| We look forward to seeing you at the meeting. | | Sincerely, |
| Sincerely,
|
|
/s/ HONG LIANG LU
| |
Hong Liang Lu |
| Chief Executive Officer |
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN. DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU ATTEND THE MEETING AND DESIRE TO WITHDRAW YOUR PROXY, YOU MAY VOTE IN PERSON AND, AT YOUR REQUEST, YOUR PROXY WILL BE WITHDRAWN.
UTSTARCOM, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held November 29, 2007June 27, 2008
To our Stockholders: NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the “"Annual Meeting”") of UTStarcom, Inc. (the “"Company”"), will be held on Thursday, November 29, 2007Friday, June 27, 2008 at 1:001 p.m., local time, at the offices of the Company, 1275 Harbor Bay Parkway, Alameda, California 94502, for the following purposes: To elect oneLarry D. Horner and Allen Lenzmeier as Class I DirectorII Directors to serve for a term expiring on the date on which the Company’sCompany's annual meeting of stockholders is held in the year 2010;2011;
2.To ratify and approve the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2007;2008;
3.To approve a stock option exchange program for employees (excluding executive officers and3. directors), pursuant to which eligible employees will be offered the opportunity to exchange their eligible options to purchase shares of common stock outstanding under the Company's existing equity incentive plans, for a smaller number of new options at a lower exercise price; and
4.To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.The foregoing items of business are more fully described in the proxy statement accompanying this notice. Only stockholders of record at the close of business on October 17, 2007April 29, 2008 are entitled to notice of, and to vote at, the Annual Meeting. All stockholders are cordially invited to attend the Annual Meeting in person. However, to assure your representation at the Annual Meeting, you are urged to submit your proxy and voting instructions over the Internet or by telephone, or complete, sign, date and return the enclosed proxy card as promptly as possible in the postage-paid envelope enclosed for that purpose. Any stockholder of record attending the Annual Meeting may vote in person even if he or she returned a proxy. Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on June 27, 2008: The Proxy Statement and Annual Report to Stockholders for the fiscal year ended December 31, 2007 are available free of charge at [ ]. | | By Order of the Board of Directors |
|
|
/s/ FRANCIS P. BARTON
| | |
Francis P. Barton |
|
| Executive Vice President and
Chief Financial Officer |
Alameda, California
October 23, 2007[ ], 2008
YOUR VOTE IS IMPORTANT
To assure your representation at the Annual Meeting, you are asked to submit your proxy and voting instructions over the Internet or by telephone, or complete, sign and date the enclosed proxy as promptly as possible and return it in the enclosed postage-paid envelope, which requires no postage if mailed in the United States.
UTSTARCOM, INC.
PROXY STATEMENT
INFORMATION ABOUT THE PROXY STATEMENT AND
VOTING AT THE ANNUAL MEETING Q: Why am I receiving these materials?
A:The Board of Directors (the “"Board”" or “"Board of Directors”") of UTStarcom, Inc. (the “"Company”") is providing this proxy statement (the “"Proxy Statement”") prepared in connection with the Company’sCompany's annual meeting of stockholders, which will take place on Thursday, November 29, 2007Friday, June 27, 2008 at 1:001 p.m., local time (the “"Annual Meeting”" or “2007"2008 Annual Meeting”") at the offices of the Company, 1275 Harbor Bay Parkway, Alameda, California 94502. The Company’sCompany's telephone number at that location is (510) 864-8800. As a stockholder, you are invited to attend the Annual Meeting and are asked to vote on the proposals described in this Proxy Statement.
Only stockholders of record at the close of business on October 17, 2007April 29, 2008 (the “"Record Date”") are entitled to notice of, and to vote at, the Annual Meeting. As of the Record Date, 121,294,645[ ] shares of the Company’sCompany's common stock, par value $0.00125 per share (the “"Common Stock”"), were issued and outstanding. No shares of the Company’sCompany's preferred stock, par value $0.00125 per share, were issued and outstanding. The stock transfer books will not be closed between the Record Date and the date of the Annual Meeting. These proxy solicitation materials and the Company’sCompany's Annual Report to stockholders for the year ended December 31, 20062007 were mailed on or about October 23, 2007[ ], 2008 to all stockholders entitled to vote at the Annual Meeting. - Q:
- What
information is containedthe purpose of the Annual Meeting?
- A:
- To vote on the following proposals:
- •
- To elect Larry D. Horner and Allen Lenzmeier as Class II Directors to serve for a term expiring on the date on which the Company's annual meeting of stockholders is held in
this Proxy Statement?the year 2011;
- •
- To ratify and approve the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2008;
- •
- To approve a stock option exchange program for employees (excluding executive officers and directors), pursuant to which eligible employees will be offered the opportunity to exchange their eligible options to purchase shares of common stock outstanding under the Company's existing equity incentive plans, for a smaller number of new options at a lower exercise price; and
- •
- To transact such other business as may properly come before the Annual Meeting or at any adjournment or postponement thereof.
- Q:
AWhat are the Board of Directors' recommendations?
- A:
: - The
informationBoard recommends that you vote your shares:
- •
- "FOR" the election of Larry D. Horner and Allen Lenzmeier as Class II directors;
- •
- "FOR" the ratification and approval of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the 2008 fiscal year,
- •
- "FOR" the stock option exchange program for employees, as described above; and
Each proxy also gives each of the proxy holders discretionary authority to vote your shares in this Proxy Statement relatesaccordance with his or her judgment with respect to all additional matters that might come before the Annual Meeting.
- Q;
- Who is entitled to vote at the Annual Meeting?
- A:
- Stockholders Entitled to Vote. Stockholders who our records show owned shares of UTStarcom Common Stock as of the close of business on the Record Date (April 29, 2008) may vote at the Annual Meeting.
Registered Stockholders. If your shares are registered directly in your name with UTStarcom's transfer agent, you are considered, with respect to those shares, the stockholder of record, and these proxy materials are being provided to you directly by UTStarcom. As the stockholder of record, you have the right to grant your voting proxy directly to the proposalsindividuals listed on the proxy card, or to be voted onvote in person at the Annual Meeting. Street Name Stockholders. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in "street name." These proxy materials are being forwarded to you by your broker, bank or other nominee, who is considered, with respect to those shares, the record holder. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote, and you are also invited to attend the Annual Meeting. However, since you are not the record holder, you may not vote these shares in person at the Annual Meeting unless you follow your broker, bank or other nominee's procedures for obtaining a legal proxy. Your broker, bank or other nominee has provided a voting instruction card for you to use.
- Q:
- How many votes do I have?
- A:
- On each proposal to be voted upon, you have one vote for each share of Common Stock of the
voting process,Company you own as of the compensation of our directors and most highly paid executive officers in 2006, and certain other required information.Record Date.
- Q:
- How may I obtain a separate set of proxy materials or Proxy Statement for
2007?2008?
AA::- If you share an address with another stockholder,
and previously consented to receiving one copy of the Proxy Statement on a voter instruction card submitted for last year’syear's annual meeting of stockholders and do not participate in electronic delivery of proxy materials, only one copy of this Proxy Statement is being delivered to you. A stockholder at a shared address who received a single copy of this Proxy Statement may request a separate copy either by calling the number provided below or by mailing a written request to the Company’sCompany's principal executive offices at the address below:
Corporate Secretary
UTStarcom, Inc.
1275 Harbor Bay Parkway
Alameda, California 94502
510-864-8800 The Company will promptly mail a separate copy of this Proxy Statement upon such request, but any such request should be made as soon as possible to ensure timely delivery. Stockholders who share an address and received multiple copies of this Proxy Statement may also request that a single copy of future proxy statements be delivered by filling out the applicable section of the voter instruction card for the Annual Meeting.
- Q:
What proposals will be voted on at the Annual Meeting? A:The proposals scheduled to be voted on at the Annual Meeting are:· The election of one Class I Director; and
· The ratification and approval of the appointment of PricewaterhouseCoopers LLP as the independent registered accounting firm of the Company for the fiscal year ending December 31, 2007.
Q: How does the Board recommend that I vote?
A:The Board recommends that you vote your shares “FOR” the nominee to the Board and “FOR” the ratification and approval of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the 2007 fiscal year.
Q: How many votes do I have?
A:On each proposal to be voted upon, you have one vote for each share of Common Stock of the Company you own as of the Record Date.
Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?
A:Many of the Company’s stockholders hold their shares through a broker or other nominee rather than directly in their own names. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
Stockholder of Record:If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., as of the Record Date, you are considered, with respect to those shares, the stockholder of record, and these proxy materials are being sent directly to you by the Company. As the stockholder of record, you have the right to grant your voting proxy directly to the Company or to vote in person at the Annual Meeting. The Company has enclosed a proxy card for your use.
Beneficial Owner:If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you together with a voting instruction card by your broker, trustee or nominee, as the case may be. As the beneficial owner, you have the right to direct your broker, trustee or nominee how to vote, and you are also invited to attend the Annual Meeting. Since a beneficial owner is not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares giving you the right to vote the shares at the meeting. Your broker, trustee or nominee has enclosed or provided voting instructions for you to use in directing the broker, trustee or other nominee how to vote your shares.
Q:How can I vote my shares in person at the Annual Meeting?
- A:
A:Shares held in your name as the stockholder of record may be voted by you in person at the Annual Meeting. Shares held beneficially in street name may be voted by you in person at the Annual Meeting only if you obtain a legal proxy from the broker, trusteebank or other nominee that holds your shares giving you the right to vote the shares.Even if you plan to attend the Annual
Meeting, we recommend that you also submit your proxy or voting instructions as described below so that your vote will be counted if you later decide not to attend the meeting.
- Q:
- How can I vote my shares without attending the Annual Meeting?
AA::- Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the Annual Meeting. If you are a stockholder of record, you may vote by submitting a proxy. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker,
trusteebank or other nominee. For directions on how to vote, please refer to the instructions below and those included on your proxy card or, for shares held beneficially in street name, the voting instruction card provided by your broker, trusteebank or other nominee.
By Internet:Stockholders of record with Internet access may submit proxies by following the “Vote-Using-the-Internet”"Vote by Internet" instructions on their proxy cards until 1:00 a.m., Central Time, on November 29, 2007.June 27, 2008. Most stockholders who hold shares beneficially in street name may vote by accessing the web site specified on the voting instruction cards provided by their brokers, trusteesbanks or other nominees. Please check the voting instruction card for Internet voting availability. By Telephone:Stockholders of record who live in the United States, Canada or CanadaPuerto Rico may submit proxies by following the “Vote-Using-the-Telephone”"Vote by telephone" instructions on their proxy cards until 1:00 a.m., Central Time, on November 29, 2007.June 27, 2008. Most stockholders who hold shares beneficially in street name may vote by phone by calling the number specified on the voting instruction cards provided by their brokers, trusteesbanks or other nominees. Please check the voting instruction card for telephone voting availability. By Mail:Stockholders of record may submit proxies by completing, signing and dating their proxy cards and mailing them in the accompanying pre-addressed envelopes. Proxy cards submitted by mail must be received by the time of the meeting in order for your shares to be voted. Stockholders who hold shares beneficially in street name may vote by mail by completing, signing and dating the voting instruction cards provided by their brokers, trusteesbanks or other nominees and mailing them in the accompanying pre-addressed envelopes.
- Q:
- Can I change my vote?
AA::You- For shares that you hold of record, you may change your proxy at any time prior to the proxy being used at the Annual Meeting by (i) delivering to the Corporate Secretary of the Company at UTStarcom, Inc., 1275 Harbor Bay Parkway, Alameda, California 94502 a written notice of revocation or a duly executed proxy bearing a later date, or (ii) attending the Annual Meeting and voting in person. The mere presence at the Annual Meeting of a stockholder who has appointed a proxy will not revoke the prior appointment. If not revoked, the proxy will be voted at the Annual Meeting in accordance with the instructions indicated on the proxy card, or if no instructions are indicated, will be voted
“FOR”"FOR" the nominee for the Board described herein, “FOR”election of Larry D. Horner and Allen Lenzmeier as Class II directors, "FOR" Proposal No. 2 (to ratify the appointment of PriceWaterhouseCoopers) and "FOR" Proposal No. 3 (to approve the stock option exchange program), and, as to any other matter that may properly be brought before the Annual Meeting, in accordance with the judgment of the proxy holders. For shares you hold beneficially in street name, you may change your vote by submitting new voting instructions to your broker, trusteebank or other nominee following the instruction they provided, or, if you have obtained a legal proxy from your broker, bank or other nominee giving you the right to vote your shares, by attending the meeting and voting in person.
- Q:
- How many shares must be present or represented to conduct business at the Annual Meeting?
AA::- The quorum requirement for holding the Annual Meeting and transacting business is that holders of a majority
of thein voting power of the issued and outstanding Common Stock of the Company issued and outstanding and
entitled to vote at the Annual Meeting, as of the Record Date, must be present in person or represented by proxy. Both abstentions and broker non-votes (described below) are counted for the purpose of determining the presence of a quorum.
- Q:
- What is the voting requirement to approve each of the proposals?
AA::Since only one director is nominated for- In the election
toof directors, the Boardtwo nominees receiving the highest number of Directors"FOR" votes at the Annual Meeting the nominee will be elected as a Class I director if he receives a minimum of one affirmative vote.elected.
The proposalproposals to (i) ratify the appointment of PricewaterhouseCoopers LLP as the Company’sCompany's independent registered public accounting firm requiresand (ii) approve the stock option exchange program for employees described in this Proxy Statement, each require the affirmative “FOR”"FOR" vote of a majority of the total number of shares present in person or represented by proxy and entitled to vote on the proposal at the Annual Meeting.
- Q:
- How are votes counted?
- A:
- In the election of directors, you may vote
“FOR”"FOR" the nominee or your vote may be “WITHHELD”"WITHHELD" with respect to the nominee. Votes “WITHHELD”"WITHHELD" with respect to the election of directors will be counted for purposes of determining the presence or absence of a quorum at the Annual Meeting but will have no other legal effect upon election of directors. You may not cumulate your votes for the election of directors.
For the proposalproposals to (i) ratify the appointment of PricewaterhouseCoopers LLP as the Company’sCompany's independent registered public accounting firm, and (ii) approve a stock option exchange program for employees described in this Proxy Statement, you may vote “FOR,” “AGAINST”"FOR," "AGAINST" or “ABSTAIN.”"ABSTAIN." If you elect to “ABSTAIN,”"ABSTAIN," the abstention has the same effect as a vote “AGAINST.”"AGAINST" such proposal. If you provide specific instructions with regard to certain proposals, your shares will be voted as you instruct on such proposals.
- Q:
- What is the effect of broker non-votes?
AA::- If you hold shares beneficially in street name and do not provide your broker, bank or other nominee with voting instructions, your shares may constitute
“broker"broker non-votes.”" Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. At this Annual Meeting, only Proposal 3 is subject to broker non-votes. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote or votes cast on that proposal. Thus, broker non-votes will not affect the outcome of any proposal being voted on at the Annual Meeting, but will count towards establishing quorum. Abstentions, however, as noted above, will have the same effect as votes against the proposal.Meeting.
- Q:
- Who will serve as inspector of elections?
AA::- The inspector of elections will be a representative from Computershare Trust Company,
N.A.,N.A, the Company’sCompany's transfer agent.
- Q:
- Who will bear the cost of soliciting votes for the Annual Meeting?
AA::- This solicitation is made by the Company, and all costs associated with soliciting proxies will be borne by the Company. We have retained The Altman Group to assist with the solicitation for an estimated fee of
$6,500$9,500 plus reasonable out-of-pocket expenses. In addition, the Company will reimburse brokerage firms, banks and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials to such beneficial owners. Proxies may be solicited by certain of the Company’sCompany's directors, officers and regular employees personally or by
telephone, facsimile or electronic mail. No additional compensation will be paid to these persons for such services.
- Q:
- What is the deadline for submission of stockholder proposals for consideration at the
20082009 annual meeting of stockholders?
- A:
- Stockholder Proposals Other Than Nomination of Directors.
Under Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “"Exchange Act”"), if the date of our 2008 annual meeting (the “2008 Annual Meeting”) is moved more than 30 days before or after the anniversary of the 2007 Annual Meeting, then for a stockholder proposal including director nominations, to be considered for inclusion in the proxy statement for the 20082009 annual stockholders meeting (the "2009 Annual Meeting"), the Secretary of the Company mustwould have to receive the written proposal by sucha stockholder at the Company’sCompany's principal executive offices within a reasonable time before the Company begins to print and mail its proxy materials. We currently expect our 2008 Annual Meeting will be held on or around July 24, 2008, which will be moreno later than 30 days before the anniversary of the 2007 Annual Meeting. As such, in connection with such meeting stockholder proposals will be due by March 26, 2008., 2009. Such proposals also must comply with the other provisions of Rule 14a-8 and additional applicable Securities and Exchange Commission (“("SEC”") rules regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Notice of such proposals should be addressed to:
Corporate Secretary
UTStarcom, Inc.
1275 Harbor Bay Parkway
Alameda, California 94502 Please note that under Rule 14a-8, ifIf, however, the date of the 2008 Annual Meetingour 2009 annual meeting is not moved more than 30 days before or after the anniversary of the 20072008 Annual Meeting, then for a stockholder proposal under Rule 14a-8 to be considered for inclusion in the proxy statement for the 2009 Annual Meeting, the Secretary of the Company would have tomust receive the written proposal by asuch stockholder at the Company’sCompany's principal executive offices no later than 120 days priorwithin a reasonable time before the Company begins to the mailing date of this Proxy Statementprint and mail its proxy materials for the 20072009 Annual Meeting, which is June 25, 2008.Meeting.
For a stockholder proposal that is not intended to be included in the Company’sCompany's proxy statement under Rule 14a-8, the stockholder must, (i) deliver a proxy statement and form of proxy to holders of a sufficient number of shares of the Company’s Common Stock to approve that proposal, (ii) provide the information required by the Bylaws of the Company and (iii)(ii) give timely notice to the Corporate Secretary in accordance with the Bylaws. AccordingBylaws, which generally require that the notice be received by the Corporate Secretary of the Company prior to our Bylaws,, 2009. However, if the date of the 20082009 Annual Meeting (the "2009 Annual Meeting Date") is moved more than 30 days before or after the anniversary of the 20072008 Annual Meeting, as we expect to be the case, then the Board shall determine an appropriate date by which notice of a stockholder proposal that is not intended to be included in the Company’sCompany's proxy statement must be received by the Company (the “"Notice Deadline”"). The Company will publicize the Notice Deadline at least ten (10) days prior to the Notice Deadline by: ·by either a filing pursuant to the Securities Exchange Act of 1934, as amended,amended; or
· by a press release.
Please note that in accordance with our Bylaws, if the date of the 2008 Annual Meeting is not moved more than 30 days before or after the anniversary of the 2007 Annual Meeting, then the notice of a stockholder proposal must be received by the Corporate Secretary of the Company no later than 45 days prior to the mailing date of this Proxy Statement for the 2007 Annual Meeting, which is September 8, 2008.
Nomination of Director Candidates:The Company’sCompany's Bylaws permit stockholders to nominate directors for election at an annual stockholder meeting. To nominate a director, a stockholder must provide the information required by the Bylaws. To nominate directors for election at the 20082009 Annual Meeting, the stockholder making such nomination must give timely notice to the Corporate Secretary in accordance with the Bylaws, which must be received by the Corporate Secretary not less than one hundred twenty (120) days prior to the date of the 20082009 Annual Meeting. However, in the event the Company fails to publicize the 20082009 Annual Meeting Date at least one hundred thirty (130) days prior to the 20082009 Annual Meeting, notice by a stockholder must be received by the Corporate Secretary within ten (10) days of: ·
- •
- the first public disclosure of the
20082009 Annual Meeting Date by the Company, or·
- •
- the date the notice of the
20082009 Annual Meeting Date is mailed to the Company’sCompany's stockholders.
As noted above, we currently expect our 20082009 Annual Meeting will be held on or around July 24, 2008., 2009. As such, a stockholder must provide notice to the Corporate Secretary of a director nomination by March 26, 2008., 2009. Copy of Company Bylaws:Copies of the provisions of the Bylaws governing the form and delivery requirements of stockholder nominations or proposals may be obtained by sending an email request to the Company’sCompany's investor relations department at investorrelations@utstar.com. A copy of the entire Bylaws is available via the link entitled “Corporate Governance”"Corporate Governance" on the Company’sCompany's website athttp://investorrelations.utstar.com/governancegovernance..
- Q:
- What if I have questions about lost stock certificates or need to change my mailing address?
- A:
- You may contact our transfer agent, Computershare, by telephone at 781-575-2879, by facsimile at 781-575-3266 or email at www.computershare.com/investor if you have lost your stock certificate or need to change your mailing address.
FORWARD-LOOKING STATEMENTS
6 This Proxy Statement contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on our current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding actions to be taken by us. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Forward-looking statements should be evaluated together with the many uncertainties that affect our business, particularly those mentioned in the section on forward-looking statements and in the risk factors in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and in our periodic reports on Form 10-Q and Form 8-K.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NomineeGeneral
The authorized number of directors of the Company is currently set at six.seven. The Company’sCompany's Bylaws provide that the Board of Directors may set the number of directors at a minimum of six and a maximum of eight members. The Company’sCompany's Certificate of Incorporation provides that directors shall be divided into three classes, with the classes serving for staggered, three-year terms (or less if they are filling a vacancy). Currently the boardBoard is comprised of onetwo Class I director,directors, two Class II directors and three Class III directors. Each of the twoThe Company's Class III Directors, Larry D. HornerThomas J. Toy and Allen Lenzmeier,Bruce J. Ryan, will hold office until the 20082010 annual meeting or until the Class II Director’sI Director's successor has been duly elected and qualified, and each of the three Class III Directors, Francis P. Barton, Jeff Clarke and Hong Liang Lu, will hold office until the 2009 annual meeting or until the Class III Director’sDirector's successor has been duly elected and qualified. The Company’s nomineeCompany's nominees for election as the Class I DirectorII Directors at this Annual Meeting is Thomas J. Toy,are the current Class I Director.II Directors, Larry D. Horner and Allen Lenzmeier. The Nominating and Corporate Governance Committee has recommended, and the Board of Directors has approved, the nomination of these nominees. Nominees The Board had anticipated that Mr. Horner, the Chairman of our Audit Committee, would retire from the Board of Directors after eight years of service but the Board has asked him to stand for re-election and remain on the Board to assist the Audit Committee during its leadership transition. The Board believes it is important that Mr. Horner be re-elected at this time in order to assure an effective transition of Audit Committee leadership. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Company’s nomineeCompany's nominees for the Class I Director, Thomas J. Toy,II Directors, Larry D. Horner and Allen Lenzmeier, who will hold office until the 20102011 annual meeting or until his successor hastheir successors have been duly elected and qualified. The Company expects that the nomineenominees for election as a Class I DirectorII Directors at the Annual Meeting will be able to serve if elected. In the event that theeither nominee of the Company becomes unable or declines to serve as a director at the time of the Annual Meeting, the proxy holders will vote the proxies for any substitute nominee who is designated by the current Board to fill the vacancy. Biographical Information for Director NomineeNominees Thomas J. ToyLarry D. Horner has served as a director since February 1995,January 2000. Mr. Horner currently serves on the board of directors of Atlantis Plastics, Inc., Clinical Data Inc., TOUSA, Inc. and several private companies. From 1994 until 2001, Mr. Horner served as Chairman of the Board since January 2007. Since March 1999, Mr. Toy hasPacific USA Holdings Corp., and from 1997 to 2001 he served as Managing DirectorChairman and Chief Executive Officer of PacRim Venture Partners,Asia Pacific Wire & Cable Corporation Limited. Mr. Horner formerly served as Chairman and Chief Executive Officer of KPMG from 1984 to 1990. Mr. Horner, a professional venture capital firm specializing in investments inCertified Public Accountant, holds a B.S. from the information technology sector. Since 2005, Mr. ToyUniversity of Kansas and is a graduate of the Stanford Executive Program.
Allen Lenzmeier has served as a partnerdirector since March 2005. Mr. Lenzmeier has served as the Vice Chairman of SmartForest Ventures, a professional venture firm specializing inBest Buy Co. Inc. since December 2004. From 2002 to 2004, Mr. Lenzmeier served as the information technology sector.President and Chief Operating Officer of Best Buy Co. Inc. Mr. Lenzmeier served as the President of Best Buy Retail from 2001 to 2002. From 1987 until 1992,1991 to 2001 Mr. Toy was employedLenzmeier served as athe Executive Vice President at Technology Funding and was a partner there from 1992 until 1999.Chief Financial Officer of Best Buy Co. Inc. and began his employment with the company in 1984. Mr. Toy alsoLenzmeier serves as a directoron the board of White Electronic Designs Corporation, Solarfun Power Holding anddirectors of several private companies. Mr. ToyLenzmeier holds B.A. and M.M. degreesa B.S. from Northwestern University.Minnesota State University Mankato.
Required Vote Since only one director is nominated The two nominees receiving the highest number of votes of the shares entitled to be voted for election to the Board of Directors at the Annual Meeting, he willsuch nominees shall be elected as a Class I director if he receives a minimum of one affirmative vote.II Directors. Votes withheld from any nominee will be counted for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Meeting, but have no other legal effect upon election of directors under the Delaware General Corporation Law.
THE COMPANY’SCOMPANY'S BOARD OF DIRECTORS RECOMMENDS VOTING
“FOR”"FOR" THE NOMINEENOMINEES SET FORTH HEREIN.
INFORMATION ABOUT OUR BOARD OF DIRECTORS
Our Directors and NomineeNominees The names of the Class I nominee and the current Class III and Class III Directorsdirectors with unexpired terms and the Class II nominees, their ages as of November 29, 2007April 30, 2008 and certain other information are set forth below: Name of Director | | | | Age | | Position | | Director
Since | | Term
Expires | | | Age
| | Position
| | Director Since
| | Term Expires
|
|---|
Class I Nominee: | | | | | | | | | | | | | | | | | | Class I Directors: | | | | | | | | | | Thomas J. Toy(1) | Thomas J. Toy(1) | | | 52 | | | Chairman of the Board | | | 1995 | | | | 2007 | | | Thomas J. Toy(1) | | 53 | | Chairman of the Board | | 1995 | | 2010 | Class II Directors: | | | | | | | | | | | | | | | | | | Bruce J. Ryan* | | | 64 | | Director | | 2008 | | 2010 | | Class II Nominees: | | | | | | | | | | Larry D. Horner | Larry D. Horner | | | 73 | | | Director | | | 2000 | | | | 2008 | | | | 74 | | Director | | 2000 | | 2008 | Allen Lenzmeier | Allen Lenzmeier | | | 64 | | | Director | | | 2005 | | | | 2008 | | | | 64 | | Director | | 2005 | | 2008 | Class III Directors: | Class III Directors: | | | | | | | | | | | | | | | | | | | | | | | | Francis P. Barton(2) | | | 61 | | | Director, Executive Vice President and Chief
Financial Officer | | | 2006 | | | | 2009 | | | | | Francis P. Barton | | | 61 | | Director, Executive Vice President and Chief Financial Officer | | 2006 | | 2009 | Jeff Clarke | Jeff Clarke | | | 46 | | | Director | | | 2005 | | | | 2009 | | | | 46 | | Director | | 2005 | | 2009 | Hong Liang Lu(3) | | | 53 | | | Director, Chief Executive Officer | | | 1991 | | | | 2009 | | | | | Hong Liang Lu | | | 53 | | Director, Chief Executive Officer | | 1991 | | 2009 |
(1)
- *
- Mr.
