Lantronix, Inc.
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported)
June
13, 2007
LANTRONIX,
INC.
(Exact
name of registrant as specified in its charter)
|
DELAWARE
|
|
1-16027
|
|
33-0362767
|
|
(State
or other jurisdiction of incorporation)
|
|
(Commission
File Number)
|
|
(IRS
Employer
Identification
No.)
|
15353
Barranca Parkway
Irvine,
California 92618
(Address
of principal executive offices, including zip code)
(949) 453-3990
(Registrant's
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[
] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[
] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[
] Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
[
] Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
On
June 13, 2007, Lantronix, Inc. (the “Company”) entered into a Severance
Agreement (the “Agreement”) with Reagan Sakai, the Chief Financial Officer of
the Company. The Agreement is effective as of May 15, 2007.
The
material terms of the Agreement include:
|
1.
|
Termination
Without Cause or Resignation With Good Reason During Specified Pre-Change
Period or Specified Post-Change Period.
|
If
a
Change of Control (as defined in the Agreement) of the Company occurs after
the
effective date of the Agreement, and either (i) the Company terminates Mr.
Sakai
without Cause (as defined in the Agreement) during the Specified Post-Change
Period or the Specified Pre-Change Period (each as defined below), or (ii)
Mr.
Sakai resigns with Good Reason (as defined in the Agreement) during the
Specified Post-Change Period or the Specified Pre-Change Period, then, subject
to the terms of the Agreement, as a severance benefit and in lieu of all other
compensation or damages, the Company shall, subject to Mr. Sakai signing a
release of claims in favor of the Company:
Pay
Mr.
Sakai a sum equal to the greater of either (i) 12 months of his base salary
in effect on the date of termination or resignation, or (ii) 12 months of
his base salary in effect as of (A) the Execution Date (as defined below) in
the
event the Company terminates Mr. Sakai without Cause or Mr. Sakai resigns with
Good Reason, during a Specified Pre-Change Period, or (B) the date of the Change
of Control in the event the Company terminates Mr. Sakai without Cause or Mr.
Sakai resigns with Good Reason during a Specified Post-Change Period, payable
as
follows and less required tax deductions and withholdings: (x) one-half of
such amount within 30 days after the later of (1) the date of the consummation
of the Change of Control, or (2) the date of such termination or resignation,
and (y) one-half of such amount on or before the date that is 12 months
following the later of (1) the date of the consummation of the Change of
Control, or (2) the date of such termination or resignation. The timing of
the
payments shall be made in accordance with the previous sentence if the sum
of
the payments to which Mr. Sakai is entitled under this paragraph do not exceed
the lesser of two times Mr. Sakai's annual compensation or two times the
compensation limit set forth in Section 401(a)(17) of the Internal Revenue
Code
of 1986, as amended (the "Code"), for the calendar year prior to the calendar
year in which Mr. Sakai is terminated or resigns. If the sum of such payments
to
Mr. Sakai under this paragraph would exceed the lesser of two times Mr. Sakai's
annual compensation or two times the compensation limit set forth in Section
401(a)(17) of the Code, then such excess amount shall be paid to Mr. Sakai
prior
to the March 15 following the end of the calendar year in which the Mr. Sakai
was terminated without Cause or the Mr. Sakai resigned with Good
Reason;
At
the
Company's expense, all medical, dental insurance coverages and Mr. Sakai
automobile benefits provided to him immediately prior to the date of such
termination or resignation for a period of 12 months following the date of
such
termination or resignation, or, if any of such benefits cannot be provided
to
Mr. Sakai for such 12 month period under the Company's policies as then in
effect or under applicable law (for example, if Mr. Sakai must elect COBRA
continuation coverage to receive such benefits), then the Company shall pay
Mr.
