Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
The Board of Directors of Digi International, Inc. has appointed James J. Loch to serve as Senior Vice President, Chief Financial Officer and Treasurer effective May 20, 2019. Mr. Loch, age 47, most recently served as Senior Vice President of Finance and Chief Financial officer of Nilfisk, Inc., a Denmark-owned company based in Minneapolis that manufactures professional cleaning equipment, from May 2016 to February 2019. From May 2015 to May 2016 he was an independent consultant focused on projects including due diligence, business planning, back office reorganization and product research. Previously, he served at Honeywell Building Solutions, a division of Honeywell International, as Chief Financial Officer (Americas) from 2008 to 2012 and then as Vice President Sales from 2012 to May 2015.
Brian G. Ballenger, our Acting Principal Financial Officer, Acting Principal Accounting Officer and Interim Treasurer, will cease to serve in those positions upon the commencement of Mr. Lochs employment. He is expected to continue to serve as Vice President of Finance and Accounting.
Our Board of Directors has approved compensatory arrangements to be effective upon commencement of Mr. Lochs employment with Digi. Mr. Loch will receive an initial annual base salary equal to $300,000 and an annual cash incentive target of $150,000. Participation in the annual cash incentive program for fiscal 2019 will be on terms substantially similar to those described for our other executive officers in the definitive proxy statement for our most recent annual meeting of stockholders, and any resulting payments will be pro-rated based on the duration of his service in the applicable performance period.
The Board also has indicated that, following the commencement of Mr. Lochs employment with us, it will consider the approval of (i) an initial grant of options to purchase up to 100,000 shares of Digi common stock at an exercise price equal to the closing market price of our common stock on the grant date, and (ii) an initial grant of restricted stock units representing a right to acquire 40,000 shares of Digi common stock. The options would expire after seven years from the grant date and will vest 25% after one year and in 36 equal proportions each month thereafter for three years, resulting in a total vesting period of four years. The restricted stock units would vest 25% on each of the first, second, third and fourth anniversaries of the grant date.
If Mr. Lochs employment is terminated within one year following a change in control by Digi without cause or by Mr. Loch for good reason, then the unvested portion, if any, of the above-described stock options or restricted stock units would vest. In addition, if Digi terminates Mr. Lochs employment for reasons other than cause (as defined in his Offer Letter) and he agrees to execute a release of claims, then he will be entitled to receive (i) twelve months of base salary in effect at the time of termination, payable in a lump sum, and (ii) a pro-rata bonus based on the number of months worked in the fiscal year prior to termination and Digis actual performance.
Mr. Loch will also be eligible to participate in other compensation and benefit programs generally available to our executive officers.
The foregoing description of the terms of Mr. Lochs employment does not purport to be complete and is qualified by the text of Mr. Lochs Offer Letter, which is set forth in Exhibit 10.1 to this report and is incorporated herein by reference.