ToyRyan was appointed Chairman ofto the Board effective as of January 1, 2007.
Directors on April 10, 2008.(2) Mr. Barton was appointed as a Class III Director in October 2006.
(3) Mr. Lu served as Chairman of the Board until his resignation from that position effective as of December 31, 2006.
Except as set forth below, each nominee or incumbent director has been engaged in his principal occupation described below during the past five years. There are no family relationships between any of our directors or executive officers. Francis P. Bartonhas served as our Executive Vice President and Chief Financial Officer since August 2005 and as a director since October 2006. From May 2003 to July 2005, Mr. Barton was Executive Vice President and Chief Financial Officer of Atmel Corporation. From May 2001 to May 2003, Mr. Barton was Executive Vice President and Chief Financial Officer of BroadVision Inc. From 1998 to 2001, Mr. Barton was Senior Vice President and Chief Financial Officer of Advanced Micro Devices, Inc. From 1996 to 1998, Mr. Barton was Vice President and Chief Financial Officer of Amdahl Corporation. From 1974 to 1996, Mr. Barton worked at Digital Equipment Corporation, beginning his career as a financial analyst and moving his way up through various financial roles to Vice President and Chief Financial Officer of Digital Equipment Corporation’sCorporation's Personal Computer Division. Mr. Barton currently serves as a director of ON Semiconductor Corporation. He holds a B.S. in Chemical Engineering from Worcester Polytechnic Institute and an M.B.A. with a focus in finance from Northeastern University. Jeff Clarke has served as a director since January 2005. Since May 2006, Mr. Clarke has served as Chief Executive Officer and President and a director of Travelport Incorporated, a private company. From April 2004 to April 2006, Mr. Clarke served as the Chief Operating Officer of CA, Inc., a global provider of management software. From 2002 to 2004, Mr. Clarke was Executive Vice President of Global Operations of Hewlett-Packard Company, and prior to that he was the Chief Financial Officer of Compaq Computer Corporation. Mr. Clarke serves as a director of Orbitz Worldwide, Inc. He holds a B.A. in Economics from the State University of New York at Geneseo and an M.B.A. from Northeastern University.
Larry D. Horner has served as a director since January 2000. Mr. Horner currently serves on the board of directors of Atlantis Plastics, Inc., Clinical Data Inc., Technical Olympic USA,TOUSA, Inc. and several private companies.
companies. From 1994 until 2001, Mr. Horner served as Chairman of Pacific USA Holdings Corp., and from 1997 to 2001 he served as Chairman and Chief Executive Officer of Asia Pacific Wire & Cable Corporation Limited. Mr. Horner formerly served as Chairman and Chief Executive Officer of KPMG from 1984 to 1990. Mr. Horner, a Certified Public Accountant, holds a B.S. from the University of Kansas and is a graduate of the Stanford Executive Program. Allen Lenzmeier has served as a director since March 2005. Mr. Lenzmeier has served as the Vice Chairman of Best Buy Co. Inc. since December 2004. From 2002 to 2004, Mr. Lenzmeier served as the President and Chief Operating Officer of Best Buy Co. Inc. Mr. Lenzmeier served as the President of Best Buy Retail from 2001 to 2002. From 1991 to 2001 Mr. Lenzmeier served as the Executive Vice President and Chief Financial Officer of Best Buy Co. Inc. and began his employment with the company in 1984. Mr. Lenzmeier serves on the board of directors of several private companies. Mr. Lenzmeier holds a B.S. from Minnesota State University Mankato. Hong Liang Lu served as our President and Chief Executive Officer and as a director from June 1991 through December 2006, and as Chairman of the Board from March 2003 to December 2006. On January 1, 2007, he assumed the title of Chief Executive Officer. 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 Executive Officer 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 Officer of Unison World, Inc. Mr. Lu holds a B.S. in Civil Engineering from the University of California at Berkeley. Bruce J. Ryan has served as a director since April 2008. Mr. Ryan is currently a private consultant. From February 1998 to November 2002, he served as Executive Vice President and Chief Financial Officer of Global Knowledge Network, a provider of information technology and computer software training programs and certifications. From 1994 to 1997, he served as the Executive Vice President and Chief Financial Officer of Amdahl Corporation, a provider of information technology solutions. Mr. Ryan previously had a 25-year career at Digital Equipment Corporation, where he served in various executive positions, including Senior Vice President of the financial services, government and professional services business group. Mr. Ryan also serves as a director of KVH Industries, Inc., IONA Technologies PLC and several private companies. He holds a B.S. in business administration from Boston College and an M.B.A. from Suffolk University. Thomas J. Toy has served as a director since February 1995, and as Chairman of the Board since January 2007. Since March 1999, Mr. Toy has served as Managing Director of PacRim Venture Partners, a professional venture capital firm specializing in investments in the information technology sector. Since 2005, Mr. Toy has served as a partner of SmartForest Ventures, a professional venture firm specializing in the information technology sector. From 1987 until 1992, Mr. Toy was employed as a Vice President at Technology Funding and was a partner there from 1992 until 1999. Mr. Toy also serves as a director of White Electronic Designs Corporation, Solarfun Power HoldingHoldings and several private companies. Mr. Toy holds B.A. and M.M. degrees from Northwestern University. The Company’sCompany's Director Nomination Process The Board’sBoard's process for identifying and evaluating nominees for director consists mainly of evaluating candidates who are recommended by the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee identifies and recommends nominees for election or reelection to the Board, or for appointment to fill any vacancy that is anticipated or has arisen on the Board, in accordance with the criteria, policies and principles set forth in the Nominating and Corporate Governance Committee Charter, or otherwise approved by the
Board. In evaluating candidates to determine if they are qualified to become members of our board of directors, the Nominating and Corporate Governance Committee looks for the following attributes, among others: the candidate's judgment, skill, diversity and experience with other organizations of comparable purpose, complexity and size; the interplay of the candidate's experience with the experience of other Board members; the extent to which the candidate would be a desirable addition to the Board; whether or not the candidate has any relationships that might impair his or her independence; and the candidate's experience, perspective, skills and knowledge of our industry. Although the Nominating and Corporate Governance Committee uses these and other criteria to evaluate potential nominees, there are no stated minimum criteria for nominees. The Board may also, on a periodic basis, solicit ideas for possible candidates from a number of sources, including current members of the Board, senior Company executives, individuals personally known to members of the Board, stockholders and employment of one or more third-party search firms. It is the policy of the The Nominating and Corporate Governance CommitteeCommittee's policy is that stockholder nominations of director candidates will be given the same consideration and evaluated with the same criteria as candidates that are recommended internally.any other candidate. For more information on stockholder nominations of director candidates, please see the section entitled “Nomination"Nomination of Director Candidates”Candidates" under “Deadlines"Deadlines for Submission of Stockholder Proposals for 20082009 Annual Meeting”Meeting" in this Proxy Statement.
The form and delivery requirements of such stockholder nominations must comply with the relevant provisions of the Company’sCompany's Bylaws, a copy of which may be obtained by sending an email to the Company’sCompany's investor relations department at investorrelations@utstar.com. A complete copy of the Bylaws is also available on the Company’sCompany's website in the “Corporate Governance”"Corporate Governance" section. Stockholder Communications with the Board of Directors The Board of Directors has established a process for stockholders to communicate with members of the Board. All concerns, questions or complaints regarding the Company’sCompany's compliance with any policy or law, or any other Board-related communication, should be directed to the Board via the link entitled “Email"Email Board of Directors”Directors" athttp://investorrelations.utstar.com/governance. All substantive and appropriate communications received from stockholders will be received and reviewed by one or more independent directors, or officers acting under their direction, who will forward such communications to the Board or particular Board committees, as appropriate. Board Attendance, Director Independence and Financial Sophistication The Board held a total of 18 meetings during the fiscal year ended December 31, 2006.2007. During fiscal year 2006,2007, each of the directors (other than former director Ying Wu who resigned from the Board on July 24, 2007) attended 75% or more of the aggregate number of meetings of the Board and the committees of the Board on which the director served subsequent to becoming a director or a member of such committee, except for a former director, Ying Wu, who missed six meetings for reasons related to his corporate duties.committee. The Board’sBoard's policy is to encourage directors to attend the Annual Meeting. FiveThree directors attended the 20062007 annual meeting of stockholders. Of the Company’sCompany's incumbent directordirectors standing for reelection and those with continuing terms, Messrs. Clarke, Horner, Lenzmeier, Ryan and Toy have been determined by the Board to be independent as set forth in Rule 4200(a)(15) 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, Horner, Lenzmeier and LenzmeierRyan possess the attributes to be considered financially sophisticated for purposes of applicable NASDAQ Marketplace Rules and each has the background to be considered an “audit"audit committee financial expert”expert" as defined by the rules and regulations of the SEC and required by the NASDAQ Marketplace Rules. The Board has not established categorical standards or guidelines to make director independence determinations, but considers all relevant facts and circumstances. The Board based its determinations
primarily on a review of the responses of the directors to questions regarding employment and compensation history, affiliations, family and other relationships, and on discussions with our directors. In making its independence determinations, the Board considered transactions between the Company and entities associated with the independent directors or members of their immediate family. All identified transactions that appear to relate to the Company and a person or entity with a known connection to a director are presented to the Board for consideration. In making its determination that each non-employee director is independent, the Board considered the transactions in the context of the NASDAQ standards, the special standards established by the SEC for members of audit committees, and the SEC and Internal Revenue Service standards for compensation committee members. The Board’sBoard's independence determinations included a review of the status of certain executive 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 these relationships and/or amounts involved, the relationships did not impair Mr. Toy’sToy's independence.
Board Committees and Related Functions The principal standing committees of the Board are the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee, each of which consists solely of non-employee, independent directors. From time to time, the Board may form a special committee or subcommittee of a standing committee to focus on specific matters. The Audit Committee of the Board is a separately-designated, standing committee of the Board of Directors and currently consists of fourfive members of the Board of Directors, all of whom: (1) meet the criteria for “independence”"independence" set forth in rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended, and the listing standards of the NASDAQ Stock Market; (2) have not participated in the preparation of the financial statements of the Company or any of its current subsidiaries at any time during the past three years; and (3) are able to read and understand fundamental financial statements, including a company’scompany's balance sheet, income statement and cash flow statement. The members of the Audit Committee are Mr. Horner, who chairs the committee, and Messrs. Clarke, Lenzmeier, Ryan and Toy. Mr. Ryan was appointed as a member of the Committee effective April 25, 2008. The Audit Committee held 3222 meetings during the 20062007 fiscal year. Messrs. Clarke, Horner, Lenzmeier and LenzmeierRyan have been determined by the Board to qualify as “audit"audit committee financial experts”experts" under applicable SEC and NASDAQ rules. The Audit Committee, among other duties and responsibilities, (i) reviews and approves the annual appointment of the Company’sCompany's independent registered public accounting firm; (ii) discusses and reviews in advance the scope and fees of the annual audit; (iii) reviews the results of the audit with the independent registered public accounting firm and discusses the foregoing with the Company’sCompany's management; (iv) reviews and approves non-audit services of the independent registered public accounting firm; (v) reviews compliance with the Company’sCompany's existing major accounting and financial reporting policies; (vi) reviews and approves all related-party transactions that would require disclosure pursuant to the rules of the SEC and the policies and procedures related to such transactions; and (vii) provides oversight and monitoring of the Company’sCompany's management and their activities with respect to the Company’sCompany's financial reporting process. In connection with the execution of the responsibilities of the Audit Committee, including the review of the Company’sCompany's quarterly earnings reports prior to public release, Audit Committee members communicated throughout 20062007 with the Company’sCompany's management and the independent registered public accounting firm.
On February 1, 2007, the The Board has approved a revisedan Audit Committee Charter a copy of which is reviewed at least annually, periodically revised (most recently on July 26, 2007), and is available on the Company’sCompany's website athttp://investorrelations.utstar.com/governance.
The Nominating and Corporate Governance Committee currently consists of four members of the Board of Directors, all of whom are “independent”"independent" in accordance with the rules of the NASDAQ Stock Market. The current members of the Committee are Mr. Clarke, who chairs the committee, and Messrs. Horner, Lenzmeier and Toy. The Nominating and Corporate Governance Committee held four formal9 meetings during the last2007 fiscal year. In addition, Mr. Clarke, as the Chairman of the committee, and on behalf of the committee, held 14 meetings with outside counsel and accountants during the last fiscal year in connection with the Company’s voluntary review of our historical stock option granting practices and the accounting with respect thereto. The Nominating and Corporate Governance Committee’sCommittee's responsibilities include the selection of director nominees for the Board and the development and annual review of the Company’sCompany's governance principles. The Nominating and Corporate Governance Committee also (i) assists the Board by actively identifying individuals qualified to become Board members; (ii) recommends director nominees to the
Board for election at the next annual meeting of stockholders; (iii) monitors significant developments in the law and practice of corporate governance and of the duties and responsibilities of directorsdirectors of public companies; (iv) leads the Board in its annual performance self-evaluation, including establishing criteria to be used in connection with such evaluation; (v) oversees compliance with the Company’sCompany's Code of Business Conduct and Ethics; and (vi) develops and recommends to the Board and administers the corporate governance guidelines of the Company, including appropriate stock ownership guidelines for officers and directors. The Nominating and Corporate Governance Committee is also responsible for reviewing with the Board, from time to time, the appropriate skills and characteristics required of Board members in the context of the current composition of the Board. This assessment includes issues of diversity in numerous factors, including independence, operational experience as a senior executive, business judgment, age, understanding of the industry, willingness to mentor, personal network, and international perspective. Additional criteria include a candidate’scandidate's personal and professional credibility, integrity and prestige, and his or her ability to blend with the Company’sCompany's Board dynamics, as well as his or her willingness to devote sufficient time to attend meetings of the Board. The Nominating and Corporate Governance Committee reviews these factors and others deemed useful in the context of an assessment of the perceived needs of the Board at a particular point in time. As a result, the priorities and emphasis of the Nominating and Corporate Governance Committee and of the Board may change from time to time to take into account changes in business and other trends, andin addition to the portfolio of skills and experience of current and prospective directors. On March 29, 2004, the The Board has adopted a charter of the Nominating and Corporate Governance Committee, addressing the nominations process and such related matters as may be required under federal securities laws and NASDAQ Marketplace Rule 4350(c)(4)(B). A copy of the Nominating and Corporate Governance Committee Charter, which is reviewed at least annually and is periodically revised (most recently on April 10, 2008), is available on the Company’sCompany's website athttp://investorrelations.utstar.com/governance.
The Compensation Committee currently consists of four members of the Board of Directors, Mr. Lenzmeier, who chairs the committee, and Messrs. Clarke, Horner and Toy, all of whom are non-employee, outside directors in addition to being “independent directors”"independent directors" as defined under the rules of the NASDAQ Stock Market. The Compensation Committee met eight12 times during fiscal year 2006.2007 and acted twice by written consent. Messrs. Horner, Lenzmeier and Toy served on the Committee
throughout fiscal year 2006, with2007. Mr. Toy servingserved as Chairman. OnChairman until April 27, 2007 when Mr. Lenzmeier replaced Mr. Toysucceeded him as Chairman of the Committee andChairman. Mr. Clarke was appointed a member of the Committee.Committee on April 27, 2007. The purpose of the Compensation Committee is to (i) approve and oversee the total compensation package for the Company’sCompany's executives, including their base salaries, incentives, deferred compensation, equity-based compensation, benefits and perquisites; (ii) review and approve corporate goals and objectives relevant to the compensation of the Company’sCompany's Chief Executive Officer (the “"CEO”"), evaluate CEO performance, and determine CEO compensation based on this evaluation; (iii) review the CEO’sCEO's performance evaluation of all executive officers and approve pay decisions; and (iv) review periodically and make recommendations to the Board regarding any equity or long-term compensation plans, and administer these plans. The Compensation Committee operates according to a charter that details its specific duties and responsibilities. The charter is reviewed at least annually, periodically revised (most recently on February 1,October 25, 2007) by the Compensation Committee, and is available on the Company’sCompany's website athttp://investorrelations.utstar.com/governance. The charter provides that the purpose of the Compensation Committee is to discharge the responsibilities of the Board relating to all compensation, including equity compensation of the Company’s executives. The charter also generally provides the membership
requirements, authority and duties of the Compensation Committee. The Compensation Committee is to consist of no fewer than three members, all of whom (i) meet the independence requirements of the NASDAQ Marketplace Rules, (ii) are “non-employee directors”"non-employee directors" under the definition of Rule 16b-3 promulgated under Section 16 of the Exchange Act, and (iii) are “outside directors”"outside directors" for purposes of the regulations promulgated under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “"Internal Revenue Code”"). During the fiscal year ended December 31, 2006,2007, all members of the Compensation Committee met these criteria. UTStarcom’s UTStarcom's Human Resources department supports the Compensation Committee in its work. The Compensation Committee also has the authority to engage the services of outside advisers, experts and others for assistance. From time to time, the Compensation Committee may direct an external advisor to work with the Human Resources department to support management and the Compensation Committee in matters such as (i) peer group development, (ii) executive officer benchmarking, including pay-for-performance analyses and tally sheet preparation, and (iii) advising on pay levels and/or pay program design. During 2006,In May 2007, the Compensation Committee did not employ anretained Compensia, Inc. as its independent outside compensation consultant; however, it began working with Compensia, Inc.consultant. For a further description of the role of the compensation consultant in our compensation process, please see the section entitled "Engagement of and Role of Independent Compensation Consultant" in the Compensation Discussion and Analysis contained in this Proxy Statement.
In May 2006, the Board of Directors formed a special committee (the "Special Committee") to consider strategic alternatives available to the Company. Mr. Toy was designated the Chairman of the Special Committee and Messrs. Clarke, Horner and Lenzmeier were appointed as members. The Special Committee completed its work in May of 2007. Compensation Committee Interlocks and Insider Participation The Compensation Committee consisted of Messrs. Clarke, Horner, Lenzmeier and Toy throughoutduring the 20062007 fiscal year. All members of the Compensation Committee during 20062007 were independent directors in accordance with the applicable independence requirements of the NASDAQ Marketplace Rules, and none were employees or officers or former employees of the Company. During 2006,2007, no executive officer of the Company served on the compensation committee (or equivalent) or board of directors of another entity whose executive officer(s) served on the Company’sCompany's Compensation Committee or Board.
Director Compensation for Fiscal Year 20062007 Directors who are our employees receive no additional compensation for serving on the Board of Directors. In fiscal year 2006,2007, our non-employee directors received a quarterly participation fee for attendance at Board meetings.both cash and equity compensation as described below. In addition, non-employee directors received annual retainer fees for committee membership and other duties. Wewe reimburse all directors for travel and other related expenses incurred in connection with our business, including attending stockholder meetings and meetings of the Board or any Board committee. The following table sets forth information concerning compensation paid or accrued for services rendered to us in all capacities by our non-employee directors (other than Mr. Ryan who was appointed to the Board in April 2008) for the fiscal year ended December 31, 2006.2007. Name | | | | Fees
Earned or
Paid in
Cash
($) | | Stock
Awards ($) (1) | | Option
Awards
($)(2) | | Total
($) | | | Fees Earned
or Paid
in Cash ($)(1)
| | Stock
Awards ($)(2)
| | Option
Awards ($)(3)
| | Total ($)
|
|---|
Jeff Clarke | Jeff Clarke | | $ | 161,950 | | | $ | 58,433 | (3) | | $ | 254,293 | (4) | $ | 474,676 | | | 133,000 | | 24,686 | (4) | 200,814 | (5) | 358,500 | Larry D. Horner | Larry D. Horner | | $ | 197,450 | | | $ | 59,457 | (5) | | $ | 105,502 | (6) | $ | 362,409 | | | 153,500 | | 25,695 | (6) | 28,062 | (7) | 207,257 | Allen Lenzmeier | Allen Lenzmeier | | $ | 156,950 | | | $ | 59,457 | (7) | | $ | 214,886 | (8) | $ | 431,293 | | | 127,000 | | 24,778 | (8) | 160,312 | (9) | 312,090 | Thomas J. Toy | Thomas J. Toy | | $ | 463,503 | | | $ | 57,241 | (9) | | $ | 103,520 | (10) | $ | 624,264 | | | 496,434 | | 24,582 | (10) | 26,851 | (11) | 547,867 |
- (1)
Amounts include the following payments in connection with the activities of the Special Committee during 2007: $147,000 to Mr. Toy as Chairman; $58,000 to Mr. Clarke as a member; $58,000 to Mr. Horner as a member; and $55,000 to Mr. Lenzmeier as a member. The Special Committee completed its work in May 2007.
(2)Amounts shown in the “Stock Awards”"Stock Awards" column do not reflect compensation actually received by the directors. Instead, the amounts shown are the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 20062007 in accordance with Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), “Share-Based Payment” (“"Share-Based Payment" ("SFAS 123(R)”"), including amounts for stock awards granted in 2006.2006 and 2007. Pursuant to SEC regulations, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting
conditions. None of the non-employee directors received stock awards prior to 2006. A discussion of the valuation assumptions used for purposes of the SFAS 123(R) calculation is included under Note 314 to our 20062007 Consolidated Financial Statements that are part of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. (2)2007.
(3)Amounts shown in the “Options Awards”"Options Awards" column do not reflect compensation actually received by the directors. Instead, the amounts shown are the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 20062007 in accordance with SFAS 123(R), including amounts for options granted during and prior to 2006.2007. A discussion of the valuation assumptions used for purposes of the SFAS 123(R) calculation is included under Note 314 to our 20062007 Consolidated Financial Statements that are part of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.(3)2007.
(4)Reflects the compensation costs recognized by us in fiscal 20062007 for 11,180 shares ofprior year's and current year's restricted stock approved for grant on April 27, 2006, with agrants. The grant date fair value of $77,911.the 21,552 shares of restricted stock awarded to Mr. Clarke in 2007 was $62,501. As of December 31, 2006,2007, Mr. Clarke had 5,59019,756 shares of unvested restricted stock outstanding.(4)
(5)Reflects the compensation costs recognized by us in fiscal 20062007 for prior years' and current year stock option grants with the followinggrants. The grant date fair values asvalue of the applicable grant date: $66,919 for a stock optionoptions to purchase 20,32043,103 shares of Common Stock granted under the 1997 Stock2006 Equity Incentive Plan (“1997 Plan”("2006 Plan") on April 27, 2006.in 2007 was $65,792. As of December 31, 2006,2007, Mr. Clarke had 125,320168,423 vested and unvested options outstanding.(5)
- (6)
- Reflects the compensation costs recognized by us in fiscal
20062007 for 11,376 shares ofprior year's and current year restricted stock approved for grant on April 27, 2006, with agrants. The grant date fair value of $79,277.the 24,310 shares of restricted stock awarded to Mr. Horner in 2007 was $70,499. As of December 31, 2006,2007, Mr. Horner had 5,68822,284 shares of unvested restricted stock outstanding.(6)
- (7)
- Reflects the compensation costs recognized by us in fiscal
20062007 for prior years' and current year stock option grants with the followinggrants. The grant date fair values asvalue of the applicable grant date: $68,209 for a stock optionoptions to purchase 20,67548,621 shares of Common Stock granted under the 19972006 Plan on April 27, 2006.in 2007 was $74,215. As of December 31, 2006,2007, Mr. Horner had 229,175277,796 vested and unvested options outstanding.(7)
- (8)
- Reflects the compensation costs recognized by us in fiscal
20062007 for 11,376 shares ofprior year's and current year restricted stock approved for grant on April 27, 2006, with agrants. The grant date fair value of $79,277.the 20,517 shares of restricted stock awarded to Mr. Lenzmeier in 2007 was $59,499. As of December 31, 2006,2007, Mr. Lenzmeier had 5,68818,807 shares of unvested restricted stock outstanding.(8)
- (9)
- Reflects the compensation costs recognized by us in fiscal
20062007 for prior years' and current year stock option grants with the followinggrants. The grant date fair values asvalue of the applicable grant date: $68,209 for a stock optionoptions to purchase 20,67541,034 shares of Common Stock granted under the 19972006 Plan on April 27, 2006.in 2007 was $62,634. As of December 31, 2006,2007, Mr. Lenzmeier had 125,675166,709 vested and unvested options outstanding.(9)
- (10)
- Reflects the compensation costs recognized by us in fiscal
20062007 for 10,952 shares ofprior year's and current year restricted stock approved for grant on April 27, 2006, with agrants. The grant date fair value of $76,322.the 22,759 shares of restricted stock awarded to Mr. Toy in 2007 was $66,001. As of December 31, 2006,2007, Mr. Toy had 5,47620,862 shares of unvested restricted stock outstanding.(10)
- (11)
- Reflects the compensation costs recognized by us in fiscal
20062007 for prior years' and current year stock option grants with the followinggrants. The grant date fair values asvalue of the applicable grant date: $68,209 for a stock optionoptions to purchase 19,90545,517 shares of Common Stock granted under the 19972006 Plan on April 27, 2006.in 2007 was $69,477. As of December 31, 2006,2007, Mr. Toy had 173,990219,507 vested and unvested options outstanding.
14
Cash Compensation Approximately one-third of the compensation paid to our non-employee directors is comprised of cash. On April 27, 2006,During 2007, the Board approved the 2006 annual equity andnon-employee directors' cash compensation forwas comprised of the non-employee directors, andfollowing elements: Type of Payment
| | Amount
|
|---|
| Chairman of the Board (pro-rated and paid quarterly) | | $ | 250,000 | | Director Retainer (pro-rated and paid quarterly) | | $ | 50,000 | | 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 |
No changes have been made certain changes into cash compensation effective as of April 27, 2006, as set forth below:above for non-employee directors for fiscal year 2008. Annual Compensation | | | | After April 27, 2006 | | Prior to April 27, 2006 | | Director Retainer (pro-rated and paid quarterly) | | | $ | 50,000 | | | | $ | 40,000 | | | Lead Director Fee | | | $ | 22,500 | | | | $ | 20,000 | | | Audit Committee Chair Fee | | | $ | 12,500 | | | | $ | 10,000 | | | Compensation Committee Chair Fee | | | $ | 7,500 | | | | $ | 5,000 | | | Nominating and Governance Committee Chair Fee | | | $ | 7,500 | | | | $ | 5,000 | | | Audit Committee Member Fee | | | $ | 5,000 | | | | $ | 3,500 | | | Compensation Committee Member Fee | | | $ | 4,500 | | | | $ | 3,000 | | | Nominating and Governance Committee Member Fee | | | $ | 3,500 | | | | $ | 2,000 | | | Credit toward Company Products | | | $ | 1,000 | | | | None | | |
Additionally,In addition to promote and facilitate a smooth transitionthe compensation set forth above, members of the role of Chairman of the Board, Mr. Toy assumed greater responsibility and was assigned additional duties on the Board prior to assuming the role as Chairman of the Board on January 1, 2007. In consideration for these additional services during the transition period, the Board approved the payment to Mr. Toy of an aggregate of $106,000, in three equal payments of approximately $35,434 on each of June 30, 2006, September 30, 2006 and December 31, 2006, as compensation for his additional services to the Company in such period. At a meeting held July 26, 2007, the Board of Directors of the Company, upon recommendation of the Nominating and Corporate GovernanceSpecial Committee of the Board of Directors approved an annual fee of $250,000 payable(see description above) were eligible to Mr. Toy for his service asreceive the Chairman of the Board of Directors, effective as of January 1, 2007. Mr. Toy ceased receiving compensation for his services as the Lead Director upon his appointment as independent Chairman of the Board on January 1, 2007.
