EXHIBIT 10(c)(ii)
MANAGEMENT AGREEMENT
THIS AGREEMENT is made as of the 25th day of March, 2002 by
and between Digi International Inc., a Delaware corporation, with its principal
executive office in Minnetonka, Minnesota ("Company") and Xxxxxxx X. Xxxxxx, a
resident of California (the "Executive").
WHEREAS, the Executive is employed as Executive Vice President
of the Company and General Manager of MiLAN Technology, a division of the
Company ("MiLAN"); and
WHEREAS, the Executive and the Company are parties to an
Employment Agreement dated February 6, 1995, as amended (the "Employment
Agreement"); and
WHEREAS, the Company recognizes that the possibility of a Sale
of Business of MiLAN may occur and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of the Executive in the performance of the Executive's duties to
the detriment of the Company and its shareholders; and
WHEREAS, it is desirable and in the best interests of the
Company and its shareholders to provide inducement to Executive to remain in the
service of the Company in the event of a Sale of Business of MiLAN without
regard to the possibility that Executive's employment may be terminated in
connection with such Sale of Business; and
WHEREAS, the Executive and the Company have agreed to
compensation for Executive in the event of a Sale of Business of MiLAN, in
accordance with the terms and conditions of this Agreement;
THEREFORE, in consideration of the foregoing and other
respective covenants and agreements of the parties herein contained, the parties
hereto agree as follows:
1. Term of Agreement. This Agreement shall commence on the
date hereof and shall continue in effect until a "Sale of Business" (as
hereinafter defined) of MiLAN; provided, however, that if a Sale of Business
occurs as the result of a sale of substantially all, but not all, the assets of
MiLAN, then this Agreement shall continue in effect with respect to any
subsequent sale during Executive's active employment with the Company of the
remaining portion of MiLAN as a going concern (the "Term"), and such subsequent
sale shall be considered part of the same Sale of Business. Except as set forth
in Section 2(b) of this Agreement, nothing stated herein shall limit the right
of the Executive or the Company to terminate the employment of the Executive
with the Company at any time prior to, at, or after the expiration of the Term
of this Agreement, with or without cause and for any reason whatsoever, subject
to the right of the Executive to receive any payment and
other benefits that may be due pursuant to the terms and conditions of Section 4
of this Agreement or of the Employment Agreement, as applicable.
2. Sale of Business. No amounts shall be payable hereunder
unless a Sale of Business of MiLAN, as set forth below, shall occur.
(a) For purposes of this Agreement, a "Sale of
Business" of MiLAN shall be deemed to occur upon the sale or
other disposition of all or substantially all of the assets of
MiLAN (in one transaction or a series of transactions).
Notwithstanding the foregoing, no Sale of Business shall be
deemed to have occurred (i) if a majority of the voting stock
(or the voting equity interest) of any corporation (or other
entity) acquiring all or substantially all of the assets of
MiLAN is, immediately following the disposition of assets,
beneficially owned by the Executive or a group of persons,
including the Executive, acting in concert, or (ii) as a
result of a reorganization in which all or substantially all
of the assets of MiLAN are owned by an entity that is wholly
owned or majority owned, directly or indirectly, by the
Company.
(b) The Executive agrees that in the event of a Sale
of Business of MiLAN during the Term, the Executive, if
employed by the Company immediately prior to such a Sale of
Business, will remain as an employee of the Company and will
make himself available to provide services to any buyer of the
assets of MiLAN for a period of time, if any, agreed upon by
the Company and such buyer, not to exceed 60 days after the
occurrence of such a Sale of Business of MiLAN (such period
referred to as the "Transition Period").
(c) If Executive and the Company are unable to reach
agreement on the terms and conditions of continued employment
of Executive with the Company, then the Company will terminate
Executive's active employment upon completion of any
Transition Period, subject to any right of continued
employment during a Severance Period pursuant to Section 4
hereof.
