SEPARATION AGREEMENT AND GENERAL RELEASE OF CLAIMS
Exhibit
10.1
SEPARATION
AGREEMENT AND GENERAL RELEASE OF CLAIMS
This
Separation Agreement and General Release of Claims ("Agreement") is
entered into
by and between Xxxx X. Xxxxxxxx ("Executive"), and Lantronix, Inc.,
a Delaware
corporation ("Company"), and is intended by the parties hereto to resolve
and
conclude any and all issues arising out of Executive's employment or
the
termination of such employment.
R
E C
I T A L S :
WHEREAS,
Executive has been employed by the Company as its President, Chief Executive
Officer; and
WHEREAS,
the parties now mutually desire to terminate their employment relationship
on
the terms set forth herein.
A
G R
E E M E N T :
NOW,
THEREFORE, in consideration of the mutual covenants and agreements contained
herein, the recitals set forth above, which are incorporated herein by
reference, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally
bound,
the parties hereto agree as follows:
1. Separation
of Employment.
Executive's employment shall end effective September 24, 2007 (the "Separation
Date"). On the Separation Date, Executive will be paid his final paycheck,
including any accrued but unused vacation through the Separation Date.
In
addition, Executive will be reimbursed for all outstanding customary
business
expenses incurred through the Separation Date. Executive shall submit
a business
expense report to the Company within sixty (60) days of the Separation
Date and
the Company will issue a reimbursement check within seven (7) business
days of
receipt thereof. In the event that after the 60-day period, Executive
discovers
any additional charges on Executive's American Express card that have
been made
by any employee, director or agent of the Company, on the Company's behalf,
and
that have not previously been reimbursed by the Company, Executive shall
promptly submit a request for reimbursement to the Company, which shall
be
approved and paid to Executive within seven (7) business days of receipt
thereof.
2. Severance
Payments.
Provided the occurrence of the "Effective Date" of this Agreement (as
defined
below in Paragraph 16), and Executive's compliance with the terms and
conditions
set forth in the Agreement, Executive shall be eligible for the following:
2.1. Separation
Pay.
Payment
of $435,000, less legally required withholdings and deductions ("Separation
Pay"). The Separation Pay shall be paid to Executive in equal installments
on
the Company's normal payroll dates during the period between the Effective
Date
and September 15, 2008. The Company, in its sole discretion, may accelerate
any
installment payment of the Separation Pay or pay it (or a portion of
it) in a
lump sum;
2.2. COBRA
Pay.
Provided Executive timely elects COBRA health-care continuation coverage,
and
notifies Company of same (including the amount of the monthly COBRA premium),
the Company will pay the cost of Executive's COBRA premiums through the
first to
occur of (i) eighteen (18) months following the Separation Date, and
(ii)
Executive's eligibility for health insurance coverage pursuant to another
employer's plan, in the same amount as if Executive had remained an active
employee of the Company. All amounts paid on Executive's behalf towards
COBRA
premiums will be reported to Executive as income on a Form 1099 and Executive
agrees to be responsible for the payment of Executive's income taxes
based on
the receipt thereof. Executive agrees to notify the Company within ten
(10) days
of Executive's receipt of health-care insurance coverage from another
employer
which would trigger (ii) immediately above;
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2.3. Car
Payment.
Payment
of $13,500, less legally required withholdings and deductions, representing
the
amount the Company would have paid on behalf of Executive for executive
automobile benefits had Executive remained employed for the eighteen
(18) month
period following the Separation Date ("Car Payment"). The Car Payment
shall be
paid to Executive in equal installments on the Company's normal payroll
dates
during the period between the Effective Date and September 15, 2008.
The
Company, in its sole discretion, may accelerate any installment payment
of the
Car Payment or pay it (or a portion of it) in a lump sum;
2.4. Options.
The
right to exercise any and all stock options that were granted to Executive
and
vested as of the Separation Date. Subject to the provisions of the Company's
stock option plan(s) and the agreements pursuant to which the options
were
granted (each of which is incorporated herein by reference), Executive
shall
have until the earlier of the following three dates to exercise each
of
Executive's vested options: (i) twenty-four (24) months after the Separation
Date; (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 (10) years after the original grant date of such option. Notwithstanding
anything to contrary contained in this Agreement or the Company's stock
option
plan(s) and the agreements pursuant to which the options were granted,
the
parties hereto agree that Executive shall cease to be a "Service Provider"
(as
defined in the Company's 2000 Stock Plan (the "Plan")) as of the Separation
Date
and all of Executive's unvested stock options as of the Separation Date
shall
automatically terminate and revert to the Plan. Attached hereto as Exhibit
"A"
is a
complete schedule of Executive's vested stock options under all Company
stock
option plans as of the date of this Agreement; and
2.5. Bonus.
A
pro-rated portion of any bonus, less legally required withholdings and
deductions, that Executive would have been entitled to, if any, under
the Team
Incentive Plan for fiscal year July 1, 2007, through June 30, 2008, had
Executive remained employed through the time of payout ("Bonus Pay").