On October 27, 2006, the Board approved a compensation policy for the members of a special committee of the Board (the “Special Committee”) that had been established to oversee the Company’s exploration of strategic alternatives. The compensation consisted of a base retainer of $15,000 per month and $2,000 per meeting attendance for the Chairman offollowing cash payments through May 2007 when the Special Committee and $10,000 per month and $1,000 per meeting attendance for the other members of the Special Committee. The Special Committee was comprised of four non-employee directors: Thomas J. Toy (Chairman of the Special Committee), Jeff Clarke, Larry D. Horner and Allen Lenzmeier.concluded its work:
Special Committee Compensation
| | May 2006-May 2007
|
|---|
| Chairman Fee (per month) | | $ | 15,000 | | Chairman Meeting Fee (per meeting) | | $ | 2,000 | | Member Fee (per month) | | $ | 10,000 | | Member Meeting Fee (per meeting) | | $ | 1,000 |
Approximately two-thirds of the compensation paid to our non-employee directors is comprised of equity: one-third of the aggregate value in stock options, and one-third of the aggregate value in restricted stock purchase rights.stock. The number of options and shares of restricted stock granted to each non-employee director (other than Mr. Ryan who was appointed to the Board in April 2008) during fiscal year 20062007 is set forth below: Name | | | | Stock Options
Granted (#) | | Restricted Stock
Purchase Rights
Granted (#) | | Jeff Clarke | | | 20,320 | | | | 11,180 | | | Larry D. Horner | | | 20,675 | | | | 11,376 | | | Thomas J. Toy | | | 19,905 | | | | 10,952 | | | Allen Lenzmeier | | | 20,675 | | | | 11,376 | | |
Name
| | Stock Options Granted (#)
| | Restricted Stock Granted (#)
|
|---|
| Jeff Clarke | | 43,103 | | 21,552 | | Larry D. Horner | | 48,621 | | 24,310 | | Allen Lenzmeier | | 41,034 | | 20,517 | | Thomas J. Toy | | 45,517 | | 22,759 |
Each stock option has an exercise price of $7.67$2.90 per share, which equals 110% ofequal to the $6.97 closing price of the Company’sCompany's Common Stock on the NASDAQ Stock Market on April 27, 2006,November 30, 2007, the date of grant. The options vestedand restricted stock vest in equal, monthly installments over a 12-month period beginning on April 27, 2006.November 30, 2007. The restricted stock purchase rights entitled the non-employee directors to purchase the Company’s Common Stock at par value. The restricted stock issued upon exercise of the restricted stock purchase rights vested in equal quarterly installments over a 12-month period beginning on April 27, 2006. The options and the restricted stock purchase rights granted to the non-employee directors in 2006grants were granted under the Company’s 1997 Stock Plan (the “1997 Plan”)made pursuant to the formCompany's 2006 Equity Incentive Plan (the "2006 Plan") and are subject to the standard terms and conditions of the forms of restricted stock award and stock option agreementagreements previously approved for use underwith the 19972006 Plan with respect to stock option grants to the Company’s directors and executive officers and the form of restricted stock purchase agreement approved for use under the 1997 Plan, each as previously filed with the Securities and Exchange Commission.SEC. Prior to 2006, the Company’s policy was to provide each non-employee director with an annual grant of an option to purchase 25,000 shares pursuant to the 1997 Plan. The Board suspended this policy in 2006, choosing instead to issue a specific number of options as part of each non-employee director’s overall annual compensation package. Also prior to 2006, non-employee directors were eligible to receive stock option grants under the 2001 Director Option Plan (the “Director Plan”). The Director Plan was terminated in July 2006 effective upon stockholder approval of the Company’s 2006 Equity Incentive Plan. Under the terms of the Director Plan, if, following a change in control of the Company, a non-employee director’s status as a Director of the Company or the successor corporation is terminated (other than as a result of voluntary resignation), the options become fully exercisable for a period of three months from the date of such termination.
For further discussion with respect to the Company’sCompany's policy and procedures relating to equity award grants that apply to non-employee directors and other service providers, please see the section entitled “Compensation"Compensation Discussion and Analysis—Other Considerations—Equity Grant Practices”Practices" contained in this Proxy Statement. For further discussion with respect to change of control arrangements applicable to outstanding equity awards, please see the section entitled “Change"Change of Control Provisions in the Equity Compensation Plans”Plans" under “Potential"Potential Payments upon Termination and Change of Control”Control" contained in this Proxy Statement. For further discussion with respect to modifications made to certain outstanding equity awards held by non-employee directors, please see the section entitled “Executive"Executive Compensation—Modifications to Outstanding Equity Awards”Awards" contained in this Proxy Statement. Indemnification Agreements During 2006, the Company was a All of our directors other than Mr. Ryan are currently party to indemnification agreements with each of its directors.the Company. The form of indemnification agreement is filed as Exhibit 10.1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.2007.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to beneficial ownership of our Common Stock as of OctoberApril 1, 20072008 (except as otherwise indicated), by: (i) each person who is known to us to own beneficially more than 5% of our Common Stock; (ii) each director and each nominee for election as a director of UTStarcom; (iii) each named executive officer;Named Executive Officer; and (iv) all of our current directors and executive officers as a group. Calculations are based on 121,294,645125,099,129 shares of Common Stock issued and outstanding as of OctoberApril 1, 2007.2008. 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 | | | 12.08 | % | | Goldman Sachs Asset Management, L.P.(4) | | 13,191,787 | | | 10.88 | % | | Renaissance Technologies Corp.(5) | | 10,208,234 | | | 8.42 | % | | Brandes Investment Partners, L.P.(6) | | 9,910,153 | | | 8.17 | % | | Barclays Global Investors, N.A.(7) | | 9,729,641 | | | 8.02 | % | | Miura Global Management, LLC(8) | | 6,615,000 | | | 5.45 | % | | Highbridge Capital Management LLC(9) | | 6,200,530 | | | 5.11 | % | | Hong Liang Lu(10) | | 4,350,089 | | | 3.54 | % | | Ying Wu(11) | | 4,720,801 | | | 3.89 | % | | William Huang(12) | | 1,158,410 | | | * | | | Michael J. Sophie | | 0 | | | 0 | | | Francis P. Barton(13) | | 417,001 | | | * | | | Allen Lenzmeier(14) | | 147,051 | | | * | | | Larry D. Horner(15) | | 272,326 | | | * | | | Jeff Clarke(16) | | 96,500 | | | * | | | Thomas J. Toy(17) | | 184,942 | | | * | | | All current directors and executive officers as a group (11 persons)(18) | | 5,897,518 | | | 4.86 | % | |
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 | | 11.7 | % | | Brandes Investment Partners, L.P.(4) | | 8,094,233 | | 6.5 | % | | Barclays Global Investors, N.A.(5) | | 7,552,347 | | 6.0 | % | | Hong Liang Lu(6) | | 4,783,382 | | 3.8 | % | | Francis P. Barton(7) | | 1,554,848 | | 1.2 | % | | Peter Blackmore | | 900,000 | | * | | | Philip Christopher(8) | | 305,812 | | * | | | David King(9) | | 148,511 | | * | | | Ying Wu(10) | | 4,720,801 | | 3.8 | % | | Jeff Clarke(11) | | 159,604 | | * | | | Larry D. Horner(12) | | 294,447 | | * | | | Allen Lenzmeier(13) | | 208,085 | | * | | | Bruce J. Ryan** | | 0 | | * | | | Thomas J. Toy(14) | | 230,460 | | * | | | All current directors and executive officers as a group (12 persons)(15) | | 8,530,705 | | 6.8 | % |
- *
- Less than 1%.
- **
- Appointed to the Board of Directors effective April 25, 2008.
- (1)
- Unless otherwise indicated, the address for all beneficial owners is c/o UTStarcom, Inc., 1275 Harbor Bay Parkway, Alameda, California 94502.
- (2)
- Under the
SEC’sSEC's proxy rules, a person who directly or indirectly has or shares voting power or investment power with respect to a security is considered a beneficial owner of the security. Voting power is the power to vote or direct the voting of shares, and investment power is the power to dispose of or direct the disposition of shares. The information on beneficial ownership in the table and the footnotes is based upon our records and the most recent Schedule 13D or 13G filed by each such person and information supplied to us by such person. Unless otherwise indicated, each person has sole voting power and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares subject to options which are exercisable within 60 days after OctoberApril 1, 20072008 are deemed to be outstanding and to be beneficially owned by the person holding such options for the purpose of computing the percentage ownership of such person, but are not deemed to be outstanding and to be beneficially owned for the purpose of computing the percentage ownership of any other person.
- (3)
- Information based on Schedule 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 SOFTBANK America Inc., a Delaware corporation. SOFTBANK America Inc. is a wholly owned subsidiary of SOFTBANK Holdings Inc., a Delaware corporation. SOFTBANK Holdings Inc. is a wholly owned subsidiary of SOFTBANK CORP., a
Japanese corporation. Softbank America Inc. has sole power to vote or direct the voting of 14,651,630
shares and sole dispositive power over 14,651,630 shares. The business address for these entities is c/o SOFTBANK CORP., Tokyo Shiodome Blvd., 1-9-1, Higashi-shimbashi, Minato-ku, Tokyo 105-7303 Japan.
- (4)
- Information based on Schedule 13G filed with the SEC on February
12, 2007 by Goldman Sachs Asset Management, L.P. Goldman Sachs Asset Management, L.P. has sole power to vote or direct the voting of 11,576,328 shares and sole dispositive power over 13,191,787 shares. The business address for Goldman Sachs Asset Management, L.P. is 32 Old Slip, New York, NY 10005.(5) Information based on Schedule 13G filed with the SEC on March 16, 2007 by Renaissance Technologies Corp. and James H. Simons. Includes 10,208,234 shares beneficially owned by Renaissance Technology Corp. and James H. Simons. Each of Renaissance Technology Corp. and James H. Simons has sole power to vote or direct the voting of 9,671,239 shares and sole dispositive power over 10,208,234 shares. The business address for Renaissance Technologies Corp. is 800 Third Avenue, New York, NY 10022.
(6) Information based on Schedule 13G filed with the SEC on February 12, 2007,14, 2008, by Brandes Investment Partners, L.P. Includes 9,910,1538.094,233 shares beneficially and jointly owned by Brandes Investment Partners, L.P., Brandes Investment Partners, Inc., Brandes Worldwide Holdings, L.P., Charles H. Brandes, Glenn R. Carlson and Jeffrey A. Busby. Each of Brandes Investment Partners, L.P., Brandes Investment Partners, Inc., Brandes Worldwide Holdings, L.P., Charles H. Brandes, Glenn R. Carlson and Jeffrey A. Busby has shared power to vote or direct the voting of 7,383,3296,722,748 shares and shared dispositive power over 9,910,1538,094,233 shares. The business address for Brandes Investment Partners, L.P. is 11988 El Camino Real, Suite 500, San Diego, CA 92130.
(7)
- (5)
- Information based on Schedule 13G filed with the SEC on
January 23, 2007February 5, 2008 by Barclays Global Investors NA. Includes 9,729,6417,552,347 shares beneficially and jointly owned by Barclays Global Investors, N.A., Barclays Global Fund Advisors, Barclays Global Investors, Ltd., Barclays Global Investors Japan Trust and Banking Company Limited, Barclays Global Investors Japan Ltd., Barclays Global Investors Australia Limited, and Barclays Global Investors Japan Trust(Deutschland) AG. Barclays Global Investors NA has the sole power to vote or direct the voting of 4,234,376 shares and Banking Company Limited.sole dispositive power over 5,927,284 shares. Barclays Global Fund Advisors has sole power to vote or direct the voting of 2,869,5751,622,736 shares and sole dispositive power over 2,869,5751,622,736 shares. Barclays Global Investors, Ltd. has sole power to vote or direct the voting of 609,0692,327 shares and sole dispositive power over 609,069 shares. Barclays Global Investors Japan Ltd. has sole power to vote or direct the voting of 432,564 shares and sole dispositive power over 432,5642,327 shares. Barclays Global Investors Japan Trust and Banking Company Limited, hasBarclays Global Investors Japan Limited, Barclays Global Investors Canada Limited, Barclays Global Investors Australia Limited, and Barclays Global Investors (Deutschland) AG have no sole voting power or sole dispositive power. The business address for Barclays Global Investors N.A. is 45 Fremont Street, San Francisco, CA 94105.(8) Information based on Schedule 13G filed with the SEC on September 28, 2007 by Miura Global Management LLC and Francisco Alfaro and Richard Turnure.
- (6)
- Includes
6,615,000 beneficially owned by Miura Global Management LLC, Francisco Alfaro and Richard Turnure. Each of Miura Global Management LLC, Francisco Alfaro and Richard Turnure has shared power to vote or direct the voting of 6,615,000 shares and shared power to dispose or to direct the disposition of 6,615,000 shares. The business address for Miura Global Management LLC is 101 Park Avenue, 21st Floor, New York, NY 10178.(9) Information based on Schedule 13G filed with the SEC on June 27, 2007 by Highbridge Capital Management LLC and related parties. Includes (i) 1,135,278 shares owned by Highbridge International LLC and options to purchase 2,500,000 shares held by Highbridge International LLC, (ii) 47 shares owned by Highbridge Statistically Enhanced Equity Master Fund—U.S., L.P., (iii) 1,215,508 shares owned by Highbridge Statistical Opportunities Master Fund, L.P., (iv) 1,208,325 shares owned by STAR, L.P. and (v) 141,372 shares held by certain accounts managed by Highbridge Capital Management, LLC. Highbridge Capital Management, LLC is the trading manager of Highbridge International LLC, Highbridge Statistically Enhanced Equity Master Fund—U.S. L.P.,
Highbridge Statistical Opportunities Master Fund, L.P. and STAR, L.P, and therefore may be deemed the beneficial owner of the foregoing shares. In addition, Glenn Dubin and Henry Swieca are Co-Chief Executive Officers of Highbridge Capital Management, LLC, and therefore may also be deemed the beneficial owner of the foregoing shares. Henry Swieca is a Co-Chief Executive Officer of Highbridge Capital Management, LLC. Each of Highbridge Capital Management, LLC, Glenn Dubin and Henry Swieca disclaims beneficial ownership of the shares owned by Highbridge International LLC, Highbridge Statistically Enhanced Equity Master Fund,—U.S., L.P. and Highbridge Statistical Opportunities Master Fund, L.P. The business address for each of Highbridge Capital Management, LLC, Glenn Dubin and Henry Swieca is 9 West 57th Street, 27th Floor, New York, NY 10019.
(10) Includes 2,401,4252,937,622 owned directly, plus an additional (i) 229,000 shares owned by The Lu Family Limited Partnership, of which Mr. Lu is a general partner, (ii) 130,000115,927 shares registered in the name of Lu Charitable Remainder Trust, of which Mr. Lu is the trustee, (iii)14,073 shares registered in the name of the Lu Family Trust of which Mr. Lu is a trustee and of which Mr. Lu and his spouse are beneficiaries, 5,332 shares registered in the name of Mr. Lu’sLu's son, and (iv) 5,332 shares registered in the name of Mr. Lu’sLu's daughter. Mr. Lu may be deemed the beneficial owner of the shares held by his children. Also includes 1,579,0001,476,096 shares issuable upon exercise of options that are exercisable currently or within 60 days of April 1, 2008.
- (7)
- Includes 1,178,848 shares owned directly and 367,000 shares issuable upon exercise of options that are exercisable currently or within 60 days of April 1, 2008.
- (8)
- Includes 26,123 shares owned directly and 279,689 shares issuable upon exercise of options that are exercisable currently or within 60 days of April 1, 2008.
- (9)
- Includes 122,468 shares owned directly and 26,043 shares issuable upon exercise of options that are exercisable currently or within 60 days of April 1, 2008.
- (10)
- Ownership as of October 1, 2007.
(11) Includes 1,340,687 shares owned directly plus an additional (i) 1,505,500 shares registered in the name of Wu Partners, a California limited partnership, of which Mr. Wu is general partner, (ii) 1,080,000 shares registered in the name of Stonybrook Investors L.P., (iii) 4,868 shares registered in the name of Wu Living Trust, (iv) 4,873 shares registered in the name of Ashley Wu Trust—1998 and (v) 4,873 shares registered in the name of Richard Wu Trust—1998. Ashley Wu and Richard Wu are Mr. Wu’sWu's children. Mr. Wu may be deemed the beneficial owner of the shares held by his children’schildren's trusts. Also includes 780,000 shares issuable upon exercise of options that are exercisable currently or within 60 days of OctoberApril 1, 2007.
2008. Mr. Wu’sWu's employment as our Executive Vice President and Chairman and Chief Executive Officer of our subsidiary, UTStarcom China Co., Ltd., terminated on June 1, 2007 and Mr. Wu resigned from the Board of Directors on July 24, 2007. As of June 1, 2007, Mr. Wu was vested in options to purchase 780,000 shares of the Company’sCompany's Common Stock.Stock, and those options are exercisable for twelve months from the date of his termination of employment. (12)
- (11)
- Includes
660,98032,732 shares owned directly plus an additional (i) 106,000 shares owned by the 2000 Huang Family Limited Partnership, of which Mr. Huang is a general partner, (ii) 6,600 shares registered in the name of his son, and (iii) 6,600 shares registered in the name of his daughter. Mr. Huang may be deemed the beneficial owner of the shares held by his children. Also includes 378,230126,872 shares issuable upon exercise of options that are exercisable currently or within 60 days of OctoberApril 1, 2007. Mr. Huang resigned as our Chief Technology Officer and Senior Vice President as of December 31, 2006. For a discussion on modifications made to certain outstanding equity awards held by Mr. Huang, please see the section entitled “Executive Compensation—Modifications to Outstanding Equity Awards” contained in this Proxy Statement.(13) 2008.
- (12)
- Includes
100,00039,186 shares owned directly 50,000 of which are subject to the Company’s right of repurchase which lapses as to 25,000 of theand 1,775 shares on each of August 1, 2008 and August 1, 2009, and 317,001owned by Mr. Horner's spouse. Also includes 253,486 shares issuable upon exercise of options that are exercisable currently or within 60 days of OctoberApril 1, 2007.(14) 2008.
- (13)
- Includes
61,37681,893 shares owned directly and 85,675126,192 shares issuable upon exercise of options that are exercisable currently or within 60 days of OctoberApril 1, 2007.(15) 2008.
- (14)
- Includes
41,37633,711 shares owned directly and 1,775 shares owned by Mr. Horner’s spouse. Also includes 229,175196,749 shares issuable upon exercise of options that are exercisable currently or within 60 days of OctoberApril 1, 2007.(16) 2008.
- (15)
- Includes
11,180 shares owned directly and 85,3202,897,440 shares issuable upon exercise of options that are exercisable currently or within 60 days of OctoberApril 1, 2007.(17) Includes 10,952 shares owned directly and 173,990 shares issuable upon exercise of options that are exercisable within 60 days of October 1, 2007.
(18) Includes 2,758,705 shares issuable upon exercise of options that are exercisable within 60 days of October 1, 2007.
EXECUTIVE OFFICERS
Our current executive officers and their ages as of November 29, 2007April 30, 2008 are as follows: | Name
|
|
|
|
| | Age |
|
| | Position |
|
|---|
Hong Liang Lu | | 53 | 53
| | | Chief Executive Officer | | Peter Blackmore | | 61 | 60
| | | President and Chief Operating Officer | | Francis P. Barton | | 61 | 61
| | | Executive Vice President and Chief Financial Officer | | Philip Christopher | | 59 | 59
| | | President of UTStarcom Personal Communications LLC | | Viraj Patel
| | | 45
| | | Vice President, Corporate Controller and Chief Accounting Officer
| | Mark Green | | 40 | 39
| | | Senior Vice President, Global Human Resources and Real Estate | | David King | | 45 | 44
| | | Senior Vice President, International Sales and Marketing | | Viraj Patel | | 45 | | Vice President, Corporate Controller and Chief Accounting Officer |
Hong Liang Lu has served as our President and Chief Executive Officer and as a director from June 1991 though December 2006, and as Chairman of the Board from March 2003 to December 2006. On January 1, 2007, he assumed the title of Chief Executive Officer. 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 Executive Officer 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 Officer of Unison World, Inc. Mr. Lu holds a B.S. in Civil Engineering from the University of California at Berkeley. Peter Blackmore has served as our President and Chief Operating Officer since July 2007. From 2005 until he joined the Company, Mr. Blackmore served as Executive Vice President in charge of world-wide sales, marketing and technology at Unisys Corporation. Prior to joining Unisys in 2005, he served as Executive Vice President of the Customer Solutions Group at Hewlett-Packard Company from 2004 and as Executive Vice President of the Enterprise Systems Group from 2002 through 2004. From 1991 until its acquisition by Hewlett-Packard in 2002, Mr. Blackmore served in a number of senior management positions with Compaq Computer Corporation, most recently as its Executive Vice President of worldwide sales and services from 2000 through 2002. Mr. Blackmore holds an M.A. in Economics from Trinity College, Cambridge, U.K.
Francis P. Barton has served as our Executive Vice President and Chief Financial Officer since August 2005 and as a director since October 2006. From May 2003 to July 2005, Mr. Barton was Executive Vice President and Chief Financial Officer of Atmel Corporation. From May 2001 to May 2003, Mr. Barton was Executive Vice President and Chief Financial Officer of BroadVision Inc. From 1998 to 2001, Mr. Barton was Senior Vice President and Chief Financial Officer of Advanced Micro Devices, Inc. From 1996 to 1998, Mr. Barton was Vice President and Chief Financial Officer of Amdahl Corporation. From 1974 to 1996, Mr. Barton worked at Digital Equipment Corporation, beginning his career as a financial analyst and moving his way up through various financial roles to Vice President and Chief Financial Officer of Digital Equipment Corporation’sCorporation's Personal Computer Division. Mr. Barton currently serves on the board of directors of ON Semiconductor Corporation. He holds a B.S. in Chemical Engineering from Worcester Polytechnic Institute and an M.B.A. with a focus in finance from Northeastern University.University 20
Philip Christopher has served as President of UTStarcom Personal Communications LLC, one of our wholly owned subsidiaries, since June 2004. Prior to joining us, Mr. Christopher was President and CEO of Audiovox Communications Corporation and Executive Vice President of Audiovox Corporation. Prior to our acquisition of Audiovox Communications Corporation, Mr. Christopher had been employed with Audiovox Corporation since 1970 and was elected to the company’scompany's board of directors in 1987. Mr. Christopher was a member of the White House Economic Council, and also serves on the board of directors of the Cellular Telecommunications Industry Association. Mr. Christopher is also the recipient of numerous industry and humanitarian awards and honors, including the prestigious Ellis Island Medal of Honor. Viraj Patel has served as our Vice President, Corporate Controller and Chief Accounting Officer since November 2005. Prior to joining us, Mr. Patel was Vice President of Finance for Celera Group from July 2005 to October 2005. Mr. Patel also served as Vice President of Finance for Nektar Therapeutics from March 2004 until June 2005. From November 2003 to March 2004, Mr. Patel served as an interim Corporate Controller for Extreme Networks. From 1999 to 2002, Mr. Patel was the Chief Financial Officer of Avanti Corporation. Prior to joining Avanti Corporation Mr. Patel worked for Pall Corporation from 1989 through 1999 where he served as the Chief Accounting Officer. Mr. Patel began his career at PricewaterhouseCoopers in 1982. Mr. Patel holds a BBA from Pace University, New York. He is a Certified Public Accountant from the State of New York and is a member of the New York State Society of CPAs and a member of the American Institute of Certified Public Accountants.
Mark Greenhas served as our Senior Vice President of Global Human Resources and Real Estate since February 2007, and served as our Vice President of Human Resources from January 2006 to January 2007. Prior to joining us, Mr. Green was at Verisign Inc. from June 2005 as the Human Resources Director of Verisign Security Services. From 1992 to 2005, Mr. Green was at Nortel, where he joined their Human Resources Leadership Development Program, rotating through multiple Human Resources areas in the U.K. and the U.S. He then moved to Hong Kong, as International Human Resources Services Manager for the APAC region, returning to the U.S. as Senior Human Resources Business Partner for the Clarify eBusiness-Software Applications Division, then Human Resources Director of Nortel’sNortel's Enterprise Division. Mr. Green received his BSEEBEng(Hons) in Electrical and Electronic Engineering from Leeds University, U.K., and MScMSc(econ) in Human Resources Management and Industrial Relations from the London School of Economics. He is also a graduate of the Institute of Personnel and Development, U.K. David Kinghas served as our Senior Vice President, Sales, and Marketing & Services since March 2006. Prior to joining us, Mr. King was the Chief Executive Officer for Visual Wireless AB from 2004 to 2006. From 1999 to 2004, Mr. King was with Ericsson AB, initially as Vice President, Sales and Marketing for Wireline Systems, then as Vice President, Product Management & Marketing and held the position of Vice President and General Manager, Wireline Systems from 2002 to 2004. From 1996 through 1999 Mr. King was with PriceWaterhouse as a principal consultant and from 1992 to 1996 Mr. King was a senior consultant with Omega Partners. Mr. King was Chairman and non-executive board director for Ascade AB, Stockholm from 2001 to 2004. Mr. King served as an officer in the Royal Marines from 1985 to 1989. He holds a BSc in Electrical Engineering from Liverpool University, and an MBA from the London Business School. Viraj Patel has served as our Vice President, Corporate Controller and Chief Accounting Officer since November 2005. Prior to joining us, Mr. Patel was Vice President of Finance for Celera Group from July 2005 to October 2005. Mr. Patel also served as Vice President of Finance for Nektar Therapeutics from March 2004 until June 2005. From November 2003 to March 2004, Mr. Patel served as an interim Corporate Controller for Extreme Networks. From 1999 to 2002, Mr. Patel was the Chief Financial Officer of Avanti Corporation. Prior to joining Avanti Corporation Mr. Patel worked for Pall
Corporation from 1989 through 1999 where he served as the Chief Accounting Officer. Mr. Patel began his career at PricewaterhouseCoopers in 1982. Mr. Patel holds a BBA from Pace University, New York. He is a Certified Public Accountant from the State of New York and is a member of the New York State Society of CPAs and a member of the American Institute of Certified Public Accountants.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS Governance of Executive Officer Compensation Program Role and Members of the Compensation Committee The Compensation Committee of the Board of Directors is responsible(the "Compensation Committee" or the "Committee") determines compensation for determining the Company’sCompany's executive officer compensation.officers. The Committee is currently comprised of four members of the Board of Directors, Messrs. Clarke, Horner, Lenzmeier and Toy, all of whom are independent, non-employee directors. Mr. Toy acted as chairperson of the Committee through April 27, 2007, at which time Mr. Lenzmeier assumed the role. Mr. Clarke was addedappointed to the Committee on April 27, 2007. The purpose of the Compensation Committee is to:responsible for: · Approve
- •
- Approving and
overseeoverseeing the total compensation package for the Company’sCompany's executives including their base salaries, incentives, deferred compensation, equity-based compensation, benefits and perquisites;
- •
· ReviewReviewing and approveapproving corporate goals and objectives relevant to the compensation of the Company’sCompany's Chief Executive Officer (the “"CEO”"), evaluateevaluating CEO performance, and determinedetermining CEO compensation based on this evaluation;·
Review
- •
- Reviewing the
CEO’sCEO's performance evaluation of all executive officers and approveapproving pay decisions; and· Review
- •
- Reviewing periodically and
makemaking recommendations to the Board regarding any equity or long-term compensation plans, and administeradministering these plans.
