicable grant date:  $66,616 for astock option to purchase 59,330 shares of Common Stock granted under the 2006Equity Incentive Plan (“2006 Plan”) on 9/30/2009.  As of December 31, 2009, Mr. Clarkehad 277,456 options outstanding.

 

(5)   Mr. Hornerresigned as of 3/1/2009 and did not receive any awards in 2009.

 

(6)   Includes thegrant date fair value for 29,904 shares of restricted stock approved for granton 9/30/2009, with a grant date fair value of $62,499.  As of December 31, 2009, Mr. Lenzmeierhad 22,428 shares of unvested restricted stock outstanding.

 

(7)   Includes thefollowing fair values as of the applicable grant date:  $67,154 for astock option to purchase 59,809 shares of Common Stock granted under the 2006Plan on 9/30/2009.  As of December 31,2009, Mr. Lenzmeier had 275,479 options outstanding.

 

35

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(8)   Mr. Lubecame a non-executive director in September 2009 after stepping down fromthe position of Executive Chairman in August 2009.  This represents the fee paid for his servicesas a non-executive director during 2009.

 

(9)   Includes thegrant date fair value for 33,732 shares of restricted stock approved for granton 9/30/2009, with a grant date fair value of $70,500.  As of December 31, 2009, Mr. Ryanhad 25,299 shares of unvested restricted stock outstanding.

 

(10)Includes thefollowing fair values as of the applicable grant date:  $75,749 for astock option to purchase 67,464 shares of Common Stock granted under the 2006Plan on 9/30/2009.  As of December 31,2009, Mr. Ryan had 172,849 options outstanding.

 

(11) Includes a one-timespecial bonus of $16,500 granted by the board for Mr. Toy’s leadershiprole during the Company’s strategic transition period.

 

(12)Includes thegrant date fair value for 79,187 shares of restricted stock approved for granton 9/30/2009, with a grant date fair value of $165,501.  As of December 31, 2009, Mr. Toyhad 59,390 shares of unvested restricted stock outstanding.

 

(13)Includes thefollowing fair values as of the applicable grant date:  $177,821 for astock option to purchase 158,373 shares of Common Stock granted under the 2006Plan on 9/30/2009.  As of December 31,2009, Mr. Toy had 524,764 options outstanding.

 

*Indemnification Agreement*

 

Allof our directors are currently party to indemnification agreements with theCompany. The form of indemnification agreement is filed as Exhibit 10.1 toour Annual Report on Form 10-K for the fiscal year ended December 31,2008.

 

**Compensation Committee Interlocks and InsiderParticipation**

 

All members of theCompensation Committee during 2009 were independent directors in accordancewith the applicable independence requirements of the NASDAQ Marketplace Rules,and none were employees or officers or former employees of the Company. During2009, no executive officer of the Company served on the compensation committee(or equivalent) or board of directors of another entity whose executive officer(s) servedon the Company’s Compensation Committee or Board.

 

**Compensation Committee Report**

 

*The following is the reportof the Compensation Committee. The information contained in this report shallnot be deemed to be “soliciting material” or to be “filed” with the SEC, orsubject to Regulation 14A or 14C or to the liabilities of Section 18of the Securities Exchange Act, except to the extent that the Companyspecifically requests that such information be treated as soliciting materialor specifically incorporates the information by reference in any future filingunder the Securities Act of 1933 or the Securities Exchange Act of 1934.*

 

The Compensation Committee of the Board ofUTStarcom, Inc. was established on January 31, 1997 and is currentlycomprised of three members: Messrs. Clarke, Lenzmeier and Toy.  Mr. Lenzmeier, the Chairman of theCompensation Committee, and Messrs. Clarke and Toy served on the Committeethroughout 2009.

