COMPROMISE SETTLEMENT AND MUTUAL RELEASE AGREEMENT
This Compromise Settlement and Mutual Release Agreement (the "AGREEMENT")
is made this 17th day of January 2003, by and among Lantronix, Inc.
("LANTRONIX"), Premise Systems Inc., a Delaware corporation and wholly owned
subsidiary of Lantronix ("PREMISE"), and
______________________________, a former shareholder of Premise ("SHAREHOLDER").
(Please print name)
RECITALS
A. The Shareholder, Lantronix, Premise and certain others are parties to an
Amended and Restated Agreement and Plan of Reorganization, dated January 7, 2002
(the "ACQUISITION AGREEMENT") by which Lantronix acquired Premise (the
"ACQUISITION").
B. Pursuant to, and on the terms provided in the Acquisition Agreement,
531,686 shares of unregistered Lantronix Common Stock are held in escrow (the
"EARNOUT ESCROW") and are to be delivered to Xxxxx Xxxxxxxx, Xxx Xxxxxxx, Xxx
Xxxxxx, Xxxxx A.S. Xxxxx, Xxxx Xxxxxxx, Xxx Xxxxxxx and Xxx Xxxxxxxxxxx (the
"PRINCIPAL STOCKHOLDERS") only in the event certain revenue milestones have been
achieved by Premise on or before March 21, 2003 (the "EARNOUT CRITERION"). In
addition, 106,337 shares of unregistered Lantronix Common Stock are held in
escrow (the "INDEMNIFICATION ESCROW") to secure the performance of certain
obligations under the Acquisition Agreement and are to be released to the
Principal Stockholders on the first anniversary of the closing of the
Acquisition.
C. Certain former shareholders of Premise that became employees of
Lantronix were granted options to purchase Lantronix Common Stock, and pursuant
to their stock option agreements, the vesting of 50% of each stock option grant
is subject to forfeiture in the event the Earnout Criterion is not achieved on
or before March 21, 2003.
D. Certain of the former shareholders of Premise have expressed concern
that the market price of Lantronix's Common Stock prior to and following the
Acquisition was artificially inflated prior to and following the Acquisition,
and that they were provided inaccurate information in connection with the
negotiation and approval Acquisition, and that such misrepresentations to them
and the marketplace has caused such former Premise shareholders substantial
harm. Certain of the former shareholders of Premise believe that they have
colorable claims against Lantronix, its subsidiaries, affiliates, and their
respective current and former officers, directors, employees, contractors,
agents, and assigns (the "LANTRONIX PARTIES") for legal relief under federal and
state law arising from or relating to the Acquisition.
E. Notwithstanding these potential claims, the undersigned Shareholder,
Lantronix and Premise, without admission of liability, each wishes to compromise
and settle the dispute and discharge any and all manners of action, causes of
action, lawsuits, proceedings, debts, dues, contracts, judgments, damages,
claims, proceedings and demands whatsoever, from the beginning of the world
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until the date of this Agreement, whether known or unknown, whether based in
fact, or law or in equity that the undersigned Shareholder may have or claim to
have relating to, arising from or in any way connected with: (i) the Acquisition
(including, without limitation, claims relating to, arising from or in any way
connected with the Acquisition Agreement, its Exhibits and any ancillary
agreements, and any and all disclosure or public information available to the
Shareholder or other former shareholders of Premise prior to and following the
Acquisition), (ii) any other agreement or matter that may exist between the
undersigned Shareholder and the Lantronix Parties, that is relating to, arising
from, or in any way connected with Lantronix's acquisition of the capital stock
and options of Premise from the undersigned Shareholder or the other former
shareholders of Premise, (iii) or the delivery of securities, including
Lantronix Common Stock and/or options to acquire Lantronix capital stock, and
the retention, disposition or exercise of such securities.
F. Because Lantronix desires to enter into a Compromise Settlement and
Mutual Release Agreement with all or substantially all of the former
shareholders of Premise, this Agreement shall only be effective upon its
acceptance by Lantronix, which shall be indicated by the execution of this
Agreement by Lantronix and Premise, with such acceptance being in the sole and
absolute discretion of Lantronix.