The Compensation Committee operates according to a charter that details its specific duties and responsibilities. The charter is reviewed at least annually, periodically revised (most recently on February 1, 2007) byFor additional information with respect to the Compensation Committee, and is available on our website inplease refer to the Corporate Governance section. The charter sets forth the membership requirements, authority and dutiessection entitled "Compensation Committee" at page 13 of this Proxy Statement. In 2007, the Compensation Committee which shall consistdelegated authority to a designated management committee (the "Awards Committee") to review and approve equity awards to certain employees and service providers below the corporate vice-president level, in accordance with the Company's Equity Award Granting Policy and Procedures discussed below. Named Executive Officers Our principal executive officer, our principal financial officer and our three most highly compensated executive officers (other than our principal executive officer and principal financial officer) for fiscal year 2007 (our "Named Executive Officers" or "NEOs") are as follows: Hong Liang Lu, Chief Executive Officer; Francis P. Barton, Executive Vice President and Chief Financial Officer; Peter Blackmore, President and Chief Operating Officer; Philip Christopher, President of no fewer than three members, allUTStarcom Personal Communications LLC; and David King, Senior Vice President, International Sales and Marketing. In addition, Ying Wu, our former Chairman and Chief Executive Officer of whom (i) meetour China subsidiary, is considered an NEO for 2007 since he would have otherwise been named an NEO based on his total compensation in 2007 but for the independence requirementsfact that he was not serving as an executive officer of the Nasdaq Marketplace Rules, (ii) are “non-employee directors” underCompany at the definitionend of Rule 16b-3 promulgated under Section 16 of the Exchange Act, and (iii) are “outside directors” for purposes of the regulations promulgated under Section 162(m) of the Internal Revenue Code. During the fiscal year ended December 31, 2006, and currently, all members of the Compensation Committee met these criteria.2007. Mr. Wu's employment with us terminated on June 1, 2007.
Process for Evaluating Named Executive Officer Performance and Compensation The Compensation Committee generally holds at least four scheduled meetings during the year and holds additional meetings periodically to review and discuss executive compensation issues. The Compensation Committee may also consider and take action by written consent. In 2006,2007, the Compensation Committee met eighttimes.twelve times and acted twice by written consent. In the first quarter of each fiscal year, generally in February, the Compensation Committee (i) considers any changes to executive officer base salaries, (ii) makes a determination whether any bonuses will be paid to our executive officers and to what extent, if any, (iii) reviews and approves annual equity grants for our executive officers in accordance with the Company's Equity Award Grant Policy, and (iv) reviews the level of perquisites and benefits provided to each executive officer. As part of its annual process, the Compensation Committee meets to review and evaluate (i) Company performance, (ii) individual performance of each executive officer, and (iii) data related to market practices for executive compensation for each of our executive officers. During these meetings, our CEO reviews and discusses with the Committee the performance and contribution of each executive officer other than himself and each executive officer's achievement of strategic operational and financial goals. While the Compensation Committee may discuss our CEO's performance and compensation package with him, it meets in executive session without him present to determine his compensation. The Company’sCommittee also has the opportunity to meet with each executive officer to discuss his or her performance during the prior fiscal year as well as goals for the current year. The Company's Human Resources department supports the Compensation Committee in its work. The Compensation Committee also has the authority to engage the services of outside advisors, experts and others for assistance. From time to time, the Committee has directed an external advisor to work with the Human Resources department to support management and the Committee in matters such as (i) peer group development, (ii) executive officer benchmarking, including pay-for-performance analyses and tally sheet preparation, and (iii) advising on pay levels and/or pay program design.
Outside Compensation Consultant
During fiscal year 2006, theThe Compensation Committee did not employretain an outside advisor. However, inadvisor prior to April 2007.
Engagement of and Role of Independent Compensation Consultant In April 2007, the Compensation Committee engaged an independent compensation consulting firm, Compensia, Inc., to advise the Compensation Committee and the Board on executive and equity compensation matters. The consulting firm reports directly to the Compensation Committee, and the Compensation Committee has sole authority to hire, fire and direct the work of the advisor. Compensia, Inc. assisted the Compensation Committee in selecting an appropriate peer group to assess executive pay levels, developed compensation "tally sheets" for each NEO, conducted a market pay assessment for each officer, and provided input to the Committee on equity compensation and market trends. Representatives from Compensia attend Compensation Committee meetings at the Committee's invitation. Role of Executive Management in Compensation Evaluation Process Our Chief Executive Compensation Process Officer plays a significant role in the compensation setting process. The Compensation Committee seeks input fromkey aspects of our Chief Executive Officer and/or other executives, including our Chief Financial Officer and Senior Vice President, Human Resources, to obtain recommendations with respect to Company compensation programs, practices and packages for executives and other employees. Our Chief Executive Officer’sOfficer's role in the compensation-setting process consists ofinclude (i) evaluating employee performance; (ii) assisting in the establishment of business performance targets and objectives; and (iii) recommending salary levels and equity awards.awards other than for himself. The Compensation Committee considers, but is not bound to and does not always accept, our Chief Executive Officer's recommendations with respect to executive compensation. The Compensation Committee typically follows the Chief Executive Officer's recommendations which are based on the same measurements the Compensation Committee uses for all executives (i.e., market data and individual performance objectives). Our Chief Executive Officer rarely recommends extraordinary adjustments for his direct reports. While the Compensation Committee mayseeks input primarily from our Chief Executive Officer, the Committee consults with other executives, including our Chief Financial Officer and our Senior Vice President, Global Human Resources, to obtain recommendations with respect to Company compensation programs, practices and packages for executives and other employees. The Compensation
Committee also has the opportunity to meet with each executive officer and discuss his or her individual performance, upon request. Other than participating in an annual evaluation process with our CEO’sChief Executive Officer and discussions with the Compensation Committee if and as requested, the other NEOs do not play a role in their own compensation package with him, it meets in executive session without him present to determine his compensation.determinations. Executive Compensation Philosophy and Framework The philosophy of the Compensation Committee is to create a compensation program in which employee compensation is tied to Company performance, market competitiveness, individual performance and employee retention.
Compensation Objectives UTStarcom’s UTStarcom's compensation program is designed to achieve three primary objectives:
- Create a high-performance culture by linking rewards to performance;
- 2.
- Be competitive with the market in order to attract, retain and motivate the caliber of talent required to drive shareholder value; and
- 3.
- Apply reward practices in a fair and consistent manner.
Target Pay Position We primarily use three primary pay components to support our compensation objectives: (i) base salary, (ii) annual cash incentive/bonus and (iii) equity. These areEach is discussed in greater detail below under “Evaluation"Evaluation of Named Executive Officer Compensation.”" For each of these elements, the Compensation Committee examines peer group compensation practices and targets direct compensation, including base salary, incentive bonus and equity, at approximately the 50th percentile of our primary peer group (as defined in the “Compensation Benchmarking”"Compensation Benchmarking" section below). These target pay positions are the same for all employees in the Company. While equity compensation is generally targeted at 50% of market value, during the Company's February 2008 equity grant process the decreased value of shares of our Common Stock affected our ability to target the 50th percentile of market in value without substantially depleting the pool of shares available for grant to all employees under the 2006 Equity Incentive Plan. Targeting the 50th percentile would have also negatively impacted our equity burn rate. For these reasons, the value of our equity grants for fiscal year 2008 was generally between the 25th and 50th percentile of market practices. The Compensation Committee has approved compensation levels for officers above and below the target pay position, based on individual and Company performance, to ensure an appropriate pay-for-performance alignment. This pay-for-performance alignment is further supported by our use of variable, or at-risk, compensation, which is designed to provide that executives receive target or above-target total compensation only to the extent that Company and individual performance objectives have been achieved.
Compensation Benchmarkingachieved or exceeded.
The While our pay-for-performance philosophy remains a central part of our compensation objectives, the Company's lack of profitability over a number of years has led to increased concern about our ability to recruit and retain qualified senior management personnel to lead our return to profitability. As a result, the Compensation Committee examines thehas taken into consideration recruiting and retention concerns as well as pay-for-performance during its evaluation of executive compensation practices ofin fiscal years 2007 and 2008.
Compensation Benchmarking We use two peer groups to assess the competitiveness of executive officer compensation practices and levels. The firstlevels, as described below. We assess the compensation levels of our NEOs and other executive officers against both peer groups, and we use the secondary peer group (the “primary”to assess compensation levels of all other officers and employees.
During fiscal year 2007, our "primary" peer group) includesgroup included 107 high technology companies with between $1 billion and $3 billion in revenue, as reported in Radford’sRadford's High-Technology Executive Survey. The profile of the primary peer group alignsaligned with UTStarcom in terms of size, and is our primary source of comparison. The secondsize. Our "secondary" peer group (the “secondary” peer group) includesincluded 21 telecom companies with more than $1 billion in annual revenue and iswas likewise pulled from the Radford High-Technology Executive Survey. The secondary peer group iswas used as a secondaryan additional reference point, and is composed of the following companies:
·• Alcatel, USA
·
| | • Ericsson | | • Samsung Telecom America | | • Alltel · AT&T/SBC
· Avaya
· Corning
· DirecTV
· Embarq
| | · Ericsson
·• Level 3 Communications
·
| | • Scientific—Atlanta | | • AT&T/SBC | | • Motorola ·
| | • Sprint Nextel | | • Avaya | | • NII Holdings ·
| | • T-Mobile | | • Corning | | • Nokia—US ·
| | • Tellabs | | • DirecTV | | • Qualcomm ·
| | • Verizon Wireless | | • Embarq | | • Qwest Communications | | · Samsung Telecom America
· Scientific—Atlanta
· Sprint Nextel
· T-Mobile
· Tellabs
· Verizon Wireless
·• Virgin Mobile
|
Both of the Company’s peer groups are reviewed annually byIn October 2007, the Compensation Committee conducted its annual review of the Company's peer groups and adjustments are made as necessarycertain adjustments to ensure that the peer groups continuecontinued to properly reflect the market in which UTStarcom competes for talent. For fiscal year 2008, the Compensation Committee determined that, rather than using components of the Radford High-Technology Executive Survey as our primary peer group, our primary peer group would be composed of 21 companies with similar revenue (~0.5x-2.0x) and similar market capitalization (~0.5x-2.0x) as UTStarcom, as set forth below:
| • ADC Telecommunications Inc. | | • Brocade Communications Systems, Inc. | | • JDS Uniphase | | • Adaptec, Inc. | | • Cohu, Inc. | | • LSI Logic Corporation | | • Altera Corporation | | • Cypress Semiconductor Corporation | | • NetGear | | • Andrew Corporation | | • EMS Technologies, Inc. | | • TEKELEC | | • Atmel Corporation | | • Extreme Networks Inc. | | • Tellabs, Inc. | | • Black Box Network Services | | • Harmonic, Inc. | | • Viasat, Inc. | | • Brightpoint, Inc. | | • Harris Stratex Networks | | • Xilinx, Inc. |
The Compensation Committee then determined that our secondary peer group for fiscal year 2008 would be composed of 115 high technology companies with between $1 billion and $3 billion in revenue, as reported in Radford's High-Technology Executive Survey. Evaluation of Named Executive Officer Compensation Base Salary Base salaries aresalary is the primary fixed compensation in our executive pay program and is used to attract, motivate and retain highly qualified executives. BaseAn individual's initial base salary is the primary fixed compensation in the executive pay programdetermined by his or her levels of expertise, experience and is determined by: · Level of responsibility;
· Expertise and experience of the employee; and
· Competitiveresponsibility, as well as competitive conditions in the industry.
Annual base salary increases, if any, are a reflection of: · The individual’sof the executive's performance for the preceding year;
· The individual’syear, anticipated future contributions and pay level relative to similar positions in our peer group;
· Internalgroup. We also take into consideration internal equity with respect to the rest of theentire executive team;
· Anticipated future contributions of the executives;team and
· Competitive competitive conditions in the industry.industry, as measured against our peer groups.
20062007 Base Salary Actions
As In February and March of 2007, and as part of anits annual process, the CEO presented his recommendations for executive officer base salary increases to the Compensation Committee in February, 2006. On February 28, 2006, the Committee met to evaluate Company performance, individual performance and data related to market practices for executive compensation. The Committee then approved the following salary increasescompensation for the Company’s namedeach of our executive officers (the “Named Executive Officers” or(other than Mr. Blackmore who joined the “NEOs”) effective February 1, 2006:
Named Executive Officer | | | | Title | | Annualized 2006
Base Salary | | % Increase | | Hong Liang Lu | | President and Chief Executive Officer | | | $ | 700,000 | | | | 0 | % | | Ying Wu | | Former Executive Vice President and Vice Chairman of the Board; former Chairman and Chief Executive Officer for China (through 5/31/07) | | | $ | 500,000 | | | | 0 | % | | Francis P. Barton | | Executive Vice President and Chief Financial Officer | | | $ | 500,000 | | | | 0 | % | | William Huang | | Former Senior Vice President and Chief Technology Officer (through 12/31/06) | | | $ | 350,000 | | | | 15 | % | | Michael Sophie | | Former Executive Vice President and Chief Operating Officer (through 5/5/06) | | | $ | 440,000 | | | | 10 | % | |
The Committee, basedCompany on its assessmentJuly 2, 2007 and thus was not part of overall Company performance, left Mr. Lu’sthe 2007 base salary at $700,000, which approximatesevaluation process). During these meetings, our CEO presented to the 50th percentile of theprimarypeer group.Committee his recommendations with respect to executive base salaries other than his own. The base salary increasessalaries for Messrs. Huang and Sophie reflect2007 as approved by the market analysis conducted prior toCompensation
Committee, the Februarypercentage increase from 2006 meeting. Mr. Huang’s base salary was increased to align mid-way between the 50th and 75th percentile to the market, reflecting his experience and contributions. Mr. Sophie’s base salary was increased to meet the 50th percentile to market. Mr. Barton was hired on August 1, 2005(if any) and the Committee decided not to change his base salary for fiscal year 2006.effective date of each increase is as follows: Named Executive Officer
| | 2006
Base Salary
| | 2007
Base Salary
| | % Increase from 2006
| | Effective date
|
|---|
| Hong Liang Lu | | $ | 700,000 | | $ | 700,000 | | 0 | % | N/A | | Francis P. Barton | | $ | 500,000 | | $ | 750,000 | | 50 | % | January 1, 2007 | | Philip Christopher | | $ | 530,000 | | $ | 550,000 | | 3.6 | % | March 1, 2007 | | David King | | $ | 340,000 | | $ | 355,000 | | 4.2 | % | March 1, 2007 | | Ying Wu* | | $ | 500,000 | | $ | 550,000 | | 10 | % | February 1, 2007 |
- *
- Mr. Wu's employment with us terminated on June 1, 2007.
2007 Base Salary Actions
Similar to the process undertaken in 2006, the CEO presented 2007 recommendations for base salary increases for the NEOs to the Compensation Committee in February, 2007. The Compensation Committee, after After a review of individual and Company performance as well asand our peer group market practices for executive compensation, approveddata, the following salary increases for our NEOs, effective as of the dates noted:
Named Executive Officer | | | | 2007 Base
Salary | | % Increase | | Effective date | | Hong Liang Lu | | $ | 700,000 | | | 0 | % | | — | | Ying Wu | | $ | 550,000 | | | 10 | % | | February 1, 2007 | | Francis P. Barton | | $ | 750,000 | | | 50 | % | | January 1, 2007 | |
The Committee did not increase Mr. Lu’sLu's base salary for 2007. The CommitteeMr. Barton's base salary was increased by 50% in light of (i) his assumption of substantially greater duties, including responsibility for the Legal and Business Development departments and (ii) the Compensation Committee's assessment of his criticality to ongoing Company success. Mr. Wu’sKing and Mr. Christopher received merit increases which reflected market data for their positions as well as recognition of their individual performance against targets set forth them in 2006. Mr. King's base salary increase was within budgeted base salary increase guidelines and kept him at the 50th percentile of the market. While Mr. Christopher's base salary increase brought him near the 75th percentile of the market, his increase was in recognition of sustained performance and his Division's contributions to the Company. Mr. Wu's salary was increased to align his compensation with that paid to executives with similar responsibilities who are employed by peer companies with revenue comparable to ours. This increase placed Mr. Barton’s base salary adjustment was made in lightWu's cash compensation between the 50th and 75th percentile of his assumptionour primary peer group for 2007, but below the 50th percentile of substantially greater duties, including responsibilityour secondary peer group for the Legal and Business Development departments, after the departure of Mr. Sophie. Mr. Barton’s base salary increase also reflects the Compensation Committee’s assessment of his criticality to ongoing Company success. Messrs. Huang and Sophie terminated their employment with the Company prior to the Committee’s review of 2007 compensation levels. Mr. Huang’s employment terminated on December 31, 2006 and Mr. Sophie’s employment terminated on May 5, 2006.
Mr. Wu’s employment with the Company and its subsidiaries terminated on June 1, 2007. Mr. Wu is eligible to receive severance benefits in accordance with the terms of his Amended and Restated Change of Control/Involuntary Termination Severance Agreement dated November 14, 2006, which provides that if Mr. Wu’s employment with us terminated as a result of a regular involuntary termination during the period of employment apart from a change of control, (i) Mr. Wu would be entitled to 12 months of base salary as in effect as of the date of such termination, payable in a lump sum within 30 days of termination, and 100% of the bonus for the year in which termination occurred, (ii) all equity awards, including without limitation option grants, restricted stock and stock purchase rights, granted to Mr. Wu would become fully vested and/or exercisable to the extent such equity awards were outstanding and/or unexercisable at the time of such termination, (iii) Mr. Wu would be permitted to exercise such vested equity awards for the shorter period of (a) 12 months from the date of termination and (b) the remaining term of the respective equity awards, and (iv) we would continue to provide Mr. Wu the same level of health coverage as in effect on the day immediately preceding the termination date until the earlier of the date he is no longer eligible to receive continuation coverage pursuant to COBRA or 12 months from the termination date. As a result, Mr. Wu is eligible to receive a total of $998,768.83 (comprised of $550,000 in base salary, $440,000 in bonus, subject to applicable withholding, and $8,768.83 for the balance of his health care premiums).
Mr. Wu has asserted that he continues to have a right to employment with one of the Company’s subsidiaries in China.
In May 2007, the Compensation Committee discussed certainreviewed and considered compensation arrangements to be presented tofor a candidate for the position of Chief Operating Officer ofcandidate, taking into consideration the Company. In determining the components of the compensation arrangementsCompany's current management structure and the reasonableness thereof,probability that the Chief Operating Officer candidate would be considered as a successor to Hong Liang Lu, the Company's current Chief Executive Officer. In crafting the offer, the Committee considered the candidate’s previous experience and industry knowledge,appropriate initial base salary level, whether or not a signing bonus would be an incentive to increase the Company’s strategic direction, the level of responsibility to be assumed by the candidate, bothcandidate's interest in the shortposition, a restricted cash award since the Company was not able to issue equity at that time, the appropriate performance bonus target as a percentage of annual salary and long term, and the availabilityproposed terms of qualified candidates in the marketplace. Ona change of control agreement. Subsequently, on May 27, 2007, the Company entered into an offer letter agreement with Mr. Peter Blackmore (the “"Blackmore Agreement”"), pursuant to which Mr. Blackmore was offered the position of President and Chief Operating Officer of the Company. Mr. Blackmore's salary was initially set at $800,000 per year and his target bonus was set at 100% of his base salary. The Blackmore Agreement providesCompensation Committee took into consideration the probability that Mr. Blackmore shall, upon commencement of employment with the Company, receive (i) an annual salary of $800,000, which shall never be reduced below the current level, (ii) a signing bonus of $100,000, (iii) an annual bonus equal to 100% ofwould succeed Mr. Blackmore’s annual salary, based upon the Company’s performance and achievement of mutually agreed upon performance objectives (an annual bonus for the 2007 calendar year of 50% of Mr. Blackmore’s annual salary is guaranteed), and (iv) upon approval of the Board of DirectorsLu as CEO of the Company when it established his initial base salary at a restricted cash award equal to $5,200,000, payablelevel that was over the 75th percentile of our peer group for a four (4) year period as follows: (a) $4,000,000 will vest as follows: $1,000,000 will vestCOO candidate but was between the 50th and become payable on each annual anniversary of Mr. Blackmore’s employment start date, subject to his continuing to provide services to the Company through each applicable vesting date, and (b) an additional $300,000 will vest and become payable on the first anniversary of the date of grant, and $25,000 will vest each month thereafter, subject to his continuing to provide services to the Company through each applicable vesting date.75th percentile for a CEO candidate. In the event of Mr. Blackmore’s death or disability all amounts under (iv) above will accelerate.
Additionally, pursuant to the terms of the Blackmore Agreement,addition, the Company entered into a Change of Control/Involuntary Termination Severance Agreement with Mr. Blackmore, effective July 2, 2007. For2007 (the "Blackmore Severance Agreement"). See "Employment Contracts and Severance Agreements with Named Executive Officers" in the "Potential Payments Upon Termination and Change of Control" section of this Proxy Statement for a description of the material terms of this agreement, please see “Employment Contractsthe Blackmore Agreement and Change of Control Arrangements with Executive Officers Other Than Named Executive Officers”the Blackmore Severance Agreement.
Similar to the process undertaken for 2007, our CEO presented to the Compensation Committee his 2008 base salary recommendations for the NEOs other than himself in the section entitled “Potential Payments Upon Termination and Change on Control” included in this Proxy Statement.February 2008. After a
Bonusreview of individual and Company performance, as well as market practices for executive compensation within our peer groups, the Compensation Committee made no adjustments to base salaries for our NEOs other than for Mr. King, whose base salary was increased from $355,000 to $366,000 per year (an increase of 3.1% from 2007), effective March 1, 2008, in order to maintain his targeted market position relative to our peer groups. During its deliberations, the Committee proposed an increase to Mr. Lu's base salary in light of its review of our peer group compensation data and taking into consideration the fact that Mr. Lu had not had an increase in base salary since 2004. Mr. Lu subsequently declined any increase in his base salary in light of the Company's financial performance and management's implementation of an effective cost-reduction strategy. In making its other salary assessments, the Committee determined that salaries for Messrs. Barton and Christopher were aligned with the compensation of executives with similar responsibilities within our peer groups and that, in light of his recent hire date, Mr. Blackmore's base salary would not be adjusted in connection with this review.
UTStarcom’sBonus
UTStarcom's annual bonus program is a discretionary, variable cash incentive program designed to reward executives (as well as all employees) for achieving key operational goals. AtThe use of a discretionary bonus program provides the Compensation Committee with the flexibility needed to address pay-for-performance goals as well as recruiting and retention concerns in a "turnaround" environment. The target annual incentive percentage for each executive represents the percentage of his or her base salary that may be paid if the Company's actual performance equals an income target established at the beginning of the year. Once the Committee establishes that payouts will occur, as determined by actual company performance at year-end, the Committee may apply negative or positive discretion to adjust the actual award. In addition, at the beginning of each fiscal year, the Compensation Committee approves specific goals for each executive officer goals whichthat reflect the process of “management"management by objective”objective" (the “"MBOs”") and which are also used to measure performance in the upcoming year for the purpose of determining bonus and equity awards. In additionMBO goals include financial performance goals with a focus on returning the Company to measures of corporate performance, suchprofitability, as bookings, revenue and margin, the Compensation Committee also evaluates individual performance, approves weightings and makeswell as other appropriate adjustments. CEO performance was based fifty percent on financial results and fifty percent on the achievement of approved MBOs in the areas of quality, people development, customer expansion, strategic products and business systems and process improvement. operating goals for each executive. Metrics for non-CEO executive officers are set by the CEO and approved by the Compensation Committee. Individual performance was based fifty percent on financial results, Several of our executive officers have bonus arrangements that are set forth in employment or other agreements with the executive officer. Mr. Christopher's annual bonus is nondiscretionary and fifty percent on individual MBOs. Financial measures established in 2006 forequals 2% of the NEOs other than the CEO varied, based on their position.after-tax operating profits of our Personal Communications Division of which he is President. Fifty percent of Mr. Wu’s performance was based on UTStarcom’s performanceKing's bonus is nondiscretionary and consists of sales commissions. Any amounts paid by us in China, as measured by bookings, revenue, contribution margin and cash collection. The remaining fifty percent of Mr. Wu’s performance was measured by achievement of MBOsconnection with such agreements are disclosed in the areas"Long Term Non-Equity Incentive Compensation" column of quality, people development, strategic product sales, business systems and process improvement and compliance. Fifty percent of Mr. Barton’s performance was based on financial measures including corporate revenue, bookings, gross margin and operating margin, operating cash flow and inventory. The remaining fifty percent of Mr. Barton’s performance was measured by achievement of MBOs in the areas of investor relations, business planning and analysis, compliance, and expense control. Messrs. Huang and Sophie were not eligible to participate in the bonus program due to their termination of employment with the Company during fiscal year 2006.Summary Compensation Table. Bonuses for the 2005 performance year were determined by the Compensation Committee in February 2006, and reflect the Committee’s assessment of Company performance for the fiscal year ended December 31, 2005. The Compensation Committee decided not to pay bonuses to its executive officers other than Mr. Huang who was awarded $75,000 based upon his technical contributions and competitive market data. Bonus decisions, other than the bonus of $250,000 paid to Mr. Barton as stipulated in his offer letter with the Company, were based on the Company’s 2005 performance, current market rate data, and MBO achievement.