Sakai an amount equal to the monthly sums paid on behalf of Mr. Sakai for such
benefits at the time of such termination or resignation for a period beginning
on the date Mr. Sakai's participation in such benefits is disallowed and ending
on the date that is no more than 12 months following the date of such
termination or resignation, payable in monthly installments within five business
days after the end of each month. If the Mr. Sakai is terminated without Cause
or resigns with Good Reason during a Specified Pre-Change Period, then payments
to the Mr. Sakai under this paragraph shall not begin until after the
consummation of the Change of Control associated with such Specified Pre-Change
Period and the first payment made to Mr. Sakai under this paragraph after the
consummation of such Change of Control shall include amounts described in this
paragraph for the period between the date of such termination or resignation
and
the consummation of such Change of Control. The Company may elect to make a
one-time lump-sum payment equivalent to the payment and benefits under this
paragraph. Such amounts are subject to withholding and/or taxation;
Subject
to the provisions of the Company's stock option plan(s), accelerate the vesting
of 100% of all unvested stock options granted to Mr. Sakai under the Company's
stock option or other benefit plan. Subject to the provisions of the Company's
stock option plan(s), Mr. Sakai shall have until the earlier of the following
three dates to exercise each of Mr. Sakai's vested options (including options
accelerated pursuant to the foregoing provisions of this paragraph: (i) 24
months after the date of Mr. Sakai's termination or resignation, (ii) for
each option, the latest date on which such option could have expired by its
original terms under any circumstances, or (iii) for each option, ten years
after the original grant date of such option. Notwithstanding
the foregoing provisions of this paragraph, if and to the extent that any stock
option held by Mr. Sakai is intended to be an "incentive stock option," within
the meaning of Section 422 of the Code, the post-termination exercise period
of
such incentive stock option shall not, without the prior written consent of
Mr.
Sakai, be extended beyond three months following the date of termination or
resignation (or 12 months following the date of termination or resignation
if
Mr. Sakai's employment with the Company was terminated, or Mr. Sakai resigned,
as a result of Mr. Sakai becoming disabled (within the meaning of Section
22(e)(3) of the Code));
and
The
Company shall pay to Mr. Sakai within 30 days of the later of (i) the date
of
the consummation of the Change of Control, or (ii) the date of such termination
or resignation, a lump-sum payment, less required tax deductions and
withholdings, equal to the larger of either (1) the highest amount of bonus
incentive cash compensation paid to Mr. Sakai for services in any past one
year
period (if any) or (2) 100% of the Mr. Sakai’s target bonus (if any) approved by
the Board of Directors.
|
2.
|
Termination
Without Cause Not During Specified Pre-Change Period or Specified
Post-Change Period.
|
If
the
Company terminates Mr. Sakai without Cause other than during a Specified
Pre-Change Period or a Specified Post-Change Period, then, subject to the terms
of this Agreement, as a severance benefit and in lieu of all other compensation
or damages, the Company shall, subject to signing a release of claims in favor
of the Company:
Continue
to pay Mr. Sakai his current base salary, less required tax deductions and
withholdings, as in effect on the date of such termination through the end
of
the week in which the applicable termination occurred and continuing for a
period of nine months. The timing of the payments shall be made in accordance
with the previous sentence if the sum of the payments to which Mr. Sakai is
entitled under this paragraph do not exceed the lesser of two times Mr. Sakai's
annual compensation or two times the compensation limit set forth in Section
401(a)(17) of the Code, for the calendar year prior to the calendar year in
which Mr. Sakai is terminated or resigns. If the sum of such payments to Mr.
Sakai under this paragraph would exceed the lesser of two times Mr. Sakai's
annual compensation or two times the compensation limit set forth in Section
401(a)(17) of the Code, then such excess amount shall be paid to Mr. Sakai
prior
to March 15 following the end of the calendar year in which the Mr. Sakai was
terminated without Cause.