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants hereafter set forth, Lantronix, Premise and the Shareholder (the
"PARTIES") agree as follows:
1. Lantronix will promptly issue to Shareholder a certificate for that
number of shares of unregistered Lantronix Common Stock indicated
opposite Shareholder's name on EXHIBIT A hereto under the column
"Additional Shares Issued". The Shareholder understands that such
shares shall not be freely transferable, as further described in the
Information Statement previously delivered to the Shareholder.
2. In the event the undersigned Shareholder is a Principal Shareholder,
Lantronix will instruct the escrow agent for the Earnout Escrow and
Indemnification Escrow to release the unregistered Lantronix Common
Stock held in Shareholder's name in said escrows.
3. In the event the undersigned Shareholder is a current Lantronix
employee that is party to an option agreement with Lantronix that
includes vesting based upon Premise achieving the Earnout Criterion,
Lantronix will amend the stock option agreement to remove such vesting
restriction. As a result, any options previously subject to the
performance-based vesting, shall be vested, and shares subject to
time-based vesting shall continue to vest as currently provided in
Shareholder's existing option agreement.
4. The undersigned Shareholder, on behalf of the Shareholder and such
Shareholder's heirs, executors, administrators and assigns (the
"SHAREHOLDER PARTIES") hereby absolutely release the Lantronix Parties
from any and all manners of action, causes of action, lawsuits,
proceedings, debts, dues, contracts, judgments, damages, claims,
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proceedings and demands whatsoever, from the beginning of the world
until the date of this Agreement, whether known or unknown, whether
based in fact, or law or in equity that the undersigned Shareholder
may have or claim to have relating to, arising from or in any way
connected with: (i) the Acquisition (including, without limitation,
claims relating to, arising from or in any way connected with the
Acquisition Agreement, its Exhibits and any ancillary agreements, and
any and all disclosure or public information available to the
Shareholder or other former shareholders of Premise prior to and
following the Acquisition), (ii) any other agreement or matter that
may exist between the undersigned Shareholder and the Lantronix
Parties, that is relating to, arising from, or in any way connected
with Lantronix's acquisition of the capital stock and options of
Premise from the undersigned Shareholder or the other former
shareholders of Premise, including, in the event Shareholder has
served as an employee a Lantronix Party, from such employment, (iii)
or the delivery of securities, including Lantronix Common Stock and/or
options to acquire Lantronix capital stock, and the retention,
disposition or exercise of such securities that the Shareholder
Parties might have. The Undersigned Shareholder hereby agrees to waive
all rights under that certain Investor Rights Agreement between the
former shareholders of Premise and Lantronix, and hereby agrees to the
termination of all rights, including registration rights, and agrees
to the amendment of such Investor Rights Agreement to delete all
rights, including the rights granted pursuant to Section 4
Registration, under such agreement. The undersigned Shareholder
acknowledges that the Shareholder shall remain bound by the
obligations under such Investor Rights Agreement.
5. Lantronix and Premise each hereby absolutely releases the Shareholder
Parties from any and all manners of action, causes of action,
lawsuits, proceedings, debts, dues, contracts, judgments, damages,
claims, proceedings and demands whatsoever, from the beginning of the
world until the date of this Agreement, whether known or unknown,
whether based in fact, or law or in equity that the undersigned
Shareholder may have or claim to have relating to, arising from or in
any way connected with: (i) the Acquisition (including, without
limitation, claims relating to, arising from or in any way connected
with the Acquisition Agreement, its Exhibits and any ancillary
agreements, and any and all disclosure or public information available
to the Shareholder or other former shareholders of Premise prior to
and following the Acquisition), (ii) any other agreement or matter
that may exist between the undersigned Shareholder and the Lantronix
Parties, that is relating to, arising from, or in any way connected
with Lantronix's acquisition of the capital stock and options of
Premise from the undersigned Shareholder or the other former
shareholders of Premise, (iii) or the delivery of securities,
including Lantronix Common Stock and/or options to acquire Lantronix
capital stock, and the retention, disposition or exercise of such
securities that Lantronix might have.
