EXHIBIT 10.20
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CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
BETWEEN
EXTENDED SYSTEMS, INC.
AND
[EMPLOYEE]
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TABLE OF CONTENTS
Page
Article 1 certain definitions.................................................1
Article 2 change of control...................................................2
Article 3 Employment Period and Employment Status.............................3
3.1 Employment Period............................................3
3.2 Employment Status............................................3
Article 4 terms of employment.................................................3
4.1 Position and Duties..........................................3
4.2 Compensation.................................................3
4.2.1 Base Salary...........................................4
4.2.2 Annual Bonus..........................................4
4.2.3 Incentive, Savings and Retirement Plans...............4
4.2.4 Welfare Benefit Plans.................................4
4.2.5 Expenses..............................................5
4.2.6 Fringe Benefits.......................................5
4.2.7 Vacation..............................................5
Article 5 termination of employment...........................................5
5.1 Death or Disability..........................................5
5.2 Cause........................................................5
5.3 Good Reason..................................................6
5.4 Notice of Termination........................................7
5.5 Date of Termination..........................................7
Article 6 obligations of the Company upon Termination.........................8
6.1 Good Reason; Other Than for Cause, Death or Disability.......8
6.2 Death........................................................9
6.3 Disability...................................................9
6.4 Cause; Other Than for Good Reason............................9
Article 7 non-exclusivity of Rights..........................................10
Article 8 full settlement; legal fees........................................10
Article 9 certain additional payments by the company.........................10
Article 10 CONFIDENTIAL INFORMATION and INTELLECTUAL PROPERTY................13
10.1 Disclosure of Confidential Information or
Intellectual Property....................................13
10.2 Transfer of Intellectual Property Rights...................13
10.3 Patent, Copyright and Other Property Rights................13
10.4 Confidential Information...................................13
10.5 Intellectual Property......................................14
Article 11 successors........................................................14
Article 12 miscellaneous.....................................................15
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
AGREEMENT by and between Extended Systems, Inc., a Delaware
corporation (the "COMPANY") and [EMPLOYEE NAME] (the "EXECUTIVE"), dated as of
the 19th day of MAY, 2004.
The Board of Directors of the Company (the "BOARD"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 "EFFECTIVE DATE" shall mean the first date during the Change of
Control Period (as defined in Section 1.2) on which a Change of Control (as
defined in Article 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii) otherwise
arose in connection with or anticipation of a Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.
1.2 "CHANGE OF CONTROL PERIOD" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one (1) year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "RENEWAL DATE"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three (3) years from such Renewal
Date, unless at least 60 days prior to the Renewal Date the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended. In conjunction with the Renewal Date, the Board will review the
Agreement annually for the purpose of determining whether the Change of Control
Period shall not be extended.
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ARTICLE 2
CHANGE OF CONTROL
For the purpose of this Agreement, a "CHANGE OF CONTROL" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT")) (a "PERSON") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of
either (i) the then outstanding shares of common stock of the Company (the
"OUTSTANDING COMPANY COMMON STOCK") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "OUTSTANDING COMPANY VOTING SECURITIES");
provided, however, that for purposes of this Subsection (a), the following
acquisitions shall not constitute a Change of control:
(i) any acquisition directly from the Company,
(ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or
(iv) any acquisition pursuant to a transaction which complies with the exception
in subsection (c) of this Article 2; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "INCUMBENT BOARD") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(c) Consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets of another entity (a
"BUSINESS COMBINATION"), in each case, unless, following such Business
Combination, at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
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ARTICLE 3
EMPLOYMENT PERIOD AND EMPLOYMENT STATUS
3.1 EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the earlier of (i) Date of
Termination as defined in Section 5.5 of this Agreement (the "EMPLOYMENT
PERIOD"), or (ii) the date that is 13 months after the Effective Date.
3.2 EMPLOYMENT STATUS.
3.2.1 Prior to the Effective Date, the Executive and the Company
acknowledge that the employment of the Executive by the Company is currently and
will continue to be "at will" and, prior to the Effective Date, the Executive's
employment may be terminated for any reason by either the Executive or the
Company at any time, subject only to the employment agreement attached as
Exhibit A. Executive and the Company further acknowledge that if the Executive's
employment is terminated for any reason prior to the Effective Date, the
Executive shall have no further rights under this Agreement.
3.2.2 From and after the Effective Date, Executive's employment
shall continue to be "at will," subject only to the terms of this Agreement,
which shall thereafter supersede the employment agreement attached as Exhibit A
or any other agreement between the parties with respect to the subject matter
hereof.
