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Exhibit 10.2    
    

EXECUTION
COPY 

 

ESCROW
AGREEMENT 

by
and among 

LA
QUINTA PROPERTIES, INC. 

and

LEHMAN
BROTHERS INC.,

BANC OF AMERICA SECURITIES LLC,

WELLS FARGO SECURITIES, LLC,

MORGAN STANLEY & CO. INCORPORATED,

CIBC WORLD MARKETS CORP.,

and

CALYON SECURITIES (USA) INC.,

as Initial Purchasers 

and 

U.S.
BANK TRUST NATIONAL ASSOCIATION,

as Trustee 

and

U.S.
BANK TRUST NATIONAL ASSOCIATION,

as Escrow Agent 

Dated
as of August 19, 2004 

 

 
 

ESCROW AGREEMENT    
    

        THIS ESCROW AGREEMENT (this "Agreement"), dated as of August 19, 2004, is made by and among LA QUINTA
PROPERTIES, INC., a Delaware corporation (the "Company"), LEHMAN BROTHERS INC., BANC OF AMERICA SECURITIES LLC, WELLS FARGO SECURITIES,
LLC, MORGAN STANLEY & CO. INCORPORATED, CIBC WORLD MARKETS CORP. and CALYON SECURITIES (USA) INC. (collectively, the "Initial
Purchasers"), U.S. BANK TRUST NATIONAL ASSOCIATION, as trustee under the Indenture referred to below ("Trustee"), and U.S. BANK
TRUST NATIONAL ASSOCIATION, as escrow agent and as securities intermediary ("Escrow Agent"). 

RECITALS

        A.    The Notes.    Pursuant to that certain indenture (the
"Indenture"), dated as of August 19, 2004, by and among the Company, La Quinta Corporation (the
"Guarantor") and the Trustee, the Company has on the date hereof and concurrently with the execution of this Agreement issued $200,000,000 in aggregate
principal amount of its 7% Senior Notes due 2012 (the "Notes") guaranteed (the "Guarantee") solely by
the Guarantor (the "Offering"). Simultaneously with the issuance of the Notes (the "Deposit Time"), the Company shall deliver, or cause the Initial
Purchasers to deliver, to the Escrow Agent (a) $196,250,000 representing the net proceeds of the Offering (as such amount may subsequently increase or decrease as a result of investment or
reinvestment thereof, the "Company Initial Amount") and (b) an additional amount of $2,411,111.18, which equals the estimated interest at 7%
payable on the Notes through October 20, 2004 (as such amounts may subsequently increase or decrease as a result of investment or reinvestment thereof, the "Additional
Amount" and together with the Company Initial Amount, the "Company Deposit") and the Initial Purchasers shall deliver to the
Escrow Agent $3,750,000, which represents the Initial Purchasers' discounts and commissions in connection with the Offering (as such amount may subsequently increase or decrease as a result of
investment or reinvestment thereof, the "Initial Purchasers Deposit" and together with the Company Deposit, the "Escrowed
Funds"). The Company Deposit and the Initial Purchasers Deposit shall be deposited each into a segregated cash collateral trust account with the Escrow Agent at its office at
100 Wall Street, New York, New York, Account No. 786667001 (the "Proceeds Account"), in the name of U.S. Bank Trust National Association, as
Trustee for the ratable benefit of the Holders of the Notes. The Proceeds Account and the Escrowed Funds shall be under the control of the Trustee. Capitalized terms used but not defined herein shall
have the meanings assigned to them in the Indenture. 

        B.    Pending Asset Acquisition.    Upon being released from the Proceeds Account pursuant to  Section 3.1 hereof:
(i) the Initial Purchasers Deposit will be disbursed to the Initial Purchasers, and (ii) the Company Deposit
will be disbursed to the Company. The net proceeds from the offering of the Notes will be used, together with cash on hand, to fund the purchase price of the acquisition (the
"Asset Acquisition") of substantially all of the assets of the limited service lodging division of The Marcus Corporation (the
"Acquired Assets") pursuant to the Asset Purchase Agreement, dated July 14, 2004,
between the Guarantor and certain subsidiaries of The Marcus Corporation (the "Asset Acquisition Agreement"), including up-front capital
expenditures and one-time transaction and integration costs related to the Asset Acquisition and for general corporate purposes. If the Asset Acquisition is terminated or otherwise does
not close prior to certain dates as specified in this Agreement, then the Notes must be redeemed at a redemption price equal to 100% of the offering price plus accrued interest to the redemption date. 

        C.    Purpose.    The parties hereto desire to set forth their agreement with regard to (1) the administration
of the Proceeds Account, (2) the creation and perfection of a security interest in favor of the Trustee for the benefit of the Holders of the Notes in the Collateral (as defined herein), and
(3) the conditions upon which Escrowed Funds will be released from the Proceeds Account. 

 
AGREEMENT

        NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

	1.
	Security Interest. 

        1.1   Pledge
and Assignment. 

        (a)   At
the Deposit Time, the Company Deposit and the Initial Purchasers Deposit will be deposited into the Proceeds Account. 