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6. With respect to the matters referenced in Paragraphs 4 and 5,
Lantronix, Premise and the Shareholder Parties waive all rights or
benefits conferred by the provisions of 1542 of the California Civil
Code, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
The Parties, being aware of this Code Section, hereby expressly,
knowingly and intentionally waive any rights they may have thereunder,
as well as under any other statute or common law principles of similar
effect.
7. The Parties agree that any dispute arising out of or relating to this
Agreement or the breach thereof shall be resolved through binding
arbitration in Orange County, California using the services of
American Arbitration Association or JAMS Endispute. Any arbitrator
must be independent, and shall have no prior business or personal
relationship with the attorneys or other professional advisors of any
of their parties or their affiliates of such nature to cause actual
bias or a reasonable appearance of bias. The parties agrees that the
arbitrator shall issue a written decision on the merits, and also
agree that the arbitrator shall have the power to award any remedies,
including attorneys' fees and costs, available under applicable law.
Each party shall pay one-half of the arbitrator's fees and costs,
unless one party is ruled the prevailing party by the arbitrator, in
which case the arbitrator, subsequent to the arbitration itself, may
award the prevailing party attorney's fees and costs.
8. The Parties agree and represent that they have not assigned,
hypothecated or transferred to any entity, person, or corporation, any
of their claims related to the dispute.
9. This Agreement is a compromise of the above-mentioned disputed claims
and shall never be treated as an admission of liability by any Party
for any purpose. The existence and terms of this Agreement are
strictly confidential and shall not be disclosed to any non-Party
except to the extent required by law.
This Agreement constitutes the full and entire understanding and agreement
between the Parties regarding the matters set forth herein. Each Party has
fully investigated the subject matter of this Agreement and has consulted such
independent legal, tax and accounting experts to the extent such Party deemed
prudent, and does not rely on any statement of fact or opinion of any of the
other Parties to this Agreement.
This Agreement shall have no force or effect until signed by each of the
Shareholder, Lantronix and Premise.
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This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the foregoing agreement is hereby executed as of the
date first above written.
LANTRONIX, INC. PREMISE SYSTEMS INC.
By: ________________________________ By: ________________________________
Xxxx X. Xxxxxxxx, interim CEO Xxxx X. Xxxxxxxx, interim CEO
Lantronix, Inc. Premise Systems Inc.
SHAREHOLDER:
By: ________________________________
Signature
________________________________
Print Name
Print Address and Phone Number:
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Exhibit A
---------
SHAREHOLDER ADDITIONAL SHARES SHARES RELEASED SHARES RELEASED
ISSUED FROM EARNOUT FROM
ESCROW INDEMNIFICATION
ESCROW
---------------
Xxx Xxxxxxx 219,954 115,623 23,125
---------------- ----------------- --------------- ---------------
Xxx Xxxxxxx 181,465 95,390 19,078
---------------- ----------------- --------------- ---------------
Xxxx Xxxxxxx 168,905 88,788 17,758
---------------- ----------------- --------------- ---------------
Xxx Xxxxx 104,915 55,150 11,030
---------------- ----------------- --------------- ---------------
Xxx Xxxxxx 100,648 52,907 10,581
---------------- ----------------- --------------- ---------------
Xxxxxx Xxxxxxxx 10,065 0 0
---------------- ----------------- --------------- ---------------
Xxxxx Xxxxxx 10,065 0 0
---------------- ----------------- --------------- ---------------
Xxxx Xxxxx 10,065 0 0
---------------- ----------------- --------------- ---------------
Xxxxx Xxxxx 10,065 0 0
---------------- ----------------- --------------- ---------------
Xxx Xxxxxxxxxxx 134,913 70,919 14,184
---------------- ----------------- --------------- ---------------
Xxxxx Xxxxxxx 549 0 0
---------------- ----------------- --------------- ---------------
Xxxxx Xxxxxx 548 0 0
---------------- ----------------- --------------- ---------------
Xxxxx Xxxxxxxx 100,648 52,907 10,581
---------------- ----------------- --------------- ---------------
Xxxx Xxxxx 5,032 0 0
---------------- ----------------- --------------- ---------------
Xxxxxxx Xxxxxxxx 3,019 0 0
---------------- ----------------- --------------- ---------------
Xxxx Xxxxxx 2,516 0 0
---------------- ----------------- --------------- ---------------
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