PALMSOURCE, INC. SEVERANCE AGREEMENT

Exhibit 10.19

PALMSOURCE, INC.

SEVERANCE AGREEMENT

This Severance Agreement (the “Agreement”) is made by and between PalmSource, Inc. (the “Company”), and you, Xxxxx Xxxxx, on August 14, 2003 (the “Effective Date”). For purposes of this Agreement, the “Company” shall include any parent or subsidiary of the Company, unless the context clearly requires otherwise.

This Agreement is intended to strongly encourage you to remain with the Company by providing you with certain severance benefits in the event that your employment with the Company terminates under certain circumstances. This Agreement also is intended to provide you with enhanced financial security in recognition of your past and future service to the Company.

1. Eligibility for Severance Benefits. You will be entitled to the payments and benefits described in Section 2 only if: (a) either (1) the Company terminates your employment for a reason other than Cause, death or Disability, or (2) you voluntarily terminate your employment with the Company for Good Reason, and (b) you both (1) sign and deliver to the Company a Release of Claims satisfactory to the Company, and (2) comply with all of the terms of this Agreement, including (but not limited to) Section 8 regarding Non-Solicitation of Employees; provided, however, that in the event the Company is involved in a transaction whereby the Company ceases to be a subsidiary of Palm, Inc. as the result of Palm, Inc. distributing the securities of the Company to Palm, Inc.’s stockholders (a “Spin-Off”), then you shall not be deemed to have been terminated without Cause nor shall you be permitted to terminate for Good Reason and receive the benefits described hereunder on account of the Spin-Off.

2. Severance Benefits. If you meet the eligibility requirements described in Section 1, you will receive the following.

(a) Lump Sum Payment. You will receive a lump sum payment based on your annual base salary and annual bonus in effect immediately prior to the date of your termination of employment (the “Termination Date”). The amount of the lump sum payment will equal two hundred percent (200%) of your annual base salary plus one hundred percent (100%) of your target annual bonus. The lump sum payment will be made on the Termination Date.

(b) Option Vesting. Any shares covered by Company stock options, whether granted to you before, on or after the Effective Date, that are unvested and unexpired on the Termination Date will become fully vested and exercisable on the Termination Date if the shares otherwise would have vested (solely by virtue of your continued employment with the Company and not, directly or indirectly, due to a change of control of the Company) during the two year period commencing on the Termination Date. Any other unvested options will be forfeited on the Termination Date.

(c) Restricted Stock Vesting. Any shares of restricted stock that you have received from the Company that remain unvested on the Termination Date will become fully vested on the Termination Date if the shares otherwise would have vested (solely by virtue of your continued employment with the Company and not, directly or indirectly, due to a change of control of the Company) during the two year period commencing on the Termination Date.

(d) Other Benefits. You will receive company-paid health, dental and vision coverage at the same level of coverage as was provided to you immediately prior to the Termination Date and at the same ratio of Company

premium payment to your premium payment as was in effect immediately prior to the Termination Date (the “Company-Paid Coverage”). If such coverage included your dependents immediately prior to the Termination Date, such dependents shall also be covered at the same ratio of Company premium payment to your premium payment as was in effect immediately prior to the Termination Date (also referred to as Company-Paid Coverage). Company-Paid Coverage shall continue until the date two years from the date of termination. For purposes of Title X of the Consolidated Budget Reconciliation Act of 1985 (“COBRA”), the date of the “qualifying event” for you and your dependents shall be the date upon which the Company-Paid Coverage commences, and each month of Company-Paid Coverage provided hereunder shall offset a month of continuation coverage otherwise due under COBRA.

(e) Cash Payment. Subject to the terms of your offer letter with Palm, Inc. dated September 13, 2001 (the “Offer Letter”), the Company will make any required cash payment (as set forth in your Offer Letter) if your 150,000 shares of Palm restricted stock grants are worth less than $2 million on the Termination Date, and such amount has not been paid (or your rights to such payment have expired) under the terms of your Offer Letter.