2007 Bonus Payouts for 2006 Performance
In February 2007,2008, Mr. Lu, our CEO, presented recommendations to the Compensation Committee for bonus payments to the NEOs other than himself, based on operating income results and his assessment of their performance.performance during the 2007 fiscal year. The Compensation Committee retained the authority to assess Mr. Lu’sLu's performance in connection with the bonus payout process. The Compensation Committee approved the following 2006 bonus payments for the NEOs,Fifty percent of Mr. Lu's MBOs are based on his meeting or exceeding targets for profit, bookings, revenue, gross margin, cash flow and inventory turns, and his remaining MBOs involve corporate level and role specific goals. Eighty percent of Mr. Barton's MBOs relates to his oversight of the finance, legal, compliance, treasury and internal audit functions, and the remaining MBOs are corporate and individual performance: Named Executive Officer | | | | 2006 Annual Bonus
Target as a Percent of
Base Salary | | 2006 Bonus
Paid | | Bonus Paid as
Percentage of
Target | | Hong Liang Lu | | | 100 | % | | | $ | 315,000 | | | | 45 | % | | Ying Wu | | | 80 | % | | | $ | 320,000 | | | | 80 | % | | Francis P. Barton | | | 80 | % | | | $ | 750,000 | | | | 187.5 | % | |
Based on corporatedevelopment specific goals. Fifty percent of Mr. King's target bonus is contingent upon his achievement of MBOs which are discussed below and individual performance, the Compensation Committee set Mr. Lu’sremainder is comprised of sales commissions. Messrs. Blackmore and Christopher did not participate in the discretionary bonus at 45% of his target, or $315,000. Theprogram during 2007, as discussed below.
In connection with this review, the Compensation Committee determined that no bonuses would be paid to the NEOs for 2007, other than bonuses that were nondiscretionary. Mr. Wu had achieved 80% of the performance measures relevant to his incentive bonus determination, based on individual and corporate performance and that Mr. Barton had achieved 100% of the performance measures relevant to his incentive bonus determination, based on individual and corporate performance. Also in February 2007, the Compensation Committee exercised its discretion and decided, based on Mr. Barton’s unique and extraordinary performance in 2006, to award him a cash performance bonus for 2006 of 187.5% of his 2006 annual bonus target. Messrs. Huang and Sophie werewas not eligible to receive a bonus for fiscal year 2007 since he was not employed by the Company at the end of the fiscal year. The amounts paid as nondiscretionary bonuses since they had terminated their employmentare as follows: Named Executive Officer
| | 2007 Annual Bonus Target as a Percent of Base Salary (unless otherwise noted)
| | 2007 Bonus
Paid
| | Bonus Paid as Percentage of Target
|
|---|
| Peter Blackmore | | 100% | | $ | 400,000 | (1) | Per offer letter agreement (see discussion below) | | Philip Christopher | | 2% of Personal Communications Division profit | | $ | 821,181 | (2) | 100% | | David King | | 33.5% of annual salary as sales commission | | $ | 72,234 | (3) | 61% |
- (1)
- Mr. Blackmore's bonus was nondiscretionary for 2007 and was paid in accordance with the
Company prior to February 1,terms of his offer letter agreement which provides that he would receive a guaranteed minimum bonus of $400,000 for 2007. For fiscal years after 2007, the date on which the Compensation Committee determined bonus awards.Equity Compensation
Officers and other employees of the Company are eligible tohowever, Mr. Blackmore will participate in the 2006 Equity Incentive Plan,discretionary bonus program described above.
- (2)
- This amount equals 2% of the after-tax operating profits of our Personal Communications Division for fiscal year 2007, of which
was adopted byMr. Christopher is President.
- (3)
- Comprised of $72,234 in sales commissions related to his achievement of the
Boardfollowing sales targets for 2007: (i) 76% of Directorshis bookings goal, (ii) 76% of his collections goal; and approved by(iii) 0% of his contribution margin goal as a result of failing to hit the stockholders in Julyminimum threshold required for payment. Bookings and collections represents 80% of 2006. They arehis total sales target and contribution margin represents 20% of his total sales target. Mr. King is also eligible to participate in the Company’s Employee Stock Purchase Plan,discretionary bonus program and his target bonus percentage for that program equals 33.5% of his annual base salary.
Based on the Company's financial performance for 2007, the Compensation Committee determined that no bonuses would be paid to the executive officers for 2007, other than as described below.set forth above. Instead, as part of the Company's strategic recovery plan, the Committee restructured the bonus program to provide for a bonus payable to Mr. King as follows: (i) 50% of the target discretionary bonus for which Mr. King would be eligible (i.e., 33.5% of his base salary) would be paid in March 2008 if he met certain strategic operating goals during the fourth quarter of 2007, and (ii) the remaining 50% of the target bonus would be paid in the fourth quarter of 2008 if (a) he met specific performance goals in the first three quarters of 2008 and (b) the Company met its operating income goals for that period. In addition, if the Company succeeds in achieving within 25% of its budgeted income targets as measured at the end of the third quarter of 2008, a multiplier may be applied to Mr. King's bonus calculation. For example, if Mr. King meets 80% of his goals for the first three quarters of 2008 and the Company exceeds its budgeted operating income by 20% (i.e., 120% of target), his bonus for this program would be calculated as follows: bonus = base salary × applicable target bonus as percentage of annual salary × 80% × 120% × 50%. Participants in this bonus program include certain executive officers and vice-presidents of the Company.
In February 2008, the Compensation Committee assessed Mr. King's performance against his strategic operating goals for the fourth quarter of 2007 and determined that he would be paid $59,108 (50% of his target percentage, or 17% of his base salary) based on his achievement of those strategic operating goals. The Compensation Committee plans to evaluate achievement of the 2008 strategic operating goals as soon as practicable upon the completion of the last measurement period. Equity Compensation Equity compensation is the largest component of UTStarcom’sUTStarcom's executive officer compensation program. We believe this is an effective way to align the interests of our executive officers with those of our stockholders in order to achieve long-term stock price growth.stockholder value. In designing the equity program, we take into account stockholder concerns about stock usage and dilution. The Compensation Committee limits annual net issuances of stock-based awards, subject to extraordinary events (e.g., acquisitions). The Compensation Committee adjusts this target rate from year-to-year based on performance and retention issues, and to stay in line withalso taking into account market practices. Our three-year annual average actual net issuanceOfficers and other employees of stock-based awardsthe Company are eligible to participate in the 2006 is 4.8%Plan, which was adopted by the Board of outstanding Common Stock.Directors and approved by the stockholders in July of 2006. They are also eligible to participate in the Company's Employee Stock Purchase Plan, as described below. In 2006, approximately 50% of NEO equity award value was delivered in stock options Both time and approximately 50% was delivered in stock awards, which are generally designated in restricted stock units and settled in our Common Stock. Stock options were granted to the NEOs subject to performance-based, one-year cliff vesting. The number of stock options that vested was based on Company and individual performance. Similarly, performance-based stock awards were granted to the NEOs based on Companyin 2007 and individual performance. The portion of stock awards that vested was2008 based on Company and individual performance. Performance for equity awards is generally measured against the same criteria as were discussed in the “Bonus”"Bonus" section above.
On November 30, 2007, in connection with the Company's annual focal award process for 2006 Performance On2007 which had been postponed from February 28, 2006,2007 due to the Company's failure to timely file periodic reports with the Securities and Exchange Commission, the Compensation Committee approvedgranted certain of the grantNEOs shares of restricted stock and RSUs under the Company's 2006 Plan, as set forth below. Certain of the awards vest over time, as noted below, but the performance-based equity awards tovest over a period of two years, with the additional requirement of achieving predetermined performance metrics as described below.
Named Executive Officer
| | Type of Award
| | Number of Shares
| | Target Performance Share Award
| | Vesting Schedule
|
|---|
| Hong Liang Lu | | Restricted Stock
Restricted Stock
RSUs | | 133,543
40,000
— | | —
—
267,086 | | 4-year time based
100% on November 30, 2008
Performance based | | Francis P. Barton | | RSUs
RSUs | | 44,781
— | | —
89,562 | | 4-year time based
Performance based | | Peter Blackmore | | RSUs
RSUs | | 0
— | | —
0 | | 4-year time based
Performance based | | Philip Christopher | | RSUs
RSUs | | 35,712
— | | —
71,249 | | 4-year time based
Performance based | | David King | | RSUs
RSUs | | 95,238
— | | —
229,885 | | 4-year time based
Performance based |
Except as noted above, the time-based awards vest over four years as follows: 25% on each of February 29, 2008, February 27, 2009, February 26, 2010, and February 28, 2011, subject to the NEOs.NEO remaining a service provider (as defined in the 2006 Plan) through each such date. The number of options that would vest and the number of performance shares to be issuedearned by each NEO with respect to each NEOthe performance-based awards was to be determined by the Compensation Committee as soon as practicable following the 20062007 fiscal year end, based on
each executive officer’sexecutive's achievement of certain management performance goals set by the Committee on the date of grant. The performance goals were tailored to each individual and includedobjectives including (i) achievement of corporate financial measures such as bookings, gross margin, revenue, operating profit, cash flow, inventory turns, contribution margin, cost reduction and cash collections, (ii) achievement of certain corporate objectives, relating to quality and organization and (iii) achievement by such executive officerNEO of additional individualized performance objectives reviewed and approved by the Compensation Committee. Mr. Blackmore did not participate in the program for 2007 because he had received an equity grant in connection with his initial employment and was not an employee for all of fiscal year 2007. Mr. Wu was not eligible to participate in this program since he was not an employee at the time of grant of the performance-based RSUs.
At its meeting on February 1,26, 2008, the Committee measured each NEO's performance against the objectives established in November 2007 as described above and determined that the number of performance-based RSUs earned by each NEO was as follows: Named Executive Officer
| | Actual RSU Award
| | Percentage of Actual Award versus Target
| |
|---|
| Hong Liang Lu | | 133,543 | | 50 | % | | Francis P. Barton | | 67,172 | | 75 | % | | Peter Blackmore | | — | | — | | | Philip Christopher | | 71,429 | | 100 | % | | David King | | 206,897 | | 90 | % |
The earned RSUs will vest 50% on each of February 29, 2008 and February 27, 2009, subject to the NEO being a service provider (as defined in the 2006 Plan) on each such date. The RSUs that were not earned were forfeited. In February and March 2008, and in connection with the Company's annual focal award process, the Compensation Committee granted certain of the NEOs shares of restricted stock, RSUs and performance shares under the Company's 2006 Plan, as set forth below. Certain of the awards vest over time, as noted below, but vesting of a majority of the awards is performance-based. The number of shares to be earned by each NEO with respect to the performance-based awards is to be determined by the Compensation Committee as soon as practicable following the 2008 fiscal year end, based on each executive's achievement of certain management performance objectives as described below. Named Executive Officer
| | Type of Award
| | Number of Shares
| | Target Performance Share Award
| | Vesting Schedule
|
|---|
| Hong Liang Lu | | RSUs
RSUs
Performance Shares
Restricted Stock | | 200,000
33,333
—
— | | —
—
100,000
300,000 | | 4-year time based
100% on February 27, 2009
Performance based
Performance based | | Francis P. Barton | | RSUs
RSUs | | 61,667
— | | —
123,333 | | 4-year time based
Performance based | | Peter Blackmore | | RSUs
RSUs | | 85,000
— | | —
170,000 | | 4-year time based
Performance based | | Philip Christopher | | RSUs
RSUs | | 50,000
— | | —
100,000 | | 4-year time based
Performance based | | David King | | RSUs
RSUs | | 55,000
— | | —
110,000 | | 4-year time based
Performance based |
Except as noted above, the time-based awards vest over four years as follows: 25% on each of February 29, 2009, February 26, 2010, February 28, 2011, and February 29, 2012, subject to the NEO remaining a service provider (as defined in the 2006 Plan) through each such date.
The performance-based awards will be earned with respect to each NEO based on management performance objectives established and tailored for each NEO by the Committee for the Company's 2008 fiscal year, including (i) achievement of corporate financial measures such as bookings, gross margin, revenue, operating profit, net income, cash flow, inventory turns, contribution margin, cost reduction and cash collections, and (ii) achievement by such NEO of additional individualized performance objectives reviewed and approved by the Committee. Performance will be measured against the established objectives and, to the extent the established objectives have been achieved, the number of performance-based RSUs, performance shares or shares of restricted stock earned by each NEO shall be determined by the Committee, in its sole discretion, provided that such NEO remains a service provider (as defined in the 2006 Plan) of the Company on the date of determination. Following the determination of the number of RSUs, performance shares or shares of restricted stock earned by each NEO, 50% of the earned awards shall vest on each of February 27, 2009 and February 26, 2010, provided that such NEO remains a service provider of the Company (as defined in the 2006 Plan) on those dates. Performance-based awards that are not earned will be forfeited. In November 2007, the Compensation Committee approved the terms of a retention plan for our CFO, Francis P. Barton, after taking into consideration: (i) Mr. Barton's performance during a challenging year, including completing the Company's previously disclosed stock option and historical sales contract investigations, bringing the Company current in its SEC filings and improving the Company's Section 404 compliance process; (ii) the critical nature of Mr. Barton's current and future role in light of anticipated management transitions in fiscal year 2008; and (iii) increasing competition in the market for experienced financial professionals. The Committee also determined that, mostwhile the retention incentive described below could be awarded in equity and/or cash, the Committee's intent was to grant equity to the extent possible under the terms of the performance objectives set for fiscal year 2006 forPlan in order to increase Mr. Barton's incentive as an owner and shareholder to drive the Company toward profitability. The agreement between Mr. Barton and the NEOs had been metCompany (the "Barton Retention Agreement") provides that the Company will provide a retention incentive to Mr. Barton with a total value of $10,000,000 (the "Retention Incentive"), consisting of a combination of restricted stock, RSUs, performance shares and determinedperformance units (together, "Equity") to be granted under the following2006 Plan and/or cash, in the sole discretion of the Compensation Committee. Each installment of the Retention Incentive will be awarded in a combination of Equity, in the Committee's sole discretion, up to the annual maximum amounts permitted under the 2006 Plan after taking into account Mr. Barton's focal awards for each particular year. Because of limits on the NEOs: Named Executive Officer | | | | Stock Option
Award
Granted | | Stock Option
Award
Vested | | Target
Performance
Share Award | | Actual
Performance
Share
Award(1) | | Percentage
of Actual
Awards
versus
Target | | Hong Lu | | | 260,000 | | | | 234,000 | | | | 130,000 | | | | 117,000 | | | | 90 | % | | Ying Wu | | | 100,000 | | | | 80,000 | | | | 50,000 | | | | 40,000 | | | | 80 | % | | Francis P. Barton | | | 92,000 | | | | 92,000 | | | | 46,000 | | | | 46,000 | | | | 100 | % | |
(1) On February 1, 2007,maximum amount of Equity that can be granted to an individual in any calendar year under the Compensation2006 Plan, the Committee determinedexpects that the named executive officers wouldRetention Incentive will be eligible to receive theawarded over a number of performance shares set forth in this column at such timeyears so that as the Committee shall approve the issuancemuch of the performance stockRetention Incentive can be awarded under the 2006 Plan as possible. Please see the section entitled "Employment Contracts and Severance Agreements with Named Executive Officers" in compliance with applicable law. The Compensation Committee has not yet approved the issuance"Potential Payments Upon Termination and Change of Control" section of this Proxy Statement for a description of the performance stock.
2006 Equity Awards for 2005 Performance
No equity awards were granted tomaterial terms of the NEOs in 2006 for 2005 performance.Barton Retention Agreement.
Our executive officers are also eligible to participate in the Company’sCompany's Employee Stock Purchase Plan to the same extent as all employees. The ESPP allows employees to purchase UTStarcom stock at a 15% discount. Up to 15% of an employee’semployee's annual base salary, but not more than $25,000, may be allocated to the purchase of the Company’sCompany's Common Stock under this plan. All of our executive officers other than Mr. Christopher currently participate in the ESPP.
Benefits, Perquisites and Other Compensation We provide medical and other benefits to executives that are generally available to other full-time employees, including group term life insurance, expatriate remuneration for those employees who are assigned overseas and who qualify under the terms of our expatriate remuneration plan, tuition reimbursement and a 401(k) plan. The 401(k) plan is a defined contribution plan and, after one year of service, employees are eligible to receive a matching contribution from the Company of up to $5,500. All of our named executive officersOur NEOs other than Messrs. Blackmore and King participated in our 401(k) plan during 20062007 and received matching contributions. We also provide the NEOs and certain other selected executives with certainadditional perquisites including financial planning services (including, in some instances, a tax gross-up with respect thereto), tax assistance payments 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, business travel accident insurance, a housing allowance and relocation expenses for certain executives who have been asked to relocate to conduct business on behalf of the Company, disability insurance and car/transportation allowances. In addition, in accordance with the caseterms of Mr. Barton, daily transportation to and from our offices.Christopher's initial employment with us, we pay premiums on a term life insurance policy for his benefit. The Compensation Committee reviews the perquisites provided to executive officers as part of its overall review of executive compensation. The Compensation Committee has determined the type and amount paid in perquisites to be within the appropriate range of competitive compensation practices. Details about the NEO’sNEO's perquisites, including the fiscal year 20062007 cost to the Company, are shown in the Summary Compensation Table under the “All"All Other Compensation”Compensation" column and the accompanying narrative.footnotes. 29
Post-Employment Obligations During 2006,2007, the Company was party to change of control and involuntary termination severance agreements with eachcertain of the Named Executive Officers.its NEOs. For a description of the material terms of these agreements, please see “Employment"Employment Contracts and Severance Agreements with Named Executive Officers”Officers" in the section entitled “Potential"Potential Payments Upon Termination and Change on Control”Control" included in this Proxy Statement. The Compensation Committee believes these agreements are in the best interest of the Company’sCompany's stockholders. As with any public company, the possibility of change of control exists for UTStarcom. Such a change of control typically means a degree of ambiguity for executives about the stability of their employment. The Compensation Committee believes these agreements help to ensure that executives will remain focused on, and committed to, the interests of the business throughout the process of exploring and/or executing a change of control. For purposes of each of the agreements described above that contain change of control involuntary termination provisions, change of control involuntary termination includes a significant reduction in employee responsibilities, a substantial reduction in facilities and/or perquisites, a reduction of base salary and/or benefits, a relocation of the employee of more than 50 miles for his or her current location, or the failure of an acquirer to assume the agreements discussed in this section. In all cases, the executive can retain his or her employment by agreeing to any of these changes.
In June 2006, the Compensation Committee adopted the Executive Involuntary Termination Severance Pay Plan (the "Executive Severance Plan"), which extends certain change of control and severance benefits to some of the Company’sCompany's executive officers, including Mr. King, who aredo not named executive officers.have individual agreements with the Company. Please see “Employment"Employment Agreements and Change of Control Arrangements with Executive Officers Other Than Named Executive Officers”Officers" in this Proxy Statement for a description of the material terms of the plan. The Compensation Committee believes that the terms of the plan is in the best interests of the Company and its stockholders in that the plan, like the agreements with certain of our Named Executive OfficersNEOs described above, helps to ensure the focus and commitment of our executive team during the process of exploring and/or executing a change of control. Reasonableness of Compensation The Compensation Committee believes it is fulfilling UTStarcom’sUTStarcom's compensation objectives and in particular, rewarding executive officers in a manner that supports our strong pay-for-performance
philosophy. Executive compensation is tied to our performance and is structured to ensure that there is an appropriate balance between our long-term and short-term performance, and also a balance between our operational performance and stockholder return. On average, the target total direct pay position for the Named Executive OfficersNEOs in 20062007 was between the 50th and 75thpercentile of the primary peer group. The Compensation Committee believes the average target pay position relative to market and pay mix are reasonable and appropriate.appropriate and are necessary to address recruiting and retention concerns in a "turnaround" environment. Mr. Barton's base salary remains high relative to our peer group; however as discussed earlier, his salary reflects (i) his assumption of substantially greater duties, including responsibility for the Legal and Business Development departments after the departure of the Company's previous Chief Financial Officer, (ii) the Compensation Committee's assessment of his criticality to ongoing Company success and (iii) Mr. Barton's extensive senior finance experience. Other Considerations Equity Grant Practices The Compensation Committee approves all equity grants to our executive officers. During fiscal year 2006,2007, the Company’sCompany's equity award pool for awards (including new hire grants and any merit or focal awards) to be made during that period was approved by the Board of Directors. A percentage of this total approved pool was designated for distribution to the company executives. Functional Vice Presidents recommended annual equity grants to their supervised employees based on individual performance, with our Chief Executive Officer making recommendations for his direct reports. The Company’sCompany's Human Resources personneldepartment then compiled the list of recommendations and presented those recommendations to the Compensation Committee for approval. Any recommendation with respect to equity grants for our
Chief Executive Officer was made by the Compensation Committee. The fair market value of the options granted was established as of the date on which the Compensation Committee approved the grants. On April 10, 2007, the Compensation Committee adopted the UTStarcom, Inc. Equity Award Grant Policy and Procedures, which applies to all equity awards from that date forward. In accordance with the Company’sCompany's equity award grant policy, equity awards to executive officers are considered and approved as follows: ·
- •
- All equity awards to executive officers are to be approved by the Compensation Committee;
·
- •
- The Compensation Committee will use its best efforts to approve equity awards at a duly called meeting of the Compensation Committee, and awards will be made by unanimous written consent only if meetings are unable to be held;
·
- •
- The date of grant of any equity award will be the last trading day in the month in which the Compensation Committee approves the award; and
·
- •
- For purposes of equity awards that are to be granted at the fair market value of the
Company’sCompany's Common Stock, the fair market value shall be the closing sales price per share of the Company’sCompany's Common Stock on the date of grant.
Compensation Committee meetings may be held at any time to consider the approval of equity awards proposed to be provided to new executive officers (including new executive officers resulting from either new hires or promotions, but other than annual focal awards, as described below), but equity awards granted by the Compensation Committee shall become effective as of the last trading day of the month of grant. Compensation Committee meetings to consider the approval of annual focal awards to executive officers shall be held during the last two weeks of February of each year, if reasonably practicable and subject to compliance with applicable laws, rules and regulations. If a meeting cannot be held and/or equity awards cannot be granted in accordance with applicable laws, rules and regulations during this time period, the Compensation Committee shall determine the meeting date for the consideration and
approval of focal awards. The Compensation Committee shall meet to approve focal equity awards during an open trading window as such term is defined in the Company’sCompany's Insider Trading Policy. Option Equity grants made to employees who are not executive officers or corporate vice presidents may be made by the Awards Committee, a management committee duly formed and authorized by the Compensation Committee and consisting of the Company’sCompany's Chief Financial Officer, Senior Vice President of Human Resources, General Counsel and Chief Accounting Officer. The Awards Committee may grant only stock options or restricted stock units and only then in accordance with specific guidelines set by the Compensation Committee. Any optionaward grants approved by the Awards Committee are effective as of the last trading day of the month of grant. Equity grants are made subject to an annual equity pool approved by the Compensation Committee. The approval pool to be awarded by the Awards Committee consisted of 5.4 million1,000,000 sharesin 2006.2007 and will consist of 2,000,000 shares in 2008. This increase to the equity pool reflects the additional authority granted by the Compensation Committee to the Awards Committee to review and award all focal and new hire awards to employees and service providers below the corporate vice president level and within certain established guidelines. The Human Resources Department provides quarterly tracking updates to the Compensation Committee regarding equity usage.
Tax Considerations Tax Considerations
Section 162(m) of the Internal Revenue Code states that public companies cannot deduct compensation paid to certain of its top executive officers in excess of $1 million per officer per year.year, but excludes from the calculation of the $1 million limit certain elements of compensation, including performance-based compensation, provided that certain requirements are met. We believe it is in our best interest, to the extent practical, to have executive officer compensation be fully deductible under Section 162(m). However, the Compensation Committee also retains the discretion, for competitive reasons, to provide compensation that may not be fully deductible. In a few instances, a portion of our annual bonus payments to certain of our executive officers does not currently qualify as deductible under Section 162(m). The Compensation Committee will continue to evaluate whether it is in
the Company’sCompany's best interest to qualify future incentive awards under Section 162(m). While stock options granted under our 1997 planStock Plan (the "1997 Plan") did not meet the requirements of Section 162(m), future equity awards will be granted under our 2006 plan,Plan, which was approved by our stockholders and therefore meets the requirements under Section 162(m). UTStarcom is currently Section 409A of the Internal Revenue Code Section 409A imposes additional significant taxes in the event an NEO, director or other service provider receives "deferred compensation" that does not satisfy the requirements of Section 409A. Although we do not maintain a traditional nonqualified deferred compensation plan, Section 409A applies to certain severance arrangements and equity awards. Consequently, to assist in avoiding additional tax under 409A, we developed the severance arrangements described above in "Post-Employment Obligations" in a non-taxpaying situation, andmanner intended to either avoid the application of Section 409A or, to the extent doing so is not subject to tax liabilities for executive pay in excess ofpossible, comply with the $1 million limit.applicable Section 409A requirements. Stock Ownership Guidelines Effective January 1, 2006, by the decision of the Nominating and Governance Committee of the Board, the Company imposed minimum stock ownership guidelines for certain executive officers as well as non-executive directors of the Company. Each executive officer is expected to acquire the required number of shares of Common Stock as set forth by the guidelines (which range from 10,000 shares to 50,000 shares, depending on the level of responsibility of the officer) before the later of (i) four years after the effective date of the guidelines or (ii) four years after an officer’sofficer's appointment to such executive office. All executives required to comply with these guidelines currently meet the ownership
requirements. See the section entitled "Stock Ownership Guidelines" in this Proxy Statement for additional information with respect to this program.
REPORT OF THE COMPENSATION COMMITTEE
The following is the report of the Compensation Committee. The information contained in this report shall not be deemed to be “soliciting material”"soliciting material" or to be “filed”"filed" with the SEC, nor shallor subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act, except to the extent that the Company specifically requests that such information be incorporatedtreated as soliciting material or specifically incorporates the information by reference intoin any future filing under the Securities Act of 1933 as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates the information by reference in such filing.1934. The Compensation Committee of the Board of UTStarcom, Inc. was established on January 31, 1997 and is currently comprised of four members: Messrs. Clarke, Horner, Lenzmeier and Toy. Mr. Lenzmeier, the Chairman of the Compensation Committee, and Messrs. Horner and Toy served on the Committee throughout 2006.2007. Mr. Clarke was appointed to serve on the Compensation Committee on April 27, 2007. During 2006,2007, the Compensation Committee was comprised solely of non-employee directors who were each: (i) independent as defined under the NASDAQ Marketplace Rules, (ii) a non-employee director for purposes of Rule 16b-3 of the Securities Exchange Act of 1934, as amended, and (iii) an “outside director”"outside director" for purposes of Section 162(m) of the Internal Revenue Code. During 2007,2008, the Committee will continue to be comprised of directors who meet these same standards. The Compensation Committee has reviewed and discussed the “Compensation"Compensation Discussion and Analysis”Analysis" section of this Proxy Statement with management, including UTStarcom’sUTStarcom's Chief Executive Officer and Chief Financial Officer. Based on this review and discussion, the Compensation Committee recommended to the Board that the “Compensation"Compensation Discussion and Analysis”Analysis" section be included in this Proxy Statement. | The Compensation Committee |
|
Allen Lenzmeier, Chairman
| |
Larry D. Horner
| |
Thomas J. Toy
| |
Jeff Clarke*
| | *Appointed April 27, 2007
Clarke |
32
Summary Compensation Table for Fiscal Year 20062007 The following table presents information concerning the total compensation of (i) our principal executive officer, (ii) our principal financial officer, and(iii) our three most highly compensated executive officers, other than our principal executive officer and principal financial officer, who were serving as executive officers at the end of our 20062007 fiscal year, and (iv) a former executive officer for whom disclosure would have been provided but for the fact that he was not serving as an executive officer at the end of the 2007 fiscal year (the “named executive officers”"Named Executive Officers"). No disclosure is provided for fiscal year 2006 for those persons who were not Named Executive Officers in 2006.
