Document:

Exhibit 10.2

 

UTSTARCOM, INC.

 

CHANGE OF CONTROL/INVOLUNTARY TERMINATION SEVERANCE
AGREEMENT

 

This
Change of Control Severance Agreement (the “Agreement”) is made and entered
into effective as of September 6, 2005 (the “Effective Date”), by and
between Francis Barton (the “Employee”) and UTStarcom, Inc., a Delawarecorporation
(the “Company”).  Certain capitalized
terms used in this Agreement are defined in Section 1 below.

 

R E C I T A L S

 

A.                                   Employee
is commencing his employment with the Company in the capacity of Executive Vice President and Chief
Financial Officer, and the Company anticipates that Employee’s resposibilities
with the Company shall initially consist of managing and directing the Company’s
global finance and accounting employees.

 

B.                                     It
is expected that the Company from time to time will consider the possibility of
a Change of Control.  The Board of
Directors of the Company (the “Board”) recognizes that such consideration can
be a distraction to the Employee and can cause the Employee to consider
alternative employment opportunities.

 

C.                                     The
Board believes that it is in the best interests of the Company and its
shareholders to provide the Employee with an incentive to continue his
employment and to maximize the value of the Company upon a Change of Control
for the benefit of its shareholders.

 

D.                                    In
order to provide the Employee with enhanced financial security and sufficient
encouragement to remain with the Company notwithstanding the possibility of a
Change of Control, the Board believes that it is imperative to provide the
Employee with certain severance benefits upon the Employee’s termination of
employment following a Change of Control.

 

AGREEMENT

 

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

 

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

 

(a)                                  Cause.  “Cause” shall mean (i) any act of
personal dishonesty taken by the Employee in connection with his
responsibilities as an employee which is intended to result in substantial
personal enrichment of the Employee,  (ii) Employee’s
conviction of a felony which the Board reasonably believes has had or will have
a material detrimental effect on the Company’s reputation or business, (iii) a
willful act by the Employee which constitutes misconduct and is injurious to
the Company, and (iv) continued willful violations by the Employee of the
Employee’s obligations to the Company after there has been delivered to the
Employee a written demand for

 

 

performance from the Company which describes the basis
for the Company’s belief that the Employee has not substantially performed his
duties.

 

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

 

(i)                       the
approval by shareholders of the Company of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation;

 

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

 

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

 

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

 

(c)                                  Change
in Control Involuntary Termination.  “Change
in Control Involuntary Termination” shall mean (i) without the Employee’s
express written consent, a significant reduction of the Employee’s duties,
position or responsibilities relative to the Employee’s duties, position or
responsibilities in effect immediately prior to such reduction, or the removal
of the Employee from such position, duties and responsibilities, unless the
Employee is provided with comparable duties, position and responsibilities;
provided, however, that a reduction in duties, position or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
shall not constitute a “Change in Control Involuntary Termination;” (ii) without
the Employee’s express written consent, a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Employee immediately prior to such reduction; (iii) a
reduction by the Company of the Employee’s base salary as in effect immediately
prior to such reduction; (iv) a material reduction by the Company in the
kind or level of employee benefits to which the Employee is entitled
immediately prior to such reduction with the result that the Employee’s overall
benefits package is significantly reduced; (v) without the Employee’s
express

 

2

 

written consent, the relocation of the Employee to a
facility or a location more than fifty (50) miles from his current location; (vi) any
purported termination of the Employee by the Company which is not effected for
Cause or for which the grounds relied upon are not valid; or (vii) the
failure of the Company to obtain the assumption of this Agreement by any
successors contemplated in Section 6 below.

 

(d)                                 Regular
Involuntary Termination.  “Regular
Involuntary Termination” shall mean any termination (other than a termination
for Cause) of the Employee by the Company which is not within twelve (12) months
after a Change in Control.