The
pro-rata calculation shall be based on the portion of that fiscal year
period
that Executive was actively employed by the Company. The Bonus Pay shall
be paid
to Executive in accordance with the Company's regular bonus payment schedule,
but in no event later than September 15, 2008.
3. Health
Insurance Benefits.
Executive's health insurance benefits will continue through September
30, 2007,
after which it will be necessary for Executive to convert or continue
such plans
and coverage at his sole option, cost and expense, except as specifically
provided in Paragraph 2.2 above. The Company, or its third party administrator,
will provide Executive with the notice and election forms required by
the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and
any
applicable state law.
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4. The
Company's Obligations Under This Agreement.
The
benefits set forth in Paragraphs 1 and 2 constitute the sole obligations
of the
Company to Executive under this Agreement and are in lieu of any damages
or
other compensation that Executive may claim under other Company policies
or
otherwise, except for Executive's base salary which has been earned up
to the
Separation Date, compensation for any accrued and unused vacation up
to the
Separation Date, reimbursement for business expenses incurred up to the
Separation Date (in accordance with the customary policies of the Company),
and
any benefits that the Company is required to provide to Executive after
the
Separation Date under COBRA or pursuant to any ERISA plan(s) of the Company.
The
benefits provided in this Agreement are in substitution for any severance
or
termination benefits otherwise available under Company policies of general
application. The benefits provided in this Agreement shall not be reduced
by any
compensation or benefits received by Executive from any subsequent employer
or
any other third party.
5. Confidential
Information and Non-Solicitation of Employees.
5.1. Confidentiality
Obligations.
Executive acknowledges and agrees that he shall continue to be bound
by and
comply with each and every term and condition of the Company's Employment,
Confidential Information and Invention Assignment Agreement ("Confidentiality
Agreement"), which is specifically incorporated herein by reference,
and any
other proprietary or confidentiality agreement(s) between Executive
and the
Company. In the event any provision of the Confidentiality Agreement
conflicts
with any provision in this Agreement, the latter shall control. Further,
Executive shall have no obligation to complete Exhibit
"C"
to the
Confidentiality Agreement or, following the Separation Date, to further
comply
with the Conflict of Interest Guidelines identified in Exhibit
"D"
thereto.
5.2. Non-Solicitation
Obligations.
Executive further agrees that for a period of one (1) year following
the
Separation Date, 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 (regularly scheduled for 40 hours or more a week) who is
then
employed by the Company.
5.3. Restrictions
Reasonable.
Executive acknowledges and agrees that the restrictions contained in
this
Paragraph 5 are reasonable and appropriate. Executive further acknowledges
and
agrees that the restrictions contained in this Paragraph 5 will not
preclude him
from engaging in any trade, business or profession that he is qualified
to
engage in.
6. Release
of Claims.
6.1. General
Release of All
Known and Unknown Claims.
Except
for the Company's obligations as provided in this Agreement, Executive
hereby
forever waives, releases, acquits, relieves and discharges the Company,
and each
of its parent corporations, subsidiaries, divisions, or affiliated
corporations,
organizations or entities and each and all of their predecessors,
successors,
heirs, assigns, officers, employees, directors, shareholders, owners,
representatives, consultants, insurers, insurance companies, attorneys
and
agents, whether previously or hereinafter affiliated in any manner
(collectively, the "Released Parties"), from any and all claims,
rights,
actions, complaints, demands, causes of action, charges of discrimination,
retaliation or harassment, wage claims, whistleblower claims, obligations,
promises, contracts, agreements, controversies, suits, debts, expenses,
damages,
attorneys' fees, costs and liabilities of any nature whatsoever,
whether or not
now known, suspected, claimed, matured or unmatured, which Executive
ever had,
now has, or may claim
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to
have
from the beginning
of time to the moment he signs this Agreement against the Released
Parties
(whether directly or indirectly), or any of them, by reason of any
act, event or
omission concerning any matter, cause or thing, including, without
limiting the
generality of the foregoing, any claims related to or arising out
of
(i) Executive's employment with any of the Released Parties or the
cessation of that employment; (ii) any common law or statutory torts;
(iii) any
federal, state or governmental constitution, statute, regulation
or ordinance,
including, without limitation, Title VII of the Civil Rights Act
of 1964, the
California Constitution, the California Fair Employment and Housing
Act, the
California Labor Code, the California Insurance Code, the California
Business
and Professions Code, the California Family Rights Act, the Family
and Medical
Leave Act, the Age Discrimination in Employment Act, the Employee
Retirement
Income Security Act, the Equal Pay Act, the Americans With Disabilities
Act and
the Xxxxxxxx-Xxxxx Act of 2002; and/or (iv) any agreement or covenant, oral
or written, express or implied, between Executive and any of the
Released
Parties; provided, however, that the foregoing release is not intended
to, and
does not, release the Released Parties from any legal obligation
they may
otherwise have to indemnify Executive against third party claims
that may be
filed against him for conduct undertaken by him during the course
and scope of
his employment with the Company or to any rights which, as a matter
of law,
cannot be waived. Notwithstanding the foregoing, this release is
not intended in
any way to waive any rights Executive may have against the Company
solely in his
capacity as a shareholder of the Company;
6.2. Waiver
of Unknown Claims.
