EXHIBIT 10.1

**CHANGE OFCONTROL AGREEMENT**

This Change ofControl Agreement (the “Agreement”) is effective as of ____________, 2001 (the“Effective Date”), by and between [EMPLOYEE NAME] (the “Employee”), and AppliedMicrosystems Corporation, a Washington corporation (the “Company”).

RECITALS

             A.         TheEmployee is presently employed by the Company and performs significantstrategic and management responsibilities necessary to the continued conduct ofthe Company’s business and operations.

             B.          TheBoard of Directors of the Company (the “Board”) has determined that it is inthe best interests of the Company and its stockholders to assure that theCompany will have the continued dedication and objectivity of the Employee,notwithstanding the possibility or occurrence of a Change of Control (asdefined below) of the Company.

             C.          TheBoard believes that it is imperative to provide the Employee with certainseverance benefits upon the Employee’s termination of employment under thecircumstances described herein which provide the Employee with enhancedfinancial security and provide sufficient incentive and encouragement to theEmployee to remain with the Company following a Change of Control.

             D.         Certaincapitalized terms used in the Agreement are defined in Section 3 below.

             In consideration of the mutualcovenants herein contained the parties agree as follows:

             1.          Termsof Employment.  The Company and theEmployee agree that the Employee’s employment is at will, and that theiremployment relationship may be terminated by either party at any time, with orwithout cause.  If the Employee’semployment terminates for any reason within two (2) months prior to, upon orwithin twelve (12) months following a Change of Control, the Employee shall notbe entitled to any payments, benefits, damages, awards or compensation otherthan as provided by this Agreement.

             2.          SeveranceBenefits.  Subject to Section 2 (c)below:

                           (a)         Termination Upon A Change of Control.  If the Employee’s employment is terminatedwithin two (2) months prior to, upon or within twelve (12) months following aChange of Control, then the Employee shall be entitled to receive thecompensation, accrued but unused vacation and benefits earned by the Employeethrough the date of the Employee’s termination of employment and in additionthereto the following severance benefits, as applicable:

                                        (i)          Involuntary Termination.  If the Employee’s employment is terminatedas a result of Involuntary Termination (as defined in Section 3(b) below), thenthe Employee shall be entitled to receive the following:
                                                     (A)       severance pay in an amount equal to 0.5times the Employee’s annual base salary at the time of such termination, plusan amount equal to a portion of the incentive bonus, if any, the Employee willhave earned for the fiscal quarter of the termination on the basis of theachievement of the agreed upon goals for the fiscal quarter of the terminationpro rated to the date of  termination,to be paid in a lump sum within thirty (30) days of the Employee’s termination;

                                                     (B)        alloptions previously granted to Employee shall be subject to the provisions ofthe underlying option agreements; and

                                                     (C)        for a period of up to 12 months afterany termination under this Section 2(a)(i), (i) the Company shall reimburse theEmployee for any COBRA premiums paid by the Employee for continued group healthinsurance coverage (the “Employment Benefits”).  If the Employee’s medical coverage immediately prior to the dateof termination of employment included the Employee’s dependents, the Companypaid COBRA premiums shall include premiums for such dependents.  Such Employment Benefits shall terminateupon the earlier of (i) 12 months from the date of the Employee’s terminationor (ii) upon commencement of new employment by the Employee.

                                        (ii)         Voluntary Resignation.  If the Employee’s employment terminates byreason of the Employee’s voluntary resignation (and is not an InvoluntaryTermination or a termination for Cause), then the Employee shall not beentitled to receive severance or other benefits following the date of suchtermination under the terms of this Agreement, and the Company shall have noobligation to provide for the continuation of any health and medical benefit orlife insurance plans existing on the date of such termination except asotherwise required by applicable law.

                                        (iii)        Disability; Death.  If the Company terminates the Employee’semployment as a result of the Employee’s Disability, or such Employee’semployment is terminated at any time due to the death of the Employee, then theEmployee shall not be entitled to receive severance or other benefits followingthe date of such termination under the terms of this Agreement, and the Companyshall have no obligation to provide for the continuation of any health and medicalbenefit or life insurance plans existing on the date of such termination exceptas otherwise required by applicable law.

