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Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain
Officers.
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(b)
On
February 19, 2008, Lantronix, Inc. (the “Company”) announced that its Board of
Directors (the “Board”) has appointed a permanent president and chief executive
officer effective as of February 19, 2008 and that Reagan Sakai will step down
as its interim chief executive officer effective as of that date. Mr. Sakai
will remain the chief financial officer of the Company. On February 20, 2008,
the Board approved a one-time cash bonus to Mr. Sakai in the amount of $25,000,
for his service as the Company’s interim chief executive officer. A copy of the
press release is attached as Exhibit 99.1 to this Current Report on Form
8-K.
(c)
On
February 19, 2008, the Company announced that its Board had appointed Jerry D.
Chase to the position of president and chief executive officer of the Company
effective February 19, 2008. Mr. Chase has also been appointed to the Board of
the Company.
From
September 2004 to July 2007, Mr. Chase was president, chief executive officer
and a board member for Terayon Communication Systems, a public cable, telecom
and satellite supplier of digital video networking applications. From 2001 to
August 2004, Mr. Chase served as the chairman and chief executive officer of
Thales Broadcast & Multimedia (“TBM”), a telecom and test equipment
supplier, and from 1998 to 2001 was president and chief executive officer of the
U.S. subsidiary of TBM. Mr. Chase began his career as a Pilot and Operations
Officer in the U.S. Marine Corps, where he built a strong foundation for
leadership, process and crisis management. Following the Marine Corps, he
attended Harvard Business School, where he received his MBA.
On
February 19, 2008 (the “Commencement Date”), the Company entered into an offer
letter agreement with Mr. Chase (the “Offer Letter”).
Pursuant
to the terms of the Offer Letter:
Salary and
Bonus. Mr. Chase will receive a base salary of $30,000 per
month, which shall be subject to review annually. Mr. Chase will be
paid a one-time sign on bonus of $65,000, which shall be earned upon the
completion of 12 months of full employment with the Company. The sign-on bonus
will be payable on the first regular payroll after the Commencement Date. In
addition, Mr. Chase shall be eligible to receive a cash incentive bonus of up to
$250,000 (the “Incentive Bonus”) for each fiscal year during which the Offer
Letter is in effect. The Incentive Bonus will be prorated for the remaining
portion of the current fiscal year ending June 30, 2008. Pursuant to the Offer
Letter, the Incentive Bonus will be reviewed and subject to change on an annual
basis by the Compensation Committee. The objectives set by the
Compensation Committee for the Incentive Bonus may include (but are not limited
to) operating metrics, objective and subjective leadership dimensions,
performance metrics in the operation of the Company, the achievement of
financial objectives and other objectives determined by the Compensation
Committee.
Options and Restricted Stock
Awards. Mr. Chase was granted a nonstatutory stock option
to purchase shares of Common Stock of the Company (the “Option”) with an
exercise price equal to the fair market value on the grant date and an award of
restricted stock (the “Restricted Stock Award”). Vesting of the Option and
Restricted Stock Award is subject to Mr. Chase’s continued employment. The
terms of the Option and Restricted Stock Award will be as follows:
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Type
of Grant
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Number
of Shares
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Vesting
Schedule
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Option
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900,000
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270,000
shares will vest on the first anniversary of the Commencement Date;
270,000 shares shall vest on the second anniversary of the Commencement
Date; and 340,000 shares shall vest on third anniversary of the
Commencement Date.
|
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Restricted
Stock
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100,000
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30,000
shares will vest on the first anniversary of the Commencement Date; 30,000
shares shall vest on the second anniversary of the Commencement Date; and
40,000 shares shall vest on third anniversary of the Commencement
Date.
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Notwithstanding
the foregoing vesting schedule, the Option and Restricted Stock Award shall
immediately vest as to the percentage of the total number of shares of Common
Stock subject to the Option and Restricted Stock Award as set forth below at the
end of any period of 120 consecutive trading days on which the Company’s Common
Stock is actively listed on a national securities exchange or NASDAQ, and the
closing or last sale price in regular trading, as applicable, for a share of
Common Stock equal or exceeds the threshold set forth below. The vesting
percentages do not cumulate.
|
Vesting
Percentage/Number of Shares
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Stock
Price Threshold
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30%
of the Option and the Restricted Stock Award
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$1.50
|
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30%
of the Option and the Restricted Stock Award
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$2.50
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40%
of the Option and the Restricted Stock Award
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$4.00
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Tax
Bonus. In the event that Mr. Chase files a timely Section
83(b) election with the Internal Revenue Service, the Company shall pay a bonus
of $35,000. The bonus shall be repaid in the event Mr. Chase voluntarily
terminates his employment or is terminated for Cause (as defined in the Offer
Letter).
Relocation. The
Company will reimburse Mr. Chase for documented actual and reasonable
out-of-pocket costs for (i) temporary housing and travel, (ii) packing and
moving costs, and (iii) closing costs incident to the sale of his home, in a
total amount not to exceed $150,000. Of this amount, the Company
shall reimburse Mr. Chase for no more than $35,000 for temporary housing and
travel expenses that are incurred on or before the expiration of 12 months after
the Commencement Date.
Termination
Payments. In the event Mr. Chase voluntarily terminates
his employment for Good Reason (as defined in the Offer Letter) or is
involuntarily terminated without Cause (as defined Offer Letter), in exchange
for a full release of claims against the Company, the Company will pay Mr. Chase
severance in the total amount of 100% of the then current total of his
annualized salary and Incentive Bonus target, less required tax deductions and
withholdings, payable on the Company’s regular payroll for a period of 12 months
following the date of termination. The amount of severance payments shall be
increased to 150% of his then current total base salary and Incentive Bonus
target if such termination without Cause or for Good Reason occurs with six (6)
months after a Change of Control (as defined in the Offer Letter). In the event
of a Change of Control (as defined in the Offer Letter), the Company shall
accelerate 100% of all unvested stock options.
The foregoing summary is qualified in
its entirety by the Offer Letter, which is attached hereto as Exhibit 10.1 and
is incorporated herein by reference.
On February 20, 2008, the Company’s
Board approved a cash payment as settlement to Curt Brown, a member of the
Board, in the amount of $36,375.00, in fulfillment of obligations to Mr. Brown
incurred in connection with his prior employment by the Company. The obligation
was incurred prior to his appointment to the Board.
Item
9.01 Financial
Statements and Exhibits.
(d)
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Exhibit
Number
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Description
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10.1
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Letter
Agreement between Lantronix and Jerry D. Chase dated February 19,
2008
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99.1
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Press
Release dated February 19, 2008
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