 

During 2009, the Compensation Committee wascomprised solely of non-employee directors who were each: (i) independentas defined under the NASDAQ Marketplace Rules, (ii) a non-employeedirector for purposes of Rule 16b-3 of the Securities Exchange Act of1934, as amended, and (iii) an “outside director” for purposes of Section 162(m) ofthe Internal Revenue Code. During 2010, the Committee will continue to becomprised of directors who meet these same standards.

 

The Compensation Committee has reviewed anddiscussed the “Compensation Discussion and Analysis” section of this AmendmentNo.1 with management, including UTStarcom’s Chief Executive Officer and ChiefFinancial Officer. Based on this review and discussion, the CompensationCommittee recommended to the Board that the “Compensation Discussion andAnalysis” section be included in this Amendment No. 1.

 
| * * | * * | *The Compensation Committee*                          |
|----------|----------|-------------------------------------------------------|
| * * | * * | * *                                              |
|     |     | Allen Lenzmeier, Chairman  Jeff Clarke  Thomas J. Toy |

 

36

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**ITEM 12.  SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS**

 

**Equity Compensation Plan Information**

 

The following table sets forth information, as of December 31,2009, with respect to compensation plans under which the Company’s equitysecurities are authorized to be issued:

 
| **Plan Category(1)**                                        | ** ** | **Number  of  securities to  be issued upon  exercise/  vesting of  outstanding  options and  restricted  stock units** | ** ** | **Weighted-  average  exercise price  of  outstanding  options** | ** ** | **Number  of  securities  remaining  available for  future********issuance  under  equity  compensation  plans  (excluding  securities  reflected  in column(a))** | ** ** |
|-------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **(a)**                                                                                                                 | ** ** | **(b)**                                                          | ** ** | **(c)**                                                                                                                                                            | ** ** |
| Equity compensation plans approved by security  holders     |       | 8,371,703                                                                                                               | (2)        |                                                             | $          | 8.23                                                                                                                                                               | (3)        |   | 13,106,608 | (4) |   |
| Equity compensation plans not approved by security  holders |       | 214,280                                                                                                                 | (5)        |                                                             | $          | 28.55                                                                                                                                                              |       |   | — | (6) |   |
| Total                                                       |       | 8,585,983                                                                                                               |       |                                                             | $          | 8.98                                                                                                                                                               | (3)        |   | 13,106,608 |   |   |

 

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(1)   See Note 10to our 2009 Consolidated Financial Statements that are part of our AnnualReport on Form 10-K for the fiscal year ended December 31, 2009, for adescription of the Company’s equity compensation plans.

 

(2)   Includes sharesof common stock to be issued upon exercise of options granted under our 2006Equity Incentive Plan (the “2006 Plan”), our 1997 Stock Plan, and our 2001 DirectorOption Plan and 2,841,929 shares of our common stock issuable pursuant torestricted stock units under our 2006 Plan.

 

(3)   Becauserestricted stock units do not have an exercise price, the 2,841,929 shares ofcommon stock issuable pursuant to RSUs under our 2006 Plan are not included inthe calculation of weighted average exercise price.

 

(4)   Includes 906,440shares of common stock to be issued upon exercise of options granted under our2000 Employee Stock Purchase Plan and 12,200,168 shares of common stockavailable for issuance under our 2006 Plan.

 

(5)   Includes sharesof common stock to be issued upon exercise of options granted under our 2003Non-Statutory Option Plan. Upon implementation of the 2006 Plan, the remainingsecurities available for future issuance under the 2003 Non-Statutory StockOption Plan were rolled into the 2006 Plan. Does not include 5,768 shares ofcommon stock subject to outstanding options with a weighted-average price of$3.35 that were assumed in acquisitions of Advanced Communication DevicesCorporation.

 

(6)   Does not include1,762 shares remaining available for future issuance under equity compensationplans related to our acquisition of Rolling Streams Systems, Ltd.