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2006
Name and principal position | | | | Year | | Salary
($) | | Bonus
($)(1) | | Stock
Awards
($)(2) | | Option
Awards
($)(3) | | All Other
Compensation
($)(4) | | Total
($) | | Hong Liang Lu* | | 2006 | | 700,000 | | 315,000 | | 930,549 | | 1,376,655 | | | 18,345 | (4) | | 3,340,549 | | Chief Executive Officer | | | | | | | | | | | | | | | | | | Francis P. Barton | | 2006 | | 500,000 | | 750,000 | | 586,326 | | 823,294 | | | 101,769 | (5) | | 2,761,389 | | Executive Vice President and Chief Financial Officer | | | | | | | | | | | | | | | | | | Ying Wu** | | 2006 | | 500,000 | | 320,000 | | 318,136 | | 604,808 | | | 290,038 | (6) | | 2,032,982 | | Former Executive Vice President and Vice Chairman | | | | | | | | | | | | | | | | | | William Huang*** | | 2006 | | 345,833 | | 0 | | 0 | | 261,546 | | | 196,859 | (7) | | 804,238 | | Former Senior Vice President and Chief Technology Officer | | | | | | | | | | | | | | | | | | Michael J. Sophie**** | | 2006 | | 153,359 | (8) | 0 | | 0 | | 0 | | | 316,917 | (9) | | 470,276 | | Former Executive Vice President and Chief Operating Officer | | | | | | | | | | | | | | | | | |
Name and principal position
| | Year
| | Salary
($)
| | Bonus
($)(1)
| | Stock
Awards
($)
| | Option
Awards
($)
| | Non-Equity
Incentive Plan
Compensation
($)
| | All Other
Compensation
($)
| | Total
($)
|
|---|
Hong Liang Lu
Chief Executive Officer | | 2007
2006 | | 700,000
700,000 | | 0
315,000 | | 312,010
930,549 | (2)
(3) | 295,238
1,376,655 | (4)
(5) | —
— | | 198,567
18,345 | (6)
(7) | 1,505,815
3,340,549 |
Francis P. Barton
Executive Vice President and Chief Financial Officer |
|
2007
2006 |
|
750,000
500,000 |
|
0
750,000 |
|
3,039,375
586,326 |
(2)
(3) |
538,592
823,294 |
(4)
(5) |
—
— |
|
84,983
101,769 |
(8)
(9) |
4,412,950
2,761,389 |
Peter Blackmore*
President and Chief Operating Officer |
|
2007 |
|
400,000 |
|
500,000 |
(15) |
500,000 |
(2) |
150,000 |
(4) |
— |
|
— |
|
1,550,000 |
Philip Christopher**
President, Personal Communications Division |
|
2007 |
|
548,333 |
|
0 |
|
48,106 |
(2) |
531,469 |
(4) |
821,181 |
|
84,864 |
(10) |
2,033,953 |
David King***
Senior Vice President, International Sales and Marketing |
|
2007 |
|
358,742 |
|
59,108 |
|
257,625 |
(2) |
41,764 |
(4) |
72,246 |
|
29,797 |
(11) |
819,282 |
Ying Wu****
Former Executive Vice President and Chairman |
|
2007
2006 |
|
346,175
500,000 |
|
0
320,000 |
|
(318,136
318,136 |
)(14)
(3) |
(316,092
604,808 |
)(14)
(5) |
—
— |
|
1,504,639
290,038 |
(12)
(13) |
1,216,586
2,032,982 |
- *
- Mr.
Lu served as President, ChiefBlackmore joined the Company on July 2, 2007.
- **
- Mr. Christopher was not a Named Executive Officer during fiscal year 2006 and
Chairman of the Board until December 31, 2006. On January 1, 2007, he assumed the title of Chief Executive Officer.thus, pursuant to SEC guidance, his 2006 compensation is not included on this table.
- ***
- Mr.
Wu’s employment as our Executive Vice President and Chairman and ChiefKing was not a Named Executive Officer of our subsidiary, UTStarcom China Co., Ltd.,in fiscal year 2006 and thus, pursuant to SEC guidance, his 2006 compensation is not included on this table.
- ****
- Mr. Wu's employment with the Company terminated on June 1, 2007.
*** Mr. Huang resigned as our Senior Vice President and Chief Technology Officer as
- (1)
- The amounts listed represent the dollar value of
December 31, 2006.**** Mr. Sophie resigned as ourbonuses earned by the Named Executive Vice President and Chief Operating Officer asOfficers during the fiscal year covered, regardless of May 5, 2006.
(1) This amount represents amounts paid or to be paid in 2007 with respect to 2006 performance, and does not include amounts paid in 2006 with respect to performance in prior years.
when such bonuses were actually paid.
- (2)
- Amounts shown do not reflect compensation actually received by the
named executive officers.Named Executive Officers. Instead, amounts shown are the dollar amounts recognized for financial statement reporting purposes for the fiscal year ended December 31, 2007 in accordance with SFAS 123(R), including amounts for stock awards granted in and prior to 2007. Pursuant to SEC regulations, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Except for Mr. Blackmore, certain amounts include awards with performance-based vesting conditions, with compensation initially measured under SFAS 123(R) at grant date fair value and re-measured at each financial statement reporting date. The cumulative
compensation cost for such awards is adjusted to reflect the fair value at the time the Compensation Committee determines the ultimate number of awards earned. For a discussion on the Compensation Committee's final award determinations based upon the performance-based vesting conditions and the cumulative dollar amount recognized for financial statement reporting in accordance with SFAS 123(R), please see footnotes 1 and 3 to the table entitled "Grants of Plan-Based Awards in Fiscal year 2007" contained in this Proxy Statement. A discussion of the valuation assumptions used for purposes of the SFAS 123(R) calculation 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.
- (3)
- Amounts shown do not reflect compensation actually received by the Named Executive Officers. Instead, amounts shown are the dollar amounts recognized for financial statement reporting purposes for the fiscal year ended December 31, 2006 in accordance with SFAS 123(R), including amounts for stock awards granted in and prior to 2006. Pursuant to SEC regulations, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The amounts include awards with performance-based vesting conditions, with compensation initially measured under SFAS 123(R) at grant date fair value
on February 28, 2006 and re-measured at each financial statement reporting date. For a discussion onThe cumulative compensation cost for such awards is adjusted to reflect the fair value at the time the Compensation Committee’s final award
determinations based uponCommittee determines the performance-based vesting conditions and the cumulative dollar amount recognized for financial statement reporting in accordance with SFAS 123(R), please see footnotes 1 and 3 to the table entitled “Grantsultimate number of Plan-Based Awards in Fiscal Year 2006” contained in this Proxy Statement.awards earned. A discussion of the valuation assumptions used for purposes of the SFAS 123(R) calculation is included under Note 32 to our 2006 Consolidated Financial Statements that are part of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.
(3)
- (4)
- Amounts shown do not reflect compensation actually received by the
named executive officers.Named Executive Officers. Instead, amounts shown are the dollar amounts recognized for financial statement reporting purposes for the fiscal year ended December 31, 2007 in accordance with SFAS 123(R), including amounts for stock option awards granted in and prior to 2007. Pursuant to SEC regulations, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. A discussion of the valuation assumptions used for purposes of the SFAS 123(R) calculation 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 exercise price of certain stock options granted under option agreements executed in February 2002 was increased from $20.25 per share to $22.93 per share, and the exercise price of certain stock options granted under option agreements executed in July 2002 was increased from $15.72 per share to $20.82 per share. The incremental fair value, computed as of the modification date in accordance with SFAS 123(R), with respect to each such modified award is $0. For a discussion of modifications made to outstanding equity awards held by certain Named Executive Officers, please see the section entitled "Executive Compensation—Modifications to Outstanding Equity Awards" contained in this Proxy Statement.
- (5)
- Amounts shown do not reflect compensation actually received by the Named Executive Officers. Instead, amounts shown are the dollar amounts recognized for financial statement reporting purposes for the fiscal year ended December 31, 2006 in accordance with SFAS 123(R), including amounts for stock option awards granted in and prior to 2006. Pursuant to SEC regulations, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions.
The amounts include awards with performance-based vesting conditions, with compensation initially measured under SFAS 123(R) at grant date fair value on February 28, 2006 and re-measured at each financial statement reporting date. For a discussion on the Compensation Committee’s final award determinations based upon the performance-based vesting conditions and the cumulative dollar amount recognized for financial statement reporting in accordance with SFAS 123(R), please see footnotes 2 and 3 to the table entitled “Grants of Plan-Based Awards in Fiscal Year 2006” contained in this Proxy Statement. A discussion of the valuation assumptions used for purposes of the SFAS 123(R) calculation is included under Note 32 to our 2006 Consolidated Financial Statements that are part of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.The exercise price of certain stock options granted under option agreements executed in February 2002 was increased from $20.25 per share to $22.93 per share, and the exercise price of certain stock options granted under option agreements executed in July 2002 was increased from $15.72 per share to $20.82 per share. The incremental fair value, computed as of the modification date in accordance with SFAS 123(R), with respect to each such modified award is $0. For a discussion on modifications made to outstanding equity awards held by certain named executive officers,Named Executive Officers, please see the section entitled “Executive"Executive Compensation—Modifications to Outstanding Equity Awards”Awards" contained in this Proxy Statement. (4)
- (6)
- This amount consists of 401(k) match 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 for executives and a tax gross-up in the amount of $6,817 related thereto, $5,611 as a car allowance, $24,000 for a 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.
- (7)
- This amount consists of $12,200 for financial planning services for executives, a premium payment of $645 for life insurance coverage under our Business Travel Accident Insurance Policy and 401(k) match payments in the aggregate amount of $5,500.
(5)
- (8)
- This amount consists of 401(k) match 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, $5,000 for financial planning services for executives and a tax gross-up in the amount of $2,782 related thereto, $69,664 for a car allowance and service, and a premium payment of $802 for disability insurance.
- (9)
- This amount consists of $10,000 for financial planning services for executives, a premium payment of $645 for life insurance coverage under our Business Travel Accident Insurance Policy, $85,624 for a car allowance and service and 401(k) match payments in the aggregate amount of $5,500.
(6)
- (10)
- This amount consists of 401(k) match 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, $24,827 as a car allowance, a premium payment of $802 for disability insurance and premium payments in the aggregate amount of $52,500 for a term life insurance policy.
- (11)
- This amount consists of a premium payment of $1,235 under our Business Travel Accident Insurance Policy, a $15,000 housing allowance, $12,994 in taxable relocation expenses and a premium payment of $568 for disability insurance.
- (12)
- This amount consists of a severance payment totaling $998,769 in connection with Mr. Wu's termination of employment, 401(k) match payments in the aggregate amount of $5,500, a premium payment of $8,769 under our Business Travel Accident Insurance Policy, $5,000 for financial planning services for executives, $24,000 as a housing allowance paid in connection with Mr. Wu's international work assignment, a tax assistance payment of $462,267 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 and a premium payment of $334 for disability insurance.
- (13)
- This amount consists of a housing allowance of $48,000 paid in connection with Mr.
Wu’sWu's international work assignment, a tax assistance payment of $216,413 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’semployee's international work assignment, a tax return filing fee payment of $250, $19,230 for payout of accrued but unused paid time off, a premium payment of $645 for life insurance coverage under our Business Travel Accident Insurance Policy and 401(k) match payments in the aggregate amount of $5,500.(7)
- (14)
- Amounts shown for stock awards and option awards in 2007 reflect the reversal of compensation cost shown in the table as 2006 compensation in accordance with SFAS No. 123R, resulting from Mr. Wu's forfeiture of performance stock and option awards upon his termination of employment with the Company on June 1, 2007. In accordance with interpretative guidance provided by the Securities and Exchange Commission, only the previously expensed portions of equity awards that were previously included in the Summary Compensation Table have been included.
- (15)
- This amount
consists ofincludes a housing allowance of $32,000$100,000 signing bonus paid in connection with Mr. Huang’s international work assignment,Blackmore's initial employment and a tax assistance payment of $76,919$400,000 guaranteed bonus paid in connectionaccordance with the Company’s tax equalization policy whereby the Company provides qualified employees with tax assistance to mitigate the tax differential arising from an employee’s international work assignment, an education tuition allowance of $14,490 paid in connection with Mr. Huang’s international work assignment, $67,305 for accrued but unused paid time off paid in connection with termination of
employment, a premium amount of $645 for life insurance coverage under our Business Travel Accident Insurance Policy and 401(k) match payments in the aggregate amount of $5,500.
(8) This amount reflects the base salary Mr. Sophie had earned as of May 5, 2006.
(9) This amount consists of $12,200 for financial planning services for executives, $220,000 which is equivalent to six months of Mr. Sophie’s base salary, paid as partterms of the severance payments to him in connection with termination of employment, $71,074 for Mr. Sophie’s accrued but unused paid time off and floating holiday benefits, $6,943 for six months of Mr. Sophie’s COBRA premiums paid in a lump sum, less applicable withholdings, and 401(k) match payments in the aggregate amount of $6,700.
From time to time, we enter into offer letters and other agreements with our executive officers.Blackmore Agreement, as amended. For a description of the material terms of such offer letter and a description of severance and change of control agreements entered into with certain of our executive officers,the Blackmore Agreement, please see the section of this Proxy Statement entitled “Employment"Employment Contracts and Severance Agreements” in the “Potential Payments Upon Termination and Change of Control” section included in this Proxy Statement.
Agreements with Named Executive Officers."
In February 2007, the Compensation Committee of the Board of Directors approved an increase in Mr. Barton’sBlackmore's annual base salary from $500,000 to $750,000, effective January 1, 2007. In addition, the Compensation Committee approved an increase in Mr. Wu’s annual base salary from $500,000 to $550,000, effective February 1, 2007. Mr. Wu’s employment with the Company terminated on June 1, 2007.for fiscal years 2007 and 2008 is currently set at $800,000 per year. Please see “2007"2008 Base Salary Actions”Actions" in the Compensation Discussion and Analysis included in this Proxy Statement for a description of the actions taken by the Compensation Committee with respect to salaries of our named executive officersNamed Executive Officers for fiscal year 2007.2008.
For a description of material modifications made during fiscal year 2006 to the named executive officers’ outstanding equity awards, please see the section entitled “Modifications to Outstanding Equity Awards” included in this Proxy Statement.
For a description of the Company’sCompany's process for determining the payment of discretionary bonuses to certain of its executive officers and the payment of long-term, non-equity incentive compensation to Messrs. Christopher and King, please see the section entitled “Bonus”"Bonus" in the Compensation Discussion and Analysis included in this Proxy Statement. From time to time, we enter into offer letters and other agreements with our executive officers. For a description of the material terms of such offer letter agreements and a description of severance and change of control agreements entered into with certain of our executive officers, please see the section entitled "Employment Contracts and Severance Agreements with Named Executive Officers" in the "Potential Payments Upon Termination and Change of Control" section included in this Proxy Statement. For a description of material modifications made to certain of the Named Executive Officers' outstanding equity awards, please see the section entitled "Modifications to Outstanding Equity Awards" included in this Proxy Statement.
Grants of Plan-Based Awards The following table presents information concerning grants of plan-based awards to each of the named executive officersNamed Executive Officers during the fiscal year ended December 31, 2006.2007.
GRANTGRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 20062007
| | | | Estimated Future Payouts Under
Equity Incentive Plan Awards | | Exercise
or Base
Price of
Option | | Grant
Date Fair
Value of
Stock and
Option | | Name | | | | Grant Date | | Threshold
(#)(4) | | Target
(#) | | Maximum
(#)(4) | | Awards
($/Sh) | | Awards
(3)($) | | Hong Liang Lu | | 2/28/2006 | | | — | | | 130,000 | (1) | | — | | | | — | | | | 812,337 | | | | | 2/28/2006 | | | — | | | 260,000 | (2) | | — | | | | 6.25 | | | | 811,200 | | | Francis P. Barton | | 2/28/2006 | | | — | | | 46,000 | (1) | | — | | | | — | | | | 287,443 | | | | | 2/28/2006 | | | — | | | 92,000 | (2) | | — | | | | 6.25 | | | | 287,040 | | | Ying Wu* | | 2/28/2006 | | | — | | | 50,000 | (1) | | — | | | | — | | | | 312,438 | | | | | 2/28/2006 | | | — | | | 100,000 | (2) | | — | | | | 6.25 | | | | 312,000 | | | William Huang ** | | 2/28/2006 | | | — | | | 33,333 | (1) | | — | | | | — | | | | 208,290 | | | | | 2/28/2006 | | | — | | | 66,667 | (2) | | — | | | | 6.25 | | | | 208,001 | | | Michael J. Sophie† | | 2/28/2006 | | | — | | | 41,800 | (1) | | — | | | | — | | | | 261,198 | | | | | 2/28/2006 | | | — | | | 83,600 | (2) | | — | | | | 6.25 | | | | 260,832 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards
| | Estimated Future Payouts Under Equity Incentive Plan Awards
| | All Other Stock Awards: Number of Shares of Stock or Units (#)
| | All Other Option Awards: Number of Securities Underlying Options (#)
| | Exercise or Base Price of Option Awards ($/Sh)
| |
| |
|---|
| |
| | Grant Date Fair Value of Stock and Option Awards ($)
| |
|---|
Name
| | Grant Date
| | Threshold
($)
| | Target
($)
| | Maximum
($)
| | Threshold
(#)(4)
| | Target
(#)
| | Maximum
(#)
| |
|---|
| Hong Liang Lu | | 11/30/2007
11/30/2007
11/30/2007 | | | | | | | |
0 | | —
—
267,086 |
(1) | —
—
267,086 |
(1) | 40,000
133,543
— | (7)
(7)
| | | | | 116,000
387,275
774,549 |
(3) |
Francis P. Barton |
|
11/30/2007
11/30/2007
11/30/2007
11/30/2007
11/30/2007
11/30/2007 |
|
|
|
|
|
|
|
0 |
|
—
—
—
—
—
89,562 |
(1) |
—
—
—
—
—
89,562 |
(1) |
44,781
165,657
254,000
300,000
689,655
— |
(8)
(9)
(9)
(9)
(9)
|
|
|
|
|
129,865
480,405
736,600
870,000
2,000,000
259,730 |
(3) |
Peter Blackmore |
|
10/31/2007
10/31/2007
10/31/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
900,000
—
350,000 |
(10)
(10) |
—
750,000
— |
(2)(10)
|
—
3.20
— |
|
2,880,000
1,200,000
1,120,000 |
|
Philip Christopher |
|
—
11/30/2007
11/30/2007 |
|
0 |
|
821,121 |
(5) |
821,121 |
(5) |
0 |
|
—
71,429 |
(1) |
—
71,429 |
(1) |
35,714
— |
(11)
|
|
|
|
|
103,571
207,144 |
(3) |
David King |
|
—
11/30/2007
11/30/2007 |
|
0 |
|
118,925 |
(6) |
118,925 |
(6) |
0 |
|
—
229,885 |
(1) |
—
229,885 |
(1) |
114,943
— |
(12)
|
|
|
|
|
333,335
666,667 |
(3) |
Ying Wu* |
|
— |
|
|
|
|
|
|
|
— |
|
— |
|
|
|
|
|
— |
|
— |
|
— |
|
- *
- Mr.
Wu’sWu's employment as our Executive Vice President and Vice Chairman of the Board and Chairman and Chief Executive Officer of our subsidiary, UTStarcom China Co., Ltd.,with us terminated on June 1, 2007.** Mr. Huang resigned as our Senior Vice President and Chief Technology Officer as of December 31, 2006.
† Mr. Sophie resigned as our Executive Vice President and Chief Operating Officer as of May 5, 2006.
- (1)
- Represents
stock award opportunity,RSUs granted under the 2006 Plan, with target awards based upon Company and individual performance objectives established and tailored for each named executive officerNamed Executive Officer by the Compensation Committee for our 20062007 fiscal year. These objectives included (i) achievement of corporate financial measures such as bookings, gross margin, revenue, operating profit, cash flow, inventory turns, contribution margin, cost reduction and cash collections, (ii) achievement of corporate objectives, relating to quality and organization and (iii) achievement by such executive officer of additional individualized performance objectives reviewed and approved by the Compensation Committee. On February 1, 2007,26, 2008, the Compensation Committee determined that, subject to vesting requirements, Mr. Lu would be eligible to receive 117,000earned 133,543 shares of Common Stock; Mr. Wu would be eligible to receive 40,000Barton earned 67,172 shares of Common Stock; Mr. Christopher earned 71,429 shares of Common Stock; and Mr. Barton would be eligible to receive 46,000King earned 206,897 shares of Common Stock. Messrs. HuangFifty percent of the earned shares vested on February 29, 2008 and Sophie werethe remainder will vest on February 27, 2009. Mr. Wu did not eligibleparticipate in the program because he was no longer employed by us at the time of grant.
- (2)
- The option was issued to
receive any shares due to their prior terminationMr. Blackmore under the 2006 Plan and in accordance with the terms of employment with us.(2)the Blackmore Agreement, as amended. The options were issued to each executive officer under the 1997 Plan. Each option hashave an exercise price of $6.25$3.20 per share, which equals the closing price of our Common Stock on the NASDAQ Stock Market on the date of grant. The options werevest 25% on October 31, 2008 and the remaining options vest 1/36th each month thereafter, subject to one-year cliffMr. Blackmore's continued service to the Company through each such vesting date. The options vest in addition to vesting based upon Company and individual performance objectives established and tailored for each executive officer byfull in the Compensation Committee for our 2006 fiscal year. These objectives included (i) achievementevent of corporate financial measures such as bookings, gross margin, revenue, operating profit, cash flow, inventory turns, contribution margin and cash collections, (ii) achievement of
corporate objectives relating to quality and organization and (iii) achievement by such executive officer of additional individualized performance objectives reviewed and approved by the Compensation Committee. On February 1, 2007, the Compensation Committee determined that the following number of shares underlying the performance options would vest: 234,000 shares for Mr. Lu; 80,000 shares of for Mr. Wu; and 92,000 shares for Mr. Barton. Messrs. Huang and Sophie were not eligible to receive any shares due to their prior termination of employment with us.
Blackmore's death or disability.
- (3)
- The value of
a stock or option award opportunitythe RSUs reflects the dollar amounts initially measured under SFAS 123(R) at fair value on the grant date fair value.of grant. The value of the stock award vesting toearned by Messrs. Lu, WuBarton, Christopher, and BartonKing was $1,052,854, $359,950$399,294, $200,843, $213,570, and $413,943,$618,621, respectively, reflecting the cumulative dollar amount recognized for financial statement reporting purposes based on thegrant date fair value of the Company’s Common Stock on February 1, 2007,26, 2008, the date the Compensation Committee finalizeddetermined the number of shares of Common Stock earned, and all the conditions required for a "grant date" to occur under SFAS 123(R) have been met. Total recognized compensation cost for such award, determined in accordance with SFAS 123(R). Pursuant to SEC regulations, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The value of the option awards vesting to each of Messrs. Lu, Wu and Barton was $1,243,243, $425,040 and $488,796, respectively, reflecting the cumulative dollar amount recognized for financial statement reporting purposeswill be based on the "grant date" (as defined in SFAS 123(R)) fair value ofover the Company’s Common Stock on February 1, 2007, the date the Compensation Committee finalized such award, determined in accordance with SFAS 123(R).vesting period. Pursuant to SEC regulations, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. A discussion of the valuation assumptions used for purposes of the SFAS 123(R) calculation is included under Note 1514 to our 20062007 Consolidated Financial Statements that are part of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.The exercise price of certain stock options granted under option agreements executed in February 2002 were increased from $20.25 per share to $22.93 per share, and certain stock options granted under option agreements executed in July 2002 were increased from $15.72 per share to $20.82 per share. The incremental fair value, computed as of the modification date in accordance with SFAS 123(R), with respect to each such modified award2007.
- (4)
- There is
$0. For further discussion on modifications made to outstanding equity awards held by certain named executive officers, please see the section entitled “Executive Compensation—Modifications to Outstanding Equity Awards” contained in this Proxy Statement.(4) There are no thresholds or maximumsthreshold (or equivalent items)item) for the equity incentive plan awards.
No amounts were paid
- (5)
- Represents a number equal to 2% of the after-tax operating profit of our Personal Communications Division of which Mr. Christopher is President, pursuant to the
named executive officers pursuant to a non-equity incentive award plan. Please seeterms of the “Bonus” column in the Summary Compensation Table includedChristopher Employment Agreement, described under "Employment Contracts and Severance Agreements with Named Executive Officers" in this Proxy StatementStatement.
- (6)
- Represents target sales commission of 331/2% of base salary payable upon attainment of at least 75% of each sales target related to bookings, collections and contribution margin under the Company nondiscretionary bonus program. Mr. King was paid $72,246 in sales commissions under this program for
amounts paid2007. For a description of the Company's bonus programs and Mr. King's payment, see "2008 Bonus Payouts for 2007 Performance" in the Compensation Discussion and Analysis section of this Proxy Statement.
- (7)
- Granted under the 2006 Plan and vest as
discretionary bonuses to certain named executive officers.follows: 40,000 shares of restricted common stock vest 100% on November 30, 2009; 133,543 shares of restricted common stock vest 25% on each of 2/29/08, 2/27/09, 2/26/10 and 2/28/11.
- (8)
- Represents RSUs granted under the 2006 Plan and which vest as follows: 25% on each of 2/29/08, 2/27/09, 2/26/10 and 2/28/11.
- (9)
- Granted under the 2006 Plan and in accordance with the terms of the Barton Retention Agreement, described under "Employment Contracts and Severance Agreements with Named Executive Officers" in this Proxy Statement. The awards vest in full in the event of Mr. Barton's death or disability.
- (10)
- Granted under the 2006 Plan and in accordance with the terms of the Blackmore Agreement, as amended, described under "Employment Contracts and Severance Agreements with Named Executive Officers" in this Proxy Statement. The awards vest in full in the event of Mr. Blackmore's death or disability.
- (11)
- Represents RSUs granted under the 2006 Plan and which vest as follows: 50% on each of 2/29/08 and 2/27/09.
- (12)
- Represents RSUs granted under the 2006 Plan and which vest as follows: 25% on each of 2/29/08, 2/27/09, 2/26/10 and 2/28/11.
Pension Benefits for Fiscal Year 2006year 2007 The Named Executive Officers did not receive any benefits from the Company under defined pension or defined contribution plans, other than theour tax-qualified 401(k) Plan, during the fiscal year ended December 31, 2006.2007.