        (b)   Each
of the Company and the Initial Purchasers hereby irrevocably pledges, assigns and sets over to the Trustee, and grants to the Trustee, for the ratable benefit of
the Holders of the Notes, a first
priority continuing security interest in all of the Company's or such Initial Purchaser's right, title and interest in and to all of the following (whether consisting of cash, investment securities,
book-entry securities or other securities, security entitlements, financial assets or other investment property, accounts, general intangibles, instruments or documents, securities
accounts, deposit accounts or other bank, trust or cash collateral accounts, or other property, assets or rights), whether now owned or existing or hereafter acquired or created (collectively, the
"Collateral"): 

          (i)  this
Agreement and the Proceeds Account; 

         (ii)  all
funds, depository receipts, investment securities, book-entry securities or other securities, security entitlements, financial assets or other
investment property from time to time held or deposited in, or credited to, the Proceeds Account, including, without limitation, the Escrowed Funds and all certificates and instruments, if any, from
time to time, representing or evidencing the Proceeds Account or the Escrowed Funds; 

        (iii)  all
interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or
all of the then existing Collateral; and 

        (iv)  to
the extent not otherwise included, all Proceeds (as such term is defined in the UCC (as defined below)) in respect of the foregoing. 

        (c)   Except
as expressly permitted by this Agreement, neither the Company nor any Initial Purchaser shall have the right to remove or withdraw from the Proceeds Account or
the Escrowed Funds any financial asset, cash or other property now or hereafter credited to the Proceeds Account or the Escrowed Funds without the prior written consent of the Trustee. If at any time
the Escrow Agent shall receive any entitlement order from the Trustee (including, without limitation, any order directing the sale, transfer or redemption of any financial asset, or cash or other item
credited, directly or indirectly, to, the Proceeds Account), the Escrow Agent shall comply with such entitlement order, without further consent of the Company, any Initial Purchaser or any other
Person. Notwithstanding anything to the contrary contained herein, if at any time the Escrow Agent shall receive conflicting entitlement orders from the Trustee, the Company or the Initial Purchasers,
the Escrow Agent shall follow the entitlement orders and instructions of the Trustee. 

        (d)   The
Trustee hereby appoints the Escrow Agent to act as the Trustee's agent, on behalf of the Holders of the Notes, for purposes of perfecting the foregoing pledge,
assignment and security interest in the Collateral, and the Escrow Agent hereby accepts such appointment. For so long as the foregoing pledge, assignment and security interest remains in effect, the
Escrow Agent hereby waives any right of setoff, banker's lien, deduction, counterclaim, defense, recoupment or similar lien that it, in its individual capacity, may have with respect to any or all of
the Collateral. 

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        1.2    Secured Obligations.    This Agreement secures the due and punctual payment and performance of all obligations
and indebtedness of the Company, whether now or hereafter existing, owing to the Holders of the Notes prior to the earlier of the closing of the Asset Acquisition or the Special Mandatory Redemption
Event (as defined in Section 3.3 hereof) including, without limitation, interest accrued thereon after the commencement of a bankruptcy,
reorganization or similar proceeding involving the Company to the extent permitted by applicable law, whether or not an allowed claim (collectively, the "Secured
Obligations"). 

        1.3    Delivery of Collateral.    All certificates or instruments, if any, representing or evidencing the Collateral
shall be held by or on behalf of the Trustee pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignments in
blank, all in form and substance reasonably satisfactory to the Trustee, all in form and substance sufficient to convey a valid security interest in such Collateral to the Trustee or shall be credited
to the Proceeds Account, which shall be a securities account maintained in accordance with Section 1.3(b) hereof. The Company and the Initial
Purchasers shall, upon the pledge of any Collateral hereunder, cause all such Collateral, including all other accounts representing a security entitlement to or containing any Collateral to be
registered in the name of the Trustee, for the ratable benefit of the Holders of the Notes, or such of its nominees as the Trustee shall direct and the Company and the Initial Purchasers shall approve
(which approval shall not be unreasonably withheld), and to be under the control of the Trustee, for the ratable benefit of the Holders of the Notes, which control shall be agreed to and acknowledged
(in a writing addressed to the Trustee) by any securities intermediary, including the Escrow Agent, holding any such account in an acknowledgment in form and substance reasonably satisfactory to the
Trustee. In addition, the Trustee shall have the right at any time to exchange certificates or instruments representing or evidencing the Collateral for certificates or instruments of smaller or
larger denominations. 

        (a)   The
Escrow Agent shall establish and maintain the Proceeds Account on its books as an account segregated from all other custodial or collateral accounts at its office at
U.S. Bank Trust National Association, 100 Wall Street, New York, New York. 

        (b)   The
Proceeds Account is and shall be maintained as a "securities account" within the meaning of Article 8 of the UCC, and the Escrow Agent, as securities
intermediary, shall treat all property (whether investment property, financial asset, security, instrument, cash or otherwise) credited to the Proceeds Account as a "financial asset" within the
meaning of Section 8-102(a)(9) of the UCC, as
in effect on the date hereof and as "financial assets" under Section 8-501(a) of the UCC, as in effect on the date hereof. Subject to the other terms and conditions of this
Agreement, all funds or other property accepted by the Escrow Agent pursuant to this Agreement shall be held in the Proceeds Account for the benefit of the Trustee and for the ratable benefit of the
Holders of the Notes. All proceeds of the Company Deposit and the Initial Purchasers Deposit shall remain on deposit in the Proceeds Account, until released in accordance with this Agreement. 

        (c)   All
Collateral shall be retained in the Proceeds Account pending disbursement pursuant to the terms hereof. All proceeds of, interest earned on, and other dividends,
distributions or amounts paid with respect to, any Collateral shall be credited to and retained in the Proceeds Account, and the Escrow Agent shall invest and reinvest the same in accordance with  Section 2.1 hereof. In all events, any monies or property so invested or reinvested and any securities, investment property and financial assets
acquired thereby shall be (i) held as Collateral in the Proceeds Account, (ii) subject in all respects to the security interest created hereby and shall be and remain under the control
of the Escrow Agent, and (iii) otherwise subject to the terms hereof. 