(f) Accrued Wages and Paid-Time Off; Expenses. The Company will pay you: (1) any unpaid base salary due for periods prior to the Termination Date, (2) a prorated annual bonus calculated at 100% of target or greater percentage, if then applicable, through your Termination Date, (3) all of your accrued and unused paid-time off (“PTO”) through the Termination Date, (4) any other amounts then earned, vested or due, including but not limited to stock, expenses, vacation, sabbatical and other benefits, and (5) following your submission of proper expense reports, the total unreimbursed amount of all expenses incurred by you in your duties of employment with the Company that are reimbursable in accordance with the Company’s then-existing policies. These payments will be made promptly upon your employment termination and within the period of time mandated by law.

3. Golden Parachute Excise Tax.

(a) In the event that the benefits provided for in this Agreement or otherwise provided by the Company (or any subsidiary thereof) to the Employee (including, but not by way of limitation, any accelerated vesting on stock options) (the “Total Payments”) would subject the Employee to an excise tax (the “Excise Tax”) imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), then the Company (or any subsidiary thereof that employs the Employee at such time) will pay the Employee (i) an amount sufficient to pay the excise tax, and (ii) an additional amount sufficient to pay the Excise Tax and federal, state and local income and employment taxes arising from the payments made by the Company (or any subsidiary thereof that employs the Employee at such time) pursuant to this sentence. Any amount required to paid to the Employee pursuant to the preceding sentence shall be referred to as the “Gross-Up Payment.”

(b) The determination of the Employee’s Excise Tax liability and the amount, if any, required to be paid under this Section 3 will be made in writing by the Company’s independent auditors (the “Accountants”). For purposes of making the calculations required by this Section 3, the Employee shall be deemed to pay federal, state and local income taxes at the highest marginal rate in effect in the calendar year in which the Gross-Up Payment will be made, based on the Employee’s residence. The Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company (or any subsidiary thereof that employs the Employee at such time) and the Employee shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 3. The Company will pay all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 3.

(c) The Accountants shall determine the Gross-Up Payment as soon as practicable after the Employee’s Termination Date (but in no event later than 15 days after the termination). In addition, the Accountants shall make a determination of any Gross-Up Payment prior to termination of employment upon written request of the Employee and assuming the Employee has a reasonable basis for believing that the or she may be entitled to a Gross-Up Payment prior to termination of employment. The Gross-Up Payment shall be paid to the Employee within five days after the Accountants’ determination. In the event that the initial Gross-Up Payment made to the Employee is finally determined to be too large or small, the following rules shall apply. If the initial Gross-Up Payment was too small, the Company (or any subsidiary thereof that employs the Employee at such time) shall promptly made an additional payment to the Employee equal to the shortfall (plus any interest, penalties or additional payable by executive with respect to such excess). If the initial Gross-Up Payment is too large, then the Employee shall repay the amount of the

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excess to the Company (or any subsidiary that has made such payment to the Employee), plus interest on the amount of such repayment at 120% of the applicable federal rate provided in section 1274 of the Code, but only to the extent that such repayment by the Employee would result in a dollar-for-dollar reduction in the Executive’s taxable income and wages for purposes of federal, state and local income and employment taxes). The Executive and the Company (or any subsidiary thereof that employs the Employee at such time) shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of the Excise Tax with respect to the Total Payments (and associated income taxes, penalties and interest).

4. Other Terminations of Employment. If your employment with the Company is terminated by the Company for Cause, death or Disability, or if you voluntarily terminate your employment other than for Good Reason, you will not be entitled to receive any of the payments or benefits described in Section 2 of this Agreement. However, you may be eligible for benefits under the Company’s severance and benefit plans and policies on the Termination Date. In addition, the Company will pay you: (1) any unpaid base salary due for periods prior to the Termination Date, (2) all of your accrued and unused PTO through the Termination Date, (3) any other amounts then earned, vested or due, including but not limited to stock, expenses, vacation, sabbatical and other benefits and (4) following your submission of proper expense reports, the total unreimbursed amount of all expenses incurred by you in your duties of employment with the Company that are reimbursable in accordance with the Company’s then-existing policies. These payments will be made promptly upon your employment termination and within the period of time mandated by law.