Nonqualified Deferred Compensation for Fiscal Year 2006year 2007 The Company does not have any non-qualified deferred compensation plan that allows the Named Executive Officers to defer their compensation. 37
Outstanding Equity Awards at Fiscal Year-End 20062007 The following table sets forth the outstanding equity awards for each named executive officerNamed Executive Officer as of December 31, 2006.2007.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 20062007
| | 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 | | | 400,000 | | | | — | | | | — | | | | 4.50 | | | | 8/31/2009 | | | | — | | | | — | | | | — | | | | — | | | | | | 150,000 | | | | — | | | | — | | | | 13.00 | | | | 2/3/2010 | | | | — | | | | — | | | | — | | | | — | | | | | | 100,000 | | | | — | | | | — | | | | 15.00 | | | | 10/17/2010 | | | | — | | | | — | | | | — | | | | — | | | | | | 100,000 | | | | — | | | | — | | | | 12.50 | | | | 12/20/2010 | | | | — | | | | — | | | | — | | | | — | | | | | | 150,000 | | | | — | | | | — | | | | 22.93 | (2) | | | 2/27/2012 | | | | — | | | | — | | | | — | | | | — | | | | | | 75,000 | | | | — | | | | — | | | | 20.82 | (3) | | | 7/24/2012 | | | | — | | | | — | | | | — | | | | — | | | | | | 115,000 | | | | 5,000 | (4) | | | — | | | | 19.04 | | | | 2/2/2013 | | | | — | | | | — | | | | — | | | | — | | | | | | 250,000 | | | | — | | | | — | | | | 37.46 | | | | 1/19/2014 | | | | — | | | | — | | | | — | | | | — | | | | | | — | | | | 260,000 | (5) | | | — | | | | 6.25 | | | | 2/27/2016 | | | | — | | | | — | | | | — | | | | — | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 130,000 | (13) | | | 1,137,338 | | | Francis P.
Barton | | | 133,334 | | | | 266,666 | (6) | | | — | | | | 8.82 | | | | 7/31/2015 | | | | — | | | | — | | | | — | | | | — | | | | | | — | | | | 92,000 | (7) | | | — | | | | 6.25 | | | | 2/27/2016 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 46,000 | (13) | | | 402,443 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 75,000 | (14) | | | 656,156 | | | Ying Wu* | | | 80,000 | | | | — | | | | — | | | | 4.50 | | | | 4/25/2009 | | | | — | | | | — | | | | — | | | | — | | | | | | 75,000 | | | | — | | | | — | | | | 13.00 | | | | 2/3/2010 | | | | — | | | | — | | | | — | | | | — | | | | | | 55,000 | | | | — | | | | — | | | | 15.00 | | | | 10/17/2010 | | | | — | | | | — | | | | — | | | | — | | | | | | 55,000 | | | | — | | | | — | | | | 12.50 | | | | 12/20/2010 | | | | — | | | | — | | | | — | | | | — | | | | | | 100,000 | | | | — | | | | — | | | | 22.93 | (2) | | | 2/27/2012 | | | | — | | | | — | | | | — | | | | — | | | | | | 50,000 | | | | — | | | | — | | | | 20.82 | (3) | | | 7/24/2012 | | | | — | | | | — | | | | — | | | | — | | | | | | 81,459 | | | | 3,541 | (8) | | | — | | | | 19.04 | | | | 2/2/2013 | | | | — | | | | — | | | | — | | | | — | | | | | | 200,000 | | | | — | | | | — | | | | 37.46 | | | | 1/19/2014 | | | | — | | | | — | | | | — | | | | — | | | | | | — | | | | 100,000 | (9) | | | — | | | | 6.25 | | | | 2/27/2016 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | — | | | | 50,000 | (13) | | | 437,438 | | | William Huang** | | | 50,000 | | | | — | | | | — | | | | 15.00 | | | | 10/17/2010 | | | | — | | | | — | | | | — | | | | — | | | | | | 40,000 | | | | — | | | | — | | | | 12.50 | | | | 12/20/2010 | | | | — | | | | — | | | | — | | | | — | | | | | | 80,000 | | | | — | | | | — | | | | 22.93 | (2) | | | 2/27/2012 | | | | — | | | | — | | | | — | | | | — | | | | | | 40,000 | | | | — | | | | — | | | | 20.82 | (3) | | | 7/24/2012 | | | | — | | | | — | | | | — | | | | — | | | | | | 47,917 | | | | 2,083 | (10) | | | — | | | | 19.04 | | | | 2/2/2013 | | | | — | | | | — | | | | — | | | | — | | | | | | 100,000 | | | | — | | | | — | | | | 37.46 | | | | 1/19/2014 | | | | — | | | | — | | | | — | | | | — | | | | | | 20,313 | | | | 54,687 | (11) | | | — | | | | 8.29 | | | | 11/29/2015 | | | | — | | | | — | | | | — | | | | — | | | | | | — | | | | 66,667 | (12) | | | — | | | | 6.25 | | | | 2/27/2016 | | | | — | | | | — | | | | 33,333 | (13) | | | 291,622 | | | Michael J. Sophie† | | | — | | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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
($)(1)
| | Equity
Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested (#)
| | Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested(1)
($)
|
|---|
| Hong Liang Lu | | 400,000
150,000
100,000
100,000
150,000
75,000
120,000
250,000
234,000
— | | —
—
—
—
—
—
—
—
—
— | | —
—
—
—
—
—
—
—
—
— | | 4.50
13.00
15.00
12.50
22.93
20.82
19.04
37.46
6.25
— |
(2)
(3)
| 8/31/2009
2/3/2010
10/17/2010
12/20/2010
2/27/2012
7/24/2012
2/2/2013
1/19/2014
2/27/2016
— | | —
—
—
—
—
—
—
—
—
40,000
133,543 |
(10)
(11) | —
—
—
—
—
—
—
—
—
110,000
367,243 | | —
—
—
—
—
—
—
—
—
—
—
267,086 |
(20) | —
—
—
—
—
—
—
—
—
—
—
734,487 | | Francis P. Barton | | 233,334
92,000
—
— | | 166,666
—
— | (4)
| —
—
— | | 8.82
6.25
— | | 7/31/2015
2/27/2016
— | | —
—
50,000
44,781
127,586
254,000
165,657 |
(12)
(13)
(14)
(15)
(16) | —
—
137,500
123,148
350,862
698,500
455,557 | | —
—
—
—
—
—
—
89,562 |
(20) | —
—
—
—
—
—
—
246,296 | | Peter Blackmore | | — | | 750,000 | (5) | — | | 3.20 | | 10/31/2014 | | —
900,000
350,000 |
(17)
(18) | —
2,475,000
962,500 | | —
— | | —
— | | Phillip Christopher | | 154,167
52,084
34,375 | | 45,833
47,916
40,625 | (6)
(7)
(8) | —
—
— | | 17.87
6.61
6.25 | | 11/4/2014
11/7/2015
2/27/2016 | | —
—
—
—
35,714
— |
(13)
| —
—
—
—
98,214
— | | —
—
—
—
—
71,429 |
(20) | —
—
—
—
—
196,430 | | David King | | 20,834 | | 29,166 | (9) | | | 6.92 | | 4/6/2016 | | —
37,500
114,943 |
(19)
(13) | —
103,125
316,093 | | —
229,885 |
(20) | —
—
—
632,184 | | Ying Wu* | | 80,000
75,000
55,000
55,000
100,000
50,000
85,000
200,000
80,000 | | —
—
—
—
—
—
—
—
— | | —
—
—
—
—
—
—
—
— | | 4.50
13.00
15.00
12.50
22.93
20.82
19.04
37.46
6.25 |
(2)
(3)
| 4/25/2009
2/3/2010
10/17/2010
12/20/2010
2/27/2012
7/24/2012
2/2/2013
1/19/2014
2/27/2016 | | —
—
—
—
—
—
—
—
— | | —
—
—
—
—
—
—
—
— | | —
—
—
—
—
—
—
—
— | | —
—
—
—
—
—
—
—
— |
- *
- Mr.
Wu’sWu's employment as our Executive Vice President and Chairman and Chief Executive Officer of our subsidiary, UTStarcom China Co., Ltd., terminated on June 1, 2007.
** Pursuant to Mr. Huang resigned as our Senior Vice President and Chief Technology Officer as of December 31, 2006.
Wu's severance agreement, the outstanding stock options will remain
†exercisable for a period of 12 months following Mr. Sophie resigned as our Executive Vice President and Chief Operating Officer asWu's last day of May 5, 2006 and hademployment of June 1, 2007 (but in no outstanding equity awards asevent will an option be exercisable for a longer period than the original term of December 31, 2006.the option).
- (1)
- Value is based on the closing price of our Common Stock of
$8.75$2.75 on December 29, 2006,31, 2007, the last trading date of fiscal year 2006,2007, as reported on the NASDAQ Stock Market.
- (2)
- The exercise price of the stock option was increased from $20.25 per share to $22.93 per share.
For further discussion on the repricing, please see the section entitled “Executive Compensation—Modifications to Outstanding Equity Awards” contained in this Proxy Statement.
- (3)
- The exercise price of the stock option was increased from $15.72 per share to $20.82 per share.
For further discussion on the repricing, please see the section entitled “Executive Compensation—Modifications to Outstanding Equity Awards” contained in this Proxy Statement.
- (4)
The options were granted on February 3, 2003, and became fully vested and exercisable as of February 3, 2007.(5)The options were granted on February 28, 2006, and options for 234,000 shares became fully vested and exercisable as of February 28, 2007, as determined by the Compensation Committee on February 1, 2007 based upon established Company and management performance objectives for our 2006 fiscal year. For further information on these performance objectives, please see footnote 2 to the table entitled “Grants of Plan-Based Awards in Fiscal Year 2006” contained in this Proxy Statement.
(6)
- The options were granted on August 1, 2005, and are 25% exercisable on the first anniversary of the grant date and 1/36th per month thereafter.
- (5)
- The options were granted on October 31, 2007 in connection with the commencement of Mr. Blackmore's employment with the Company, and are 25%
annual increments beginning August 1, 2005.exercisable on October 31, 2008, and 1/36th per month thereafter.
- (6)
- The options were granted on November 5, 2004, and are 25% exercisable on the first anniversary of the grant date and 1/36th per month thereafter.
- (7)
- The options were granted on November 8, 2005, and are 25% exercisable on the first anniversary of the grant date and 1/36th per month thereafter.
- (8)
- The options were granted on February 28, 2006, and
became fully vestedare 25% exercisable on the first anniversary of the grant date and exercisable as of February 28, 2007, as determined by the Compensation Committee on February 1, 2007 based upon established Company and management performance objectives for our 2006 fiscal year. For further information on these performance objectives, please see footnote 2 to the table entitled “Grants of Plan-Based Awards in Fiscal Year 2006” contained in this Proxy Statement.1/36th per month thereafter.
(8)
- (9)
- The options were granted on
February 3, 2003, and became fully vested and exercisable as of February 3, 2007.(9)The options were granted on February 28,April 7, 2006, and options for 80,000 shares becameare 25% exercisable on the first anniversary of the grant date and 1/36th per month thereafter.
- (10)
- Represents restricted stock issued on 11/30/2007 that fully
vestedvests on 11/30/2008.
- (11)
- Represents restricted stock issued on 11/30/2007 that vests 25% on 2/29/2008; 2/27/2009; 2/26/2010; and
exercisable as of February 28, 2007, as determined by the Compensation Committee on February 1, 2007 based upon established Company and management performance objectives for our 2006 fiscal year. For further information on these performance objectives, please see footnote 2 to the table entitled “Grants of Plan-Based Awards in Fiscal Year 2006” contained in this Proxy Statement.(10)The options were granted on February 3, 2003, and were forfeited in connection with the termination of Mr. Huang’s employment with us effective as of December 31, 2006.
(11)The options were granted on November 30, 2005, and were forfeited in connection with the termination of Mr. Huang’s employment with us effective as of December 31, 2006.
2/28/2011.
- (12)
The options were granted on February 28, 2006, and were forfeited in connection with the termination of Mr. Huang’s employment with us effective as of December 31, 2006.(13)Represents stock award opportunity, based on Company and individual performance objectives established and tailored for each named executive officer by the Compensation Committee for our 2006 fiscal year. On February 1, 2007, the Compensation Committee determined, based on Company and individual performance during the 2006 fiscal year, that Mr. Lu would be eligible to receive 117,000 shares of Common Stock; Mr. Wu would be eligible to receive 40,000 shares of Common Stock; and Mr. Barton would be eligible to receive 46,000 shares of Common Stock. Messrs. Huang and Sophie were not eligible to receive any shares due to their prior termination of employment with us. For further information on these performance objectives, please see footnote 1 to the table entitled “Grants of Plan-Based Awards in Fiscal Year 2006” contained in this Proxy Statement.
(14)
- Represents restricted stock issued upon the exercise of stock purchase rights granted to Mr. Barton on August 1, 2005 in connection with commencement of Mr.
Barton’sBarton's employment with us. The original award of 100,000 shares of restricted stock vests in equal installments of 25,000 shares per year on each of the first four anniversaries of the date of grant.
- (13)
- Represents restricted stock units granted on 11/30/2007 that vest 25% on 2/29/2008; 2/27/2009; 2/26/2010; and 2/28/2011.
- (14)
- Represents performance shares with only a service condition granted on 11/30/2007 in accordance with the terms of the Barton Retention Agreement. 172,414 shares of the original grant of 300,000 shares vested on 11/30/2007. The remaining 127,586 shares will vest on 11/30/2008.
- (15)
- Represents restricted stock issued on 11/30/2007 in accordance with the terms of the Barton Retention Agreement that fully vests on 11/30/2008.
- (16)
- Represents restricted stock units granted on 11/30/2007 in accordance with the terms of the Barton Retention Agreement that fully vests on 11/30/2008.
- (17)
- Represents restricted stock issued on 10/31/2007 in connection with the commencement of Mr. Blackmore's employment with the Company. The award of restricted stock vests 25% per year over four years on each one year anniversary of July 2, 2007.
- (18)
- Represents restricted stock units granted on 10/31/2007 in connection with the commencement of Mr. Blackmore's employment with the Company. The restricted stock units vest 25% per year over four years on each one year anniversary of July 2, 2007, the date Mr. Blackmore joined the Company.
- (19)
- Represents restricted stock issued upon the exercise of stock purchase rights granted to Mr. King on 7/20/2006 in connection with commencement of Mr. King's employment with the company. The original award of 50,000 shares of restricted stock vests in equal installments of 12,500 shares per year on each of the first four anniversaries of 4/3/2006.
- (20)
- Represents stock award opportunity, based on Company and individual performance objectives established and tailored for each Named Executive Officer by the Compensation Committee for our 2007 fiscal year. On February 26 , 2008, the Compensation Committee determined, based on Company and individual performance during the 2007 fiscal year, that Mr. Lu earned 133,543 RSUs; Mr. Barton earned 67,172 RSUs; Mr. Christopher earned 71,429 RSUs; and Mr. King earned 206,897 RSUs. The earned RSUs vest 50% each on 2/29/2008 and 2/27/2009.
39
Option Exercises and Stock Vested in Fiscal Year 2006year 2007 The following table presents all stock options exercised and value realized upon exercise, and all stock awards vested and value realized upon vesting, by the named executive officersNamed Executive Officers during the fiscal year ended December 31, 2006.2007.
OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 20062007
| | | OPTION AWARDS | | STOCK AWARDS | | | 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)
($) | | | Number of Shares Acquired on Exercise (#)
| | Value Realized on Exercise ($)
| | Number of Shares Acquired on Vesting (#)
| | Value Realized on Vesting ($)(1)
|
|---|
Hong Liang Lu | Hong Liang Lu | | | — | | | | — | | | | — | | | | — | | | | — | | — | | 117,000 | | 339,300 | Francis P. Barton | Francis P. Barton | | | — | | | | — | | | | 25,000 | | | | 192,969 | | | | — | | — | | 933,069 | | 2,722,119 | | Peter Blackmore | | | — | | — | | — | | — | | Philip Christopher | | | — | | — | | — | | — | | David King | | | — | | — | | 12,500 | | 42,234 | Ying Wu | Ying Wu | | | — | | | | — | | | | — | | | | — | | | | — | | — | | — | | — | William Huang | | | — | | | | — | | | | — | | | | — | | | | Michael J. Sophie | | | — | | | | — | | | | — | | | | — | | | | |
- (1)
The value realized equals $7.72,
- Amount is the
closingmarket price (closing price) of our Common StockUTStarcom, Inc. common stock on August 1, 2006 (thethe vesting date)date less the original purchase price, if any, multiplied by the number of shares that vested, less the original purchase price for the number of vested shares of $0.00125 per share.stock or units vesting. Modifications to Outstanding Equity Awards On February 1, 2007, the Board extended the post-termination exercise period with respect to any vested equity awards held by any of our terminated service providers as of such date, during the period of time that we are not current in our filings with the SEC, rendering such awards unexercisable, (i) for a period of ninety (90) days from the date we become current in our filing of periodic reports with the SEC, but not beyond December 31, 2007, or (ii) beyond December 31, 2007, but in no event more than thirty (30) days from the date the Company becomes current in its filing of periodic reports with the SEC. Mr. William Huang, our former Senior Vice President and Chief Technology Officer, held vested equity awards that were included in this extension.
In connection with our voluntary review of our historical equity award grant practices, each of our independent directors, Messrs. Clark, Horner, Lenzmeier and Toy, elected to amend any of his previously granted stock options that may in the future be determined to be discounted stock options under Section 409A of the Internal Revenue Code of 1986, as amended (“("Section 409A”"), by executing a Stock Option Amendment Election Form in December 2006. In the event any such previously granted stock option is determined to be a discounted stock option under Section 409A, the affected stock option agreement will be automatically amended to provide for an exercise price not less than the fair market value of the Common Stock subject to option on the effective date of grant. Additionally, certain of our named executive officers,Named Executive Officers, including Messrs. Lu, Wu, Barton and Huang,Wu, executed a Protective Amendment Election Form that amends any stock option agreements previously entered into by and between us and each of Messrs. Lu, Wu, HuangBarton and Barton,Wu, in the event any such stock option agreements may in the future be determined to have resulted in the above individuals holding discounted stock options under Section 409A. In the event any such previously granted stock option is determined to be a discounted stock option under Section 409A, the affected stock option agreement will be automatically amended to provide for an exercise price not less than the fair market value of the Common Stock subject to option on the effective date of grant.
Each of Messrs. Lu Wu and HuangWu also executed an Amendment Election Form that amends the terms of various stock option agreements entered into by and between us and Messrs. Lu Wu and HuangWu in February and July of 2002. Each Amendment Election Form provides for an adjustment to the exercise price of the applicable stock options, to the extent such options remained unexercised at the time of the election and may constitute discounted stock options under Section 409A, based on preliminary estimates made solely for tax purposes in order to avoid potential adverse tax consequences to Messrs. Lu Wu and HuangWu and us associated with discounted stock options under Section 409A. The exercise price of applicable stock options granted under the Option Agreements executed in February 2002 were was
increased from $20.25 per share to $22.93 per share, and the exercise price of grants under the Option Agreements executed in July 2002 werewas increased from $15.72 per share to $20.82 per share. POTENTIAL PAYMENTS UPON TERMINATION AND CHANGE OF CONTROL Employment Contracts and Severance Agreements with Named Executive Officers Hong Liang Lu.We On November 30, 2007, we entered into aan Amended and Restated Change of Control/Involuntary Termination Severance Agreement with Hong Liang Lu, the Company's Chief Executive Officer (the "Lu Severance Agreement"), which was subsequently amended and restated on January 30, 2008 to bring the agreement into compliance with Section 409A. The Lu Severance Agreement, as amended and restated, amends Mr. Lu's previous Change of Control Severance Agreement with the Company dated January 17, 2003, as previously filed with the SEC. The Lu Severance Agreement has a term of three (3) years from January 30, 2008. Following the expiration of the three (3)-year term, Mr. Lu (the “and the Company may, but are not obligated to, enter into a new agreement. If Mr. Lu's employment continues following the expiration of the three (3)-year term and the Company and Mr. Lu do not enter into a new agreement, Mr. Lu's then current benefits arrangements shall continue in accordance with the terms of the Lu Severance Agreement”). until the parties agree otherwise. The Lu Severance Agreement provides that if Mr. Lu’sLu's employment with us terminatesthe Company is terminated as a result of an involuntary termination"involuntary termination" by the Company or terminated by Mr. Lu for "good reason" (as both terms are defined in the Lu Severance Agreement) at any time within 12eighteen (18) months after a change of control, (i) Mr. Lu willhe shall be entitled to 24the following severance benefits: (i) twenty-four (24) months of base salary as in effect as of the date of such termination, payable in a lump sum within 30 days(ii) two hundred percent (200%) of termination, and 100% of his full annual performance target bonus for the year in which termination occurs, (ii)less applicable withholding, (iii) all equity awards including, without limitation, option grants, restricted stock optionsand stock purchase rights, granted to Mr. Lu prior to the change of control will become fully vested and/or released from the Company's repurchase right (if any shares of stock purchased by or granted to Mr. Lu prior to the change of control remain subject to that repurchase right) and exercisable as of the date of termination to the extent such equity awards are outstanding and/and unexercisable or unexercisableunreleased at the time of such termination, and all stock owned by(iv) such equity awards shall be exercisable until the earliest of (a) twelve (12) months from Mr. Lu that is subject to a right of repurchase by us at the timeLu's date of termination, that(b) the latest date the equity award could have expired by its original terms under any circumstances, (c) the tenth (10th) anniversary of the original date of grant of the equity award, or (d) the date provided for under the equity plan under which the award was purchased priorgranted, and (v) an amount equal to the change of control shall have such repurchase rights lapse with respect to all such shares, and (iii) we will continue to provide Mr. Lu the same leveltwelve (12) months of health coverage as in effect on the day immediately preceding the termination date until the earlier of the date he is no longer eligible to receiveinsurance premiums for continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“("COBRA”"), or 12 months fromat the same level of health (i.e., medical, vision and dental) coverage and benefits in effect for Mr. Lu on the day preceding the date of his termination date. Ifof employment. The Lu Severance Agreement also provides that if Mr. Lu’sLu's employment with us terminates other thanthe Company is terminated as a result of an involuntary termination within 12 months after"involuntary termination" by the Company or terminated by Mr. Lu for "good reason" (both as defined in the Lu Severance Agreement) during the term of the Lu Severance Agreement, apart from a change of control, Mr. Luhe shall not be entitled to receivethe following severance benefits: (i) twenty-four (24) months of base salary as in effect as of the date of such termination, (ii) one hundred percent (100%) of his full annual performance target bonus for the year in which termination occurs, less applicable withholding, (iii) all equity awards, including without limitation option grants, restricted stock and stock purchase rights, granted to Mr. Lu will become fully vested or otherreleased from the Company's repurchase right (if any shares of stock purchased by or granted to Mr. Lu remain subject to such repurchase right) and exercisable to the extent such equity awards are outstanding and unexercisable or unreleased at the time of such termination, (iv) such equity awards shall be exercisable until the earliest of (a) twelve (12) months from his date of termination, (b) the latest date the equity
award could have expired by its original terms under any circumstances, (c) the tenth (10th) anniversary of the original date of grant of the equity award, or (d) the date provided for under the equity plan under which the award was granted, and (v) an amount equal to twelve (12) months of health insurance premiums for continuation coverage pursuant to COBRA, at the same level of health (i.e., medical, vision and dental) coverage and benefits in effect for Mr. Lu on the day preceding the date of his termination of employment. Severance benefits payable under the terms of the Lu Severance Agreement.Agreement are payable in a lump sum within thirty (30) days of the date of termination; however, if Mr. Lu is a "specified employee" ("Specified Employee") within the meaning of Section 409A at the time of his termination, then the severance and benefits payable to Mr. Lu pursuant to the Agreement (other than due to death), if any, and any other severance payments or separation benefits which may be considered deferred compensation under Section 409A (together, the "Deferred Compensation Separation Benefits") and which are otherwise due to Mr. Lu on or within the six (6) month period following Mr. Lu's termination will accrue during such six (6) month period and will become payable in a lump sum on the date six (6) months and one (1) day following the date of his termination of employment or the date of his death, if earlier. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. As a condition to receiving severance benefits as described above, Mr. Lu is required to sign a waiver and release of all claims arising out of his termination of employment and a nondisparagement agreement. Francis P. Barton. On July 29, 2005, we entered into an agreement with Francis P. Barton, our Executive Vice President and Chief Financial Officer of the Company (the “"Barton Agreement”"). in connection with his initial employment. The Barton Agreement provides that Mr. Barton shall initially receive an annual salary of $500,000, a signing bonus of $250,000, an annual bonus for the 2005 calendar year of up to $250,000, an option to purchase 400,000 shares of Common Stock of the Company at fair market value on the date of grant and a share purchase right for the purchase of 100,000 shares of Common Stock of the Company at par value. Twenty-five percent of the shares subject to the option shall vestvested one year after the date of grant, with the remaining 75% vesting on a monthly basis thereafter.thereafter, subject to Mr. Barton remaining a service provider of the Company (as defined in the 2006 Plan) through each such date. The shares subject to the share purchase right shall vest in equal installments of 25% per year on each of the first four anniversaries of the date of grant.grant, subject to Mr. Barton remaining a service provider of the Company (as defined in the 2006 Plan) through each such date. We entered into an Amended and Restated Change of Control Severance/Involuntary Termination Agreement with Mr. Barton dated August 23, 2006 (the "Barton Severance Agreement") which was subsequently amended and restated on January 30, 2008 to bring the agreement into compliance with Section 409A. The Barton Severance Agreement has a term of three (3) years from January 30, 2008. Following the expiration of the three (3)-year term, Mr. Barton (the “and the Company may, but are not obligated to, enter into a new agreement. If Mr. Barton's employment continues following the expiration of the three (3)-year term and the Company and Mr. Barton do not enter into a new agreement, Mr. Barton's then current benefits arrangements shall continue in accordance with the terms of the Barton Severance Agreement”). until the parties agree otherwise. The Barton Severance Agreement provides that if Mr. Barton’sBarton's employment with usthe Company terminates as a result of an involuntary termination"involuntary termination" (as defined in the Barton Severance Agreement) at any time within 18eighteen (18) months after a change of control or any other regular involuntary termination during the periodterm of employment, (i) Mr.the Barton willSeverance Agreement, he shall be entitled to 24the following severance benefits: (i) twenty-four (24) months of base salary as in effect as of the date of such termination, payable in a lump sum within 30 days of termination, and 100%(ii) one hundred percent (100%) of the bonus for the year in which termination occurs, (ii)(iii) all equity awards, including without limitation option grants, restricted stock and stock purchase rights, granted to Mr. Barton prior to the change of control will become fully vested and/or exercisable to the extent such equity awards are
outstanding and/or unexercisable at the time of such termination, (iii) Mr. Barton would
be permitted to exercise(iv) such vested equity awards forshall be exercisable until the shorter periodearliest of (a) 12twelve (12) months from theMr. Barton's date of termination, and (b) the remaining termlatest date the equity award could have expired by its original terms under any circumstances, (c) the tenth (10th) anniversary of the respectiveoriginal date of grant of the equity awards,award, or (d) the date provided for under the equity plan under which the award was granted, and (iv) we will continue(v) an amount equal to provide Mr. Bartontwelve (12) months of health insurance premiums for continuation coverage under COBRA at the same level of health (i.e., medical, vision and dental) coverage and benefits as in effect for Mr. Barton on the day immediately preceding the day of his termination date until the earlier of the date he is no longer eligible to receive continuation coverage pursuant to the COBRA, or 12 months from the termination date.employment.