At
the
Company's expense, all medical, dental insurance coverages and executive
automobile benefits provided to him immediately prior to the date of such
termination for a period of nine months following the date of such termination,
or, if any of such benefits cannot be provided to Mr. Sakai for such nine month
period under the Company's policies as then in effect or under applicable law
(for example, if Mr. Sakai must elect COBRA continuation coverage to receive
such benefits), then the Company shall pay Mr. Sakai an amount equal to the
monthly sums paid on behalf of Mr. Sakai for such benefits at the time of such
termination for a period beginning on the date Mr. Sakai's participation in
such
benefits is disallowed and ending on the date that is nine months following
the
date of such termination, payable in monthly installments within five business
days after the end of each month. The Company may elect to make a one-time
lump-sum payment equivalent to the payment and benefits under this paragraph.
Such sums are subject to withholding and/or taxation.
Allow
Mr.
Sakai to exercise any and all stock options that were granted to Mr. Sakai
and
vested as of the date of termination. Subject to the provisions of the Company's
stock option plan(s), Mr. Sakai shall have until the earlier of the following
three dates to exercise each of Mr. Sakai's vested options: (i) 18 months
after the date of Mr. Sakai's termination, (ii) for each option, the latest
date on which such option could have expired by its original terms under any
circumstances, or (iii) for each option, ten years after the original grant
date of such option. Notwithstanding the foregoing provisions of this
paragraph., if and to the extent that any stock option held by Mr. Sakai is
intended to be an "incentive stock option," within the meaning of Section 422
of
the Code, the post-termination exercise period of such incentive stock option
shall not, without Mr. Sakai's prior written consent, be extended beyond three
months following the date of termination (or 12 months following the date of
termination if Mr. Sakai's employment with the Company was terminated as a
result of Mr. Sakai becoming disabled (within the meaning of Section 22(e)(3)
of
the Code)).
Pay
to
Mr. Sakai a prorated bonus, less applicable tax withholdings and deductions,
based on the percentage of the current bonus period during which Mr. Sakai
was
included in the bonus plan and the actual bonus pool amount for the position
granted by the Company’s Board of Directors for the current bonus period,
payable within five business days such bonuses are calculated and paid
generally.
3. Definitions
For
purposes of the Agreement, the term Specified Pre-Change Period means the period
beginning on the date a definitive agreement is executed by all parties thereto
(the "Execution Date") for a transaction that will constitute a Change of
Control of the Company when consummated, and ending on the date the Change
of
Control governed by such definitive agreement is consummated; provided, however,
that if the Change of Control governed by such definitive agreement is not
consummated within sixty (60) days after the Execution Date or if such
definitive agreement is terminated before the Change of Control governed by
such
definitive agreement is consummated, there shall be no Specified Pre-Change
Period with respect to such definitive agreement or the Change of Control
governed by such definitive agreement. For the avoidance of doubt, the parties
agree that the determination of whether a Specified Pre-Change Period exists
cannot be made until it has been determined whether a Change of Control has
been
consummated pursuant to the applicable definitive agreement within 60 days
after
the Execution Date of such definitive agreement. For purposes of the Agreement,
the term Specified Post-Change Period means the period beginning on the date
of
the consummation of a Change of Control of the Company, and ending on the
two-year anniversary date of the consummation of such Change of
Control.
As
a
further material inducement and condition to the payment of the above-referenced
severance monies that may be payable pursuant to this Agreement, Mr. Sakai
agrees that for a period of one year following Mr. Sakai's date of termination
or resignation, he will not, either directly or indirectly, or either on his
own
behalf or on behalf of any other person, recruit or solicit for hire any
individual who is then employed by the Company.
The
foregoing description of the Agreement is qualified in its entirety by reference
to the provisions of the Agreement attached hereto as Exhibit 10.1 to this
Current Report on Form 8-K.
Item
9.01 Financial
Statements and Exhibits.
(d)
|
10.1
|
Severance
Agreement effective as of May 15, 2007 between the Company and Reagan
Sakai.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
|
Date:
June 20, 2007
|
LANTRONIX,
INC., a Delaware corporation
|
|
|
|
|
|
|
By:
|
/s/
Marc H. Nussbaum
|
|
|
|
|
Marc
H. Nussbaum
Chief
Executive Officer
|