        1.4    Further Assurances.    Prior to, contemporaneously herewith, and at any time and from time to time hereafter,
the Company and the Initial Purchasers shall, at the Company's sole expense, execute and deliver to the Trustee such other instruments and documents, and take all further action as the 

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Trustee
deems necessary or as the Trustee may reasonably request to confirm, perfect or maintain the perfection and priority of the security interest of the Trustee granted or purported to be granted
hereby or to enable the Trustee to exercise and enforce its rights and remedies hereunder with respect to any Collateral, and the Company and the Initial Purchasers shall take all necessary action to
preserve and protect the security interest created hereby as a first priority, perfected Lien and encumbrance upon the Collateral. 

        1.5    Maintaining the Proceeds Account.    So long as this Agreement is in full force and effect: 

        (a)   The
Company and the Initial Purchasers shall establish and maintain the Proceeds Account with the Escrow Agent in accordance with this Agreement, and the Proceeds
Account shall at all times remain under the exclusive dominion and control of the Trustee; 

        (b)   It
shall be a term and condition of the Proceeds Account, notwithstanding any term or condition to the contrary in any other agreement relating to the Proceeds Account,
that either (i) the Initial Purchasers Deposit shall only be used for the payment to be made to the Initial Purchasers and the Company Deposit shall be used for the payment of a portion of the
purchase price of the Asset Acquisition, including up-front capital expenditures and one-time transaction and integration costs related to the Asset Acquisition and for general
corporate purposes or
(ii) the Escrowed Funds shall be used for the redemption of the Notes, in each case pursuant to the applicable provisions of Article 3
below; 

        (c)   The
Escrow Agent shall maintain the Proceeds Account and all securities entitlements and other positions carried in the Proceeds Account solely in its capacity as Escrow
Agent and shall not assert any claim to or interest in the Proceeds Account or any such securities entitlement or other positions except in such capacity; and 

        (d)   The
Escrow Agent shall maintain a separate record of all securities, instruments, checks and other remittance items received in the Proceeds Account. 

        1.6    Transfer and Other Liens.    The Company and each of the Initial Purchasers agrees that it shall not
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral or (ii) create or suffer to exist any Lien upon or
with respect to any of the Collateral, except for the security interest granted to the Trustee pursuant to this Agreement and non-consensual liens arising by operation of law. The Trustee
agrees that it shall not cause or permit the Proceeds Account or any other security entitlements or other positions carried in the Proceeds Account to become subject to any Lien created or arising
through the Trustee, except for the security interest granted to the Trustee pursuant to this Agreement and non-consensual liens arising by operation of law. The Company shall pay the fees
and expenses of the Escrow Agent as provided in Section 5.3 below, and the Escrow Agent shall have no right to lien, or attach the funds held in,
the Proceeds Account for any fees, expenses, costs or other amounts that may be due to the Escrow Agent. 

        1.7    Attorneys-in-Fact.    The Company and each Initial Purchaser hereby irrevocably appoint
each of the Trustee and the Escrow Agent as their attorney-in-fact, coupled with an interest, with full authority in the place and stead of the Company and such Initial
Purchaser and in the name of the Company and such Initial Purchaser or otherwise, from time to time in the Trustee's or the Escrow Agent's reasonable discretion but without any obligation to take any
action and to execute any instrument which is necessary or advisable or which the Trustee or the Escrow Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation, to receive, endorse and collect all instruments made payable to the Company or the Initial Purchasers representing any interest payment, dividend or other distribution in respect
of the Collateral or any part thereof and to give full discharge for the same, and the expenses (including, without limitation, reasonable legal fees and expenses) of the Trustee and the Escrow Agent
incurred in connection 

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therewith
shall be payable by the Company and the Initial Purchasers and shall be deemed Secured Obligations hereunder. 

        1.8    Trustee May Perform.    Without limiting the authority granted under  Section 1.7 hereof and except with respect to the
failure of the Company and the Initial Purchasers to deliver investment instructions, which
shall be governed by Section 2.1 hereof, if the Company and the Initial Purchasers fail to perform any agreement contained herein, the Trustee or
the Escrow Agent may, but shall not be obligated to, itself perform, or cause performance of, such agreement, and the expenses of the Trustee or the Escrow Agent incurred in connection therewith shall
be payable by the Company and shall be deemed Secured Obligations hereunder. 

	2.
	Investment and Liquidation of Escrowed Funds. Escrowed Funds shall be invested and reinvested by the Escrow Agent on the following terms
and conditions: 

        2.1    Required Investments.    

        (a)   As
soon as practicable upon deposit of the Escrowed Funds, the Escrow Agent shall invest in accordance with the instructions of the Company and the Initial Purchasers
pursuant to Section 2.1(b) all amounts on deposit in the Proceeds Account in readily accessible, unrestricted money market funds that are solely invested in Government Securities;  provided,
however, beginning 11 months after the date hereof, the Company Deposit may only be
invested in cash, cash items, or government securities as described in section 856(c)(4)(A) of the Internal Revenue Code of 1986, as amended. 