3. Incentive Compensation for Sale of Business. If a Sale of
Business of MiLAN occurs and (i) Executive is employed by the Company
immediately prior to such Sale of Business or (ii) Executive's employment was
terminated by the Company without "cause" (as defined in the Employment
Agreement) within one (1) year prior to such Sale of Business, the Company will
pay Executive incentive compensation calculated as a percentage of the purchase
price received by the Company as a result of such Sale of Business, in
accordance with the attached Exhibit A. Any incentive compensation payable to
Executive under this Section 3 shall be due and payable to Executive only when,
as and if the Company receives the purchase payment (or payments) for such Sale
of Business. The Company and Executive agree that the Housing Normalization
Payments (as defined and provided in the
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Employment Agreement) shall continue to be paid by the Company during
Executive's employment until May 31, 2002, after which time the Company's
obligation to make such Housing Normalization Payments shall cease.
4. Termination Following Sale of Business.
(a) If a Sale of Business of MiLAN occurs and (i)
Executive is employed by the Company immediately prior to such
Sale of Business and for the duration of any Transition
Period, (ii) the Company terminates Executive's active
employment at or after completion of any Transition Period for
reasons other than for "cause" (as defined in the Employment
Agreement), and (iii) Executive does not accept in his sole
discretion employment after the Transition Period with any
buyer of the assets of MiLAN, then Executive shall be entitled
to the following payments and other benefits:
(i) the Company shall continue to employ
Executive and to pay to the Executive an amount equal
to Executive's base salary, which shall not be less
than Executive's base salary on the date hereof, for
a period of one year after any Transition Period, in
accordance with the Company's normal payroll
practices (the "Severance Period");
(ii) the Company shall pay the Executive an
amount equal to the annual cash bonus award Executive
would have earned for the fiscal year in which the
Sale of Business occurs, based on the average
percentage achievement levels of other senior
managers of the Company, such payment to be made in
the same manner and at the same time as other senior
managers of the Company receive their annual cash
bonus awards; provided, however, that the cash bonus
award payable to Executive under this subsection
shall be prorated based on the number of calendar
days that Executive was actively employed by the
Company during the fiscal year in which the Sale of
Business occurs (not including as active employment
any days that Executive is employed by the Company
during the Severance Period); and
(iii) the Company shall continue to allow
Executive to participate in the Company's group
insurance and retirement benefit plans during the
Severance Period, in accordance with the terms and
conditions of such plans as then in effect.
(b) During the Severance Period, Executive will
continue to be an employee of the Company (including without
limitation for purposes of the Company's stock option plan)
and shall assist the Company with transition matters as
reasonably requested. The salary continuation and other
benefits
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payable during the Severance Period pursuant to Section 4(a)
shall be in lieu of, and not in addition to, any severance pay
or benefits that the Executive may be entitled to receive from
the Company under the Employment Agreement or any other policy
or agreement of the Company. Executive shall not be entitled
to receive bonus, Housing Normalization Payments, or any other
compensation or benefits from the Company during the Severance
Period except as expressly provided in Section 3 or Section
4(a).
(c) If Executive's employment has not been earlier
terminated by the Company for "cause" (as defined in the
Employment Agreement), upon completion of the Severance Period
the Company will terminate Executive's employment with the
Company without cause and without additional obligation to
Executive for severance pay or other compensation (other than
any acceleration of vesting of stock options of the Executive
to which Executive is entitled pursuant to the terms of any
written stock option agreement between Executive and the
Company).
(d) If Executive in his sole discretion accepts
employment with any buyer of the assets of MiLAN after the
Transition Period, then Executive's employment with the
Company shall end effective the last day of the Transition
Period. Thereafter and for a period of six (6) months after
the Transition Period (the "Consulting Period"), Executive
will become a consultant to the Company and will make himself
available to provide consulting services to the Company up to
a maximum of two (2) hours in any calendar month. The Company
will compensate Executive during the Consulting Period at the
rate of $200 per month. During the Consulting Period,
Executive shall be an independent contractor of the Company
and shall not be eligible for any employee benefits or
programs of the Company, except for his continued
participation in the Digi International Inc. Stock Option Plan
and Digi International Inc. 2000 Omnibus Stock Plan in
accordance with the terms of those plans and as set forth in
Section 6 of this Agreement.
5. Repayment of Loan and Right of Offset. In the event that
the full amount of any loans from the Company to Executive has not been repaid
by Executive as of the Sale of Business of MiLAN, then the Company may offset
the loan balance from any amounts payable to Executive under Section 3 or
Section 4(a).
6. Stock Options. The Company agrees with Executive (i) that
Executive will continue to be an eligible participant in the Digi International
Inc. Stock Option Plan and Digi International Inc. 2000 Omnibus Stock Plan,
during any Transition Period, Severance Period and/or Consulting Period, and
that his unvested options will continue to vest during any Transition Period,
Severance Period and/or Consulting Period, and (ii) that any options that are
vested as of the end of the Severance Period or Consulting Period, as
applicable, would continue to be exercisable for a three (3) month period
thereafter, provided that in no
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event shall any option be exercisable more than ten (10) years from its date of
grant. The Company agrees with Executive that any unvested stock options issued
to Executive that vest by their terms upon a Sale of Business would so vest.
7. Notice. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered or certified mail, return receipt requested, postage pre-paid,
addressed to the last known residence address of the Executive or in the case of
the Company, to its principal executive office to the attention of the Chief
Executive Officer, with a copy to the Chief Financial Officer, or to such other
address as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
8. Successors and Assigns. This Agreement is binding on and
inures to the benefit of the Executive and Executive's heirs and legal
representatives, and on the Company and its successors and assigns. No rights or
obligations of the Executive or the Company hereunder may be assigned, pledged,
disposed of or transferred by such party to any other person or entity without
the prior written consent of the other party.
9. Governing Law. This Agreement shall be construed under and
governed by the laws of the State of Minnesota.
10. Entire Agreement. This Agreement constitutes the entire
agreement between Executive and the Company regarding the subject matters
contained herein and supersedes all prior agreements relating to such subject
matters.
11. Amendments and Waivers. No provision hereof may be
altered, amended, modified, waived or discharged in any way whatsoever except by
written agreement executed by both parties. No delay or failure of either party
to insist, in any one or more instances, upon performance of any of the terms
and conditions of this Agreement or to exercise any rights or remedies hereunder
shall constitute a waiver or a relinquishment of such rights or remedies or any
other rights or remedies hereunder.
12. Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute one and the same instrument.
DIGI INTERNATIONAL INC. EXECUTIVE
By /s/ Xxxxxxxxxxx Xxxxxxxx /s/ Xxxxxxx X. Xxxxxx
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Its Senior Vice President and CFO XXXXXXX X. XXXXXX
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EXHIBIT A
TO MANAGEMENT AGREEMENT
INCENTIVE COMPENSATION
Incentive compensation pursuant to Section 3 of the Agreement shall be
determined by the following matrix:
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INCENTIVE COMPENSATION AS SALE OF BUSINESS
PERCENTAGE OF SALE OF BUSINESS VALUE VALUE
---------------------------------------------------- -----------------------------------
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2% $5,000,000 or less
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$100,000 plus 5% of the Value $5,000,000 to $7,499,999
between $5,000,000 and $7,500,000
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3% $7,500,000
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$225,000 plus 7% of the Value $7,500,000 to $9,999,999
between $7,500,000 and $10,000,000
---------------------------------------------------- -----------------------------------
4.5% $10,000,000 or more
---------------------------------------------------- -----------------------------------
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"Sale of Business Value" shall mean the total fair market value of all cash,
equity securities, property, debt or other obligations and any other form of
consideration paid directly or indirectly (including, in the case of an
acquisition of assets, the current value of any long-term liabilities assumed,
directly or indirectly, by any acquiring party in connection with the Sale of
Business) by any acquiring party to the Company in connection with the Sale of
Business of MiLAN. If such Sale of Business occurs in a series of transactions,
the Sale of Business Value shall be the aggregate fair market value of the
consideration for each transaction, and the incentive compensation payable on
later transactions comprising the Sale of Business shall be incremental based on
the Sale of Business Value.
The fair market value, in the case of publicly traded equity securities, shall
be based on the last closing sale price in the primary public market for such
securities on the last trading day prior to the date the acquisition is first
publicly announced. The Sale of Business Value shall be calculated without
deducting any of the Company's transaction expenses, including without
limitation, any brokerage fees, any fees and expenses of attorneys, accountants
or other advisors.