Executive expressly agrees to waive and relinquish all rights and
benefits he
may have under Section 1542 of the California Civil Code which reads
as
follows:
"§
1542. [Certain claims not affected by general release.] A general
release does
not extend to claims which the creditor does not know or suspect
to exist in his
OR HER favor at the time of executing the release, which if known
by him OR HER
must have materially affected his OR HER settlement with the
debtor."
6.3. Agreement
Effective Notwithstanding Subsequent Discovery of Different
Facts.
The
parties hereto acknowledge that they may discover hereafter facts
different from
or in addition to those they now know or believe to be true with
respect to the
claims, demands, causes of action, obligations, damages and liabilities
of any
nature whatsoever that are the subject of the release set forth
in Paragraph 6
of this Agreement, and they each expressly agree to assume the
risk of the
possible discovery of additional or different facts, and agree
that this
Agreement shall be and remain effective in all respects regardless
of such
additional or different facts.
6.4. No
Assignment.
Executive represents and warrants that he has made no assignment,
and will make
no assignment, of any claim, chose in action, right of action
or any right of
any kind whatsoever, embodied in any of the claims and allegations
referred to
herein, and that no other person or entity of any kind had
or has any interest
in any of the demands, obligations, actions, causes of action,
debts,
liabilities, rights, contracts, damages, attorneys' fees, costs,
expenses,
losses or claims referred to herein.
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7. Withholding
of Taxes; Tax Reporting.
The
Company may withhold from any amounts payable under this Agreement
all such
federal, state, city and other taxes, and may file with appropriate
governmental
authorities all such information, returns or other reports
with respect to the
tax consequences of any amounts payable under this Agreement,
as may, in its
judgment, be required by law.
8. Internal
Revenue Code Section 409A.
This
Agreement is intended to be exempt to the extent possible from
the requirements
of Internal Revenue Code Section 409A, including current and
future guidance and
regulations interpreting such provisions. To the extent that
any provision of
this Agreement fails to satisfy a requirement for such an exemption,
the
provision shall automatically be modified in a manner that,
in the good-faith
opinion of the Company, brings the provisions into compliance
with such
requirement while preserving as closely as possible the original
intent of the
provision and this Agreement. If it is determined by the Company
that any
payment under this Agreement is subject to the requirements
of Code Section 409A
notwithstanding the preceding sentences, then the provisions
of the Agreement
shall be automatically modified in such manner as brings the
Agreement into
compliance with such requirements. In particular, and without
limiting the
preceding sentence, while any stock of the Company is or is
treated as publicly
traded and Executive is a "specified employee" under Code Section
409A(a)(2)(B)(i), then any payment under this Agreement that
is treated as
deferred compensation under Code Section 409A shall be delayed
until the date
which is six months after the date of separation from service
(without interest
or earnings).
9. Assignment
of Agreement.
Executive may not assign this Agreement. The Company shall
be entitled to assign
this Agreement to any successor in interest to its business.
The Company will
obtain an assumption of this Agreement by any successor or
assign to all or
substantially all of the business and/or assets of the Company
(whether direct
or indirect, by acquisition, merger, consolidation or otherwise),
but the
failure to obtain such assumption shall not prevent or delay
such acquisition,
merger, consolidation or other transaction or relieve the Company
of its
obligations under the Agreement. This Agreement shall bind
and inure to the
benefit of the Company's successors and assigns, as well as
Executive's heirs,
executors, administrators, and legal representatives.
10. Severability.
Should
any portion, word, clause, phrase, sentence or paragraph of
this Agreement be
declared void or unenforceable, such portion shall be considered
independent and
severable from the remainder, the validity of which shall remain
unaffected.
11. No
Waiver.
Failure
to insist on compliance with any term, covenant or condition
contained in this
Agreement shall not be deemed a waiver of that term, covenant
or condition, nor
shall any waiver or relinquishment of any right or power contained
in this
Agreement at any one time or more times be deemed a waiver
or relinquishment of
any right or power at any other time or times.