        (b)   The
Company Deposit and the Initial Purchasers Deposit held by the Escrow Agent in the Proceeds Account, shall, at the written direction of the Company and the Initial
Purchasers, be invested and reinvested by the Escrow Agent prior to the occurrence of a Special Mandatory Redemption Event (as defined below) or an Event of Default under the Indenture;  provided,
however, that the Company's and the Initial Purchasers' directions shall be limited to
investments or reinvestments in readily accessible, unrestricted money market funds that are solely invested in Government Securities; provided,  further,
however, beginning 11 months after the date hereof, the Company Deposit may only be
invested in cash, cash items, or government securities as described in section 856(c)(4)(A) of the Internal Revenue Code of 1986, as amended. The Escrow Agent hereby agrees that any investments
made in accordance with this Article 2 shall be permitted under this Agreement provided that the Trustee shall at all times have control (as such
term is defined in Section 8-106 of the UCC) over such investments. 

        2.2    Interest.    All interest and other amounts earned on the Escrowed Funds shall be reinvested in accordance with
the terms hereof and will be subject to the security interest granted hereunder to the Trustee. 

        2.3    Limitation of Trustee's and Escrow Agent's Liability.    In no event shall the Trustee or the Escrow Agent have
any liability to the Company or any Initial Purchaser or any other Person for (a) investing the funds from time to time in the Proceeds Account in accordance with the provisions of this  Article 2 or in compliance with the written direction of the Company and the Initial Purchasers, regardless of whether greater income or a higher
yield could have been obtained had the Escrow Agent invested such funds in other money market funds, except for liability arising out of the gross negligence, willful misconduct or bad faith of the
Trustee or the Escrow Agent or (b) not complying with any direction of the Company and the Initial Purchasers with respect to the investment or reinvestment of funds in the Proceeds Account to
the extent that any such direction is inconsistent with this Article 2. Notwithstanding anything herein to the contrary, neither the Trustee nor
the Escrow Agent shall have any responsibility whatsoever for determining whether an investment satisfies the limitations set forth in Article 2 hereof, including that the security is one
described in section 856(c)(4)(A) of the Internal Revenue Code of 1986, as amended. 

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	3.
	Disposition of Collateral Upon Certain Events. 

        3.1    Release of Escrowed Funds for the Asset Acquisition.    Subject to  Section 3.2 below, at the sole expense of the
Company, and concurrently with, and conditioned upon, the Escrow Agent's and the Trustee's receipt
on or before October 18, 2004 of a certificate from the chief executive officer or chief financial officer of the Company, acknowledged by Lehman Brothers Inc.
("Lehman Brothers") on behalf of the Initial Purchasers, substantially in the form of Exhibit A
hereto (the "Release Certificate"), (a) the Escrow Agent shall transfer the Company Deposit on deposit in the Proceeds Account to the Company and
the Initial Purchasers Deposit on deposit in the Proceeds Account to Lehman Brothers on behalf of the Initial Purchasers, in each case, in immediately available funds in accordance with the transfer
instructions contained in such Release Certificate; (b) the Trustee and the Escrow Agent shall deliver to the Company and the Initial Purchasers a release of security interest with respect to
the Collateral as of the closing of the Asset Acquisition (the "Asset Acquisition Date"), substantially in the form of  Exhibit C hereto, duly executed
by the Trustee and the Escrow Agent, and the Trustee and the Escrow Agent shall take all further actions, if any,
that are reasonably requested and deemed necessary by the Company and the Initial Purchasers to terminate the Trustee's security interest in the Collateral as of the Asset Acquisition Date and, on the
Asset Acquisition Date, all funds transferred by the Escrow Agent to the Company and to Lehman Brothers on behalf of the Initial Purchasers in accordance with the provisions of this  Section 3.1
shall automatically be deemed to be free and clear of the Trustee's security interest provided herein; and (c) the Escrow
Agent shall release to the Company and to Lehman Brothers, on behalf of the Initial Purchasers, all funds remaining in the Proceeds Account, if any, after complying with the transfer instructions in
the Release Certificate which excess funds shall be allocated among the Company and the Initial Purchasers in proportion to the amounts of the Company Deposit and the Initial Purchasers Deposit.
Notwithstanding the above, the delivery of the Release Certificate shall be deemed to occur concurrently with the release of Escrowed Funds in accordance with this  Section 3.1 and the consummation
of the Asset Acquisition. The Company covenants and agrees not to deliver a Release Certificate unless the
conditions set forth in Section 3.2 below have been satisfied. The Escrow Agent and the Trustee may conclusively rely on the Release Certificate. 

        3.2    Conditions to Release.    The Escrowed Funds on deposit in the Proceeds Account shall be released in accordance
with Section 3.1 concurrently with the consummation of the Asset Acquisition on or before October 18, 2004, if all of the following
conditions have been met: 

        (a)   all
conditions precedent under the Asset Acquisition Agreement to the Asset Acquisition have been satisfied or waived by the parties thereto, except for any condition
that by its terms can only be satisfied at the closing of the Asset Acquisition, as conclusively evidenced by the Release Certificate; provided, that,
the Company agrees not to deliver to the Escrow Agent the Release Certificate if the Guarantor or the Company shall have waived any provision of Section 8.1 of the Asset Acquisition Agreement
with respect to the representations set forth in Sections 4.3 or 4.9(a)(iii) of the Asset Acquisition Agreement without first having obtained the written consent of Lehman Brothers, which
consent shall not be unreasonably withheld or delayed, nor shall Lehman Brothers condition such consent, directly or indirectly, on the payment of any fee or expense or the forfeiture or waiver by the
Guarantor or the Company of any of their respective rights under the Operative Documents (as defined in the Purchase Agreement, dated August 5, 2004, among the Company, the Guarantor and the
Initial Purchasers, as amended on August 18, 2004 (the "Purchase Agreement")); 

        (b)   the
Company has sufficient funds available, including the Company Deposit held in the Proceeds Account, cash on hand and amounts available under the Company's credit
facility, to pay all amounts payable under the terms of the Asset Acquisition Agreement; 

        (c)   there
are no Liens on the Acquired Assets other than Permitted Liens; 

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        (d)   no
Event of Default has occurred and is continuing under the Indenture; and 

        (e)   the
Company has delivered the Release Certificate to the Trustee and the Escrow Agent. 