 

**Security Ownership of Certain Beneficial Owners and Management**

 

Thefollowing table sets forth certain information with respect to beneficialownership of our common stock as of December 31, 2009 by (i) eachperson who is known to us to own beneficially more than 5% of our common stock,(ii) each current and proposed director of UTStarcom, (iii) eachcurrent executive officer, and (iv) all of our current and proposeddirectors and executive officers as a group. Calculations are based on130,191,864 shares of common stock issued and outstanding as of December 31,2009.

 
| **Name and Address of Beneficial Owner(1)** | ** ** | **Shares  Beneficially  Owned(2)** | ** ** | **Percent of  Total  Outstanding(2)** | ** ** |
|---------------------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
| Entities affiliated with Softbank Corp. (3) |       | 14,651,630                         |       | 11.3                                  | %          |   |
| Shah Capital Management (4)                 |       | 8,004,957                          |       | 6.1                                   | %          |   |
| Hong Liang Lu (5)                           |       | 4,761,509                          |       | 3.7                                   | %          |   |
| Jack Lu                                     |       | 0                                  |       | 0                                     |       |   |
| Kenneth Luk                                 |       | 300,000                            |       | *                                     |       |   |
| Peter Blackmore (6)                         |       | 1,656,954                          |       | 1.3                                   | %          |   |

 

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| **Name and Address of Beneficial Owner(1)**                                             | ** ** | **Shares  Beneficially  Owned(2)** | ** ** | **Percent of  Total  Outstanding(2)** | ** ** |
|-----------------------------------------------------------------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
| Jeff Clarke (7)                                                                         |       | 330,096                            |       | *                                     |       |
| Baichuan Du                                                                             |       | 0                                  |       | 0                                     |       |
| Allen Lenzmeier (8)                                                                     |       | 376,868                            |       | *                                     |       |
| Xiaoping Li                                                                             |       | 0                                  |       | 0                                     |       |
| Bruce J. Ryan (9)                                                                       |       | 119,919                            |       | *                                     |       |
| Thomas J. Toy (10)                                                                      |       | 598,282                            |       | *                                     |       |
| William Wong                                                                            |       | 0                                  |       | 0                                     |       |
| All current and proposed directors and executive  officers as a group (11 persons) (11) |       | 8,143,628                          |       | 6.3%                                  |       |

 

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*      Less than 1%.

 

(1)   Unless otherwise indicated, theaddress for all beneficial owners is c/o UTStarcom, Inc., 1275 Harbor BayParkway, Alameda, California 94502.

 

(2)   Under the SEC’s proxy rules, aperson who directly or indirectly has or shares voting power or investmentpower with respect to a security is considered a beneficial owner of thesecurity. Voting power is the power to vote or direct the voting of shares, andinvestment power is the power to dispose of or direct the disposition ofshares. The information on beneficial ownership in the table and the footnotesis based upon our records and the most recent Schedule 13D or 13G filed byeach such person and information supplied to us by such person. Unless otherwiseindicated, each person has sole voting power and sole investment power withrespect to all shares beneficially owned, subject to community property lawswhere applicable. Shares subject to options which are exercisable within60 days of December 31, 2009 are deemed to be outstanding and to bebeneficially owned by the person holding such options for the purpose ofcomputing the percentage ownership of such person, but are not deemed to beoutstanding and to be beneficially owned for the purpose of computing thepercentage ownership of any other person.

 

(3)   Information based onSchedule 13G, Amendment No. 2, filed with the SEC on March 28,2007 by Softbank Corp., Softbank America, Inc, and Softbank Holdings, Inc.Includes 14,651,630 shares registered in the name of SoftbankAmerica Inc., a Delaware corporation. Softbank America Inc. is awholly owned subsidiary of Softbank Holdings Inc., a Delaware corporation.Softbank Holdings Inc. is a wholly owned subsidiary of Softbank Corp., aJapanese corporation. Softbank America Inc. has sole power to vote ordirect the voting of the 14,651,630 shares and sole dispositive power over the14,651,630 shares. The business address for these entities is c/o SoftbankCorp., Tokyo Shiodome Blvd., 1-9-1, Higashi-shimbashi, Minato-ku, Tokyo105-7303 Japan.

 

(4)   Information based onSchedule 13D, Amendment No. 2, filed with the SEC on December 8,2009 by Shah Capital Management. Includes 8,004,957 shares beneficially andjointly owned by Shah Capital Management. Shah Capital Management has the sole power to vote or direct the votingof the 8,004,957 shares and sole dispositive power over the 8,004,957 shares.The number does not include the shares to be purchased by Shah CapitalOpportunity Fund LP pursuant to the Placement. The business address for Shah Capital Management is 8601 Six Forks Road,Suite 630, Raleigh, NC 27615.

 

(5)   Consists of 3,326,413 sharesowned directly, 229,000 shares owned by The Lu Family Limited Partnership, ofwhich Mr. Lu is a general partner, 80,775 shares registered in the name ofLu Charitable Remainder Trust, of which Mr. Lu is the trustee, 49,225shares registered in the name of the Lu Family Trust of which Mr. Lu is atrustee and of which Mr. Lu and his spouse are beneficiaries. Alsoincludes 1,076,096 shares issuable upon exercise of options that areexercisable currently or within 60 days of December 31, 2009.

 

(6)   Consists of 1,006,353 sharesowned directly, 484,375 shares issuable upon exercise of options that areexercisable currently or within 60 days of December 31, 2009 and166,226 shares issuable pursuant to restricted stock units vesting within60 days of December 31, 2009.

 

(7)   Consists of 87,249 shares owneddirectly and 242,847 shares issuable upon exercise of options that areexercisable currently or within 60 days of December 31, 2009.

 

(8)   Consists of 136,278 sharesowned directly and 240,590 shares issuable upon exercise of options that areexercisable currently or within 60 days of December 31, 2009.

 

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(9)   Consists of 46,424 shares owneddirectly and 73,495 shares issuable upon exercise of options that areexercisable currently or within 60 days of December 31, 2009.

 

(10)Consists of 165,905 shares owneddirectly and 432,377 shares issuable upon exercise of options that areexercisable currently or within 60 days of December 31, 2009.

 

(11)Includes 2,549,780 sharesissuable upon exercise of options that are exercisable currently or within 60days of December 31, 2009 and 166,226 shares issuable pursuant torestricted stock units vesting within 60 days of December 31, 2009.

 

**ITEM 13.  CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**

 

**Review, Approval or Ratification of Related PersonTransactions**

 

OurAudit Committee is responsible for review, approval or ratification of “related-persontransactions” between us or our subsidiaries and related persons. Under SECrules, a related person is a director, officer, nominee for director, or 5%stockholder of UTStarcom since the beginning of the last fiscal year, and hisor her immediate family members. We have adopted written policies andprocedures that apply to any transaction or series of related transactions inwhich our company or a subsidiary is a participant, the amount involved exceeds$120,000 and a related person has a direct or indirect material interest.Pursuant to our policy, the following transactions will not be deemed to berelated person transactions that require Audit Committee approval:

 

·      *Employmentof executive officers.*  Anyemployment by us of an executive officer of our Company if: (a) therelated compensation is required to be reported in our proxy statement underSEC compensation disclosure rules; or (b) the executive officer is not animmediate family member of another executive officer or director of ourcompany, and the related compensation would have been reported in our proxystatement under SEC compensation disclosure rules if the executive officerwas a “Named Executive Officer,” and the Compensation Committee approved (orrecommended that the Board of Directors approve) such compensation.

 

·      *Directorcompensation.*  Anycompensation paid to a director if the compensation is required to be reportedin our proxy statement under SEC compensation disclosure rules.

 

·      *Certaintransactions with other companies.*  Any transaction with another company at whicha related person’s only relationship is as an employee (other than an executiveofficer), director or beneficial owner of less than 10% of that company’sshares, if the aggregate amount involved does not exceed the greater of$1,000,000 or two percent of that company’s total annual revenues.

 

·      *Transactionswhere all shareholders receive proportional benefits.*  Any transaction where the related person’sinterest arises solely from the ownership of a class of our equity securitiesand all holders of that class of our equity securities received the samebenefit on a *pro rata* basis (*e.g*., dividends).

 

·      *Transactionsinvolving competitive bids.*  Any transaction involving a related personwhere the rates or charges involved are determined by competitive bids.

 

·      *Regulatedtransactions.*  Anytransaction with a related person involving the rendering of services as acommon or contract carrier, or public utility, at rates or charges fixed inconformity with law or governmental authority.

 

·      *Certainbanking-related services.*  Anytransaction with a related person involving services as a bank depositary offunds, transfer agent, registrar, trustee under a trust indenture or similarservices.

 

·      *Othertransactions.*  Any othertransaction where disclosure of such transaction would not be required pursuantto Item 404 of Regulation S-K, as may be amended from time to time.

 

39

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**Related Person Transactions**

 

During2009, we were party to the following related party transactions under therelevant standards:

 

*Yellowstone*

 

OnSeptember 7, 2009, we entered into a consulting agreement with YellowstoneInvestment Advisory Limited (“Yellowstone”). Mr. William Wong, one of theproposed directors, is a managing director of Yellowstone. Pursuant to theconsulting agreement, Yellowstone acted as a strategic consultant assistingwith the relocation of our headquarters to China and introducing executiveofficer and directors candidates to us. We also agreed to reimburse Yellowstone’s reasonable expenses incurredin connection with the services. During 2009, we paid approximately $60,000 forconsulting services provided by Yellowstone. During the first quarter of 2010, we paid approximately $315,000 forconsulting services provided by Yellowstone.

 

Theaudit committee did not review and approve the consulting arrangement withYellowstone because at the time the consulting agreement was entered into, Mr. Wongwas not expected to become a director and therefore the transaction was notsubject to review by the audit committee. The consulting agreement and the relationship between the Company andYellowstone was reviewed by the Board in determining Mr. Wong’sindependence.

 

*Shah Capital*

 

On February 1, 2010, we entered into a CommonStock Purchase Agreement with Shah Capital Opportunity Fund LP, an affiliate ofShah Capital Management, one of ourstockholders holding 5% of more of our common stock, and a certain other party,pursuant to which we will issue and sell 5,000,000 shares of our common stockto Shah Capital Opportunity Fund LP for a purchase price of $2.20 pershare.  The transaction is part of theprivate placement transaction described in more detail in the section ofthis Amendment No. 1 above entitled “Directors.”

 

*Softbank Corp.*

 

SoftbankCorp. is an affiliate of Softbank America, Inc., one of our stockholdersholding 10% or more of our common stock. During 2009, we recognized aggregate revenue of $28million (includes $5 million in sales to NEC Networks & SystemIntegration Corp., Japan Electronic Computer Co. Ltd., Nippon Telecom Sales KKand Oki Electric Industry Co., Ltd. for which Softbank Corp. was the ultimatecustomer) with respect to sales to affiliates of Softbank Corp., including (i) salesof telecommunications equipment to Softbank BB, (ii) sales of equipment andservices to Softbank Telecom Co., Ltd, a wholly owned subsidiary of SoftbankCorp. and (iii) sales of equipment to BB Cable, an affiliate of SoftbankCorp.

 

Theaudit committee has reviewed and approved the transaction with Shah Capital andSoftbank Corp. described above.

 

**Director Independence**

 

Ofthe Company’s current directors, Messrs. Clarke, Lenzmeier, Ryan and Toyhave been determined by the Board to be independent as set forth in Rule 5605(a)(2)of the NASDAQ Marketplace Rules, the listing standards of NASDAQ Stock Market,as currently in effect. In addition, the Board has also determined that Messrs. Clarke,Lenzmeier and Ryan possess the attributes to be considered financiallysophisticated for purposes of applicable NASDAQ Marketplace Rules and eachhas the background to be considered an “audit committee financial expert” asdefined by the rules and regulations of the SEC and required by the NASDAQMarketplace Rules.

 

Ofthe proposed new directors, Messrs. Du, Li, and Wong have been determinedby the Board to be independent as set forth in Rule 5605(a)(2) of theNASDAQ Marketplace Rules, the listing standards of NASDAQ Stock Market, ascurrently in effect. In addition, the Board has also determined that Messrs. Wongand Li possess the attributes to be considered financially sophisticated forpurposes of applicable NASDAQ Marketplace Rules.

 

TheBoard has not established categorical standards or guidelines to make directorindependence determinations, but considers all relevant facts andcircumstances. The Board based its determinations primarily on a review of theresponses of the directors to questions regarding employment and compensationhistory, affiliations, family and other relationships, and on discussions withour directors.

 

40

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Inmaking its independence determinations, the Board considered transactionsbetween the Company and entities associated with the directors or members oftheir immediate family. All identified transactions that appear to relate tothe Company and a person or entity with a known connection to a director arepresented to the Board for consideration. In making its determination that eachnon-employee director is independent, the Board considered the transactions inthe context of the NASDAQ standards, the standards established by the SEC formembers of audit committees, and the SEC and Internal Revenue Service standardsfor compensation committee members.

 

TheBoard’s independence determinations included a review of the status of certainexecutive officers as limited partners of an investment fund managed by Mr. Toy.In each case, the Board determined that, because of the nature of each of theserelationships and/or amounts involved, the relationships did not impair Mr. Toy’sindependence.

 

TheBoard’s independence determinations also included a review of the payments madeby the Company to Yellowstone, of which Mr. Wong is a managing director,pursuant to a consulting agreement by and between the Company and Yellowstone.The Board determined that the payments did not impair Mr. Wong’sindependence.

 

The Board’s independence determinations also included a review of thetransactions between the Company and BEIID, of which Mr. Li is theexecutive deputy general manager and also between the Company and theManagement Committee of Beijing Economic and Technology Development Zone, anaffiliate of BEIID (for the relocation of the Company’s headquarters to China).The Board determined that the transactions did not impair Mr. Li’sindependence.

 

**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

**PricewaterhouseCoopers LLPFees for the Fiscal Years Ended December 31, 2009 and 2008**

 

The aggregate feesbilled for professional accounting services by PricewaterhouseCoopers LLPfor the fiscal years ended December 31, 2009 and 2008 are as follows:

 
| ** **             | ** ** | **Fiscal Year Ended  December 31,** | ** ** |
|------------------------|------------|------------------------------------------|------------|
| ** **             | ** ** | **2009**                                 | ** ** | **2008** | ** ** |
| Audit Fees (1)         |       | $                                        | 4,665,000  |   | $ | 9,716,000 |   |
| Audit-Related Fees (2) |       | 153,000                                  |       | 1,282,000 |   |
| Tax Fees (3)           |       | 42,000                                   |       | 25,000 |   |
| All Other Fees (4)     |       | 3,000                                    |       | 3,000 |   |
| Total Fees             |       | $                                        | 4,863,000  |   | $ | 11,026,000 |   |

 

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(1)   Audit fees are fees forprofessional services rendered for the integrated audit of UTStarcom’sconsolidated financial statements and of its internal control over financialreporting, for review of the interim consolidated financial statements includedin quarterly reports, and for services that are normally provided byPricewaterhouseCoopers LLP in connection with statutory and regulatoryfilings or engagements.

 

(2)   Audit-related fees representaggregate fees paid or accrued for professional services rendered foraccounting consultations and other procedures performed with respect to certainCompany acquisition and divestiture efforts.

 

(3)   Tax fees are fees for taxservices related to tax compliance, tax planning and tax advice.

 

(4)   All other fees are fees for anonline accounting research tool.

 

The AuditCommittee has determined that the provision to us byPricewaterhouseCoopers LLP of non-audit services as listed above iscompatible with PricewaterhouseCoopers LLP maintaining its independence.

 

41

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**AuditCommittee Pre-Approval Policies and Procedures**

 

The AuditCommittee has direct responsibility for the appointment, retention, evaluation,compensation, oversight and termination of the independent registered publicaccounting firm employed by us. The Audit Committee has authorized Mr. Ryanto pre-approve audit and non-audit services to be performed by our independentregistered public accounting firm. Such preapproval by Mr. Ryan is to befollowed up for approval by the Audit Committee at its quarterly meetings. Forthe fiscal year 2009, there were no audit-related fees, tax fees, or any othernon-audit fees that were approved by the Audit Committee pursuant to the “deminimis” exception under Regulation S-X Rule 2-01(c)(7)(i)(C).

 

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**PART IV**

 

**ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**

 

**The following documents are beingfiled as part of this Amendment No.1 to the Annual Report:**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                           |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                |       | Certification  of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                |
| 31.2                |       | Certification  of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                |
| 32.1                |       | Certifications  Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. |

 

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**SIGNATURES**

 

Pursuantto the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, the registrant has duly caused this Amendment No.1 to theAnnual Report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|                 |   | UTSTARCOM, INC. |
|----------------------|--------|----------------------|
|                 |   |                 |
|                 |   |                 |
| Date: April 27, 2010 |   | By:                  | /s/  KENNETH LUK |
|                 |   | Name:                | Kenneth  Luk |
|                 |   | Title:               | *Senior Vice President and  Chief Financial Officer* |

 

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant and in thecapacities and on the dates indicated:

 
| **Name**             | ** **           | **Title**                                                               | ** ** | **Date**        |
|----------------------|----------------------|-------------------------------------------------------------------------|------------|-----------------|
| ** **           | ** **           | ** **                                                              | ** ** | ** **      |
| /s/  PETER BLACKMORE |                 | Chief Executive Officer,  President and                                 |       | April  27, 2010 |
| Peter  Blackmore     |                 | Director  (principal executive officer)                                 |       |            |
|                 |                 |                                                                    |       |            |
| /s/  KENNETH LUK     |                 | Senior Vice President,  Chief Financial                                 |       | April  27, 2010 |
| Kenneth  Luk         |                 | Officer  (principal financial officer and principal accounting officer) |       |            |
|                 |                 |                                                                    |       |            |
| *                    |                 | Director                                                                |       | April  27, 2010 |
| Hong  Liang Lu       |                 |                                                                    |       |            |
|                 |                 |                                                                    |       |            |
| *                    |                 | Chairman                                                                |       | April  27, 2010 |
| Thomas  J. Toy       |                 |                                                                    |       |            |
|                 |                 |                                                                    |       |            |
| *                    |                 | Director                                                                |       | April  27, 2010 |
| Jeff  Clarke         |                 |                                                                    |       |            |
|                 |                 |                                                                    |       |            |
| *                    |                 | Director                                                                |       | April  27, 2010 |
| Allen  Lenzmeier     |                 |                                                                    |       |            |
|                 |                 |                                                                    |       |            |
| *                    |                 | Director                                                                |       | April  27, 2010 |
| Bruce  J. Ryan       |                 |                                                                    | ** ** | ** **      |
|                 |                 |                                                                    | ** ** | ** **      |
| * By:                | /s/  PETER BLACKMORE |                                                                    |       | ** **      | ** ** |
| Attorney-in-fact     |                 |                                                                    | ** ** | ** **      |
|                      |                      |                                                                         |            |                 |  |

 

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