                                        (iv)       Termination for Cause.  If the Employee is terminated for Cause,then the Employee shall not be entitled to receive any severance or otherbenefits following the date of such termination under the terms of thisAgreement, and the Company shall have no obligation to provide for thecontinuation of any health and medical benefit or life insurance plans existingon the date of such termination except as otherwise required by applicable law.
                           (b)        Limitation of Payments and Benefits.

                                        (i)          To the extent that any of the paymentsand benefits provided for in this Agreement or otherwise payable to theEmployee constitute “parachute payments” within the meaning of Section 280G ofthe Internal Revenue Code of 1986, as amended (the “Code”), and, but for thisSection 2(b), would be subject to the excise tax imposed by Section 4999 of theCode or any similar or successor provision, the aggregate amount of suchpayments and benefits shall be reduced, but only to the extent necessary sothat none of such payments and benefits are subject to excise tax pursuant toSection 4999 of the Code.

                                        (ii)         Within sixty (60) days after the laterof termination of employment or the related Change in Control, the Companyshall notify the Employee in writing if it believes that any reduction in thepayments and benefits that would otherwise be paid or provided to the Employeeunder the terms of this Agreement is required to comply with the provisions ofSubsection 2(b)(i).  If the Companydetermines that any such reduction is required, it will provide the Employeewith copies of the information used and calculations made by the Company todetermine the amount of such reduction. The Company shall determine, in a fair and equitable manner afterconsultation with the Employee, which payments and benefits are to be reducedso as to result in the maximum benefit for the Employee.

                                        (iii)        Within thirty (30) days after theEmployee’s receipt of the Company’s notice pursuant to Subsection 2(b)(ii), theEmployee shall notify the Company in writing if the Employee disagrees with theamount of reduction determined by the Company, or the selection of the paymentsand the benefits to be reduced.  As partof such notice, the Employee shall also advise the Company of the amount ofreduction, if any, that the Employee has, in good faith, determined to benecessary to comply with the provisions of Subsection 2(b)(i) and/or thepayments and benefits to be reduced. Failure by the Employee to provide this notice within the time allowedwill be treated by the Company as acceptance by the Employee of the amount ofreduction determined by the Company and/or the payments and benefits to bereduced.  If any differences regardingthe amount of the reduction and/or the payments and benefits to be reduced havenot been resolved by mutual agreement within sixty (60) days after theEmployee’s receipt of the Company’s notice pursuant to Subsection 2(b)(ii), theamount of reduction and/or the payments and benefits to be reduced asdetermined by the Employee will be conclusive and binding on both partiesunless, prior to the expiration of such sixty (60) day period, the Companynotifies the Employee in writing of the Company’s intention to have the mattersubmitted to arbitration for resolution and proceeds to do so promptly.  If the Company gives no notice to theEmployee of a required reduction as provided in Subsection 2(b)(ii), the Employeemay unilaterally determine the amount of reduction required, if any, and/or thepayments and benefits to be reduced, and, upon written notice to the Company,the amount and/or the payments and benefits to be reduced will be conclusiveand binding on both parties.

                                        (iv)       If, as a result of the reductionsrequired by Subsection 2(b)(i), the amounts previously paid to the Employeeexceed the amount to which the Employee is entitled, the Employee will promptlyreturn the excess amount to the Company.

             3.          Definitionof Terms.  The following termsreferred to in this Agreement shall have the following meanings:
                           (a)         Change of Control.  “Change of Control” shall mean theoccurrence of either of the following events:

                                        (i)          Any “person’ (as such term is used inSections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) isor becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act),directly or indirectly, of securities of the Company representing more thanfifty percent (50%) of the total combined voting power represented by theCompany’s then outstanding voting securities; or

                                        (ii)         A merger or consolidation of theCompany with any other corporation or other business entity, other than amerger or consolidation which would result in the voting securities of theCompany outstanding immediately prior thereto continuing to represent (eitherby remaining outstanding or by being converted into voting securities of thesurviving entity or parent thereof) more than fifty percent (50%) of the totalcombined voting power represented by the voting securities of the Company orsuch surviving or parent entity outstanding immediately after such merger orconsolidation; or (B) the complete liquidation of the Company; or (C) the saleor disposition by the Company of all or substantially all the Company’s assets,unless the Company remains an operating business and a going concern, and, withrespect to subsection 2(b), the Company continues the Option in effect.