        3.3    Special Mandatory Redemption.    If (i) the Asset Acquisition Agreement is terminated in accordance with
its terms or (ii) the Asset Acquisition is otherwise not closed on or before October 18, 2004 (each, a "Special Mandatory Redemption
Event"), then the Company shall notify the Escrow Agent and the Trustee (with a copy to Lehman Brothers on behalf of the Initial Purchasers) of such Special Mandatory
Redemption Event, in a certificate from the chief executive officer or chief financial officer of the Company substantially in the form of  Exhibit B hereto (the "Special
Mandatory Redemption Release Certificate"), and the Escrow Agent,
without any further instruction by the Company or the Initial Purchasers, shall release the Escrowed Funds to the (A) Paying Agent, as agent for the Company solely to redeem the Notes on the
second Business Day following the date of termination in accordance
with clause (i) above or the date specified in clause (ii) above, as applicable, at a redemption price equal to 100% of the offering price of the Notes plus accrued and unpaid interest
to the redemption date (the "Redemption Payment") and (B) to the extent that the Escrowed Funds exceed the Redemption Payment, such excess funds
shall be allocated to the Company and the Initial Purchasers in proportion to the amounts of the Company Deposit and the Initial Purchasers Deposit;  provided, however, that if the Redemption Date (as defined below) occurs prior to October 20,
2004, the Escrow Agent shall distribute to the Company an amount of such excess funds equal to the amount of pre-funded interest equal to the product of $38,888.89 and the number of days
during the period beginning on the day after the Redemption Date and ending on October 20, 2004 prior to allocating the excess funds amount to the Company and the Initial Purchasers. The
Company shall mail or cause to be mailed on the Business Day following the first Special Mandatory Redemption Event, by first class mail, a notice of redemption to each holder of Notes at such
holder's registered address appearing in the Security Register which notice shall state: 

        (a)   the
redemption date and the Redemption Payment; provided, that the redemption date shall be the second Business Day
following the first Special Mandatory Redemption Event (the "Redemption Date"); 

        (b)   the
name and address of the Paying Agent; 

        (c)   that
the Notes must be surrendered to the Paying Agent to collect the redemption price; 

        (d)   that,
unless the Company defaults in making such Redemption Payment, interest on the Notes ceases to accrue on and after the Redemption Date; and 

        (e)   that
no representation is made as to the correctness of the CUSIP and/or ISIN numbers, if any, listed in such notice or printed on the Notes. 

        3.4    Release of Proceeds.    The Escrow Agent shall: (x) promptly liquidate all of the Collateral in the
Proceeds Account to obtain cash proceeds by no later than 12:00 noon (New York time) one Business Day after the occurrence of the Special Mandatory Redemption Event; and (y) on the Redemption
Date transfer such cash proceeds to the Paying Agent to be used to redeem the Notes and, after the Redemption Payment has been paid in full, any excess proceeds shall be allocated among the Company
and the Initial Purchasers in proportion to the amounts of the Company Deposit and the Initial Purchasers Deposit immediately prior to the Redemption Date;  provided, however, that if the Redemption Date occurs prior to October 20, 2004, the Escrow Agent
shall distribute to the Company an amount of such excess funds equal to the amount of pre-funded interest equal to the product of $38,888.89 and the number of days during the period
beginning on the day after the Redemption Date and ending on October 20, 2004 prior to allocating the excess funds amount to the Company and the Initial Purchasers. The Company shall, as
promptly as practicable, notify the Initial Purchasers and the Trustee and the Escrow Agent in writing if the Asset Acquisition Agreement is terminated. 

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        3.5    Payment of Redemption Payment.    The Redemption Payment will be considered paid on the date due if the Paying
Agent (if the Paying Agent is not the Company, the Guarantor or a Subsidiary thereof) holds as of 11:00 a.m. Eastern Time on the Redemption Date money in immediately available funds and
sufficient to pay the Redemption Payment. If the Redemption Date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue on such payment for the intervening period. 

        3.6    Remedies Upon Default.    If an Event of Default shall have occurred and be continuing under the Indenture: 

        (a)   The
Trustee may, but shall not be obligated to, without notice to the Company except as required by law and at any time or from time to time, direct the Escrow Agent to
liquidate any Government Securities and transfer all funds in the Proceeds Account to the Paying Agent to apply such funds in accordance with Section 6.10 of the Indenture, and subject to the
terms of this Agreement, for the benefit of the Holders of the Notes. 

        (b)   The
Escrow Agent and/or the Trustee may also exercise in respect of the Collateral, in addition to the other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party under the UCC in effect at that time in the State of New York (the "UCC") (whether or
not the UCC applies to the affected Collateral), and may also, without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sales, at
any of the Trustee's or the Escrow Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Trustee may deem commercially reasonable. The Company and
the Initial Purchasers agree that, to the extent notice of sale shall be required by applicable law, at least ten days' notice to the Company and the Initial Purchasers of the time and place of any
public sale or the time after which any private sale is to be made shall constitute
reasonable notification. The Trustee and the Escrow Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Trustee or the Escrow Agent may
adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so
adjourned. 