12. Mutual
Arbitration Agreement.
To the
fullest extent allowed by law, any controversy, claim or dispute
between
Executive and the Company (and/or any of its affiliated, subsidiary,
or related
entities, owners, directors, officers, employees, volunteers
or agents) relating
to or arising out of this Agreement or Executive's employment
(or the cessation
thereof), will be submitted to final and binding arbitration
in Orange County,
California, for determination in accordance with the American
Arbitration
Association's ("AAA") Employment Arbitration Rules as the exclusive
remedy for
such controversy, claim or dispute. In any such arbitration,
the parties may
conduct discovery to the same extent as would be
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permitted
in a court of law. The arbitrator shall issue a reasoned, written
decision, and
shall have full authority to award all remedies which would
be available in
court. The Company shall pay the arbitrator's fees and any
AAA administrative
expenses. Any judgment upon the award rendered by the arbitrator
may be entered
in any court having jurisdiction thereof. Possible disputes
covered by the above
include (but are not limited to) unpaid wages, breach of contract
(including
this Agreement), torts, violation of public policy, discrimination,
harassment,
or any other employment-related claims under laws including,
but not limited to,
Title VII of the Civil Rights Act of 1964, the Americans With
Disabilities Act,
the California Labor Code, the California Fair Employment and
Housing Act, the
Age Discrimination in Employment Act, the Americans with Disabilities
Act, and
any other statutes or laws relating to Executive's relationship
with the Company
regardless of whether such dispute is initiated by Executive
or the Company.
Thus, this bilateral arbitration agreement fully applies to
any and all claims
that the Company may have against Executive, including but
not limited to claims
for misappropriation of Company property, disclosure of proprietary
information
or trade secrets, interference with contracts, trade libel,
gross negligence, or
any other claim for alleged wrongful conduct or breach of the
duty of loyalty.
However, claims for workers' compensation benefits, unemployment
insurance and
those arising under the National Labor Relations Act (or any
other claims where
mandatory arbitration is prohibited by law) are not covered
by this arbitration
agreement, and such claims may be presented to the appropriate
court or
government agency. BY AGREEING TO THIS BINDING ARBITRATION
PROVISION, BOTH
EXECUTIVE AND THE COMPANY GIVE UP ALL RIGHTS TO TRIAL BY JURY.
This arbitration
agreement is to be construed as broadly as is permissible under
applicable
law.
13. Counterparts.
This
Agreement may be executed in one or more counterparts and the
counterparts
signed in the aggregate shall constitute a single, original
instrument.
14. Entire
Agreement.
This
Agreement, together with the documents referenced herein, contains
the entire
integrated agreement of the parties hereto with respect to
the subject matter
hereof and it supersedes any and all other agreements, either
oral or in
writing, between the parties hereto with respect to the subject
matter hereof.
Each party to this Agreement acknowledges that no representations,
inducements,
promises or agreements, written, oral or otherwise, have been
made by any party,
or anyone acting on behalf of any party, which are not embodied
herein, and that
no other agreement, statement or promise not contained in this
Agreement shall
be valid or binding, including but not limited to the parties'
Severance
Agreement dated May 15, 2007. This Agreement may not be modified
or amended by
oral agreement, but only by an agreement in writing signed
by the Chairman of
the Board of the Company and Executive.
15. Attorneys'
Fees.
In the
event of any arbitration arising out of this Agreement, the
prevailing party
shall be entitled to recover from the non-prevailing party
its costs and
expenses (including reasonable attorneys' fees) incurred in
such
arbitration.
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16. Older
Workers Benefit Protection Act Provisions.
The
Company advises Executive as follows: (a) this Agreement does not waive
rights or claims that may arise after Executive executes it;
(b) Executive
has twenty-one (21) days to consider this Agreement and whether
he will enter
into it, although he may sign it sooner than that if he so
desires;
(c) Executive may revoke this Agreement at any time within seven
(7) days
after executing it; and (d) Executive should consult an attorney prior to
executing this Agreement. This Agreement shall not become effective
or
enforceable until after the seven (7)-day revocation period
has expired, without
revocation by Executive ("Effective Date").
IN
WITNESS WHEREOF, the undersigned have executed this Separation
Agreement and
General Release of Claims on the dates set forth hereinafter.
| Dated: September 24, 2007 | /s/ Xxxx X. Xxxxxxxx |
| XXXX X. XXXXXXXX | |
| LANTRONIX, INC. | |
|
Dated:
September
24, 2007
|
By:
/s/
X.X.
Xxxxx
|
| X.X. XXXXX | |
|
Chairman
of the Board of Directors
|
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