                           (b)        Involuntary Termination.  “Involuntary Termination” shall mean theEmployee’s resignation within 60 days after any of the following:

                                        (i)          Without the Employee’s express writtenconsent, the assignment to the Employee of any significant duties or thesignificant reduction of the Employee’s duties, either of which is materiallyinconsistent with the Employee’s position with the Company and responsibilitiesin effect immediately prior to such assignment, or the removal of the Employeefrom such position and responsibilities, which is not effected for death,Disability or for Cause;

                                        (ii)         Without the Employee’s express writtenconsent, any reduction by the Company in an amount greater than 10% in the basesalary and/or or maximum incentive bonus (subject, however, to satisfaction of applicablegoals with respect to the actual amount of incentive bonus earned) as in effectimmediately prior to such reduction, other than a reduction applied generallyto executive officers of the Company;

                                        (iii)        Without the Employee’s express written consent,any reduction by the Company in the kind or level of employee benefits to whichthe Employee is entitled immediately prior to such reduction, other than areduction applied generally to executive officers of the Company;

                                        (iv)       Without the Employee’s express writtenconsent, the relocation of the Employee to a facility or a location more than40 miles from the Employee’s then present location, without the Employee’sexpress written consent; or

                                        (v)        The failure of the Company to obtain theassumption of the terms of this Agreement by any successors contemplated inSection 4 below, provided, however, that the Employee’s resignation as a resultof any of the foregoing conditions shall be a voluntary resignation, and not aninvoluntary termination, unless the Employee gives written notice of any suchcondition(s) to the Board and allows the Company at least 10 days thereafter tocorrect such condition(s).
                           (c)         Cause.  For purposes of this Agreement, a termination for “Cause” occursif the Employee is terminated for any of the following reasons:

                                        (i)          The Employee’s theft, dishonesty,misconduct or intentional falsification of any employment or Company records;

                                        (ii)         The Employee’s intentional and improperdisclosure or use of the Company’s confidential or proprietary information;

                                        (iii)        Any action by the Employee that has amaterial detrimental effect on the Company’s reputation or business;

                                        (iv)       The Employee’s failure or inability toperform any assigned duty reasonably expected of a person holding theEmployee’s position after written notice from the Board to the Employee of, anda reasonable opportunity to cure, such failure or inability; or

                                        (v)        The Employee’s conviction (including anyplea of guilty or nolo contendere) for any criminal act that impairs theEmployee’s ability to perform his duties for the Company.

                           (d)        Disability.  “Disability” shall mean that the Employee isunable to perform his duties as an employee of the Company as the result of hisincapacity due to physical or mental impairment for 120 days (not necessarilyconsecutive) in any one year period. Termination resulting from Disability may only be effected after atleast 30 days’ written notice by the Company of its intention to terminate theEmployee’s employment.  In the eventthat the Employee resumes the performance of substantially all of his duties asan employee of the Company before the termination of his employment becomeseffective, the notice of intent to terminate shall automatically be deemed tohave been revoked.

             4.          EmployeeCovenant Regarding Nonsolicitation. For a period of one (1) year following termination of employment for anyreason, the Employee shall not recruit, solicit, or invite the solicitation ofany employees of the Company to terminate their employment with the Company.

             5.          Successors.

                           (a)         Company’s Successors.  Any successor (or parent thereof) to theCompany (whether direct or indirect and whether by purchase, lease, merger,consolidation, liquidation or otherwise) or to all or substantially all of theCompany’s business and/or assets shall assume the obligations under thisAgreement and agree expressly to perform the obligations under this Agreementin the same manner and to the same extent as the Company would be required toperform such obligations in the absence of a succession.  For all purposes under this Agreement, theterm “Company” shall include any successor (or parent thereof) to the Company’sbusiness and/or assets which executes and delivers the assumption agreementdescribed in this subsection (a) or which becomes bound by the terms of thisAgreement by operation of law.

                           (b)        Employee’s Successors.  All rights of the Employee hereunder shallinure to the benefit of, and be enforceable by, the Employee’s personal orlegal representatives, executors, administrators, successors, heirs,distributees, devisees and legatees. Employee shall have no right to assign any of his obligations or dutiesunder this Agreement to any other person or entity.
             6.          Notice.