The Barton Severance Agreement also provides that if Mr. Barton’sBarton's employment with usthe Company terminates as a result of a regular"regular involuntary terminationtermination" (as defined in the Barton Severance Agreement) during the periodterm of employmentthe Barton Severance Agreement apart from a change of control, (i) Mr. Barton willhe shall be entitled to 24the following severance benefits: (i) twenty-four (24) months of base salary as in effect as of the date of such termination, payable in a lump sum within 30 days of termination, and 100%(ii) one hundred percent (100%) of the bonus for the year in which termination occurs, (ii)(iii) all equity awards, including without limitation option grants, restricted stock and stock purchase rights, granted to Mr. Barton will become fully vested and/or exercisable to the extent such equity awards are outstanding and/or unexercisable at the time of such termination, (iii) Mr. Barton would be permitted to exercise(iv) such vested equity awards forshall be exercisable until the shorter periodearliest of (a) 12twelve (12) months from theMr. Barton's date of termination, and (b) the remaining termlatest date the equity award could have expired by its original terms under any circumstances, (c) the tenth (10th) anniversary of the respectiveoriginal date of grant of the equity awards,award, or (d) the date provided for under the equity plan under which the award was granted, and (iv) we will continue(v) an amount equal to provide Mr. Bartontwelve (12) months of health insurance premiums for continuation coverage under COBRA at the same level of health (i.e., medical, vision and dental) coverage and benefits as in effect for Mr. Barton on the day immediately preceding the day of his termination date untilof employment. Severance benefits payable under the earlierterms of the Barton Severance Agreement are payable in a lump sum within thirty (30) days of the date heof termination; however, if Mr. Barton is no longer eligiblea Specified Employee within the meaning of Section 409A at the time of his termination, then the severance and benefits payable to receive continuation coverageMr. Barton pursuant to the COBRABarton Severance Agreement (other than due to death), if any, and any other severance payments or 12separation benefits which may be considered Deferred Compensation Separation Benefits and which are otherwise due to Mr. Barton on or within the six (6) month period following Mr. Barton's termination will accrue during such six (6) month period and will become payable in a lump sum on the date six (6) months fromand one (1) day following the date of his termination date.of employment or the date of his death, if earlier. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. As a condition to receiving benefits as described above, Mr. Barton is required to sign a waiver and release of all claims arising out of his termination of employment and a nondisparagement agreement. If On November 30, 2007, we entered into a retention plan with Mr. Barton’sBarton, effective November 30, 2007 (the "Barton Retention Agreement"). The Barton Retention Agreement provides that the Company will provide a retention incentive to Mr. Barton with a total value of $10 million (the "Retention Incentive"), consisting of a combination of restricted stock, RSUs, performance shares and performance units (together, "Equity") to be granted under the 2006 Plan and/or cash, in the sole discretion of the Compensation Committee. Each installment of the Retention Incentive will be awarded in a combination of Equity, in the Committee's sole discretion, up to the annual maximum amounts permitted under the 2006 Plan after taking into account Mr. Barton's focal awards for each particular year. The first installment was awarded effective November 30, 2007, the second installment was awarded effective January 29, 2008, and the remaining installments are expected to be awarded each January thereafter. Because of limits on the maximum amount of Equity that can be granted to an individual in any calendar year under the 2006 Plan, the Company expects that the Retention
Incentive will be awarded over a number of years, so that as much of the Retention Incentive can be awarded under the 2006 Plan as possible. For purposes of determining the vested value, the value of Equity to vest will be based on the Fair Market Value (as defined in the 2006 Plan) of the Company's common stock on the applicable date of grant. In the event Mr. Barton's employment with usthe Company terminates other than asin a resultmanner that would trigger the payment of a change of control or other involuntary termination, Mr. Barton shall not be entitled to receive severance or other benefits under the Barton Severance Agreement, or as a result of his death or "disability" (as defined in the 2006 Plan), Mr. Barton would be entitled to a cash payment equal to the amount of the Retention Incentive that had not been granted in Equity as of the date of such termination of employment. The vesting of any Equity granted as part of the Retention Incentive may also accelerate pursuant to the terms of the Barton Severance Agreement. In addition, if Mr. Barton's employment with the Company terminates as a result of his death or "disability" (as defined in the 2006 Plan), any Equity granted pursuant to the Barton Retention Agreement will vest in full as of the date of termination. Peter Blackmore. On May 27, 2007, we entered into an offer letter agreement with Mr. Peter Blackmore (the "Blackmore Agreement"), pursuant to which Mr. Blackmore was offered the position of President and Chief Operating Officer of the Company. The Blackmore Agreement was subsequently amended by the Compensation Committee on October 25, 2007 and provides that Mr. Blackmore shall receive (i) an annual salary of $800,000, which shall never be reduced below the current level, (ii) a signing bonus of $100,000, (iii) an annual bonus equal to 100% of Mr. Blackmore's annual salary, based upon the Company's performance and achievement of mutually agreed upon performance objectives (an annual bonus for the 2007 calendar year of 50% of Mr. Blackmore's annual salary is guaranteed), and (iv) upon approval of the Board of Directors of the Company, a grant of (a) shares of restricted stock and RSUs (subject to the limitations of the Company's 2006 Equity Incentive Plan) with an aggregate value of $4 million on the date of grant and which will vest as follows: one quarter (25%) of the shares will vest on each annual anniversary of his start date, subject to his continuing to provide services to the Company through each applicable vesting date, and (b) options to purchase shares of common stock of the Company with a value of $1.2 million on the date of grant which will vest as follows: one quarter (25%) of the options will vest on the first anniversary of the date of grant, and the remaining options will vest in equal installments of 1/36th each month thereafter, subject to his continuing to provide services to the Company through each applicable vesting date. In the event of Mr. Blackmore's death or disability, the vesting of his restricted stock, RSUs and stock options will accelerate in full. We entered into a Change of Control/Involuntary Termination Severance Agreement with Mr. Blackmore, effective July 2, 2007 (the "Blackmore Severance Agreement") which was subsequently amended and restated on January 30, 2008 to bring the agreement into compliance with Section 409A. The Blackmore Severance Agreement has a term of three (3) years from January 30, 2008. Following the expiration of the three (3)-year term, Mr. Blackmore and the Company may, but are not obligated to, enter into a new agreement. If Mr. Blackmore's employment continues following the expiration of the three (3)-year term and the Company and Mr. Blackmore do not enter into a new agreement, Mr. Blackmore's then current benefits arrangements shall continue in accordance with the terms of the Blackmore Severance Agreement until the parties agree otherwise. The Blackmore Severance Agreement provides that if Mr. Blackmore remains employed with the Company through July 2, 2008 (the "Trigger Date") and he is not offered the position of Chief Executive Officer of the Company on or before the Trigger Date, he shall be entitled to the following benefits: (i) twelve (12) months of base salary as in effect as of the Trigger Date, less applicable withholding, payable in a lump sum within thirty (30) days of the Trigger Date; (ii) one hundred percent (100%) of his full annual performance target bonus for the year of the Trigger Date, payable in a lump sum within thirty (30) days of the Trigger Date; (iii) all equity awards, including without limitation stock option grants, restricted stock and stock purchase rights, granted to him by the
Company shall become fully vested, or, as applicable, released from the Company's repurchase right and exercisable as of the Trigger Date to the extent such equity awards are outstanding and unexercisable or unreleased at such date; and (iv) all Mr. Blackmore's outstanding restricted cash awards shall become fully vested, and payable in a lump sum within thirty (30) days of the Trigger Date. The Board and Mr. Blackmore may mutually agree in writing to extend the Trigger Date; provided, however, the Trigger Date cannot be extended beyond February 13, 2009. The Blackmore Severance Agreement further provides that if Mr. Blackmore's employment with the Company is terminated as a result of an "involuntary termination" by the Company or terminated by Mr. Blackmore for "good reason" (as both terms are defined in the Blackmore Severance Agreement) at any time within eighteen (18) months after a change 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 such termination, less applicable withholding, (ii) two hundred percent (200%) of his full annual performance target bonus and a monthly pro rated amount of his 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 prior to the change of control shall become fully vested, or, as applicable, released from the Company's repurchase right and exercisable as of the date of the termination to the extent such equity awards are outstanding and unexercisable or unreleased at the time of such termination, (iv) such equity awards shall be exercisable until the earliest of (a) twelve (12) months from his date of termination, (b) the latest date the equity award could have expired by its original terms under any circumstances, (c) the tenth (10th) anniversary of the original date of grant of the equity award, or (d) the date provided for under the equity plan under which the award was granted, (v) all Mr. Blackmore's outstanding restricted cash awards shall become fully vested, and (vi) an amount equal to twelve (12) months of health insurance premiums for continuation coverage under COBRA at the same level of health (i.e., medical, vision and dental) coverage and benefits as in effect for Mr. Blackmore on the day immediately preceding the day of his termination of employment. In addition, the Blackmore Severance Agreement provides that if Mr. Blackmore's employment with the Company is terminated as a result of an "involuntary termination" by the Company or terminated by Mr. Blackmore for "good reason" (as both terms are defined in the Blackmore Severance Agreement) during the term of the Blackmore Severance Agreement apart from a 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 such termination, less applicable withholding, (ii) one hundred percent (100%) of his full annual performance target 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 shall become fully vested, or, as applicable, released from the Company's repurchase right and exercisable as of the date of the termination to the extent such equity awards are outstanding and unexercisable or unreleased at the time of such termination, (iv) such equity awards shall be exercisable until the earliest of (a) twelve (12) months from his date of termination, (b) the latest date the equity award could have expired by its original terms under any circumstances, (c) the tenth (10th) anniversary of the original date of grant of the equity award, or (d) the date provided for under the equity plan under which the award was granted, (v) all Mr. Blackmore's outstanding restricted cash awards shall become fully vested, and (vi) an amount equal to twelve (12) months of health insurance premiums for continuation coverage under COBRA at the same level of health (i.e., medical, vision and dental) coverage and benefits as in effect for Mr. Blackmore on the day immediately preceding the day of his termination of employment. Severance benefits payable under the terms of the Blackmore Severance Agreement are payable in a lump sum within thirty (30) days of the date of termination; provided, however, that if Mr. Blackmore is a Specified Employee within the meaning of Section 409A at the time of his termination, then the severance and benefits payable to Mr. Blackmore pursuant to the Blackmore
Severance Agreement (other than due to death), if any, and any other severance payments or separation benefits which may be considered Deferred Compensation Separation Benefits and which are otherwise due to Mr. Blackmore on or within the six (6)-month period following 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) months and one (1) day following the date of his termination of employment or the date of his death, if earlier. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. As a condition to receiving severance benefits as described above, Mr. Blackmore is required to sign a waiver and release of all claims arising out of his termination of employment and a nondisparagement agreement. Philip Christopher. We entered into an employment agreement with Philip Christopher, President of UTStarcom Personal Communications LLC, in connection with our acquisition of Audiovox. Under the terms of the agreement with Mr. Christopher dated June 11, 2004 (the "Christopher Employment Agreement"), Mr. Christopher's employment is for a three year term commencing November 1, 2004, the effective date of the acquisition transaction, through November 1, 2007. His annual base salary was set at $500,000 per year and his target bonus opportunity during the term of the agreement was set at 2% of the annual earnings before taxes of the Company's Personal Communications Division, of which he is President. He was also entitled to receive a stock option grant for 200,000 shares of our Common Stock. Following the expiration of Mr. Christopher's Employment Agreement, he became an "at will" employee. David King. Mr. King is a Covered Employee under the Company's Executive Involuntary Termination Severance Pay Plan. Please see the description of the plan set forth below for the material terms of Mr. King's severance benefits in the event of his termination of employment other than for "cause," death or "disability." Ying Wu.On November 14, 2006, we entered into an Amended and Restated Change of Control/Involuntary Termination Severance Agreement with Mr. Ying Wu, our then Executive Vice President, Vice Chairman of the Board and Chairman and Chief Executive Officer of our subsidiary, UTStarcom China Co., Ltd. (the “"Wu Severance Agreement”"). The Wu Severance Agreement provided that if Mr. Wu’sWu's employment with us terminated as a result of an involuntary termination at any time within 18 months after a change of control, (i) Mr. Wu would be entitled to 24 months of base salary as in effect as of the date of such termination payable in a lump sum within 30 days of termination, and 100% of the bonus for the year in which termination occurred, (ii) all equity awards, including without limitation option grants, restricted stock and stock purchase rights, granted to Mr. Wu prior to the change of control would become fully vested and/or exercisable, to the extent such equity awards were outstanding and/or unexercisable at the time of such termination, (iii) Mr. Wu would be permitted to exercise such vested equity awards for the shorter period of (a) 12 months from the date of termination and (b) the remaining term of the respective equity awards, and (iv) we would continue to provide Mr. Wu the same level of health coverage as in effect on the day immediately preceding the termination date until the earlier of the date he is no longer eligible to receive continuation coverage pursuant to COBRA, or 12 months from the termination date. The Wu Severance Agreement also provided that if Mr. Wu’sWu's employment with us terminated as a result of a regular involuntary termination during the period of employment apart from a change of control, (i) Mr. Wu would be entitled to 12 months of base salary as in effect as of the date of such termination, payable in a lump sum within 30 days of termination, and 100% of the bonus for the year in which termination occurred, (ii) all equity awards, including without limitation option grants, restricted stock and stock purchase rights, granted to Mr. Wu would become fully vested and/or exercisable to the extent such equity awards were outstanding and/or unexercisable at the time of such termination, (iii) Mr. Wu would be permitted to exercise such vested equity awards for the shorter period of (a) 12 months from the date of termination and (b) the remaining term of the respective
equity awards, and (iv) we would continue to provide Mr. Wu the same level of health coverage as in effect on the day immediately preceding the termination date until the earlier of the date he is no longer eligible to receive continuation coverage pursuant to COBRA or 12 months from the termination date.
If Mr. Wu’sWu's employment with us terminated other than as a result of a change of control or other involuntary termination, Mr. Wu would not be entitled to receive severance or other benefits under the Wu Severance Agreement. Mr. Wu’sWu's employment with the Company and its subsidiaries terminated on June 1, 2007. In connection with his termination of employment, Mr. Wu is eligible to receivewas paid severance benefits for involuntary termination without a change in control in accordance with the terms of the Wu Severance Agreement as described above, such payments to totalin the amount of $998,768.83 (comprised of $550,000 in base salary, $440,000 in bonus, subject to applicable withholding, and $8,768.83 for the balance of his health care premiums). William Huang. We entered into an AmendedEmployment Agreements and Restated Change of Control/Control Arrangements with Executive Officers Other Than Named Executive Officers
Executive Involuntary Termination Severance Agreement dated August 21,Pay Plan. Effective June 20, 2006, the Compensation Committee of the Board of Directors adopted the Executive Involuntary Termination Severance Pay Plan which was subsequently amended and restated on January 30, 2008 to bring the plan into compliance with Mr. HuangSection 409A (the “Huang Severance Agreement”"Executive Plan"). The Huang Severance Agreement hadExecutive Plan extends certain change of control and severance benefits to certain of the same termsCompany's executive officers, including Mr. King, who do not have separate agreements with the Company. The Executive Plan is filed as Exhibit 10.30 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007. The following description of the Executive Plan is qualified in its entirety by the actual language of the plan: The Executive Plan, as amended and conditionsrestated effective January 30, 2008, provides for the payment of severance benefits to certain eligible employees, as defined in the Wu Severance Agreement as described above. Mr. Huang voluntarily resigned as ourExecutive Plan (each a "Covered Employee"). Covered Employees under the Executive Plan are designated by the Executive Plan administrator, but generally are Senior Vice President and Chief Technology Officer effective on December 31, 2006. In connectionlevel or above. The Executive Plan provides that if the Company (or any parent or subsidiary of the Company) terminates a Covered Employee's employment for other than "cause," death or "disability," or a Covered Employee terminates his or her employment with his departure, Mr. Huang did notthe Company for "good reason" (as such terms are defined in the Executive Plan), the Covered Employee shall receive the following severance benefits: (i) a lump sum cash payment equal to one (1) year of base pay plus one hundred percent (100%) of the Covered Employee's target bonus for the year of termination, (ii) an amount equal to twelve (12) months of the premiums for continuation coverage under COBRA of each Covered Employee (and any severance payments or benefitseligible dependents) under the HuangCompany's medical, dental and vision plans at the same level of coverage in effect on the severance date, (iii) the Covered Employee shall fully vest in and, if applicable, have the right to exercise, all of his or her outstanding and unvested equity compensation awards, and (iv) all such equity awards (including awards that vest as a result of the Executive Plan) shall be exercisable until the earliest of (a) twelve (12) months from the Covered Employee's date of termination, (b) the latest date the equity award could have expired by its original terms under any circumstances, (c) the tenth (10th) anniversary of the original date of grant of the equity award, or (d) the date provided for under the equity plan under which the award was granted. Severance Agreement. However, Mr. Huang was paid for his accrued but unpaid time off and floating holiday benefits inpayable under the amountterms of $67,305. Michael J. Sophie. Mr. Sophie resigned as ourthe Executive Vice President and Chief Operating Officer effective as of May 5, 2006. We entered into a Severance Agreement and Release dated April 13, 2006 with Mr. Sophie (the “Sophie Severance Agreement”). Pursuant to the Sophie Severance Agreement, we paid Mr. Sophie the equivalent of six months of regular base salaryPlan are payable in a lump sum within thirty (30) days of $220,000, less applicable withholdings. Mr. Sophie also receivedthe date of termination; however, if the Covered Employee is a Specified Employee within the meaning of Section 409A at the time of such termination, then the severance and benefits payable to the Covered Employee pursuant to the Executive Plan (other than due to death), if any, and any other severance payments for his accrued but unpaid time offor separation benefits which may be considered Deferred Compensation Separation Benefits, which are otherwise due to the Covered Employee on or within the
six (6) month period following the Covered Employee's termination will accrue during such six (6) month period and floating holiday benefits in an amount of $71,074.18. In addition, we paid the approximate equivalent of six months of Mr. Sophie’s COBRA premiumswill become payable in a lump sum amounton the date six (6) months and one (1) day following the date of $6,943, less applicable withholdings. Mr. Sophie’s outstanding stock options continued to vest according to their respective vesting schedules through May 5, 2006. All unvested portions of Mr. Sophie’s stock options as of May 5, 2006 were canceled and/or terminated on May 5, 2006 and Mr. Sophie was entitled to exercise the vested portions of his stock options for a period of 120 days afterCovered Employee's termination of his employment or the date of the Covered Employee's death, if earlier. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with us.the payment schedule applicable to each payment or benefit. As a condition to receiving benefits under the Executive Plan, the Covered Employee is required to sign and not revoke a waiver and release of all claims arising out of the Covered Employee's termination of employment and a nondisparagement agreement. The benefits provided under the Executive Plan are in lieu of any other severance or retention plan benefits available to the Covered Employee and shall be reduced by any severance paid to a Covered Employee under any other plan or arrangement. Change of Control Provisions in the Company's Equity Compensation Plans The 1997 Stock Plan. The Our 1997 Plan provides that, in the event of our proposed dissolution or liquidation, the Board must notify each optioneeparticipant under the 1997 Plan as soon as practicable prior to the effective date of such proposed dissolution or liquidation. The Board has the discretion to allow the optioneeparticipant to exercise his or her option or stock purchase right until 15 days prior to the effective date of such dissolution or liquidation. In the event of our merger with or into another corporation, or the sale of substantially all of our assets, each outstanding option or stock purchase right under the 1997 Plan will be assumed or substituted by the successor corporation. In case the successor corporation refuses to assume or substitute the outstanding option or stock purchase right, such outstanding option or stock purchase right will become fully exercisableexercisable for a period of 15 days from the date the optioneeparticipant is notified of such refusal by the Board. In addition, the 1997 Plan provides, in general, that an optioneea participant whose status as a Service Provider (as defined in the 1997 Plan) is terminated is entitled to exercise his or her option, to the extent such option has vested as of the date of termination, until the earlier of (i) expiration of the option according to its terms, (ii) expiration of a period of 3 months following termination, or (iii) expiration of a period of 12 months following termination as a result of death or disability. The 1997 Plan allows the post-termination exercise period to extend beyond the default term, if the stock option agreement entered into by us and the optioneeparticipant pursuant to the 1997 Plan provides for a longer term.
Under the Officer and Director Option Agreement approved for use under the 1997 Plan in connection with awards to our directors and officers beginning in December of 2005, if the optionee’sparticipant's status as a Service Provider or director is terminated following a change of control, the optioneeparticipant shall be entitled to exercise his or her option, to the extent such option has vested as of the date of such termination, until the earlier of (i) expiration of the option according to its terms, or (ii) expiration of a period of 12 months following the termination of the optionee’sparticipant's status as a Service Provider or director. The 1997 Plan was terminated in July 2006 effective upon stockholder approval of our 2006 Equity Incentive Plan. The 2006 Equity Incentive Plan. Our 2006 Equity Incentive Plan (“2006 Plan”) provides that in the event a participant in the 2006 Plan terminates service with us and our affiliates, any options which have become exercisable prior to the time of termination will remain exercisable for three months from the date of termination, unless a shorter or longer period of time is determined by the 2006 Plan administrator. If termination was caused by death or disability, any options which have become exercisable prior to the time of termination will remain exercisable for 12 months from the date of termination, unless a shorter or longer period of time is determined by the 2006 Plan administrator. In no event may a participant exercise the option after the expiration date of the option. In the event of our change of control, each outstanding award will be assumed or substituted by the successor corporation. In the event the successor corporation refuses to assume or substitute awards
granted under the 2006 Plan, all options and stock appreciation rights will fully vest and become exercisable, all restrictions on restricted stock will lapse, and, with respect to restricted stock units, performance shares, and performance units, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. In addition, if an option or stock appreciation right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a change of control, the 2006 Plan administrator will notify the participant in writing or electronically that the option or stock appreciation right will be fully vested and exercisable for a period of time determined by the 2006 Plan administrator in its sole discretion, and the option or stock appreciation right will terminate upon the expiration of such period. The change of control provisions in the 1997 Plan and 2006 Plan apply to all executive officers. Estimated Post-Employment Payments and Benefits Assuming the termination of employment of the named executive officersNamed Executive Officers took place on December 31, 2006,2007, and based upon the price per share of our Common Stock of $8.75,$2.75, the closing market price as of December 29, 2006 (the last trading day of fiscal year 2006),31, 2007, the estimated payments and benefits that each of the named executive officersNamed Executive Officers would be eligible to receive under various circumstances are set forth in the following charts. Please see the section above entitled “Employment"Employment Contracts and Severance AgreementsAgreements With Named Executive Officers”Officers" under “Potential"Potential Post-Employment Payments upon Termination and Change of Control”Control" contained in this Proxy Statement for detailed descriptions of the agreements with each of the named executive officersNamed Executive Officers that govern post-employment payments and benefits. No payments are due in the event of voluntary termination of employment or termination of employment for “Cause”"Cause" as defined in the agreements described above.
Hong Liang Lu | | Involuntary
Without Cause
Termination | | Termination
upon/following
Change of Control | | Disability (1) | | Death (2) | | Base Salary ($) | | | — | | | | $ | 1,400,000 | | | | $ | 192,000 | | | $ | 500,000 | | Bonus ($) | | | — | | | | $ | 700,000 | (3) | | | — | | | — | | Accelerated Shares Underlying Outstanding Options ($) | | | — | | | | $ | 650,000 | (4)(5) | | | — | | | — | | Accelerated Stock Awards ($) | | | — | | | | $ | 1,137,338 | (4)(5) | | | — | | | — | | Health Care ($) | | | — | | | | $ | 13,886 | | | | $ | 13,886 | | | — | | TOTAL: | | | — | | | | $ | 3,901,224 | | | | $ | 205,886 | | | $ | 500,000 | |
| | Involuntary
Without Cause
Termination
| | Termination
upon/following
Change of Control
| | Disability(1)
| | Death(2)
|
|---|
| Base Salary ($) | | $ | 1,400,000 | | $ | 1,400,000 | | $ | 192,000 | | $ | 500,000 | | Bonus ($) | | $ | 700,000 | (3) | | 1,400,000 | (4) | | — | | | — | | Accelerated Shares Underlying Outstanding Options ($)(5) | | | 0 | | | 0 | | | — | | | — | | Accelerated Stock Awards ($)(5) | | $ | 1,211,739 | | $ | 1,211,739 | | | — | | | — | | Health Care ($) | | $ | 11,847 | | $ | 11,847 | | $ | 11,847 | | | — | | TOTAL: | | $ | 3,323,586 | | $ | 4,023,586 | | $ | 203,847 | | $ | 500,000 |
- (1)
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- We provide all active full-time employees with short and long-term disability insurance coverage. In the case of short-term disability, employees will receive 60% of monthly earnings up to a maximum weekly benefit of $3,000 for up to 12 weeks. Any disability beyond 12 weeks will be covered by the long-term disability coverage which provides employees with 60% of monthly earnings up to a maximum monthly benefit of $13,000. The amount represents payments for 12 months of disability under the policies; however, in the event an employee continues to meet the definition of
“disability”"disability" under the long-term disability policy, long-term disability benefits may continue until an employee’semployee's Social Security Normal Retirement Age.Age, as defined in the long-term disability policy.
- (2)
- We provide all active full-time employees with basic life and accidental death insurance coverage which provides for payment of two times annual earnings to a maximum benefit of $500,000 in the event of death.
- (3)
- Represents target bonus of 100% of base
salary, subject to management performance objectives for our 2006 fiscal year. On February 1, 2007, the Compensation Committee determined that Mr. Lu would receive a $315,000salary.
- (4)
- Represents target bonus
for fiscal year 2006.of 200% of base salary.
(4) Included in these amounts are 100% of options and stock awards opportunity subject to management performance objectives for our 2006 fiscal year. On February 1, 2007, the Compensation Committee determined that Mr. Lu would be eligible to receive 90% of that award opportunity. For further information on these performance objectives, please see footnote 1 to the table entitled “Grants of Plan-Based Awards in Fiscal Year 2006” contained in this Proxy Statement.
- (5)
- Amounts represent the value of unvested stock options and awards grants as of December 31,
20062007 for which the vesting was accelerated. The value of accelerated options is measured as the difference between the fair market value using the closing market price of the Company’sCompany's Common Stock as of December 29, 2006,31, 2007, the last trading day of fiscal year 2006,2007, of $8.75$2.75 multiplied by the number of all stock options that were unvested as of December 31, 2006.2007. For restricted stock awards, it is measured as the fair market value of the stock ($8.75)2.75), less the par value cost basis, multiplied by the number of shares of restricted stock that were unvested as of December 31, 2006.
2007. As of December 31, 2007, Mr. Lu had no stock options with an exercise price less than $2.75.
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