5. Definition of Terms. The following terms used to in this Agreement shall have the following meanings:

(a) Cause. “Cause” means (1) following delivery to you of a written demand for performance from the Company (or any subsidiary thereof that employs you at such time) which describes the basis for the Company’s (or any subsidiary’s) reasonable belief that you have not substantially performed your duties, your continued violations of your obligations to the Company (or any subsidiary thereof that employs you at such time) which are demonstrably willful and deliberate on your part; (2) any act of dishonesty taken in connection with your responsibilities as an employee that is intended to result in your substantial personal enrichment; (3) your conviction or plea of no contest to a crime that negatively reflects on your fitness to perform your duties or xxxxx the Company’s reputation or business; (4) willful misconduct by you that is injurious to the Company’s reputation or business; or (5) your willful violation of a material Company employment policy. For purposes of determining whether Cause exists, an act or failure to act will be deemed “willful” only if effected not in good faith or without reasonable belief that the action or failure to act was in the best interests of the Company. Anything herein to the contrary notwithstanding, your employment shall not be terminated for Cause, unless written notice stating the basis for the termination is provided to you and you are given fifteen (15) days after receipt of such notice to cure„ and you have had an opportunity to be heard by a quorum of the Board and, after such hearing, the Board votes to terminate you for Cause.

(b) Disability. “Disability” means your being unable to perform the principal functions of your duties due to a physical or mental impairment, but only if such inability has lasted or is reasonably expected to last for at least six months. The Company will determine whether a Disability exists based on evidence provided by one or more physicians approved by the Company.

(c) Good Reason. “Good Reason” means, without your written consent: (1) any material reduction in your title, duties, authority or responsibilities; (2) any change in reporting such that you do not report to the Board of Directors of the Company; (3) the Company reducing your base salary other than reduction by the Company with respect to all executive officers as a part of a general readjustment of their compensation levels; (4) any material reduction, without good business reason, of facilities, assistance and perquisites (including office space and location) available to you immediately prior to such reduction; (5) the Company’s failure to provide you with benefits at least equal to those provided to other senior executives of the Company; (6) the relocation of your office more than fifty (50) miles from its then present location; or (7) failure of the Company to obtain assumption of this Agreement by any successor in interest to all or substantially all of the assets or business of the Company upon merger, consolidation, sale or similar transaction (unless you remain in a comparable position with a successor and your new employer assumes this Agreement).

For the purpose of any determination regarding the applicability of the immediately preceding “Good Reason” events, the position taken by you shall be presumed to be correct unless the Company establishes by clear and convincing evidence that such position is not correct. Your continued employment shall not constitute a consent to a

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waiver of your rights to assert Good Reason hereunder nor shall your death or Disability terminate the right of your estate or heirs to assert Good Reason if such right exists at the time of your death or Disability.

(d) Release of Claims. “Release of Claims” means a waiver by you of all employment-related obligations of the Company and all claims and causes of action against the Company.

6. Term of Agreement. If you have a termination of employment that entitles you to receive the payments and benefits described in Section 2, this Agreement will not terminate until all of your and the Company’s obligations under the Agreement have been satisfied. If you have a termination of employment that does not entitle you to receive the payments and benefits described in Section 2, this Agreement will terminate on the date you terminate employment.

7. At-Will Employment. The Company and you acknowledge that your employment is and will continue to be at-will, as defined under applicable law.

8. Non-Solicitation of Employees. You agree that for a period of time commencing on the Termination Date and for one year following the Termination Date, you will not either directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees to leave their employment, or take away such employees, or attempt to solicit, induce, recruit, encourage, take away or hire employees of the Company, either for yourself or any other person or entity.

9. Assignment. This Agreement will be binding upon and become of advantage to (a) your heirs, executors and legal representatives upon your death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of your rights to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance or other disposition of your right to compensation or other benefits will be null and void.

10. Notices.

(a) General. All notices, requests, demands and other communications called for by this Agreement will be in writing and will be deemed given (1) on the date of delivery if delivered personally, (2) one day after being sent by a well established commercial overnight service, or (3) four days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:

If to the Company:

PalmSource, Inc.

0000 Xxxxxxxx Xxx.

Xxxxxxxxx, XX 00000

Attn: Vice President, Legal Affairs

If to you:

at your last residential address known by the Company.