                           (a)         General.  Notices and all other communicationscontemplated by this Agreement shall be in writing and shall be deemed to havebeen duly given when personally delivered or when mailed by U.S. registered orcertified mail, return receipt requested and postage prepaid.  In the case of the Employee, mailed noticesshall be addressed to him at the home address which he most recentlycommunicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to itscorporate headquarters, and all notices shall be directed to the attention ofits Secretary.

                           (b)        Notice of Termination.  Any termination by the Company for Cause orby the Employee as a result of a voluntary resignation or an InvoluntaryTermination shall be communicated by a notice of termination to the other partyhereto given in accordance with Section 6 of this Agreement.  Such notice shall indicate the specifictermination provision in this Agreement relied upon, shall set forth inreasonable detail the facts and circumstances claimed to provide a basis fortermination under the provision so indicated, and shall specify the terminationdate (which shall be not more than 15 days after the giving of such notice).

             7.          MiscellaneousProvisions.

                           (a)         No Duty to Mitigate.  The Employee shall not be required tomitigate the amount of any payment contemplated by this Agreement (whether byseeking new employment or in any other manner), nor, except with respect to theEmployment Benefits as described in Section 2(a)(i), shall any such payment be reducedby any earnings that the Employee may receive from any other source.

                           (b)        Waiver.  No provision of this Agreement shall be modified, waived ordischarged unless the modification, waiver or discharge is agreed to in writingand signed by the Employee and by an authorized officer of the Company (otherthan the Employee).  No waiver by eitherparty of any breach of, or of compliance with, any condition or provision ofthis Agreement by the other party shall be considered a waiver of any othercondition or provision or of the same condition or provision at another time.

                           (c)         Choice of Law.  The validity, interpretation, constructionand performance of this Agreement shall be governed by the laws of the State ofWashington.

                           (d)        Severability.  The invalidity or unenforceability of anyprovision or provisions of this Agreement shall not affect the validity orenforceability of any other provision hereof, which shall remain in full forceand effect.

                           (e)         Arbitration.  In the event of any dispute or claim relatingto or arising out of the Employee’s employment relationship with the Company,this Agreement, or the termination of the Employee’s employment with theCompany for any reason (including, but not limited to, any claims of breach of contract, wrongfultermination, fraud or age, race, sex, national origin, disability or otherdiscrimination or harassment), the Employee and the Company agree that all suchdisputes shall be fully, finally and exclusively resolved by bindingarbitration conducted by the American Arbitration Association in King County,Washington.  The Employee and theCompany hereby knowingly and willingly waive their respective rights to haveany such disputes or claims tried to a judge or jury. Provided, however, thatthis arbitration provision shall not apply to any disputes or claims relatingto or arising out of the actual or alleged misuse or misappropriation ofconfidential information, including, but not limited to, either party’s tradesecrets or proprietary information.
                           (f)         No Assignment of Benefits.  The rights of any person to payments orbenefits under this Agreement shall not be made subject to option orassignment, either by voluntary or involuntary assignment or by operation oflaw, including (without limitation) bankruptcy, garnishment, attachment orother creditor’s process, and any action in violation of this subsection (f)shall be void.

                           (g)        Employment Taxes.  All payments made pursuant to this Agreementwill be subject to withholding of applicable income and employment taxes.

                           (h)        Assignment by Company.  The Company may assign its rights under thisAgreement to an affiliate, and an affiliate may assign its rights under thisAgreement to another affiliate of the Company or to the Company; provided,however, that no assignment shall be made if the net worth of the assignee isless than the net worth of the Company at the time of assignment.  In the case of any such assignment, the term“Company” when used in a section of this Agreement shall mean the corporationthat actually employs the Employee.

                           (i)          Counterparts.  This Agreement may be executed incounterparts, each of which shall be deemed an original, but all of whichtogether will constitute one and the same instrument.

                           (j)          Prior Agreements.  This Agreement shall supersede all priorarrangements whether written or oral, and understandings, regarding the subjectmatter of this Agreement.

             IN WITNESS WHEREOF, each of theparties has executed this Agreement, in the case of the Company by its dulyauthorized officer, as of the day and year first above written.
COMPANYAPPLIED MICROSYSTEMS CORPORATION      By:  Title:     EMPLOYEEBy: