August 20, 2019
Christopher Wheaton
1621 2nd Street
Kirkland, WA 98033
Dear Chris:
BSQUARE Corporation is pleased to extend to you an offer of employment as the company's Chief Financial Officer. We look forward to working with you and to the contributions you will make at Bsquare.
You will report to Ralph Derrickson, Chief Executive Officer. Your principal place of employment will be at our headquarters, currently Bellevue, Washington, with business travel as needed to meet the responsibilities of your role. This offer is based on a start date of September 9, 2019, unless you and the company decide on a different mutually-acceptable start date (the "Start Date").
Transition Period and Base Pay
During the period from September 9, 2019 through September 29, 2019 (“Transition Period”), you will be expected to work 3 days per week. Your annual salary during this Transition Period will be paid bi-weekly, in accordance with our normal payroll procedures, at a rate equivalent to an annual salary of $165,000, less applicable tax and other withholdings.
Effective September 30, 2019 you will begin working on a full-time basis and you will be paid bi-weekly, in accordance with our normal payroll procedures at a rate equivalent to an annual salary of $275,000 (“Base Salary”), less applicable tax and other withholdings, subject to review annually.
You will be an “officer” for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, subject to certain Bsquare stock trading restrictions and SEC reporting requirements.
Bonus Plan
You will be eligible to participate in our Annual Bonus Plan ("ABP"). Commencing in 2019, your annual bonus potential will be $100,000.00 at 100% achievement, pro rated based on your Start Date. The ABP is structured such that no bonuses are paid until Bsquare achieves certain financial targets and you achieve individual objectives that you and the CEO will agree upon. Bonuses are paid annually, by March 15 following the close of our fiscal year, and are payable at the sole discretion of the Compensation Committee of Bsquare's Board of Directors (the "Board"). You must remain continuously employed by the company through the end of the calendar year to be eligible to receive any bonus payout for that calendar year, except as otherwise specifically set out below.
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Benefits
You will be eligible to participate in the employee benefit plans and programs generally available to our employees. These plans and programs are subject to our policies in effect from time to time, as well as the eligibility and other terms of these plans and programs. Currently they include:
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group medical, dental, and vision coverage; |
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life insurance and short- and long-term disability benefits, subject to waiting periods; |
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401(k) retirement plan with company matching contributions; |
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Employee Assistance Program and Emergency Travel Assistance Program; |
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Paid Time Off (PTO) to be initially accrued at 5.54 hours per pay period, which is equivalent to 18 days per year; and |
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Ten (10) Company-paid holidays and two (2) floating Company-paid holidays per calendar year. |
Bsquare reserves the right to modify or terminate any of its benefit plans or programs at any time and for any reason.
Equity
Subject to approval by the Compensation Committee of the Board (or of the full Board, including a majority of the independent directors), you will receive the one-time equity award described below this paragraph. The grant date of the award will be the later of (i) your Start Date and (ii) the date of the approval referred to in the preceding sentence. This award will be subject to the terms of our standard form of award agreement, and the company's 2011 Inducement Award Plan, as amended from time to time. You acknowledge that this award is a material inducement in your decision whether to accept this offer of employment, and that you would not have been willing to accept this offer in the absence of the award.
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An option to purchase up to 129,173 shares of Bsquare common stock. This option will be a non-qualified stock option, that is, not intended to qualify as an incentive stock option under the Code (as defined below). The option will vest as follows: 25% will vest on the first anniversary of the grant date, and the balance will vest in equal monthly installments for three years thereafter, subject to your continued employment. The exercise price will be the closing price of the company's common stock on the grant date. |
Termination and Change of Control Benefits
Immediately prior to consummation of a Change of Control, all of your unvested stock options and restricted stock units shall become fully vested and immediately
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exercisable, provided that you are an employee on the day that the Change of Control is consummated. In addition, if your employment is terminated by Bsquare or any successor thereto within 12 months following a Change of Control when neither "cause" nor "long term disability" exists or if you terminate your employment for "good reason," and provided that you release Bsquare and any successor thereto and its respective agents from any and all employment-related claims in a signed, written release satisfactory in form and substance to the company or any successor thereto that becomes effective and irrevocable on or before the Release Deadline, you will be entitled to receive a one-time lump sum severance payment equal to (i) 6 months of your then-effective annual Base Salary plus (ii) 100% of your target ABP bonus as may be modified from time to time by the Compensation Committee of the Board, and you shall be eligible for continued COBRA coverage (subject to your COBRA eligibility and election) at the company's expense for a period of 6 months following your termination date.