ARTICLE 4
TERMS OF EMPLOYMENT
4.1 POSITION AND DUTIES.
4.1.1 During the Employment Period,
(a) the Executive's position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned to the Executive at any time during the 120-day
period immediately preceding the Effective Date and
(b) the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the Effective Date or any
office or location less than 50 miles from such location.
4.1.2 During the Employment Period, the Executive agrees to serve
the Company faithfully and to the best of Executive's ability and to devote
Executive's full time, attention and efforts to the business and affairs of the
Company during Executive's employment by the Company. The Executive agrees not
render or perform services for any other corporation, firm, entity or person
which are inconsistent with the provisions of this Agreement.
4.2 COMPENSATION.
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4.2.1 BASE SALARY. During the Employment Period, the Executive shall
receive an annual base salary ("ANNUAL BASE SALARY"), which shall be paid at a
monthly rate, at least equal to twelve (12) times the highest monthly base
salary paid or payable, including any base salary which has been earned but
deferred, to the Executive by the Company and its affiliated companies in
respect of the twelve (12) month period immediately preceding the month in which
the Effective Date occurs. Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to Annual Base
Salary as so increased. As used in this Agreement, the term "AFFILIATED
COMPANIES" shall include any company controlled by, controlling or under common
control with the Company.
4.2.2 ANNUAL BONUS. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "ANNUAL BONUS") in cash at least equal to the Executive's most
recently established (i) target bonus under the Company's Management Incentive
Program, (ii) target commission under the Company's or sales commission program,
or (iii) comparable bonus under any predecessor or successor plan, before the
public announcement of the transaction that resulted in the Change of Control
(annualized in the event that the Executive was not employed by the Company for
the whole or such fiscal year) (such target, the "ANNUAL BONUS AMOUNT"). Each
such Annual Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
4.2.3 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
4.2.4 WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its affiliated companies.
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4.2.5 EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
4.2.6 FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits in accordance with the plans, practices,
programs and policies of the Company and its affiliated companies in effect for
the Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
4.2.7 VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the plans, policies, programs and
practices of the Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
ARTICLE 5
TERMINATION OF EMPLOYMENT
5.1 DEATH OR DISABILITY. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12.2 of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "DISABILITY EFFECTIVE DATE"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"DISABILITY" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
5.2 CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "CAUSE"
shall mean:
(a) The Executive has breached the confidential or proprietary
information provisions of Article 10 of this Agreement;
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(b) The Executive has breached any other material contractual
obligation under this Agreement or any other agreement between the Company and
the Executive and has failed to cure such breach within 30 days after receipt of
written notice of such breach from the Company;
(c) The Executive has committed fraud, misappropriation or
embezzlement in connection with the Company's business or materially violated a
federal or state law or regulation applicable to the business of the Company;
(d) The Executive has been convicted or has pleaded NOLO CONTENDERE
to any crime involving moral turpitude or financial misconduct;
(e) The Executive has engaged in willful misconduct, including
willful violation of any Company policy, which is injurious to the Company; or
(f) The Executive has willfully and materially failed to perform the
Executive's duties as an executive of the Company to the satisfaction of the
Company or its Board and has failed to cure such default within 30 days after
receipt of written notice of default from the Company.
For purposes of subsections 5.2(e) and 5.2(f) above, no act or
failure to act, on the part of the Executive, shall be considered "willful"
unless it is done, or omitted to be done, by the Executive without reasonable
belief that the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the written instructions of the
Chief Executive Officer or a senior officer of the Company or based upon the
written advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together with counsel, to be heard
before the Board), finding that the Executive's conduct falls under one or more
of subsections (a) through (f) of this Section 5.2, and specifying the
particulars thereof in detail.
5.3 GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "GOOD REASON" shall
mean:
(a) The assignment to the Executive of any duties or
responsibilities
inconsistent in any respect with the Executive's position or a reduction in the
Executive's compensation or any action by the Company which results in a
reduction in the scope or responsibility with respect to the Executive's duties
that is inconsistent in any respect with the Executive's position, authority,
duties or responsibilities as contemplated by Section 4.1 of this Agreement
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
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(b) any failure by the Company to comply with any of the provisions
of Section 4.2 of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(c) the Company's requiring the Executive to be based at any office
or location other than as provided in Subsection 4.1.1(b) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the Effective
Date;
(d) any purported termination of the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(e) any failure by the Company to comply with and satisfy Section
11.3 of this Agreement.
For purpose of this Section 5.3, any good faith determination of
"Good Reason" made by the Executive shall be conclusive.
5.4 NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12.2 of
this Agreement. For purposes of this Agreement, a "NOTICE OF TERMINATION" means
a written notice that
(a) indicates the specific termination provision in this Agreement
relied upon,
(b) to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and
(c) if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date (which date shall
be not more than 30 days after the giving of such notice).
The failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
5.5 DATE OF TERMINATION. "DATE OF TERMINATION" means
(a) if the Executive's employment terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein, as the case may be,
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(b) if the Executive's employment is terminated by the Company other
than for Cause or Disability, the date on which the Company notifies the
Executive of such termination and
(c) if the Executive's employment is terminated by reason of death
or Disability, the date of death of the Executive or the Disability Effective
Date, as the case may be.
ARTICLE 6
OBLIGATIONS OF THE COMPANY UPON TERMINATION
6.1 GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If,
during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause, Death or Disability, or the Executive shall
terminate employment for Good Reason:
(a) the Company shall pay to the Executive in eighteen (18) equal
monthly installments, with the first payment due and payable 30 days after the
Date of Termination, the aggregate of the following amounts:
(i) the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the product of (x)
the Annual Bonus Amount and (y) a fraction, the numerator of which is the number
of days in the current fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation previously deferred by the
Executive (together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid (the sum
of the amounts described in Subparagraphs (1), (2) and (3) shall be hereinafter
referred to as the "ACCRUED OBLIGATIONS"); and
(ii) the amount equal to one and one-half times (1.5 x) the sum of
(x) the Executive's Annual Base Salary and (y) the Annual Bonus Amount;
(b) for eighteen (18) months after the Executive's Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue
benefits to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4.2.4 of this Agreement if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer-provided plan, the medical and other welfare benefits described
herein shall terminate;
(c) the Company reimburse the Executive for usual and customary
outplacement benefits, such as legal, accounting, employment placement expenses
and other incidental expenses in connection with termination of employment, in
an amount not to exceed $10,000.
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(d) Any unvested options to purchase the Company's securities
granted under the Company's 1998 Stock Option Plan, as amended (the "Plan"), or
any successor plan providing a similar benefit shall become vested and may be
exercised by the Executive in accordance with the Plan.
(e) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and benefits shall be
hereinafter referred to as the "OTHER BENEFITS").
6.2 DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term "OTHER BENEFITS" as utilized in this Section 6.2 shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
6.3 DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6.3 shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company and its affiliated companies to
disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families.
6.4 CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) the Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
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Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations by the Company to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other Benefits. In
such case, all Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination.
ARTICLE 7
NON-EXCLUSIVITY OF RIGHTS
Nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor, subject to Article 3, shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
ARTICLE 8
FULL SETTLEMENT; LEGAL FEES
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and except as specifically provided in
Section 6.1(b), such amounts shall not be reduced whether or not the Executive
obtains other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Executive or others of the validity or unenforceability of,
or liability or entitlement under, any provision of this Agreement or any
guarantee of performance thereof (whether such contest is between the Company
and the Executive or between either of them and any third party, and including
as a result of any contest by the Executive about the amount of any payment
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "CODE").
ARTICLE 9
CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
9.1 Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Article 9) (a "PAYMENT") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"CODE"),
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or any corresponding provision of state or local tax laws, or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "EXCISE TAX"), then the Executive shall be
entitled to receive an additional payment (a "GROSS-UP PAYMENT") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of this Section 9.1, if it
shall be determined that the Executive is entitled to a Gross-Up Payment, but
that the Payments do not exceed 110% of the greatest amount (the "REDUCED
AMOUNT") that could be paid to the Executive such that the receipt of Payments
would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to
the Executive and the Payments, in the aggregate, shall be reduced to the
Reduced Amount.
9.2 Subject to the provisions of Section 9.3, all determinations
required to be made under this Article 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the Company's
current public accounting firm or such other certified public accounting firm as
may be designated by the Executive (the "ACCOUNTING FIRM"), which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Article 9, shall be paid by the Company to the Executive within five (5)
days of the receipt of the Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("UNDERPAYMENT"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9.3 and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
9.3 The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
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(a) give the Company any information reasonably requested by the
Company relating to such claim,
(b) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(c) cooperate with the Company in good faith in order to effectively
contest such claim, and
(d) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9.3, the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one (1) or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
9.4 If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9.3, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9.3) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9.3, a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does
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not notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
ARTICLE 10
CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERTY
10.1 DISCLOSURE OF CONFIDENTIAL INFORMATION OR INTELLECTUAL
PROPERTY. Executive will not, at any time during or after Executive's employment
by Company, make any unauthorized use or disclosure of Confidential Information
(as defined below) or Intellectual Property (as defined below), including
confidential information or intellectual property of third parties to which
Executive had access as a result of Executive's employment. Nothing in this
Agreement shall prohibit Executive from complying with a court order to produce
information, but Executive agrees to provide Company notice, immediately upon
becoming aware of such requirement, of any subpoena, order, or other mandate to
produce information which may be Confidential Information and to cooperate fully
with Company in obtaining such protection as Company deems appropriate.
10.2 TRANSFER OF INTELLECTUAL PROPERTY RIGHTS. During Executive's
employment by Company, Executive agrees to promptly disclose in writing to
Company any Intellectual Property, whether originated, conceived, created, made,
developed or invented in whole or in part by Executive, and maintain adequate
and current records thereof. Pursuant to this Agreement, Executive assigns,
transfers, and conveys to Company, or its designees or successors, Executive's
entire right, title and interest in any Intellectual Property that Executive
originates, conceives, creates, makes, develops or invents, whether as sole
inventor, creator, developer or originator or as a joint inventor, creator,
developer or originator with others, whether made within or without the usual
working hours or upon the premises of Company or elsewhere, during Executive's
employment.
10.3 PATENT, COPYRIGHT AND OTHER PROPERTY RIGHTS. Either during or
subsequent to Executive's employment, upon the request and at the expense of
Company, but for no consideration in addition to that due to Executive pursuant
to Executive's employment with Company and this Agreement, Executive shall
execute, acknowledge, and deliver to Company or its designee any instruments
that in the judgment of Company may be necessary or desirable to secure or
maintain for the benefit of Company or its designee adequate patent, copyright,
and other property rights with respect to Intellectual Property within the scope
of this Agreement, including, but not limited to: (a) domestic and foreign
patent and copyright applications, (b) any other applications for securing,
protecting, or registering property rights, and (c) powers of attorney,
assignments, oaths, affirmations, supplemental oaths and sworn statements.
Executive shall also assist Company or its designee, as required, to draft such
instruments, to obtain such rights, and to enforce such rights, provided that
such assistance will not unreasonably interfere with your other endeavors.
10.4 CONFIDENTIAL INFORMATION. For purposes of this Agreement,
"CONFIDENTIAL INFORMATION" means any confidential or private information, not
generally known to the public, related to the business or operations (past,
present or future) of Company. Confidential Information encompasses a broad
scope of information that includes, without limitation:
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business plans and strategies; information regarding the identities, skills,
qualities, competencies, characteristics, expertise, or experience of the
directors, officers, or employees of Company; information regarding the
compensation practices of, or payments made to or by, Company; the contents of
communications, oral or written, with, by or between directors, officers,
employees, or agents of Company; statements of fact or opinion or mixed
statements of fact and opinion if such statements are based on information or
events to which Executive had access as a result of Executive's employment by
Company; and similar information related to third parties to whom Company owes a
duty of confidentiality or privacy.
10.5 INTELLECTUAL PROPERTY. For purposes of this Agreement,
"INTELLECTUAL PROPERTY" includes, without limitation, any and all information,
ideas, concepts, improvements, discoveries, designs, inventions, trade secrets,
know-how, manufacturing processes, product formulae, design specifications,
writings and other works of authorship, computer programs, and business methods,
whether patentable or not, which are originated by, conceived by, created by,
made by, developed by, invented by, learned by, or disclosed to Executive,
individually or in conjunction with others, during Executive's employment by
Company (whether during business hours or otherwise and whether on Company's
premises or otherwise) which relate to Company's business, products, or services
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing and trading terms,
evaluations, opinions, interpretations, acquisition prospects, the identity of
customers or their requirements, the identity of key contacts with in the
customer's organizations or within the organization of acquisition prospects, or
marketing and merchandising techniques, prospective names, and marks). The term
"Intellectual Property" also includes all rights provided by the law of any
jurisdiction throughout the world with respect to such information, ideas,
concepts, improvements, discoveries, designs, inventions, trade secrets,
know-how, manufacturing processes, product formulae, design specifications,
writings and other works of authorship, computer programs, and business methods,
including, without limitation, the right to maintain the same as confidential
information, the right to first publication, the right to obtain patents and
industrial rights thereon, all rights of copyright, all trademark rights, and
the right to protect the same against acts of unfair competition.
ARTICLE 11
SUCCESSORS
11.1 This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
11.2 This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
11.3 The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "COMPANY" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
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ARTICLE 12
MISCELLANEOUS
12.1 This Agreement shall be governed by and construed in accordance
with the laws of the State of Idaho, without reference to principles of conflict
of laws. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
12.2 All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
[Employee Name]
[Employee Address]
If to the Company:
Extended Systems, Inc.
5777 N. Meeker
Boise, ID 83713
Attention: Chief Financial Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
12.3 The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
12.4 The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
12.5 The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Subsections 5.3(a) through 5.3(e) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf.
Dated: _______________, 2004
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Print Name
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EXTENDED SYSTEMS, INC.
Dated: _______________, 2004 By:
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Print Name
--------------------
Its
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