        (c)   Any
cash held by the Escrow Agent as Collateral and all net cash proceeds received by the Trustee or the Escrow Agent in respect of any sale or liquidation of,
collection from, or other realization upon, all or any part of the Collateral may, in the sole discretion of the Trustee, be held by the Trustee or the Escrow Agent as collateral for, and/or then or
at any time thereafter be applied (after payment of any costs and expenses incurred in connection with any sale, liquidation or disposition of or realization upon the Collateral, including reasonable
attorney's fees and expenses, and the payment of any amounts payable to the Trustee or the Escrow Agent) in whole or in part by the Trustee or the Escrow Agent for the ratable benefit of the Holders
of the Notes against, all or any part of the Secured Obligations in such order as the Trustee shall elect. Any surplus of such cash or cash proceeds held by the Trustee or the Escrow Agent and
remaining after payment in full of all the Secured Obligations and the reasonable out-of-pocket costs and expenses incurred by and amounts payable to the Trustee or the Escrow
Agent hereunder or under the Indenture shall be paid over to the Company or as a court of competent jurisdiction shall direct in writing. 

	4.
	Representations and Warranties. 

        4.1    Representation and Warranties of the Company.    The Company hereby represents and warrants that: 

        (a)   The
Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. 

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        (b)   This
Agreement has been duly and validly authorized, executed and delivered by the Company and (assuming due authorization, execution and delivery by the Initial
Purchasers, the Trustee and the Escrow Agent) constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforceability is considered in a proceeding at law or in equity), and
except that rights to indemnification and contribution thereunder may be limited by public policy relating thereto. 

        (c)   The
execution, delivery and performance of this Agreement by the Company will not conflict with or result in a breach or violation of any of the terms or provisions of,
impose any lien, charge or encumbrance (except as contemplated by this Agreement) upon any property or assets of the Company pursuant to, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement, license or instrument to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject,
nor will such actions result in any violation of the provisions of the charter or bylaws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its properties or assets. 

        (d)   Other
than as described in the Offering Memorandum, dated August 5, 2004, relating to the Notes, as supplemented by the Offering Memorandum Supplement, dated
August 18, 2004, no consent, approval, authorization or order of, or filing, registration or qualification with, any such court or governmental agency or body is required for the execution,
delivery and performance of this Agreement by the Company, other than filings of UCC financing statements. 

        (e)   There
are no legal or governmental proceedings pending to which the Company is a party or of which any property or assets of the Company is the subject which, if
determined adversely to the Company would reasonably be expected to have a material adverse effect on the operations, management, financial position, results of operations, business or prospects of
the Company, and to the Company's knowledge, no such proceedings have been threatened by governmental authorities or others. 

        (f)    The
Company has not taken, and will not take, any action that might cause the pledge of the Collateral pursuant to this Agreement to violate Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System. 

        (g)   Upon
the delivery to the Escrow Agent of the Collateral in the Proceeds Account and the filing of UCC financing statements with the Secretary of State of the State of
Delaware and the Secretary of State of the State of New York, the Trustee will have a valid, duly perfected first priority security interest in such Collateral, as security for the payment and
performance of the Secured Obligations for the benefit of the Trustee and the Holders of the Notes, and enforceable as such against all creditors of the Company and any Persons purporting to purchase
any of such Collateral from the Company. The actions, recordings and filings described in the immediately preceding sentence are the only actions, recordings and filings necessary to publish notice of
and perfect the rights of the Trustee in all of such Collateral. 

        (h)   Concurrently
with the execution and delivery of this Agreement, the amount of $198,077,777.78, which consists of (i) $196,250,000 in net cash proceeds from the
sale of the Notes and (ii) $2,411,111.18 of additional cash, has been deposited by or on behalf of the Company into the Proceeds Account. 

9

 

        (i)    The
Escrowed Funds are sufficient to make any payment that may be required under Section 3.3 hereof. 

        4.2    Indemnity.    The Company shall indemnify and hold harmless the Trustee, the Escrow Agent and their respective
directors, officers, agents and employees, from and against any and all claims, actions, obligations, damages, losses, liabilities and expenses, including, without limitation, defense costs,
investigative fees and costs, reasonable legal fees and claims for damages incurred in any action or proceeding between the parties hereto or in disputes with third parties or otherwise, arising from
or in connection with the Trustee's and/or the Escrow Agent's acceptance of, or performance under, this Agreement, except to the extent that such liability, expense or claim is directly attributable
to the gross negligence, willful misconduct or bad faith of the Trustee or the Escrow Agent. 

        4.3    Termination.    This Agreement shall automatically terminate upon (a) the release of all of the
Collateral pursuant to Section 3.1 hereof or (b) the payment and performance in full in immediately available funds of the Secured
Obligations. The provisions of Section 4.2, Section 5.1 and  Article 6 hereof shall survive
any termination or discharge or satisfaction of this Agreement as well as the resignation or removal of the
Trustee or the Escrow Agent. 

	5.
	Escrow Agent. 

        5.1    Limitation of the Escrow Agent's Liability; Responsibilities of the Escrow Agent.    

        (a)   Except
as otherwise provided herein, the Escrow Agent's responsibility and liability under this Agreement shall be limited as follows: (i) the Escrow Agent does
not represent, warrant or guaranty to the Trustee or the Holders of the Notes from time to time the performance of the Company; (ii) the Escrow Agent shall have no responsibility to the
Company, the Initial Purchasers, the Holders of the Notes or the Trustee from time to time as a consequence of the performance or non-performance by the Escrow Agent hereunder, except for
any bad faith, gross negligence or willful misconduct of the Escrow Agent; (iii) the Company and the Initial Purchasers shall remain solely responsible for all aspects of their respective
businesses and conduct; and (iv) the Escrow Agent is not obligated to supervise, inspect or inform the Company, the Initial Purchasers or any third
party of any matter referred to in this Section 5.1(a). In no event shall the Escrow Agent be liable for acting in accordance with or relying upon any instruction, notice, demand, certificate
or document from the Company or the Initial Purchasers or any entity acting on their behalf delivered in accordance with the terms hereof. In no event shall the Escrow Agent be liable for incidental,
indirect, special, consequential or punitive damages (including, but not limited to lost profits). 