For purposes hereof, "cause," "good reason" and "Change of Control" are defined on Attachment A hereto, and "long term disability" is defined in the company's sponsored Long Term Disability group insurance plan.
No severance shall be payable hereunder unless the release described herein has been signed and become effective and irrevocable within 60 days from the date of your termination of employment (the "Release Deadline"). Upon the release becoming effective, any severance payable hereunder will be payable commencing on or as soon as administratively practicable after the Release Deadline, subject to the following paragraph.
Tax Matters
In the event the termination of your employment occurs at a time during the calendar year when the release could become effective in the calendar year following the calendar year in which your termination occurs, then any payments hereunder that would be considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated thereunder ("Section 409A") will be paid commencing on the first payroll date to occur during the calendar year following the calendar year in which such termination occurs, or, if later, the Release Deadline. Each installment payment hereunder shall, for all purposes of Section 409A, be treated as a separate payment.
Notwithstanding any other provision of this letter agreement, if at the time of the termination of your employment, you are a "specified employee," determined in accordance with Section 409A, any payments and benefits provided hereunder that constitute "nonqualified deferred compensation" subject to Section 409A that are provided on account of separation from service shall not be paid until the first payroll date to occur following the six-month anniversary of your termination date (the "Specified Employee Payment Date"). The aggregate amount of any payments that would otherwise have been made during such six-month period shall be paid in a lump sum on the Specified Employee Payment Date without interest, and thereafter, any
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remaining payments shall be paid without delay in accordance with their original schedule.
With regard to any provision in this letter agreement that provides for reimbursement of expenses or in-kind benefits, except for any expense, reimbursement or in-kind benefit provided pursuant to this letter agreement that does not constitute a deferral of compensation within the meaning of Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be deemed to be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect, and (iii) such payments shall be made on or before the last day of your taxable year following the taxable year in which the expense occurred.
The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. You and the company agree to work together in good faith to consider amendments to this letter agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to you under Section 409A.
Furthermore, notwithstanding any other provision of this letter agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided or to be provided by the company or any successor to you or for your benefit pursuant to the terms of this letter agreement or otherwise ("Covered Payments") would constitute parachute payments within the meaning of Section 280G of the Code and be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any interest or penalties with respect to such excise tax (collectively, the "Excise Tax"), then the Covered Payments shall be reduced (but not below zero) to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax. Any determination required under this paragraph, including whether any payments or benefits are parachute payments and whether and the extent to which any reduction in the Covered Payments is required, shall be made by the company in its sole discretion consistent with the requirements of Section 409A. You shall provide the company with such information and documents as the company may reasonably request in order to make a determination under this paragraph. The company's determinations shall be final and binding on the company and you.
At-Will Employment
Your employment with Bsquare will be for no specific period of time. Rather, your employment will be at-will, meaning that you or Bsquare may terminate the employment relationship at any time, with or without cause, and with or without notice and for any reason or no particular reason. Although your compensation and benefits
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may change from time to time, the at-will nature of your employment may only be changed by an express written agreement signed by an authorized officer of the company.
Representations
By accepting this offer, you represent that you are able to accept this job and carry out the work that it would involve without breaching any legal restrictions on your activities, such as non-competition, non-solicitation or other work-related restrictions imposed by a current or former employer. You also represent that you will inform Bsquare about any such restrictions and provide the company with as much information about them as possible, including any agreements between you and your current or former employer describing such restrictions on your activities. You further confirm that you will not remove or take any documents or proprietary data or materials of any kind, electronic or otherwise, with you from your current or former employer to Bsquare without written authorization from your current or former employer, nor will you use or disclose any such confidential information during the course and scope of your employment with the company. If you have any questions about the ownership of particular documents or other information, you should discuss those questions with your former employer before removing or copying the documents or information.