 

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

 

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

 

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

 

4.                                       Severance Benefits.

 

(a)                                  Termination
Following A Change of Control.  If
the Employee’s employment with the Company terminates as a result of a Change
in Control Involuntary Termination at any time within twelve (12) months after
a Change of Control, Employee shall be entitled to the following severance
benefits:

 

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

 

(ii)                    one
hundred percent (100%) of Employee’s bonus for the year in which the
termination occurs;

 

(iii)                 all
stock options and share purchase rights granted by the Company to the Employee
prior to the Change of Control shall become fully vested and exercisable as of
the date of the termination to the extent such stock options and share purchase
rights are outstanding and unexercisable at the time of such termination and
all stock subject to a right of repurchase by the

 

3

 

Company (or its successor) that was purchased prior to
the Change of Control shall have such right of repurchase lapse with respect to
all of the shares;

 

(iv)                the
same level of health (i.e., medical, vision and dental) coverage and benefits
as in effect for the Employee on the day immediately preceding the day of the
Employee’s termination of employment; provided, however, that (i) the
Employee constitutes a qualified beneficiary, as defined in Section 4980B(g)(1) of
the Internal Revenue Code of 1986, as amended; and  (ii) Employee elects continuation
coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended (“COBRA”), within the time period prescribed pursuant to
COBRA.  The Company shall continue to
provide Employee with health coverage until the earlier of (i) the date
Employee is no longer eligible to receive continuation coverage pursuant to
COBRA, or (ii) twelve (12) months from the termination date.

 

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

 

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

 

(ii)                    one
hundred percent (100%) of Employee’s bonus for the year in which the Regular
Involuntary Termination occurs;

 

(iii)                 continued
vesting in Company stock options and share purchase rights granted to the
Employee prior to the date of the Regular Involuntary Termination, for a period
of twelve (12) months from the date of the Regular Involuntary Termination,
with the right to exercise said stock options and share purchase rights within
ninety (90) days from the end of said twelve-month period.

 

(c)                                  Termination
Apart from a Change of Control or Regular Involuntary Termination.  For avoidance of doubt, if the Employee’s
employment with the Company terminates as a result of Cause, then the Employee
shall not be entitled to receive severance or other benefits hereunder, but may
be eligible for those benefits (if any) as may then be established under the
Company’s then existing severance and benefits plans and policies at the time
of such termination.

 

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

 

4

 

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

 

(a)                                  delivered
in full, or

 

(b)                                 delivered
as to such lesser extent which would result in no portion of such benefits
being subject to the Excise Tax, 

 

whichever
of the foregoing amounts, taking into account the applicable federal, state and
local income taxes and the Excise Tax, results in the receipt by Employee on an
after-tax basis, of the greatest amount of benefits, notwithstanding that all
or some portion of such benefits may be taxable under Section 4999 of the
Code.

 

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

 

6.                                       Successors.

 

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

 

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

 

5

 

7.                                       Notices.

 

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

 

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

 

8.                                       Arbitration.

 

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

 

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

 

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

 

(d)                                 EMPLOYEE
HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION.  EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY

 

6

 

CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION
WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES
A WAIVER OF EMPLOYEE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF
ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP,
INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:

 

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

 

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

 

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

 

9.                                       Miscellaneous Provisions.

 

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

 

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

 

(c)                                  Integration.  This Agreement and any outstanding stock
option agreements and restricted stock purchase agreements referenced herein
represent the entire agreement and understanding between the parties as to the
subject matter herein and supersede all prior or contemporaneous agreements,
whether written or oral, with respect to this Agreement and any stock option
agreement or restricted stock purchase agreement.

 

7

 

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

 

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

 

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

 

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

 

8

 

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

 

	
  COMPANY:

  	
   

  	
  UTSTARCOM, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Russell L. Boltwood

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EMPLOYEE:

  	
   

  	
  /s/ Francis P. Barton

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Francis P. Barton

  
	
   

  	
   

  	
  Printed Name

  
					

 

9Exhibit 10.3

 

 

July 29, 2005

 

(Delivery by Facsimile and Overnight Courier)

 

Francis P. Barton

14720 Montalvo Road

Saratoga, CA 95070

 

Dear Fran:

 

I am pleased to confirm UTStarcom’s job offer to you for
the position of Executive Vice President and
Chief Financial Officer, with
a starting date of August 1, 2005. 
This position reports directly to Hong Lu, the Company’s Chairman, Chief
Executive Officer and President, and is located at the Company’s headquarters
in Alameda, California.

 

The key elements of this employment offer are as follows:

 

Salary: 
Your gross annual salary is $500,000.  Paydays are on the 15th and the
last day of each month.  Direct deposit
is available.