        (b)   No
implied covenants or obligations shall be inferred from this Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by the provisions of any
agreement beyond the specific terms hereof. Specifically and without limiting the foregoing, the Escrow Agent shall in no event have any liability in connection with its investment, reinvestment or
liquidation, in good faith and in accordance with the terms hereof, of any funds held by it hereunder, including without any limitation any liability for any delay not resulting from its bad faith,
gross negligence or willful misconduct in such investment, reinvestment or liquidation, or any loss of principal or income incident to any such delay. 

        (c)   The
Escrow Agent shall not be called upon to advise any party as to selling or retaining, or taking or refraining from taking any action with respect to, any securities
or other property deposited hereunder. 

        (d)   No
provision of this Agreement shall require the Escrow Agent to expend its own funds or otherwise incur any financial liability in the performance of any of its duties
hereunder. 

10

 

        (e)   The
Escrow Agent shall not incur any liability for not performing any act or fulfilling any duty, obligation or responsibility hereunder by reason of any occurrence
beyond the control of the Escrow Agent (including but not limited to any act or provision of any present or future law or regulation or governmental authority, or any act of God or war). 

        (f)    The
Escrow Agent may consult with counsel of its own selection and the advice of such counsel shall be full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. The Escrow Agent may act through its agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care. 

        5.2    Substitution of the Escrow Agent.    The Escrow Agent may resign by giving no less than 30 Business Days' prior
written notice to the Company, Lehman Brothers on behalf of the Initial Purchasers and the Trustee. Such resignation shall take effect upon the later to occur of (i) delivery of all funds and
any other Collateral maintained by the Escrow Agent hereunder and copies of any books, records, plans and other documents in the Escrow Agent's possession relating to such funds or other Collateral or
this
Agreement to a successor agent approved by the Company (which approval shall not be unreasonably withheld or delayed) and (ii) the Company, the Initial Purchasers, the Trustee and such
successor agent entering into this Agreement or any written successor agreement no less favorable to the interests of the Holders of the Notes and the Trustee than this Agreement and the taking of
such other steps as may be necessary to give the successor agent a first priority security interest in the Proceeds Account and any other Collateral, and the Escrow Agent shall thereupon be discharged
of any obligations arising under this Agreement after the effective date of such resignation. 

        5.3    Fees and Expenses.    The Company will bear the fees payable to the Escrow Agent in connection with its
engagement under this Agreement. In addition, the Company will upon demand pay to the Escrow Agent the amount of any and all reasonable expenses, including, without limitation, the reasonable fees,
expenses and disbursements of its counsel, experts and agents retained by the Escrow Agent that the Escrow Agent may incur in connection with (a) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (b) the exercise or enforcement of any of the rights of the Trustee and the Holders of the Notes hereunder or (c) the
failure by the Company to perform or observe any of the provisions hereof. 

	6.
	Miscellaneous. 

        6.1    Waiver.    The parties hereto may specifically waive any breach of this Agreement by the other parties, but no
such waiver shall be deemed to have been given unless such waiver is in writing, signed by the waiving party, and specifically designates the breach waived, nor shall any such waiver constitute a
continuing waiver of similar or other breaches. 

        6.2    Invalidity.    If, for any reason whatsoever, any one or more of the provisions of this Agreement shall be held
or deemed to be inoperative, unenforceable or invalid in a particular case or in all cases, such circumstances shall not have the effect of rendering any of the other provisions of this Agreement
inoperative, unenforceable or invalid, and the inoperative, unenforceable or invalid provision shall be construed as if it were written so as to effectuate, to the maximum extent possible, the
parties' intent. 

        6.3    Assignment.    This Agreement shall inure to and be binding upon the parties and their respective successors
and permitted assigns; provided, however, that neither the Initial Purchasers nor the Company may assign
their rights or obligations hereunder without the express prior written consent of the Trustee. Any such purported assignment in violation of this  Section 6.3 shall be null and void. 

        6.4    Choice of Law.    The existence, validity, construction, operation and effect of any and all terms and
provisions of this Agreement shall be determined in accordance with and governed by the laws of the State of New York, without regard to the principles of choice of law thereof (other than 

11

 

Section 5-1401
and Section 5-1402 of the New York General Obligations Law). Regardless of any provision in any other agreement, New York shall be the "securities
intermediary's jurisdiction" for purposes of Section 9-305 and Section 8-110 of the UCC. 

        6.5    Entire Agreement; Amendments.    This Agreement, the Purchase Agreement and the Indenture contain the entire
agreement among the parties with respect to the subject matter hereof and supersede any and all prior agreements, understandings and commitments with respect thereto, whether oral or written;  provided,
however, that this Agreement is executed and accepted by the Trustee and the Escrow Agent
subject to all terms and conditions of the Trustee's acceptance of the trust under the Indenture, as fully as if said terms and conditions were set forth at length herein. This Agreement may be
amended only by a writing signed by duly authorized representatives of all parties. The Trustee and the Escrow Agent may execute an amendment to this Agreement only if the requisite consent of the
Holders of the Notes required by Section 9.02 of the Indenture has been obtained, unless no such consent is required by such Section 9.01 of the Indenture. 