(b) Notice of Termination. Any termination by the Company for Cause or by you for Good Reason must be communicated by a notice of termination to the other party. The notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the date of your employment termination (which will not be more than 30 days after the giving of such notice). Any failure on your part to include in the notice

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any fact or circumstance which contributes to a showing of Good Reason will not waive any of your rights under this Agreement or prevent you from asserting that fact or circumstance in enforcing this Agreement.

11. Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.

12. Entire Agreement. This Agreement, your Management Retention Agreement and the agreements evidencing any Company stock options and restricted stock granted to you represent the entire agreement and understanding between the Company and you concerning your severance arrangements with the Company, its parent (if any) or any of its subsidiaries, and supersedes and replaces any and all prior agreements and understandings concerning your severance arrangements with the Company or Palm, Inc., including the severance provisions in your Offer Letter, except as otherwise provided in Section 2(e) of this Agreement. You hereby acknowledge and agree that you are waiving any and all rights to severance payments and/or benefits that you may have under the Offer Letter, except as otherwise provided in Section 2(e) of this Agreement.

13. Arbitration.

(a) General. In consideration of your service to the Company, its promise to arbitrate all employment related disputes and your receipt of the compensation, pay raises and other benefits paid to you by the Company, at present and in the future, you agree that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from your service to the Company under this Agreement or otherwise or the termination of your service with the Company, including any breach of this Agreement, shall be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1283.05 (the “Rules”) and pursuant to California law. Disputes which you agree to arbitrate, and thereby agree to waive any right to a trial by jury, include any statutory claims under state or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the California Fair Employment and Housing Act, the California Labor Code, claims of harassment, discrimination or wrongful termination and any statutory claims. You further understand that this Agreement to arbitrate also applies to any disputes that the Company may have with you.

(b) Procedure. You agree that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes or California Code of Civil Procedure. You agree that the arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. You agree that the arbitrator shall issue a written decision on the merits. You also agree that the arbitrator shall have the power to award any remedies, including attorneys’ fees and costs, available under applicable law. You understand the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that you shall pay the first $200.00 of any filing fees associated with any arbitration you initiate. You agree that the arbitrator shall administer and conduct any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s National Rules for the Resolution of Employment Disputes conflict with the Rules, the Rules shall take precedence.

(c) Remedy. Except as provided by the Rules, arbitration shall be the sole, exclusive and final remedy for any dispute between you and the Company. Accordingly, except as provided for by the Rules, neither you nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator shall not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

(d) Availability of Injunctive Relief. In addition to the right under the Rules to petition the court for provisional relief, you agree that any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or any other agreement regarding trade secrets, confidential information,

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nonsolicitation or Labor Code §2870. In the event either party seeks injunctive relief, the prevailing party shall be entitled to recover reasonable costs and attorneys fees.

(e) Administrative Relief. You understand that this Agreement does not prohibit you from pursuing an administrative claim with a local, state or federal administrative body, such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation board. This Agreement does, however, preclude you from pursuing court action regarding any such claim.

(f) Voluntary Nature of Agreement. You acknowledge and agree that you are executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. You further acknowledge and agree that you have carefully read this Agreement and that you have asked any questions needed for you to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that you are waiving your right to a jury trial. Finally, you agree that you have been provided an opportunity to seek the advice of an attorney of your choice before signing this Agreement.

14. No Oral Modification, Cancellation or Discharge. This Agreement maybe changed or terminated only in writing (signed by you and an authorized officer of the Company).

15. Withholding. The Company is authorized to withhold, or cause to be withheld, from any payment or benefit under this Agreement the full amount of any applicable withholding taxes.

16. Governing Law. This Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).

17. Acknowledgment. You acknowledge that you have had the opportunity to discuss this matter with and obtain advice from your private attorney, have had sufficient time to, and have carefully read and fully understand all the provisions of this Agreement, and are knowingly and voluntarily entering into this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement on the respective dates set forth below:

XXXXX X. XXXXX
/s/    Xxxxx X. Xxxxx						Date:		August 14, 2003
PALMSOURCE, INC.
/s/    Xxx Xxxxx						Date:		August 14, 2003
Name:  Xxx Xxxxx
Title:    Vice President, Human Resources

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