Exhibit 10(m)
February 4, 2003
Mr. Lawrence Kraft
3108 2nd Street North
Arlington, VA 22201
Dear Larry,
On behalf of Digi International Inc., I am pleased to offer you employment as
Vice President, Americas Sales & Marketing reporting to Joe Dunsmore.
Compensation
Your annualized total compensation target for this position is $300,000. The
annualized base salary is $165,000 with an annualized incentive target of
$135,000.
You will participate in Digi International’s Executive Incentive Plan. For the
current fiscal year, your plan will contain the following components:
Quarterly Performance: 37.5% of your incentive target will be based on
achievement of quarterly revenue and profitability targets.
Annual Performance “At Plan”: 12.5% of your incentive target will be based on
achievement of the annual revenue and profitability plan.
Increasing Annual Profitability: 50% of your incentive target will be based on
the company’s exceeding the annual profitability and revenue plan. There is a
provision for partial payment under this component based on level of
achievement.
Please see the attached worksheet for more information on the Executive
Incentive Plan. All payments are pro-rated based on length of service in the
quarter/fiscal year.
Stock Options
We will recommend to the Board of Directors an initial grant of 75,000 stock
options. Your options will be at the market price at the time the board approves
your grant and will vest over four years at a rate of 25% (18,750 shares) upon
completion of one year, then proportionate monthly vesting thereafter. This
option request will be brought to the Board of Directors on your start date.
Benefits
Digi offers a comprehensive benefit program which includes Medical, Dental,
Vision, Life and Disability Insurance, Medical and Dependent Care Reimbursement
Plans, 401(k) Savings Plan, Employee Stock Purchase Plan, and a Tuition
Reimbursement Program. You will be eligible for participation in Digi’s health
insurance programs on the first day active employment with the company and will
be eligible for participation in the 401(k) Savings Plan on the first day of the
month following date of hire. Stock Purchase Plan participation eligibility
begins on the first of January, April, July and October following date of hire.

 

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You will be eligible to participate in Digi’s $500,000 Executive Life Insurance
program. If accepted by the carrier, Digi International will pay the full annual
premium. This is in additional to the basic and optional life insurance programs
offered to all employees.
Vacation eligibility begins on the date of hire. Upon hire, you will receive
four weeks of vacation. You will not accrue above or below this amount
regardless of time taken. Should you leave the company at any point in the
future, you will be paid for four weeks of accrued vacation.
Relocation
Digi will cover the full cost of your relocation to Minnesota. This will
include:

•   Professional relocation assistance by our corporate provider, Relocation
Today. You can utilize a realtor that they recommend or work with one outside of
their referral group.   •   Commuting expenses for a period of eight (8) months.
This includes one roundtrip airfare per week for either you or your wife.   •  
The company will secure temporary housing for a period of eight (8) months. If
you elect an alternative termporary housing arrangement, we will reimburse your
expenses for a period of four (4) months.   •   Automobile expenses for the
first 30 days in Minnesota.   •   Shipment and temporary storage of household
goods.   •   Realtor fees and closing costs on the sale of your existing home.  
•   Closing costs on the purchase of your new home. This will not include
“points” paid on the purchase of a new home, real estate taxes or any other
extraordinary closing costs.   •   Reimbursement of any other reasonable
expenses not listed above as approved by myself.   •   A “gross-up” of all
taxable relocation expenses.

If you should voluntarily leave Digi International before twelve months of
employment, all relocation costs paid on your behalf or to you must be repaid to
the company. Your signature on this offer letter indicates your agreement to
this provision and authorizes Digi International to deduct any amount due from
any final payments owed to you. This provision will not be enforced in the event
that Digi International experiences a change of control during the first twelve
months of your employment.
Other
If Digi International should involuntarily terminate your employment at any time
in the future, you will be provided with six months of severance pay (based on
your base salary) as consideration for a Release of Claims against the Company.
You will be considered an active employee for the purposes of health, dental,
life, 401(k) and stock option plan participation during the severance period if
you elect bi-weekly severance payments. If you elect a lump sum payment, the
Company will pay the first six months of COBRA premiums for health and dental
continuation. You will receive a pro-rated bonus for the applicable period
worked calculated on the company’s achievement levels at the time of the event.

 

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This does not include any situations where you were involuntarily terminated for
cause (performance or misconduct). In the event of a change of control, you will
be provided with the six months of severance pay for either an involuntary or
voluntary termination. Severance pay will be taxed per applicable tax
regulations without any “gross up” or other provision for the taxation of your
payment.
Digi International Employment Agreement
This offer of employment is contingent upon your signature on the enclosed Digi
International Employment Agreement. Your signature constitutes acceptance of the
terms and conditions contained in the Agreement, so please read it thoroughly
prior to signing. This offer is also conditioned upon Digi’s determination that
you are not subject to any agreement with any former employer or any other party
that would prohibit you from working in the position of Vice President, Americas
Sales & Marketing. If at any time in the future the Company determines that you
are subject to an agreement that, in Digi’s sole discretion, would prohibit your
employment by Digi, Digi may withdraw this offer of employment or terminate your
employment with the Company.
Employment with Digi International Inc. is “at will,” which means that it is for
no definite period and may be terminated by either you or Digi at any time for
any reason without prior notice. I understand, agree, and acknowledge that any
reliance on any statements by any representative of the company contrary to this
“at will” arrangement is unreasonable and may not form any basis for my reliance
thereon.
Your start date will be February 10, 2003. Please inform me of your acceptance
of this offer by February 5, 2003 and acknowledge your acceptance by signing one
of the enclosed copies and returning it to me along with your signed Employment
Agreement prior to your first day of employment.
Larry, we are fortunate and excited to have you join the “Digi Team”. I look
forward to working with you.
Sincerely,
Digi International Inc.
Tracy Roberts
Director, Human Resources
/s/ Tracy Roberts
Offer accepted:

         
/s/ Lawrence A. Kraft
  2/5/03   2/10/03
 
       
Lawrence A. Kraft
  Date   Start Date