        6.6    Notices.    All notices, requests, instructions, orders and other communications required or permitted to be
given or made under this Agreement to a party hereto shall be delivered in writing by hand delivery or overnight delivery, or shall be delivered by facsimile or telephonically with confirmation in
writing not more than twenty-four hours following such facsimile or telephonic notice. A notice given in accordance with the preceding sentence shall be deemed to have been duly given upon
the sending thereof, except for notice to the Trustee or the Escrow Agent, which shall be deemed given only when received. Notices should be addressed as follows: 

To
the Company: 

La
Quinta Properties, Inc.

909 Hidden Ridge, Suite 600

Irving, Texas 75038

Attention: General Counsel

Facsimile No.: (214) 492-6616 

With
a copy to: 

La
Quinta Corporation

909 Hidden Ridge, Suite 600

Irving, Texas 75038

Attention: General Counsel

Facsimile No.: (214) 492-6616 

With
a copy to: 

Akin
Gump Strauss Hauer & Feld LLP

1700 Pacific Avenue, Suite 4100

Dallas, Texas 75201

Attention: Terry M. Schpok, P.C.

Facsimile No.: (214) 969-4343 

If
to the Initial Purchasers to: 

Lehman
Brothers Inc.

Banc of America Securities LLC

Morgan Stanley & Co. Incorporated

Wells Fargo Securities, LLC

CIBC World Markets Corp.

Calyon Securities (USA) Inc. 

12

 

c/o
Lehman Brothers Inc.

745 Seventh Avenue, 19th Floor

New York, New York 10019

Attention: John Cokinos

Facsimile No.: (646) 758-1124) 

With
a copy to: 

Weil,
Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Attention: Rod Miller, Esq.

Facsimile No.: (212) 310-8007 

To
Trustee: 

U.S.
Bank Trust National Association

100 Wall Street, Suite 1600

New York, NY 10005

Attention: Corporate Trust Services, Ward A. Spooner

Facsimile No.: (212) 361-6153 

To
the Escrow Agent: 

U.S.
Bank Trust National Association

100 Wall Street, Suite 1600

New York, NY 10005

Attention: Corporate Trust Services, Ward A. Spooner

Facsimile No.: (212) 361-6153 

With
a copy to: 

Anderson
Aquino LLP

260 Franklin Street

Boston, MA 02110

Attention: David T. Anderson, Esq.

Facsimile No.: (617) 439-0400 

or
at such other address, facsimile number or phone number as the specified entity most recently may have designated in writing in accordance with this  Section 6.6 to the other parties. 

        6.7    Counterparts.    This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery
of a manually executed counterpart of this Agreement. 

        6.8    Trustee.    In connection with the appointment and in acting hereunder, the Trustee, in its capacity as
Trustee, is entitled to all rights, privileges, benefits, immunities, protection and indemnities provided to it under the Indenture. 

(Signature
Page Follows) 

13

        IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day first written above. 

	 	 	THE COMPANY:
	

 	
 	

LA QUINTA PROPERTIES, INC.
	

 	
 	

By:	

/s/  STEVEN J. FLOWERS      
 Name: Steven J. Flowers

Title: Vice-President and Treasurer

	 	 	TRUSTEE:
	

 	
 	

U.S. BANK TRUST NATIONAL ASSOCIATION
	

 	
 	

By:	

/s/  CHERYL L. CLARKE      
 Name: Cheryl L. Clarke

Title: Assistant Vice President
	

 	
 	

ESCROW AGENT:
	

 	
 	

U.S. BANK TRUST NATIONAL ASSOCIATION
	

 	
 	

By:	

/s/  CHERYL L. CLARKE      
 Name: Cheryl L. Clarke

Title: Assistant Vice President

	 	 	LEHMAN BROTHERS INC.
	

 	
 	

By:	

/s/  STEPHEN MEHAS      
 Name: Stephen Mehas

Title: Managing Director
	

 	
 	

For itself and as representative of the several Initial Purchasers.

QuickLinks

Exhibit 10.2

ESCROW AGREEMENTEXHIBIT 10.20
                                                                   -------------

--------------------------------------------------------------------------------

                                CHANGE OF CONTROL
                              EMPLOYMENT AGREEMENT

                                     BETWEEN

                             EXTENDED SYSTEMS, INC.

                                       AND

                                   [EMPLOYEE]

--------------------------------------------------------------------------------
<PAGE>

                                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

<PAGE>

                               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.

                                        1
<PAGE>

                                    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.

                                        2
<PAGE>

                                   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.

                                        3
<PAGE>

            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.

                                        4
<PAGE>

            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;

                                        5
<PAGE>

            (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;

                                        6
<PAGE>

            (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,

                                        7
<PAGE>

            (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.

                                        8
<PAGE>

            (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

                                        9
<PAGE>

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"),

                                       10
<PAGE>

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:

                                       11
<PAGE>

            (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

                                       12
<PAGE>

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:

                                       13
<PAGE>

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.

                                       14
<PAGE>

                                   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.

                                       15
<PAGE>

            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
                                          -------------------------------------
                                          Print Name
                                                     --------------------------

                                          EXTENDED SYSTEMS, INC.

Dated:  _______________, 2004             By:
                                                -------------------------------
                                                Print Name
                                                           --------------------
                                                Its
                                                    ---------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00072-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00072-of-00352.parquet"}]]