Contingent Offer
This offer is contingent upon the terms and conditions set out in this letter, as well as the following: (i) your execution of the company's Non-Disclosure Agreement; (ii) verification of your right to work in the United States, as demonstrated by your completion of an I-9 form upon hire, and your submission of acceptable documentation as noted on the I-9 form within three days of your Start Date; and (iii) satisfactory completion of reference checks and, if requested by us, a background investigation.
We are excited at the prospect of your joining our team. If you have any questions, please don't hesitate to call me. If you wish to accept this position, please sign below and return this letter to me.
We look forward to hearing from you.
Sincerely,
Bsquare CorporationAcknowledged and agreed:
By:
Ralph C. DerricksonChristopher Wheaton
President & CEO
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ATTACHMENT A
For purposes of this letter agreement, "cause" means and is limited to dishonesty, fraud, commission of a felony or of a crime involving moral turpitude, destruction or theft of company property, physical attack to a fellow employee, intoxication at work, use of controlled substances or alcohol to an extent that materially impairs your performance of your duties, willful malfeasance or gross negligence in the performance of your duties, violation of law in the course of employment that has a material adverse impact on the company or its employees, your failure or refusal to perform your duties, your failure or refusal to follow reasonable instructions or directions, misconduct materially injurious to the company, neglect of duty, poor job performance, or any material breach of your duties or obligations to the company that results in material harm to the company.
For purposes hereof, "neglect of duty" means and is limited to the following circumstances: (i) you have, in one or more material respects, failed or refused to perform your job duties in a reasonable and appropriate manner (including failure to follow reasonable directives), (ii) the Board, or a duly appointed representative of the Board, has counseled you in writing about the neglect of duty and given you a reasonable opportunity to improve, and (iii) your neglect of duty either has continued at a material level after a reasonable opportunity to improve or has reoccurred at a material level within one year after you were last counseled.
For purposes hereof, "poor job performance" means and is limited to the following circumstances: (i) you have, in one or more material respects, failed to perform your job duties in a reasonable and appropriate manner, (ii) the Board, or a duly appointed representative of the Board, has counseled you in writing about the performance problems and given you a reasonable opportunity to improve, and (iii) your performance problems either have continued at a material level after a reasonable opportunity to improve or the same or similar performance problems have reoccurred at a material level within one year after you were last counseled.
For purposes of this letter agreement, "good reason" shall mean the occurrence of any of the following, in each case without your written consent:
(i)a material reduction in your Base Salary other than a general reduction in Base Salary that affects all similarly situated executives in substantially the same proportions;
(ii)a material reduction in your ABP bonus target; or
(iii)a material, adverse change in your title, authority, duties or responsibilities (other than as required by applicable law).
You cannot terminate your employment for good reason unless you have provided written notice to the company of the existence of the circumstances providing grounds for termination for good reason within thirty (30) days of the initial existence of such grounds and the company has had at least thirty (30) days from the date on which such notice is provided to cure such circumstances. If you do not terminate your
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employment for good reason within ninety (90) days after the first occurrence of the applicable grounds, then you will be deemed to have waived your right to terminate for good reason with respect to such grounds.
Further, for purposes of this letter agreement, a "Change of Control" shall mean:
(i)the acquisition of the company by another entity by means of merger, consolidation or other transaction or series of related transactions resulting in the exchange of the outstanding shares of the company for securities of, or consideration issued, or caused to be issued by, the acquiring entity or any of its affiliates, provided, that after such event the shareholders of the company immediately prior to the event own less than a majority of the outstanding voting equity securities of the surviving entity immediately following the event; or
(ii)any sale, lease, exchange or other transfer not in the ordinary course of business (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the company.
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