 

Signing Bonus: You will be paid a gross signing bonus amount of $250,000, payable upon the commencement of
your employment with the Company.

 

Options:  You will be granted UTStarcom
stock options and share purchase rights, as follows:

 

a)              Stock Options: You will be granted UTStarcom stock options in the total amount of
400,000 shares, at the fair market value (i.e., market closing price) on the
grant date, which shall be Monday August 1, 2005.  These options will be vested in four years
from the grant date: 25% of the options will be vested after one year, and the
remaining shares will be vested at 1/36th per month thereafter.

 

b)             Share Purchase Rights:  You will be granted UTStarcom
share purchase rights (SPRs) in the total amount of 100,000 shares, with the
opportunity for you to exercise these rights at a per share price of $0.00125 within
60 days of the date of this offer letter. 
These SPRs will be vested in four years from the grant date: 25% of the
SPRs will be vested after one year from the date of grant, 25% after two years,
25% after three years, and 25% after four years from the date of grant.

 

Annual Bonus:  For calendar year 2005, you will
be eligible for a total gross cash bonus amount of up to $250,000, of which
$125,000 shall be guaranteed to you. 
Your total aggregate bonus will be based upon completion of mutually
agreed upon performance objectives as determined by Hong Lu, and paid in February 2006.

 

Change in Control/Involuntary Termination
Agreement:  You will be offered a change in control agreement between yourself and the
Company, which shall include mutually agreed upon language which will provide
that in the case of your involuntary termination from Company service (in a
case other than change in control), that you would receive a gross payment
equal to one year’s gross base salary (equal to the base salary in effect at
the time of your involuntary termination); full payment of the gross annual
bonus being offered at the time of your involuntary termination; and continued
vesting in Company stock options and SPRs granted prior to the date of your
involuntary termination for a period of twelve (12) months from the date of
your involuntary termination.

 

 

Paid Time Off (PTO): You will be provided at the inception of your employment with an accrual
rate for PTO equivalent to 25 days per year, which will continue during your
employment with the Company pursuant to the Company’s policies relating to PTO
accrual and use.

 

Transportation Assistance: The Company will provide for you, on a net taxation basis, a driving
service to transport you from your home to the Company’s Alameda offices for
purposes of work on Mondays through Fridays.

 

Please be prepared to provide proof of eligibility for
employment in the United States on your first day of work, in compliance with
the Immigration Reform and Control Act (Form I-9).  Additionally, this offer of employment is contingent upon
completion of both personal reference verifications, and a criminal background
check.  UTStarcom reserves the right to withdraw its offer of employment to you if the results
of the reference verifications and/or the criminal background check are not
satisfactory, in the sole judgment of UTStarcom.

 

As an employee of the Company, you will be expected to
abide by Company rules and regulations. You will be expected to sign and
comply with an agreement, which requires, among other provisions, the
non-disclosure of proprietary information.

 

Under separate cover I will forward to you the following
materials for your review: a proposed Change in Control Agreement (as described
above); a proposed Indemnification Agreement; a Director and Officers’
Questionnaire; and a Power of Attorney regarding outside counsel’s filing of
SEC Forms 3/4/5 on your behalf.

 

We are pleased that you have chosen to become part of the
UTStarcom team, and wish you the very best as you begin your employment with
UTStarcom. If you have any questions about UTStarcom or its benefit programs,
please feel free to contact either myself at 510-749-1530 (or
Russell@utstar.com), or Ed Hudson, the Company’s Director of Human Resources,
at 510-769-2828 (or ed.hudson@utstar.com).

 

Please sign one copy of this letter to indicate your intent
to accept the terms and conditions of this offer letter, and please return the
signed copy to the Human Resource Department confidential fax at (510) 338-4395.

 

Sincerely,

 

 

	
  Russell L. Boltwood

  	
   

  
	
  General Counsel/CHRO

  	
   

  

 

 

I accept the terms and conditions of this offer letter, and
I understand that it replaces those of any earlier offers of employment (if
any).

 

 

	
  Signed:

  	
  /s/ Francis P. Barton

  	
   

  
	
   

  	
  Employee Signature

  
	
   

  	
   

  
	
  Print Name:

  	
  Francis P. Barton

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  July 29, 2005

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